More money for Banks as BoE keeps interest rates at 0.5%

AGENCE FRANCE PRESSE | APRIL 18, 2012

Bank of England policymakers all voted in favour of holding interest rates at a record low earlier in April, while one member called for more stimulus cash, the BoE said on Wednesday.

Minutes from the central bank’s Monetary Policy Committee (MPC) meeting on April 4-5 showed that the nine policymakers voted to keep the key lending rate at 0.50 percent, where it has stood since March 2009.

The policymaking panel meanwhile voted 8-1 at the same meeting in favour of maintaining the size of the bank’s asset purchasing programme at £325 billion (388 billion euros, $514 billion).

One member, David Miles, voted for the second month to increase the so-called quantitative easing (QE) programme by an additional £25 billion.

Under QE, the central bank creates new cash that is used to purchase assets such as government and corporate bonds in the aim of giving a boost to lending and economic activity.

“For most members, there was no sufficient reason to change either bank rate or the quantity of asset purchases,” the minutes read.

“Moreover, for them, it seemed sensible to let the current programme of asset purchases run its course while coming to a view on medium-term prospects in the context of the May forecast round.

“For one member, the balance of risks continued to warrant an expansion of the asset purchase programme this month, although the decision was finely balanced.”

Wall Street Aristocracy Got $1.2 Trillion in Loans from Fed

Bloomberg
August 22, 2011

Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.

By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.

“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”

(View the Bloomberg interactive graphic to chart the Fed’s financial bailout.)

Foreign Borrowers

It wasn’t just American finance. Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG (UBSN), which got $77.2 billion. Germany’s Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.

The largest borrowers also included Dexia SA (DEXB), Belgium’s biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default.

The $1.2 trillion peak on Dec. 5, 2008 — the combined outstanding balance under the seven programs tallied by Bloomberg — was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

Peak Balance

The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.

The Fed has said it had “no credit losses” on any of the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said the central bank netted $13 billion in interest and fee income from the programs from August 2007 through December 2009.

“We designed our broad-based emergency programs to both effectively stem the crisis and minimize the financial risks to the U.S. taxpayer,” said James Clouse, deputy director of the Fed’s division of monetary affairs in Washington. “Nearly all of our emergency-lending programs have been closed. We have incurred no losses and expect no losses.”

While the 18-month U.S. recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, banks and the economy remain stressed.

Odds of Recession

The odds of another recession have climbed during the past six months, according to five of nine economists on the Business Cycle Dating Committee of the National Bureau of Economic Research, an academic panel that dates recessions.

Bank of America’s bond-insurance prices last week surged to a rate of $342,040 a year for coverage on $10 million of debt, above where Lehman Brothers Holdings Inc. (LEHMQ)’s bond insurance was priced at the start of the week before the firm collapsed. Citigroup’s shares are trading below the split-adjusted price of $28 that they hit on the day the bank’s Fed loans peaked in January 2009. The U.S. unemployment rate was at 9.1 percent in July, compared with 4.7 percent in November 2007, before the recession began.

Homeowners are more than 30 days past due on their mortgage payments on 4.38 million properties in the U.S., and 2.16 million more properties are in foreclosure, representing a combined $1.27 trillion of unpaid principal, estimates Jacksonville, Florida-based Lender Processing Services Inc.

Liquidity Requirements

“Why in hell does the Federal Reserve seem to be able to find the way to help these entities that are gigantic?” U.S. Representative Walter B. Jones, a Republican from North Carolina, said at a June 1 congressional hearing in Washington on Fed lending disclosure. “They get help when the average businessperson down in eastern North Carolina, and probably across America, they can’t even go to a bank they’ve been banking with for 15 or 20 years and get a loan.”

The sheer size of the Fed loans bolsters the case for minimum liquidity requirements that global regulators last year agreed to impose on banks for the first time, said Litan, now a vice president at the Kansas City, Missouri-based Kauffman Foundation, which supports entrepreneurship research. Liquidity refers to the daily funds a bank needs to operate, including cash to cover depositor withdrawals.

The rules, which mandate that banks keep enough cash and easily liquidated assets on hand to survive a 30-day crisis, don’t take effect until 2015. Another proposed requirement for lenders to keep “stable funding” for a one-year horizon was postponed until at least 2018 after banks showed they’d have to raise as much as $6 trillion in new long-term debt to comply.

‘Stark Illustration’

Regulators are “not going to go far enough to prevent this from happening again,” said Kenneth Rogoff, a former chief economist at the International Monetary Fund and now an economics professor at Harvard University.

Reforms undertaken since the crisis might not insulate U.S. markets and financial institutions from the sovereign budget and debt crises facing Greece, Ireland and Portugal, according to the U.S. Financial Stability Oversight Council, a 10-member body created by the Dodd-Frank Act and led by Treasury Secretary Timothy Geithner.

“The recent financial crisis provides a stark illustration of how quickly confidence can erode and financial contagion can spread,” the council said in its July 26 report.

21,000 Transactions

Any new rescues by the U.S. central bank would be governed by transparency laws adopted in 2010 that require the Fed to disclose borrowers after two years.

Fed officials argued for more than two years that releasing the identities of borrowers and the terms of their loans would stigmatize banks, damaging stock prices or leading to depositor runs. A group of the biggest commercial banks last year asked the U.S. Supreme Court to keep at least some Fed borrowings secret. In March, the high court declined to hear that appeal, and the central bank made an unprecedented release of records.

Data gleaned from 29,346 pages of documents obtained under the Freedom of Information Act and from other Fed databases of more than 21,000 transactions make clear for the first time how deeply the world’s largest banks depended on the U.S. central bank to stave off cash shortfalls. Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness.

Morgan Stanley Borrowing

Two weeks after Lehman’s bankruptcy in September 2008, Morgan Stanley countered concerns that it might be next to go by announcing it had “strong capital and liquidity positions.” The statement, in a Sept. 29, 2008, press release about a $9 billion investment from Tokyo-based Mitsubishi UFJ Financial Group Inc., said nothing about Morgan Stanley’s Fed loans.

That was the same day as the firm’s $107.3 billion peak in borrowing from the central bank, which was the source of almost all of Morgan Stanley’s available cash, according to the lending data and documents released more than two years later by the Financial Crisis Inquiry Commission. The amount was almost three times the company’s total profits over the past decade, data compiled by Bloomberg show.

Mark Lake, a spokesman for New York-based Morgan Stanley, said the crisis caused the industry to “fundamentally re- evaluate” the way it manages its cash.

“We have taken the lessons we learned from that period and applied them to our liquidity-management program to protect both our franchise and our clients going forward,” Lake said. He declined to say what changes the bank had made.

Acceptable Collateral

In most cases, the Fed demanded collateral for its loans — Treasuries or corporate bonds and mortgage bonds that could be seized and sold if the money wasn’t repaid. That meant the central bank’s main risk was that collateral pledged by banks that collapsed would be worth less than the amount borrowed.

As the crisis deepened, the Fed relaxed its standards for acceptable collateral. Typically, the central bank accepts only bonds with the highest credit grades, such as U.S. Treasuries. By late 2008, it was accepting “junk” bonds, those rated below investment grade. It even took stocks, which are first to get wiped out in a liquidation.

Morgan Stanley borrowed $61.3 billion from one Fed program in September 2008, pledging a total of $66.5 billion of collateral, according to Fed documents. Securities pledged included $21.5 billion of stocks, $6.68 billion of bonds with a junk credit rating and $19.5 billion of assets with an “unknown rating,” according to the documents. About 25 percent of the collateral was foreign-denominated.

‘Willingness to Lend’

“What you’re looking at is a willingness to lend against just about anything,” said Robert Eisenbeis, a former research director at the Federal Reserve Bank of Atlanta and now chief monetary economist in Atlanta for Sarasota, Florida-based Cumberland Advisors Inc.

The lack of private-market alternatives for lending shows how skeptical trading partners and depositors were about the value of the banks’ capital and collateral, Eisenbeis said.

“The markets were just plain shut,” said Tanya Azarchs, former head of bank research at Standard & Poor’s and now an independent consultant in Briarcliff Manor, New York. “If you needed liquidity, there was only one place to go.”

Even banks that survived the crisis without government capital injections tapped the Fed through programs that promised confidentiality. London-based Barclays Plc (BARC) borrowed $64.9 billion and Frankfurt-based Deutsche Bank AG (DBK) got $66 billion. Sarah MacDonald, a spokeswoman for Barclays, and John Gallagher, a spokesman for Deutsche Bank, declined to comment.

Below-Market Rates

While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.

JPMorgan Chase & Co. (JPM), the New York-based lender that touted its “fortress balance sheet” at least 16 times in press releases and conference calls from October 2007 through February 2010, took as much as $48 billion in February 2009 from TAF. The facility, set up in December 2007, was a temporary alternative to the discount window, the central bank’s 97-year-old primary lending program to help banks in a cash squeeze.

‘Larger Than TARP’

Goldman Sachs Group Inc. (GS), which in 2007 was the most profitable securities firm in Wall Street history, borrowed $69 billion from the Fed on Dec. 31, 2008. Among the programs New York-based Goldman Sachs tapped after the Lehman bankruptcy was the Primary Dealer Credit Facility, or PDCF, designed to lend money to brokerage firms ineligible for the Fed’s bank-lending programs.

Michael Duvally, a spokesman for Goldman Sachs, declined to comment.

The Fed’s liquidity lifelines may increase the chances that banks engage in excessive risk-taking with borrowed money, Rogoff said. Such a phenomenon, known as moral hazard, occurs if banks assume the Fed will be there when they need it, he said. The size of bank borrowings “certainly shows the Fed bailout was in many ways much larger than TARP,” Rogoff said.

TARP is the Treasury Department’s Troubled Asset Relief Program, a $700 billion bank-bailout fund that provided capital injections of $45 billion each to Citigroup and Bank of America, and $10 billion to Morgan Stanley. Because most of the Treasury’s investments were made in the form of preferred stock, they were considered riskier than the Fed’s loans, a type of senior debt.

Dodd-Frank Requirement

In December, in response to the Dodd-Frank Act, the Fed released 18 databases detailing its temporary emergency-lending programs.

Congress required the disclosure after the Fed rejected requests in 2008 from the late Bloomberg News reporter Mark Pittman and other media companies that sought details of its loans under the Freedom of Information Act. After fighting to keep the data secret, the central bank released unprecedented information about its discount window and other programs under court order in March 2011.

Bloomberg News combined Fed databases made available in December and July with the discount-window records released in March to produce daily totals for banks across all the programs, including the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, Commercial Paper Funding Facility, discount window, PDCF, TAF, Term Securities Lending Facility and single-tranche open market operations. The programs supplied loans from August 2007 through April 2010.

Rolling Crisis

The result is a timeline illustrating how the credit crisis rolled from one bank to another as financial contagion spread.

Fed borrowings by Societe Generale (GLE), France’s second-biggest bank, peaked at $17.4 billion in May 2008, four months after the Paris-based lender announced a record 4.9 billion-euro ($7.2 billion) loss on unauthorized stock-index futures bets by former trader Jerome Kerviel.

Morgan Stanley’s top borrowing came four months later, after Lehman’s bankruptcy. Citigroup crested in January 2009, as did 43 other banks, the largest number of peak borrowings for any month during the crisis. Bank of America’s heaviest borrowings came two months after that.

Sixteen banks, including Plano, Texas-based Beal Financial Corp. and Jacksonville, Florida-based EverBank Financial Corp., didn’t hit their peaks until February or March 2010.

Using Subsidiaries

“At no point was there a material risk to the Fed or the taxpayer, as the loan required collateralization,” said Reshma Fernandes, a spokeswoman for EverBank, which borrowed as much as $250 million.

Banks maximized their borrowings by using subsidiaries to tap Fed programs at the same time. In March 2009, Charlotte, North Carolina-based Bank of America drew $78 billion from one facility through two banking units and $11.8 billion more from two other programs through its broker-dealer, Bank of America Securities LLC.

Banks also shifted balances among Fed programs. Many preferred the TAF because it carried less of the stigma associated with the discount window, often seen as the last resort for lenders in distress, according to a January 2011 paper by researchers at the New York Fed.

After the Lehman bankruptcy, hedge funds began pulling their cash out of Morgan Stanley, fearing it might be the next to collapse, the Financial Crisis Inquiry Commission said in a January report, citing interviews with former Chief Executive Officer John Mack and then-Treasurer David Wong.

Borrowings Surge

Morgan Stanley’s borrowings from the PDCF surged to $61.3 billion on Sept. 29 from zero on Sept. 14. At the same time, its loans from the Term Securities Lending Facility, or TSLF, rose to $36 billion from $3.5 billion. Morgan Stanley treasury reports released by the FCIC show the firm had $99.8 billion of liquidity on Sept. 29, a figure that included Fed borrowings.

“The cash flow was all drying up,” said Roger Lister, a former Fed economist who’s now head of financial-institutions coverage at credit-rating firm DBRS Inc. in New York. “Did they have enough resources to cope with it? The answer would be yes, but they needed the Fed.”

While Morgan Stanley’s Fed demands were the most acute, Citigroup was the most chronic borrower among the largest U.S. banks. The New York-based company borrowed $10 million from the TAF on the program’s first day in December 2007 and had more than $25 billion outstanding under all programs by May 2008, according to Bloomberg data.

Tapping Six Programs

By Nov. 21, when Citigroup began talks with the government to get a $20 billion capital injection on top of the $25 billion received a month earlier, its Fed borrowings had doubled to about $50 billion.

Over the next two months the amount almost doubled again. On Jan. 20, as the stock sank below $3 for the first time in 16 years amid investor concerns that the lender’s capital cushion might be inadequate, Citigroup was tapping six Fed programs at once. Its total borrowings amounted to more than twice the federal Department of Education’s 2011 budget.

Citigroup was in debt to the Fed on seven out of every 10 days from August 2007 through April 2010, the most frequent U.S. borrower among the 100 biggest publicly traded firms by pre- crisis market valuation. On average, the bank had a daily balance at the Fed of almost $20 billion.

‘Help Motivate Others’

“Citibank basically was sustained by the Fed for a very long time,” said Richard Herring, a finance professor at the University of Pennsylvania in Philadelphia who has studied financial crises.

Jon Diat, a Citigroup spokesman, said the bank made use of programs that “achieved the goal of instilling confidence in the markets.”

JPMorgan CEO Jamie Dimon said in a letter to shareholders last year that his bank avoided many government programs. It did use TAF, Dimon said in the letter, “but this was done at the request of the Federal Reserve to help motivate others to use the system.”

The bank, the second-largest in the U.S. by assets, first tapped the TAF in May 2008, six months after the program debuted, and then zeroed out its borrowings in September 2008. The next month, it started using TAF again.

On Feb. 26, 2009, more than a year after TAF’s creation, JPMorgan’s borrowings under the program climbed to $48 billion. On that day, the overall TAF balance for all banks hit its peak, $493.2 billion. Two weeks later, the figure began declining.

“Our prior comment is accurate,” said Howard Opinsky, a spokesman for JPMorgan.

‘The Cheapest Source’

Herring, the University of Pennsylvania professor, said some banks may have used the program to maximize profits by borrowing “from the cheapest source, because this was supposed to be secret and never revealed.”

Whether banks needed the Fed’s money for survival or used it because it offered advantageous rates, the central bank’s lender-of-last-resort role amounts to a free insurance policy for banks guaranteeing the arrival of funds in a disaster, Herring said.

An IMF report last October said regulators should consider charging banks for the right to access central bank funds.

“The extent of official intervention is clear evidence that systemic liquidity risks were under-recognized and mispriced by both the private and public sectors,” the IMF said in a separate report in April.

Access to Fed backup support “leads you to subject yourself to greater risks,” Herring said. “If it’s not there, you’re not going to take the risks that would put you in trouble and require you to have access to that kind of funding.”

As Society Breaks Down, People Beg for Tyranny

by Luis R. Miranda
The Real Agenda
August 11, 2011

It’s been at least 15 years since I heard calls for people to wake up because the greatest crisis in humanity’s existence was rapidly approaching. Today, as I watch video and photos from London, and previously from Syria, Egypt, the United States and Lybia, I cannot help but think that those who sought to warn us were simply and plainly correct. Perhaps the most surprising fact is that those truth tellers, who were often identified as conspiracy theorists, told us how it would happen and as the break point got closer and closer, they were even able to predict different aspects of the fall with outstanding precision.

Who would have believed 15 years ago that the world would crumble to its knees and would beg for the implementation of tyrannical policies and regimes in order to bring back law and order? I certainly didn’t. Before I began studying history and current events, I thought society would be able to take care of itself and avoid disaster. But the latest video feeds from London and everywhere else clearly show that society is lost in the foggy alternative reality they were born into 50 or more years ago. The social engineers played their hand well and now have most of the population consuming itself in a web of self-degradation, death and perversion fed to us as the sexiest fad for almost half a century.

In England, polls show that upwards of 65 percent of people are now calling for the use of rubber bullets, water canyons, police abuse and other tyrannical practices because they are too afraid to organize with their neighbors and take care of the looters that are destroying decades-old family businesses, homes, cars, shoe and clothing stores and other property to get their hands on the latest electronics, jewelry and various valuable products by breaking windows, smashing store front doors and pulling citizens from the their cars to smash their heads on the streets. Instead, British people are now calling for a government sponsored Police State.

Notice that most of the places that are being affected by riots and unrest are sections of the society whose members are unarmed and who cannot defend themselves because their government, which cannot protect them 24/7, implemented regulations to ban the people’s right to be armed and to defend their properties and their families. London shows signs of the most recent confrontation between members of the government-dependent underclass and the hard-working middle class, just as the social engineers planned it. As governments cut spending in a failed attempt to fix deficits and reduce their debt, it is exactly the underclass that feels the pinch first. But instead of attacking government policies and the entities responsible for the financial collapse, this uneducated underclass takes it upon themselves to beat the daylights out of middle class folks who suffer from the bank-sponsored self-inflicted financial crisis.

The financial and political apartheid taking place in the world -where governments steal the people’s pension funds to invest them in fictitious financial products, banks get bailed-out as they charge interest rates and / or fees for people to keep money in their accounts, the government cuts social security and medical care spending, people’s paychecks and pension buy less food- will continue to increase social volatility not only in London or Greece, but in the Americas, Asia, Africa and everywhere else. The Social Experiment failed horribly. But then again, it was meant to fail. The divisions meant to occur in order to monopolize, control and conquer arrived right on time.

The underclass as well as the dumbed down middle-class that for centuries sucked off the system through government established dependence programs only woke up after finding themselves with no jobs, no pension, no savings and no future. They woke up from their eternal state of slavery because the bribery scheme known as welfare that the government used to hook them up is suddenly crashing down, and they have not safety net to fall onto. What do I mean by bribery scheme? In 2007, the richest country in the planet had at least 52.6 percent of the people receiving government aid of some sort: pensions, social security and so on.. One in five Americans held a government job or a job that depended on government spending. Around 19 million used food stamps and 2 million got subsidized housing. If that is not government bribery, I don’t know what is it. The social engineers made sure from the start that only two classes existed: the productive class and the parasitical class. Both the government and the dependent classes are equally violent towards those who produce and who support them throughout their lives.

But perhaps one of the most abhorrent aspects of the current societal collapse is that the social engineers point to the underclass and the working class as those responsible for the crisis. That’s right. They accuse the so-called “useless eaters” for their greed and for living beyond their means and hold them responsible for the crisis we now experience. Both the underclass and a large part of the middle class are in part responsible for their greed and decadence. But weren’t they born and bathed into a system that promoted and facilitated their greed, decadence and dependence? Of course they were. Should the underclass and the middle class then be held responsible for the now developing crisis because they were greedy and dependent? Of course not. But that is what the bankers, the social engineers want the dumbed down majority to think, and that is why tonight racial divides grow bigger in London, the United States, Africa and Asia. The underclass believes that the middle class are the ones responsible for the crisis because they are successful business owners and were able to take care of themselves and their families. In the meantime, the bankers who are responsible for both classes’ misery run rampant ripping people off around the world.

The people are to blame, say the bankers, because they want more services but don’t want to pay more taxes. Due to the fact millions have not bought the propaganda, the government is now playing the collectivist card. “There is no need to look for anyone to blame because we must now come together to solve our problems”. Neither the government nor the banks want the taxpayers to fully understand that these two entities are solely responsible for the current state of affairs. Governments have bribed citizens openly for at least a century in order to control them, therefore it is insane to believe that someone will buy the government and bank sponsored propaganda.

While millions of people lose their jobs, homes and lives because they cannot afford them, a few decadent scum bags consume themselves in fake tribalism, racism, theft and violence while the cowardly ones wait for the state to do something and beg for Martial Law and a Police State. Those who accepted the American-created culture of death, sex, thuggery, drug use, suicide and gang oriented behaviours are now acting as what they always dreamed to be: a bunch of disaffected slaves with no jobs or future that look up at rappers, singers, sports figures, electronics, alcohol and drugs to fulfill their empty lives. The world went from praising explorers, scientists, fire fighters, inventors and community leaders to worship ‘bling’ and Madison Avenue-created delusion.

Those who took advantage of a corrupt debt-based system to get their holiday vacation, car and house loans were shocked after the banks that own their livelihoods cut off lines of credit three years ago to put an end to the fantasy reality they were accustomed to for so many years. Those who foolishly believed that paying into the public pension system would guarantee them some devalued change to live the rest of their lives, even though many had warned of its non-existence, were not only fools, but also irreparable willful ignorants. They trusted their government so much to give them everything, that no room was left to think that the same State could one day decided to take it all away; which is what is happening now. So now, the most dependent members of society are blaming other citizens and not the banks and the governments for their misery. Why? Because blame is the base of Statism and the State has shown people well to accept the blame game when it favours the State. They are now begging the social engineers to put an end to their misery. Events like the riots in London and the United States are just the beginning of what is turning out to be a long summer and a coming long winter. Street violence, crime and government opposition will be used by the controllers to take away more of our rights. Government will use armies and violence against peaceful protesters before bringing out austerity and a more visible Police State, to crush people’s right to speak and arm to themselves, track social media, email accounts, and any other sign of dissent.

Now, this is what a broken down society looks like in the developed world. Can you imagine what will it look like in socialist or inherently paternalistic poor countries when austerity, hunger and deep misery gets there?

Obama’s 2012 Budget: Tool Of Class War

Paul Craig Roberts
Friday, February 18, 2011

Obama’s new budget is a continuation of Wall Street’s class war against the poor and middle class. Wall Street wasn’t through with us when the banksters sold their fraudulent derivatives into our pension funds, wrecked Americans’ job prospects and retirement plans, secured a $700 billion bailout at taxpayers’ expense while foreclosing on the homes of millions of Americans, and loaded up the Federal Reserve’s balance sheet with several trillion dollars of junk financial paper in exchange for newly created money to shore up the banks’ balance sheets. The effect of the Federal Reserve’s “quantitative easing” on inflation, interest rates, and the dollar’s foreign exchange value are yet to hit. When they do, Americans will get a lesson in poverty.

Paul Craig Roberts

 

Now the ruling oligarchies have struck again, this time through the federal budget. The U.S. government has a huge military/security budget. It is as large as the budgets of the rest of the world combined. The Pentagon, CIA, and Homeland Security budgets account for the $1.1 trillion federal deficit that the Obama administration forecasts for fiscal year 2012. This massive deficit spending serves only one purpose–the enrichment of the private companies that serve the military/security complex. These companies, along with those on Wall Street, are who elect the U.S. government.

The U.S. has no enemies except those that the U.S. creates by bombing and invading other countries and by overthrowing foreign leaders and installing American puppets in their place.

China does not conduct naval exercises off the California coast, but the U.S. conducts war games in the China Sea off China’s coast. Russia does not mass troops on Europe’s borders, but the U.S. places missiles on Russia’s borders. The U.S. is determined to create as many enemies as possible in order to continue its bleeding of the American population to feed the ravenous military/security complex.

The U.S. government actually spends $56 billion a year, that is, $56,000 million, in order that American air travelers can be porno-scanned and sexually groped so that firms represented by former Homeland Security Secretary Michael Chertoff can make large profits selling the scanning equipment.

With a perpetual budget deficit driven by the military/security complex’s desire for profits, the real cause of America’s enormous budget deficit is off-limits for discussion.

The U.S. Secretary of War-Mongering, Robert Gates, declared: “We shrink from our global security responsibilities at our peril.” The military brass warns of cutting any of the billions of aid to Israel and Egypt, two functionaries for its Middle East “policy.”

But what are “our” global security responsibilities? Where did they come from? Why would America be at peril if America stopped bombing and invading other countries and interfering in their internal affairs? The perils America faces are all self-created.

The answer to this question used to be that otherwise we would be murdered in our beds by “the worldwide communist conspiracy.” Today the answer is that we will be murdered in our airplanes, train stations, and shopping centers by “Muslim terrorists” and by a newly created imaginary threat–“domestic extremists,” that is, war protesters and environmentalists.

The U.S. military/security complex is capable of creating any number of false flag events in order to make these threats seem real to a public whose intelligence is limited to TV, shopping mall experiences, and football games.

So Americans are stuck with enormous budget deficits that the Federal Reserve must finance by printing new money, money that sooner or later will destroy the purchasing power of the dollar and its role as world reserve currency. When the dollar goes, American power goes.

For the ruling oligarchies, the question is: how to save their power.

Their answer is: make the people pay.

And that is what their latest puppet, President Obama, is doing.

With the U.S. in the worst recession since the Great Depression, a great recession that John Williams and Gerald Celente, along with myself, have said is deepening, the “Obama budget” takes aim at support programs for the poor and out-of-work. The American elites are transforming themselves into idiots as they seek to replicate in America the conditions that have led to the overthrows of similarly corrupt elites in Tunisia and Egypt and mounting challenges to U.S. puppet governments elsewhere.

All we need is a few million more Americans with nothing to lose in order to bring the disturbances in the Middle East home to America.

With the U.S. military bogged down in wars abroad, an American revolution would have the best chance of success.

American politicians have to fund Israel as the money returns in campaign contributions.

The U.S. government must fund the Egyptian military if there is to be any hope of turning the next Egyptian government into another American puppet that will serve Israel by continuing the blockade of the Palestinians herded into the Gaza ghetto.

These goals are far more important to the American elite than Pell Grants that enable poor Americans to obtain an education, or clean water, or community block grants, or the low income energy assistance program (cut by the amount that U.S. taxpayers are forced to give to Israel).

There are also $7,700 million of cuts in Medicaid and other health programs over the next five years.

Given the magnitude of the U.S. budget deficit, these sums are a pittance. The cuts will have no effect on U.S. Treasury financing needs. They will put no brakes on the Federal Reserve’s need to print money in order to keep the U.S. government in operation.

These cuts serve one purpose: to further the Republican Party’s myth that America is in economic trouble because of the poor: The poor are shiftless. They won’t work. The only reason unemployment is high is that the poor had rather be on welfare.

A new addition to the welfare myth is that recent middle class college graduates won’t take the jobs offered them, because their parents have too much money, and the kids like living at home without having to do anything. A spoiled generation, they come out of university refusing any job that doesn’t start out as CEO of a Fortune 500 company. The reason that engineering graduates do not get job interviews is that they do not want them.

What all this leads to is an assault on “entitlements”, which means Social Security and Medicare. The elites have programmed, through their control of the media, a large part of the population, especially those who think of themselves as conservatives, to conflate “entitlements” with welfare. America is going to hell not because of foreign wars that serve no American purpose, but because people, who have paid 15% of their payroll all their lives for old age pensions and medical care, want “handouts” in their retirement years. Why do these selfish people think that working Americans should be forced through payroll taxes to pay for the pensions and medical care of the retirees? Why didn’t the retirees consume less and prepare for their own retirement?

The elite’s line, and that of their hired spokespersons in “think tanks” and universities, is that America is in trouble because of its retirees.

Too many Americans have been brainwashed to believe that America is in trouble because of its poor and its retirees. America is not in trouble because it coerces a dwindling number of taxpayers to support the military/security complex’s enormous profits, American puppet governments abroad, and Israel.

The American elite’s solution for America’s problems is not merely to foreclose on the homes of Americans whose jobs were sent offshore, but to add to the numbers of distressed Americans with nothing to lose the sick and the dispossessed retirees, and the university graduates who cannot find jobs that have been sent to China and India.

Of all the countries in the world, none need a revolution as bad as the United States, country ruled by a handful of selfish oligarchs who have more income and wealth than can be spent in a lifetime.

Paul Craig Roberts [email him] was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand.

U.S. Fed Commits to Erasing the Dollar

Ben Bernanke and his cabal of governors approved the expenditure of at least $600 billion to buy U.S. debt.  This move makes the private Federal Reserve Bank the largest holder of U.S. even debt above China.

CNBC/Reuters

The Federal Reserve launched a controversial new policy on Wednesday, committing to buy $600 billion more in government bonds by the middle of next year in an attempt to breathe new life into a struggling U.S. economy.

The decision, which takes the Fed into largely uncharted waters, is aimed at further lowering borrowing costs for consumers and businesses still suffering in the aftermath of the worst recession since the Great Depression.

The U.S. central bank said it would buy about $75 billion in longer-term Treasury bonds per month. It said it would regularly review the pace and size of the program and adjust it as needed depending on the path of the recovery.

In its post-meeting statement, the Fed described the economy as “slow”, and said employers remained reluctant to add to payrolls. It said measures of inflation were “somewhat low.”

“Although the committee anticipates a gradual return to higher levels of research utilization in a context of price stability, progress toward its objectives has been disappointingly slow,” the Fed said. (Click here to read Fed statement.)

Stocks showed relatively little reaction to the news. The Dow Jones Industrial Average bounced around between positive and negative, a day after closing at its highest level since April 26. The S&P 500 Index and the Nasdaq also were mostly flat.

Longer-dated U.S. Treasurys shed gains, with 30-year bonds falling more than a point.

The US dollar fell against the euro and also pared gains against the yen.

The central bank repeated its vow to keep the federal funds rate on overnight loans ultra-low for an extended period. Some analysts had speculated the Fed might broaden this commitment.

Kansas City Fed President Thomas Hoenig continued his streak of dissents, saying the risk of additional securities purchases outweighed the benefits.

In a separate statement, the New York Fed said it would temporarily relax a rule limiting ownership of any particular security to 35 percent.

It said holdings would be allowed to rise above that threshold “only in modest increments.” Including the Fed’s ongoing plan to reinvest maturing assets, the New York Fed expects to conduct $850 billion to $900 billion in Treasury purchases through the end of the second quarter of 2011.

With the U.S. economy expanding at only a 2 percent annual pace in the third quarter of this year and the jobless rate seemingly stuck around 9.6 percent, the Fed had come under pressure to do more to stimulate business activity.

The central bank had already cut overnight interest rates to near zero in December 2008 and bought about $1.7 trillion in U.S. government debt and mortgage-linked bonds.

Those purchases, however, occurred when financial markets were stricken by crisis, and economists and Fed officials alike are divided over how effective the new program will be. Further bond purchases, however, are viewed with a skeptical eye by many economists and some Fed officials.

Indeed, some worry further bond buying could do more harm than good by providing tinder for inflation that will ignite when the recovery finally gains traction.

Markets had already seen sharp moves in anticipation of a resumption of bond purchases by the Fed. U.S. stocks and government bonds have rallied, while the dollar has taken a drubbing in advance of the decision.

Stocks have also been supported by expectations—now validated—that Republicans, viewed as more pro-business by investors, would seize control of the House and pick up Senate seats in elections on Tuesday that were seen as a referendum on the economy.

Since Republicans campaigned on a platform for smaller government, Congress may be less likely to offer fresh stimulus spending if the economy sputters, leaving the Fed as the primary source of support.

With the prospect of a long period of ultra-low returns in the United States, investors have flocked to emerging markets, pushing those currencies higher. Emerging economies, worried about a loss of export competitiveness, have cried foul.

“We are all under attack by the relaxed monetary policy of the United States,” Colombian Finance Minister Juan Carlos Echeverry told investors on Tuesday.

The Bank of Japan, which meets on Thursday and Friday, is also poised to launch a new round of bond buying. The European Central Bank and Bank of England also meet this week, but are not expected to shift policy.

The Fed move is likely to weaken the dollar further, which will helps big exporters like CNBC parent General Electric