We know that the Federal Reserve has inaugurated a policy of aggressively buying Treasury bills, agency debt, and mortgage-backed securities as part of what is often described as Quantitative Easing. The numbers are hard to absorb: $300 billion of Treasuries, $200 billion of agency debt, and $1.2 trillion of mortgage-backed securities, all between March and September.
The Fed doesn’t tell us whom they buy their Treasuries from, but it seems likely to be the same big banks that serve as primary dealers buying the debt from the government. The primary dealers appear to be holding a slice of this paper for only a short term before selling it on to the Federal Reserve. The net of those transactions becomes a further monetization of the federal debt. So whats going on here?
Lets see:
Banks buy debt and sell it to the Fed for profit.
Banks take the extra money and invest in a distorted market for more profit.
What have they actually done? Essentially nothing. All that really happens is that the banks get free money from the Fed so that they can "legally" make more money. The Fed takes the debt and contracts it to the U.S. Government/The Tax Paying U.S. Citizen. The Tax-Payer is on-the-hook for his/her lifetime including the lifetime of their children. Yet another scheme to make banks even more money!
Remember: The Fed makes money from nothing. It costs them only a few pennies to have their own Federal Reserve Notes (not backed by anything of worth/value, it is FIAT money). They loan out this paper via contract to the government who then guarantees that every U.S. citizen will be taxed in some way and that money will go to the Federal Reserve Banks. The IRS is a tool that exists only to serve the Federal Reserve Bank obligation.
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So even in times of recession or economic downturn, the Federal Reserve & Friends are making money on the backs of the same people it busted in causing the recession, in order to make even more money. I hope that is simple enough for most of you to understand.
The Fed is also buying even more mortgage-related debt. With the government now guaranteeing mortgage-backed securities, those securities are not that much more risky than actual government debt. This gives the Fed further rationale for having purchased almost $600 billion of mortgage-backed securities since March. Which brings us to a likely connection to the speed of the stock market rebound since March 2009. Looking through the evidence today, we can see that the Federal Reserve has purchased close to $250 billion in Treasuries, and that may have provided the liquidity needed for the big banks to turn around and dump new cash into stocks. Goldman Sachs made upwards of $100 million (per day) on many days through its trading activities in just one quarter alone.
You can compare the surprising stock market rally to the Fed’s purchases of Treasuries. You can likely suspect despite what they say in the media, that our stock market is far more manipulated than most people realize. As a cautionary note, many of the emergency programs of making direct loans to financial institutions are being wound down by the Federal Reserve at the same time it is focusing on direct purchases in these specific markets. Those countervailing actions have kept the total balance sheet of the Federal Reserve relatively stable since it doubled in the second half of 2008, but that could quickly change if the Fed wanted to launch new programs.
So we are the Fed's important game pieces in a giant profit-making game. The Fed is the game's creator, rule-changer, banker, and extra player, all rolled up into one entity. The Friends of the Fed are additional players in their game. Try as we might, or not so much, the odds are heavily stacked against us (the tax-paying American). In fact, the way the Fed writes the rules, there is no way that You and your family members have any chance to beat the game. And to not play?? Well, its not an option at this point because your leaders have opted you, your family, friends, and co-workers into the game. After all, your leaders are your representatives and they do so on your behalf. Don't you like those odds?
WAKE UP AMERICA!
WAKE UP UK!
WAKE UP UK!
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