Fed Meddling
Research for Online Investors

by John Dalt

12/01/11

If I give you two good D-cell batteries for two bad batteries plus a nickel, how much are my two good batteries worth? Since the dead batteries are worthless, didn’t I just sell my new batteries for a nickel? The Federal Reserve just agreed to loan the ECB dollars for 0.58% interest (a 58 cents a year on $100 bucks) in their “dollar liquidity swap” program.

The euro rallied and the dollar fell. Who knew dead batteries were worth so much? How did the Federal Reserve justify helping Europe? We found our answer in the Federal Reserve press release announcing the program.

From the first paragraph, “The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.”

Now we understand. The U.S. Federal Reserve was worried that Ma and Pa Kettle in Kentucky might not be able to get a revolving loan to buy one of those new fangled washing machines.  Their remedy is to loan money to Europe. Is that what they would have us believe? I feel better already.

Yesterday’s actions simply highlight the reason the Federal Reserve should be abolished.  They are “world improvers.”  They simply cannot avoid intervening where ever the opportunity exists for them to meddle.

Years ago, I read the history of the Rothschild family. They made money by providing financing to Kings and countries to finance wars.  Occasionally to both sides of a conflict at the same time. What did they care? They were bankers, and went were the demand was. What is the difference between the Rothschild’s and our Federal Reserve? Only one I can see, Ben Bernanke has the backing of the U.S. government behind him.

We just wonder how long. The secrecy has been peeled away by Freedom of Information releases.  We now see the “invisible hand” they have exerted over the U.S. economy. Bloomberg sued the Federal Reserve to release documents in 2008. 29,000 pages of documents were finally released in August 2011 after the Fed fought the release all the way to the Supreme Court.

Only after the Supreme Court refused to hear their appeal last March was the Fed obliged to release details of their “operations” during the credit crisis.  Bloomberg reports the Fed loaned over $7.77 TRILLION dollars to financial institutions between August 1007 and April 2010.  To put that number in context, U.S. GDP is approx. $15 trillion dollars.  The controversial TARP program was only $800 billion.

The Fed defends the loans as important to prop up financial institutions that were too big to fail.  The argument is that one big bank failure could trigger a “chain reaction” in the credit markets.  What were the results of the program? Bloomberg reports “Total assets held by the six biggest U.S. banks increased 39 percent to 9.5 trillion on Sept. 30 2011, from $6.8 trillion on the same day in 2006.”

Tell me again, what is the difference between Bernanke’s Federal Reserve and the Rothschild’s banking operation?

If you would like some entertaining reading tonight, Andy Stern wrote an Op-Ed for the Wall Street Journal today titled “China’s Superior Economic Model.”

The drivel from this socialist and how he wants to move the U.S. to a totalitarian system is sad.  He would fit right in with the “Occupy Wall Street” protesters.  What is breathtaking is the fact he is a regular at the White House, visiting 21 times in the first half of 2009.  He served on the President’s National Commission on Fiscal Responsibility and Reform.  His idea of reform would see the U.S. with unions representing all workers and the government turning out five year plans every other year (when the last one failed).

Initial Jobless Claims came in higher than expected this morning at 402 thousand.  The ISM Manufacturing Index was reported at 52.7, an improvement over last month’s reading of 50.8.  Any reading over 50 indicates growth, under 50 means slowing in the manufacturing sector.

Overnight, China reported November’s Purchasing Manager Index (PMI); it was 49.0 which was down from 50.4 in October.  This was the worst official reading since February 2009.  Today, the market is consolidating yesterday’s gains.  Tomorrow’s Non-Farm Payrolls report is expected to come in at the 120 thousand jobs added range.  The market will most likely head lower on a bad number and going into the weekend as traders will want to take some profits off the table.

Mailbag:
So we are printing money to save the Euro, because Germany wouldn’t let the ECB do it?  Great, just Great.---subscriber T.M.

Reply: Technically they are not, because the ECB has to put up collateral of euros to “swap” for the dollars they are taking.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions .based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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