Goldman Sachs Is A Small Fish

The Fed Is The Vampire Squid

By Monty Pelerin 

The gap between the reputation of the Federal Reserve and its actual value to the economy is perhaps greater than any other institution extant. It is a myth that the Fed is necessary and an even greater myth that it is beneficial to society. As Charles Hugh Smith observed:

In a system that depends on lies and the credulity of the citizenry, the greatest lie is that the Federal Reserve’s “quantitative easing” bailouts of the banks somehow help our citizens and communities.

Operating under the meme that it is necessary for a healthy economy, the Fed and its cronies in the financial system have exploited the wealth of the nation, systematically transferring earned wealth by ordinary citizens into the hands of the financial elite. The story behind its creation, see The Creature From Jekyll Island, should shock any American.

After 100 years of exploitation, the Federal Reserve (and other central banks) have placed all modern economies in risk of collapse. At this point, there is likely no way to avoid such an outcome. It is only a question of when matters spin out of control.

Wealth will continue to be destroyed (actually shifted) via inflation). This shift will continue to enrich the financial and monied class at the expense of ordinary citizens. The middle class is slowly being destroyed. The process has been a slow-motion version of Weimar Germany. At some point, control will be lost and fast-speed Weimar will emerge.

No one knows when the system will spin out of control. It could commence tomorrow or it could take another decade or two. The fact that the economy can no longer grow is a sign that we may be nearing that point. The trillions of dollars created to “save” the economy has not done anything to create jobs. Job creation appears to have reversed. Standards of living for the middle class are not rising and have not for decade or more. These are signs of the damage inflicted by dishonest money.

If anything has been accomplished by the Fed, it has been a deferral of the inevitable. This deferral has been purchased at great costs to be incurred in the future.

Matt Taibbi, in a famous article in Rolling Stone, unforgettably referred to Goldman Sachs as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” His colorful description has haunted Goldman since.

In reality, Mr. Taibbi blamed a low-level officer for the sins of the general staff. Goldman Sachs behaved rationally based on the policies they were provided by the Federal Reserve and the political hacks in Washington. So did the rest of the financial industry. These generals at the Fed deliberately made the rules by which lower level officers like Goldman, Lehman, Merrill Lynch and the like could get rich as the expense of the rest of society. They made it legal to prey on the productive.

The following comments by Anthony Wile reflect on the true vampire squid — the Federal Reserve (emboldening by me):

Warren ett has just come out with the statement, about which I tweeted [@HACPWile] 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.” 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.”