Barring unexpected bad economic news in the next several days, the Federal Reserve will finish its bond-buying program at the end of this month. In all, the program has pumped $3.5 trillion into the economy since 2008, helping to revive financial markets and stabilize the economy.
Now comes the hard part.
In its effort to wean the economy off of extraordinary monetary support, the Fed’s next task is to decide when to raise interest rates from their prolonged ultralow levels.
Technically, the decision is straightforward. It is appropriate to raise rates when the economy shows signs of overheating, as measured by inflation in wages and prices. Currently, there are no such signs. Wages have long stagnated, even for college-educated workers. As for prices, the Fed’s preferred annual inflation measure was recently 1.5 percent, well below its 2 percent target.
Politically, however, the decision is fraught. The Fed is not supposed to be swayed by elected officials or special interests. But bond holders — a powerful political constituency that includes financial firms, investment funds and wealthy individuals — generally want the Fed to raise rates sooner rather than later, and they have ample opportunity to dominate public discourse. Their aim is to pre-emptively attack inflation, which diminishes the value of their bonds.
But it is not the Fed’s job to protect investors’ bond portfolios. Its job is to foster both stable inflation and full employment. With the American economy still operating below par, low interest rates would pose an inflation threat only after they had succeeded in spurring credit, strong growth and robust employment. Since those results have not yet been achieved, there is no inflationary pressure and no reason to raise rates in the near term. Continue reading
Taper time. That’s the message from Federal Reserve officials, who announced Wednesday that the central bank will start gradually withdrawing the extraordinary monetary support it has provided for the U.S. economy since the financial crisis erupted in 2008.
In its final meeting of the year, the Fed’s rate-setting panel said Wednesday that starting in January it will cut its monthly purchases of mortgage and U.S. Treasury securities by a total of $10 billion a month, to $75 billion. The Federal Open Market Committee also said that the economy is expanding at a “moderate” pace.
“Taking into account the extent of federal fiscal retrenchment since the inception of its current asset purchase program, the Committee sees the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy,” the FOMC said in a statement.
Fed to taper massive US stimulus
starting in January
Just do it. That’s the message for the Federal Reserve as it decides this week whether its
Christmas present to the American people
should be to start scaling back on the $85bn (£52bn) in newly minted electronic money
it is chucking at the American economy
Wall Street thinks – and hopes – an announcement this week is unlikely.
Financiers have enjoyed the Fed’s gigantic monetary
experiment. They have exchanged Treasury bills and mortgage-backed securities
for cash, which they have used to
play the global markets.
Main Street has not done so well out of the Fed’s quantitative easing programme.
Indeed, by helping to generate
speculative increases in commodity prices QE has squeezed disposable incomes
and done as much harm as good.
U.S. Stock Market Takes a Dive –
Is The Bubble Beginning to Pop?
Evidence: Stock Market Crash
It’s always dangerous to attempt to predict when a major financial event is going to unfold.
Doing so puts one’s credibility on the line, and in the realm of media credibility is everything,
but the signs that the party is headed for an abrupt end were so blatant that we made
the call back in October of last year that we would likely see some big moves in
the first quarter of 2014, and then Nobel Prize winning economist Robert Shiller
came out saying that the stock market looks like it is in a bubble.
Obviously there is no way to know for certain what will happen.
The Fed may very well back down from its promise to taper, or even speed up the printing presses.
One thing is for sure though: this isn’t going to end well.
FEDERAL GOVERNMENT FORCING
401K FUNDS INTO TREASURIES?
Those who have been delaying moving their retirement funds
out of the system on the account of early
withdrawal taxes may want to take notice.
If the official 2012 year end notification an SD reader
received from the TSP is any indication,
it appears that our prediction of forced movement of 401k, IRA,
private & public pension funds
into US Treasury bonds may be closer than ever.
As can be clearly seen via the document below,
the retired former employee of the Social Security
Administration has received official notice
that all future 401k contributions have been moved
from his prior allocation into 100% US treasury bonds!
I just heard from a friend of mine that who worked for
the Social Security Administration for a few years
that his entire 401k has been moved from where
he allocated it into US treasury bonds.
He just received his annual statement that shows all of his funds
have been moved, without his permission
or even notice!
This is what Max Keiser and Jim Sinclair have been predicting for over a year now.
As far as I know,
thus far this has only been applied to non-active employees,
but it looks like the tip of the iceberg,
and smacks of desperation. I thought you guys could take a look at this. Silver Dragon
January 24, 2014 By
401K and Retirement funds
being switched to U.S.
Government Bonds without notice
Published on Jan 25, 2014
The government has begun stealing everyone’s 401K and
retirement plans from their previous allocations
and converting them to buying U.S. government bonds.
This has been said for a long time that it would happen by Truthful financial experts.
It has now begun.
All information in video is linked in the article below.
Royal Bank quietly
cuts some mortgage rates
Royal Bank of Canada, the country’s largest mortgage lender, has quietly cut some of its
mortgage rates this weekend. The move appears to be part of a broader dip in rates,
although economists generally still expect an increase in 2014.
Five-year fixed mortgage rates rose industry-wide for much of 2013,
from their low of 2.64 per cent in April to their high of 3.39 per cent in September,
according to Alyssa Richard, the chief executive officer of RateHub.ca. They edged down
a bit later in the fall but had generally been steady at around 3.25 per cent since then.
Chase Manhattan Plaza Sale Sets Record
for Chinese Buyers
FebAprJunAugOctDec45.0050.0055.0060.00* Price chart for
JPMORGAN CHASE & CO. Click flags for important stories.JPM:US56.47-1.12-1.94%
to Fosun (656) International Ltd. would be the largest purchase of a
New York building by a Chinese buyer, showing Asian investors’
growing appetite for U.S. real estate.
Shanghai-based Fosun, run by billionaire Guo Guangchang, agreed to buy the 60-story
lower Manhattan tower for $725 million, according to a statement filed to
Hong Kong’s stock exchange. The 2.2 million-square-foot (204,000-square-meter)
steel skyscraper was completed in 1961.
Chinese buyers are expanding U.S. property investments, seeking yield and a safe haven
while the government maintains curbs on domestic purchases.
This year, a group including Zhang Xin, the billionaire co-founder of Soho China Ltd. (410),
took a stake in midtown Manhattan’s General Motors Building.
Greenland Holding Group Co., a Shanghai-based, state-owned developer,
agreed this month to buy a 70 percent share of Atlantic Yards,
a residential and commercial project in Brooklyn.
BRICS Inject Capital into I.M.F. Basket of Currencies
By JC Collins
In my previous post I briefly explained how China was in the process of assuming
the liabilities of the Federal Reserve, in addition to their already held
liabilities of the U.S. Treasury. Such a strong statement will require
even stronger evidence. This I will attempt to achieve over this multi-part essay.
“The legislative process is underway right now.
We want the reforms to be adopted expeditiously.
It’s really the U.S. Treasury, Jack Lew and his team that’s taking the lead
on getting these measures through the U.S. Congress that are required to implement the 2010 reforms.”
“Just to remind you what those are, the 2010 reforms do a couple things.
One, they bring four dynamic emerging market countries into
the top 10 shareholder ranks or what we call quota ranks of the institution.
China, Brazil, Russia, India. It also doubles our permanent capital, the quota.
And it also creates a fully elected Executive Board.”
– William Murray, I.M.F. Deputy Spokesman, Jan 9, 2014.
“The IMF is explicit in its antidemocratic leanings, what it calls “political considerations”. The SDR blueprint calls for the appointment of “an advisory board of eminent experts” to provide direction on the amount of money printing in the new SDR system. Perhaps these “eminent experts” would be selected from among the same economists and central bankers who led the international monetary system to the brink of destruction in 2008.”
– James Rickards, Currency Wars, Penguin Group, 2011
G. Edward Griffin’s mind altering “The Creature from Jekyll Island” introduced many of us to the somewhat hidden history of the U.S. Federal Reserve. It told of how the Federal Reserve Act was passed in Congress during the Christmas break in the year 1913. It was insidious. And it changed the course of human history, as it planted the seed of what would slowly grow to become the world’s reserve currency.
Though the U.S. dollar didn’t become the official reserve currency until the Bretton Woods Agreement of 1944, it is commonly accepted that the dollar had already usurped the British pound of this title well before it was officially acknowledged. As I believe the U.S. dollar has now already been usurped by another. We’ll get back to that in a while.
There was another event which took place in the year 1913 which has been little understood or known at all in the western world today. After the collapse of the Manchu Dynasty in 1911, the remaining Government of the Chinese Republic issued bonds to foreign investors for the purpose of raising capital to rebuild the country. These bonds were titled the 1913 Chinese Government 5% Reorganization Gold Loan. Emphasis on the word gold for later reference.
These bonds were pegged to the price of gold as a hedge against future inflation and were denominated in four currencies. The underwriting banks for the bonds reflect the four currencies which the bonds were interchangeable with at the time, which are now known as HSBC, Deutsche Bank, the Bank of Tokyo-Mitsubishi UFJ, and Caylon – Credit Agricole Corporate and Investment Bank.
Keep in mind that these bonds were issued in the same context as the U.S. Treasury Bonds which the world’s central banks have been gobbling up since 1944. These bonds had a yield. These bonds have never fully been acknowledged by the Chinese government. As a part of the deal with the British government for the return of Hong Kong, the People’s Republic of China did honor 10% of the outstanding bonds at about 62% of the face value. And what I can say at this time is that there is in fact a deal in the works for a final payout on the remaining bonds. We’ll get back to that in a while.
In 1944, as a part of the Bretton Woods system, the International Monetary Fund and the World Bank were created. These were western dominated institutions whose sole purpose was organizing foreign markets for the acceptance of U.S. dollars. We will leave the full explanation of these institutions and their role in structuring our current debt based system for another essay series, but for our purposes here, it’s important to understand that they propagated the exporting of dollar inflation to what we now call the “emerging markets”, or the BRICS countries.
Since the initial printing of the Federal Reserve Note (U.S. dollar) in 1913, the “dollar” has lost 95% of its value. We see this devaluation of the dollar as inflation, or the increase of costs for items we buy. This devaluation of the dollar has had a few milestones. One is after the Bretton Woods Agreement when the dollar became the primary reserve currency of the world. The second came when President Richard Nixon uncoupled the dollar from its peg with gold. This was in 1971. A third milestone can be argued to be in 1973, when the so called “petrodollar” was created with agreements between the U.S. and Saudi Arabia, and later all the OPEC countries. This “petrodollar” scheme ensured that all oil trades were completed internationally in U.S. dollars. This was a slight-of-hand from the Bretton Woods arrangement to the “petrodollar” arrangement.
A fourth milestone was obviously the onset of Quantitative Easing after the financial crisis of 2008. The chart below clearly shows how with each milestone the amount of debt (money printing) by the U.S. Treasury and Federal Reserve tag team has been multiplied dramatically leading to inflation. This is shown by an increase in the red line, which represents CPI – Consumer Price Index, the amount you pay for stuff.
The only end to this pattern is an end to the dollar as the world’s primary reserve currency. Just like the British pound before it. In the chart below you’ll notice the same gradual downward pattern as the U.S. dollar.
The central banks of the world were buying up U.S. treasuries before the British even accepted that there was a problem with the pound. The same is happening today with the dollar. In fact, most of the world outside the United States has already accepted the demise of the dollar as fact. But the idea is unfathomable to the average American.
The International Monetary Fund issues a currency called SDR – Special Drawing Rights. The SDR’s are valued on a basket of currencies. In essence, it’s a true to life multiply reserve currency system. It has been slowly built up since the early 1970’s, at the same time the U.S. dollar started its serious devaluation. Could the plan have been in place since 1971 to end the dollar system through hyperinflation before implementing the SDR as a true world currency? Perhaps.
On January 9, 2014, I.M.F. Deputy Spokesman William Murray was giving a press briefing. With zero coverage of this briefing in the western media, it’s important to relay what happened when the questioned was asked about the implementation of the 2010 Code of Reforms, or Governance Reforms. Mr. Murray answered by stating:
“The legislative process is underway right now. We want the reforms to be adopted expeditiously. It’s really the U.S. Treasury, Jack Lew and his team that’s taking the lead on getting these measures through the U.S. Congress that are required to implement the 2010 reforms.”
It seems both the U.S. Treasury and the I.M.F. are very anxious about these reforms. So what are they?
“Just to remind you what those are, the 2010 reforms do a couple things. One, they bring four dynamic emerging market countries into the top 10 shareholder ranks or what we call quota ranks of the institution. China, Brazil, Russia, India. It also doubles our permanent capital, the quota. And it also creates a fully elected Executive Board.”
This tells us a few important things. One, the influence of the BRICS countries within the structure of the I.M.F. is going to be greatly expanded. As stated, they will be in the top 10 shareholder ranks. These are positions previously dominated by western financial and U.S. dollar interests. The gravity of this statement cannot be understated.
Second, it’s telling us that the BRICS countries are bringing capital with them. Enough capital in fact, to double what the I.M.F. presently holds on reserve. The BRICS countries will be injecting a huge amount of capital into the SDR system. One only has to research the amount of gold being exported to the BRICS countries, especially China, to understand where this capital, or worth, will come from. We’ll get back to that in a while.
Thirdly, expanding the influence of the BRICS countries within the structure of the I.M.F. also “creates a fully elected Executive Board”. The Executive Board of the I.M.F. is responsible for SDR allocation. Let that sink in for a moment. The BRICS countries are going to have an equal say on SDR allocation. The SDR is being built up as the world’s reserve currency. The value of the SDR will be based on a basket of currencies. And the U.S. Treasury is pushing congress to make this happen.
On August 5, 2013, the Peoples Bank of China called for a “New Bretton Woods” system where the U.S. dollar would be removed as the world’s primary reserve currency. It also called for an expanded usage of the SDR and for the new system to be supported by gold.
In Part Two, we will explore how the U.S. debt, being the liabilities of both the Treasury and the Federal Reserve, will be consolidated with the treasury bonds held by China and rolled into the new SDR system. – JC Collins