When did the Federal Reserve know what?

The magnitude of recent monetary operations, have made decades worth of the central bank's most important data thereto, statistically insignificant.

Non-Borrowed Reserves of depository institutions (your deposits that banks actually have instead of needing to borrow) started going negative [which is never supposed to happen] in early 2008 ... and the corresponding Net Free Reserves of depository institutions were in free fall by March 2008; long before the extent of the problem was announced.

http://research.stlouisfed.org/fred2/series/BOGNONBR?cid=123,

http://research.stlouisfed.org/fred2/series/NFORBRES?cid=123,

Also, before monetary authorities started rapidly giving their member banks more reserves than had previously exited.

http://research.stlouisfed.org/fred2/series/WRESBAL?cid=32215

Despite any sales pitch to the contrary about financial stability, central banks exist in order to subsidize the risk free profits of member banks with the full faith and credit of the government.

Arguments that an 'independent' central bank will better defend the value of credit currencies are obviously erroneous.

The only thing that makes the credit of the Federal Reserve Banks valuable is that it is good for the payment of taxes at par. Clearly, the world is willing to conduct business with credit based currencies, and there is nothing about the Federal Reserve or any other central bank that makes their credit more valuable than the credit of the government itself.

The treasury is also perfectly capable of auctioning and repurchasing it's own debt. For example, quoted on a zero coupon basis it could offer a security at ~$0.95 and bid ~$0.90 providing holders with a lien defining their risk. The treasury could also conduct a federal funds auction for depository institutions short reserves and liquidate failed institutions in receivership. Essentially, anything the private, for-profit, central banking cartel can do with fiat credit money, the public treasury can do interest free. Unfortunately for bankers, they need to find other ways to make money than expecting infinite government subsidization of risk free interest payments. Reducing the interest burden on governments and the correspondingly vicious deflationary taxation burden on the economy is the key to real economic growth, and more importantly - real economic stability.

GDP VS REAL GOLD AND SILVER DOLLAR GDP

The Gross Domestic Product balances, essentially the volume of non-wholesale transactions, are some of the most fundamental of all economic data. Nevertheless, GDP balances must be contrasted against the market prices of gold and silver in order to accurately reflect the real GDP on a long term basis against historical gold (1873-1933) dollars and silver (1933-1964) dollars. Liars may figure with various arbitrary indexes or other damned statistical lies that the gross domestic product is expanding, but real figures representing real commodities cannot lie, & most especially the two ultimate commodities that can reflect the historical value of all goods since time immemorial, silver and gold.

Real gold dollar and silver dollar GDP have been collapsing since an all time high in October of 2001. The current silver dollar real GDP was first reached in 1971 and the current gold dollar real GDP was reached in 1956.

The charts below graph the value of the Gross Domestic Product as expressed as a number of ounces of gold or silver. Rallies of gold and silver are not bubbles at all but actually anti-bubbles because they represent a contraction in the real value of credit and corresponding deflation in the value of credit based asset bubbles. The catastrophic economic consequences should be very alarming to politicians and monetary authorities with a laissez-faire attitude about debasing their way out of debt.

Contrary to the current defunct economics enslaving us, an economic crises cannot be solved by extending credit from helicopters or any other vehicles of military spending. Did debasing Germany's reparations with unbalanced budgets work? No, it did not work, and caused unprecedented price inflation, especially with foreign imports. The gross domestic product as measured in a debased currency was not as high as the real gross domestic product as measured in the value of foreign exchange. When the Japanese refused to borrow, the government decided to fiscally force economic expansion by borrowing for them, and thus Japan's debt as a percentage of GDP reflects that policy. Governments that debase their way out of debt achieve success only at real price.

Debasing debts with unbalanced budgets creates a vicious interest burden requiring more cyclical debasement. Where does it end? Historically, such irresponsible government spending causes collapse of foreign exchange markets leading to armed conflicts. Interconnectedness of globalist economies make the collapse of the foreign exchange value of any major currency a threat to the stability of all the others. Today, an inability of a debased dollar to finance energy imports is the single greatest clear and present danger threatening to bring the the entire United States military to a screeching halt.

The only real economic solution to the deflationary negative feedback loop is to increase real rates of return as measured in real goods, commodities. Inter-commodity spreads pressure markets that deviate too much from the center of gravity. Whether or not there is enough time for governments to bring spending under control before international trade is completely destroyed does remain to be seen. Real growth only comes at the price of drastically reducing the taxation burden on economies by reducing the interest burden on governments, & the continued course of debasement will not end well.

Gold and silver annual average pricing data from the LBMA and GDP data from the NIPA provided "as is" only.

COPYRIGHT MMXI BY JEFFREY MANDALIS WITH ALL RIGHTS RESERVED