The Golden Truth: The U.S. Dollar: Backed By The FULL FAITH AND CREDIT Of The Federal Reserve Printing Press

Tuesday, December 21, 2010

The U.S. Dollar: Backed By The FULL FAITH AND CREDIT Of The Federal Reserve Printing Press

And print money is what the Fed has been doing best - really since 1971 after Nixon closed the gold window:

(click on chart to enlarge)

And really this chart just shows M2, since the Fed has removed its reporting of M3 since March 2006. The missing component is large eurodollar deposits. My friend and colleague "Jessie" wrote an excellent summary of how the Fed is exploiting this category to really ramp up the money supply off the books. His essay can be found HERE

As a follow-up to my commentary yesterday on the looming State/municipal catastrophe, check out this post on Clusterstock today - LINK. Not only are most large cities strapped with massive budget deficits, but as the analysis in the Clusterstock piece demonstrates, municipal property tax receipts are going to take a big dive. This will just add gasoline to the fire. Expect the Federal Government to bail out this situation via even more Fed printing.

Finally, check out this King World News interview with James Turk, who explains why we are in the incipient stages of hyperinflation:

Rising interest rates along with the surge in commodity prices that we have been seeing in the back half of this year is writing on the wall that hyperinflation is very near. If anyone needs further proof just look at what QE2 is already doing. The Fed is turning government debt that the market doesn’t want into currency which is the cause of all hyperinflation.

The link to this quickie is HERE. Essentially, if you are not accumulating precious metals right now, expect that your financial well-being eventually will be tragically compromised. I'm thinking the new slogan on U.S. currency should be: "In the printing press we trust."

9 comments:

JohnTuesday, 21 December, 2010
Which one of the 2 guys in the photo is Ben?
ReplyDelete
Replies
AnonymousTuesday, 21 December, 2010
Not a very encouraging report on ECU from Choristopher Ecclestone's blog.

http://seekingalpha.com/instablog/516886-christopher-ecclestone/37271-ecu-silver-short-empty-vessels-make-the-most-sound
ReplyDelete
Replies
Dave in DenverTuesday, 21 December, 2010
Chris Ecclestone puts out bearish research on ECU on behalf of a hedge fund that is short. His work is inaccurate and extremely misleading. He has turned down every invitation by management to get together and go over the story. He is basically a slime-ball. We think he is fronting his research for Citadel Capital, which owns Etrade. The second largest shareholder of ECU has detailed evidence supporting the fact that Etrade is contantly shorting the stock.
ReplyDelete
Replies
Dave in DenverTuesday, 21 December, 2010
When Trust Matters: LOL. I guess Ben could be either one.
ReplyDelete
Replies
HalTuesday, 21 December, 2010
Dave--on the issue of FRN: just thinking while typing: our FRNs state just that-A "Federal Reserve Note". it does not specify the piece of paper is a "US of A Note" and we all know the Fed is not part of the US Govt; it's not even as close as an off shore Enron entity was to Enron.

While (most) everybody is questioning the value of the FRN being backed by gold there may be a far larger problem: our FRN's are backed by the Federal reserve, a legal entity with a balance sheet loaded with toxic assets from 1-3 years ago, and Treasuries bought as a backstop for the Treasury which since rates have moved up a bit might be valued at a loss just from rate changes.

We may as well be conducting business with Monopoly Money.
ReplyDelete
Replies
Dave in DenverTuesday, 21 December, 2010
Hal that's a great way to look at this. I never thought about that aspect before in terms of the Fed backing.
ReplyDelete
Replies
HalWednesday, 22 December, 2010
Dave: in my corporate days I was involved in many legal issues related to "piercing the corporate Veil" where companies would try to isolate liability where if there was litigation it would not take down the entire company.

The above thought process is just another step in that direction, The US Govt (in theory OUR govt)has since the 60's when it got rid of silver certificates (don't know when gold certificates were trashed) had something else in mind when issuing FRN's.

When you think about it--what is the Fed Reserve balance sheet that is backing all the paper dollars out there.

The gold or lack thereof is a different problem.
ReplyDelete
Replies
Dave in DenverWednesday, 22 December, 2010
Great insight Hal
ReplyDelete
Replies
AnonymousSaturday, 25 December, 2010
ben is the healthy looking fella on the left, thats the Dollar on the right.Ready to rally though, from the look of him...
ReplyDelete
Replies

Add comment

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.