Wednesday’s tragic financial comedy came the way of Ben Bernanke and his testimony to the US Congress. In this testimony he said three important things; gold is NOT money (what it is, he did not say), QE3 is on the way, and that the Federal Reserve’s QE program has been a “PROFIT CENTER for the Treasury.” The two statements and the QE3 proclamation are all ridiculous; however, the “profit center” comment is the most absurd.
Have you thought through just what kind of relationship there is between the Treasury and the Fed? First, when the Treasury auctions bonds that are purchased by hedge funds, pension funds, or individual citizens, the purchaser uses his own funds to buy them and the Treasury pays him a rate of return for the use of his money. This is the way it is supposed to work; however, things get dicey when the Fed is involved.
When the Fed buys Treasuries it isn’t using cash on hand today from last quarter’s profit. It is conjuring up money out of thin air in order to pay for the bonds. When Bernanke was recently asked about this (not today) he said it wasn’t money printing. When asked where the money came from he smiled and said “from the Fed,” but it wasn’t money printing. When pressed again and asked if the money was on the books the prior day to pay for the multi-billion bond purchase he said no; it was indeed counterfeited for the purchase.
OK, we know that the Fed counterfeits money for these purchases (oh, and by the way, I DO understand that when a government prints money it is not actually counterfeiting but I don’t care – I will continue to use that analogy) but why was today’s statement laughably absurd? It was ridiculous because the Fed does not pay for bond purchases (QE) with its own money, it prints this money at a cost to the American people (read: INFLATION). Moreover, the Treasury pays the Fed the interest rate on the bond then the Fed remits that same interest payment back to the Treasury. And that’s a “profit center?” Are you kidding me? That’s a circle jerk!
How in the hell can that be a “profit center?”
If you’re married and your wife sells you a bond so she can go shopping, and you pay her with the kids Monopoly money, then she gives you some bucks from the money she “saved on sale items” for the cost of borrowing the Monopoly money, and then you “remit” those dollars back to her…was that a f%$!#* “profit center” for her? NO! It is a financial f%^$!#@ circle jerk that most people do not want to even understand.
“Bernanke is on TV? Who is that guy? I like his beard though, whoever he is. Is TMZ on yet?” Sadly, the average slack-jawed voting yokel is like this.
Here come the bears again. If you have NOT watched this whole video, please do so now. If you HAVE watched it, please view it again since it is relevant another time with today’s testimony of The Ben Bernanke.
Have you thought through just what kind of relationship there is between the Treasury and the Fed? First, when the Treasury auctions bonds that are purchased by hedge funds, pension funds, or individual citizens, the purchaser uses his own funds to buy them and the Treasury pays him a rate of return for the use of his money. This is the way it is supposed to work; however, things get dicey when the Fed is involved.
When the Fed buys Treasuries it isn’t using cash on hand today from last quarter’s profit. It is conjuring up money out of thin air in order to pay for the bonds. When Bernanke was recently asked about this (not today) he said it wasn’t money printing. When asked where the money came from he smiled and said “from the Fed,” but it wasn’t money printing. When pressed again and asked if the money was on the books the prior day to pay for the multi-billion bond purchase he said no; it was indeed counterfeited for the purchase.
OK, we know that the Fed counterfeits money for these purchases (oh, and by the way, I DO understand that when a government prints money it is not actually counterfeiting but I don’t care – I will continue to use that analogy) but why was today’s statement laughably absurd? It was ridiculous because the Fed does not pay for bond purchases (QE) with its own money, it prints this money at a cost to the American people (read: INFLATION). Moreover, the Treasury pays the Fed the interest rate on the bond then the Fed remits that same interest payment back to the Treasury. And that’s a “profit center?” Are you kidding me? That’s a circle jerk!
How in the hell can that be a “profit center?”
If you’re married and your wife sells you a bond so she can go shopping, and you pay her with the kids Monopoly money, then she gives you some bucks from the money she “saved on sale items” for the cost of borrowing the Monopoly money, and then you “remit” those dollars back to her…was that a f%$!#* “profit center” for her? NO! It is a financial f%^$!#@ circle jerk that most people do not want to even understand.
“Bernanke is on TV? Who is that guy? I like his beard though, whoever he is. Is TMZ on yet?” Sadly, the average slack-jawed voting yokel is like this.
Here come the bears again. If you have NOT watched this whole video, please do so now. If you HAVE watched it, please view it again since it is relevant another time with today’s testimony of The Ben Bernanke.
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