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The "Independent" Fed Admits The Truth
The Market Ticker ^ | 1/22/2011 | Karl Denninger

Posted on 01/23/2011 7:21:37 AM PST by FromLori

It is not independent, it is an arm of Treasury.

Everything you were told was a scam and a lie - yet another time for

But the new rules have slowly begun to catch the attention of market analysts. Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world's most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted.

The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.

Got it?

Independent monetary authority my ass.

Function follows form. Anyone who believes that The Fed is independent after this charade, which incidentally it did on its own (and that, by itself, is cute - The Fed's "balance sheets" would never have passed examination under GAAP) has rocks in their head.

The simple fact of the matter is this - The Fed is out of bullets and they know it. They've driven rates to zero but still can't get beyond the premium demanded for loans, and the fact that cash flow is insufficient to meet service requirements. This is why the shift has taken place to the Government, which (thus far) has been able to keep borrowing and borrowing, since nobody is (yet) questioning whether the government will be able to meet the cash flow.

The key there is "yet."

Treasury, for its part, is worried too. They should be.

In his January 6, 2011 letter urging that Congress act to protect America’s creditworthiness by increasing the statutory debt limit, Secretary Geithner made clear that any default on legal debt obligations of the U.S. would be unthinkable. In response, Members of Congress of both parties have indicated agreement that the United States must honor its obligations. However, Treasury disagrees with suggestions by some that Congress could somehow evade this responsibility by passing legislation to “prioritize” payments on the national debt above other legal obligations of the United States.

Uh huh.

Guess what Timmy? Most of what The United States spends money on is not a legal obligation.

Oh sure, some of it is. Salaries for our servicemembers, for example. They worked, they're owed. Legally. That's a legal obligation. Debt service (interest) is a legal obligation.

Social Security and Medicare are not. Nor are farm subsidies, Department of Education meddling, and, incidentally, while your salary Timmy is for work you've already done, Congress can de-fund your position and reduce your salary for future work to one penny.

If they did, you'd be overpaid.

The simple solution to the "Debt Ceiling" is to spend only what you take in via taxes.

That means no more debt is required.

And yes, I'm well-aware that it also means a 43% (roughly) immediate cut in Federal Spending.

I assert that such a cut can be made without impinging on one dollar of actual legal obligation of The United States.

Stop lying Neal, and tell your boss Timmy that we know he's lying too.


TOPICS: Business/Economy
KEYWORDS: debt; denninger; fed; interest; printing; ticker
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To: Lurker
More "privatize any profits, socialize any losses".

The Fed just privatized $78.4 billion of profits to the Treasury last year. Bastards!

21 posted on 01/23/2011 10:38:19 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Toddsterpatriot
The Fed just privatized $78.4 billion of profits to the Treasury last year. Bastards!

Then why are they talking about transferring liabilities to the US taxpayer in the future? I don't give a crap what they did last year. Why do they feel the need to do this this year?

22 posted on 01/23/2011 10:40:18 AM PST by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: Lurker
Then why are they talking about transferring liabilities to the US taxpayer in the future?

If interest rates rise, the value of long dated bonds falls. If the Fed has to "mark to market" their positions, but still pass along all interest to the Treasury, their capital will be reduced.

I don't give a crap what they did last year.

You mean when they didn't privatize a gain and socialize a loss.

23 posted on 01/23/2011 10:45:59 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Toddsterpatriot

“The Fed just privatized $78.4 billion of profits to the Treasury last year.”

But they are liars!!!! Enron accounting tricks at the FED. The whole country has been ENRONIZED

“May 6, 2010, the day of the flash crash, the New York Stock Exchange stepped in and arbitrarily drew a line above and below which trades that day were ‘broken’ or canceled (effectively treating them as if they had never happened). The move to break trades was historically unprecedented. “

They are going to continue of break the LAW until they are either stopped or they are d**d.


24 posted on 01/23/2011 10:48:22 AM PST by TruthConquers (Delendae sunt publicae scholae)
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To: Toddsterpatriot
If interest rates rise, the value of long dated bonds falls. If the Fed has to "mark to market" their positions, but still pass along all interest to the Treasury, their capital will be reduced.

That would be too bad. It would be shocking, shocking I tell you, to expect a private institution like the Fed to be treated like any other investor.

Most everybody else has to 'mark to market' their positions. If it's good enough for everybody else, it's good enough for the Fed.

25 posted on 01/23/2011 10:50:52 AM PST by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: TruthConquers
But they are liars!!!!

How's that?

Enron accounting tricks at the FED.

Enron fabricated earnings. How is the Fed doing that? Why would they?

The move to break trades was historically unprecedented

I don't think that's true. But so what? The flash crash was historically unprecedented as well.

They are going to continue of break the LAW

What law was broken when the trades were canceled?

26 posted on 01/23/2011 10:53:29 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Lurker
Hush!

You're supposed to agree! All is great and fantastic under the Obama Administration's handling of this economy. The Bailouts were brilliant! The Fed is making a “profit” for us, although greatly lacking evidence and facts!

Never mind that the Fed gave 5 Trillion Dollars to foreign Banks a year and a half ago without Congress. (That we will never see dime of again.) Never mind that the Fed also gave out 3.3 Trillion dollars secretly to US Corporations, and some of that “78.4 billion” supposedly being paid back comes from those secret loans. (At .05% interest.)

Never mind that you are completely wasting your time talking to trolls with one track minds. Rule #1. The Troll is ALWAYS right! Rule #2., If the Troll is proven wrong, refer back to rule number 1!

27 posted on 01/23/2011 10:55:17 AM PST by PSYCHO-FREEP (Patriotic by Proxy! (Cause I'm a nutcase and it's someone Else's' fault!....))
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To: Lurker
It would be shocking, shocking I tell you, to expect a private institution like the Fed to be treated like any other investor.

The Fed isn't a private institution.

Most everybody else has to 'mark to market' their positions. If it's good enough for everybody else, it's good enough for the Fed.

They should mark their gold at the market price. $350 billion instead of $11 billion.

28 posted on 01/23/2011 10:56:31 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: PSYCHO-FREEP
Never mind that the Fed gave 5 Trillion Dollars to foreign Banks a year and a half ago without Congress. (That we will never see dime of again.)

The Fed didn't give money to foreign banks. They swapped dollars for foreign currencies. The swaps were unwound (the Fed got the dollars back and returned the foreign currency) profitably.

29 posted on 01/23/2011 10:59:02 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: TruthConquers

Thanks and for those who don’t get it this is what it means

” the Fed has changed the rules and any losses by the Federal Reserve banks can be denoted as liabilities on THE TREASURY!”


30 posted on 01/23/2011 11:01:23 AM PST by FromLori (FromLori">)
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To: Toddsterpatriot

Wikileaks says otherwise...


31 posted on 01/23/2011 11:01:48 AM PST by Minus_The_Bear
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To: Toddsterpatriot

So, if the Fed is so “Profitable” and competent as you say, then why is there a 14.3 Trillion Dollar deficit and why have they monetized our currency?

Oh, I forgot, refer back to rule #1.


32 posted on 01/23/2011 11:03:28 AM PST by PSYCHO-FREEP (Patriotic by Proxy! (Cause I'm a nutcase and it's someone Else's' fault!....))
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To: Minus_The_Bear

Show me...


33 posted on 01/23/2011 11:06:40 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: PSYCHO-FREEP
So, if the Fed is so “Profitable” and competent as you say, then why is there a 14.3 Trillion Dollar deficit

Congress spends more than $78 billion will cover.

why have they monetized our currency?

Why have they turned our currency into money?

Oh, I forgot, refer back to rule #1.

That must be the one that shows you don't know what you're talking about.

34 posted on 01/23/2011 11:09:09 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Toddsterpatriot

You’re right, feeding the Trolls is a pointless waste of time. Expect no further responses from me.

All the proof of what I am saying is already material evidence known as the US economy and the Dollar. It’s out there, up front and center for everyone to physically see. No further need to support the facts. They speak for themselves no matter how Trolls like you try to spin them.

One thing for sure, It’s a sure win to do the very opposite of what every you say.


35 posted on 01/23/2011 11:16:52 AM PST by PSYCHO-FREEP (Patriotic by Proxy! (Cause I'm a nutcase and it's someone Else's' fault!....))
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To: Toddsterpatriot
What is the time frame?
Explain why it matters.

Well, at some point, the world's financial community says, "Hey, the Emperor has no clothes!"

The probability is that they never catch up.
Catch up to what?

The liabilities keep growing faster than the "future profits", leading to the exclamation above.

36 posted on 01/23/2011 11:18:59 AM PST by Oatka ("A society of sheep must in time beget a government of wolves." –Bertrand de Jouvenel)
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To: PSYCHO-FREEP
You’re right, feeding the Trolls is a pointless waste of time.

So is trying to correct idiots.

Expect no further responses from me.

Run away.

37 posted on 01/23/2011 11:26:14 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Oatka
The liabilities keep growing faster than the "future profits", leading to the exclamation above.

If the Fed remits zero to the Treasury and ends the year with $50 billion in mark downs, why does it matter?

38 posted on 01/23/2011 11:27:58 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Toddsterpatriot
The Fed isn't a private institution.

In post 3 you said it is. Which is it? Can I buy stock in it?

39 posted on 01/23/2011 11:33:30 AM PST by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: Lurker
In post 3 you said it is.

No I didn't.

Can I buy stock in it?

No.

40 posted on 01/23/2011 11:34:40 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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