Federal Reserve

Musical ‘Fed’ Chairs – Same Old S—*

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MUSICAL ‘FED’ CHAIRS

Eight years ago: “President Trump nominated Jerome H. Powell as the new Chairman of the Federal Reserve Bank. Don’t look for much to change.” (see New Fed Chairman – Same Old Story)

Two weeks ago: “I am pleased to announce that I am nominating Kevin Warsh to be the CHAIRMAN OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. Congratulations Kevin! PRESIDENT DONALD J. TRUMP (Truth Social)

Before Powell was Janet Yellen…

“…if Ms. Yellen makes it through the current year unscathed, she won’t be hanging around afterwards. She won’t want to extend her risk of being at the helm when the ship sinks. And don’t trouble yourself worrying about who the next Fed chief will be.  It doesn’t matter.”  

WHY DOESN’T IT MATTER? 

Expectations that a “new” Fed chair will make a difference are shortsighted. The Federal Reserve has its own agenda.

The Fed is a private institution; a bankers bank. Banks exist for the purpose of creating money, lending it out, and collecting interest – in perpetuity. Also, the inception of the Fed was authorized by Congress AFTER a promise was made to insure that the U.S. government never ran out of money.

Deficits are funded by the Fed via monetization and placement of Treasury securities with primary dealers (banks). Any treasuries not sold to investors remain on the books of the banks, including the Federal Reserve.

NOTE: The largest single holder of U.S. Treasury debt is the Federal Reserve Bank, at about $6 trillion. This is 16% of the total debt ($38 trillion) and five times the amount of U.S. debt held by Japan.

Japan holds nearly twice as much ($1.2 trillion) U.S. debt as China ($680 billion) which is third on the list behind the United Kingdom ($889 billion).

THE FEDERAL RESERVE CONTROLS THE PURSE STRINGS 

Government spending is dependent on the creation of money by the Federal Reserve. Without the Federal Reserve, government spending would come to a screeching halt due to a lack of funds.

Nominees must be vetted (unofficially, of course) by the Fed before approval by Congress. If you think that is hogwash, then ask Judy Shelton. (see The Federal Reserve vs. Judy Shelton And Gold)

ANYONE who is nominated and approved, and sits on the Federal Reserve board in any capacity MUST/WILL fit right in.

CONCLUSION 

The Federal Reserve System operates independently, and in the interest of the banks and those who own the banks. It has never been about “doing the right thing” or “serving the public” or “correct policy”.

The Fed and its member banks have created the inflation that has destroyed more than 99% of the purchasing power of the U.S. dollar. The effects of that inflation have left the entire world awash in debt and hooked on cheap credit. The U.S. government approves of this because it is a primary beneficiary of the largesse.

Where we are today is the culmination of decades of irresponsible financial/fiscal policies and a complete abdication of fundamental economics.

The Fed now spends most of its time and effort trying to contain the damage stemming from a century of inflation which it created, interest rate manipulation, and market intervention.

Greenspan, Bernanke, Yellen, Powell, (or Warsh) make no difference. It is the same old story, same old song, same old s___. (also see Federal Reserve – Conspiracy Or Not?)

Why Is The Fed Buying T-Bills?

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(This article was originally published on TalkMarkets.com December 11, 2025)

The expected reduction in the Fed funds target rate was announced today. The target rate was lowered to a range between 3.50-3.75%. The Fed also announced that it will begin purchasing about $40 billion per month of short-dated Treasury bills starting December 12.

The announcement to purchase a significant amount of short-term Treasury securities every month might be more important than the interest rate reduction. Why is the Fed buying T-bills?

NEW YORK FED AND OMOs

The Trading Desk at the New York Federal Reserve is the operational unit that executes open market operations on behalf of the Fed — buying and selling securities via its primary dealers.

Open Market Operations (OMOs) include the purchase and sale of securities (mainly U.S. Treasury securities, agency debt, and agency MBS) in the open market by the Fed.

Per ChatGPT, OMOs “are the core mechanism by which the Fed adjusts the amount of reserves in the banking system to influence liquidity and interest rates.”

Another way to say it is that OMOs allow the Fed to “steer” the federal funds rate to its desired range and maintain adequate reserves/liquidity in the system.

REASONS FOR CONCERN

Ordinarily, the Fed lends (repurchase agreements, called repos) or borrows (reverse repos) cash temporarily, often on an overnight basis. These actions are short-term oriented and intended to help keep rates stable and maintain liquidity.

This works when reserves are reasonably ample, or abundant. If not, stronger measures a necessary.

The purchase of “shorter-term Treasury securities” is a stronger measure. In other words, today’s announcement is an indication that financial system liquidity is a big concern for the Fed.

The Fed policy of higher rates for longer has had material effects on the bond and money markets that threaten the structural integrity of the financial system. Hence, expect more aggressive actions by the Fed to contain the damage.

Liquidity issues in the overnight money markets are likely prompting the Fed to take this action. The action is similar to the Fed’s aggressive acquisition of long-dated securities in the bond market at the onset of the 2008 financial crisis, when credit markets imploded.

The purchase of Treasury bills is beginning as the Fed winds down its efforts to reduce the size of its balance sheet, which resulted from its 2008 accumulation. This time, the focus of accumulation is on short-term securities.

By purchasing T-bills in the open market, the Fed is injecting needed reserves/liquidity into the system.

That implies that system liquidity is the primary concern, and not just for the Fed, but for investors, businesses, and individuals.

(also see System Liquidity Risk and Liquidity Problems Could Overwhelm Inflation’s Effects )

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED

 

What Powell Said And Why It Matters

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WHAT POWELL SAID

“a marked slowing in both the supply of and demand for workers…suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment.” and “…the shifting balance of risks may warrant adjusting our policy stance,” Jerome Powell – Jackson Hole, WY 8/22/25

An AI summary of Powell’s remarks sans the emotion and frothiness of investors and others said that “Powell’s Jackson Hole remarks were carefully calibrated—not a firm commitment to cutting rates, but a clear signal of readiness to pivot if economic conditions warrant it. He recognized rising risks in the labor market and suggested that, given such risks and the Fed’s already restrictive stance, a policy adjustment might be justified. However, any change would be data-driven and cautious.”

WHY IT MATTERS 

Investors and the media interpreted those remarks as the signal that “the race is on”. Someone said that Powell’s remarks “opened the door to a possible interest rate cut”. 

Investors rushed through the door with complete abandon and drove stock prices up to new highs, seemingly oblivious to Powell’s expressed statements  that conditions “may warrant adjusting our policy stance” and “any change would be data-driven and conscious.”

The door was kicked open almost one year ago when the Federal Reserve announced its intention to lower the Fed funds target rate in September 2024. After two successive cuts, the target rate has remained unchanged.

Jerome Powell acknowledges the growing risks in the labor market and the presumed risk of higher inflation from tariffs. The labor market threat is real and appears to be significant. Hence, Powell’s comments that labor market risks can accelerate “quickly in the form of sharply higher layoffs and rising unemployment” are noteworthy.

Tariffs are not inflationary.

“Tariffs are taxes imposed by a government on imported goods. Tariffs are assessed at the port of entry and must be paid before the goods can be unloaded. Whoever (businesses, consumers, etc.) imports the goods pays the tariff(s) to U.S. Customs and Border Protection, a government agency. Subsequently, remittance is made to the U.S. Treasury. (see Tariffs Are NOT Inflationary)

The effects of tariffs compound the risks associated with the labor market. Any acceleration in layoffs and unemployment will be exacerbated by the effects of tariffs. The results could lead directly to deflation and economic depression.

CONCLUSION

The Fed dilemma pertaining to interest rate policy remains the same. Lower interest rates and aggressive monetary growth will slam the dollar. Higher rates and restrictive monetary policy will depress economic activity.

Holding rates stable seems the more prudent choice. If nothing else, a disastrous day of reckoning might be postponed.

Far from being a boon to growth (domestic or otherwise), the effects of tariffs will magnify and accelerate problems in the labor market and the economy. Those effects can overwhelm Fed efforts to stave off financial and economic collapse.

The worst that could happen is likely to come quickly. (also see Complete Financial Collapse Is Unavoidable)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED

Top Beneficiaries Of The Federal Reserve

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I asked ChatGPT who benefits from the Federal Reserve. My exact question and ChatGPT’s complete response are below. The response has not been altered and is entirely attributable to ChatGPT, including bold type and quotation marks. My comments and conclusion are at the end of the article…

Kelsey’s Gold Facts: Who – specifically – benefits from the existence and operation of the Federal Reserve?

ChatGPT: The existence and operation of the Federal Reserve benefits a wide range of entities—some directly, others indirectly. But when we ask “who benefits most” or “who benefits specifically,” we’re typically talking about:

🎯 Top Beneficiaries of the Federal Reserve System

1. Large Commercial Banks (Especially Primary Dealers)

These include:

    • JPMorgan Chase

    • Bank of America

    • Citigroup

    • Goldman Sachs

    • Morgan Stanley

    • Barclays, BNP Paribas, etc.

Why they benefit:

    • Direct access to liquidity: Can borrow cheaply from the Fed’s discount window or repo operations.

    • Influence over monetary policy transmission: As primary dealers, they execute Fed open market operations and often get early insight into policy sentiment.

    • Backstops during crises: Received bailouts, special lending programs (like during 2008 & 2020).

    • Asset price inflation: Low rates and QE support higher bond and stock prices, which boosts bank assets and profits.

💡 Example: In 2020, the Fed’s emergency lending and bond-buying programs disproportionately aided large banks’ balance sheets and market holdings.

2. The U.S. Treasury and Federal Government

Why they benefit:

    • Lower borrowing costs: Fed purchases of Treasury bonds (QE) reduce yields and interest payments.

    • Monetary–fiscal coordination: While technically independent, Fed policies like low rates and QE help finance large deficits more cheaply.

    • Remittances: The Fed returns excess profits (minus expenses) to the Treasury—over $100 billion in some years.

3. Wall Street & Asset Managers

    • BlackRock, Vanguard, Fidelity, Bridgewater, Citadel, etc.

Why they benefit:

    • Asset inflation: Fed-driven low interest rates push capital into risk assets, boosting equity, bond, and real estate markets.

    • Monetary policy front-running: Large firms often interpret and trade on Fed policy shifts faster than the public.

    • Contractual relationships: In 2020, BlackRock was contracted to run parts of the Fed’s corporate bond-buying program.

4. Investors & Speculators

    • Hedge funds, pension funds, and private equity.

Why they benefit:

    • Predictable Fed policy (forward guidance) reduces market volatility.

    • QE and interest rate suppression inflates asset values.

    • Moral hazard: Speculators feel confident the Fed will step in during downturns (“Fed Put”).

5. Member Banks of the Federal Reserve System

Over 2,000 U.S. banks own stock in their regional Federal Reserve Bank.

Why they benefit:

    • Annual dividends (6% or market-based) paid on required capital stock.

    • Regulatory access & influence: Participation in Fed advisory committees.

    • Support services: Payments systems, bank supervision, research.

📌 Important: These “shares” in the Fed are not publicly traded and do not confer ownership or control in the corporate sense—but member banks still benefit financially and operationally.

6. Corporate America (Indirectly)

    • Lower interest rates = cheaper business borrowing.

    • Stimulated consumer demand via credit and employment.

    • Rising asset prices improve corporate valuations and shareholder wealth.

7. U.S. Dollar Holders & Global Institutions (Mixed Impact)

    • Foreign central banks, IMF, global corporations.

Why they benefit:

    • The Fed’s stability policies protect the dollar’s reserve status.

    • In times of global crisis, the Fed provides dollar swap lines to foreign central banks—sustaining global trade and investment flows.

⚖️ Who Benefits the Least (or Bears the Costs)?

    • Savers: Near-zero interest rates erode real returns on savings.

    • Lower-income individuals: Asset inflation primarily benefits the wealthy who own stocks and real estate.

    • Small banks and credit unions: Have less access and influence compared to megabanks.

    • The broader public: Often experiences delayed wage growth and long-term inflation impacts.

🧭 Summary

Those who benefit most directly and consistently from the Federal Reserve’s operation are:

    • Large commercial and investment banks (especially primary dealers)

    • The U.S. government (via debt financing and remittances)

    • Wall Street firms and large asset managers

    • Major corporate borrowers and institutional investors

These entities operate closest to the Fed’s monetary and financial plumbing—where influence, access, and monetary flows are strongest.

MY COMMENTS AND CONCLUSION

Who benefits the most…

It should not be surprising that the top beneficiaries of the Federal Reserve System are 1) large commercial banks (primary dealers) and 2) the U.S. Treasury and the federal government.

The Federal Reserve exists for the benefit of the banks and bankers. Its purpose and motivation are not aligned with public expectations. The Fed’s objective is to facilitate the ongoing creation of money and loans (no-reserve banking), which generates interest income. Banks create money, lend it, and collect interest – all in perpetuity. (see Federal Reserve – Purpose And Motivation).

In order to swing the needed votes in Congress to pass the legislation which authorized creation of the Federal Reserve in 1913, some additional pressure was brought to bear by the executive branch and some key players in government. In exchange for that support and special influence, the Federal Reserve affiliated parties promised that the government, i.e., U.S. Treasury, would never run out of money. Hence, existing Treasury debt gets rolled over continuously and the size of the debt continues to grow…

“The Federal Reserve provided a convenient ‘funnel’ for US Treasury securities in the form of bills, notes, and bonds. These securities are a form of debt that is “monetized” on issuance and become a source of collateral and funding for trillions of dollars worth of economic activity.

Today, US Treasury securities are issued and sold at auction. A portion are sold via the program Treasury Direct, but most are placed with certain primary dealers. Any unsold securities are required to be kept and held by the primary dealers.

The Federal Reserve also holds Treasury securities on its own balance sheet. Between the Fed and its primary dealers, plus any Treasuries sold to the investing public, the US Treasury receives an amount of money equivalent to the dollar amount of securities it has issued. This is true always – every time; regardless of any undersubscriptions.

In other words, the Federal Reserve underwrites and guarantees that the U.S. Treasury/Government will get whatever funds it needs. And that was the promise made over one hundred years ago.” (U.S. Government Is Beholden To The Fed )

Close behind in the heirarchy of Federal Reserve beneficiaries are Wall Street firms, money managers, investors and speculators.

There are some additional beneficiaries listed which might raise some eyebrows. Personally, I would question the claim that U.S. dollar holders are a beneficiary of the Federal Reserve.

The Federal Reserve and the banks create inflation by continually expanding the supply of money and credit. Intentional inflation by the Federal Reserve System has destroyed the U.S. dollar, which has lost more than 99% of its purchasing power since the Fed’s inception in 1913.

Who benefits the least (or bears the costs)…

I did not ask for this information, but ChatGPT gave it to me anyway, and it is an eye-opener.

The Fed doesn’t care about smaller banks and credit unions. That lack of concern dates back to the Fed’s inception. Smaller banks are at the bottom of the list in size and influence, regardless of remarks made by former Treasury Secretary Yellen. It is all about size and influence, not fairness.

Bringing up the rear for benefits from the Federal Reserve is “the broader public”. Actually, the broader public is not a beneficiary – at all – of the Federal Reserve. As a result of the U.S. dollar’s loss of purchasing power, coupled with painfully slow wage growth, the broader public “Bears the Costs” for the Fed’s fun and games.

All of this contrasts markedly with public perception of the Federal Reserve and its role as stated by Fed Chair Powell earlier this year..,

“The public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals, and, really, keeping our heads down and doing our work,” he added. “That is how we best serve the public.”  Federal Reserve Chair Jerome Powell, January 2025

The Federal Reserve does not exist “to serve the public”. The Federal Reserve is a banker’s bank and exists for the benefit of the banks and bankers who create, control, and lend money in perpetuity.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED

Trump vs. Powell vs. Yellen – Same Game

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We have been here before. President Trump’s latest bashing of Fed Chair Powell isn’t without precedent. Chair Powell was the object of President Trump’s scorn during his first term, too.

It doesn’t stop there, though. Trump vs. Powell was preceded by Trump vs. Yellen.

During the 2016 campaign, Trump accused Yellen of keeping interest rates artificially low to benefit the Obama administration and predicted a market collapse once she raised rates. He claimed she was “keeping them artificially low to get Obama retired” and “she should be ashamed of herself.” (NBC News Nov 2016) 

One year later, towards the end of his first year in office, President Trump nominated Jerome Powell as the new Fed Chairman. Here is what I said then…

“President Trump nominated Jerome H. Powell as the new Chairman of the Federal Reserve Bank. Don’t look for much to change. And Janet Yellen’s announcement that she will resign from the board upon Mr. Powell’s induction as board chair is pretty much a non-event.” (New Fed Chairman, Same Old Story Nov 2017)

That was almost eight years ago. Has anything changed? Ironically, in 2016, Trump was displeased with Fed Chair Yellen for “keeping rates artificially low”. Now, he is attacking Fed Chair Powell for not lowering rates more aggressively.

THEN AND NOW

Both Ms. Yellen and Chair Powell face(d) similar situations. Their terms as Fed Chair expire(d) before their terms as board members conclude. That would mean sticking around for a couple of years as a board member after their term as board Chair ends.

I believe Ms. Yellen, as Fed Chair, was very concerned about the prospect of presiding over a financial crisis that would tarnish her reputation as Fed Chair. Here is what I said seven months prior to Jerome Powell’s assumption as Fed Chair…

“…if Ms. Yellen makes it through the current year unscathed, she won’t be hanging around afterwards. She won’t want to extend her risk of being at the helm when the ship sinks.

And don’t trouble yourself worrying about who the next Fed chief will be.  It doesn’t matter. It is too late in the game for a quarterback change to have any meaningful impact.” (The Fed’s Dilemma July 2017)

CONCLUSION 

The situation today isn’t much different from eight years ago. Jerome Powell’s term as Federal Reserve Board Chair ends May 2026. I expect him to finish his term (ends May 2026) as Chairman and voluntarily resign from the board at that time without serving the remainder of his term (ends January 31, 2028) as a member of the board, just as Chair Yellen did, for similar reasons.

Can you imagine either Janet Yellen or Jerome Powell serving as a member of the board after their term as Fed Chair ended? (also see Cruisin’ Wtih The Fed and Federal Reserve –  Conspiracy Or Not?)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED

Cruisin’ With The Fed

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The Federal Reserve is on autopilot. Minutes from the May 6-7 meeting said FOMC members noted that “economic activity had continued to expand at a solid pace and labor market conditions continued to be solid”.

This might sound surprising given the fact that the notes also revealed concern and discussion about rising Treasury yields, U.S. dollar depreciation against other currencies, heightened volatility in the equity markets, negative effects of tariffs on the supply chain and international trade, potentially worsening inflation, and lots of uncertainty.

In the face of a long list of duly noted concerns, the Fed still found itself trumpeting a familiar refrain regarding economic activity…

“Even as the U.S. dollar declined and the Treasury yield curve steepened, the Federal Reserve remained adamant that economic activity and the labor market remained strong and policy intervention was unnecessary, according to the minutes of the May Federal Open Market Committee meeting. – (Kitco News)

It is somewhat hard to believe that economic activity and the labor markets weren’t affected by all of the negative factors listed above.  They were, of course; but some of those negative effects won’t show up until later.

Also, as is normally the case, a good deal of negativity is ignored or downplayed when the final assessment is made. I mean, can you imagine the havoc that would ensue if we heard something like this:

“Recent indicators suggest that economic activity continues to decline and the pace of that decline is steepening. Rather than growing, it is clear that the economy is shrinking and that the rapid descent into recession may quickly turn into an economic depression that could last for years. Labor markets are in turmoil with company closures, layoffs, and skyrocketing unemployment.”

This leads us back to our opening statement “The Federal Reserve is on autopilot.”. Here are some previous statements regarding economic activity and the labor markets…

March 2025 FOMC summary notes: “The economy was described as ‘healthy’ despite negative sentiment, with the labor market remaining strong.” 4

January 2025 from FOMC notes and Chair Powell’s press conference transcript:

“Recent indicators suggest that economic activity has continued to expand at a solid pace. … Labor market conditions have cooled from their formerly overheated state and remain solid.” 1 2 4

IN A RUT 

Sometimes autopilot can sound like a broken record. Here are some examples of similar statements from previous Federal Open Market Committee (FOMC) meeting notes:

  1. January 2020 FOMC Statement: “Economic activity has been rising at a moderate rate… Labor market conditions remain strong.”

  2. December 2019 FOMC Statement: “Economic activity has been rising at a moderate rate… Labor market conditions remain strong.“

  3. September 2019 FOMC Statement: “Economic activity has been rising at a moderate rate… The labor market remains strong.“

  4. June 2019 FOMC Statement: “Economic activity is rising at a moderate rate… Labor market conditions remain strong.”

  5. May 2019 FOMC Minutes: “Economic activity appeared to be expanding at a solid pace… Labor market conditions remained strong.”

SUMMARY 
The FOMC’s consistent use of positive descriptive summaries about the economy and the labor markets is intentional and not likely to change. Actually, in light of the above references, we can call it boilerplate.
Boilerplate text, or simply boilerplate, is any written text (copy) that can be reused in new contexts or applications without significant changes to the original. The term is used about statements, contracts, and source code, and is often used pejoratively to refer to clichéd or unoriginal writing.
That might be okay if the Fed had a better track record when it comes to avoiding economic catastrophe. As it is, investors and others are blindsided from economic reality until the negativity hits them squarely in the face.

Inflation Is Created By The Federal Reserve (AUDIO)

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The Federal Reserve is responsible for inflation. This audio dispels any concerns or doubts about other guilty parties or spontaneous events. If the Fed truly wanted to stop inflation dead in its tracks, it could do so in an instant. There are problems associated with that action, though. After listening to this audio (6 minutes), you will know why the Fed will never claim responsibility for its financial crimes and will never purposely stop inflating the supply of money and credit…

 

 

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Bare Naked Facts About Fed Independence

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FED INDEPENDENCE

Chair Powell has been particularly vocal about the Fed’s independence lately. His statements are the result of provocation by some, including President Trump, who have called for various actions including an audit of the Federal Reserve, firing the current Chair (Powell), and abolishing the Fed. The calls for action and the inflammatory rhetoric are usually the result of anger and frustration about Fed economic policies, notably the level and direction of interest rates.

Recently, Powell has targeted tariffs as a variable that could hamper the Fed’s ability to accomplish its objectives and fulfill its responsibilities. That ignores how bad the situation was prior to Trump’s election and inauguration. It also is an attempt to deflect blame away from the Fed for its role in causing inflation, destroying the U.S. dollar, and mismanaging the economy for more than a century.

Meanwhile, President Trump can’t wait to “fire Powell” for “ignoring his demands that interest rates be lowered”. He can’t, so his exasperation erupts in vocal condemnation of the Fed chair. If the tariffs are seen as causing economic disaster, Trump can blame Powell for not lowering interest rates.

Standoff.

The argument over Fed independence needs to be considered in proper context. Keep reading…

ORIGIN OF THE FED

The Federal Reserve System was authorized by an act of Congress in 1913. However, it is not a government agency. The Federal Reserve is a privately-owned institution which is comprised of 12 regional banks. The regional banks are owned by various commercial banks – member banks – who hold stock in the Federal Reserve banks. In other words, the Federal Reserve is a bank which is owned by its member banks – a banker’s bank.

The authorization by Congress vested 1) the power to create money and 2) control of the money supply to the Federal Reserve exclusively. In return for Congressional approval, or rather, to induce members of Congress to vote affirmatively for its inception, the principal figures (elite bankers and banking family “royalty”) behind the creation of the Federal Reserve promised (guaranteed) the United States government in a secret meeting that it would never run out of money.

Publicly, the Federal Reserve System was promoted as a ‘non’ – bank institution in deference to the mistrust and generally negative opinions concerning national banks and the banking elite. Many early Americans were wary of the connection between banks and political power, fearing that a central bank would create an elite class that could dictate economic policy and control the nation’s money supply.

PURPOSE OF THE FED

The purpose of the Federal Reserve is to provide a structured system whereby its member banks can create and lend money in perpetuity. The Fed accomplishes this by continually expanding the supply of money and credit.

The Federal Reserve exists for the benefit of the banks and bankers. Its purpose and motivation is not aligned with the general public interest. The Fed’s objective is to facilitate the ongoing creation of money and loans which generate interest income.

WHERE WE ARE NOW

For more than 100 years, the Federal Reserve has pursued a course of intentional inflation which has brought about a series of economic disasters and near-complete destruction of the U.S. dollar’s purchasing power. The effects of Fed inflation caused the Great Depression of the 1930s and the Great Recession of 2008-2010. Errant Fed policy has erased more than 99% of the U.S. dollar’s purchasing power.

As traditional financial assets continue to slide down a slippery slope, Trump’s tariffs get blamed for causing much of the carnage. This is realistically appropriate to some degree. But the world economy was standing at the cliff’s edge prior to Trump’s election.

Where we go from here might not be a choice anymore.

CONCLUSION 

It would take an act of Congress t0 alter or change the Federal Reserve’s control over economic policy and the money supply. Do you think a majority of  congressional representatives and senators would vote for a bill that eliminates the guaranteed source of unlimited money which they now spend so freely?

The way I see it, there are several courses of action possible which all lead to the same end result. Here they are…

  1. Fed continues to operate unhampered as is.
  2. Congress passes legislation that abolishes the Federal Reserve
  3. Potential legislation by Congress alters or limits the Fed’s control

Regarding No. 1, we can expect a continuation of dollar depreciation, financial and economic volatility (including recessions and depressions), etc. In other words, more of the same things that have plagued us for the past 112 years under the Fed’s watch care and keeping. Eventually, the end result would be a credit collapse, deflation, and a world-wide depression. This is likely regardless of changes in interest rate policy and the effects of tariffs.

As far as No. 2, abolition of the Federal Reserve would leave a void in money creation and supply which would cripple the world’s economy. The withdrawal symptoms would be horrific. Economies would grind to a halt and a global depression would ensue.

No. 3 presumes a modified approach to reigning in the creature from Jekyll Island. The debate about specifics would increase the uncertainty surrounding this choice and would extend the timeline indefinitely. Regardless of the final version, it would come too late to derail the train of economic terror hurtling towards us now.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED

Federal Reserve Is A Private Institution – Powell Is Not A Public Servant

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At his press conference earlier this week, Fed Chair Jerome Powell said the following… “The public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals, and, really, keeping our heads down and doing our work,” he added. “That is how we best serve the public.” 

Powell’s repeated use of the personal pronoun “our” rates special attention. I don’t think he means it in the collective sense. In this case, “our” means them – not us. Admittedly, his appending claim “…how we best serve the public” is meant to allay fears and present himself and the Fed in a more positive light. Nevertheless, investors and others need to know and understand some things about the Federal Reserve’s origin and purpose.

From The Creature From Jekyll Island (G. Edward Griffin)…

“Back in 1910, Jekyll Island was completely privately owned by a small group of millionaires from New York. We’re talking about people such as J. P. Morgan, William Rockefeller and their associates. This was a social club and it was called “The Jekyll Island Club.” That was three years before the Federal Reserve Act was finally passed into law. It was November of that year when Senator Nelson Aldrich sent his private railroad car to the railroad station in New Jersey and there it was in readiness for the arrival of himself and six other men who were told to come under conditions of great secrecy. For quite a few years thereafter these men denied that any such meeting took place. It wasn’t until after the Federal Reserve System was firmly established that they then began to talk openly about their journey and what they accomplished. Several of them wrote books on the topic, one of them wrote a magazine article and they gave interviews to newspaper reporters so now it’s possible to go into the public record and document quite clearly and in detail what happened there.” 

PURPOSE OF THE FED 

The purpose of the Federal Reserve is to provide a structured system whereby its member banks can create and lend money in perpetuity. The Fed accomplishes this by continually expanding the supply of money and credit.

The Federal Reserve exists for the benefit of the banks and bankers.  Its purpose and motivation is not aligned with ours. The Fed’s objective is to facilitate the ongoing creation of money and loans which generate interest income. (see The Federal Reserve – Purpose And Motivation)

Our financial problems are the result of intentional inflation created by the Fed. Cheap and easy credit has exacerbated the fragility of the entire banking system.

Why in the world would the United States Congress approve a bill which authorized the inception of a private institution whose purpose and goals had nothing at all to do with serving the public? Besides, the government (President Andrew Jackson) had promised there would never be another National Bank. Here is why the Federal Reserve exists today…

COLLUSION AND SECRECY 

In order to allay the fears of the American public, and convince Congress that it was in the best interests of the country to authorize by law the existence of this ‘private’ institution, it was necessary to effect a campaign at two specific levels: grass roots, i.e., the American public; and, behind closed doors, i.e., politicians and the U.S. government.

The message delivered was that the mission of the Federal Reserve was to actively manage the stages of the economic cycle – recession, depression, recovery, prosperity – and, thus, avoid the extremities of panics and crashes that had plagued the banking industry and put depositors at continual risk. (This has morphed into a two-pronged goal of focusing on 1) maximum employment and 2) stable prices.)

The statement of intention to manage the stages of the economic cycle was born out of necessity. Members of Congress would not vote in favor of any bill authorizing existence of a central bank without their constituents approval. If the American public thought there were benefits that could outweigh their fears, and if enough members of Congress felt similarly, and perceived that public support was sufficient, then possibly the bill would pass.

Support of business and the general public notwithstanding, approval was not assured. In exchange for support by the government (Wilson administration including Treasury officials and others), another secret meeting was held at which an agreement was made that if the Federal Reserve was granted a legitimate birthright, all future government funding was assured.

In other words, the Federal Reserve underwrites and guarantees that the US Treasury/Government will get whatever funds it needs; a promise made over one hundred years ago. (see U.S. Government Is Beholden To The Fed & Vice-Versa)

PRIVATE INTERESTS VS PUBLIC POLICY 

So, what did the bankers get out of this? The answer is found in one word. Money.

More specifically, they got control over the money. They were now legally authorized to be everyone’s sugar daddy, and, ostensibly, they had the support of the United States government and its citizens.

Banks lend money to individuals, companies, and governments. They also lend money to countries, revolutionaries, and global conglomerates.

The Fed is not particularly interested in the profitability or welfare of  smaller, individual banks, though. It was intended originally that the Federal Reserve could better supervise and contain damages spawned by errant actions of independent banks, but the primary goal was to create an environment that would allows the banks, especially big, power center banks, to operate and function without interruption, and on a hugely, profitable scale.

With the inception of the Fed, the bankers could protect the interests of their elite hierarchy and retain control over the money supply, lending activities, funding their own special interest activities, and make tons of money doing it.

JEROME POWELL VS DONALD TRUMP

President Trump is now demanding (again) that the Fed lower interest rates. This is what Powell had to say about it…

“I am not going to have any response or comment whatsoever on what the President said,” Powell replied. “It is not appropriate for me to do so.”

Fed policy (and purpose) is not designed to support off the wall “demands” by politicians (or investors, for that matter). A similar “demand” was made during Trump’s first term. It went nowhere. Two years into his successor’s term in office, the Fed began raising rates; much to the chagrin of a majority of outspoken enthusiasts from both political parties.

The current difference of opinion between Mr. Powell and President Trump could be entertaining, though.

CONCLUSION

Regardless of claims to the contrary, the Federal Reserve does not exist to serve the public interest. The Federal Reserve is a banker’s bank which exists for the purpose of 1) creating and lending money and 2) collecting interest in perpetuity.

As valid as are the calls to end the Fed, it likely won’t happen. The United States government would lose its pipeline to unlimited funding. The result would be financial and economic pandemonium.

The road ahead, though, will bring financial and economic devastation anyway. Right now, the Fed has everything it can do to handle the unintended consequences of its own errant policies over the past century. Fighting the negative effects of more than one hundred years of intentional inflation is a full-time job. (see Federal Reserve – Conspiracy Or Not?)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED

Liquidity Problems Could Overwhelm Inflation’s Effects

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LIQUIDITY PROBLEMS – 1929 

In 1928 and 1929, the Fed raised interest rates for the purpose of curbing rampant speculation in stocks. At that time, investors could borrow as much as 90% of the stock price for their proposed investment. The banks were just as aggressive as investors and were happy to oblige.

Raising rates did not slow stock speculation by investors or banks, however.

What it did do was cause a slowdown in economic activity. Thus, as economic activity declined, the stock market continued its rise, unabated.

As the decline in economic activity continued, both businesses and consumers were affected negatively. The money was available for investors to buy more stocks, albeit at a higher cost; but, businesses and consumers struggled with liquidity problems.

STOCK BUBBLE BURSTS 

The crash in the stock market brought illiquidity issues to light. Layoffs in the financial industry were numerous and swift. The ranks of the unemployed ballooned.

If you were an investor who had purchased stock with 10% down, it would take only a 20% decline for you to have lost twice as much as your original investment.

Now, imagine the plight of the banks who had lent money to investors using stocks as collateral. The collateral was worth as much as 30% less after one day of trading. Bank failures became almost commonplace during the Great Depression that followed.

FED RESPONSE

As might be expected, the Fed did purchase government securities in the open market and lowered the discount rate. It also assured commercial banks that it would supply needed reserves.

Unfortunately, “too little; too late” became the common descriptive phrase used when referring to Federal Reserve response to the crisis which it had caused. That is because the economic devastation was overwhelming.

Unemployment soared to as much as 25% and prices declined (deflation) by more than one-third. The aggressive, free-spending social programs of the 1930s government could not stop the slide and contributed to the length and breadth of the depression. At the depths of the Great Depression in 1932, the stock market had declined by 90%.

The stock market crash was not the cause of the Great Depression, though. The Great Depression was caused by a Fed policy of higher interest rates. Whatever the intention or merits of the action (the higher rates were imposed for the purpose of curbing rampant stock speculation), it led to a reduction in economic activity which was well underway before stocks crashed.

INFLATION, DEFLATION, AND THE FED 

The Federal Reserve officially implemented an interest rate policy of “higher for longer” almost three years ago. Rates moved up rapidly and bond prices have lost one-third to one-half of their value since then, depending on length of maturity. (see “And So Rates Will Be Higher” – Jerome Powell)

It matters not what the intention was or whether it was correct. What matters at this point are the circumstances in which the Fed finds itself now.

Most, or all, of our serious financial and economic problems are the result of a century of intentional inflation. The effects of that inflation lead to a loss of purchasing power in the currency (U.S. dollar). When the Fed intervenes in the markets either directly (by purchasing or selling securities) or indirectly (manipulating interest rates), it creates distortions which have ripple effects and are amplified.

In addition, those effects are unknown with regards to extent, duration, and timing. Remember being surprised at the higher increases in consumer prices post-Covid and economic shutdown. Those increases are attributable to government (and central banks) actions in response to the ‘pandemic’.

The economic shutdown was forced upon society by government – rightly or wrongly. As a result, the decline in economic activity led to huge financial and economic problems for society, including supply chain issues. These problems were met with phenomenally huge financial largesse (inflation) by governments and central banks, which, in turn, led to higher consumer prices (effects of inflation).

After more than one hundred years of trial and error, it is apparent that…

  1. The Federal Reserve causes the problems and crises with which it continues to grapple.
  2. The Fed is doomed to a role of reacting to crises of varying intensity (worse) and frequency (more often).
  3. Serious deflation and economic depression would overwhelm efforts by government to reverse the effects or contain the damage.

CONCLUSION 

There is no path to financial stability from the current point that does not involve a cleansing of huge magnitude. The cleansing will be accompanied by serious financial and economic pain. The Fed is continually dancing with its own devils amid music which is horribly out of tune. The only option left is to wait until the music stops. (also see If The Markets Turn Quickly, How Bad Can Things Get? )

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED