NOVEMBER 28, 2011
I have maintained for years that the ongoing U.S. federal deficit is being actively funded by the Fed, through their primary dealers. More evidence has emerged today due to some great reporting by Bloomberg.
It’s quite simple, actually. The U.S. government has a spending problem. Again this year, it will spend about $1,500,000,000,000 more than it takes in in tax revenue. OK, so where do we get that $1.5T? By borrowing, of course. The problem is: Folks aren’t exactly lining up to loan the U.S. billions and billions of dollars at 1-2% interest. In a free and fair market, rates would rise to the point where buyers would emerge and a new equilibrium would be reached. However, rates cannot be allowed to rise so, what to do?Since 2008, the primary dealer banks have had virtually unlimited access to the Fed’s “discount window”. Through this lending facility, banks are able to borrow nearly infinite amounts of money from the Fed. What do they do with this money? They buy treasury bonds and notes! What a deal! Instead of creating the obvious problems associated with overt money printing to fund the U.S. deficit, the Fed funds the deficit covertly by having their PDs borrow funds at 0% and “re-invest” the money into treasuries. All the while, the big banks book the risk-free spread as profit, report healthy earnings on CNBS and pay their executives and traders fat and lavish bonuses. Pretty slick, huh? You don’t believe me? OK, read this:
Another classic Fed/TBTF/Congressional shell game. Watch the right hand while the left does all the real damage.
While the country bickered over $700B in TARP, the Fed was secretly doling out $7.7T through the discount window. Let’s actually lay out the numbers, just in case you don’t catch the gravity of this:
$700,000,000,000 in TARP
$7,700,000,000,000 in actual Fed lending
THE ACTUAL FED LENDING WAS 10X LARGER THAN THAT WHICH WAS DEBATED IN CONGRESS!
WHO IS REALLY IN CHARGE HERE? THE SHEEP OR THE WOLVES?
Well, by now, you know. The ultimate question is: Does it matter? Is there anything you can do, anyway? You can rally with the “tea partiers” but the spending and the corruption continues. You can march with the “occupiers” but the power base and the bonuses continue unabated.
I’m sorry to say that all you can do is protect yourself. By visiting this site and others such as ZeroHedge, you’ve educated yourself. You now see what’s really going on. Continue to prepare. The day is coming when the music will finally stop and the entire ponzi will collapse. Continue buying and stacking. Continue warning others and counseling them to do the same.