Everything you were told was a scam and a lie - yet another time for
But the new rules have slowly begun to catch the attention of market analysts. Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world's most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted.
The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.
Independent monetary authority my ass.
Function follows form. Anyone who believes that The Fed is independent after this charade, which incidentally it did on its own (and that, by itself, is cute - The Fed's "balance sheets" would never have passed examination under GAAP) has rocks in their head.
The simple fact of the matter is this - The Fed is out of bullets and they know it. They've driven rates to zero but still can't get beyond the premium demanded for loans, and the fact that cash flow is insufficient to meet service requirements. This is why the shift has taken place to the Government, which (thus far) has been able to keep borrowing and borrowing, since nobody is (yet) questioning whether the government will be able to meet the cash flow.
The key there is "yet."
In his January 6, 2011 letter urging that Congress act to protect Americas creditworthiness by increasing the statutory debt limit, Secretary Geithner made clear that any default on legal debt obligations of the U.S. would be unthinkable. In response, Members of Congress of both parties have indicated agreement that the United States must honor its obligations. However, Treasury disagrees with suggestions by some that Congress could somehow evade this responsibility by passing legislation to prioritize payments on the national debt above other legal obligations of the United States.
Guess what Timmy? Most of what The United States spends money on is not a legal obligation.
Oh sure, some of it is. Salaries for our servicemembers, for example. They worked, they're owed. Legally. That's a legal obligation. Debt service (interest) is a legal obligation.
Social Security and Medicare are not. Nor are farm subsidies, Department of Education meddling, and, incidentally, while your salary Timmy is for work you've already done, Congress can de-fund your position and reduce your salary for future work to one penny.
If they did, you'd be overpaid.
The simple solution to the "Debt Ceiling" is to spend only what you take in via taxes.
That means no more debt is required.
And yes, I'm well-aware that it also means a 43% (roughly) immediate cut in Federal Spending.
I assert that such a cut can be made without impinging on one dollar of actual legal obligation of The United States.
Stop lying Neal, and tell your boss Timmy that we know he's lying too.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.
NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.
The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
Looking for "The Best of Market Ticker"? Check out Ticker Classics.
Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.
The Market Ticker content may be reproduced or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media or for commercial use.
Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.