More FED SHENANIGANS

Perhaps you suspected, but didn't really know.

To support the housing market by keeping the mortgage rates low the government,

who doesn't like the free market of capitalism, but prefers to intercede to make the outcome more politically palatable, has entered the market to purchase mortgage securities from banks.

Here is how it works:

The bank who makes a mortgage (with money it does not necessarily have) then packages this mortgage with others and offers it as a mortgage backed security,

which before the interceding, would have been sold at market rates of interest ,i.e. higher rates. But instead it is sold to the Federal Reserve at artificially lower rates.

Where does the federal reserve get the money to purchase these securities? It doesn't get it from the Treasury, nor from Congressional Authority. Yes, the money is created from nothing or "out of thin air", and shows up on the books of the lending bank and Federal Reserve as a Reserve Balance.

This money is being created silently all of the time and no one knows the amount of it, just part of the swollen assets of the Federal Reserve and an insidious dilution of our dollars. Of the $12 Trillion U.S.bank Assets, $1.3Trilllion are phantom numbers- they are there, but are not real.

From: Daniel Amerman, www.SafeHave.com, April 29, 2010

". . .the Fed's ability to create money is also likely the eventual source of funding for unsustainable federal government deficits, for financial system bailouts to come, and for future derivatives bailouts. Ultimately, the Federal Reserve is the likely source of repayment for the bailouts of Medicare and Social Security, to the extent these bailouts cost more than taxes can realistically raise. And when the time comes for an already bankrupt US Federal Government to bail the bankrupt states out of their pension fund insolvencies (as well as the Pension Benefit Guarantee Corporation),

the Federal Reserve is also likely to be the ultimate source.

. . There's a long history of nations creating money out of the nothingness in times of perceived national need. It's an infamous history. Well-known examples include the continental dollars issued by the US Continental Congress during the Revolutionary war. Other international examples include Weimar Republic Germany, several episodes in Argentina, as well as modern Zimbabwe. Monetization has a very long history. And that history is one of almost always ending badly, usually very badly for a nation's savers and retirees.

. . There are, however, some unprecedented features to this particular monetization. For 97 years, since its creation in 1913, the Federal Reserve has been able to openly manipulating investment markets by paying banks in reserve balances - but it has never done so. Not in any prior crisis on any significant scale. And there have been plenty of crises, including the Great Depression, World War I and World War II. Yet the Federal Reserve has never resorted to doing this before on a massive scale, and the reason is that for responsible economists (unlike the current Federal Reserve) this is terrifying and risky stuff. When a nation stops worrying about taxes or bonds, and just starts creating money without limit for political purposes - we know what usually happens."

Who benefits and who loses with this dilution of the value of money? First, lenders lose and borrowers gain with cheaper money, but even if it affects all with price inflation, ultimately those who have saved and the fixed income pensioners are most affected. The FED with no authorization or transparency by you or your representatives is cheating and robbing you and your families, so that it may appear that all is well and we are "recovering" from the economic downturn.

With Love and Kindness,

THE HATMAN