August 03, 2009

Audit the Fed?

Friday's Happy Face entry was, I guess, somewhat satirical. Actually, I simply do not see how the United States economy can recover in anything under a decade or so. The interesting part for me is the study of the various components, or shells, under which the Powers That Be are hiding the grim truth from their subjects. In this regard, the "Audit the Fed!" Brigade forming in Congress strikes me as a kind of Suicide Cult. It's borderline treason, in fact, for otherwise estimable pols like Ron Paul to suggest we really, really ought to kick over the slimy rock called the Federal Reserve Bank and see what slithers out. I'm pretty sure we don't want to know.

We don't want to know because the only thing actually propping up the American economy at this point is the ability of the United States Treasury to issue the world's fiat currency. The consequences of losing that capacity, or the worldwide, coordinated denigration of that ability, would spell almost instantaneous disaster. The Fed and the Treasury are playing an elaborate game of creating money out of thin air through the interplay between the two institutions. It is made deliberately complicated and confusing by the principals involved. The last thing they want is clarity. I heard Bill Maher the other night on "Real Time" express his fundamental inability to understand "how it all works." Bill's a smart guy, so you can rest assured he doesn't understand it because no one who could explain it wants him to understand it.

Who or what is propping up American consumer demand? Who or what is propping up the Dow Jones Industrial Average? Who or what is filling in the massive shortfall called the American federal budget deficit? Is the recent stock market rally (March to the present) the result of an improving economy? If it is the American public actually investing in the stock market, why is it that there is no apparent significant transfer from savings (such as money market) into equities?Of the $2.7 trillion runup in the stock market since March, only $400 billion can be traced to transfers from money market and savings. So the balance of $2.3 tril is coming from...? The usual place: the bailout money, laundered through financial institutions which turn around and invest in order to drive up the value of their own equities. And the bailout money comes from? Borrowing?

The surge in the GDP? Well, government spending is up 11%, and government spending (as faithful readers know) is one of four parameters used in computing the GDP. And half of all government spending is borrowed money at this point. So 5.5% of the increase is actually a non-offset liability which is being counted as a positive sign of growth.

The stimulus package (borrowed money) is temporarily boosting consumer activity, somewhat. And when America's payday advance runs out?

Are foreigners actually buying U.S. Treasuries at this point, or has the Treasury/Reserve figured out a way to create the illusion that they are to disguise the Fed's own purchase of America's own debt (through straw men, through compliant foreign banks, through...look, quick, over there!) ? As Dmitry Orlov says, have we moved from IOU to I-Owe-Me? Do Bernanke/Geithner have the fastest set of hands in the history of all shell games?

So where do all these illusions come from? I suppose from the usual source: the inability of the political system ever to admit how dire things really are. We've "stabilized" the banks by allowing them to mark-to-fantasy all those trillions in toxic debt (mortgage-backed securities, other flimflammery) stuffed away in their reeking vaults. It allows them to pretend they are solvent when they are not, to use fraudulent accounting to impress federal "regulators" who are all too willing to believe in the first place.

Audit the Fed? I don't think so. Move along. There's nothing to see here. We're in the middle of an amazing rebound, that's all. Without really dealing with anything (because we can't), we've managed to solve everything. Do you believe it? Good, glad to hear it. Really, that's all we were after.

No comments:

Post a Comment