PeacePlan
01-11-2011, 07:38 PM
Posted from: www.kingdomeconomics.info (http://www.kingdomeconomics.info/) blog on January 11, 2011
Fed's Net Income Soars - says Wall Street Journal today
Bernanke's QE policies creates 'money' for our Treasury - Tim Geithner's account
Today's Wall Street Journal states that the Fed's revenue surged to $80.9 billion in 2010 and after spending some 2.5 billion for its operations (a huge amount it seems to me) , the net income of the Fed was $78.4 billion. This tremendous increase in revenue (some 65% greater then in 2009) demonstrates some interesting accounting tricks which are used by our Central Bank to accomplish their monetary policies. What are these accounting tricks and why should the American people now demand that the Fed also use these same accounting tricks to eliminate the burden of taxes for the American people?
Let's assume for purposes of this missive that I am the Fed Chairman and that I am creating money via quantitative easing (QE) policies. What do I actually do to implement this policy of QE? Let me cover the basic steps in numerical order so that you can understand what I actually do:
1. First of all, I must think about the quantity of money that I want to create via this policy called QE. After thinking and meditating on the quantity that I want to create, let's say I decide on the number $600 billion. Let's further say that I decide that this $600 billion should be created in monthly steps of around $75 billion each month for (say) an eight month period ending in June 2011. And let's also assume that I decide to allow the monthly interest income now accumulating from the $1.25 trillion of prior QE purchases of mortgage backed securities to also be available for purchases of new government securities. This means that I now should have some $105 billion in monthly cash in my Fed banking account (called the SOMA) to use for the purchases of treasury assets. Then what?
2. My next step is to get approval of this strategy from the key members of the FOMC (the federal open market committee). The FOMC consists of myself and 11 other members, most of which tend to follow the protocol of letting me develop a strategy and policy for monetary policy implementation. I am confident that Mr. Dudley, the President of the NY Fed and administrator of the SOMA account, will agree with my strategy. Now I need four additional votes from the FOMC committee to implement my dream plan ($600 billion of money creation with some $30 billion of monthly interest income from prior QE investments also available for my plan). This amounts to some $900 billion available for QE purchases between now and the end of June, 2011. What a neat plan. Now let's think about how this plan is implemented by me and my FOMC committee.
3. After the committee approves my plan, I then instruct Mr. Dudley, President of the NY Fed, to contact the manager of the SOMA account on the 14 floor of the NY Fed building for implementation. Let's say that the manager is Brian P. Sack and his duty is to implement this new QE policy just approved by the FOMC. What does Brian actually do to increase the 'dollars' in the Fed's SOMA account. In other words, where does Brian get the 'money' for the Fed's banking account? Just what is 'money' today for transacting business and for purchasing assets?
4. The reality today is that there is NO MONEY stored some place that will provide this $600 billion for new purchases. Money today is 'created out of nothing'. What does this mean in practical terms? Let's review what I did from Step #1 to now. In Step #1, I merely meditated and mentally thought about the dollar amount of funds that I desired for my QE policy. I then chose the number of $600 billion or $600,000,000,000 as the number that I desired (my conscious mind thought up this amount). I then got this number approved by my FOMC committee. I then instructed my right hand man, Mr. Dudley, President of the NY Fed and also the Secretary of the FOMC committee to create these dollars 'out of nothing'. Mr. Dudley then instructs the manager of the SOMA account on the fourteenth floor of the NY Fed building to create these dollars over a given time period. Then What?
5. The desk manager, let's say Brian Sack, then just punches in the correct number in his SOMA computer on the fourteenth floor of the NY Fed building and 'wa-lau'...money or dollars are magically created 'out of nothing' and then I can visualize this new money within the computer screen and witness the quantitative increase in my virtual banking account at the Fed...now a high speed computer that creates digits or numbers as our 'money'. With the new numbers in my SOMA account, I can now purchase whatever assets that the FOMC allowed. Digits in the computer are now our 'money' in the USA and also most of the world. Basically, digits in the computer have replaced the paper Federal Reserve Note (now only about 5% of money in circulation). What does all this mean?
Anyone who knows something about the history of money, recognizes that digits in the computer screen are not a physical thing which exists in space and time like gold and/or silver. Our original money created via our Constitution (1792) involved a real physical commodity which exists in space and time. Computer digits can be created by decision and punched into a computer by anyone...given the authority to do so. What we really have today is a system of AUTHORITY and then a monetary unit which is no thing (nothing). Our money today is created by mostly the decisions and dreams of a Fed Chairman and a committee of eleven subjective banksters who then manipulate their monetary policy to effect change in the greater marketplace. Over the past couple of years our Fed Chairman, Ben S. Bernanke, and his committee have created computer digits in the trillions to manipulate our markets. Is this process a sound and constitutional process?
What happens today is that computer digits (no thing units) get transferred from computer to computer (a form of virtual reality in cyberspace) and this process then increases and decreases 'dollars' (really virtual digits or numbers) in the accounts of those who deal with the Fed and its system (and it's called monetary policy). What a change from the days of my youth when I actually exchanged physical coins and physical paper notes when I desired to purchase goods and services. What we have today is a centralized system of 'imaginary' money creation by a few men and women who attempt to manipulate the entire global monetary system with their imaginary thinking and actions. What else?
The income received by our Fed's actions are really a result of accounting tricks and gimmicks which give the illusion of money earned...but which, in reality, are nothing more then accounting tricks (a form of shell game) which allows them to function and earn income (some $80.9 billion in 2010) and then transfer (via the computer) some $78.4 billion to the account of Timothy Geithner, our Treasury Secretary. All this is quite illusionary to anyone who understands this process and gimmickry. Our money today, is 'nothing' and these no thing units are used to further the goals and motivations of those in POWER and CONTROL. The common person who works and sweats to produce our real wealth (goods) must assume that their earnings will have some staying power and validity over time.
What an immoral and unconstitutional system has evolved since the creation of the Federal Reserve Act in 1913. Few understand what has evolved. Few comprehend what is happening to our economy. Few seem to have any interest in changing this corrupt system. Where is all this leading and why is this illusionary and corrupt system destined for collapse in the near future? Can a few subjective thinkers in high places of authority, really run the entire global economic system?
First of all, money really rules this planet and those in control of our money can use this privilege to accomplish their goals and objectives with no real conscious approval by the greater population of people who must live with this system. The weak and meek are victims of this type of system and the power brokers who run the system can create their realities via their monetary tricks and treats. The original constitutional monetary system (of our founding Fathers) was basically a decentralized system and money was invented to perform specific functions within our economy. What we have today is a non-system of digits and numbers... virtualized in high speed computers... controlled and then administered by a few Central Bankers and Politicians who seek to create them dream economy.
What appears as a dream economy for the few in control (the POWER centers) is really a nightmare economy for the vast majority of wealth producers on this planet. We now have monetary units which can not perform the basic functions for which money was invented. The function called...standard of value...is basically meaningless when the monetary unit is not itself a 'standard'. The function called...store of value...is basically meaningless as this function has minimal meaning when the monetary unit can only be 'stored' in cyberspace as digits and numbers. Digits and numbers are 'imaginary' and meaningless for measuring 'value' in any objective manner. What is 'value' without a standard of value?
The origin of money emerged as a proxy for 'value'. Value has, historically, always been stored as some thing within nature that exists in space and time. Our founding Father of money, Thomas Jefferson, chose silver as our monetary unit. Congress approved silver in the Coinage Act of 1792. The producers in the marketplace had confidence in silver (and indirectly gold) as our monetary units. Our standard of value had meaning when silver was used as a proxy for value. Can Capitalism survive with a virtual monetary unit...stored in high speed computers...in cyberspace...and created and manipulated by Central computers in select locations on our planet (called Central Banks)?
In conclusion, I think we need to re-think our entire monetary philosophy as well as our economic philosophy going forward. Do the American people really want this type of system for our economy? Will this type of system produce meaningful growth and prosperity for our economy going forward. Does our current debt based monetary unit...created 'out of nothing'...allow for the essentials of a free market economy where producers and consumers and create real wealth and receive real meaning from their efforts and creativity.
My suggestion to our leaders is to return to First Principles and then reconstruct a new set of principles for our American economy and the global economy going forward. Reality is NOW! If our leaders do not desire a change in our current system, then I think we need to politely suggest that our Fed use their accounting tricks and treats to also eliminate our tax burden. Since 'dollars' can now be created 'out of nothing' via the stroke of a computer key, why not let our Fed just create all the 'dollars' needed for our government? If trillions of 'dollars' can be 'created by punching digits' in the master money computer at the NY Fed, why not just create another couple of trillion to cover all the people's tax liabilities? Wouldn't this be fair and just??? Think about it!!! Enjoy and let's keep pressure on getting some transparency within our Federal Reserve System. D
Posted by Donald B. Swenson at 1/11/2011 11:42 AM
Fed's Net Income Soars - says Wall Street Journal today
Bernanke's QE policies creates 'money' for our Treasury - Tim Geithner's account
Today's Wall Street Journal states that the Fed's revenue surged to $80.9 billion in 2010 and after spending some 2.5 billion for its operations (a huge amount it seems to me) , the net income of the Fed was $78.4 billion. This tremendous increase in revenue (some 65% greater then in 2009) demonstrates some interesting accounting tricks which are used by our Central Bank to accomplish their monetary policies. What are these accounting tricks and why should the American people now demand that the Fed also use these same accounting tricks to eliminate the burden of taxes for the American people?
Let's assume for purposes of this missive that I am the Fed Chairman and that I am creating money via quantitative easing (QE) policies. What do I actually do to implement this policy of QE? Let me cover the basic steps in numerical order so that you can understand what I actually do:
1. First of all, I must think about the quantity of money that I want to create via this policy called QE. After thinking and meditating on the quantity that I want to create, let's say I decide on the number $600 billion. Let's further say that I decide that this $600 billion should be created in monthly steps of around $75 billion each month for (say) an eight month period ending in June 2011. And let's also assume that I decide to allow the monthly interest income now accumulating from the $1.25 trillion of prior QE purchases of mortgage backed securities to also be available for purchases of new government securities. This means that I now should have some $105 billion in monthly cash in my Fed banking account (called the SOMA) to use for the purchases of treasury assets. Then what?
2. My next step is to get approval of this strategy from the key members of the FOMC (the federal open market committee). The FOMC consists of myself and 11 other members, most of which tend to follow the protocol of letting me develop a strategy and policy for monetary policy implementation. I am confident that Mr. Dudley, the President of the NY Fed and administrator of the SOMA account, will agree with my strategy. Now I need four additional votes from the FOMC committee to implement my dream plan ($600 billion of money creation with some $30 billion of monthly interest income from prior QE investments also available for my plan). This amounts to some $900 billion available for QE purchases between now and the end of June, 2011. What a neat plan. Now let's think about how this plan is implemented by me and my FOMC committee.
3. After the committee approves my plan, I then instruct Mr. Dudley, President of the NY Fed, to contact the manager of the SOMA account on the 14 floor of the NY Fed building for implementation. Let's say that the manager is Brian P. Sack and his duty is to implement this new QE policy just approved by the FOMC. What does Brian actually do to increase the 'dollars' in the Fed's SOMA account. In other words, where does Brian get the 'money' for the Fed's banking account? Just what is 'money' today for transacting business and for purchasing assets?
4. The reality today is that there is NO MONEY stored some place that will provide this $600 billion for new purchases. Money today is 'created out of nothing'. What does this mean in practical terms? Let's review what I did from Step #1 to now. In Step #1, I merely meditated and mentally thought about the dollar amount of funds that I desired for my QE policy. I then chose the number of $600 billion or $600,000,000,000 as the number that I desired (my conscious mind thought up this amount). I then got this number approved by my FOMC committee. I then instructed my right hand man, Mr. Dudley, President of the NY Fed and also the Secretary of the FOMC committee to create these dollars 'out of nothing'. Mr. Dudley then instructs the manager of the SOMA account on the fourteenth floor of the NY Fed building to create these dollars over a given time period. Then What?
5. The desk manager, let's say Brian Sack, then just punches in the correct number in his SOMA computer on the fourteenth floor of the NY Fed building and 'wa-lau'...money or dollars are magically created 'out of nothing' and then I can visualize this new money within the computer screen and witness the quantitative increase in my virtual banking account at the Fed...now a high speed computer that creates digits or numbers as our 'money'. With the new numbers in my SOMA account, I can now purchase whatever assets that the FOMC allowed. Digits in the computer are now our 'money' in the USA and also most of the world. Basically, digits in the computer have replaced the paper Federal Reserve Note (now only about 5% of money in circulation). What does all this mean?
Anyone who knows something about the history of money, recognizes that digits in the computer screen are not a physical thing which exists in space and time like gold and/or silver. Our original money created via our Constitution (1792) involved a real physical commodity which exists in space and time. Computer digits can be created by decision and punched into a computer by anyone...given the authority to do so. What we really have today is a system of AUTHORITY and then a monetary unit which is no thing (nothing). Our money today is created by mostly the decisions and dreams of a Fed Chairman and a committee of eleven subjective banksters who then manipulate their monetary policy to effect change in the greater marketplace. Over the past couple of years our Fed Chairman, Ben S. Bernanke, and his committee have created computer digits in the trillions to manipulate our markets. Is this process a sound and constitutional process?
What happens today is that computer digits (no thing units) get transferred from computer to computer (a form of virtual reality in cyberspace) and this process then increases and decreases 'dollars' (really virtual digits or numbers) in the accounts of those who deal with the Fed and its system (and it's called monetary policy). What a change from the days of my youth when I actually exchanged physical coins and physical paper notes when I desired to purchase goods and services. What we have today is a centralized system of 'imaginary' money creation by a few men and women who attempt to manipulate the entire global monetary system with their imaginary thinking and actions. What else?
The income received by our Fed's actions are really a result of accounting tricks and gimmicks which give the illusion of money earned...but which, in reality, are nothing more then accounting tricks (a form of shell game) which allows them to function and earn income (some $80.9 billion in 2010) and then transfer (via the computer) some $78.4 billion to the account of Timothy Geithner, our Treasury Secretary. All this is quite illusionary to anyone who understands this process and gimmickry. Our money today, is 'nothing' and these no thing units are used to further the goals and motivations of those in POWER and CONTROL. The common person who works and sweats to produce our real wealth (goods) must assume that their earnings will have some staying power and validity over time.
What an immoral and unconstitutional system has evolved since the creation of the Federal Reserve Act in 1913. Few understand what has evolved. Few comprehend what is happening to our economy. Few seem to have any interest in changing this corrupt system. Where is all this leading and why is this illusionary and corrupt system destined for collapse in the near future? Can a few subjective thinkers in high places of authority, really run the entire global economic system?
First of all, money really rules this planet and those in control of our money can use this privilege to accomplish their goals and objectives with no real conscious approval by the greater population of people who must live with this system. The weak and meek are victims of this type of system and the power brokers who run the system can create their realities via their monetary tricks and treats. The original constitutional monetary system (of our founding Fathers) was basically a decentralized system and money was invented to perform specific functions within our economy. What we have today is a non-system of digits and numbers... virtualized in high speed computers... controlled and then administered by a few Central Bankers and Politicians who seek to create them dream economy.
What appears as a dream economy for the few in control (the POWER centers) is really a nightmare economy for the vast majority of wealth producers on this planet. We now have monetary units which can not perform the basic functions for which money was invented. The function called...standard of value...is basically meaningless when the monetary unit is not itself a 'standard'. The function called...store of value...is basically meaningless as this function has minimal meaning when the monetary unit can only be 'stored' in cyberspace as digits and numbers. Digits and numbers are 'imaginary' and meaningless for measuring 'value' in any objective manner. What is 'value' without a standard of value?
The origin of money emerged as a proxy for 'value'. Value has, historically, always been stored as some thing within nature that exists in space and time. Our founding Father of money, Thomas Jefferson, chose silver as our monetary unit. Congress approved silver in the Coinage Act of 1792. The producers in the marketplace had confidence in silver (and indirectly gold) as our monetary units. Our standard of value had meaning when silver was used as a proxy for value. Can Capitalism survive with a virtual monetary unit...stored in high speed computers...in cyberspace...and created and manipulated by Central computers in select locations on our planet (called Central Banks)?
In conclusion, I think we need to re-think our entire monetary philosophy as well as our economic philosophy going forward. Do the American people really want this type of system for our economy? Will this type of system produce meaningful growth and prosperity for our economy going forward. Does our current debt based monetary unit...created 'out of nothing'...allow for the essentials of a free market economy where producers and consumers and create real wealth and receive real meaning from their efforts and creativity.
My suggestion to our leaders is to return to First Principles and then reconstruct a new set of principles for our American economy and the global economy going forward. Reality is NOW! If our leaders do not desire a change in our current system, then I think we need to politely suggest that our Fed use their accounting tricks and treats to also eliminate our tax burden. Since 'dollars' can now be created 'out of nothing' via the stroke of a computer key, why not let our Fed just create all the 'dollars' needed for our government? If trillions of 'dollars' can be 'created by punching digits' in the master money computer at the NY Fed, why not just create another couple of trillion to cover all the people's tax liabilities? Wouldn't this be fair and just??? Think about it!!! Enjoy and let's keep pressure on getting some transparency within our Federal Reserve System. D
Posted by Donald B. Swenson at 1/11/2011 11:42 AM