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Monday, January 31, 2011

Federal Reserve Slashing and Burning the Middle Class

Warning signals are going off over the Fed's destruction of dollar and of the middle class, but very few are listening.

Mike Whitney / Counterpunch.com:
Treasury Yields are Blinking Red

Treasury yields are "blinking red", but the Fed keeps acting like nothing's wrong. What's the deal?

Let's explain: Fed chairman Ben Bernanke's bond purchasing program (QE2) has sent the yield on the 30-year Treasury skyrocketing. At the same time, the the 2-year Treasury is stuck at a lowly 0.61. That means, the "yield curve" between the two bonds has grown steeper, which normally happens at the beginning of a recovery because investors are moving out of "risk free" bonds to riskier assets like stocks. Typically, the yield on the long-term bond will start to go down on its own because investors expect the Fed to raise short-term rates to curb potential inflation. But that's not happening this time. Why? ...

the Fed is planning to give every working man and woman in the US a big pay-cut so they can go nose-to-nose with foreign labor. You can see how this blends seamlessly with Obama's State of the Union Speech where he focused on "competition" as his central theme...
Kelly Evans / Wall Street Journal:
The Fed's Magic Show Appears to Be Over --
the Fed's failure reflects a longstanding flaw in its approach. For years, it has been pushing interest rates lower, doing so after each successive downturn as inflation became less and less of a concern. But that wasn't simply due to successful monetary policy. Technological innovation, the globalization of the work force and demographic change had plenty to do with it, too.

Instead of being a cure-all, the Fed's policies spawned two great asset bubbles...

The only real fix is to lower the cost of U.S. workers relative to foreign rivals and machines, or else raise their bang for the buck. The latter, while clearly preferable, requires education and training that won't turn things around overnight. The Fed, meanwhile, has tried its hardest to generate separate, asset-based sources of income and spending. But that has bred backlash and complacency. The Fed, in other words, is out of silver bullets.
Kelly Evans / Wall Street Journal:
Cost Inflation Puts a Wrench Into the Works --
The "prices-paid" component of the ISM [Institute for Supply Management] survey, or what manufacturers pay for materials, has rebounded to 72.5 in December from a low of 18 in December 2008. While still below its 2008 high of 91.5, that suggests broad-based cost pressure on manufacturers...
Reuven Brenner / Forbes:
The Federal Reserve: Fool Me Once, Shame On You … --
If and when the Federal Reserve should lose money on the $2 trillion plus of securities on its balance sheets so as to erase its capital, the central bank does not have to record the loss...

If interest rates rise, the Fed could get even deeper in the hole and pay back Treasury with freshly minted money, effectively monetizing the losses. That means inflation and even more dollar devaluation...
 Kelly Evans / Wall Street Journal:
The Great Stagnation, Low-Hanging Fruit and America’s ‘Sputnik Moment’ --
... economic development and technological innovation have reached a plateau, and unfortunately we in America are only now just realizing it...

three major forms [of low hanging fruit] — free land, technological breakthroughs (specifically during the 1880-1940 period), and smart, uneducated kids — and two minor ones, cheap fossil fuels and the U.S. Constitution. In other words, these preconditions gave rise to rapid growth and incredible prosperity over the last couple of centuries, but we have now exhausted their dividends...
Federal Reserve openly aiming for inflation – The Fed looks for a sequel in punishing the U.S. dollar and hopes to inflate debt and the middle class away...
The Federal Reserve is concerned about the banks. That is the bottom line. They do not care about a stable currency and the proof is in the pudding as they say. The US dollar has taken a beating over the last few decades. The Fed is not a government agency yet has the power without Congressional oversight to basically destroy the purchasing power of millions of Americans. How is that even possible? Keep in mind that the Fed during this economic downturn has taken on much more than their original charter had mandated. Is this the kind of world we want where the banks can use the taxpayer as a piggybank with no accountability?...
Author speaks of world with limited Federal Reserve --
In an era of economic unrest and financial instability on the federal level, New York Times best selling author Dr. Thomas Woods offered his perspective on the failure of the Federal Reserve and its responsibility for recent financial calamities...
Intermex Financial: 
Shut Down The Federal Reserve --
#1 We Must Shut Down The Federal Reserve...
 Andrew Jackson: Slayer of the 2nd Central Bank

Andrew Jackson, seventh President of the United States, had it right.

C.J. Maloney / Real Clear Markets:
1836: The Death Of Our 2nd Central Bank --
"In half an hour, I can remove all the constitutional scruples in the District of Columbia." - Nicholas Biddle, President, Second Bank of the United States (1822-1836)

The Second Bank of the United States (one of America's earlier experiences with central banking) was created in 1816, just in time to exacerbate the Panic of 1819, before succumbing to an untimely death in 1836 at the hands of President Andrew Jackson (1829-1837), who doubtless has Ron Paul's admiration for the deed. "The Bank is trying to kill me", Jackson declared, "but I shall kill it!" Rare for his species, the words were not mere campaign rhetoric; he meant what he said.

On September 22, 1832, Jackson ordered the public deposits at the Bank to be removed and dispersed amongst a group of 91 different state banks. When the bill re-chartering the Bank was passed by Congress in 1832, Jackson vetoed the measure, making it known that he intended to terminate the entire institution. The presidential election of 1832 (which pitted Jackson against the arch-mercantilist and Bank supporter Henry Clay) was heavily influenced by the question of the Bank's re-chartering. Jackson crushed Clay, winning 288 of 337 electoral votes...

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