“The bank is something more than men, I tell you. It’s the monster. Men made it, but they can’t control it.” – John Steinbeck, The Grapes of Wrath
Mass Dollar Debasement
The beast looms large, spreading its influence widely. The Federal Reserve, the body tasked with issuing U.S. legal currency, is adopting a bold strategy. However, its objectives are narrow.
Operating relentlessly, the Federal Reserve, under the leadership of Chairman Powell, is implementing what Minneapolis Fed President Neel Kashkari has termed “infinite cash” into the economy. The ultimate goal? To undermine the dollar in a bid to save it. The stakes are monumental, and the risks even greater.
The largest asset bubble in history, swollen by the Fed’s continuous issuance of inexpensive credit, has burst. At the same time, measures to control the coronavirus have decimated the economy. The impending wave of unemployment, bankruptcies, and economic turmoil could surpass even the devastation seen during the Great Depression of the 1930s.
While the economy may be in shambles, the Fed is taking all necessary measures to preserve the dollar’s status as the world’s reserve currency. Should the dollar decline, it would signal an end to life as it’s been known for the past 75 years.
To achieve this, the Fed is flooding the financial sector with a limitless supply of cheap credit. In the interim, it must prioritize the bailout of large banks and corporations. Yet, the Fed’s true aim is to reduce debts through mass dollar debasement.
So, what does this all mean?
Match Made In Hell
It’s an outrageous notion that you, the taxpayer, are indirectly funding this operation through the U.S. Treasury. A large portion of the $2.2 trillion stimulus package, known as the CARES Act, is specifically designed to facilitate this.
Understanding the collaboration between the Fed and the Treasury can be both alarming and enlightening. While it may cause anger, grasping this dynamic unveils the complex web of our financial obligations.
Remember, the Treasury is part of the Executive Branch and receives funding primarily from taxpayers—including you. As dictated by the CARES Act, the Treasury has just received $454 billion.
How will the Treasury utilize this $454 billion? Will it allocate funds to various federal programs, or perhaps boost the nation’s gold reserves?
The answer is clear: the Treasury is transferring the full $454 billion of taxpayer money to the Federal Reserve. The Fed plans to leverage this amount to generate an astounding $4.5 trillion in credit.
This entire process allows the Fed to extend $4.5 trillion as credit to bail out major corporations—like Boeing. Essentially, the Fed will sustain businesses that should otherwise fail, creating a situation where numerous companies exist in a lifeless state. Moreover, the methods employed will remain largely secret, as pointed out by Zero Hedge:
“The Senate-approved stimulus bill repeals the sunshine law for the Fed’s meetings until the President declares the coronavirus threat over or until the end of the year (spoiler: the coronavirus threat may never end). This change renders any Freedom of Information Act lawsuits attempting to unveil the details of Fed meetings virtually impossible.”
If that doesn’t ignite your passion, more revelations are on the way.
The Upside of The Great Depression of the 2020s
The Federal Reserve, the very institution that just received $454 billion from the Treasury, is not only bailing out struggling American corporations. Beginning Monday, the Fed will also be providing funds to foreign central banks in exchange for their Treasuries.
Specifically, the Fed is initiating a new liquidity facility on April 6. This facility, known as the Foreign and International Monetary Authorities (FIMA Repo Facility), will enable foreign central banks to trade their Treasuries held with the Fed for U.S. dollars.
This marks the seventh liquidity initiative launched by the Fed since the financial system began to falter after the collapse of the greatest asset bubble in history. But is it not curious? Aren’t Treasuries perceived as the safest and most liquid financial asset available?
Perhaps not anymore. Foreign central banks hold Treasuries but require dollars for their dollar-denominated obligations. Consequently, they are selling Treasuries in large quantities to obtain the necessary dollars.
In fact, March alone saw a staggering $109 billion drop in Treasuries held by foreign central banks at the Fed, representing the largest monthly decline in history. This massive sell-off is precisely why the Fed is launching the FIMA Repo Facility.
However, there exists a much simpler and more elegant solution to address these financial imbalances. It doesn’t need a new liquidity facility or require Chair Powell to distribute liquidity worldwide.
What is this solution?
Cease the chaos. Allow markets to function freely. Let interest rates rise.
The financial system is already on the verge of collapse. Why not allow it to do so fully? Would that be reckless? Would the consequences be too grave?
The aspirations and dreams of three generations could vanish, which might happen regardless. Yet, the experience of witnessing civilization radically altered as a result of many years of reckless financial practices may hold an unexpected benefit.
With a bit of luck, The Great Depression of the 2020s could pave the way for genuine banking practices for generations to come.
Sincerely,
MN Gordon
for Economic Prism
Return from The Upside of The Great Depression of the 2020s to Economic Prism
