Best of the Week
Most Popular
1. Crude Oil and Water: How Climate Change is Threatening our Two Most Precious Commodities - Richard_Mills
2.The Potential $54 Trillion Cost Of The Fed's Planned Interest Rate Increases - Dan_Amerman
3.Best Cash ISA Savings for Rising UK Interest Rates and High Inflation - March 2018 - Nadeem_Walayat
4.Fed Interest Hikes, US Dollar, and Gold - Zeal_LLC
5.What Happens Next after February’s Stock Market Selloff - Troy_Bombardia
6.The 'Beast from the East' UK Extreme Snow Weather - Sheffield Day 2 - N_Walayat
7.Currencies Will Be ‘Flushed Down the Toilet’ Triggering a ‘Mad Rush into Gold’ - MoneyMetals
8.Significant Decline In Stocks On The Cards! -Enda_Glynn
9.Land Rover Discovery Sport Extreme Driving "Beast from the East" Snow Weather Test - N_Walayat
10.SILVER Large Specualtors Net Short Position 15 Year Anniversary - Clive_Maund
Last 7 days
Watch This Group Signal Stock Market Trend Changes - 22nd Mar 18
Stocks are Gapping Beneath the Trendline Support - 22nd Mar 18
Fed Action Casts Shadow on Bullish Case for Stocks - 22nd Mar 18
A Strong Economy and Weak Stock Market is Bullish for Stocks - 22nd Mar 18
Fed Raises US Interest Rates 25bp – Where Are We In The Stock Market Cycle? - 22nd Mar 18
Why Spotify Will Likely Surge During Its IPO - 22nd Mar 18
SY Police Arrest Woman for Blowing Trumpet at Sheffield Tree Felling Protest - 22nd Mar 18
Facebook: The Anti-Social Network Covert Data Gathering - 21st Mar 18
Additional Signs for Gold and Silver Amid Increasing FOMC Tension - 21st Mar 18
Credit Concerns In U.S. Growing As LIBOR OIS Surges to 2009 High - 21st Mar 18
Stock Markets Are Flat-to-lower Before the FOMC - 21st Mar 18
Will Powell’s Actions Pop Stock Market Perfection - 21st Mar 18
Economic Moral Hazards of the International Criminal Court - and Philippines Withdrawal - 21st Mar 18
Larry Kudlow vs. Vladimir Putin on Gold - 21st Mar 18
Trump Builds Economy and War Machine - 21st Mar 18
This Stock Market "Illusion" Can Destroy Once-Vibrant Portfolios - 21st Mar 18
Gold Short-term Pull Back in Progress - 20th Mar 18
Stocks Appear to be Under Pressure - 20th Mar 18
Time To Eliminate Your Wall Street Tax? - 20th Mar 18
The Beast from the East Snow, UK Roads Driving Car Accidents - 20th Mar 18
Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - 19th Mar 18
2018 Reversal Dates for Gold, Silver and Gold Stocks - 19th Mar 18
This Tech Breakthrough Could Save The Electric Car Market - 19th Mar 18
Stocks Set to Open Lower, Should You Buy? - 19th Mar 18
The Wealth Machine That Rising Interest Rates Create Conflict With The National Debt - 19th Mar 18
Affiliate Marketing Tips and Network Recommendations - 19th Mar 18
Do Stocks Bull Market Tops Need Breadth Divergences? - 19th Mar 18
Doritos Instant £500 Win! Why Super Market Shelves are Empty - 19th Mar 18
Bonds, Inflation & the Market Amigos - 19th Mar 18
US Housing Real Estate Market and Banking Pressures Are Building - 19th Mar 18
Stock Market Bulls Last Stand? - 18th Mar 18
Putin Flip-Flops Like A Drunken Whore On Bitcoin Cryptocurrency Legalization - 18th Mar 18
How to Legally Manipulate Interest Rates - 18th Mar 18
Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - 18th Mar 18
Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - 17th Mar 18
Strong Earnings Growth is Bullish for Stocks - 17th Mar 18
The War on the Post Office - 17th Mar 18
GDX Gold Mining Stocks Fundamentals - 16th Mar 18
Nationalism, Not the Russians, got Trump Elected - 16th Mar 18
Has Bitcoin Bought It? - 16th Mar 18
Crude Oil Price – Who Wants the Triangle? - 16th Mar 18
PayPal Cease Trading Crypto Currency Bitcoin Warning Email Sophisticated Fake Scam? - 16th Mar 18
EUR/USD – Something Old, Something New and… Something Blue - 16th Mar 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

Why the Federal Reserve Is So Dangerous

Politics / Central Banks Dec 18, 2012 - 09:27 AM GMT

By: Money_Morning


Shah Gilani writes: The Federal Reserve System is a government-sanctioned private enterprise that functions as a socialist tool.

It was conceived in 1910 and constructed for the benefit of the private bankers who control it. Congress blessed the scheme in 1913 with passage of the Federal Reserve Act.

These days the Fed doesn't just backstop America's too-big-to-fail banks. It has expanded its doctrine of socializing banking losses globally.

The Fed helped bail out private businesses, foreign big banks and central banks in Europe and Japan in the credit crisis of 2008 and is the model for the European Central Bank, as well as the ECB's primary backstop.

To understand how the Fed gets taxpayers around the world to pay the losses its member banks routinely incur, let's pull back the curtain on the Fed and explain how it operates.

Here's What the Fed Really Does
Banks lend money and sometimes they don't get paid back. That's not a problem if it doesn't happen too often and if profits from other loans and investments cover the loan losses.

But since banks have gotten really big and have to make big loans (due to economies of scale and return on capital expectations) they need big borrowers. There are no bigger borrowers on the planet than governments, and that's where a lot of banks are lending.

Of course, governments aren't immune to over-borrowing and insolvency.

All the big banks that lent to banks in countries now in financial straits continue to lend to them because if they don't they won't get paid back what they are owed. Banks would fail from a cascade of losses and would either have to be bailed out or shut down.

That's where the Federal Reserve comes in.

They don't let their constituent members go under. If they have to, they will print money and give it to them, no matter how much they need.

That includes foreign banks and foreign governments. The Fed's member banks lend all the time to both foreign banks and foreign governments. It only follows that our banks are not immune to what goes on anywhere they have lent money. They are directly in the line of fire.

If there was no Fed or no ECB, there wouldn't be a backstop for banks that have lent to borrowers in Europe who can't pay them back. Countries would fail.

But they don't fail because central banks print money to give to banks so they can extend the loans they made, reschedule them, or in some way keep them going so they don't have to write them off as losses.

What's Wrong With Bankers Helping Bankers?...Plenty
The Federal Reserve System was designed to ensure that bankers always get paid. Congress blessed this scheme because Congress can be bought, was bought in 1913, again in 1977 when the Fed was given its "dual mandate," and is still being bought and paid for by bankers today.

Essentially, the Fed operates on a socialist model. It's not capitalism because banks would be "allowed" to fail under the rules of capitalism.

But they are protected from failing by virtue of taxpayers being called upon, in one way or another (mostly by future inflation and currency debasement, in other words, less purchasing power) to "socialize" banks' losses.

There is no going backwards. Globally we couldn't endure the hardships that would befall us if a cascade of big banks failed. So don't worry, that won't happen. But you should be worried about the creeping socialism.

The elitist class of bankers and money brokers, whose incredible wealth is protected by taxpayers, is going to have to increase the size of loans they make since they have more capital to disperse and earn income on, and will end up needing more taxpayers under their thumbs to keep their game a win-win for themselves.

Not that there isn't a way out for us taxpayers, those of us who would like to earn more than half a percent on our fixed income investments. There is a way out...

We have to end the Fed. It's just that simple.

End the Fed and all the big banks would have to be either shrunk or broken up, because there would be no more backstopping them with taxpayer money. The truth is they should all be made small enough to be allowed to fail without encumbering the national economy, or unfortunately today, the global economy.

Think about it. Banks that should have failed in 2008 are bigger than ever.

They've paid off what they borrowed to stay alive. They are paying dividends again. They are buying back billions and billions of dollars of their stocks again. They are paying big fat bonuses again. But they still complain that tougher capital standards and reserve ratios will ruin their profitability and they won't be able to lend to the people who need them.

Seriously, this is what the Federal Reserve does, has done, and will continue to allow to happen -- unless we end the Fed and their game for good

Source :

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules