How to Justify a Flailing Fed

Warren Buffett has just come out with the statement, about which I tweeted earlier today when I first stumbled on it, that the "Fed Is [the] Greatest Hedge Fund in History." According to Bloomberg, he elaborated with the statement that the Fed's "generating '$80 billion or $90 billion a year probably' in revenue for the U.S. government." Here's more:

Buffett compared the U.S. Federal Reserve to a hedge fund because of the central bank's ability to profit from bond purchases while accumulating a balance sheet of more than $3 trillion.

The central bank has been buying $85 billion of bonds a month to help the U.S. recover as it emerges from the deepest slump since the Great Depression. Chairman Ben S. Bernanke and other Fed policy makers unexpectedly opted this week to sustain that pace of asset purchases instead of tapering it, saying they need to see more signs of lasting improvement in the economy.

... The Fed "is under no pressure, none whatsoever to have to deleverage," Buffett said. "So it can pick its time, and if you have somebody wise there – and I think Bernanke is wise, and I certainly expect his successor to be – it can be handled. But it is something that's never quite been done on this scale. It will be interesting to watch."

For Buffett it will be "interesting to watch," but not for many others. The Fed may not be under pressure to deleverage but only 62 percent of US citizens are working currently, according to some estimates, and up to 50 million or more may be using food stamps. The impoverishment of US Inc. is well underway and it's not an academic exercise but a kind of central banking end game. Europe's pan-central bank has done no better.

Central banking, as the name implies, is a centralizing force. In its operative history over the past 100 years or so it has centralized wealth in the hands of a few financial controllers while consolidating even the largest industries. Even entrepreneurs need to work within the "system" if they wish to have any chance at a profit.

It thrives on bigness and fixing the price and volume of money. As a result, it is gradually organizing the entire world around mercantilism. The current Fed Chairman Ben Bernanke, like all the others, has supported this process via inflationary policies that have sapped the savings and investments of hundreds of millions while propping up large, but technically bankrupt, financial enterprises.

Buffett sees the cup as half full. He wants us to believe that the Fed is doing a good job because it is generating income for the US taxpayer. This avoids any discussion of how Fed policies have devastated both savers and investors – not just in the past five years but over the past century.

It is not in Buffett's self-interest to have this larger conversation. Nor is it, apparently, in the controlled mainstream media's. Buffet wants to focus on the Fed's hedge-fund-like attributes. The media generally wants to focus on the issue of "leadership." The article quoting Buffett then goes on to mention the following regarding the current situation of the Fed:

Fed Vice Chairman Janet Yellen is Obama's leading candidate to replace Bernanke after former Treasury Secretary Lawrence Summers withdrew his name from consideration, people familiar with the matter said this week. The president has also said that he's weighing former Fed Vice Chairman Donald Kohn for the post.

This meme is available all over the Internet, and is surely a good example of how a dominant social theme can be used to distract people from larger issues when it comes to their collective pocketbook.
A recent article appearing over at MSNBC, entitled "How Larry Summers opened the door to a woman," provides us with another example. The article dwells on the differences between Larry Summers and Janet Yellen regarding who would make a better Federal Reserve chairman. Summers, we are informed, comes up short – not just because of his personality but because of his ... maleness. Here's a crux excerpt from the article:

[Some have been] furious that President Obama would favor a man with so many liabilities over a woman with so many measurable and vouched-for credentials. "This is something that women have observed and experienced over and over again in our lives and in our work and it makes us cross-eyed with frustration," NOW president Terry O'Neill told Buzzfeed. "You don't slam the glass ceiling down on the head of a better qualified woman so that you can appoint some man who's less qualified."

Summers' gender problem wasn't just that he wasn't a woman or that he had offended many women, but also that his more alienating qualities were so closely associated with male socialization: His lack of interest or awareness in others' responses to him, his cold-eyed, hyper-empirical approach, his unflinching belief in his own rightness. (There are women who fit this description. But women are more often expected and taught to put others' feelings before their own, to be collaborative, and to be likable.) That hurt his ability to do his job well.

All the tropes of modern feminism are on display in these brief paragraphs, including the most damning of all, "male socialization." This apparently includes "hyper empiricism" and a sense of "unflinching rightness."

Like some sort of 20th century anachronism – reminding us that elites have put various dominant social themes into play for a reason – the idea that men are inferior to women when it comes to cooperation is presented to us as if it were brand new again. The Internet and its alternative media are boiling with denunciations of central banking but you would never guess the virulence of these attacks from mainstream coverage.

Every part of the central banking meme is illogical and economically ruinous. In fact, I would suggest that the seeds of the next great monetary bubble are being laid right now. It is critically important that people understand what is really going on, because when this bubble begins to inflate in earnest, human nature will make us most susceptible to its allure.

All of us who wish to preserve our wealth and ensure our prosperity will have to grapple with what is on its way. I truly believe that the top men who have organized our current economic environment now "get it." They know that the game cannot be extended much further and are preparing for one last "party."

This is one of the reasons we've reorganized this website, to focus closely on coming developments and try to help our readers capitalize from what is about to occur – and to then protect themselves from the inevitable disaster that will follow.

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If you have the time and resources to attend, I would truly urge you to make a reservation while there is still space. No one else is approaching these issues in this manner, and no other group has our record when it comes to accuracy and forecasting using our models. What is now occurring is predictable, discouraging and ultimately ruinous but you can make it work in your favor if you are willing to do so. Hope to see you there, if you act soon. Click here for more information: High Alert Investment Conference.

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