Monday, January 7, 2008

Private Ownership of U.S. Fed is Unsustainable and a financial meltdown highly probable

-- Posted Sunday, 6 January 2008 | Digg This Article | Source:



Wealth Preservation Wealth Enhancement

Financial and Geopolitical Intelligence

But if you wish to remain slaves of bankers and pay the cost of your own slavery, let them create money.

Joshua Stamp, Director, Bank of England, 1928

Even the most causal student of Economic History knows that the United States Federal Reserve system, or The Fed as it is called, is not a U.S. government owned or controlled entity.

Various international private banks, several of which are headquartered in Europe, own the �United States� Fed. Moreover, this �United States� Fed leads a Cartel of Central Banks* who collectively intervene in a wide variety of markets, as Deepcaster (see January, 2008 Letter) and others have demonstrated. All this is obviously quite financially incestuous.


*We encourage those who doubt the scope and power of Intervention by a Fed-led Cartel of Central Bankers to read Deepcaster's January, 2008 Letter containing a summary overview of Intervention entitled "Market Intervention, Data Manipulation - - Increasing Risks, The Cartel End Game, and Latest Forecast" at Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcasters profitable recommendations displayed at have been facilitated by attention to these Interventionals.

These International Bankers, acting through theirU.S.� Fed, make money by creating money out of �thin air� as eloquently described by the Dean of the Newsletter Writers, Richard Russell:

I still can't get over the whole Federal Reserve racket.

Consider the following - - let's take a situation where the U.S. government needs money. The U.S. doesn't just issue United States Notes, which, of course it could. These notes would be dollars backed by the full faith and credit of the United States. No, the U.S. doesn't issue dollars straight out of the U.S. Treasury.

This is what the U.S. does - - it issues Treasury Bonds. The U.S. then sells these bonds to the Fed. The Fed buys the bonds. Wait, how does the Fed pay for the bonds? The Fed simply creates money out of thin air (book-keeping entry) with which it buys the bonds. The money that the Fed creates from nowhere then goes to the U.S. The Fed holds the U.S. bonds, and the unbelievable irony is that the U.S. then pays interest on the very bonds that the U.S. itself issued. (With great profit to the private owners of The Fed - - Ed. Note) The mind boggles.

The damnable result is that the Fed effectively controls the U.S. money supply. The Fed is not even a branch of the U.S. government. The Fed is not mentioned in the Constitution of the United States. No Constitutional amendment was ever created or voted on to accept the Fed. The Constitutionality of the Federal Reserve has never come before the Supreme Court. The Fed is a private bank that keeps the U.S. forever in debt - - or I should say in increasing debt along with ever rising interest payments.

How did the Fed get away with this outrage? A tiny secretive group of bankers sneaked through a bill in 1913 at a time when many in Congress were absent. Those who were there and voted for the bill didn't realize (as so often happens) what they were voting for (shades of the shameful 2002 vote to hand over to President Bush the power to decide on war with Iraq).

Richard Russell, Richards Remarks,, March 27 2007

After President Wilson signed the Federal Reserve Act into law in 1913, he reportedly said, I am a most unhappy man, I have unwittingly ruined my countrya great industrial nation is now controlled by its system of creditthe growth of the nation, therefore, and all of our activities are in the hands of a few men��

Insightful economic forecaster Ian Gordon notes several negative consequences of the nearly 100-year reign of The Fed, consequences with which we cope today.

Since its inception in 1913, the Federal Reserve Board has been responsible for almost 95% devaluation of the U.S. Dollar. All this has been achieved through its ability to continually inflate the money supply.

And, between 1985 and 2005, the Federal Reserve Board has increased the money supply by five times. This extraordinary money creation is merely the catalyst for debt creation. In a fiat money system, money is debtthere is absolutely no way this money can ever be repaid except by continued inflation. But, now that the credit bubble is blown up, inflation is no longer an option; bankruptcy looms. The Federal ReserveWhat Has It Done For You Lately? Ian Gordon, December 29, 2007 (

Gordon goes on to conclude that today we are in the late Autumn of an inflationary blow-off in the current 50 to 70 year Kondratieff cycle. (The Economist Kondratieff theorized that Central Bankers were instrumental in creating 50 to 70 year long, four phase cycles, with the Winter Phase characterized by a deep recession or depression). Indeed, according Kondratieff theory this month, January 2008, we are on the threshold of a Kondratieff Winter - - a deep recession or depression. Deepcaster agrees that such a Kondratieff Winter is likely in the next very few years, but for other reasons than just the Kondratieff cycle (see June, 2007 and January, 2008 Deepcaster Letters at

When the United States has, in recent years, been threatened with recession or depression (e.g. 1987 and 2001), the Greenspan-led Fed responded to each threat by ever more massive fiat money (debt) creation. The problem is that each time the fiat money supply is inflated by an ever-greater amount, more money must be printed in order to stave off recession or depression. One recent calculation has indicated that approximately $6 must now be created (i.e. printed) in order to drive each additional $1 of GDP.

Such profligate printing merely delays financial disaster, but does not avoid it. Such a disaster could be avoided by linking currency to the Monetary Metals Gold & Silver but The Cartel strenuously resists that. It would dilute their power and profits.

Monetary inflation reflected in (the now hidden by The Fed) M3 is now increasing at nearly 13% annualized per year ( - - a 5 year doubling time. Of course, this reckless Fed-generated Monetary Inflation is gradually translating into Price Inflation, though that price inflationary effect has 1) been temporarily delayed by importing cheap goods and cheap labor into the United States via the de facto Open Borders policy and 2) has been disguised by data manipulation (see section of January, 2008 Deepcaster Letter regarding shadowstats Alternative Government Statistics Calculations at Latest Letter at

Of course, among the negative consequences resulting from rampant monetary inflation and easy credit has been serious wage depression and job quality degradation of American workers, as well as the destruction of much of the United States� domestic manufacturing capacity.

A major problem with The Fed's profligate fiat money creation is that as the money supply continues to increase prices begin to increase at an increasing rate. That rate is beginning to be reflected even in the jiggered U.S. government's CPI and PPI figures which the December 13 and 14, 2007 data releases showed. Of course, Real Consumer Price Inflation is over 11% annualized (

Deepcaster and Richard Russell are of the same mind regarding the consequences of the Fed-created monetary inflation. Regarding the continued inflation of the money supply:

1) The U.S. Dollar will eventually (pushed by Fed policies) self-destruct (though we are at the beginning of a short-term U.S. Dollar bounce as Deepcaster has earlier forecast) and

2) The system must eventually destroy itself. It is not a matter of whether, it is simply a matter of when and how Richards Remarks, March 27, 2007

So if the system must eventually destroy itself and The Cartel likely knows this, what has been, and is likely in the future to be, their response?

First, in order to stave off the day or month or year of Reckoning (which, we reiterate, is coming mainly as a consequence of their dramatic monetary inflation and easy money policies), the Fed-led Central Bankers Cartel has created, and for the past several years has operated, an extraordinary �financial machine� built on increasing trillions of dollars of created derivatives for the manipulation of major markets ranging from Precious Metals to Crude Oil and Energy, to Equities and Strategic Commodities. (See Deepcasters January, 2008 article Market Intervention Accelerating�� at

But, finally, the pressures of the Real Economy (e.g. increases in food and energy costs) coupled with this relentless and irresponsible money (debt) creation by The Fed have begun to seriously stress the entire financial system, as the credit freeze-up last August, 2007 shows. As we pointed out in our January, 2008 Letter, the credit freeze-up, subprime crisis, toxic derivatives and other threats have not gone away. These threats are latent and growing, waiting to erupt again.

Indeed perhaps the most salient item of evidence that The Central Bankers Market Intervention Regime is becoming less and less effective is that The Cartel requires, and thus creates, an ever-increasing number of derivatives to manage all the various markets in which The Cartel intervenes. Indeed, those amounts of derivatives are increasing exponentially. (See Deepcasters January, 2008 article Market Intervention Accelerating�� at

So what are the Central Bankers to do as their Market Intervention Regime becomes less and less effective? What are they doing?

They surely must want to avoid allowing the financial system to collapse around them (in a manner in which its failure would be linked to them) lest they be subject to the wrath of the populace of the major nations. They must thus develop a solution - - an End Game as it were - - for what Deepcaster and Richard Russell view as the inevitable collapse.

Deepcaster has described The Cartels apparent End Game is in its June, 2007 Letter posted at in the Archives at Latest Letter.

A most compelling rational conclusion from the foregoing is that The Cartel expects (and may even be pushing) the Dollar to go further and further decline, over the medium term, and to continue their other policies, until there is a �No-Salvation, No-Return Systemic Crisis. (Very short-term, Deepcaster earlier forecast the U.S. Dollar to bounce into the 1st quarter of 2008 - - a forecast that is being fulfilled - - but that does not affect the fact that the primary trend for the U.S. Dollar is down.)

It is clear from a variety of substantial evidence that the relentless monetary inflation, toxic derivatives, dark liquidity, et al has put the financial system in such serious jeopardy that it will be difficult or impossible to remedy (see Deepcasters December 23rd Alert).

That the U.S. economy is headed in the direction of serious stagflation (a Kondratieff Winter) is pretty clear from the November, 2007 statistics. According to shadowstats, Real Consumer Price Inflation is running in excess of 11% a year and, as we commented above. The Money Supply Growth (M3) is increasing at nearly 13% a year or a doubling time of nearly 5 years.

Moreover, U.S. GDP �growth� is a negative number - - a negative 2% according to shadowstats. It would appear that The Cartel-charted-course toward a stagflationary recession/depression is on course.

To be sure, this Fed policy of explosively increasing the money supply (money from helicopters to use a phrase associated with Chairman Bernanke) and The Cartels massive and increasing use of derivatives to intervene in a wide variety of markets (see - - then follow the path: statistics>derivatives>Tables 19 through 22) is fraught with danger. Deepcaster, Warren Buffett and Jim Sinclair have pointed out the dangers of derivatives. Indeed, Buffett calls them toxic and Sinclair has aptly described the financial system as sitting on a $20 trillion trembling mountain of derivativesthink Weimar Republic. Unfortunately Jim Sinclair, Warren Buffett, and Deepcaster are correct.

In sum, with The Cartel�s increasing use of derivatives comes an increasing risk of a financial meltdown. We had such a harbinger of one in August, 2007 with the credit market freeze-up but The Cartel was able to rescue its major International Bank and Wall Street clients from this one.

So far The Cartel has staved off a systemic meltdown. But, alas, it may well not always be so.

Thus we expect that a (inevitable eventually) No-Salvation, No-Return Systemic Crisis will likely, as Deepcaster pointed out in his June, 2007 Letter, at some point provide The Cartel a catalyst to force realization of its End Game. Only the timing and details are dark.

The clue to the character of the �End Game� is the Strategic and Prosperity Partnership Agreement signed by Presidents Bush, Fox of Mexico and Martin of Canada in Waco, Texas in March, 2006.

This Agreement was signed without the approval of Congress, or the knowledge of most of the American people.

It is clear from the End Game Plan reflected in this Agreement why the Bush Administration has been so resistant to defending U.S. borders.

It is also clear that a key component of the End Game Plan is the dissolution of the United States Dollar and other currencies into a new currency, the �Amero.� Indeed, two bits of anecdotal evidence that this plan is being taken seriously are:

1) That the Swiss Portfolio Investment Advisory Company is already touting the Amero Alternative on its website; and

2) The London investment firm Jeffries International Ltd.s Vice President, Steven Pervis, said that the coming Amero will have a big impact on everybodys life.

One clear inference is that if The Cartel is pushing the Amero as the eventual, and their favored, alternative to the U.S. Dollar, The Cartel certainly intends to continue its interventional efforts at suppressing the prices of Gold and Silver in order to prevent their attaining widely-recognized legitimacy as money.

The foregoing are only a couple of the components of this massive and dramatic End Game Plan, the particulars of which can be found in Deepcasters June, 2007 Letter at at Latest Letter in the Archives.

In the event of the success (from The Cartel�s perspective) of the implementation of the End Game Plan, doubtless The Fed would transmogrify itself into The (still private and very profitable) Central Bank responsible for issuing the Amero.

Of course, the key question for the long-term is whether The Cartel will be able to pull it off. Certainly they have been instrumental in creating a financial climate which has crisis potential.

The immediate question is whether their massive Cartel Interventional Takedown Machinery will continue to be potent enough to do as they did most recently on December 13 and 14, 2007 - - implement major takedowns of the Gold price directly in face of the high CPI and PPI inflation numbers reported on those two days.

As their recent exponentially increasing derivatives creation shows, The Cartel is having a harder and harder time maintaining their potency.

So it appears that if The Fed is not able to lead its Cartel to success in implementing its End Game, the No-Salvation, No-Return Systemic Crisis which its policies will likely create, will clearly and publicly be its responsibility.

In that event, is it not highly likely that The Fed would be unable to continue as a privately owned for-profit entity?

Rather, and as an alternative to The Cartel�s planned End Game, there could then arise genuine a United States National Bank issuing United States Notes (as did President J.F. Kennedy briefly before he was killed) solidly backed by the monetary metals, Gold and Silver.


January 4, 2008


Wealth Preservation Wealth Enhancement

Financial and Geopolitical Intelligence

Gravitas, Pietas, Virtus

-- Posted Sunday, 6 January 2008 | Digg This Article | Source:

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