News & Analysis
US Is Broke, Failing, But Show Goes On
Obama (left) seeks $4 trillion cut to deficit, higher taxes for rich ... Backs benefit programs, draws battle lines with GOP ... President Obama pledged to pare the projected deficit by $4 trillion in the next 12 years, vowing to protect the nation's most vulnerable while pushing again for higher taxes for its richest citizens. In a 43-minute speech that mixed appeals for a united sense of purpose with sharply partisan jabs, the president laid out his vision of a country strengthened both by fewer debts and a greater diligence to solving the problems of Medicaid and Medicare. In promising to preserve those programs, he enlists his administration in the beginning of what is expected to be an epic battle with Republicans over their fate. "We are a better country because of these commitments,' he said in an impassioned defense of Medicaid and Medicare against Republicans' push for sweeping changes. "I'll go further – we would not be a great country without those commitments." – Boston Globe
Dominant Social Theme: These are important times. Every word is important, every speech is necessary. America will be saved once the politicians agree on the proper plan.
Free-Market Analysis: In his recent speech, US President Barack Obama pledged to pare the projected deficit by $4 trillion in the next 12 years, and to raise taxes on America's wealthiest Americans. His presentation was reported seriously and gravely by the mainstream media that must be aware, nonetheless, that total US obligations are in the area of US$200 trillion. There is no real way that the US federal government can honor what it has already undertaken. These proposals (by both sides of the aisle) take on aspects of a dominant social theme. They are promotions, proposing unrealistic solutions to the very problems that the process itself has created.
America is broke and the US$4 trillion that Obama just proposed in cuts or the US$6 trillion proposed by Republicans won't really make much of a difference. We've used this metaphor before, but watching the entire, larger process is like watching a cartoon where one of the animated characters has just run off a cliff. Its legs are still moving, but it is about to fall a long ways down. The amazing thing is watching the "business as usual" approach that both the media and the parties themselves seem to be taking toward the entire process.
To use another metaphor, one can think of the US as the "Titanic" after it has struck an iceberg and is sinking. There is a good deal of reporting on the deck chairs, on the music that the band is playing, on the various plans for the passengers to disembark. But there is no real acknowledgment in any of the coverage that the ship itself is sinking and that in a few hours it will not even exist as viable, floating entity. Even the International Monetary Fund, which is an invention of the Anglo-American elite has just issued a "sharp warning" that the US must make major cuts in spending or end up in default like Greece. The trouble is of course that there is no entity that will come to the rescue of the US as the European Union has (so far) come to the rescue of the Southern PIGS.
The larger EU itself, of course, has problems. All major Western economies have serious problems. But again the US political and economic system and the media that reports on it, seem incapable of dealing with the larger issues. This article excerpted above in the Globe about Obama's speech is a good example of how the establishment is coping.
The Boston Globe, a mainstream newspaper owned by the New York Times (which has its own problems) devoted a lot of ink to President Obama's speech. It was composed by two Globe staffers so we'll refer to the article as being written by the "Globe" as shorthand. The speech was "43 minutes" long and called for cutting costs across the board but notably in defense spending.
The salient points of Obama's proposal were a $4 trillion cut to the "deficit," plus higher taxes to help preserve Medicaid and Medicare. This is contrasted in the article with a Republican plan to cut almost $6 trillion in spending over 10 years made by US Representative Paul Ryan of Wisconsin last week. His plan, we learn, would "transfer much of the responsibility for [Medicaid and Medicare] costs] from the federal government to state government, individuals, and insurers.
Neither of these two plans actually reduces federal spending. They merely reduce its GROWTH. Because the GOP plan also seeks various tax cuts along with the spending plan, about $4.4 trillion would be cut from the projected deficit, the Globe reports, stating that the nation's current debt is $14 trillion (which understates the larger problem by about US$185 trillion. The Globe, predictably, was impressed by the tone of the speech, describing it as a speech that "mixed appeals for a united sense of purpose with sharply partisan jabs," and laid out "a vision of a country strengthened both by fewer debts and a greater diligence to solving the problems of Medicaid and Medicare." Here's some more:
In promising to preserve those programs, [President Barack Obama] enlists his administration in the beginning of what is expected to be an epic battle with Republicans over their fate. "We are a better country because of these commitments,' he said in an impassioned defense of Medicaid and Medicare against Republicans' push for sweeping changes. "I'll go further — we would not be a great country without those commitments.' Obama also sought cuts in defense spending and renewed his pitch for a simpler tax code.
His call for the end of the Bush tax cuts for incomes above $250,000 for couples reignites a ferocious debate from the fall midterm elections. That element of the speech triggered the most vociferous and immediate opposition from Republicans. "Any plan that starts with job-destroying tax hikes is a nonstarter,' House Speaker John Boehner, Republican of Ohio, said in a statement. The Medicaid and Medicare over haul is key to the Republicans' plan, which aims for deeper cuts to the deficit over a shorter time ...
The article then notes the "chasm between the positions of the Republicans and Obama" before returning to the substance of Obama's speech and Obama's admission that when it comes to Medicare and Medicaid "some changes are needed." The plan, the Globe reports, would improve efficiency and lower drug prices by "leveraging the purchasing power of Medicare." Perhaps the saddest part of the reporting has to do with the size of Medicare program, which the Globe reports as 46.6 million beneficiaries at a total cost of $509 billion. In Massachusetts alone, meanwhile, "There are 452,600 low-income children in the state who depend on Medicaid for health care." Given these staggering numbers, one is hard-pressed to remember that neither of these programs even existed 60 years ago. In time, neither will exist again.
The speech did not touch on specifics for Social Security except to warn that adjustments will be needed. The consensus of politicians questioned by the Globe seemed to be that larger issues regarding the US's declining fiscal and monetary situation may taken several years to work out.
One wonders how those involved will ever tackle the larger issues when even the more adversarial of the two parties does not seem to be telling the truth about the numbers involved. We reported yesterday that Speaker of the House John Boehner's claim that the Republican budget deal cut some US$39 billion in federal spending obligations but might be less. In fact, in a staff report yesterday, the Christian Science Monitor yesterday presented an analysis that concluded the deal may cut as little as $352 million!
The bill did pass yesterday in the US House of Representatives, with some 60 Tea Party freshmen Congressmen and "Conservative" Republicans voting against it. Boehner's signature "deficit reducing issue" was salvaged only because enough Democrats voted for it. This, after the mainstream media anointed Boehner the "victor" in the government spending debate. If Boehner was the victor, why did the "defeated" party give him the support he needed?
The nonpartisan Congressional Budget Office is the source for the story. Many of the "cuts" we learn, involved funds that were not actually going to spent or that were not, strictly speaking even government funds. Boehner is quoted as well: "There are some who claim the spending cuts in this bill aren't ‘real,' that they're ‘gimmicks.' I just think it's total nonsense ... A cut is a cut."
Boehner may take the point of view that a cut is a cut, but the larger process seems most questionable. Neither side of the aisle is able to tell the truth and the mainstream American media is incapable of doing anything more than catalogue the minutia of a failed process. This is all being presented as business-as-usual but it is not business as usual. The process itself has no answers. The entire dollar-reserve system died in 2008 but there is no recognition of that in Congress or among those who are doing the reporting.
America and NATO are apparently trying to disengage from Afghanistan (another story that is not being much reported on). But the West (and thus the US) has just started military action on several other fronts and there is as yet no political will to cut the larger military-industrial establishment that is driver behind these campaigns. Larger countries like China, Russia and Brazil that have accepted the current dollar reserve system have given notice that they will not do so much longer. Price inflation around the world is gathering strength and America is no exception. The government lies about the economy.
In truth, the third Great American Revolution is gathering even as we write. The first revolution of course saw the framing and composition of the Constitution. The second revolution resulted in the Civil War and the diminishment of states rights. But the third revolution, the current one, is both slower and probably more profound. It will likely include devolution of power and passive or active resistance to an out-of-control Leviathan. There will be demands (as there already are) for lower taxes, less military spending and even a new approach to the US monetary system. These will be resisted by the powers-that-be.
The outlines are fairly clear for those who wish to see. It is much the same in Europe as America though the emphases are currently different. In Europe, the protests continue to focus on restoring government programs and alleviating austerity. In America, the anger is basically focused on government spending. But in both Europe and America, the frustration is palpable and the arguments pit the middle classes against the elite ruling classes. This is a change from even a few years ago. All of a sudden fault lines have emerged and they are both significant and powerful.
Taking the broadest view, one could speculate that Western civilization itself is going through a fairly rare convulsion. As we have often pointed out, the last significant sociopolitical evolution took place after the invention of the Gutenberg press, which convulsed Europe and ultimately led to the Renaissance, the Reformation, the Age of Enlightenment, the formation of whole new country (America) and numerous wars, including the 30-year Peasant War and the American and French revolutions.
Today, we see similar upheavals, though not yet nearly so advanced. We argue these tumultuous times are a direct result of Internet truth-telling about the elite's central banking economy combining with the evident and obvious failures of the system as it is. In fact, it seems to us that the Anglo-American power elite has taken a desperate gamble, purposefully destabilizing the current system in order to create social and economic confusion that will lead to the establishment of world government.
These sorts of strategies have played out before. But today, the Anglo-American elite driving the process is at war with its middle classes. The goal is actually the destruction of Western economies and currencies so that a new world order can emerge out of the ruins. To this end, the West's most prominent economies and political systems are being destroyed from the inside out.
Ironically, most of those involved in the destruction are not doing so with any conscious appreciation of the roles that they are playing. The destruction has been set in motion at the highest levels and has to do with the imposition of fiat-money central banking regime, graduated income taxes, a Pan-European and American military industrial complex and regulatory democracy itself with its growing authoritarian and judicial vengefulness, phony enemies (Islam) and unreal and wasteful war on terror.
The goal is control. In Central America , a woman is fingerprinted at a grocery store when she wishes to pay for her items with a hundred dollar bill. Banks in developing countries will no longer accept bank checks; one has to be a resident of the country in order to open a bank account. INTERPOL proposes a biometric database for all seven billion citizens of the world that will make international travel more "efficient."
Privately held central banks throughout the developing world, meanwhile, are making and implementing Draconian economic rules that are then coordinated and eventually expanded to the West as well. The purpose is to freeze all money transactions of any size and to track money flows generally. Only the elite and its delegated authorities are to have access to large pools of capital on demand as they wish. The war on terror itself is very useful in this regard as it gives the elites the pretext it needs to enforce even the most ludicrous and Draconian demands for transparency.
It is part of a larger, unspoken struggle. Commercial banks and savings banks are the front line troops enforcing the will of the BIS and the elites behind the scenes. The walls are constructed regulation buy regulation in developing countries and then exported, once finished, to the West, complete with established precedents and progressive arguments. Within this context, US debates about "cutting the federal budget" can be seen as nothing more than another distraction.
Conclusion: The elites are racing to build global government before the Western middle classes are fully aware. The current political debates, with their ephemera and trivialities hardly give one even a taste of what is yet to come. A clash of cultures is in the offing. The Western mainstream media likely will not cover it, but then, again, you see, there IS the Internet's alternative media ...
Posted by Wayne on 04/22/11 12:52 AM
Appears that it's embedded ... go to "The Money That Is Sold Abroad Is You!" on Youtube!
Posted by Wayne on 04/22/11 12:48 AM
The simple truth that all are trying avoid see link
Click to view link
The Masters have sold you out!
Posted by Ingo Bischoff on 04/20/11 10:44 AM
DB: "Ingo, thank you for your gracious answers. This comes back to the issue of you wishing to have government own all land and rent it out, correct?"
BISCHOFF: The idea is not that the goverment "owns" the land. Land cannot be owned under Anglo-Saxon law. The idea is that within a sovereign jurisdiction, where the "government" is "We the People...", the title to all land is held in "allodium" for the purpose of administering its use equitably to benefit all its residents. This can only be done by valuing the land and offering it up for use to the highest bidder of rent. The "land rent" idea to administer the use of land emerged in post Roman England as part of the "barbaric laws" of the Angles, Saxons, Thueringians, Friesians and the "folkland laws" of the Jutes who emigrated there from the Continent.
DB: "Is that your position as well as regards the Founding Fathers? Did the Founding Fathers also want the US government to own all land? Is that your implication in your answer?"
The early North American settlers were Anglo Saxons who fled the "feudal law" of the Norman King. The founders by and large believed in Anglo Saxon law regarding the use of land (See Jefferson's letter to King George entitled "A Summary View of he Rights of British America"). They required in the U.S. Constitution that any new state have the same constitution as the original thirteen states.
The founding fathers did not want the U.S. Government to own land. The reason the U.S. Government owns any land is by "right to land gained by conquest", part of Anglo Saxon law.
As regards the original thirteen states, under their constitutions, all land was entirely held in "allodium" by each state. As new states joined the Union, they were under Article IV required to have the same type of constitutions. All previous titles to land had to be resolved in order to become allodial to the newly formed states, regardless whether a state came into existence through treaties, annexation, etc. Primarily in the West, the U.S. Government kept title to much of the land which was conquered from the Indians by the U.S. Cavalry.
Posted by Ingo Bischoff on 04/20/11 02:14 AM
DB: "Question 1. Why would this be so, Ingo? Are you saying the free-market failed or is it because government somehow interfered?"
BISCHOFF: There cannot be a free market in "land". Every square inch on this earth is unique. The supply of land is perfectly inelastic. There can only be a market in "rent" based on the value of "land" (location). The founders understood this. That is why the original states all formed their constitutions on the Anglo-Saxon shire system. This requires the periodic valuations of "land" (locations) which can then be offered up for use in the "free market" for the highest rent. Land itself cannot be sold or its value monetized legally.
DB: "Question 2. Also, many conspiratorial historians believe that Morgan instigated or at least aggravated the crash of 1907. Presumably you don't. Or do you?"
I am quite familiar with the history of the 1907 crash. The crash was brought on by the "land" question (mining) and the 18 year real estate cycle. J.P. Morgan and his collegues with the NY banks wanted the Federal Government involved and used the severity of the 1907 crash to force hearings. They had hoped to steer the Congress to let them have control so that the monetizing of real estate values did not get out of hand. The Congress didn't oblige to give them control. Instead they split the Fed system into twelve regional districts. Which severely restricted the land speculation. The NY Fed then violated the 1913 FRA and monetized debt and real estate values anyway in the early 1920s.
Reply from The Daily Bell
Ingo, thank you for your gracious answers. This comes back to the issue of you wishing to have government own all land and rent it out, correct?
Is that your position as well as regards the Founding Fathers? Did the Founding Fathers also want the US government to own all land? Is that your implication in your answer?
Posted by Ingo Bischoff on 04/20/11 12:05 AM
DB: "1. The pre-1935 Fed created money through commercial bank against Real Bills and Gold. However, you haven't got a clue how Real Bills work ... HOW DID THIS WORK?"
BISCHOFF: Commercial banks bought 90 Day Real Bills from producers and by authorization under state charter were created redeemable currency against them. When the Real Bills matured, the currency expired (withdrawn from circulation). At anytime a holder could exchange currency for gold. Real Bills financing brought into circulation all te currency necessary to clear the Real Bills without creating inflation.
DB: "2. Why does he think the pre-1935 Fed WAS NECESSARY? Wasn't it a mercantilist institution that gave advantage to some over others and enshrined those advantages into law? And why had the free-market FAILED to such a degree that its creation was necessary."
BISCHOFF: This monetary system got into trouble when instead of only Real Bills, commercial banks started to also monetize ever increasing real estate values. This led to booms and busts in the economy of the late 1800s. After the crash of 1907, the U.S. Congress got involved to gather the commercial banks into a national system. The result of several years of hearings was the Federal Reserve Act of 1913. It authorized creation of redeemable FRNs only against Real Bills and gold within a system of twelve Federal Reserve Banks. The FRNs were created on a regional basis and subscribed by the individual banks to the extent they held Real Bills and Gold.
DB: "Hope you answer those two questions Mr. Bischoff. Your comments reach many thousands more than just those few on this thread."
BISCHOFF: I was glad to answer the two questions. As regards a caustic comment to one or another of the feedbackers, I make it when I finally feel that they deserve it rather than to just ignore them.
Reply from The Daily Bell
Well, let's not be caustic. He is a very bright Bug and your answers are sometimes circituitous. Certainly, the rhetoric should diminish on all sides so we can continued this conversation, which hopefully is useful to more than ourselves.
In this case, again, you have answered directly and precisely from our point of view which leads to another question:
"This monetary system got into trouble when instead of only Real Bills, commercial banks started to also monetize ever increasing real estate values."
Question 1. Why would this be so, Ingo? Are you saying the free-market failed or is it because government somehow interfered?
Question 2. Also, many conspiratorial historians believe that Morgan instigated or at least aggravated the crash of 1907. Presumably you don't. Or do you?
Posted by Zenbillionaire on 04/19/11 08:28 PM
@ The Bug
"1) The elite gave the Fed the money
2) The member banks gave the Fed the money
3) Congress passed a bill to have the Treasury give the Fed the money
4) The Fed created the money out of thin air via digital keystrokes "
I'm thinking a group of guys put on masks, got on a train with no money, then got off the train with a lot of money. Maybe that would be the pre-digital version of option 4? Prestidigitation.
Posted by Bionic Mosquito on 04/19/11 08:21 PM
"However, you haven't got a clue how Real Bills work."
Please, Ingo, stick to one deflection at a time.
"And Bug, it behooves us to be patient so Mr. Bischoff does not take his ball and go home ..."
DB, you will note, I said "please."
Time for me to go play ball....
Posted by Ingo Bischoff on 04/19/11 07:20 PM
"I am now convinced you are purposely obfuscating and avoiding the question. You are creating strawmen. You cannot answer because to answer would expose the false foundation on which you have built some theory of the economic world."
I am glad that you are convinced. Now go and study the post-1935 Fed.
I am not interested in it. My only interst lies in the philosophical principles that exist between the pre-1935 Fed and the post-1935 Fed.
The post-1935 Fed creates money by monetizing debt. It does so in numerous ways. Go find out for yourself.
The pre-1935 Fed created money through commercial bank against Real Bills and Gold. However, you haven't got a clue how Real Bills work.
Pre-1935 FRNs are redeemable and have a positive value. Post-1935 and post-1971 FRNs are irredeemable and have a negative value.
If you want to disgree with this go ahead. I'll just bow to your intellectual superiority. What can I say....??? I know when I have met my match.
Reply from The Daily Bell
Try to keep the conversation going without ill feelings. Our elves are not convinced about any of this but Ingo Bischoff does evince a broad spectrum of knowledge and we would like to continue to learn more.
Our point in answer to this statement by Mr. Bischoff is as follows:
1. The pre-1935 Fed created money through commercial bank against Real Bills and Gold. However, you haven't got a clue how Real Bills work ... HOW DID THIS WORK?
2. Why does he think the pre-1935 Fed WAS NECESSARY? Wasn't it a mercantilist institution that gave advantage to some over others and enshrined those advantages into law? And why had the free-market FAILED to such a degree that its creation was necessary.
Hope you answer those two questions Mr. Bischoff. Your comments reach many thousands more than just those few on this thread.
And Bug, it behooves us to be patient so Mr. Bischoff does not take his ball and go home ...
Posted by Bionic Mosquito on 04/19/11 06:53 PM
I am now convinced you are purposely obfuscating and avoiding the question. You are creating strawmen. You cannot answer because to answer would expose the false foundation on which you have built some theory of the economic world.
I say the Fed creates money from nothing. You say it does not. In order to flush this out between us, I ask for your explanation as to where the Fed then got funds in the first place such that it could buy assets to the tune of $2.5 trillion.
I have tried this several times on this thread. The request is simple enough. For someone who thinks and writes as well as you do, my questions cannot be so confusing. Yet you respond, once again, by not responding.
"If you have the Fed's financials, please pass them on to Ron Paul. He is looking for them."
My request presupposes some knowledge on your part. It has been widely reported, even by the Fed itself, that the Fed holds assets in the range of $2.5 trillion. This was about $800 billion prior to the events of 2008, and approximately $2 trillion prior to QE2. The Fed publishes the data weekly. I apologize for assuming you were aware of this information. This information is easily found at the Federal Reserve site.
As to Ron Paul wanting to see the financials, you are mistaken. He has been after an audit. A high school accounting student knows the difference. I have no doubt you do as well. That you even raise this subject, and additionally make such a silly statement speaks volumes to your desire to avoid the subject.
"...the Fed DOES NOT BUY TREASURY PAPER WITH TREASURY PAPER."
I said nothing about the Fed buying treasury paper. In fact, I said the Fed can and does buy paper of all sorts, not just treasury paper. Additionally, I said nothing about the Fed using Treasury paper to make its purchases. I am asking you with what the Fed has bought the assets it has bought, and where did it get the funds needed to make the purchases that now sit on its balance sheet.
"Now, here you are asking the same question. What is this....???"
Yes, Ingo. What is this?
I have repeatedly asked a simple question. You could, if you chose to, answer it quite simply. Let me give you some ideas:
1) The elite gave the Fed the money
2) The member banks gave the Fed the money
3) Congress passed a bill to have the Treasury give the Fed the money
4) The Fed created the money out of thin air via digital keystrokes
Perhaps you have another answer. Or no answer. I will bet the latter.
Reply from The Daily Bell
Mr Bischoff will probably reply he is not interested in the post 1935 Fed. But remember please much of the material on this thread is related Dr. Fekete's comments regarding the post 1935 Fed, which Mr. Bischoff originally set out to defend ... So perhaps he will continue to comment on this issue.
Above, in his response we have asked him some questions about the pre-1935 Fed, which he seems fonder of ...
Posted by Ingo Bischoff on 04/19/11 04:26 PM
"Where did the Fed get the money to "buy" a $2.5 trillion plus balance sheet?"
If you have the Fed's financials, please pass them on to Ron Paul. He is looking for them.
As to answering the question the DB posed, I told the DB very clearly that the Fed DOES NOT BUY TREASURY PAPER WITH TREASURY PAPER. The DB asked me to justify that it did. I can not justify it, because it doesn't happen.
Now, here you are asking the same question. What is this....???
Posted by Bionic Mosquito on 04/19/11 12:26 PM
Fair enough. That it is the gnomes drafting a response and no longer the elves is rather suggestive....
Posted by Bionic Mosquito on 04/19/11 11:42 AM
DB: WHERE DOES BEN BERNANKE GET THE FUNDS TO BUY TREASURY PAPER IF HE MUST COLLATERALIZE THE FUNDS WITH THE PAPER IT INTENDS TO BUY IN ADVANCE!
BM: The Fed has $2.5 trillion dollar balance sheet. The money to build this balance sheet came from SOMEWHERE.
IB: I explained the "money" creation by the "faux commercial" banks in the post-1935 Fed to one of your very astute Feedbackers.
Ingo, This wasn't the question. I have read your two part answer to DB several times. I have read the comments by Dave Jr, which you state answer this question. However, it doesn't answer DB's question, nor mine, which is the same question phrased differently: Where did the Fed get the money to "buy" a $2.5 trillion plus balance sheet?
No need to try anymore on my account. DB has stopped asking, I will as well. Perhaps DB has stopped asking because they understand your answer and I am the only one left in the dark at this point. Perhaps DB stopped asking, because they too, have finally grown weary of this conversation on this thread.
Reply from The Daily Bell
We haven't stopped asking at all. We are merely digesting and the elves are considering ... The gnomes are drafting a response, meanwhile.
Posted by Ingo Bischoff on 04/19/11 10:48 AM
@ the man from mars
"And whenever no one has any interest in buying such Notes and Bills in a failed auction, are they then extraordinarily rendered as sub-prime junk bonds ...... to be purchased with the handy QE facility?"
That is exactly what seems to be happening.
Posted by AmanfromMars on 04/19/11 04:46 AM
"The Fed sells the Notes and Bills for the Treasury in Federal Open Market auctions. It receives payment in FRNs from the purchasers and passes those FRNs on to the Treasury. No Ponzi scheme here." .... Posted by Ingo Bischoff on 4/18/2011 11:48:52 PM
And whenever no one has any interest in buying such Notes and Bills in a failed auction, are they then extraordinarily rendered as sub-prime junk bonds ...... to be purchased with the handy QE facility?
Thanks for all the info, by the way, IB. It is most helpful.
Posted by Luciano on 04/19/11 01:28 AM
They did not spend the last 50 years brainwashing and dumbing down the general population for nothing. It's tied with their antics and outbursts because they do not want their drones to wake up and realize that they have been taken for a ride and reduced to wards and slaves of the state who does their thinking for them.
Posted by So What on 04/19/11 12:30 AM
thsi whole thing could be solved by terminating the federal government in it's entiry, stopping the wars, and shipping all of the Israeli zionist warmongers back to khazaria where they belong..
Posted by Ingo Bischoff on 04/18/11 11:48 PM
@ the man from mars
"If U.S.Treasury Notes and Bonds are purchased/exchanged for dollars from the Fed, is that a Ponzi transaction?"
U.S. Treasury Notes and Bonds are not exchanged for FRNs by the Fed. The Fed sells the Notes and Bills for the Treasury in Federal Open Market auctions. It receives payment in FRNs from the purchasers and passes those FRNs on to the Treasury. No Ponzi scheme here.
If however the U.S. Congress year after year votes budget deficits and has the Treasury turn them into Notes and Bonds for the Fed to sell, then that is a Ponzi scheme, because they include in each years budget deficit to be monitized the previous years interest expense.
Posted by Ingo Bischoff on 04/18/11 11:32 PM
@ Dave Jr
"The Fed as we know it will end. As I stated before, "the lake is about fished out". They will claim to be the damaged party as they walk off with real property and resources. We will be left with a mountain of worthless paper. We think we are winning, up to that day."
Thank you, Dave....I could not have said it any better.
The DB may not realize that English is neither my or Dr. Fekete's mother tongue. I believe we do our best to get things across in English. I fear that sometimes I am hampered in expressing myself clearly in a language with which I did not grow up.
Reply from The Daily Bell
Oh, didn't know that. But you are very good writer, Ingo Bischoff, so that is no excuse not to write simply and comprehensibly!
Posted by Ingo Bischoff on 04/18/11 11:09 PM
"What is a "wage fund" Ingo, in this context?"
When Real Bills are purchased by the commercial banks and the seller (business in the chain of producing consumer goods) receives cash, he uses this cash to pay his employees. Since he can draw a Real Bill for the amount of value which includes his labor costs, the producer can abtain the money for payroll right away when he discounts the Real Bill to the bank. That is referred to as the "wage fund" inside the Real Bill.
Posted by Bionic Mosquito on 04/18/11 10:48 PM
"Markets are less free with corruption. So why should we leave that door open?"
I have replied to this in detail, but it is held up for some foul language that I did not use (just pulling your chain, DB).
In any case, every once in a while, look up! It should get posted eventually.