Tag Archives: Central Banking

Don’t Expect a Return to a Gold Standard Any Time Soon

goldstandard

Despite trillions of paper currency units poured into the world economies since the start of the financial crisis, there has been no recovery, in fact, all legitimate indicators have shown worsening conditions except, of course, for the pocketbooks of the politically -connected financial elites. Yet, despite the utter failure of the current money and banking paradigm to resolve the situation, the chance of a return to a commodity based monetary order is highly unlikely especially when one looks at the anti-gold bias found in typical college economics textbooks.

Macroeconomics: Principles, Problems and Policies by McConnell, Brue and Flynn is a leading introductory level college text which has been through, to date, some 20 editions. Until the financial crisis of 2008, the subject of a commodity- backed money was not discussed, however, after the crisis and the popularity of gold standard enthusiasts like former Congressman and Presidential candidate Ron Paul, the authors of Macroeconomics obviously felt the need to address the resurgence in the interest of metallic money.

McConnell and company’s critique of the gold standard is full of fallacious reasoning that monetary cranks have employed for generations, all of which have been easily refuted by eminent economists. Yet, the lies and distortions about commodity money continues in academia.

The authors admit that:

To many people, the fact that the government does

not back the currency with anything tangible seems

implausible and insecure.

This logical sentiment and realization of the fraudulent nature of unbacked currency by those outside the economics profession is brushed aside by the esteemed trio:

But the decision not to back the currency with anything tangible was made for a very good reason.

Yes, and we know what that reason was: so that the state and central banksters could have a ready and unlimited access to the creation of money to solidify and expand their power. The gold standard was always an impediment to this cherished dream of the political elites – the establishment of an irredeemable, paper monetary order.

The authors, not surprisingly, see things differently:

If the government backed the currency with something

tangible like gold, then the supply of money would

vary with how much gold was available. By not backing

the currency, the government avoids this constraint and

indeed receives a key freedom – the ability to provide

as much or as little money as needed to maintain the

value of money and to best suit the economic needs of

the country.

By all means, the state and central banksters should be given as much “freedom” as possible for we all know that governments would never abuse such license and would always act in the best interests of their citizens. Certainly, the authors are not aware of any cases in history where such “freedom” was ever abused.

Nearly all today’s economists agree that managing the

money supply is more sensible than linking it to gold or

to some other commodity whose supply might change

arbitrary and capriciously. . . . if we used gold to back the

money supply so that gold was redeemable for money . . .

then a large increase in the nation’s gold stock as the

result of a new gold discovery might increase the money

supply too rapidly and thereby trigger rapid inflation. Or

a long-lasting decline in gold production might reduce the

money supply to the point where recession and

unemployment resulted.

Volumes have been written debunking such stupidity. The point, however, is that millions of minds have been exposed to such thinking and while most will not become economists (thank goodness!), what is taught in college and university classrooms about the gold standard is negative, to say the least. Moreover, those who continue in a career in finance or economics will unlikely ever be presented with an accurate assessment of the gold standard.

A return to a sound and just monetary order will only take place after the ideological groundwork has been first laid, just as fiat money and central banking came about after years of proselytizing by inflationists. It is also not enough to show the economic efficacy and moral soundness of commodity money, the ideas of crackpots like McConnell, Brue and Flynn need to be exposed for what they are.

Under the current academic environment, as generations have been misinformed, deceived, and lied to, it is unlikely that a return to a gold standard will take place. Until the intellectual battle is won, paper money and the central banksters that manage it will continue their reign of financial terror.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com/

Jailing Banksters Will Not Resolve the Economic Crisis

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Anglo Irish Bank

Last week, an Irish court sentenced three prominent banksters for their roles in the 2008 financial crisis. Judge Martin Nolan, who pronounced judgment, said that the bansksters had committed “a very serious crime.” He continued, “The public is entitled to rely on the probity of blue chip firms. If we can’t rely on the probity of these banks we lose all hope or trust in institutions.”*

A number have criticized the judge’s sentence for its mildness in light of the catastrophic damage that the banks have done to the economy. Irish taxpayers have bailed out the banks five times since 2011, while it has been estimated that it will take up to 15 years, if ever, to recover.

While Irish banksters and the political class who have enabled them are certainly deserving jail time and much worse, whether they or other banksters who have committed similar crimes are punished will not prevent a reoccurrence of further economic crisis, undo the harm done to the Irish economy, nor will it pull Ireland or the rest of the Western world out of its economic malaise.

The seminal cause of the economic crisis of 2008 and almost every one preceding it has been the fraudulent expansion of the money supply by the banking system through the practice of fractional reserve banking. Until this economy wrecking and social destructive scheme, along with the central banks that oversee and protect the nefarious practice, are abolished, the economic crisis will continue and deepen no matter how many banksters are jailed.

Simply put: fractional-reserve banking, for those who do not know, which includes 99.9% of the financial press, is the practice by which banks keep only a fraction of their deposits on hand and “invest” or loan out the rest at interest. Of course, if any other warehouse or storage facility engaged in such a practice it would be rightly considered fraud.

The process is augmented by central banks, which expand the money supply through the deposits that individual banks keep with them. In fact, the main purpose for the creation of central banking in the first place was to enable individual banks to engage in this fraudulent undertaking which leads to all sorts of monetary mischief.

The beautiful part of outlawing fractional reserve banking is that it requires no creation of regulatory agencies, commissions, or convoluted legislation. All that is needed is a simple universal prohibition of the nefarious practice applicable at all times and all places: any bank or financial intermediary which engages in fractional reserve banking or similar practices will be condemned and prosecuted with its perpetrators punished up to and including torture and death!

The judicial system is culpable too in this process. Courts that actually prosecute banksters are not trying to get to the root of the problem, but are merely saving face with the public by doling out prison time or uttering harsh rebukes at the banksters. Of course, as an arm of the state, the courts have a vested interest in not seeking the truth, since doing so would expose the actual method upon which nation-states obtain a good deal of their power. Fines, jail time (usually reduced or suspended) to placate the angry populace is as far as the judicial system will typically go.

Naturally, a financial order devoid of fractional reserve banking would, as Providence had intended, consist of gold and silver, where paper currency and notes would most likely be of limited if any use. The only significant hanky-panky which would occur with metallic money would be the old ploy of “coin clipping” which, although deplorable, was limited as compared to the inflations that have taken place under a pure paper, fiat standard. To keep coin debasement in check, however, the same punitive measures should prevail as with those who engage in fractional reserve banking.

Punishing banksters for their monetary transgressions years after their dastardly deeds have taken place is comparable to buying fire insurance after a house has burned down. If the Irish and the rest of the world’s populations want to eliminate the monetary chaos and the declining living standards which have ensued over the past half dozen years or so, they need to look at the ultimate cause of the crisis – eliminate fractional reserve banking and the central banks which condone and engage in the practice.

*Tyler Durden, “Ireland Jails 3 Top Bankers Over 2008 Collapse . . . Instead of Bailing Them Out.” Zero Hedge. 30 July 2016.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com/

The Gold Standard: Friend of the Middle Class

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In-Gold-We-Trust

It has been theoretically demonstrated and seen in general practice that a monetary system of 100% metallic money devoid of central banking checks monetary inflation, prevents a general rise in the price level, and eliminates the dreaded business cycle while making all sorts of monetary mischief nearly impossible. A gold standard is not only economically superior to any paper money scheme, but is morally just, which is why it is hated by the politically well-connected, academics, politicians, and the rest of the Establishment.

Often not discussed, however, even by its proponents is the beneficial effect that “hard money” has for the middle class.

It is not a coincidence that since the U.S. left the last vestiges of the gold standard in 1971with President Nixon’s nefarious decision to no longer redeem international central bank payments in gold, real wages for Americans have stagnated. Nixon’s decision to put the nation on an irredeemable paper money standard set it on a course of economic ruination, which is why he should have been hounded from office not for his role in the bungled, petty cover up at the Watergate.

Stagnating wage rates have been confirmed by a number of studies, take, for instance one from the Pew Research Center which states that “today’s average hourly wage has just about the same purchasing power as it did in 1979. . . . [I]n real terms the average wage peaked more than 40 years ago: The $4.03-an-hour rate recorded in January 1973 has the same purchasing power as $22.41 would today.”*

While the absence of the gold standard has impoverished laborers, it has benefitted (not surprisingly) the very wealthy – hence, the reason why it was abandoned, as the Pew Study reports: “What gains have been made, have gone to the upper income brackets. Since 2000, usual weekly wages have fallen 3.7% (in real terms) among workers in the lowest tenth of the earnings distribution, and 3% among the lowest quarter. But among people near the top of the distribution, real wages have risen 9.7%.”**

Of course, this was part of Nixon’s plan: redistribution of wealth from the middle class and low income groups via money printing to the political class. Such a scheme, however, could have only happened if the gold standard was eliminated.

Since the start of the abominable Obama Administration in 2009, the adjusted monetary base of the U.S. rose from $1.772 trillion to $3.966 trillion as of March 16, 2016.*** Of course, even these unfathomable figures as well as all other information supplied by the dominant media and government cannot be trusted. It, therefore, can be safely assumed that the real money supply is more than officially reported.

Money, like every other good, is subjected to the immutable law of supply and demand. Every increase in the money supply reduces the purchasing power of the monetary units which are already in circulation. Naturally, since wages are paid in dollars, increases in the supply of them will decrease their purchasing power. Thus, while nominal wages have gone up as the Pew Study shows, real wages (what wages can purchase) have stagnated.

The decline in real wages over the decades from profligate money printing has resulted in lower standard of living for wage earners and those living on fixed incomes. The rise in two income families is, in part, a consequence of a paper money economy and the fact that the financial survival of families now requires two incomes. Two-income families have also profound cultural implications which are now manifesting themselves.

There has been much talk throughout the current presidential campaign about the financial decline of the middle class. Candidates on the Left naturally talk of subsidies and more redistribution of wealth while those on the Right have called for tax cuts. While tax reduction of any kind is always welcomed and leads to economic growth, a sound monetary policy is just as important for a revitalization of the middle class. Moreover, a return to honest money does not require any expansion of government spending or debt.

If policy makers truly want to improve the condition of the middle class, which consists primarily of wage earners, a return to a monetary order of “hard money” is an economic and moral necessity.

*Drew Desilver. “For Most Workers, Real Wages Have Barely Budged for Decades.” Pew Research Center. 9 October 2014.

**Ibid.

***Jerome R. Corsi, “Obama’s Latest Fraud: ‘Economic Recovery’ Disproven in Just 9 Charts.” WND Money. 3 March 2016.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com/

Presidential Dictatorship

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Sic Semper tyrannis II

Executive orders, undeclared wars, drone hits, assassination of citizens and non-citizens alike, the overthrow of foreign regimes, domestic spying, the abetting of known criminal activities through pardons, economic planning, opening borders, monetary manipulations are just some of the nefarious activities that routinely emanate from the most dangerous political office that the world has ever painfully come to know – the United States Presidency!

The U.S. presidents can and have created a veritable “hell on earth” for their opponents, perceived enemies, and the innocent not only in the country in which they reign, but over the lives and fortunes of peoples and places where they have absolutely no authority to interfere. While other chiefs of state have theoretically had such power, U.S. presidents have been able to inflict their destruction and chaos because, paradoxically, the nation’s free-market system, for a long time, created immense wealth which could be tapped into.

The tyrannical nature of the presidency was recognized long ago by those politically perspicacious men who opposed both the office and the draconian document which created it. Few groups in history have been so vindicated for their foreboding as those who vainly argued against the ratification of the United States Constitution than the Antifederalists.

“An Old Whig”* aptly sums up the damage that would come about if the Constitution was ratified and the office of president would come into being:

. . . the office of President of the United States appears to me

to be clothed with such powers as are dangerous. To be the

fountain of all honors in the United States, commander in chief

of the army, navy and militia, with the power of making treaties

and of granting pardons, and to be vested with an authority to

put a negative upon all laws, unless two thirds of both houses

shall persist in enacting it, . . . .**

An Old Whig saw that the president would become a “king” but without the natural and binding checks that even the most absolutist of monarchs were restrained by:

[The president] is in reality to be a KING as much a King

as the King of Great Britain, and a King too of the worst

kind; – an elective King. . . . The election of a King

whether it be in America or Poland, will be a scene of

horror and confusion; and I am perfectly serious when

I declare that, as a friend to my country, I shall despair

of any happiness in the United States until this office

is either reduced to a lower pitch of power or made

perpetual and hereditary.***

One of the Federalists’ counterarguments to the Antifederalists’ concern over the presidential office was the widely held assumption that George Washington would become the new Republic’s first chief executive and the general knowledge of his impeccable character would assuage those worried of potential executive overreach. Such a lame response neglected to look into the future when the office’s huge potentiality for despotism would be sought after and won by those who had less upstanding personal traits than the father of the country.

The growing decentralized political movements throughout the world with, for instance, the hopefully upcoming British exit from the European Union, can only be enhanced if the office of the president and, for that matter, all other nation state’s chief executives are exposed as tyrannical institutions which are anathema to individual liberty and collective self-determination. Presidents, premiers, chancellors, prime ministers, and their like along with central banking are the two nefarious pillars of power of the modern nation state whose continued existence guarantees perpetual war and economic regression.

In this seemingly interminable presidential election cycle, populist, libertarians, conservatives, and all sorts of anti-Establishment types are delusional if they believe the totalitarian direction in which the country is now headed will be reversed through elections or choosing the “right” candidate. “Making American Great Again” will only come about when the chief executive office and the statist document that created it have been repudiated.

Prior to the presidency’s abolition, its ideological justification must be first debunked. There is no finer place to start for this most necessary task to take place than in the dissemination of the perceptive and enduring words of the much neglected Antifederalists.

*Probably penned by a group of Philadelphia Antifederalists – George Bryan, John Smilie, James Hutchinson and maybe others. See, John P. Kaminski & Richard Leffler, eds., Federalists and Antifederalists: The Debate Over the Ratification of the Constitution. Madison, Wisconsin: Madison House Publishers, 1989, p. 18.

**Ibid., p. 86.

***Ibid.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com/

Falling Oil Prices Not the Reason for U.S.’s Economic Woes

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The dramatic fall in the global price of oil is being cited by the financial press, government officials, and academia as the catalyst for the recent abysmal U.S. economic data which shows that the economy is, in all likelihood, sliding into a recession or worse.

While falling oil prices sound like a plausible explanation for the abysmal financial numbers, anyone with a modicum of economic sense (which excludes much of the financial Establishment) can see that it is merely a smokescreen to obfuscate the real culprit.

The fall in oil prices, while detrimental to many oil producers, should actually be a boon for the rest of the economy, especially those industries that are heavily reliant on energy. Lower fuel prices mean lower production costs leading to, ceteris paribus, greater output.

For consumers, lower oil prices mean lower utility bills and cheaper gasoline, both of which mean more disposable income for either savings or more consumption. Why would greater disposable income lead to a recession?

Naturally, lower prices are not good for oil producers. But a decline in one sector of the economy (albeit an important one), does not lead to a general collapse. While the energy sector may be contracting, industries that use fuel should be able to expand as their production costs fall.

The Federal Reserve’s Quantitive Easing (QE), Zero Interest Rate Policy (ZIRP), Operation Twist (OT), and their variations have created a massive bubble in asset prices which is now beginning to burst. All of these polices have been undertaken to save the banking system from collapse after the crisis of 2008. Since the start of the Great Recession, none of the problems that have led to it have been addressed.

Not only has the stock market been artificially inflated by the Federal Reserve, but it has come at a devastating cost in the decimation of savers, as the return on their money has dropped to next to nothing. This, of course, has had debilitating consequences on retirees and seniors.

The Obama Administration, with little opposition from Republicans, has increased the federal deficit to nearly $20 trillion from the $4 trillion it had inherited with little or no hope of any reduction. Its wasteful stimulus program of a few years ago has done nothing to improve conditions while its collectivist health care initiative has placed crushing burdens across the economic spectrum.

What is even scarier is that Obummer is apparently clueless about current economic conditions, as he mindlessly demonstrated in his (thankfully) last State of the Union Address: “Anyone claiming that America’s economy is in decline is peddling fiction. What is true – and the reason that a lot of Americans feel anxious – is that the economy has been changing in profound ways, changes that started long before the Great Recession hit and hasn’t let up.”

Obama is correct in one sense: there is a “profound change” that is happening in the economy, however, it is a change for the worse which he and his harmful policies have created.

Not surprisingly, in their rebuttal to the speech, the Republicans offered little in substance. Instead, they chose a spokesperson whose only claim to fame was her infamous decision as governess of South Carolina to remove the Confederate flag from state buildings. Needless to say, the choice of Nikki Haley met with disgust among the party’s base. The GOP is not called the “stupid party” for nothing!

Unfortunately, for the vast majority of Americans, there is little likelihood that the present Administration or the next, be it of a different party, will turn things around. Instead, there will probably be more of the same.

Until there is a change in ideology where the corrupt notions of money and credit creation via the printing press and the running of gargantuan deficits are debunked, American living standards will never improve.

Antonius Aquinas@AntoniusAquinas

The Deteriorating U.S. Economy

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Despite doubling the national debt and the expansion of the money supply to some $8 trillion since the beginning of Obummer’s misbegotten presidency, the U.S. economy is once again in a free fall. Actually, there has been no real recovery, but a continual deterioration of living standards despite the lies and distortions from the financial media and government authorities.

Conditions, however, are now descending at an even faster pace.

Recently, the leading manufacturer of heavy equipment, Caterpillar, announced that job cuts would exceed 10,000 through 2018. Up to 5,000 employees will receive pink slips between now and the end of 2016. Retail sales for the manufacturing giant have slumped 11% between June and August.*

While Caterpillar’s contraction is an ominous sign, a more telling indicator of worsening economic conditions came from the Federal Reserve’s refusal to raise interest rates at its latest FOMC meeting. Many commentators had speculated that the Fed would raise rates at least a quarter of one percent on the belief that the economy was strengthening.

The Fed, of course, based its refusal to raise rates on “international concerns” – China’s stock market selloff. The real reason is that the nation’s central bank understands, although it will not publicly admit it, that the economy is far too weak to “absorb” a rate hike, no matter how infinitesimal.

More importantly, the Fed cannot raise rates to any significant degree because the entire financial system, which is built on “cheap money,” would immediately plunge into a significant downturn similar to that of 2008, or worse. The federal government and many of the states and municipalities would default since they could not continue to finance their current profligate borrowing and spending patterns with higher interest rates.

Thus, the Fed is trapped in a world of zero interest rates for the foreseeable future. As economic conditions continue to worsen, the central bank will more than likely turn to another round of money printing like its infamous “QE” program.

While the Fed is locked into a zero interest rate policy, the Obama Administration and Congress remain oblivious to economic reality. A few years back, Obama and the one time Democratically-controlled Congress tried a “stimulus” program which did nothing, but increase the national debt. Also weighing down the economy is the disastrous Obamacare program which will only become more burdensome as time passes.

Just as troubling, none of the current crop of presidential hopefuls, with one possible exception, has proposed or suggested any credible measure that will improve matters. None of the fundamental problems that are crippling the economy have been seriously addressed.

The reason why there has been no recovery is that the malinvestments and bubbles created during the last boom have not been allowed to contract and or burst. Instead, the Fed pumped massive amounts of “liquidity” (money printing) into the markets which kept these institutions (mostly banks) and their assets afloat.

A credit implosion will not come about “voluntarily.” The Fed will not increase interest rates nor will the Obama Administration or Congress have the courage to cut spending to relieve pressure on the Fed to finance its unsustainable deficits and continue to inflate the stock market.

Instead, there eventually will be a monetary crisis surrounding the dollar which will force interest rates to rise which will lead to widespread defaults and bankruptcies and an ensuing depression which will dwarf every previous economic downturn in American history.

Alternative financial analysts have, for some time, pointed to the declining living standards not only in the U.S., but throughout the Western world. Egon von Greyerz of Matterhorn Asset Management has predicted some very unpleasant times in the not too distant future: “The coming years will not be easy. I wrote an article a few years ago called ‘The Dark Ages Are Here’ and I now really think they are imminent. These will be difficult times for most of us.” **

Ultimately, the only way the U.S. economy will be turned around is through a change in ideology. The ideas and policies upon which not only the U.S., but the Western world’s economies are predicated upon must be debunked. Until the principles and beliefs of the current economic system are intellectually discredited, the U.S. economy will continue to stagnate and eventually collapse.

* Matt Egan, “Caterpillar to Cut More Than 10,000 Jobs.” CNN Money. http://money.cnn.com/2015/09/24/investing/caterpillar-job-cuts-china-oil/index.html 24 September 2015.
** Egon von Greyerz. “A Stock Market Collapse and Surge in Gold is Imminent. What will be the Trigger?” Gold Switzerland. https://goldswitzerland.com/a-stock-market-collapse-and-surge-in-gold-is-imminent/ 10 October 2015.

Antonius Aquinas@AntoniusAquinas

Banksters Responsible for Irish Crash

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the Central Bank’s former head economist Thomas O’Connell has told the Oireachtas Banking Inquiry that Ireland’s banking and economic crash should never have happened.

In testimony before the Oireachtas Banking Inquiry, Thomas O’Connell, the ex-head economist of Ireland’s central bank, attempted to deflect blame for the part he played in the financial crisis of 2008 and the subsequent bust that occurred.

O’Connell had the nerve to say that “[It] should never have been allowed to happen with all the consequences of huge increases in unemployment, rising emigration, enormous debt, suicides . . . that we have seen.”* No kidding, Sherlock!

O’Connell believes that the financial crisis occurred not because of the policies of the central bank per se, but because it was the failure of the government and “regulators” to curb the excesses and bubbles that were forming mostly in the real estate sector, “any concerns or issues raised by staff for airing in the public arena were invariably watered down so as not to reflect adversely on matter of concern to Government.” He added that it was “difficult to get views through that might impinge on vested interests.”

Naturally, since O’Connell was a paid employee of the central bank, he would want to divert attention or critiques of its role in the calamity. O’Connell wisely (for his sake) focused on periphery issues, but failed to discuss the actual genesis of the crisis which rests in the explosive expansion of the money supply generated by the European Central Bank (ECB). The “new” money and credit was then facilitated by the Irish central bank and funneled through the country’s banking system that ignited the boom.

The graph below shows the dramatic growth in the money supply during the boom period. Unfortunately, Ireland adopted the Euro in 1999, but it did not begin to circulate internally until 2002.

From 2002 to the onset of the financial panic, the money supply almost doubled from €5 ½ trillion to nearly €10 trillion. The new “liquidity” drove up asset prices and inflated real estate markets, especially in Spain and Ireland. Despite this fact, O’Connell remained silent on the ECB’s reckless monetary policy in his address.

When asked about how the crisis could have been avoided, O’Connell suggested (apparently with a straight face) that there were too few economists employed by the regulatory agencies and the government and that those that were on staff were largely ignored: “This would have been less of an issue if there was a willingness to listen to the view of economists. In addition, the Financial Regulator employed very few economists.”

Yeah, right, that is definitely what Ireland needed – more economists such as the likes of O’Connell who are nothing but apologists and spinmeisters for the global financial elite who enable them to continue their endless rounds of money printing for their own enrichment and power to the detriment of the poor and middle classes!

Instead of more economists as O’Connell ridiculously recommends, the financial crisis could have been avoided, or more accurately would have never taken place, had Ireland and the rest of Europe followed sound economic theory long spoken of and taught by real economists, and ignored monetary cranks like O’Connell, Benjamin Bernanke, Mario Draghi and Janet Yellen. The financial crisis of 2008, and the far greater one to come, would never have occurred if Ireland was devoid of the plague of central banking, and money was once again a commodity.

If Ireland ever wants to get out of the financial quagmire it now finds itself in, it must stop listening to or give any credence to the very people that are responsible for the creation of the mess in the first place. Instead of recognition, the likes of Thomas O’Connell should be ignored, ridiculed, or, better yet, prosecuted for the incalculable economic and social damage that he and his fellow banksters have perpetrated.

Before economic recovery can occur, there must first take place intellectual change and the acceptance of policies and institutions that have stood the test of time. Gold and silver have been monies for some five thousand years, their re-adoption as the medium of exchange in Ireland will go a long way in the Emerald Isle’s economic and social restoration.

*Claran Hancock, “Banking and Economic Crash ‘Should not Have Happened.'” The Irish Times. 10 June 2015.

Antonius Aquinas@AntoniusAquinas

Big Banks Profit While Main Street Suffers

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If anyone doubts that the Western world’s monetary order is rigged to enrich the banking system, the first quarter financial reports of America’s top banks should disabuse any unbelievers.

The Financial Times reported that four of the five big U.S. trading banks had a combined revenue of $19.4 billion in the first quarter of 2015. Goldman Sachs had a 14.7 percent* return on its equity in the first quarter while J.P. Morgan, the nation’s largest bank, earned $5.91 billion or $1.45 a share, up 3.6% from a year earlier.** Revenues for J.P. Morgan grew 4% to $24.8 billion.

The enthusiastic coverage of the big banks healthy first quarter proceeds and the chest-thumping of its bank executives left out, not surprisingly, the real reason for their windfall gains – the Federal Reserve. The big banks have been the chief beneficiaries of the Fed’s easy monetary policy since the start of the financial crisis.

The Fed’s “zero interest rate policy” (ZIRP) and its “quantitative easing” (QE) program have been the catalyst for the large banks’ recent record performance. Ostensibly, these policies were instituted to assist the economy in its recovery from the Great Recession, however, in actuality they have been done to save the big banks from collapse while the economy has been flooded with billions of increasingly worthless dollars causing significant price inflation.

Low interest rates have enabled the banksters and financial houses to borrow at next to nothing and invest in all sorts of ventures, many of which are highly risky. Easy money is also the cause for the huge run up in assets prices and the highs in nominal stock prices.

Worse, ZIRP has allowed the federal government to sustain its ridiculous level of spending, borrowing what it cannot raise in taxes at a near zero rate of interest. When interest rates do rise, the federal government will most likely default, bringing the banks down with them.

While the big banks and Wall Street have done quite well from the Fed’s massive money printing, everyone else has suffered and have seen their standard of living plummet even from official estimates.

The Federal Reserve reported a slowdown in hiring in March, a big drop off in industrial production, and lower housing starts in the first quarter, to mention just a few troubling statistics. Things are getting to the point that the Fed is reconsidering whether it should raise interest rates in the second half of the year as it had hoped to do. Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, admitted, “Data available for the first quarter of this year have been notably weak.”***

The first quarter sizable earnings of the big banks are an example of what a number of commentators have termed “crony capitalism.” Through government assistance, businesses earn wealth not by pleasing customers and satisfying their needs, but by currying favors from the state. In the banksters’ case, instead of making wise and prudent loans, they receive largesse in the form of billions of Federal Reserve notes.

Not only is such a system immoral, but it gives legitimate market activity – those firms that do not receive state assistance – a bad rap as profitable enterprises are lumped in with state favorites. This ultimately leads to greater regulation as calls for the government to tax “windfall profits” would affect all firms even those who earned rightful profits.

The solution to crony capitalism and the ill gotten gains of the banking system is not greater oversight, but instead, the abolition of the Federal Reserve and a return to sound money based on gold or silver. Under such a system, banks and financial houses would profit only if they satisfied consumers’ wants.

In the banks’ case, this would mean safeguarding depositors’ money and making prudent loans with the funds they were entrusted with to lend. For those financial institutions that succeed at such tasks, profits would be their reward; for those who do not and mismanage investment funds they would be out of business and allowed to fail. Banks would operate under the same economic laws as any other enterprise.

The prevailing system of crony capitalism which benefits the 1% must be exposed for the grand redistribution scheme that it has long been. Only when bankers earn their wealth as Main Street does will America return to a just and (sound) monetary order.

*Tom Braithwaite & Ben McLannahan, “Goldman in Robust Return on Equity Showing,” Financial Times, 17 April 2015, 14

**Ciaran MCEvoy, “JPMorgan Profit Beats Wall St. Views, As Does Wells Fargo by Shrinking Less,” Investor’s Business Daily, 15 April 2015, A1.

***Jon Hilsenrath, “Fed Shies Away from June Rate Hike,” The Wall Street Journal, 17 April 2015.

Antonius Aquinas@AntoniusAquinas

Don’t “Audit the Fed,” Abolish It

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In recent remarks to the Senate Banking Committee, Federal Reserve Chairwoman Janet Yellen was her typical evasive and non committal self when the topic of interest rate hikes were broached. When the subject of potential oversight of the Fed came up, however, Ms. Yellen became quite forthright in her response.

When asked about a bill introduced by Kentucky Senator Rand Paul to “Audit the Fed,” Ms. Yellen declared: “I want to be completely clear: I strongly oppose ‘Audit the Fed.'”* Ms. Yellen defended her position on the grounds, which have been given by every previous Fed Chairman, that oversight would lead to politicized monetary decision making thus compromising the central bank’s “independence.”

Senate Banking Chairman, Richard Shelby (R., Ala.) countered the Chairwoman saying “there is an even greater need for additional oversight” of the Fed since the onset of the financial crisis in 2007.

Ms. Yellen, her predecessors, and every other Fed apologist are simply wrong when they assert that the central bank is an independent agency that is free of political influence. The Federal Reserve System was created by an act of Congress (1913) and can ultimately be “reformed,” altered, and or abolished by Congressional fiat if so desired.

That Congress does not oversee Fed policy is a result of its charter, which was originally crafted by the Big Banksters of the time (mostly the Rockefellers and Morgans) in concert with their bought for and paid politicians. The lack of oversight was a deliberate part of their plan to give bankers and financers free reign to conduct monetary policy for their own benefit.

The Federal Reserve is and has always been a political creature designed for the benefit of financial elites. It is a highly privileged cartel with monopoly control of the nation’s money supply. Unlike the propaganda which emits from Fed officials, the central bank was instituted to protect banksters from financial collapse and bank runs. Fine tuning the economy, reducing unemployment, or fighting inflation are all ancillary concerns for the Fed.

These are the simple facts which are deliberately kept from the public at large by the political establishment, academia and the media.

The Audit the Fed movement, which began in earnest with Ron Paul’s first presidential run, is a wrongheaded approach to solve the nation’s ongoing financial crisis. Senator Rand Paul’s bill is mostly grandstanding to bolster his status among the Republican Party’s populist contingent in his anticipated race for the nomination.

In fact, instead of meaningful reform, greater public oversight of the Fed would most likely lead to worse results. Every Congressman and Senator would be pressuring the central bank to fund their pet projects. Can one imagine what the growth rate of the money supply would be if 535 ravenous politicians had a say in the conduct monetary policy?!

Those who want to reverse the nation’s economic malaise should seek the Federal Reserve’s abolition and advocate its replacement with a de-politicized monetary order free of central banking. Such a system would most likely be based on a commodity (gold and/or silver) where “money producers” are free to engage in the creation of the “best money” and banking services to satisfy customers’ needs.

In such an order, banks would function as any other enterprise by profit and loss. If banks loan funds wisely, they will succeed; if not, they will fail and go out of business replaced in the marketplace by more savvy entrepreneurs. There will be no bailouts at taxpayers’ expense for reckless financial speculation. Money and banking would become a sound and honest undertaking.

To actually believe that an Audit the Fed initiative would become law is beyond naïve. The political establishment will never voluntarily relinquish or allow any legitimate oversight of one of its chief pillars of power.

Instead of seeking change via politics, reformers must first change the climate of public opinion which can only be accomplished when the prevailing ideology is debunked. Until the Federal Reserve is seen as an engine of inflation and the creator of economic disorder which needs to be eradicated, America’s financial woes will, unfortunately, continue.

* Jon Hilsenrath, “Yellen Puts Fed on Path to Lift Rates,” The Wall Street Journal, Wednesday, 25February 2015, A1, A2.

Antonius Aquinas@AntoniusAquinas

The World Bank and Rising Food Prices

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A recent World Bank report warned of rising global food prices as if a study (no doubt an expensive one) is needed to explain what everyone who buys food or, for that matter, any commodity, is keenly aware of. “Food price shock,” the report cautioned, “can both spark and exacerbate conflict and political instability, and it is vital to promote polices that work to mitigate these effects.”

Naturally, the report fails to explain the real reason for increases in food prices. Like the lies, distortions, and half truths which used to emanate from the Soviet news agency, Pravda, the World Bank report misleads its readers citing “increasing weather concerns,” “import demand” pressure from China, and “geopolitical tension in the Ukraine” for the escalating food costs.

All of this, of course, is nonsense spoken to bamboozle the public and the naïve financial press who will swallow just about anything that a governmental authority shovels out.

The fundamental reason for skyrocketing food prices is the massive amount of money which has been issued since the start of the financial crisis by the likes of the World Bank, IMF, the Fed, Bank of England, and the ECB.

Not surprisingly, the report contradicts itself. Despite the reasons that it gives for the sharp rise in food prices, it admits that the supply of food worldwide is at an all time high: “. . . prices increased despite bumper crops in 2013 and continued projections of record grain harvests and stronger stocks expected for 2014.” It added that even the political turmoil in the Ukraine “have not disrupted exports so far.”

So, if supply is at record levels and demand has increased only significantly in China, what accounts for the massive price hikes across the globe? Simple: money creation.

The report, and others like it, speak of the devastating effect that high food prices have on the poor and impoverished. Instead of pointing the finger at themselves or the other international inflation generating agencies, the World Bank has in the past called for income redistribution which never help the poor, but just line the pockets of politicians and enlarge the balance sheets of the banksters.

Without the unprecedented money creation of the past half dozen years, food prices would have fallen. Instead, the trillions printed have done inestimable harm to the world’s economies while the banking and financial sectors have seen record “profits.”

If the World Bank was truly concerned about the impact of higher food prices, it would immediately fold up shop, call for the liquidation of all central banks and advocate a return to honest money based on a commodity be it gold or silver. Moreover, any bank or financial institution that did not maintain a reserve requirement of 100% would be shut down, charged with fraud and embezzlement while its perpetrators would be rounded up either scourged, tarred and feathered, or, at the very least, face a life time of hard manual labor.

Such measures are more than justified after what has taken place over the past decade and all of the mischief and ruination banks have committed throughout history. These or any other meaningful punishments will also act as a deterrent to anyone contemplating such nefarious activity in the future.

The solution to rising food prices is straight forward, however, its implementation is the problem. To achieve a sound monetary order, public opinion must be shown and then persuaded that the cause of most of the current financial difficulties stem from central and fractional-reserve banking practices. Until a majority is convinced of this evil, things will most likely not turn around.

Unfortunately, until food prices go a lot higher, or there is another crisis or general collapse, no significant alteration of the present fiat monetary system will take place. Nor can it be assumed that as things get worse, a “new system” or a “reform” of the present one will be necessarily better. Under the current statist ideological conditions, it will more than likely be a lot worse.

In sum, erroneous World Bank reports on escalating food prices will continue to be released.

Antonius Aquinas@AntoniusAquinas