US Federal Reserve – praag.org

‘Save our Swiss gold’

‘Gold wars’ are intensifying ahead of the polling day in the Swiss Gold Initiative.

The Swiss National Bank (SNB) and establishment parties went “all in” during the week and intensified their campaign. They suggested that passing the Swiss Gold Initiative would be a ‘fatal’ for Switzerland and would be positive only for speculators.

The ‘yes’ side countered by saying the SNB’s assertions were alarmist and over the top. They say that it is not an invitation to speculators as there would be a five year transition to gold being 20% of Swiss reserves. They warned that there is a real risk of another debt crisis and a global currency crisis and that gold reserves would protect the Swiss franc and the Swiss economy.

Because if Germany failed miserably to obtain 674 tons of gold from the US Federal Reserve in 2013, it is assured that Switzerland will find absolutely nothing in its quest to obtain more than double, or 1,500 tons, of gold as a successful November 30 referendum outcome would require.

Then again, considering it was Obama’s action that destroyed the Swiss banking sector after the US crushed the centuries-long tradition of “Swiss banking anonymity”, this could be just the right action with which “neutral” Switzerland could finally take its revenge on the regime that cost it what was for centuries the primary source of capital inflow.

In 1992, after a concerted political campaign spearheaded by some of the country’s political parties, Switzerland joined the International Monetary Fund following a national referendum.

Under IMF rules, adopted in the latter part of the 1970s, IMF member countries cannot link their currencies to gold. After joining the IMF, Switzerland was therefore constrained in how it could subsequently revalue its gold reserves since IMF Articles of Association prohibited IMF member countries from linking their currencies to gold.

Well known Swiss banker, financial adviser and author of ‘Gold Wars’ Ferdinand Lips believed that Switzerland had been put under enormous foreign pressure and duress to sell half of its gold reserves, and he wrote in 2002 questioning “Is the SNB on New York’s leash?”, saying that “In my opinion, the once strong, proud and independent SNB has been degraded to an ‘Off-shore Branch’ of the U.S. central bank (the Federal Reserve) and reports directly to Alan Greenspan and his cohorts in New York.”

Lips added that “It is a given that the Swiss gold sales will help New York money center banks to survive a bit longer. It will help them manipulate the gold market. But, gold’s time is still to come. If the SNB does not stop its sales, Switzerland will have to buy back its gold one day but at a higher price. The question is: With what?”

With the SNB now in full media mode arguing against a 20% gold holding in the reserves however, perhaps some of the Swiss media might care to interview Dr. Jean-Pierre Roth who can now be found sitting on the boards of Nestlé, Swiss Re and Swatch.

The Yellen Fed will inflate

The Yellen Fed will inflate until the markets tell the Fed what to do.

Frederick J. Sheehan is the author of Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (McGraw-Hill, 2009), which was translated and republished in Chinese (2014). He is researching a book about Ben Bernanke.

As always, there was plenty of talk after Federal Reserve Chairman Janet Yellen held a press conference yesterday, June 18, 2014. Complaints are heard she said nothing of substance, which is true. To what the Fed might do, Yellen answered, “It depends.”

In fact, there is no question what Janet Yellen will do. The Yellen Fed will inflate until the markets tell the Fed what to do. The-then Vice Chair recited all one needs to know on March 4, 2013, in “Challenges Confronting Monetary Policy.”

“I view the Committee’s current rate guidance as embodying “lower for longer” commitment….”

Federal Reserve Chairman Janet Yellen will inflate to infinity since her mind is incapable of grappling with an alternative.

US indexes hit record highs

It was another good week for the stock market. The Dow Jones industrial average and Standard & Poor’s 500 index both ended Friday at record highs. It was the third consecutive day the S&P 500 index reached a new record, and it’s now up 6.2% for 2014. The Dow is also up for the year at 2.2%. All the major stock indexes managed to finish the week ahead of where they started at the beginning of the week.

For the week, the S&P 500 index managed to gain 3.39 points to 1,962.87, an increase of 0.17%. The weekly gain is becoming a welcome trend. The S&P 500 has managed to end the week ahead in five of the last six weeks, and it’s the 22nd time this year it’s managed to hit a record high.

The Dow had a slightly smaller percentage gain in the S&P 500 coming in with an increase of 0.15%. That was 25.62 points more than the previous week, and the Dow ended at 16,947.08. This broke the previous record high which was set on June 10, 2014 when it ended at 16,945.92.

While the NASDAQ Composite continued to make gains, it’s still well below the soaring heights of the dot-com era when it managed to peak at over 5,000. It managed a 0.20% increase for the week, or 8.71 points, to end at 4,360.04. While not a all-time record, it is the highest level in 14 years

US government bonds slipped a fraction during the week, with the year for the 10 year Treasury note ending at 2.61%. This was down 0.01% from Thursday.

While all the major indexes were able to finish up, the moves have been coming in small increments. It appears the market is currently focusing on the specific performance of individual companies, rather than the geopolitical unrest in Iraq and Ukraine, and questions about the US economy.

The midweek remarks from the Federal Reserve indicating they plan to keep short-term interest rates low also helped stocks for the week. The Federal Open Market Committee (FOMC) release a statement saying interest rates remained unchanged at 0.00% to 0.25% at the end of their two-day meeting.

Whether week ahead brings about new record highs will depend a lot on housing data which will be coming out during next week, as well as if there are any major new geopolitical developments.

Investors fight Fed on inflation

Treasury 30-year bonds dropped as investors bet on faster inflation even as Federal Reserve Chair Janet Yellen dismissed signs of rising consumer prices.

Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina says “Fed officials will have to acknowledge the firming price environment.”

Benchmark 10-year notes fell for a third week after Yellen said June 18 that the Fed maintains its commitment to low interest rates. Gauges of expectations for consumer prices for periods from five to 30 years widened before the Commerce Department is forecast to report June 26 that the Fed’s preferred measure of inflation rose to the highest since October 2012. The Treasury will sell $107 billion of coupon debt next week.

“The market is voting with its feet and lifting rates because it doesn’t agree with Yellen’s conclusion on CPI,” said Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York.

“The market does seem to be fighting the Fed here,” said James Caron, who manages money in New York at Morgan Stanley Investment Management, which oversees $61 billion of fixed-income assets. “The market believes it’s only a matter of time before those inflation pressures start to manifest.”

Source: Bloomberg/Reuters

The Fed is the Great Deceiver

By Paul Craig Roberts and Dave Kranzler.

Is the Fed “tapering”? Did the Fed really cut its bond purchases during the three month period November 2013 through January 2014? Apparently not if foreign holders of Treasuries are unloading them.

From November 2013 through January 2014 Belgium with a GDP of $480 billion purchased $141.2 billion of US Treasury bonds. Somehow Belgium came up with enough money to allocate during a 3-month period 29 percent of its annual GDP to the purchase of US Treasury bonds.

Certainly Belgium did not have a budget surplus of $141.2 billion. Was Belgium running a trade surplus during a 3-month period equal to 29 percent of Belgium GDP?

No, Belgium’s trade and current accounts are in deficit.

Did Belgium’s central bank print $141.2 billion worth of euros in order to make the purchase?

No, Belgium is a member of the euro system, and its central bank cannot increase the money supply.
So where did the $141.2 billion come from?

There is only one source. The money came from the US Federal Reserve, and the purchase was laundered through Belgium in order to hide the fact that actual Federal Reserve bond purchases during November 2013 through January 2014 were $112 billion per month.

In other words, during those 3 months there was a sharp rise in bond purchases by the Fed. The Fed’s actual bond purchases for those three months are $27 billion per month above the original $85 billion monthly purchase and $47 billion above the official $65 billion monthly purchase at that time. (In March 2014, official QE was tapered to $55 billion per month and to $45 billion for May.)

Why did the Federal Reserve have to purchase so many bonds above the announced amounts and why did the Fed have to launder and hide the purchase?

Some country or countries, unknown at this time, for reasons we do not know dumped $104 billion in Treasuries in one week.

Another curious aspect of the sale and purchase laundered through Belgium is that the sale was not executed and cleared via the Fed’s own National Book-Entry System (NBES), which was designed to facilitate the sale and ownership transfer of securities for Fed custodial customers. Instead, The foreign owner(s) of the Treasuries removed them from the Federal Reserve’s custodial holdings and sold them through the Euroclear securities clearing system, which is based in Brussels, Belgium.

We do not know why or who. We know that there was a withdrawal, a sale, a drop in the Federal Reserve’s “Securities held in Custody for Foreign Official and International Accounts,” an inexplicable rise in Belgium’s holdings, and then the bonds reappear in the Federal Reserve’s custodial accounts.

What are the reasons for this deception by the Federal Reserve?

The Fed realized that its policy of Quantitative Easing initiated in order to support the balance sheets of “banks too big to fail” and to lower the Treasury’s borrowing cost was putting pressure on the US dollar’s value. Tapering was a way of reassuring holders of dollars and dollar-denominated financial instruments that the Fed was going to reduce and eventually end the printing of new dollars with which to support financial markets.The image of foreign governments bailing out of Treasuries could unsettle the markets that the Fed was attempting to sooth by tapering.

A hundred billion dollar sale of US Treasuries is a big sale. If the seller was a big holder of Treasuries, the sale could signal the bond market that a big holder might be selling Treasuries in large chunks. The Fed would want to keep the fact and identity of such a seller secret in order to avoid a stampede out of Treasuries. Such a stampede would raise interest rates, collapse US financial markets, and raise the cost of financing the US debt. To avoid the rise in interest rates, the Fed would have to accept the risk to the dollar of purchasing all the bonds. This would be a no-win situation for the Fed, because a large increase in QE would unsettle the market for US dollars.

Washington’s power ultimately rests on the dollar as world reserve currency. This privilege, attained at Bretton Woods following World War 2, allows the US to pay its bills by issuing debt. The world currency role also gives the US the power to cut countries out of the international payments system and to impose sanctions.

As impelled as the Fed is to protect the large banks that sit on the board of directors of the NY Fed, the Fed has to protect the dollar. That the Fed believed that it could not buy the bonds outright but needed to disguise its purchase by laundering it through Belgium suggests that the Fed is concerned that the world is losing confidence in the dollar.

If the world loses confidence in the dollar, the cost of living in the US would rise sharply as the dollar drops in value. Economic hardship and poverty would worsen. Political instability would rise.

If the dollar lost substantial value, the dollar would lose its reserve currency status. Washington would not be able to issue new debt or new dollars in order to pay its bills.

Its wars and hundreds of overseas military bases could not be financed.

The withdrawal from unsustainable empire would begin. The rest of the world would see this as the silver lining in the collapse of the international monetary system brought on by the hubris and arrogance of Washington.

Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.

Pussy Riot in an unauthorized offensive show at the US Federal Reserve?

Before the make-over — Before the unusually expensive make-over

Is the American Federal Government into concert promotion?

Two members of the unusually lame Russian punk rock band Pussy Riot, who seem to have a unusually strong media promotion team behind them, were recently released from prison and will appear at an Amnesty International concert in Brooklyn February 5th, WNYC reports.

Nadezhda Tolokonnikova and Maria Alyokhina are scheduled to appear during the Bringing Human Rights Home concert at the Barclays Center in New York.

It is not certain which human right they had wished to defend when they were caught trespassing in a church in Moscow. The whole episode has an air of being manufactured, as if they might appear alongside the US Federal Turds next.

Musically it is hard to understand their large global following, but politically less so.

Tolokonnikova and Alyokhina were released from prison last month after serving 21 months for hooliganism after a March 2012 arrest for giving an unauthorized offensive performance in Christ The Savior Cathedral.

It is not known whether they might do an unauthorized offensive performance in front of the Federal Reserve.

Dollar soars on news of diminishing US stimulus

The dollar soared Thursday as global markets reeled from the US Federal Reserve’s signal it may start to taper its massive stimulus this year.

News of a cash crunch in China also sent jitters through the market, driving investors into the safe-have dollar.

The euro fell to $1.3223 around 2200 GMT from $1.3297 late Wednesday.

The dollar jumped against the Japanese currency, to 97.27 yen from 96.39 yen, while the euro rose to 128.62 yen from 128.24.

“The price action in the US dollar today confirms that yesterday’s Federal Reserve meeting marked a major turning point for the greenback,” said Kathy Lien of BK Asset Management.

Stock markets across the globe and commodity prices swooned after Federal Reserve Chairman Ben Bernanke said Wednesday that the central bank could begin to wind down its $85 billion-a-month stimulus program as early as this year if the US economy continues to improve.

Analysts said the markets focused on the timetable for the tapering instead of the Fed’s statement that any move is conditional on the economic outlook.

The world’s reserve currency also benefited from renewed concerns about slowing growth in China, the world’s second largest economy, after weak manufacturing data.

Lien noted that interbank overnight lending rates in China had spiked to a record high in a rise that began two weeks ago, but the central bank has refrained from injecting money into the system.

The situation was made worse by weakening economic data, she said.

“Now China finds itself in a liquidity crunch begging for the central bank to step in,” Lien said.

“The central bank however refuses to do because they want to punish speculators and are in the midst of reforming the economy but the longer they hold off, the more disruption it will have on China’s economy and the global financial markets.”

The dollar rose to 0.9275 Swiss franc from 0.9277 late Wednesday.

The pound, however, was stronger against the greenback, fetching $1.5501, up from $1.5483. – AFP