Alex’s Notes: This keeps getting better and better. The Federal Reserve act was passed in 1913. In direct conflict with the US Constitution which states only gold and silver are legal as money, it allowed a private bank to control the issuance of currency, to basically create money at will.

I can already hear the argument versus gold and silver as money starting up..the barbarous relic theme…instead of addressing this argument which has gone on for as long as man has wanted to control issuance of currency, let me just point out one simple fact: you cannot build a stable house with a measurement of value that changes all of the time. If the inches on a slide rule a carpenter used changed its size constantly, the house would be a catastrophe waiting to happen. That is precisely what the US Dollar is, a measure that changes value constantly. It would take you almost $100 to buy in raw goods what $1 would buy you 100 years ago. These are simple, indisputable facts, and have nothing to do with the idea that people do not want gold coins clinking around in their pocket. The point is money must have a stable measure or it cannot be the foundation a financial house is built upon.

Evidence of this is pretty obvious and widespread in today’s economy.

The US government literally borrows money from the Fed then taxes US citizens to pay the interest, then the Fed, which is a private bank, then uses your tax dollars to buy garbage out of the market and off the books of financial firms, cleaning their books and padding everyone’s pockets in the process, once again at the cost of the american taxpayer.

Lets be clear here: I am not trying to get you mad at the government, I am trying to point out that you can either trust the paper system with your money, or you can put your money in gold. History proves that parabolic debasement of the money supply that is occurring now, has led to the demonitization of that particular form of money, every time.

Get safe. Gold is the Money of Kings.

***

Wall Street profits from trades with Fed

By Henny Sender in New York

Published: August 2 2009 23:04 | Last updated: August 2 2009 23:04

Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.

The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.

However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.

The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage. Barclays, for example, e-mails clients with news on the Fed’s balance sheet, detailing the share of the market in particular securities held by the Fed.

“You can make big money trading with the government,” said an executive at one leading investment management firm. “The government is a huge buyer and seller and Wall Street has all the pricing power.”

A former official of the US Treasury and the Fed said the situation had reached the point that “everyone games them. Their transparency hurts them. Everyone picks their pocket.”

The central bank’s approach to securities purchases was defended by William Dudley, president of the New York Fed, which is responsible for market operations. “We believe that opting for transparency is a greater good,” he said. “If we didn’t have transparency, we’d be criticised on other grounds.”

However, another official familiar with the matter said the central bank “has heard that dealers load up on securities to sell to the Fed. There is concern, but policy goals override other considerations.”

Barney Frank, chairman of the House financial services committee, said the potential profiteering may be part of the price for stabilising the financial system.

“You can’t rescue the credit system without benefiting some of the people in it.” Still, Mr Frank said Congress would be watching. “We don’t want the Fed to drive the hardest possible bargain, but we don’t want them to get ripped off.”

The growing Fed activity has coincided with a general widening of market spreads – the difference between bid and offer prices – as the number of market participants declines. Wider spreads enable banks, in their capacity as market-makers, to make more profit.

Larry Fink, chief executive of money manager BlackRock, has described Wall Street’s trading profits as “luxurious”, reflecting the banks’ ability to take advantage of diminished competition.

“Bid-offer spreads have remained unusually wide, notwithstanding the normalisation of financial markets,” said Mohamed El-Erian, chief executive of fund manager Pimco in Newport Beach, California.

Spreads narrowed dramatically during the years of the credit bubble.

Brad Hintz, an analyst at AllianceBernstein, said he doubted that spreads would ever return to those levels, a development that could be pleasing to the Fed.

“They want to help Wall Street make money,” he said.

Additional reporting by Brooke Masters in Washington

Original Article

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