Wednesday, June 8, 2011

Incompetence and Confusion: Federal Reserve to Raise Interest Rates? U.S.Dollar, Liquidity Trap, Inflation, and Savings.

May 31st, 2011

The Federal Reserve System appears as an organization at odds with itself. On one hand it claims no fiduciary responsibility to anyone while on the other hand it claims to be concerned for economic welfare of the United States – while maintaining no apparent or mandated constitutional authority for its power, it should be noted. Furthermore, while employing the most arrogant of economic experts from the nation’s most arrogant of educational institutions, The Fed appears as completely incompetent while knowing no more of how to fix the currently listless U.S. economy than does the average simpleton. Additionally, The Fed appears as an organization which has been dishonest and has lied to the American people for so long that The Fed surely now takes the American public for complete idiots as well, all the while professing to the nation of how it cares for our economic welfare. Now, “A top Federal Reserve official says it is time to raise interest rates to avoid causing inflation and economic problems.” (See WSJ link below for quote source.)

The Fed has completely devalued the dollar to a fraction of its prior value (review the historic price of gold). Such currency devaluation was apparently done for any of several arguable reasons (to compete with cheap labor from other nations, to create a currency war, or most likely, to ‘swindle’ Chinese creditors). Not the least of these possible reasons for devaluing the dollar, it seems, was to artificially increase prices in an attempt to superficially – and by definition – put an end to any current economic depression (by artificially bolstering the U.S. GNP as a result of increased prices due to the devalued dollar) - which would help any politician running for reelection, btw.

As for raising interest rates to alleviate inflation pressures, clearly, the devalued dollar would be the only true driving factor for any increased pressures of inflation – as the majority of the population has long been unemployed or underemployed. Consequently, consumer demand and spending could not be causing any inflation. While some may counter that the increased price of fuel has caused inflation pressures to rise, it is likely that the increased price of fuel is also largely a result of the devalued U.S. Dollar (Federal Reserve Note) – a point which I will show at a future date when I have the time. Additionally, anyone that knows anything about economics knows that our government welcomes inflation for its contracting purposes in addition to its [and The Fed's] apparently concerted seigniorage efforts (see inflation tax, fiat dollar/money, and printing money).

As a testament to the level of fools for which The Fed apparently assumes comprises the majority of the U.S. populace, during the midst of the heightened and escalating devaluation of the Dollar – a devaluation resulting from The Fed’s actions, The Fed now wants the populace to increase its savings (according to the WSJ article below which quotes the head of the K.C. Fed). That is, The Fed apparently wants us to increase our savings levels while it continues to devalue the dollar – as if the U.S. populace could be as stupid as the Chinese creditors to allow the banks to hold our money/wealth while the central bank (The Fed) devalues the money to a level where it is worth less than when the money was put into any savings account. Even the Chinese fools/creditors eventually caught-on to what was happening in that regard. Now The Fed (apparently with no more foreigners around to swindle) expects the average American to be just as stupid as the Chinese had been. And additionally, of course, few Americans have jobs which would allow for saving any money, anyhow. What’s more, as a result of the economic depression, depressed real estate values, and nonexistent demand for workers, many retirement savings of aging Americans has long since been wiped-out – all the while during recent years The Fed maintaining an apparent historic position of desiring any such retirement savings to be invested in the equities markets and not kept in savings accounts.

Nevertheless, I must admit, given the listless U.S. economy and the liquidity trap which appears to have gripped the same, The Fed surely needs to do something different (other than lining its own pockets while increasing the value of its gold reserves which it has done superbly well over recent decades with the devalued dollar). Clearly the U.S. economy is in the throws of a liquidity trap. Few, other than myself – apparently, are even willing to admit the possibility of such a liquidity trap in the U.S. Most probably won’t admit such a possibility because they fear reprisals and retribution for stating such from the all-powerful Federal Reserve System and its government lackeys. When corporations pursue capital investments in infrastructure, for example, such typically increases the need for workers (which is a good thing). However, when corporations make these capital investments – say in new facilities, they often secure/sell bonds to ensure the financing of the capital improvement effort. There in lies the rub and the basis of the liquidity trap as well. Because, when interest rates are at an all time low rate of return (as they are currently), the interest rate ultimately has nowhere to go but up. When one buys a bond at one rate of return and then the rate is increased for new bonds, the value of the bond at the lower rate of return is then worth a lesser face value than when it was purchased. Therefore the holder of that bond at the lower interest rate has now lost money due to the availability of a bond at an increased interest rate. So in other words, no one wants to buy any bonds with such low rates of returns as they currently stand because such would surely be a losing investment to the purchaser of bonds. Furthermore, according to some, increased savings only worsens a liquidity trap – and, in fact, any economics textbook will tell you to throw money at a liquidity trap.

So what is The Fed’s true intent in this matter of seeking increased interest rates? Given its lack of fiduciary responsibility to anyone other than itself and its minimal transparency to observers, it is unlikely that any outsider will ever know what is the true intent of The Federal Reserve System. Given the hold and power The Fed has over our governments and politicians, it is unlikely that our governments and legal establishments will help us in this regard either. To be clear, the Nation's Founding Fathers stood against a national/Federal Bank and included no such allowance for a delegation of financial power/authority to a non-government agency/banking cartel [such as The Federal Reserve System] in our American Nation's Constitution.

Surely, it is probably best to let the economy drive itself rather than to let this banking cartel known as The Federal Reserve System make economic policy. After being in existence for nearly one hundred years, if The Fed has not determined by now what to do during times of economic woes to benefit the nation, what is the point in having it run our money supply and setting monetary and fiscal policy? As such, the time is clearly at hand to “SHRED THE FED”!!!

Adam Vernon Trotter / AVT

PS. Should time/history prove The Fed System to be less than forthright, let us hope that ultimate justice exists in the universe and that those bankers who were reported to have secretly met at Jekyll Island nearly one hundred years ago to frame The Federal Reserve System are now being subjected to that ultimate justice – as we can also hope the same ultimate justice will exist for the politicians, lawyers, and judges who continue to allow for the perpetuation of any seemingly corrupt and incompetent Federal Reserve System to this day.

Kansas City Fed's Hoenig Sees Need to Lift Rates

Liquidity trap

How Much Of The World Is In a Liquidity Trap? (Krugman)

Liquidity Trap

Definition of Terms: "Shred The Fed"

Concerning the Federal Reserve System and Fiduciary Responsibility….

Thomas Jefferson and the Federal Reserve System.