Dudley Tells a Porkie

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machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Dudley Tells a Porkie

Stung by criticism of Bernanke's Folly, the Fed sends out its flacks for damage control. William Dudley of the New York Fed is the highest-ranker:

Mr. Dudley rejected the idea that the Fed might be setting the stage for uncontrollable inflation in years to come. He said the Fed had tools for draining the bank reserves sitting on its balance sheet.

“We are very, very confident that those tools will be completely effective at keeping inflation in check,” he said. “We are completely willing to use those tools, when the time comes, to prevent an inflation problem. Higher inflation is not a way out. It is not a solution.”

http://www.nytimes.com/2010/11/16/business/economy/16fed.html?hp

We've already been through this charade. From the time the Fed started its panicky asset purchases in Sep. 2008, it claimed that it would shed the huge balance sheet expansion in due course. This intention was repeatedly cited in Fed meeting minutes.

Now, with QE2, the idea of reversing QE1 has evaporated. Instead, the central planners are doubling down with another trillion of thin-air, money-for-nothin' acquisitions from their primary dealer cronies and henchmen.

As I wrote in Dec. 2008 and reiterated yesterday, the functional logic of a Ponzi scheme requires an exponentially expanding base of fiat credit. Dr. Martenson makes the same point in the Crash Course. Any attempt to reverse the process produces an economic crash. This is an iron law.

Dudley's 'draining reserves' tall tale is no more sincere this time than it was two years ago. So I'm calling him out on this brazen prevarication. But then, why would anyone trust a ringer with this kind of resume:

Mr. Dudley ... joined the New York Fed in 2007 from Goldman Sachs, where he was the chief United States economist.

That would be the same Goldman Sachs which was allowed to masquerade as a commercial bank (and received a waiver of the statutory 30-day waiting period) so it could latch on to the Federal Reserve's 'free money' sugar teat. And guess what -- this systemic abuse of allowing investment banks access to government-subsidized credit hasn't been reversed either.

One hopes Dudley Do-Wrong ends up sharing a windowless cell with the largest-scale con artist in history, Bozo 'Benny Bubbles' Bernanke. Fraud is fraud, even with a government license to counterfeit. The venerable common law on this point, extending back centuries, far predates the unconstitutional Federal Reserve Act of 1913.

Up against the wall, Do-Wrong! A fully-informed jury of sovereign citizens has a bone to pick with you.

 

 

DrKrbyLuv's picture
DrKrbyLuv
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 1995
Re: Dudley Tells a Porkie

Hello Machinehead!

Bozo 'Benny Bubbles' Bernanke has far too much power in unilaterally deciding to unleash QE2. Why was there no congressional debate or even a study done? It looks like sovereign has left the citizens as we no longer have input. "Benny Bubbles" has become the fourth branch of government - unelected, unaccountable and unrepentant!

If QE2 is needed, it should be done at 0% interest to maximize the desired effect. After all, our credit is solely used to back the money and it will have a “devaluing” effect on our currency (taxing effect on the people). ZIRP for the people!

My understanding is that the $600 billion will be handled through the FOMC which means in addition to creating the targeted $600 billion, an additional $600 billion will be created as unnecessary reserves. Excess reserves are already around $1 trillion, why do we need more (maybe because they can milk another 0.025% interest from the sugar teats of the added reserves?).

Why not go around the FOMC and monetize the debt without adding to reserves?

Of course this could become a theoretical accounting problem as reserves act as liabilities to the Fed (assets to the member banks), without them, how would the Fed show the liability? Hmmmmmm…it looks like the Fed has no real liability as its promise to pay is accepted as the final payment - what a gig!

Larry

P.S. - The carry trade can cruise in luxury aboard the QE2 while we foot the bill

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