Who or what keeps central banks "honest"

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BungeeBones's picture
BungeeBones
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Who or what keeps central banks "honest"

There is an adage that there is "honor among theives".. Given that there are central banks operated all around the world there must be a "code" among them which the rest of us are not privy to. There must be something, some code that they  have to keep their members in-line.

The cries from the Ron Paul, Peter Schiff crowd is that the US Fed has somehow, someway crossed that line and we (the people) need new management.  We need to audit them for the first time to do what? Why? To prove they were mismanaged? Their peer central banks around the world haven't figured that out? My thought is this - who are we to step in and tell the Fed, or any other central bank how to run their business?

Before I get flamed let me elaborate. Nearly all of the central banks around the world use FRNs as reserve currency. Are they professional bankers? Yes. Do they know that there is no metals backing the FRN? Yes. Are they over 21 (or of legal age and mental capacity to contract)? Yes. So if all these central banks around the world are happy and content shifting around worthless pieces of paper among themselves why should it matter to us? They are businesses within themselves. Are the Ron Paul et al. saying the central banks are too big to fail? and we have to step in and bail them out?  If you listen clostly to the Ron Paul and Peter Schiff rhetoric that seems to be precisely what they are saying. Both are saying, in essence, that the Fed has been mismanaged and has printed up too much "money" and it will collapse itself and the economy. They both imply that "the people" need to step in and take over management. But when they do, the people also take over the "toxic asset" that they are. Perhaps the bailout is just a warm up to transfer the Fed to "the people" to saddle them with their own private debt?

Ron Paul et al. spout "sound money" principals but I'll put forth this undeniable fact that connects the dots here. Every one of those central banks I mention has had perfect, complete 100% freedom to "cash in" their FRNs as soon as they got them. Instead, they chose to hoard them. Seems like a pretty stupid decision on their part doesn't it?  So again, are they too big to fail?

If I am right then it has been their HOARDING of FRNs that has led to the current collapse, not their printing. If they had been converted to better stores of wealth during these last decades any detrimental effects that the conversion and redemption of the FRNs would be behind us. Hoarding to the point where dumping them could ruin an economy should be viewed as an act of economic war. It could be seen as a very effective weapon if one looks from that perspective.

But looking back what did FDR do to end hoarding? Well the gold confiscation act says it itself was the action taken to break the back of the hoarding. What action could any particular governemnt take today against foreign central banks who hoard its currency? The more they save them the bigger the bomb they have gets. Could any country afford to let that happen?

So I am starting to think that total and massive printing may not be a bad strategy after all (a complete paradigm and polar shift for me). It tells the central banks around the world not to hoard the notes and find some other storage medium. So as far as investment strategy goes Peter Schiff seems right on the money when he says get out of the "dollar" (he really means the FRN) . As the hoards of FRNs get ripped free from their anchors they will all end up doing what they should have been doing right along (i.e. coming home for settlement). And once its settled the debt, if any, is retired. But right now, the debt is written up as FRNs. That is the contract. And as long as they want to hoard them then we (the FED) have perfect license to print them up by the shipload if necessary to break up the hoarders.

The bottum line is that ANY mismanagement of any particular central bank will result in disciplinary action from both its peers (i.e. other central banks stupid enough to accept pieces of paper) and the marketplace.. The lesson learned by them seems like an obvious one - don't store wealth in paper assets. And the bottum line is that the Fed can issue its own debt instruments backed by gold at anytime they want. Nixon closed the gold window, and any executive action or congressional can begin issuing secured debt at any time. What all the panic and rhetoric about the demise of the "dollar" is really about the loss of an unsecured credit line that we have enjoyed for forty years.  I stress the point, unsecured however.

 

As a national security issue, however, I don't think we can continue to keep letting the world central bankers to keep hoarding dollars. Printing up massive amounts of FRNs does reduce our own savings (what little bit we have) but again, why did those people not convert their own paper assets to other storage mediums? Because they too, rode the "hoarding" train and kept their wealth in FRN denpominated investments. Are they over 21?

 

 

Cloudfire's picture
Cloudfire
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Re: Who or what keeps central banks "honest"

Hi, Bungee Bones;

I have to mull this over a bit, to discern the ramifications of what you're saying, but I give you an "A+" in Courage, for posting this on CM, and a solid "A" for Original and Independent Thinking, which is often in short supply.  Regardless of how this all shakes up, I applaud you for presenting a viewpoint that steps outside of the new "conventional wisdom".

 

 

 

goes211's picture
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Re: Who or what keeps central banks "honest"

My thought is this - who are we to step in and tell the Fed, or any other central bank how to run their business?

I don't want to tell anyone how to run THEIR business.  However, their control of money, credit, inflation, ... does effect everyone and everything.  That makes their business, my business!

Ron Paul et al. spout "sound money" principals but I'll put forth this undeniable fact that connects the dots here. Every one of those central banks I mention has had perfect, complete 100% freedom to "cash in" their FRNs as soon as they got them. Instead, they chose to hoard them. Seems like a pretty stupid decision on their part doesn't it?  So again, are they too big to fail?

If I am right then it has been their HOARDING of FRNs that has led to the current collapse, not their printing. If they had been converted to better stores of wealth during these last decades any detrimental effects that the conversion and redemption of the FRNs would be behind us. Hoarding to the point where dumping them could ruin an economy should be viewed as an act of economic war. It could be seen as a very effective weapon if one looks from that perspective.

Also can you elaborate on your feelings about hoarding?  You seem to think that people don't have the right to hoard their own property.  Can you explain what exactly hoarding is, how it is bad, and who gets to decide what quantity is hoarding?  Based upon your answers I may question whether you believe in private property.

If you were addicted to gambling and your bookie continued to allowed you to ring up losses, who's fault would it be when the debt finally comes due?  In your world the gambler is not at fault, only the bookie for not collecting before things got out of hand.  Seems like a strange way of looking at the problem to me.

The bottum line is that ANY mismanagement of any particular central bank will result in disciplinary action from both its peers (i.e. other central banks stupid enough to accept pieces of paper) and the marketplace.

That assumes they are actually in competition.  What if they are all using their powers primarily to extract unearned wealth from society at large for their own benefit.

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DrKrbyLuv
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Re: Who or what keeps central banks "honest"

Hello all!

Interesting "big picture" questions.

Bungee asks:

Who or what keeps central banks "honest"

They aren't honest.  Maybe the question should be who manages, regulates and controls them?

The central banking cartel members operate under different circumstances and with unequal power.  For example, The Peoples Bank of China is owned and operated by China's government.  There are a number of private banks in China but the issuance and control of their currency is a government function.  This enables China to avoid a national debt since the federal government never has to borrow any money from private banks.

On the other hand, the Federal Reserve is privately owned by a small group of international bankers, including Rockefeller, Warburgs and the big kahuna - the House of Rothschild.  The Fed is managed through the New York branch, which accounts for over 50% of the reported stock.  The New York fed is dominated by J.P. Morgan Chase, Citi Bank, Goldman Sacks, etc.

The BIS (Bank of International Settlements) and the IMF regulate the network of central banks.  The BIS is owned mostly by the central banks of the west with China gaining a stronger voice.  China complies with most of the BIS rules and provisions - but not all.  They ignore the rules when they think it detracts from their sovereignty and best interests.

For example, they protect their currency and make demands on most large corporations that want to do business with China.  For example, Japan wants to export more cars to China, but China is requiring some factories be built in China - and they want to be partners of those plants.  The did the same thing with GM and that's why GM will build plants in China instead of the U.S.  Simply put, they believe in fair trade (by their definition) and not free trade (by our definition).

Most of the nations that use a private central bank, are being pulled together (consolidated) under the BIS - IMF.  For example the US, UK (the Bank of England was nationalized but the creation of money is a private function through the big banks), Germany, France, Spain, etc.

This is creating a rift as nations with their own central banks want to keep their financial sovereignty.  I wish the U.S. were one of them.

China seems to be gaining power in the IMF-BIS while doing so on their terms.  They have a greater say in what we do in the U.S. while we have no say in what they do.  Simultaneously, I think China is building a parallel system.  They can invite the members they want (SCO) to cooperate under a system that allows greater autonomy for their members.

Larry

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Re: Who or what keeps central banks "honest"

The market use to, it may not have caught them right away.  This is when we had the "mark to market" method of analysing assets.  In this method they had to price an asset at whatever the market would by them for and take losses and gains each quarter. 

Now we have the "mark to (for the lack of a more accurate term) fiction"  they decide what the stuff is worth untill they sell it than take the losses and gains at that point.

That is what kept all banks including central banks somewhat honest.

Now we just live in a world with purple skies and unicorns.  God help us!

BungeeBones's picture
BungeeBones
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Re: Who or what keeps central banks "honest"
goes211 wrote:

My thought is this - who are we to step in and tell the Fed, or any other central bank how to run their business?

I don't want to tell anyone how to run THEIR business.  However, their control of money, credit, inflation, ... does effect everyone and everything.  That makes their business, my business!

 

So can I interpret that to mean that you don't want to interfere but will? How do you plan or want to interfere? Tell the Fed how to operate? How much/little money to print? That's called management. As I pointed out, the charge against the Fed is mismanagement. The proposed cures I've heard are ideas about  perspectives on proper Fed managment. But my overall point is that the current mass printing of FRNs might be a sound management considering the potential economic bomb  China, the Middle East and Japan have accumulated. Inflate the currency to difuse the bombs.

goes211 wrote:

Ron Paul et al. spout "sound money" principals but I'll put forth this undeniable fact that connects the dots here. Every one of those central banks I mention has had perfect, complete 100% freedom to "cash in" their FRNs as soon as they got them. Instead, they chose to hoard them. Seems like a pretty stupid decision on their part doesn't it?  So again, are they too big to fail?

If I am right then it has been their HOARDING of FRNs that has led to the current collapse, not their printing. If they had been converted to better stores of wealth during these last decades any detrimental effects that the conversion and redemption of the FRNs would be behind us. Hoarding to the point where dumping them could ruin an economy should be viewed as an act of economic war. It could be seen as a very effective weapon if one looks from that perspective.

Also can you elaborate on your feelings about hoarding?  You seem to think that people don't have the right to hoard their own property.  Can you explain what exactly hoarding is, how it is bad, and who gets to decide what quantity is hoarding?  Based upon your answers I may question whether you believe in private property.

If you were addicted to gambling and your bookie continued to allowed you to ring up losses, who's fault would it be when the debt finally comes due?  In your world the gambler is not at fault, only the bookie for not collecting before things got out of hand.  Seems like a strange way of looking at the problem to me.

No, I think people have the right to hoard. If I write you checks every week and you never cash them though, if I later change banks and your hoarded checks become worthless why would you blame me and not yourself for not simply cashing them? It's about who is reponsiblle for the current problem and hoarding is a big part of the cause. If no central banks ever saved FRNs as their reserves we would not be having this discussion at all. As such, their decision to keep FRNs was an investment decision. They (the world central banks) don't need to be bailed out from own poor investment decisions. Yes, I am totally distancing myself from any responsibilty for Fed actions. They  are not backed "by the people".

goes211 wrote:

The bottum line is that ANY mismanagement of any particular central bank will result in disciplinary action from both its peers (i.e. other central banks stupid enough to accept pieces of paper) and the marketplace.

That assumes they are actually in competition.  What if they are all using their powers primarily to extract unearned wealth from society at large for their own benefit.

 

You seem to be implying world wide colusion between Japanese, American, Russian, Chines, European etc. central banks. That seems quite far fetched to me. Yes they are greedy, yes they want to run the world, but their greed keeps them competing with each other too.  And that is why I started with the remark about "honor among thieves".The central banks are thieves but right now it looks like one central bank (the US Fed) is about to rip off a bunch of other centralbanks. Do we really want "the people" stepping in the middle of that fray? Or do we let the central banks thash each other to death like in a gang war?  I don't think the answer is for "we the people" to become like them and start their own fiat money system and convince the rest of the world to use IT as a new reserve currency.  The fundamental problem is that central banks around the world fell into the trap of using unbacked securities from a private bank (the Fed). They should have known better. What more can I say?

 

 

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DrKrbyLuv
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Re: Who or what keeps central banks "honest"

Bungee wrote:

But looking back what did FDR do to end hoarding? Well the gold confiscation act says it itself was the action taken to break the back of the hoarding. What action could any particular governemnt take today against foreign central banks who hoard its currency?

There was no such thing as "gold hoarders" - that bogeyman was created by FDR to pass blame on the fact that the U.S. was lying about having anywhere near enough gold to back up their currency. 

There was NO reason to confiscate the people's gold.  It was government theft pure and simple.  When the U.S. went off the gold standard, it ended their need to keep any gold since the money couldn't be redeemed domestically.  The international window was kept open to allow the big banking cartel to sack our treasury and gold reserves.

FDR was a thief and a traitor...IMHO...those are strong words but appropriate...

Larry

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BungeeBones
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Re: Who or what keeps central banks "honest"
DrKrbyLuv wrote:

Bungee wrote:

But looking back what did FDR do to end hoarding? Well the gold confiscation act says it itself was the action taken to break the back of the hoarding. What action could any particular governemnt take today against foreign central banks who hoard its currency?

There was no such thing as "gold hoarders" - that bogeyman was created by FDR to pass blame on the fact that the U.S. was lying about having anywhere near enough gold to back up their currency. 

There was NO reason to confiscate the people's gold.  It was government theft pure and simple.  When the U.S. went off the gold standard, it ended their need to keep any gold since the money couldn't be redeemed domestically.  The international window was kept open to allow the big banking cartel to sack our treasury and gold reserves.

FDR was a thief and a traitor...IMHO...those are strong words but appropriate...

Larry

 

Thanks Larry,

 

I was not supporting or endorsing FDRs actions but rather the tactic. If the stated reason of the confiscation was indeed a lie (and I don't doubt it) the storyline that it was done to combat "hoarders" worked. If it worked then with all the reasons for doubt that you bring up how much more effective would it be today against the massive amounts that China , the Middle East,  Japan and Europe have accumulated? My main point is to point out that these entities knew fully well the risks they were taking by lending  with trepayment terms of  unsecured instruments. It's as if we have this national guilt trip and should feel sorry for all these central banks that are about to get ripped off by the fed. If they knew what they were getting into it doesn't even rank as being ripped off, however, because they knew what they were getting when they entered the deal. That is called making a bad investment, not being ripped off.

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IMO the banks will eventually take ALL of our assets...

The way the world appears to be heading I can forsee a time in the future where no one other than the few who are currently consolidating their global power will own any private assets.

In other words ownership of any assets by individuals (ie 'we the people') will eventually disappear.

By that I mean home ownership for the vanishing middle class will disappear along with individual ownership of any other physical or financial assets.

I can see a future where the banks will own just about all residential property in perpetuity and people will pay a sizeable bond plus rent to the banks in order to be accommodated.

On the surface it will seem not unlike a mortgage except the property can never actually be purchased and the payments to the banks will never cease. Effectively your landlord will be a bank!

There will be nothing to hand down to one's offspring and no possiblity of ever becoming financially independant even later in one's life.

So all you home and property 'hoarders' out there take heed!! Wink

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Re: Who or what keeps central banks "honest"

I don't want to tell anyone how to run THEIR business.  However, their control of money, credit, inflation, ... does effect everyone and everything.  That makes their business, my business!

Now that is the central issue, why do they control money and credit?  See that is the problem most people have is not understanding that money is no different than any other product.  Why do we have a single entity (The FED - a cartel) in charge of money?

The main problem I see is people debate about who should run/control the central bank rather than the more appropriate question which is why have one at all?  You can even go further and ask why have a single currency?  Allow competing currencies, include one run by bankers and let the individual and businesses decide which to use.  Could be gold, silver, or some other coin.  Could be something entirely different like the digital coin that someone posted about earlier, could be the dollar or another fiat currency.  The problem is that any government created cartel/monopoly will always result in inefficient markets.

I personally think we should end the fed, but I think the way to end the fed is to simply repeal the legal tender laws and bank regulations that create a monopoly and let people choose.  I think we would see the Fed and it's associated banks falter and go under very quickly.

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goes211
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Re: Who or what keeps central banks "honest"

Now that is the central issue, why do they control money and credit?  See that is the problem most people have is not understanding that money is no different than any other product.  Why do we have a single entity (The FED - a cartel) in charge of money?

The main problem I see is people debate about who should run/control the central bank rather than the more appropriate question which is why have one at all?  You can even go further and ask why have a single currency?  Allow competing currencies, include one run by bankers and let the individual and businesses decide which to use.

 Exactly!  Now that sounds like a free market which is why none of the power-brokers ( central banks, politicians, large corporations, ... ) would ever go for it.

 

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goes211
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Re: Who or what keeps central banks "honest"

 So can I interpret that to mean that you don't want to interfere but will?

NO!

How do you plan or want to interfere?

I only ask that they not interfere with me.  I believe in Liberty which means they are free to do whatever they want but their rights end where mine begin.  The current legal/financial system allows them to take from me without my permission.

Tell the Fed how to operate? How much/little money to print? That's called management.

NO! NO! NO!

As I pointed out, the charge against the Fed is mismanagement.

Not from me.  It is that they have powers that no one should have in a free society.

The proposed cures I've heard are ideas about  perspectives on proper Fed managment. But my overall point is that the current mass printing of FRNs might be a sound management considering the potential economic bomb  China, the Middle East and Japan have accumulated. Inflate the currency to difuse the bombs.

Sound management for whom?  I doubt my mother living off a fixed income pension would consider inflation sound management.

I do think I understand ( and may somewhat agree with ) one of your points.  Basically you are saying that these America's debtors should have realized that we were never going to pay back our debts so you are advocating a soft default through inflation.  The problem is that the middle and lower classes ( anyone far away from the printing press ) will get royally screwed by this strategy.

I also don't believe that anyone should have that power, much less a group of unelected bankers.

 You seem to be implying world wide colusion between Japanese, American, Russian, Chines, European etc. central banks. That seems quite far fetched to me. Yes they are greedy, yes they want to run the world, but their greed keeps them competing with each other too.  And that is why I started with the remark about "honor among thieves".The central banks are thieves but right now it looks like one central bank (the US Fed) is about to rip off a bunch of other centralbanks. Do we really want "the people" stepping in the middle of that fray? Or do we let the central banks thash each other to death like in a gang war?  I don't think the answer is for "we the people" to become like them and start their own fiat money system and convince the rest of the world to use IT as a new reserve currency.  The fundamental problem is that central banks around the world fell into the trap of using unbacked securities from a private bank (the Fed). They should have known better. What more can I say?

I am not claiming some sort of conspiracy.  I believe that when push comes to shove they will stick together because an unraveling of one of the major players could threaten the sweet deal that they all currently have.

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Re: Who or what keeps central banks "honest"
goes211 wrote:

 

The proposed cures I've heard are ideas about  perspectives on proper Fed managment. But my overall point is that the current mass printing of FRNs might be a sound management considering the potential economic bomb  China, the Middle East and Japan have accumulated. Inflate the currency to difuse the bombs.

Sound management for whom?  I doubt my mother living off a fixed income pension would consider inflation sound management.

I do think I understand ( and may somewhat agree with ) one of your points.  Basically you are saying that these America's debtors should have realized that we were never going to pay back our debts so you are advocating a soft default through inflation.  The problem is that the middle and lower classes ( anyone far away from the printing press ) will get royally screwed by this strategy.

I also don't believe that anyone should have that power, much less a group of unelected bankers.

 

 

No, You miss my point alltogether. What I am saying is there is no American debtors if the agreement was based on fraud. My main point about the other Central Banks here is that there is no way in hell they can say they held FRNs unknowingly. Like you said, they all work alike and they knwo the loans they made were payable in FRNs. There is absolutely no fraud for them

Regarding your mother on a fixed income. Well, her mother was on a fixed income too and they inflated the previous generations saving themselves didn't they? I mean Congress has upped the debt limit every single year. So what's the deal there... when one gets old its ok lay a guilt trip on your kids so they don't shut you off??? Don't take this the wrong way, because yours is the typical American viewpoint, but it is selfish and hypocritical to say you want to tear down the Fed yet complain of the ramifications of doing it.  My folks are 92. He's been retired for 30  years. When he started working he payed about 2.5% of his income. I've had to pay in 7.5%. He did'nt have to pay medicare I don't believe while that charge is more than the social security deduction.  When he started, life expectancy was lower than the retirement age. They didn't expect people to live long enough to collect it but if they did, there was a safety net. Now, they live longer on social security than the time they worked (almost).

But, let me ask you this. Did you or your mother ever try to operate using silver dollars in lieu of paper ones? After all you can buy them at kitco.com. So why aren't Americans refusing the use of the "evil system"? No one holds a gun to their head forcing them to conduct business in FRNs.

 

Buy Silver coins. pay your paper boy in silver. Go to the local mom and pop and buy your bread with silver coins. I say this, if we don't then we are as big a part of the problem as the Fed is. We are the enablers. We like the bennies of free money but complain about the reality of it and the writing on the wall.

 

 

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