The Fed is Heralded as a savior.
I’d like to present a dissenting opinion and it will only take a moment. The Fed is a quasi-governmental entity — read private bank. It is a very large private bank that oversees the money flows between banks with the exclusive privilege of creating and destroying money granted per the United States government. I don’t know when the destroying of money has actually ever occurred since 1913 when the Fed was created.
Tomorrow (9/17/2008) will be a grand day for the markets as they celebrate the saving of AIG, which if left alone would have hurt a many people and companies. In the long run it would have been better for everyone and helped people realize that the income’s of taxpayers aren’t for sale <pillaging> if they were left to fail. It would also have prevented a precedent from being created that the Fed can and will purchase anyone if need or desire be.
However, the Fed is able to say they are “rescuing” AIG, Freddie, and Fannie all in a very short period. Here is a thought to ponder…
If I am able to create money out of nothing or thin air then why wouldn’t I want to seem like a savior and help out distressed companies in the name of helping the economy? I don’t have a great answer why I wouldn’t. If I can shave a few cents off of everyone’s dollar who will notice? At first it won’t be apparent, but eventually there will be consequences, and at the end of the day I will be the savior. The consequences won’t be traced back to me. Like committing a crime knowing you won’t be caught… do you commit the crime?
Revisiting the notion of buying low (through fictitious money that is treated as real money)… I’m the Fed and create $85 billion dollars to purchase 80% of AIG. Great so now I own 80% of its liabilities and assets. No, not so great because nobody knows what the actual value of the assets are. <Remember I can create money> For someone who can’t create money this is a problem, and the exact problem AIG ran into. However, with the ability to create money I can now continue to add more “cash” to AIG’s balance sheet helping it though the crisis. At the end of the day AIG, Freddie, or Fannie have been saved all though Monopoly money. They will once again be players in the “free market”, but purchased at a unbelievably low cost. FREE
Conclusion: You and I purchased AIG, Fannie, and Freddie… however we will never see a dime of profit in return. Do you see a problem with this? Yet, the Fed will be treated like a king for saving the financial markets. Perhaps the right thing to say would be using someone else’s money to purchase a failing company and then profiting without ever returning that money to the “lender”.
That is Default. Fraud. Theft. Robbery.
Final thought:
Do you think that income taxes are legal and necessary according to the constitution of the United States?