Central Banks Seek Excuses to Plunder Treasuries and Enrich the Banking Cartel

By: Barry_M_Ferguson

Dumb and Dumber and Dumberer
Jim Carrey starred in the movie ‘Dumb and Dumber’ in 1994. The movie told the story of the two stupidest humans on earth - Lloyd Christmas and Harry Dunne. They were ‘dumb’ and ‘dumber’. But, even this over the top portrayal of these two stupid characters could not have possibly equal the stupidity of the real characters that run our world today. They can only be described as ‘dumberer’. Even worse, our ‘leaders’ must think of the rest of us as ‘dumbererest’.

While I must admit that government has the general citizenry pretty well characterized (readers of articles such as this excluded), there are times when those of us who know better must speak out. It seems that every calamity in modern times gives the central banks an excuse to plunder treasuries and enrich the banking cartel. The big banks get rich and the rest of us pay for it. We willingly allow for such pilfering as long as the stock market goes up. Every move from the central banks is targeted to do just such a thing. An earthquake/ tsunami struck Japan on March11, 2011. The yen immediately appreciated and their stock market fell. The central banks of the G-7 immediately intervened to sell trillions in yen to stem the market plunge. The insanity is this. Why can’t the ‘market’ decide where the yen or the market should be priced? The people of Japan needed help. A nuclear power facility threatened to ‘melt down’. Yet, the BOJ’s could only think of supporting the stock market. The US central bank is no different. Every disaster is a license to manipulate. Central banks intervene in market price discovery. For instance, our Fed is currently busy with QE2 intervention.

The absurdity with which our government behaves, the arrogance with which they dictate, and the preposterousness of their economic imposition is an insult to any life form beyond a jelly fish. In case you don’t know, jelly fish are an organism without a brain. They also use the same orifice to feed and excrete. For reasons such as these, I tend to associate jelly fish with our rulers (government) - the Federal Reserve. Allow me to shed some light on the effects of intervention so we can decide if it is helpful. 

The latest episode of insanity directed to the dumberest occurred on Tuesday, March 22, 2011. The Federal Reserve announced that 2010 brought forth record profits. (Remember - a lot of dumb people think the Fed is a part of the US government.) No, not for us - for them! The Fed made a record $81.7 billion in 2010 ‘largely on investments made to help the economy and banks weather the 2007 - 2009 financial crisis’. As per their mandate, they turned over the bulk of the loot to the US Treasury - some $79.3 billion. (Remember - there are a lot dumber people that think the Fed does not operate as a ‘for profit’, ‘private bank’.) This adds to the $47.4 billion the Fed transferred to the Treasury in 2009. The Fed would like us to believe this is a wonderful development in that they have transferred to the Treasury a sum of $126.7 billion over the past two years. (Remember, there are a lot of dumberest people that actually think the Fed acts only in the best interests of its subjects. There are more Pelosi types running around than you would think.)

How again did the Fed earn $87.7 billion in a year? They are, of course, an intervening market manipulation machine. And, they are indeed a bank and banks make money by lending it. Don’t forget trading securities and derivatives is also profitable if you have all the inside information. The Fed has an advantage in that they can simply conjure money out of thin air for which to lend. Better yet, they can simply ‘create’ money on spreadsheets for which to lend. And, on all the money they steal from their subjects, uh..., I mean ‘create’, they charge interest! Could there be a better business model for pure profits? Now, think for a moment. Wouldn’t a profound financial crisis to a government present an opportunity to lend huge sums of money and impose vast power? Think a little harder. Name a company that profited more from the financial meltdown of the last decade than the Federal Reserve?

For perspective, Exxon made an estimated $30 billion for the year 2010. Yet, somehow the dumberest of the dumber society malign companies like Exxon as corporate pigs. These people think companies that make tens of billions of dollars in profits are obscene and they should be subjected to ‘windfall’ taxation. The Fed beat Exxon by a factor of 3! Do we hear any complaining? In reality, we can now say that the Federal Reserve is by earnings the largest company operating in the US. And yes, for the dumberestest people, the Fed is a ‘private corporation’ feeding on the US taxpayer. How did they make their money again? Oh yeah, the were ‘helping’ their banking friends through a crisis. Please, tell that to Lloyd Christmas! The real question is, are we now better off for all the Fed’s intervention? After all, the Fed did give the Treasury $126.7 billion in windfall earnings over the last two years. While I admit that I graduated from public schools, I decided to make like Jethro Bodine and commence to do a little ciphering.

Besides the forfeiture of capitalism, freedom, dignity, and sovereignty, how much did this $125.7 billion cost us? From the end of 2008 to the end of 2010, the national debt grew from $10.7 trillion to $14 trillion. That’s an increase of $3.3 trillion. That was the capital the Fed used to ‘help the economy and banks’ through the financial disaster that they, the Fed, helped to generate. That $3.3 trillion was borrowed at an average interest rate of 3.1% (according to the Fed). Once I cipher $3.3 trillion times 3.1% using my ‘times-its table’ (okay, I used a calculator), I come up with $102 billion in interest coupons on the extra debt. $125.7 billion minus the $102 billion nets the Treasury about $24 billion on the deal. That is, until we have to roll the debt over in another seven to ten years and then it costs the tax payers another $102 billion (or whatever the prevailing interest rates might dictate) and now the whole deal is a loser to the tune of hundreds of billions on top of the tens of trillions that the country already cannot repay. Yet, the Federal Reserve rakes in record profits from this action. The tax payers accumulate record debt. If we focus on that aspect, we miss the point of the Fed’s intent. The most important thing is that Mr. Dimon of J.P. Morgan and Mr. Moynihan of Bank of America got their $20 million dollar compensation packages. That makes me feel better, anyway!

So we are supposed to believe that the Fed has our best interest at heart. They are working hard to revive the economy and restore our portfolios. Please, we would have to be dumber than the dumberestest person on earth to believe that! Let’s look at how dumb the Fed thinks we are.

The Fed produces a report on the fiscal condition of the citizenry in the US.

From the Federal Reserve statistical release year 2010 ‘Flow of Funds Accounts of the United States’ page 118 (http://www.federalreserve.gov/releases/z1/current/z1.pdf):

‘Balance Sheet of Household and Nonprofit Organizations with Equity Detail’ - From 2008 to 2010, ‘Assets’ grew from $65.5 trillion to $70.7 trillion. Let us make note, however, that ‘Tangible assets’ fell from $24.3 trillion to $23.1 trillion. Where did the ‘Asset’ increase come from? ‘Equity shares at market value’ rose from $12.4 trillion to $18.1 trillion. ‘Net Worth’ rose from $51.3 trillion to $56.8 trillion. Net worth increases were a function of the stock market only. Real assets like real estate continued to contract. The Fed is using market manipulation to fool its audience. After all, the top 10 percent of income earners own 90% of all stocks. Mutual fund ownership is even less than 50% of the US populace. The ‘net worth’ increase is confined to stock owners and even then, to large stock owners. We can corroborate this notion with all the other analysis out today showing an ever widening gap between rich and poor. Therefore, modern economic improvement only holds true for a slim minority of already very wealthy friends of the Fed. 

What is the fiscal condition of the US government?

Same release, page 68 - ‘L.106 Federal Government’ - ‘Total financial assets’ grew from $1.268 trillion to $1.650 trillion. That roughly $400 billion dollar gain came from two areas. One, ‘Agency- and GSE-backed securities’ grew from $54 billion to $225 billion and two, ‘Consumer credit’ grew from $111 billion to $317 billion. In case you want to know, the ‘agency’ stuff is bad mortgage paper held by Fannie and Freddie (the Fed ‘transferred’ the ‘equity’ to us, the taxpayers, while they kept the ‘loan’) and ‘consumer credit’ is actually ‘student loans’ (I followed the asterisk). Yes, ‘student loans’ are actually counted as an ‘asset’. Aren’t student loan default rates pretty high?

This is information we need to know so allow me to expand my topic here. The student loan default rate reported by the government is currently 7%. Of course, since this is a government number, we know without question it is yet another bald face lie. Our government cannot utter one letter of one syllable of one word of truth if Jesus wrote it on an index card and God helped move their jaw. So, I did a little reading. According to Mark Kantrowitz of FinAid (in an article published by msn.com, 2010), there is about $730 billion in outstanding federal and private student loan debt and only 40% is actively being repaid. You can do your own ciphering on the real default rate but 7% ain’t the right answer. Don’t forget to carry the knots when you do your ‘gozendas’! Of course Sallie Mae accounts for half of this figure but we must remember, the new government regulations now give Sallie a virtual monopoly in student loans. Two last points. First, this type of debt cannot easily be washed away by bankruptcy and can therefore be carried on the books regardless of potential collectibility. That makes the assets of the government seem larger than reality. Also, one of the players in the student loan world is a company named Student Loan Corp. They are a division of - guess who? - Citigroup. Do I smell rat droppings? Yes, again, the bank makes the money to service the loan and the tax payer is on the hook for defaults. Second, with the default numbers as bad as they really are, student loans that experience a stoppage of payment after two years of commencement are no longer statistically factored. Those loan defaults are not counted. That’s why the 7% government number is so ridiculous.

Also interesting, Federal liabilities grew in 2010 by a little over $3 trillion and almost all of that was of course ‘Treasury securities’. So, the Fed wants us to believe that government assets are growing and total $1.650 trillion. Yet, the Federal Reserve now boasts of assets totaling over $2.4 trillion!

So, the Fed has assets of $2.4 trillion and no debt (everything they have is guaranteed by the taxpayers and everything they buy comes from money they ‘print’ from our Treasury) and the US government has assets of $1.6 trillion and $14 trillion in debt. Yes, it should be apparent to even the dumberest of dumb, we have been swindled. See my previous article on the Fed’s swindle: http://bmfinvest.blogspot.com/p/feds-furtive-filching.html. But there’s more.

All this manipulation and stimulation and intervention has pumped a ton of money into the big bank cartel’s hands. Uh, I mean the ‘financial system’. And yes, a lot of that money has made its way into rallying the stock market. Let’s go even dumber with the Fed. Uh, I mean, ‘deeper’.

March 22, 2011 - Dallas Federal Reserve Bank President Richard Fisher said he is “beginning to see the signs of speculative excess” in the US. He added, “ There’s a lot of liquidity sloshing around the US financial system”. I didn’t get the transcript of the entire speech but he must have also expressed his sudden realization that the Earth was not really flat! Maybe he is seeing signs that the Earth orbits the Sun! Perhaps he is also seeing signs that the invention of the wheel might be useful! We must remind ourselves that Mr. Fisher is known to be a ‘hawkish’ member of the Fed. We currently have earthquakes and tsunamis exacting severe economic damage (Japan’s HAARP-ing), riots spurred by economic disparity (Mideast and Northern Africa, parts of Asia), countries bowing to central banks for debt bailouts (the US, Greece, Ireland,...), inflation threatening the fastest growing economies (China, India, Brazil), a melting US currency, the worst new home sales for the month of February, 2011 in history (since 1963 when statistics were started), falling durable goods orders for the fourth month in a row in February (2011), military conquests everywhere, no budget in the US because the gutless Congress can neither cut spending nor sign off on another $1.5 trillion in borrowed money to add to the already $14.2 trillion debt that cannot be repaid, and economies totally supported by central bank injections. And yet, the stock market rallies on. Speculative excess? Boy, I wonder what finally opened Mr. Fisher’s eyes? Sadly, he also thinks that the economy is improving (in the face of new home sales falling to the lowest level since records began in 1963), unemployment is 8.9% (despite a 3/23/2011 IBD front page story reporting the ‘real’ number of 22% confirming that absolutely no one in the entire solar system believes the fake-o US government numbers), and that Fed-induced inflationary effects would be ‘transitory’ (as they always are until rising prices eventually collapse an economy). Dumb, dumber, dumberest, and even dumberestest.

Why do we accept so many lies? Why do we tolerate a government of mendacity? How has a country conceived by geniuses like Jefferson and Madison (framed a constitution to greatly limit the powers of the federal government), and guided by the sheer indomitable courage of Andrew Jackson (vetoed the charter of the central bank of his time) fallen so far? Why has surrender to these evils of government and central banking come so easily? Because, our country is not only inhabited by the Lloyd Christmases and Harry Dunnes of the world, but we are led by these intellectual dwarfs. Dumb and dumber and dumberest indeed!

Thank you for taking time to read this piece. Now spread the truth. Me? I’ve got stocks to buy to keep the speculative excess going!

Barry M. Ferguson, RFC
President, BMF Investments, Inc.
Primary Tel: 704.563.2960
Other Tel: 866.264.4980
Industry: Investment Advisory
barry@bmfinvest.com
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Barry M. Ferguson, RFC is President and founder of BMF Investments, Inc. - a fee-based Investment Advisor in Charlotte, NC. He manages several different portfolios that are designed to be market driven and actively managed. Barry shares his unique perspective through his irreverent and very popular newsletter, Barry’s Bulls, authored the book, Navigating the Mind Fields of Investing Money, lectures on investing, and contributes investment articles to various professional publications. He is a member of the International Association of Registered Financial Consultants, the International Speakers Network, and was presented with the prestigious Cato Award for Distinguished Journalism in the Field of Financial Services in 2009.

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