You know Bernanke is destroying the country when the banking industry the Fed was designed to benefit turns against its master.
John Hardy slams the Fed in this epic article:
Bring it on, Ben!
So, Ben, let’s get this thing over with and let’s test how this market is positioned for what you have to say today. We’re tired of speculating and gaming what you may or may not write in today’s statement and how many billions of dollars you might conjure into existence on a monthly basis for the next year or more. Bring it on: let’s watch another wave of monetary policy history crash over us as you pull out the hammer and close your lips around another batch of coffin nails – ready to grasp the first nail to drive into the soon sealed coffin of Keynesian economics and then another in the coffin of fractional reserve banking and perhaps another into the coffin of fiat currencies. Oh, it’s all the same coffin? Fine – it will go quicker that way. Just remember to save a few nails for the millions of coffins of pensions and savings: for all of the responsible people who didn’t join in on the credit bonanza of the last few decades and spent their lives scrimping and saving. Let’s devalue their savings and nuke the US currency rather than go the quicker and more just road of default, shall we? Extend and pretend is the Fed’s motto, after all. Just watch out for those new crazies on the Hill that are starting to bang on the doors of the Eccles building. Will they break in and cart you off before you’ve finished your final magnum opus – the end of the US dollar and the US economy?
Bring it on, Ben: take us that much nearer to the denouement of 100 years of US Federal Reserve. There won’t be a second hundred years. The final countdown starts now.
John J Hardy is Consulting FX Strategist for Saxo Bank. John has developed a broad following from his popular and often quoted daily Forex Market Update column, received by Saxo Bank clients and partners, the press and sales traders.
Most people don’t understand the true purpose of the Federal Reserve system and why the banks typically love it like their daddy. I find that even educated people who know the Fed is destroying the country don’t know specifically why the banks want the Fed.
The reason why the banks want the Fed is because it can evenly inflate the money supply and circumvent market forces that naturally limit inflation. It can do this because the bank notes it issues are legal tender and the entire nation is forced to use their specific notes and all other banks in the US must accept their notes as currency.
Prior to the Fed, banks would reject notes from other banks that they deemed unsound. If a bank was issuing paper in an inflationary manner, its notes would become devalued and possibly rejected by other banks. If people felt the bank was insolvent, they would rush to pull their money out before it declared bankruptcy.
This market pressure kept a tight lid on banks inflating the money supply and other reckless behavior. The banks found they could not inflate as much as they wanted to and this hampered their profits.
The only way for the banks to inflate the money supply and not face bank runs was to have a government imposed cartel. That cartel was established in the Federal Reserve system. Now the central bank can inflate the money supply, and because it has the ability to print endlessly while its notes are legally imposed on the public, it can not go out of business from a bank run.
The central bank is free to inflate as much as it likes while the private banks reap the huge profits from the expansion of private debt that accompanies the suppressed interest rates. The operation of the Fed is exactly like that of our Ponzi Socialist Security system, were by a government imposed mandate keeps a completely insolvent system solvent through violently looting the working members of society.
In a normal free market, the major banks would have been ran out of business decades ago. Only through the use of violence against the innocent by government can the major banks remain in business.
Apparently Saxo has woken up to the self-destructive nature of this unholy alliance between the banking industry and the government. Even the private banks are coming to realize that eventually this system will destroy them as well as the rest of the nation. The Fed is so reckless and destructive that it has made its own beneficiaries turn against it.