Fed Reserve Bank.... Good for you?

[Westbranch]

this is a jaw dropper if you did not know about it already....ENJOY! a good read.

https://www.linkedin.com/pulse/how-fed-went-from-lender-last-resort-destroyer-american-booth?trk=eml-email_feed_ecosystem_digest_01-hero-0-null&midToken=AQH3t79vAHtEKQ&fromEmail=fromEmail&ut=1r5X7m6e9hkTE1

[CDN-VT]

I copped the jest , without all the java distractions :

Danielle DiMartino Booth

President at Money Strong, LLC; Former Advisor, Federal Reserve Bank of Dallas

Early morning, December 16, 2008, with a drizzle of freezing rain falling, few would even glance at the line of inconspicuous Mercury Marquis sedans pulling up to Washington, DC’s Fairmont Hotel. Emerging from the luxurious four-star establishment, their Foggy Bottom home eight times a year, are eleven little-known bureaucrats with their contingent of requisite subordinates.

There is no fanfare to mark the coming momentous decision they are to take on as they comfortably settle in for the ten-minute caravan to the neoclassical white marble edifice known as the Marriner S. Eccles Federal Reserve Board Building, located at Twentieth Street and Constitution Avenue NW.

Another half dozen of their peers had already left their homes in nearby Georgetown or some other Washington suburb and they too are making their way to the same address for the all-important 9 a.m. meeting.

Only one of these bureaucratsâ€"the chairman, a mild-mannered former professorâ€"might have been recognized in an American airport. The restâ€"unelected, immune to political pressure, mostly academics, and save one, inexperienced in the intricacies of running a major corporation, or even a small businessâ€"were virtually invisible outside the narrow world they inhabited despite the enormous power they wielded.

As these seventeen people arrived, they stowed their coats and umbrellas, grabbed a cup of coffee or tea, and mingled, the low hum of their conversation perhaps more subdued than on similar occasions. The day before, the first of the two-day affair, had been extraordinary in both the dire picture it painted of the American economy and the realization that they would have to take bold and unprecedented action.

That next sleety morning, they met again, determined to take action to prop up a faltering Wall Street, hopelessly mired in the greatest financial crisis since the Great Depression. Even as they convened, the wreckage of the previous three months still burned around them. Credit markets had seized up and fears for the fate of the economy were mounting.

With a few exceptions, virtually all of those at the meeting were PhD economists who had earned doctorates at MIT, Yale, Harvard, Princeton, and other top American universities. They met under the auspices of the Federal Open Market Committee (FOMC), the decision-making body of the Federal Reserve System. They believed a lifetime of study in economic theory and monetary policy had given them unique insight to steer policy for the most powerful central bank in the world, the lender of last resort for failing Wall Street banks, and the U.S. government’s last line of defense against utter financial chaos.

Created in 1913 after the Panic of 1907, the Federal Reserve was founded to keep the public’s faith in the buying power of the U.S. dollar. After failing miserably in the 1930s, the Fed aimed to be more responsive. This led the institution to find discipline in the rising macroeconomic models championed by top monetary theorists. During the ensuing “Quiet Period” in American banking, deposit insurance prevented panics, the Fed controlled interest rates and manipulated the money supply, and though occasional disruptions flared, like the failure of Continental Illinois National Bank and Trust Company in 1984, no systemic risk erupted for seventy years. The Fed had tamed the volatile U.S. economy.

Until September 2008, when all hell broke loose in a worldwide panic that completely blindsided and, embarrassed the Federal Reserve. The Fed had used billions of dollars in taxpayer funds to bail out Wall Street fat cats. Everyone blamed the Fed.

Just before 9 a.m., the door to the chairman’s office opened. Federal Reserve Chairman Ben Bernanke took his place in an armchair at the center of a massive oval table. The members of the FOMC found their designated places around the table; aides sat in chairs or couches against the wall. With staff, the room contained fifty or sixty people, far more than normal for this momentous occasion.

In front of each FOMC member was a microphone to record their words for posterity. To a casual observer, the content of their conversation would be obscured by economic jargon.

This day, their essential task was to vote on whether to take the “fed funds” rateâ€"the interest rate at which banks lent money to each other in the overnight marketâ€"to the zero bound. The history-making low rate would ripple throughout the economy, affecting the price to borrow for businesses and consumers alike.

Bernanke was calm but insistent. His lifetime of study of the Great Depression indicated this was the only way. His sheer depth of knowledge about the Fed’s mishandling of that tragic period was undoubtedly intimidating.

By the end of the meeting, the vote was unanimous. The FOMC officially adopted a zero-interest-rate policy in the hopes that companies teetering on the brink of insolvency would keep the lights on, keep employees on their payrolls, and keep consumers spending. It would even pay banks interest on deposits.

Free cash. We’ll even pay you to take it!

As they gathered their belongings, everyone shook hands, all very collegial despite the sometimes vigorous discussion. They journeyed back to their nice homes in the toniest neighborhoods of America’s richest cities: New York, Boston, Philadelphia, Chicago, Dallas, San Francisco, Washington, DC.

They returned to their lofty perches, some at the Eccles Building, others to the executive floors of Federal Reserve District Bank buildings, safely cushioned from the decision they had just made. Most of them were wealthy or had hefty defined benefit pensions. Their investments were socked away in blind trusts. They would feel no pain in their ivory towers.

It took a few months, but the Fed’s mouth-to-mouth resuscitation brought gasping investment banks and hedge funds and giant corporations back to life. Wall Street rejoiced.

But the Fed’s academic models never addressed one basic question: What happens to everyone else?

In the decade following that fateful day, everyday Americans began to suffer the aftereffects of the Fed’s decision. By 2016, the interest rate still sat at the zero bound and the Fed’s balance sheet had ballooned to $4.5 trillion, thanks to the Fed’s “quantitative easing” (QE), the label given its continuing purchases of Treasuries and mortgage-backed securities.

To what end? All around are signs of an economy frozen in motion thanks to the Fed’s bizarre manipulations of monetary policy, all intended to keep the economy afloat.

The direct damage inflicted on our citizenry begins with our youngest minds and scales up to every living generation in our country’s midst.

The journey could begin anywhere, but let’s start in Erie, Pennsylvania, an area of the country that was struggling even before 2008. The Fed’s high interest rates in the 1980s killed its steel and auto industries. The zero bound has dealt the region another devastating blow. Now, in an Erie elementary school students are given stapled copies of “Everyday Mathematics” instead of an actual textbook. After a snowstorm, twenty-one buckets were deployed to catch leaks because there was no money to repair the roof. In the last five years, the Erie school district has laid off one fifth of its employees and closed three schools to cut costs. School officials are being forced to divert budgets earmarked for kids and facilities to cover the shortfall in its teacher pension fund, starved for yield in a zero-interest-rate environment where bonds return only 1 to 2 percent.

This is not limited to Erie. By mid-2016, long-term returns for U.S. public pensions have dropped to the lowest levels ever recordedâ€"a $1.25 trillion funding gapâ€"forcing pension fund managers from New York to California to resort to ever-riskier investments to meet their legal obligationsâ€"and to cut services to make up the shortfall.

Ruining Americans’ pension systems? The professor and the FOMC had not anticipated that particular side effect.

And then there are the millennials, the 77 million young people born between 1980 and 1995. As private equity surged into real estate, purchasing homes to be used as rentals in search of higher yields, house prices have soared and the market share of first-time home buyers has dropped to its lowest level in almost thirty years. Nearly half of males and 36 percent of females age eighteen to thirty-four live with their parents, the highest level since the 1940s.

Delaying household formation and all the consumer spending that goes with that? Not on the FOMC’s radar.

Even with mortgage rates at record lows, stagnant wages have made it difficult for millennials to amass down payments. Builders anxious to maximize returns now focus on constructing expensive houses, leaving fewer starter homes for sale in urban areas favored by today’s young adults. It is an ominous trend for baby boomers. For many, home equity makes up the bulk of their retirement savings.

Killing the move-up housing market? Nope, the FOMC didn’t foresee that either.

Chances are pretty good that most boomers didn’t get the gist of the statement released by the Fed on that December day in 2008. A certificate of deposit (CD) now pays a hair above nothing. Those boomersâ€"my mom among themâ€"have taken a long hard look at their retirement accounts and realized with a sense of dread that a lifetime of scrimping and risk-averse investing has left their nest eggs vulnerable to serious erosion.

With interest rates on CDs near zero, the average boomer household would need $10.6 million in principal to safely earn $15,930 in interest, the annual income at the federal poverty-line level for a family of two.

Do your folks have $10 million in savings? Mine don’t.

Of course, with $10 million, CDs might not be on the table, but that’s the point. Several hundred thousand dollars won’t do the trick without undue risk for aging boomers.

The members of the FOMC knew their decision would screw savers and the risk-averse elderly. They didn’t care. They couldn’t afford to. Even when well-intentioned smart people save the world, there are always a few, or in this case, millions of inevitable casualties. C’est la vie!

Sadly, there were no angry protests, no million-man marches on Washington that sent shock waves through our country after the FOMC issued its press release. Only the quiet, unheralded loss of some fundamental freedoms: the freedom to save for our retirements risk free, the freedom to sleep in peace knowing our pensions are safe, and the freedom for U.S. companies to invest in our nation’s future.



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Long read , But as I have seen B4 .

VT

[russ_drinkwater]

I feel it will get worse, both here in australia and in america.
We are in the calm before the storm!

[Westbranch]

Russ, VT I assume you guys have heard of Lord Moncton in the EU Parliament...
here is a recent interview with him about the wold economy

https://www.youtube.com/watch?v=PmhOrjxksjA

and an other one from last year on the data used to project temps that does NOT support Al Gores position... https://www.youtube.com/watch?v=2cssne9Q5KM

ADD: the second should follow the first..

[russ_drinkwater]

Makes a lot of sense to me.
So much money is spent there on FBI, CIA, homeland security, national guard, etc etc etc.
Just a waste of borrowed taxpayer funds!
Wildlife officers running around in full swat gear and so on.
From where other people sit it is insane.
Sell off so called federal owned land back to private people makes sense.
The debt over there is unbelievable!
And the record epa is just a criminal group of thugs strangling economic growth and development!
Interest rates need to be locked at 1-5% for 10-20 years to enable growth of industries once again. Both in america and here in australia.
We have lost all our manufacturing factories and skilled workers to china and other "work for a bowel of rice countries"!
A financial transaction tax of 2% and removal of all other taxes would get things going!
Put workers wages back in their pockets and if you are cashed up and spend you pay up, buy shares you pay up, transfer cash overseas you pay up etc etc.

[Westbranch]

Russ, I had all but forgotten about the FTT proposal.  A Brit friend told me about that a long, long time ago and at that time the British DEBT, not just the deficit, could have been wiped out with a  0.1% FTT...  Reason being there are millions of them done daily by the banks, Buy , Sell, Loans, Transfers, Mortgages, Deposits, Withdrawals, the list goes on...  I my view the downside is the expansion of the Grey/Black Market for goods and Services, where all transactions are in cash... 
Have you heard of your Government proposing to do away with cash and going to electronic payment Yet?

[russ_drinkwater]

I suspect it is in the wind!
But it will not happen here as we have no mobile coverage in a lot of rural areas here in australia and little
chance of it being upgraded in my lifetime (20 years plus hopefully)
With no mobile coverage cashless is impossible and I hate smart phone as well.
It would be a voted out of government decision if they tried it.
They are renewing our bank notes at the moment and I am waiting to see if they can our $100 note in the revamp.
Transaction tax is the way to go as it gets all the fat cats, multi-national companies etc etc. If you use money you pay up.
Trump needs it bad! LOL.
All other taxes must go otherwise it will not work.
At one stage brazil had it to fund health care costs and the coffers overflowed.
As I do not have to lodge tax returns anymore, most of my dealing are in cash as you get a far better price and people
like to have some readies in their pockets for a change.
Power outages cause problems here and heavy industry loads such as smelters drain base load productions quickly.
Another reason cashless is insane and unworkable. No power = no usable "money" = upset idiots, who can not even cook a meal at
home or are too stupid to have food stocks at home.
Fuel pumps, traffic lights, refrigeration, all of it suffers.
The power outage in britian a few years ago shows what will happen even with a few days without power.
No power and all transactions revert to cash only! As well as crazy people in panic mode.
Lucky breathing is automatic!

[CDN-VT]

I heard they will get rid of the penny (one cent bit) and those in the tax bracket of 12% will get rounded up ..
Notice it always has & try to pay a bill in cash , they assume me to have the correct amount , so I rounded down & the bill next month interest on 2 cents ..


If our idiot in power today keeps letting in all that sneak into the Kanada , we will have the same trouble as Sweden,France and many more that are being pushed behind the smoke screens .

They dropped our 1000 $ note & now made our notes in plastic .
One hiccup and that is now not even good fire starter

VT 

[russ_drinkwater]

From a nursing perspective I have concerns with the plastic money in regards to Hep B,A,C as well as drugs present
on the plastic money! Hepatitis is tough bug and can survive for 14 days plus on a needle tip or plastic money!
Never lick your fingers or eat after handling plastic cash my friend!
They seem to be determined to kill us off by any means possible.
Wash your notes in warm soapy water?
Gives a new spin on money laundering