President Trump is taking on TPTB, the Federal Reserve

Wed, 25 Jul 2018 22:04:14 +0000

eowyn2

For those who don’t know, TPTB = The Powers That Be.

105 years ago, a group of powerful bankers and politicians met secretly on a privately-owned Jekyll Island off the coast of Georgia to create a banking cartel — the Federal Reserve Bank. On December 23, 1913, Congress passed the Federal Reserve Act making the federal government a “partner” in their private cartel.

And so was born the Federal Reserve System (FDS) — a curious quasi-public, quasi-private banking system that is America’s central bank. A government entity with private components, the FDS supervises and regulates the banking system, manages the country’s money supply through monetary policy, maintains the stability of the financial system, and attempts to prevent and contain banking panics.

The importance of the Federal Reserve and its public-private nature have provoked many a conspiracy theory, which is not helped by its Inspector General Elizabeth Coleman’s admission in May 2009 that the FDS could not account for $9 TRILLION in “off-balance sheet transactions.”

There have been repeated calls to audit the Federal Reserve, but none came to fruition, which should be cause for our suspicion.

Five days ago, on July 20, 2018, CNBC published a commentary by Richard X. Bove, with the stunning title, “Trump poised to take control of the Federal Reserve“. Richard X. Bove is an equity research analyst at the Hilton Capital Management and the author of Guardians of Prosperity: Why America Needs Big Banks (2013).

Below is Bove’s commentary in its entirety:

President Donald Trump has multiple reasons as to why he should take control of the Federal Reserve. He will do so both because he can and because his broader policies argue that he should do so. The president is anti-overregulating American industry. The Fed is a leader in pushing stringent regulation on the nation. By raising interest rates and stopping the growth in the money supply it stands in the way of further growth in the American economy.

First, He Can

The Board of Governors of the Federal Reserve is required to have seven members. It has three. Two of the current governors were put into their position by President Trump. Two more have been nominated by the president and are awaiting confirmation by the Senate. After these two are put on the Fed’s board, the president will then nominate two more to follow them. In essence, it is possible that six of the seven Board members will be put in place by Trump.

The Federal Open Market Committee has 12 members and sets the nation’s monetary policy. Seven of the 12 are the members of the Board of Governors. Five additional are Federal Reserve district bank presidents. Other than the head of the Fed bank in New York, who was nominated by the president, the other four can only take their positions as district bank presidents if the board in Washington agrees to their hiring. One of these, the Fed Bank president in Minneapolis, Neel Kashkari, is already arguing for no further rate increases.

Second, Regulation

Following the passage of the Dodd Frank Act in July 2010, the Fed was given enormous power to regulate the banking industry. It moved quickly to implement a number of new rules. The Fed set up a system that would penalize banks that failed to obey its new rules. These rules included setting limits as to how big an individual bank could be; how much money the banks had to invest in fed funds and Treasurys as a percent of their assets; which loans were desirable and which were not; where the banks had to obtain their funding and many, many, more up to and including how much a bank could pay its investors in dividends.

These rules have meaningfully slowed bank investments in the economy (the Volcker Rule) and they have had a crippling effect on bank lending in the housing markets (other agencies have had an impact here also).

Thus, of all of the government agencies the Fed has been possibly the most restrictive. The president has already moved to correct these excesses by putting in place a new Fed Governor (Randal Quarles) to regulate the banking industry.

Three, Killing Economic Growth

In the second quarter of 2018, the growth in non-seasonally adjusted money supply (M2) has been zero. That’s right, the money supply did not grow at all. This is because the Fed is shrinking its balance sheet ultimately by $50 billion per month. In addition, the Fed has raised interest rates seven times since Q4 2015. Supposedly there are five more rate increases coming.

This is the tightest monetary policy since Paul Volcker headed the institution in the mid-1980s. It will be recalled his policies led to back-to-back recessions. Current Fed monetary policy is directly in conflict with the president’s economic goals.

Moreover, the Treasury is estimating it will pay $415 billion in interest on the federal debt in this fiscal year. A better estimate might be $450 billion if rates keep going up. There are a lot of bridges and tunnels and jobs that could be created with this money.

Then there is inflation. It is likely to rise if the Fed eases its policies. If that happens paying down the federal debt becomes easier. On a less desirable note, higher interest rates lower real estate values. Lower rates that stimulate inflation increase real estate values.

Bottom Line

The president can and will take control of the Fed. It may be recalled when the law was written creating the Federal Reserve the secretary of the Treasury was designated as the head of the Federal Reserve. We are going to return to that era. Like it or not the Fed is about to be politicized.

See also:

~Eowyn

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3 responses to “President Trump is taking on TPTB, the Federal Reserve

  1. How would establishing our own minting and printing do as President Kennedy began? Maybe we should run parallel with the the Fed for a short while, but we must some day return to the silver and gold standard. Our using the petroleum standard benefits no one but the few who control British Petroleum, Royal Dutch Shell, Standard Oil in any shape or form, and other cartel members.

     
  2. While I can’t stand the Federal Reserve, I think we need to understand a few things about what we call “money” and real wealth. Those who propose a return to the gold standard don’t understand that there is not enough gold to make that possible and that a good amount of it is not in our hands.

    We currently depend on “whatever the market will bear”. This is problematic for a number of reasons. The biggest being that this “money” has no intrinsic value, other than as a means of exchange.

    It would work well in a “closed economy”. We aren’t in a closed economy. So, we depend on others to accept that our “money” has the value we say it has. In other words, that we’ll “make good” on this note to the extent of the value of the note.

    This in itself makes us vulnerable to market manipulation. I’m all for the government “guaranteeing” federal-issued currency at the face value. This should not be farmed out to private concerns and usury should be illegal.

    That will not eliminate manipulation of markets, but it will eliminate manipulation by central bankers. Fortunately, the United States needs minimal resources abroad. We could very nearly supply all our own needs. There are sufficient reserves to generate income.

    With the usury removed the fluctuation would stop. A “dollar” would be worth a “dollar”, period. No “debt” would be attached to a note. They would return to what they once were, a promise to redeem a note for the value stated.

     
  3. Ending the Fed would also solve the single greatest problem that now has us into a dead end.

     

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