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Illustrated: The Incompetence of the Fed

Inside the Fed in 2006: A Coming Crisis, and Banter ... As the housing bubble entered its waning hours in 2006, top Federal Reserve officials marveled at the desperate antics of home builders seeking to lure buyers. The officials laughed about the cars that builders were offering as signing bonuses, and about efforts to make empty homes look occupied. They joked about one builder who said that inventory was "rising through the roof." But the officials, meeting every six weeks to discuss the health of the nation's economy, gave little credence to the possibility that the faltering housing market would weigh on the broader economy, according to transcripts that the Fed released Thursday. Instead they continued to tell one another throughout 2006 that the greatest danger was inflation — the possibility that the economy would grow too fast. – New York Times

Dominant Social Theme: The Fed gets it right ... eventually.Federal_Reserve_Building

Free-Market Analysis: Wow, what an article. At a time when many in the alternative media were shouting out loud about an impending financial crisis, many of the top men at the US Federal Reserve could only make jokes about desperate discounts being given out by house-builders that found themselves saddled with an ever-growing inventory they literally couldn't give away.

And who provides this information? Why, the Fed itself as part of an ongoing "openness" about its deliberations. This is, for the Fed, not a generous move but a desperate one. We've been writing about the trouble that central banking is in and the moves that will have to be made to try to counteract the growing perception that the Fed in particular is a sinecure of the vastly wealthy.

This is a direct result, in our view, of the Internet Reformation that has made it impossible for the power elite to pretend its dominant social themes are grounded in reality. The Fed didn't used to release a narrative of its deliberations. But over time, the pressure to explain this mysterious mercantilist facility has increased significantly. Tens of millions believe in the fear-based promotions of the elite, but millions do not anymore.

Central banking is a good example of just such a fear-based promotion. Invented in England some 500 years ago, the privilege of printing money for the state has been jealously guarded and incrementally expanded by a tiny pool of "central banking" until it has reached its current perfection.

The idea behind central banking in the modern age is that the world's financial system is fragile and prone to breakdown and needs a central clearinghouse to guarantee solvency. The reality is that central banks – particularly the Fed – have garnered a franchise to print money-from-nothing.

The mechanism of the Fed is presented antiseptically in textbooks but the reality is far from bloodless. The few (Anglosphere) families that control the Fed and other central banks around the world have used the literally hundreds of trillions they control to create what is popularly called a New World Order.

They have fully purchased political, military, educational and media facilities in the West and elsewhere in order to propagate the gospel of globalism. They then manipulate current events up to and including wars in order to realize their aim of global governance.

But even as they have approached their goal of apparent total control of the world's political and military processes, they have received setback after setback from an unforeseen facility: The Internet. While it is true that the US's DARPA created the Internet, it was the unanticipated creation of the personal computer that turned a private military facility into a worldwide phenomenon.

The Internet, like the Gutenberg Press before it, has allowed an unfettered exchange of information about the Way the World Works. The result has been a gradual discovery by the masses of central banking and the essential insanity of a system that gives a handful of people the ability to direct trillions to their friends and colleagues.

The inevitable result of the collision of what we call the Internet Reformation and the memes of the elite – specifically central banking – is the gradual creation of a deep dissatisfaction with the Fed and central banking generally.

The elites rely on public acceptance of its memes to govern behind the scenes. If its main methodology of control – central banking – is foundering on the shoals of public skepticism, then the larger plan to create global governance is in jeopardy as well. Without the limitless money and control that central banking provides, the plans of the Anglosphere elite to run the world are not simply in jeopardy, they are likely ruined.

And thus it is that the elite attempts damage control at the Fed, the world's most important central bank and one integral to their plans. The New York Times, one of the most prestigious of the elite's mainstream mouthpieces, presents the elements of this limited hangout. Here's some more from the article excerpted above:

"We think the fundamentals of the expansion going forward still look good," Timothy F. Geithner, then president of the Federal Reserve Bank of New York, told his colleagues when they gathered in Washington in December 2006 ... As the year rolled along, however, Mr. Bernanke increasingly took the view that his colleagues were too sanguine. "I don't have quite as much confidence as some people around the table that there will be no spillover effect," he said.

As for Mr. Geithner, who became Treasury secretary in 2009, his spokesman, Anthony Coley, said, "Secretary Geithner was an early source of initiative at the Fed to reduce risk and make the financial system more resilient even before 2006." ...

For the Fed 2006 began with the departure of Mr. Greenspan, who presided in January over his final meeting as Fed chairman and was then widely regarded as the epitome of a central banker, a master who had guided the American economy through almost 20 years of remarkably consistent growth.

"I'd like the record to show that I think you're pretty terrific, too," Mr. Geithner said in adding his voice to the chorus of tributes at that final meeting. "And thinking in terms of probabilities, I think the risk that we decide in the future that you're even better than we think is higher than the alternative."

[Fed officer} Janet Yellen said: "It's fitting for Chairman Greenspan to leave office with the economy in such solid shape. The situation you're handing off to your successor is a lot like a tennis racquet with a gigantic sweet spot."

We long ago predicted that any damage control the elites attempted to do regarding the Federal Reserve would probably not do much good. The system is indefensible and relied on misdirection and ignorance for justification.

We can see from these article excerpts that a weak attempt is being made to shield Ben Bernanke from the worst excesses of the Fed's extraordinary destructiveness. He is being portrayed as a far-seer who had at least an inkling of what was to occur. Alan Greenspan, within the context of this narrative, is to play the part of the villain.

Yet none of this will make any difference, we believe. It is, to use the hoary cliché, like arranging deck chairs on the Titanic. Thousands of financial writers and bloggers on the Internet were far more prescient than Fed officials when it came to the looming financial crisis. The release of Fed conversations merely confirms the inadequacy of the current system.

In fact, the basic function of central banking is impossible. It is impossible to predict the future value of money. It not feasible to set the volume and value of money either. To do so is to fix the price of money. And price fixing never works. The price fixing of money inevitably leads to ruin.

In our view, ruin is, of course, what the power elite seeks. It intends, from what we can tell, to create a massive worldwide depression (and perhaps a world war of some sort) to usher in true world government with a true global money and worldwide central bank, perhaps the IMF.

Thus, we would hypothesize that the Fed's current "limited hangout" is nothing more than a delaying tactic. The elites at this point are playing for time, and ratcheting up global tensions (see Iran) as quickly as they can.

The trouble the elite families have is that in the context of the Internet they are dealing with a process not an episode. The Internet Reformation has yet to play itself out, in our view, and the results have yet to be fully explored.

Alternatively, it could be that by exposing the Fed to yet more opprobrium via this limited hangout, the powers-that-be intend to destabilize the system of central banking in order to generate a true, international gold standard controlled by some government entity, perhaps the UN.

Conclusion: This seems far-fetched to us as well, given the troubles the elites are having creating a current monetary consensus. If they do have this in mind, it seems to us they may end up outsmarting themselves. It's happened before.

SOURCE: The Daily Bell

© Copyright 2008 - 2012 All Rights Reserved. The Daily Bell is an informative compendium of independent economic views and analysis, which is published by The Foundation for the Advancement of Free-Market Thinking (FAFMT).

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