A diagram showing the organization of the Federal Reserve System

 

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An Irredeemably Bad Deal

Obama, Geithner and the Missing Six Trillion Dollars

by ROB URIE

Timothy Geithner, President Barack Obama’s first Treasury Secretary and chief architect of many of the various and sundry bank bailouts and associated programs carried out during Mr. Obama’s first term in office, recently wrote a book telling his side of ‘the story.’ To be clear, I haven’t read the book and have no intention of doing so. Life is short and the relevant side of the story, the economic consequences of Mr. Geithner’s policies, is the one of interest here. The prevailing storyline in the banker’s ghettoes of New York and London is of an indispensable and functioning financial system saved and a second Great Depression averted through Mr. Geithner’s necessary but unpopular programs to transfer public resources to nominally private corporations— Wall Street banks, in order to save them. Implied is that the travails Wall Street faced in 2008 – 2009 were the result of ‘natural’ forces and that its restoration is substantially related to restoration of ‘the economy.’ Mainstream economists have put forward variations on this latter claim through repeated assertion that ‘the economy,’ as measured by GDP (Gross Domestic Product) and the official unemployment rate, has ‘recovered’ to pre-recession levels.

urie1a

Graph (1): Contrary to the view on Wall Street and within the Western economic establishment restoration of Wall Street has not ‘fixed’ the economy. The policies of Mr. Geithner, the Obama administration and the Federal Reserve have ‘fixed’ profits, compensation and bonuses for Wall Street. The drop in median income is evidence of ongoing economic Depression for most citizens of the West. Assertions to the contrary by Mr. Geithner, the Obama administration and the ‘eternal sunshine of the spotless mind’ crowd of Western economists are evidence of whose interests they represent. Apparent in the recovery of financial profits without a recovery in household incomes is that Wall Street doesn’t need a functioning economy to earn ‘profits.’

 

 

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The Fed Is The Great Deceiver — Paul Craig Roberts and Dave Kranzler

 

Paul Craig Roberts and Dave Kranzler

Is the Fed “tapering”? Did the Fed really cut its bond purchases during the three month period November 2013 through January 2014? Apparently not if foreign holders of Treasuries are unloading them.

From November 2013 through January 2014 Belgium with a GDP of $480 billion purchased $141.2 billion of US Treasury bonds. Somehow Belgium came up with enough money to allocate during a 3-month period 29 percent of its annual GDP to the purchase of US Treasury bonds.

Certainly Belgium did not have a budget surplus of $141.2 billion. Was Belgium running a trade surplus during a 3-month period equal to 29 percent of Belgium GDP?

No, Belgium’s trade and current accounts are in deficit.

Did Belgium’s central bank print $141.2 billion worth of euros in order to make the purchase?

No, Belgium is a member of the euro system, and its central bank cannot increase the money supply.

So where did the $141.2 billion come from?

There is only one source. The money came from the US Federal Reserve, and the purchase was laundered through Belgium in order to hide the fact that actual Federal Reserve bond purchases during November 2013 through January 2014 were $112 billion per month.

In other words, during those 3 months there was a sharp rise in bond purchases by the Fed. The Fed’s actual bond purchases for those three months are $27 billion per month above the original $85 billion monthly purchase and $47 billion above the official $65 billion monthly purchase at that time. (In March 2014, official QE was tapered to $55 billion per month and to $45 billion for May.)

Why did the Federal Reserve have to purchase so many bonds above the announced amounts and why did the Fed have to launder and hide the purchase?

Some country or countries, unknown at this time, for reasons we do not know dumped $104 billion in Treasuries in one week.

 

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