The Federal Reserve Doesn’t Want Banks to Increase Lending, Because of Inflation

If the Fed policy is not about expanding credit, which is what the Fed tells us that it is all about, then it is all about a hidden tax for Americans, a ‘controlled’ demolition of the US dollar as I have always said.

The Fed fears that the constant devaluation of the dollar and the still ongoing greatest financial collapse in world history will get ‘out of control’ that is all.

All the elite fears is that they are losing control (= power). The elite already has/owns all the money in the world and is now after total power. The middle class gets intentionally wiped out in this process. The Fed and the US government are looting and destroying America.

“When a country embarks on deficit financing (Obamanomics) and inflationism (Fed) you wipe out the middle class and wealth is transferred from the middle class and the poor to the rich.”
– Ron Paul

All the money and power will be even more concentrated in very few hands. And when they will have turned the US into a Third World country, then they will buy it all up for cents on the dollar, as they are already doing with the banking system and then they are planning to rebuilt America again with them as Lords and the people as slaves in the New World Order.

Remember:

McHUGH:
Well, I’m a renegade banker. I have sat in at meetings where the Federal Reserve came in, sat down and “said stop lending, we think there is a recession coming.” The very fact that we were told to stop lending caused a recession. That happened in 1990-1991. Word of that finally hit the mainstream media and one of the first acts Clinton did was that he grabbed the regulators by the throats and said, “why don’t you let the bankers start lending again.” The next time they came in, they told us to start lending.

They have that kind of power. They decide when recessions and depressions happen. They decide when hyperinflation happens.

They can do it through a lot of different tools. The hidden one is the regulatory agencies where they come in and intimidate bankers and tell them what to do. They have a lot of power. They can have the boards of directors of banks thrown in jail. They can have people fired. They use those powers behind the scenes, nobody knows about them. As a banker, I have seen the dark side of the Fed. I have watched them rate good loans as bad loans, and charge off loans when in fact, customers were fine, the loans were fine. We are in a bit of that environment again now. What happens is, the last thing these government agencies want to happen is that they get called on the carpet before Congress. So they become overzealous, overcautious at precisely the wrong times. There is a lot of action by the Fed that messes with the normal business free market cycles that would prevent excesses. A lot of the publicity in today’s market is that there wasn’t enough government intervention, there wasn’t enough regulation and that is true too, they got too far in one extreme, but they create imbalances and create these problems by overacting as well. [emphasis mine]

Source: Whether Or Not We Like It: “We shall have World Government”

More info/quotes on the Fed here: Ron Paul on Glenn Beck: Destruction of the dollar


fed

Tim Duy – Director of Undergraduate Studies of the Department of Economics at the University of Oregon and the Director of the Oregon Economic Forum – noticed an amazing sentence in the minutes of the most recent meeting of the Fed Open Market Committee:

As has already been widely noted, the minutes of the most recent FOMC meeting reiterated the Fed’s eagerness to reverse, not extend, policy:

Overall, many participants viewed the risks to their inflation outlooks over the next few quarters as being roughly balanced. Some saw the risks as tilted to the downside in the near term, reflecting the quite elevated level of economic slack and the possibility that inflation expectations could begin to decline in response to the low level of actual inflation. But others felt that risks were tilted to the upside over a longer horizon, because of the possibility that inflation expectations could rise as a result of the public’s concerns about extraordinary monetary policy stimulus and large federal budget deficits. Moreover, these participants noted that banks might seek to reduce appreciably their excess reserves as the economy improves by purchasing securities or by easing credit standards and expanding their lending substantially. Such a development, if not offset by Federal Reserve actions, could give additional impetus to spending and, potentially, to actual and expected inflation. To keep inflation expectations anchored, all participants agreed that it was important for policy to be responsive to changes in the economic outlook and for the Federal Reserve to continue to clearly communicate its ability and intent to begin withdrawing monetary policy accommodation at the appropriate time and pace.

Read that carefully and realize this: An apparently not insignificant portion of the FOMC believes that there is a terrible risk that banks loosen their credit standards and increase lending at a time when, even if the economy posts expected gain, unemployment remains at unacceptably high levels. Silly me, I thought increased lending was the whole point of the exercise to lower interest and expand the balance sheet. That whole credit channel thing. If not to expand lending during a credit crunch, then what else are they expecting?

I am in shock that this sentence made it into the minutes. One can only conclude that a significant portion of policymakers are simply clueless. Or, more disconcerting, they have lost all faith in the ability of financial institutions to channel capital into activities with any hope of financial returns. Has the Fed now embraced the view that they manage the economy through little else then fueling and extinguishing bubbles?

Yves Smith has the definitive last word on the issue:

These statement is an indication of intellectual bankruptcy at the Fed, that they have learned nothing from the crisis. But that isn’t surprising. CEOs usually need to be fired after they have presided over a disaster. They are incapable of seeing and remedying their errors. Why should senior bureaucrats be any different?

Wednesday, November 25, 2009

Source: Washington’s Blog

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