Ben Bernanke: Federal Reserve audit would constitute “takeover” by Congress, threaten the “financial system, dollar and economy”

When asked by Rep. John Duncan on Thursday about the fact that a majority of Congress is co-sponsoring Ron Paul’s HR 1207 bill to audit the Federal Reserve, Ben Bernanke responded:

Ben Bernanke: “My concern about the legislation is that if the GAO is auditing not only the operational aspects of the programs and the details of the programs but making judgments about our policy decisions would effectively be a takeover of policy by the Congress and a repudiation of the Federal Reserve would be highly destructive to the stability of the financial system, the dollar and our national economic situation.”

While many viewers interpreted Bernanke’s statements as a “threat”, we would not rule out the possibility that he was merely stating an opinion that is indeed shared by many economists who grew up under the notion that the autonomy of the Federal Reserve and its mission to centrally manage the economy is sacrosanct and not open to debate.

Fortunately, times have changed and serious questions are being raised as to…

  • what the Federal Reserve has been up to in recent years,
  • its role in the current economic crisis and the creation of the housing bubble through artificially low interest rates,
  • its secret agreements with foreign powers and foreign banking institutions with no oversight whatsoever
  • its disastrous effect on the dollar, which lost 96% of its value since the Fed was established in 1913
  • whether the Fed should have as much unchecked power as it currently does, and
  • the safest way to abolish the Fed if it is established that it has in fact outlived its usefulness.

It’s interesting to consider what happened when President Andrew Jackson tried to abolish one of the Fed’s predecessor banks, the Second Bank of the United States, during his second term (1833 – 1837):

Jackson believed that his reelection was a mandate from the people to break the power of what he called “this hydra of corruption,” the Second Bank of the United States. To accomplish this, Jackson decided to withdraw government money from the bank to pay current expenses and to deposit future government revenues in selected state banks. These banks were called pet banks. Jackson appointed Roger B. Taney of Maryland as secretary of the treasury to carry out this policy after his two previous secretaries refused.

Bank President Biddle and his congressional supporters, led by Clay and Webster, were determined to save the bank. Biddle used the bank’s money to buy political favors. In 1834 the Senate passed a resolution of censure against Jackson and refused to confirm Taney’s appointment to the Cabinet. Biddle said, “This worthy President thinks that because he has scalped Indians and imprisoned Judges he is to have his way with the bank. He is mistaken.”

Biddle began to restrict credit and call in loans from state banks. Business leaders pleaded with Jackson to approve the bank and end the crisis. However, Jackson placed the blame for the panic on the doorsteps of Biddle’s bank and advised all callers to “Go to Nicholas Biddle.” Biddle’s reply was: “All the other banks and all the other merchants may break, but the Bank of the United States shall never break.”

In this struggle for power, Biddle was doomed to defeat. Jackson rallied public opinion behind him, and Biddle was pressured into restoring credit and loans. All he had proved was that Jackson was correct in his contention that a private monopolistic bank, independent of government regulation, should not be entrusted with public finances. Jackson won his greatest political victory, and the Second Bank of the United States passed out of existence when its charter expired in 1836.

Emphasis addedSource


  • longshotlouie

    “Paper money eventually returns to its intrinsic value —- zero.”

    – Voltaire

  • Ross

    You’d think that a person with the name Sean would have some perspective on the surpression and inhumanity that the British inflicted on the Irish.This is the mentality that ignores the suffering of their fellow man for personal gain.

    You are full of it Sean,and when the ultimate economic collapse happens Sean,you will be expendible flotsom and jetsom, just like the masses,since you will not be in the inner circle.

    Obama and the Fed has the US on the path of total collapse.

  • Sean

    Thomas Jefferson supported the Dallas Tariff which was our first protective tariff. The dallas tariff made up 90% of government revenue up till the civil war and there was no need for the income tax.

    • Sean

      in 1913 they dramatically lowered tarrifs with the Under-Wood Simmons act and created the income tax.

  • Results
    • Christine

      Where’s the money? Who has it? The FED and the government seem to be creating ways to get more money from us, the worker bees. we dutifully go off to work (if we have a job) and they give them our hard earned money to pay for their spending sprees…all to serve the very elite wealthy. The government is going after all of the big basic human needs that create a mandatory payment to them or something that creates interest income for themselves…cars, health insurance, home loans, taxes…anyway they can to pay off the huge debt they are creating.

      Of course, if they do not do something about job creation, no one will be able to buy anything or sell anything.

      And the wars that are spreading…it has been said that it only needs to be sustained, not won. There is money to be made in war for the elites. There is no winning a war that has a basis in a false pretext created to start it. The longer it goes on, the more the elite make from their goal of oil control and weapon sales, which they are invested in.

      We need a course of government that is for the people. That’s not what we have right now.

      I look forward to the audit of the FED’s activities. They are the cause and source of all of our woes. These are the folks that actually run our government. They pretend to be the stabilizers of the economy….well, if they are, then they need to sharpen up their job skills. I believe they know what is going on and are doing this intentionally. Better it is that they are dissolved completely…as well as the IRS. They pretend to be the Savior, but they are the problem! The state of the world is getting worse and worse because of them. No one likes being manipulated!

      America will once again be free and unburdened from the corruption that currently exists.

  • Paul

    The way I see things is this. There is plenty of wealth in the world. People in this country and all over the world have created it by making and growing things over the past 2000 years or more. Unfortunately A few (slimey money changers), savvy individuals have figured out how to take most of that wealth and hoard it for themselves. It is high time to separate that wealth from those (slimey money changers) savvy individuals either by tact or by force it must be done. The human race is not very accepting of slavery and that is exactly what those wealth hoarders intend for us all! I just cant, as a farm boy, figure out why someone would want to have so much money while others have none. It is totally incomprehensible to me but there it is.

    • Christine

      I agree! Everyone was born with gifts, talents and skills and certain inalienable rights, thus the Constitution, Bill of Rights and Declaration of Independence to acknowledge this, but our system has evolved to pervert and disregard these rights. When we turn the back the tide to the original intentions of this country, then the sayings we use to describe America will not be just overused and trite words.

      Land of the free? Wealthiest nation on the planet? Really? We’re totally in debt to foreign countries and running fast towards bankruptcy. Can’t provide properly for medical care, homes stolen by intentional misdeeds in our financial institutions, educational opportunities out of reach for most, food costs, on and on. It seems “they” in the government, including the FED, have plans on making life more difficult than in making it easier so they can spend the money we make thus making us slaves without rights to justice, life, liberty and the pursuit of happiness. Their plans are towards a one world government, of control over everyone and everything…while everything they do appears to make things more and more out of control. Such a deception. These really are sick people in charge. Perhaps they will one day see that this way simply does not work well, not for them or anyone.

      I envision a world where there is plenty for everyone everywhere and everyone truly cares about the welfare and lives of others, not just a select few siphoning off the rightfully due riches of others from the work of their own hands. This world was not created for just a select few. With this premise, the policies that guide everything would be quite different from what we currently have and are moving towards.

      “Their” word is control, our word is universal “care”. Politicians are suppose to be “in public service” to the masses. We are suppose to be able to trust them, but when they get into office and do exactly the opposite of what they promised, then it is again apparent that they repeatedly lie to get into office to work their own will, not the will of the people. They are a disappointment. I think most have forgotten, if they ever really knew, what public service means.

      Ron Paul is the exception. He is consistent and holds every bill before him up to the light of the Constitution, Bill of Rights and Declaration. This keeps him steady and trustworthy. We know he will not be in the business of taking our civil liberties or rights away. We can depend on him.

      • Sean

        We are working on globalization, but not a “one world government.” We have been working on a “one world economy” right before everyone’s eyes, and everyone is accepting it. Even Ron Paul is for free trade.. This is the only thing proping the fed up. It gives them rights to work with other central banks to make fair trade.

        • Christine

          I believe you are mistaken and a bit naive. The new world order is called one world government, globalization, whatever name you find acceptable, they all mean the same thing. They purposefully give various names to it to try to make it palatable for the masses. If one name doesn’t work and is objectionable, another name will work is what they hope.

          Ron Paul is for free trade, to be friendly with other nations and trade with them, but not surrender our constitution, bill of rights, and declaration to do it. He believes in still remaining a sovereign country and government.

          Not everyone is accepting what is happening.

          The FED is involved in far more things than trade. Once the FED audit is conducted by the GAO, then we will see the totality of their involvement in world affairs and activities. The USA was intended to be run by the President and elected officials, not financiers in secret.

          The FED is having difficulty with bringing Russia on board with this one world economy. They do not like the “tax system”. Of course, no one does, and it needs to change. This is how the FED gets it’s money from you, me and everyone. The original intention of our founders was not this, in fact, it was to get away from England and the heavy tax burdens, just exactly what was again created in 1913 with the FED and the IRS. The financiers wormed their way into the system once again. The USA lost it’s freedom then and has been run by financiers who only have their interests at heart, not yours, mine or the citizens of the USA. Not those of other countries either. If they did have our best interests at heart, we would have affordable basic needs as human beings and the government would be small.

          I look forward to the FED’s audit.

          • Sean

            It is very unlikely that we are going to have a “one world government…” I don’t think any other country would accept that. On the other hand, why would we need a one world government if we have a one world economy?? The whole idea is to integrate countries. As long as the governments are working together than we can merge into a world economic structure under the control of the elite. It’s all the same.. Being friendly with nations is one thing. Having serveral countries being totally dependent on eachother for money and goods is completly different story.

          • Christine

            As I said previously, the one world economy is one world government, is globalization. All the same. In case you haven’t noticed, even here in the USA, the ones who control the money have and do control our government. They are called the FED, teamed up and in bed with our government. The FED is reaching worldwide.

            Perhaps these links at this website will get you up to speed. The link at the bottom will take you to more and more links previously posted.


            On thing we should understand about this financial mess is to dismiss the mistaken notion that “if it happens over there, it won’t affect me”. That is not true. What has gone out will be totally karmic and will come back to them…someday. Perhaps soon. We don’t know when.

            So with the FED as the brainchild for all of the financial woes that are spreading throughout the USA and to other countries (just to remind them and us all of how powerful the FED is and how far reaching their decisions can affect populations despite borders), all the wars incited by USA, the destruction in other countries on the path to control the world’s oil, we should know there will be a time to pay retribution. The FED is a banking cartel. They do what others can not do because it is absolutely illegal. They don’t abide by the law, hold their plans in secret, execute them in secret behind the curtain, but there are Universal Laws that govern this world. The FED cannot duck from Universal Laws. They just happen.

        • Sean

          Ron Paul and everyone know what kind of situation we are in. They will all say that we need to live within our means. That means we need an even trade balance so we aren’t borrowing money and over consuming.

          But getting rid of the fed is just going to make a problem worse. It’s not going to force us to live within our means; it’s going to force us into a type of deflation which we could not get out of.

          You have to understand that it was government policy that has gotten us into this fragile position where it could harm us to eliminate the fed. Government policy has to change before you can successfully remove them.

          • Sean

            Even if we got rid of the fed, we would still have fractional reserve banking. Large banks would take the roll of the central bank and dictate monetary policy. Smaller banks would have to take loans from the larger banks before they collapse. That is what history has taught us..

          • Ross

            So Sean,you think that debt slavery is good for the masses only because you can extricate advantage from it, like all the other parasites? Why pay interest to the Fed who counterfeit money,when the people can pay lesser interest and keep inflation under control via more monetary discipline?

            Your demented,flawed postings reveal a more avaricous side that seeks personal advantage over any moral reponsibility you feel towards your fellow man.

            How much do they pay you Sean?

          • Sean

            you are a slooooow one. WE CAN’T HAVE ANY OTHER MONEY SYSTEM AND STILL PURCHASE OIL!!! are you that stupid?

          • Sean

            The income tax replaced tariffs.. I’ve been suggesting that we get rid of income taxes and replace them with tariffs again so we can at least try to live within our means so we wont have to borrow money anymore and have this system of debt! maybe if you would read some of my posts before making retarded remarks, than you would learn a little bit.

          • Sean

            hahahahahaha! that is sooo funny. You don’t even understand the feds role. The fed has to raise interest rates to stop the banks from lending too much money. Without the fed doing that, banks would lend too much and inflation would get out of control. GO TO SCHOOL!

          • Christine

            Go here and sign up to read this book for free. Some education will help you and us all.


          • longshotlouie

            So they ‘lowered’ rates to 1% (then lower).

            Are the banks lending too much?

            Interest rates will go up when our creditors (China, Japan, et al) want a better return for their risky investment in us.
            That will bring the inflation, and the next wave of the housing crisis.

            Not enough to GO TO SCHOOL, if you are being fed hogwash.

          • longshotlouie

            Sean replies:
            July 4th, 2009 at 12:02 pm
            The income tax replaced tariffs.. I’ve been suggesting that we get rid of income taxes and replace them with tariffs again so we can at least try to live within our means so we wont have to borrow money anymore and have this system of debt! maybe if you would read some of my posts before making retarded remarks, than you would learn a little bit.

            As long as the FED can print money out of thin air, there is no restriction to living beyond our means.

            If you are the teacher, then regression is the subject.

          • Sean

            Lou, i’m sorry but you have it backwards. Whenever interest rates rise, inflation goes down. It is called monetary policy, they use it for price stability.

            Whenever a country grows, it inflates the currency. The federal reserve has to raise interet rates to stop the country from growing too fast and inflating too much. With a fiat currency and without the fed, there would be runaway inflation.

            The reason we switched to a fiat currency is because we import too much oil. That was 40 years ago and we import 10 times more oil now than today. The problem is 10 times worse now than before. There is no way in heaven or hell that we could or would switch back in the fragile position that we are in.

            Getting rid of the fed isn’t going to force us to live within our means. It’s gonna cause a depression. The money supply would contract and ruin our economy. The great depression was caused by a contraction of the money supply. We had to get off the gold standard and inflate the dollar to get out of it.

          • Sean
          • longshotlouie

            Keep uttering your tired statist theory. The one that turns out to have brought us to this moment in history.

            You seem to enjoy the fact that money is created as debt. For you growth seems to equal debt. When you overspend at your house, do you get another credit card to help fulfill your ‘growth’? Maybe you have a high-quality printer to print up some fiat-fiat currency to help sustain the economic ‘growth’ of your household.

            Bottomline: If it makes no sense in household finance, it makes no sense.

            And yet another story comes out about another thing that you were sure would not be a problem. There will be many more in the near future.

            India Joins Russia, China in Questioning U.S. Dollar Dominance

            Debt is not wealth.

          • longshotlouie

            The Economics of Illusion

          • Sean

            Bottomline; we can’t afford to import 500 billion dollars worth of oil a year without a flexible currency.

            Bottomline; Switching from tarrifs to income tax has made it impossible to live within our means. It is not good for an economy or country to remove tariffs from goods comming in and replacing them with domestic taxes.

          • Sean

            I AM NOT PRO DEBT! just because i tell you why we have a fiat currency and how it’s keeping our country alive, doesn’t mean i am for it.


            That is why I laugh about all the things everyone says about me and call them stupid.

          • longshotlouie

            Does the heroin keep the addict alive?

            Maybe if you stomp your feet and hold your breath till you are red in the face, your fantasy will become reality.

          • Sean

            Do you think ending the federal reserve is going to stop a heroin addict from getting his drugs?

          • longshotlouie

            Is that what you took from my reply?

            s i m p l e t o n

          • Sean

            haha no, i was trying to make a point. we are addicts and oil is our drug. Just because we get rid of the fed doesn’t mean we will stop importing oil.. It is not the federal reserve that is telling businesses to go china to bring goods here. They do it because it is cheaper and because they don’t have to pay taxes on those goods as they would here.

          • Sean

            “Does the heroin keep the addict alive?” …
            Does air keep the addict alive?

          • longshotlouie

            Well that makes it better. As long as we are only being robbed so the addict can get drugs. Lessee, we are the addicts pumping the drug without any concern for the fact that our children and grandchildren will have to pay. But wait, if we make addicts out of our children and theirs, they can pass off that exponentially larger debt to their children and …….. BOOM

            Speaking of oil, is it not odd that as consumption declines and reserves are at historical highs, we get to pay more?

          • Sean

            This is where it gets good.. Why do you think the government spends so much money? Compare these two charts. Knowledge is gold.



          • longshotlouie

            Thanks for the common knowledge charts. I doubt that anyone here needs a chart to tell them the debt and trade deficits are both unsustainable. Again, they are symptoms, not the disease.

          • Sean

            That’s not the point. Do you know anything about keynesian ecnomics? The government spends money and racks up the national debt to replace money spent overseas. Can you see a resemblence in the charts other than they are high? Did you pass algebra in high school?

            If we had tariffs we wouldn’t need income taxes and the government would not have to borrow so much money.

          • longshotlouie

            Here we go around the maypole again.

            I haven’t argued the path of recovery yet, just acknowledgement of the actual disease and its root.

            Your condescending tone is tiresome. Enjoy your navel.

          • Sean

            we are talking about two different diseases. You can’t cure one of them and expect to live.

          • Christine

            In Louie’s link…

            …they acknowledge the imbalance in the trade deficit, and of more concern is Russia, China and India now seeming to object to US dollar dominance in the global economy.

            Before the US went after Saddam, he wanted to change the currency to buy oil from the US dollar. Real reason the US went after him? Most likely. Changing the currency to buy oil would be a game changer for sure.

            Now it is up for discussion again at the G8.

            If Americans feel our leaders are doing a bad job at managing our economy, how they just let all the wrong doers just slide and in fact gave them bailouts and bonuses, and are on a wild spending spree on borrowed money, perhaps other countries are also objecting. Americans may not be alone in the battle with the FED.

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  • Sean

    “Protectionists fault the free trade model as being reverse protectionism in disguise, that of using tax policy to protect foreign manufacturers from domestic competition. By ruling out revenue tariffs on foreign products, government must fully rely on domestic taxation to provide its revenue, which falls disproportionately on domestic manufacturing.” – wikipedia

    • Sean

      so you would rather our government command, control, and tax our own people instead of foreign manufacturers.. You are a GENIUS!!

      • onemore

        It’s a confusing blog when you talk to yourself.

        • Sean

          haha okay. don’t think too hard about it.

  • Nate Y

    First of all, it is impossible to simply cut taxes in order to relieve the burden of tariffs. Pricing is a dynamic process and the clumsy hand (or iron fist) of the state is not well suited for such a mission. It’s impossible for the state to do what you claim it can do/what you want it to do.

    Also, the command/control/protectionist government you promote cannot be called a Republic in any meaningful sense of the word.

    • Sean

      hahahaha what?! we were protectionist for the first two hundred years of our country. Were we not a republic? do you know what a republic means? hahaha!!!!!!! you are seriously trying to throw out a bone.

      What you said makes no sense. If goods cost more money we could pay for them with lower taxes. That is simple, you are just not smart enough to understand. There is no market adjustment that needs to be made. Good try.

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  • VR

    Take a music break.

    I Want My Bailout Money

  • Sean

    Everyone on this page is off topic. I think ignorance drives this group of crowd and makes them even more incoherent to the real world and what’s really going on.. Why do you think the dollar would collapse if we changed policy? What makes anyone in their right mind think that sound money would have some adverse effect? Nobody here understands monetary policy because they haven’t learned it or been educated in anything related to the sort. This is just a kid’s playground, nothing of any importance.

    • Christine

      Why…because none of your economic education has any relevance anymore since the dollar has been made worthless and everything and everyone finally has the opportunity to live a free, peaceful and happy life? Think of all the crimes against humanity and households that are rooted in this idea of money. I’d say the masses would welcome such a world. It’s only those who are clinging to the idea of money or gold, that it has the importance that we have mistakenly placed on it, that we have all stupidly agreed and believed that we need it for the world to work as we truly desire that will have a tough time adapting to the new way of living without it. Make the shift and imagine a world without it. Imagine the magnitude of freedom it will bring so we can live lives that contribute to and express our highest good.

      We use the excuse that we have money to lord it over others and make them deprived. We use the excuse that we don’t have money to inhibit the fulfillment of our needs and desires. It’s the love of money, the clinging to it that creates all the problems and perpetuates a world in constant turmoil.

      Think of all the things we do and are done for money, that are destructive instead of constructive. Replacing it with something else, just shifts the same results to something else. Give freely, receive freely…pretty simple and uncomplicated.

      • Nate Y

        While a gift economy would be pretty sweet, I don’t think it’s possible outside a very small and isolated community.

        • Christine

          Oh, your imagination (which is how we create in the first place) will grow over time. Beliefs will change from those that don’t serve us very well to the ones that actually work according to our true nature, not the ones that we have gradually adopted over time that has only hidden who we really are and what we are made of. Our true nature is still there. This is a far better use of our imagination than some of the things I have read that are scary, negative, doom and gloom and destructive. There is a famous quote, “Your imagination is a preview of coming events.” so we have to be careful about what we imagine. We need to get a grip on ourselves, our minds, our thoughts. The value of the human being will rise to an all time high. Everyone’s talents and gifts will be needed and honored because it takes the all of us to make up the world, even if we give them daily to contribute for free. I’m sure we will have a different sense about ourselves when we have evolved to this point. We were all born with special gifts. It’s up to discover what they are and put them to the best use for all to benefit from. And it happens automatically…when we give, we receive in the very instant. It makes us feel good, more positive about ourselves and the world. We have a place where we are made useful (not used), are valued (not replaced by the artificial belief and value of the amount of money we hold onto).

          Some of the things that have been put forth describe humanity as dire and desperate, worried and scared. When it happens that we can no longer buy or sell, that humans finally wake up and realize we have believed in someone else’s belief that a $5 is worth $5 rather than the fact that it is just a piece of paper, and that someone’s item we purchased is actually worth $5. The FED, the CFR, the trilateral commission, Bilderberg group, the new world order fascists would have us believe that we have no power over them. They can have their secret little meetings, but it would take us all to surrender to their way of thinking for them to have their way. Up until now, we have let them. It’s time to strengthen our own imagination and visual plans for how we want to live, really live.

          If you try to hold on tight to something that another is using to manipulate and control you, all you have to do is simply let go while they are tugging. Just like the old game of tug of war, the other side falls down, but you remain standing strong. Let them trip over themselves on the way down! …then merely walk away. Refuse to give your personal power over to them. Stay strong and create the life we really want. We collectively can.

    • Nate Y

      More incoherent nonsense from you. You’re no fan of sound money. Rev up those printing presses Ben!!!!

      Of course, I do feel sorry for Bernanke. I wouldn’t be shocked if he doesn’t seek reappointment.

      • Sean

        That is exactly the kind of thinking i was talking about.. rev up those engines and don’t think about where the oil comes from. Ignore the fact that we consume 20 million barrels a day. That has nothing to do with money and has no importance what so ever. Who needs gas anyways. We can pay for it with gold till we are broke but at least we can know what it feels like to have it my way.

        • Nate Y

          I don’t know why you think oil/gas makes the world turn. Yes, it is an important commodity. Let’s go ahead and say it’s the world’s most important commodity at present. So what? It’s a boon for the countries that are lucky enough to be sitting on an ocean of it. But it doesn’t mean the US (or any country that needs to import the stuff) is helpless. All that needs to be done is to figure out what we can produce and exchange for it (a job for the free market). As you point out, the US consumes a whole mess of the stuff on a daily basis. We need it. Okay. No problem. It’s just another import. What can we trade for it? It can’t simply be dollars/bonds because, in the end, imports have to be paid for with exports. A country can’t just print it’s currency or issue bonds to pay for imports without serious consequences developing over time. Like the ones we’re reckoning with at present.

          You worry about high gas prices and want alternative energy sources? Well so do I. But our worries and wants would be better satisfied through the free market. Best to let it function.

          • Sean

            We can’t trade goods for oil because we don’t have anything they want. Saudi Arabia isn’t in the position to help their economy so they lend money all over the world to actual developing nations. That’s what they have been doing for the past 40 years. It’s called petrodollar recycling.

            Whatever system of money we have, whatever we do, we are not going to produce here as long as it is more expensive than elsewhere. That is why I have been for higher tarrifs and lower taxes.

        • Christine

          And some day, hopefully sooner than later, we will have a totally free market…and not even have a financial exchange. We’ll work for free and have all of our needs met. We will actually enjoy living without worry and financial stress. We will contribute like at no other time in recent history. I know it’s difficult to believe, but there was a time when money did not exist. I’m not sure who even invented/imagined that the idea of money would work, but he was wrong. That idea has infiltrated our hearts and way of living to the point that it has made itself apparently destructive to all, even those who claim to have the power and control over it. No one is winning by maintaining this way of living. We need to free ourselves from the entrapment of a false belief in someone else’s belief in money and that we even need to have a monetary exchange of any kind.

          I would much rather live in a society and show up for work knowing that the janitor who has a family can meet his obligations to care for his family just as well as the Director or VP. We are each needed and we all have the same desires and needs. We love our families and children and want the best for them. I want that for everyone. It would be a nicer world to live in if everyone was doing great. No need for social services needed, no need for any of these bandaids to a system that simply does not work well for any of us.

          “Your imagination is a preview of your coming attractions.”
          ~Albert Einstein

          See that it is true, then be careful about what you imagine.

          • Sean

            I’m not going to work for free. Neither is anyone else.. Money has been around for thousands and thousands of years. It is what fuels capitalism.

            The money system is the best means for trade. The reason why I can buy food and other goods is because I provide services to other people. What if the people who sell the food don’t need any of my work? I’m going to have to give him something he wants. I could spend my waking hours trying to find someone to provide services to for exchange for something that the food man wants, but it’s easier to have a barter system of money which everyone can accept and use.

            “The best way to predict the future is to invent it.”

          • Christine

            I agree with your quote. To invent is to create something that doesn’t already exist. That’s what I hope to see in my lifetime. It takes going beyond and challenging current beliefs.

            Going back to the gold standard is necessary and may be the first step in what I envision. A part of that step is the audit of the FED. At least then, the corruption would slow down. It’s rampantly spreading into other countries, global financial corruption. They are having a tough time with Russia adhering to the “tax system”, something about the “Rule of Law”. CSpan is covering a Russian Summit. No one likes the idea that we have been working for the FED/IRS to have that hard earned money we could have been using for our families, college, medical, whatever our needs be spent on who knows what. I’m not envisioning a barter system. To work for free sounds weird by itself, but in the context of what I see as possible it all works and is free. I’d like to see an advancement beyond this system. Unfair practices are being maintained and being passed from one generation to the next.

            i.e. Job are uneven in pay and yet everyone has the same basic needs. With this premise, we have created the haves and have nots. The have nots create the need for social systems and then we have more government, on and on. It would just be a superior system to honor and value everyone’s contribution in a system that allows them to provide for themselves rather than depend on the inept and inadequate government agency services and corruption. The system we have starts with the belief that one skill set is of less value than another…and that is not true. It’s an old worn our belief that has been passed down for generations and merely accepted as valid and true. It leads to bigger, expensive government the “haves” pay for.

          • Sean

            The union is what created the middle class. All countries with higher union percentages have lower income inequality. Ronald Reagan got rid of half of the union and since then the gap between wages has risen dramatically.

            We really can’t return to the gold standard because we import so much oil. The reason why we got off the gold standard is because OPEC countries owned more dollars than we had in gold. They could have taken ALL of our gold if we didn’t delink it from the dollar. Once you understand this, you can realize why we have to create money out of thin air..

            Taxes and income taxes should naturally become lower overtime as the population grows. Income taxes in the 60’s were 89.4% for the wealthy. Now they are 35%. I don’t believe in taxes but it comes with the system of money we have designed for purchasing oil. We have to pay money as a country to borrow money as a country to run our economy as a whole.

          • Christine

            Historically there have always been classes (even before unions). I would like to see the day when “class” disappears. It still exists because things became accepted as they are. There are those who have the need to feel superior so the income levels of every human varies, yet we all have the same basic needs. Therein lies the problem of our system, worldwide.

            I personally don’t like world beliefs where I know extreme poverty exists at the same time those that run the FED exist, and all those in between. Everyone should be empowered to take care of themselves and live a good life. Isn’t that what America as all about at the conception?

            The reason we went off the gold standard may have been as you say, but it is maintained because of Congress’ spending and the FED’s activities.

            Federal Income taxes that are collected go to pay off the national debt, and in this case, it’s increasing into numbers I cannot even fathom! When the FED is audited, we will know what our money has contributed to. It may be things we don’t even agree with.

            You know how Obama stressed how the middle and lower class would not see one thin dime of increase on their taxes…well, inflation is occurring and that is a “hidden” tax, homes were sent into foreclosure (all planned by the FED/Government I am sure), now the health care system that O. is proposing would put a cap on the amount people could itemize as deductions (stuck with paying the rest), on and on….

            This tax thing is really out of hand. It seems that were there is a definite demand/need, or avenue for people to get ahead, the FED just weaves it’s way into our lives to intercept the flow of money for themselves! Sick of it!

            We don’t create something new by going over what already exists with justifications. What is, is not working.

          • Sean

            You will not see inflation from all of this money because it is not in the system in any way.. The money supply does not determine inflation. The velocity of money determines inflation..

            That is the reason why we got off the gold standard and we import 10 times more oil now than then so it’s not going to change back. It’s worse now than then.

            There was never a “middle class” to speak of before the union. The union created the middle class in a matter of 8 years. Unions take money from the rich and provide benifits to their employees..

        • Nate Y

          Printing money to pay for oil simply makes things worse over time. Has your mind changed from “we need to print money in order to finance our oil consumption” to “we need higher tariffs and lower taxes”? Lower taxes would be great. Higher tariffs would be not-so-great. Yes, tariffs are nice for the protected industry. But their benefit comes at the expense of everyone else. Tariffs, on the whole, impede economic growth. One cannot grow wealthier through the restriction of trade. You really should head over to LaRouche’s site. You’ll find yourself among “American System” pro-tariff pro-government subsidized industry protectionists.

          On tariffs…

          If we don’t produce anything to trade for oil, then we don’t get the oil. Simple as that. Basic economics. One must produce if one is to consume. And a smart person (or nation) refuses to go into debt in order to enjoy present consumption. Why? Becasue she recognizes the inevitable consequences and the prices to be paid.

          • Sean

            haha one cannot grow wealthier through the restriction of trade? did you forget what creates wealth? production. trade restrictions protect domestic production, so you are speaking nonsense and contradicting yourself.

            Our country had hundreds of years of protectionism and high tarrifs. It wasn’t until 1947 when we designed the GATT, and in 1994 the WTO.

            There is nothing we can produce to match the quantity as oil. there is nothing we can produce for 500 billion dollars.. There is no economy without oil, there is no food, there is no life to speak of..

        • Nate Y

          Again, yes, trade restrictions (like tariffs) protect domestic industries. But the benefits funneled to the protected industries come at the expense of all other domestic industries and result in a weaker economy. Also, you must realize that other countries retaliate. Because of the tariffs the US government imposes, other countries impose tariffs on US exports. Lots of negative consequences result. In the end, tariffs serve to enrich government and the favored industries and to impoverish the people and the unprotected industries. But since people (like you) tend to focus only on what is seen (the high profits and new jobs created) and neglect the unseen/more difficult to see (higher prices/shortages, previous jobs destroyed, etc.) they actually call for tariffs!

          You want to live in a country truly dedicated to the protection of domestic production? Head on over to North Korea.

          Best to let people trade freely.

          • Sean

            North Korea is a communist country. You can’t compare a North Korea to a self sufficient republic…

            The higher prices would not matter if you lower taxes. Goods would end up costing the same percentage compared to income.

            Higher tarrifs would create sooo many more jobs than it would destroy. If any jobs are destroyed, it would be shipping jobs which is minute compared to the production jobs that would be created.

            The concept of free trade says that a country will export as much as they import. Obviously this is not the case and to live within our means we have to tax imports. That is the only way to accomplish this.

          • Sean

            read this


            I guess your for globalization.

          • Gold is Freedom

            Could someone explain this ‘oil restricts the use of gold’ argument. Keep seeing it pop up here, but never with a full explanation of why.

            Unless the price of gold was fixed, and at too low a price, how could oil need restrict gold use?

            There is plenty of gold to the job, IMO.

          • Sean

            You can’t balance a supply of money when we import a trillion dollars more than we export. We would end up giving away a trillion dollars worth of gold every year.

            “Hence the fixed exchange rates of currencies tied to gold were switched to a floating rate, also based on market price and exchange. This largely came about because Petrodollars outside the United States were more than could be backed by the gold at Fort Knox under the fixed exchange rate system.”

            “foreign countries acquired more dollar reserves, outnumbering the entire amount of gold the United States possessed. Nixon completely eradicated the gold standard, preventing other countries from being able to claim gold in exchange for their dollar reserves”

            “The United States of America has held a trade deficit starting late in the 1960s. It was this very deficit that forced the United States in 1971 off the gold standard). Its trade deficit has been increasing at an alarming rate since 1997 [32] (See chart) and increased by 49.8 billion dollars between 2005 and 2006, setting a record high of 817.3 billion dollars, up from 767.5 billion dollars the previous year.” -wiki

          • Gold is Freedom

            Thanks, I get it now.
            Since we are not tied to gold we can live on unlimited credit.

          • Sean

            We have to unless we start living within our means. That is why I suggested taxing imports instead of our income but everyone is for free trade and doesn’t understand the consequences. We would rather tax ourselves than foreign manufactorers.. That shows how stupid EVERYONE is.

          • Gold is Freedom

            I love free trade.
            Just haven’t seen it in a long, long time.

          • Sean

            What do you think NAFTA is?

          • Results

            managed (manipulated) trade

          • Results

            True free trade and a true free market economy do not lead to disaster. Only manipulated (by government) trade and a manipulated (by government) market economy give us what we are now experiencing.

          • Sean

            If anything, we are subsidizing exports which would actually help our economy. You don’t know what you are talking about.

          • Gold is Freedom

            That is true, ‘Results’

            It is also true about the monetary system.

          • Sean

            How do you know a “true free market” doesn’t lead to disaster? During the free banking era half of the banks failed..

            Are you some economic expert because you don’t seem to know much?

          • Gold is Freedom

            Along with economics and history, you have a problem with the social graces.

          • Sean

            haha, look it up for yourself. I’m not trying to make friends here.. You were the one who jumped in with a smart ass remark.

        • longshotlouie
          • Sean

            hahahahaha! this guy’s idea is to print money to pay for debt. You have no clue! that is so funny, i’m crying.

          • Gold is Freedom

            At what point in the clip was ‘print money to pay debt’ mentioned?

            You should be crying, from embarassment.

          • Sean

            He said we should turn housing debt into equity just like we turned bank debt into equity. You are an embarassment.

          • Gold is Freedom

            I will try again.
            At what point in the clip was ‘print money to pay debt’ mentioned?

            Is it necessary to belittle and berate those with which you converse?

          • Sean

            You obviously don’t know what we did for the banks..

            They didn’t say it in those exact words, but that is what they are talking about.. You are the one who butted in and made some smart ass remark. Just because you don’t understand what they are talking about doesn’t excuse yourself from making stupid remarks.

          • Results

            One thing to be said in Taleb’s favor is that he has never lost a spectacular amount of money at once. Three times now he has made money when few others did. The first was in the 1987 Black Monday stock market crash, when he made $35 million to $40 million as a trader. The second was the tech stock crash of 2000, when Taleb’s own fund, Empirica, gained 60 percent. And the third is Universa.

          • Results

            You cannot respond appropriately. I understand.

          • Sean

            so what. Warren buffet has made billions of dollars and is the most successful investor in the world. He is one of Obama’s economic advisors..

          • Results

            More accurately, Buffet has lost billions over the last year.

          • Results
          • Sean

            so what, everybody lost money when the stock market crashed. He is the second richest man in the world from investing.

          • Results

            No sean, everyone did not lose money.

          • Sean

            You can’t judge Obama yet. I’m not saying I agree with everything that he is doing but his approval ratings will stay low until everything is fixed and then they will go back up.. Polls don’t mean a damn thing. George Bush has had the highest and lowest approval rating. What does that show…

            Everyone who has a 401k has lost money. I’m not talking about people like you without salary paying jobs.

          • Results

            Some followed the status-quo piper, some did not.

          • Sean

            72% of america has a 401k.. That means 72% of america lost money during the stock market crash..

          • Gold is Freedom

            So 100% of 401K’s lost money?

          • Sean

            Everyone I work with and have talked to has lost money from their 401k’s. I’m not a stock market expert so i’m not going to say either which way.. I don’t say and pull things out of my ass like you.. I don’t speak unless I know what i’m talking about.

          • Sean

            ya i guess all 401k, retirement, and mutual fund accounts are losing money.. stock markets go thru cycles, we are on the downside but it will bounce back. That is why they tell people not to take money out of their 401k.

  • Christine

    We really have the FED to thank for all their hard work to make our dollar worthless. It’s so worthless, that we no longer need it!

    After the dollar became worthless, I discovered there was a job I would rather spend my days doing versus the job I had been doing that simply paid the bills (barely). I go to work each day and I don’t receive a paycheck because I work for free now.

    After work I’ll swing by the grocery store to pick up a few things, you know, milk, eggs, bread and butter, all free of charge!

    I live in a home that was built for free (because it’s the job the carpenters just love to do). Because it was free, there is no mortgage, no interest payments, no bankers involved, no ARM and I can’t possibly be screwed out of my home!

    I drive a new car these days. It was created by those ingenious folks who invented a car that runs on batteries. There was no loan on the car…our dollars absolutely worthless…so I got it for FREE!

    The wars have stopped. Finally, peace at last. There was just “no money” in the sale of weapons and oil…everything is totally free. The financial elites have found something else to do with their time that is more productive and they too have real jobs…and they do them all for free! No paychecks.

    There was no need for the IRS any longer. It just was senseless to keep collecting dollars that were worthless anyway….and no one had any to give because we all work for free.

    The politicians find they are coming to work less and less. We found that we have enough laws on the books to cover everything we need. In fact, we got rid of quite a few that were rendered totally unnecessary due to our worthless dollars.

    Other countries around the world saw and heard how well we were doing without money, so they also go to work for free. We exchange our products and services freely to those who need and use them.

    I find that the only products and services that are available are top quality. With the ability to pick things up for free, we only use the highest quality of services only, the others are just discontinued and go out of business quickly so there is very little waste.

    I will make an appointment to see my doctor next week. It’s just my annual visit. He really has my best interest at heart and takes good care of me, all for free. I rarely need to go to the doctor anymore. All that financial stress I was carrying around with me had been ruining my health, but that’s all gone now! I’m just getting healthier and happier. Oh, and there was no need for insurance companies any longer because there was just no profit it in anymore! I will always get the care I need and nothing will be cost prohibitive…because it’s all free now!

    I’m taking a few college classes now and working on my MA. When the dollar became worthless, that opened up a lot more educational opportunities…college is free! The teachers teach because it is the job they love to do.

    It truly is an even playing field now. There are no longer the have and the have nots. We all get paid the same…nothing! And it’s all free. We all just choose to do the right thing and make our contributions every day.

  • brad maynard

    after listening to bernanke say that there would be great economic turmoil if the gao was to look at the books, i wonder if he would be correct (DISCLAIMER: im all for auditing) my concern is that perhaps the fed is involved in far more nefarious programs than even speculation suggests or could dream of. perhaps he knows that should it be uncovered (whatever that may be) the US could be in BIG trouble. hope not but if you look at bernanke’s face during that statement it shows more worry than exasperation.

    • Nate Y

      Who knows if there would be “great economic turmoil if the GAO was to look at the books”? But that would be a good thing in the long run. Best to get it out in the open and dealt with.

      • brad maynard

        agreed. just makes you wonder what they really are hiding, is kinda scary that if this bill does pass unwatered, does gerald celente’s prediction of rioting in the streets come to fruition? wow interesting times indeed.

        • Nate Y

          Who knows? I doubt it would come to riots in the streets though.

    • I think it might come to riots in the streets and war!!!!

      For a while, until the Fed is just abolished. Nothing too serious, but the exposure of the Federal Reserve’s operations will for the first time show people what really goes on there.

  • VR

    There was the smell of blood,
    broken hearts and dying dreams
    in the air when Americans
    began to lose their jobs
    and were foreclosed on.

    The money, they said, had vanished
    into the maw of the financial “crisis”
    created so banks could suck up billions
    in 401Ks, mutual and pension funds

    in addition to the taxpayer bailout
    and regurgitate it into the mint julep glasses
    of CEOs and shareholders fanning themselves
    while sitting on the financial plantation’s veranda,
    living off the retirement
    of the Middle and Working Classes,

    and in the deep, dead of financial winter
    will drink hot toddies and imported brandy
    while wrapped in cashmere sweaters
    by the comforting fire
    of their remote and casual brutality.

    by Vi Ransel

  • Larry L Bortles

    Thanks Lindsey, without any transparency requirement, it is indeed difficult to document any of the inner workings of the Fed. That opacity, however, given the Fed’s pinnacle position within our economic system, is a HUGE problem, hence my support for the audit.

    On ownership, I believe it will be a safe bet that this will have remained essentially the same from a control and benefits standpoint over the past 33 years.

    The real point? None of us should be left guessing about the ownership, control and agenda of the Fed! It controls our currency, and is, in fact, the world’s biggest counterfeiter. How else to explain our current dollar is worth no more than what 5¢ would have purchased in 1913, the year that the Federal Reserve Act was passed?

  • Larry L Bortles

    Ron, I appreciate your initiative. It was long after I graduated from Cornell with an Economics degree and received a MBA from Harvard that I discovered that the Federal Reserve Bank is no more “Federal” than FedEx. This “soft fiction” of the Fed being part of the US governance system must have been advanced and supported by our educational system by design. George F. Baker, the founder of HBS was, after all, one of the original 1913 founders and owners of the Fed.

    I believe it very important that the original and current ownership of the Fed be broadcast as clearly as possible, for it makes an enormous difference in how one should perceive its role. Simply, it is a privately held company with its own agenda, separate and apart from our USA system of governance. As a licensee of the US, it certainly should be required to submit periodic professional audits.

    The following is what I recently wrote President Obama, which may be useful in your discussions and deliberations.



    President Obama, I see that you have decided to give the Fed the formal responsibility for managing the US banking industry.

    This is at once puzzling and disturbing. Puzzling, because the Federal Reserve Bank is already privately owned by some of the largest banking institutions in the US; disturbing, because the Fed is not responsible to the electorate or any arm of the US government; and its ownership structure makes it primarily foreign controlled.

    The website provides you with an overview of the Fed’s ownership, should you question my statement on this.

    Currently, my information is that the Fed is majority foreign owned. The most recent ownership compilation is contained with the following statement:

    Here are the top controllers of the Federal Reserve Bank
    1. Rothchild banks of London and Berlin.
    2. Lazard Brothers Banks of Paris.
    3. Israel Moses Seif Banks of Italy.
    4. Warburg Bank of Hamburg and Amsterdam.
    5. Lehman Brothers Bank of New York.
    6. Kuhn, Loeb bank of New York.
    7. Chase Manhattan Bank of New York, which controls all of the other 11 Federal Reserve Banks.
    8. Goldman, Sachs Bank of New York.

    This ownership combination has been challenged by the Federal Reserve Bank, but my understanding is that a study of Standards and Poors will verify the ownerships. This means that the controlling interest of our national monetary system is foreign.

    Former Fed Chairman Greenspan, in stated quite plainly that the Fed answers to no one, except on a purely voluntary basis.

    So, why would you choose pass to the Fed your administration’s responsibility for managing the speculatively indiscreet – some term parasitic, for which I have sympathy – major banks? Makes no sense to me, so long as you hold the public’s trust to be your uppermost responsibility.

    • Lindsey Brutus

      Larry: While I agree with your post, the website’s document of Fed ownership is dated 1976. Maybe we can get a more recent document although I doubt it seeing as how the Fed answers to no one. Keep up the good work!

      • licker

        yeah, your move are so darn old. please have a recent document pls. what you gave may have been obsolete already.

        like you. ahhahaha

  • Robert B. Winn

    In the late 1990’s Alan Greenspan and the Federal Reserve encouraged a device invented by J.P. Morgan-Chase bank executives called the credit default swap, by which a bank required by federal law to have funds on hand in case of loan defaults could pay another bank to have the funds. With the failure of Lehman Brothers in 2008,
    Ben Bernanke and Henry Paulson began throwing public revenues at large banks, telling the American public that these banks were too large to allow to fail. The real question in the minds of Bernanke and Paulson was, If Lehman Brothers was holding 18 billion dollars worth of credit default swaps when it failed, did that 18 billion dollars really exist?
    Well, really it did not. It was just a Ponzi scheme.
    Gee, I wonder if the American people would like to buy some shares in a Ponzi scheme. Ben Bernanke and the Federal Reserve can buy them a couple of trillion dollars worth of Ponzi scheme shares. Isn’t party politics fun?

    • Matt

      Umm before you start ranting, you may wish to learn what a credit default swap is before you just start assigning completely random terms like ‘ponzi scheme’ to it? Sounds like you are just taking random things you don’t think you like, but don’t really know about and just putting them together in an angry thought. The two are COMPLETELY different. Now I am not defending the extent to which credit default swaps were used, but hey that was the free markets at work and not a ponzi scheme!

      By the way, Greenspan was a fervent believer in the self-regulating manner of free markets and perceived these as another way to distribute risk and encourage capital allocation and price discovery, but underestimated the GLOBAL GREED (not just the United States) that occurred in economies of nearly all nations despite differences in financial system philosophy and interest rate levels (see: Germany and Japan for two dichotomous examples).

      A credit default swap is an agreement between two parties to hedge (and later to speculate – or allocate resources via the free market system) debt issued by a company. This contract included a principal payment and promised notional payments (sounds like a bond does it not?!?!?) that would then be paid should the underlying security default. That contract (CDS) could then later be sold.

      Sounds like a breakdown within a free market economy to me so please let me know how this is a Ponzi Scheme?!?!

      • Nate Y

        Yeah…I think greed entered the human psyche right around 1990. The fact is that the Fed/Gov’s policies of intervention protected and encouraged the greedy at the expense of the frugal. In a free market, greed is held in check by fear. People are greedy for gains and fearful of loss. All the Fed/gov policies, bailouts, artificially low interest rates, moral hazard, etc. encouraged reckless behavior. It wasn’t the free market that bailed out LTCM and others. The free market didn’t drive interest rates down to 1% after 9/11. The free market didn’t create Fannie/Freddie and provide them with an implicit government guarantee. Nope, we have the Fed/Gov to thank for that.

        • longshotlouie

          Muy Bueno

          1% rates sowed the seeds of destruction.

          • Matt

            I understand, but how does ‘greed get kept in check by fear’ if my greed can make me a lifetimes worth of money legally in one year? What fear do I have after that? Fear of failure? Fear of failure is inherent within the US culture. If you have people within the free market system that have devised ways to legally exploit cracks within the system and profit tremendously, what does ‘bailing out of LTCM’ or rescuing Fannie/Freddie have to do with anything? This ‘fear of loss’ is already baked into our peripatetic labor force which causes free market laborers to try and make as much as possible as efficiently as possible and you get paid all the while until you succeed or fail.

            People don’t think ‘well hell ya know I would NEVER normally make a crapload of money on these risky credit default swaps, but hey the government will bail out my company if it all goes south so maybe i will take this risky bet!’ They were seeking to make as much as possible as quickly as possible, WHETHER OR NOT THE COMPANY FAILS OR IS RESCUED BY THE GOVT IS OF ZERO CONCERN – they saw the chance of a lifetime and took it and will look for another job after that.

            Free markets did create a compensation structure that allowed excessive risk-taking – and have done so across a swath of interest rate levels and government intervention. Free markets did create a shoddy ‘originate and distribute’ model that was not ‘self-regulated’ until after people made their cash legally and ran. Free markets then also created complex (but rational on paper) financial derivatives that allowed people to make their cash and run. What fear mitigates that in today’s world?

            The additional problem is, the bust didn’t just happen here in the home of 1% rates. Countless firms across the globe, in countries with far higher rates and with completely different economic philosophies participated.

            It was a breakdown in the global free-market atmosphere, not just as simple as ‘the United States government and the fed’ did it.

      • Nate Y

        Rather than hop on another not-so-merry-go-round with you, I’ll just say that I’ve stated my piece and leave it at that. I have no interest and lack the skill to write my own economic treatise. Which is what would be required to properly address all your questions and confusions. You seem to have a sharp mind, I’m sure you can sort out all your questions for yourself (with the help of some books of course). I think Thomas Woods’ book “Meltdown” is a good start in understanding (Austrian) economics. He kinda comes off a bit prickish but whatever. Then go ahead and read some material by Hazlitt, Hayek, Rothbard, Schiff, Paul, Murphy, Hoppe, Bastiat, Mises (of course), and others. Much of their material is available for free at I know their reasoning and prescience changed my mind from “the free market and greed messed everything up” to “we don’t have anything close to free markets…if we want to have economic stability we have to get back to sound money, economic liberty, limited government etc.” Perhaps it will have the same effect on yours.

    • Short This

      A credit default swap allows someone to make a highly leveraged bet that a business will be forced into bankruptcy. “Credit default swaps” allow you to speculate on a company getting into financial trouble.

      Sometimes, you can enter a credit default swap trade even if you don’t own the underlying bonds. This can lead to dishonest behavior. For example, I can buy a credit default swap on XYZ corporation’s debt. Then, I can naked short sell XYZ corporation, creating the impression that XYZ is having financial trouble. In turn, this can cause customers to cease doing business with them, causing actual financial trouble.

      When the bust occurs, banks must pay extra capital to their customers, as they demand payment for the swap. The customer trades his XYZ bonds for the return promised in the credit default swap. Most credit default swap agreements assume that the issuing bank has an AAA credit rating. Otherwise, the possibility of the bank defaulting should be subtracted from the fee charged. Only a “too big to fail” bank with an AAA credit rating can profitably sell credit default swaps. The credit default swap agreement usually contains a clause that says “If the issuing bank has a credit rating downgrade, then the customer may demand immediate payment or posting of collateral.”

      That is what happened to AIG. They wrote a whole bunch of credit default swap contracts as part of their insurance business. Selling a credit default swap is almost the same as selling insurance. However, AIG did not expect most of their credit default swaps to be in-the-money at the exact same time. Their fancy Mathematical models assumed that was a statistical impossibility. Then, all of AIG’s customers demanded payment of their credit default swap agreements. This caused AIG to have a cashflow problem and led to a credit rating downgrade. After the downgrade, according to the terms of the credit default swap contracts, AIG had to post full collateral for the in-the-money credit default swaps AIG had sold. That’s the reason AIG needed to raise $85 billion in a hurry, so it could meet these “margin calls” on its credit default swap contracts.

      See You In Vegas

      • Matt

        Right, not a ‘Ponzi Scheme’, just a terribly run business.

  • WK

    We have one simple choice to make. “MONOPOLY GAME” or “REALITY” ? The current system is a board game, and we are the game pieces. Do we want to continue being “played”, or do we want tp “play” ? If we want to “play”, we must “think”. Peasants don’t think, they react. CITIZENS think…. Let’s consider the MOST valuable commodity on the planet. It is US…without our energy, the game would be over. Maybe we should all rent “Ghandi” next weekend and watch it again. Let’s remind ourselves who truly owns the power, and commit to using it…peacefully, of course. End the FED? Absolutely.. and don’t stop there.

    • longshotlouie


      • WK

        Personally, I can only take on so much mental chaos before I shut down and become ineffectual. I am learning to boil things down, like maple syrup, to get to the “nectar” of what we must do. The very lowest common denominator we have to work with is our God-given ability to work and produce food for ourselves and our families. Around the world, ALL people suffer the whims of corrupt governments. No one is impervious to this, and we must do all we can to spread this one simple message.

        Without bloodshed, we must say “NO MORE”. We cannot give up our individuality, because this is were progress is born, through creativity from individuals. However, we MUST, MUST, MUST cooperate as an organism of human beings warding off parasites. Collective ignorance will destroy us.

  • WTF Bernanke! Are you on drugs, or worse, delusional? The
    private Federal Reserve System has done nothing to stabilize
    the dollar (value of the dollar is down 96% since 1913)! Let
    us see; that is 1% a year for the last 96 years. Now that
    is what I call real stabilization! Oh! And the great depression;
    the “FED” really did a swell job there on stabilization! And
    inflation (our hidden tax) on top of ALL of our other taxes;
    brought to us by the “good and benevolent FED” has caused our
    economic demise! Then there is deflation and fiat money! Wow!
    The list goes on and on and on! We Americans are such an ingrate people! We should be ashamed of ourselves! That we should be; for letting their sorry asses in the door back in 1913 to bleed us all dry!
    For everyone out there reading this, ALL of our unconstitutional
    income taxes are sent directly to the “FED”! Look at the back of your checks when they clear your bank. It is always stamped a
    private Federal Reserve bank! This country better wake up FAST
    to what the “FED” is up to, and to what they are all about! I have only touched the tip of the iceberg on the private “FED”.

  • john

    Penny, If you will look back a bit on the website, Ron Paul already tried to fight this but failed. He said that he will NOT sign any bill that will tax people due to global warming. He got a petition of 31,000 enviornmentalists and scientists with PHD’s all saying that global warming isnt effecting the enviornment. But Nancy Pelosi couldn’t get the votes needed so she came crying to Obama and he “Pulled a few strings” and barely got enough to pass this.

    I pray to god we impeach that piece of dogshit we call a president.

    Ron Paul 2012!