If I have seen further it is by standing on the shoulders of giants.

Wednesday, December 30, 2009

Federal Reserve Proposes ‘Term Deposit Facility’ to Withdraw Money from Banking System

On Monday the Federal Reserve put forth the idea of creating a new way to withdraw money from the banking system when the need to tighten money policy presents itself.

Dubbed a term deposit facility, what it will do is allow banks or other financial institutions opportunity to earn interest on loans that are of longer duration to the central bank.

There were no specifics from the Fed on how the interest rates would be determined on these loans, but the idea they could be decided through an auction or a specific type of formula was thrown out by the Federal Reserve. One parameter known for sure at this time is they maturity of the loan wouldn’t be longer than one year, with the majority probably being from one to six months, said the Fed.

All of this emerges from the fears coming from the extraordinary and possibly reckless spending, whereby the banking system has been extended $2.2 trillion in credit, which will inevitably generate a high inflationary rate as the money flows throughout the economy when lending begins in earnest again.

Other tools looked at being used in an attempt to keep inflation from getting out of control has been the sales of assets of the banks, along with reverse repurchase agreements.

The Fed has been asserting it has the effectiveness to take the stimulus capital out of the market before the inevitable inflation gets out of control. According to the Fed they will be able to do that before inflationary pressures arise; a highly dubious assertion which is unlikely to be backed up since inflationary pressures in some sectors like food prices are already beginning to rise.

This is part of the frustration the banking industry has been experiencing, where they are pressured by Obama to loan to risky companies in order to create more jobs and help the economy, while at the same time regulators tell them to build up their cash reserves and abstain from taking too many risks which could create more problems. These mixed signals can’t coincide, and so you have to have one or the other, but not both.

Of course if banks respond and start lending, which will put the money out there to be used, the consequences will be inflation surging to very high levels.

This is why the Fed is preparing these various mechanisms in an attempt to manage the amount of money loaned into the market in order to keep inflation low. It’s highly doubtful they’ll be able to do this, no matter what gimmicks they develop to keep the money out of the market.

The Fed knows that once the economy actually starts to recover (which it hasn’t), there will be a flood of money pouring into the market. They will attempt to tighten the money supply so the amount of money going out won’t result in extraordinary inflation. I don’t think they can do it, and Americans will have to endure more pain over the long term because of the misguided actions of the Federal Reserve.

Source: Federal Reserve Proposes ‘Term Deposit Facility’ to Withdraw Money from Banking System

Sunday, December 20, 2009

The Known Universe

The Known Universe takes viewers from the Himalayas through our atmosphere and the inky black of space to the afterglow of the Big Bang. Every star, planet, and quasar seen in the film is possible because of the world's most complete four-dimensional map of the universe, the Digital Universe Atlas that is maintained and updated by astrophysicists at the American Museum of Natural History.

The Known Universe

Friday, December 18, 2009

TIME Magazine Names Ben Bernanke "Person of the Year 2009" !?

Ben Bernanke is a nerd and he just happens to be the most powerful nerd on the planet.

Bernanke is the 56-year-old chairman of the Federal Reserve, the central bank of the U.S., the most important and least understood force shaping the American — and global — economy. Those green bills featuring dead Presidents are labeled "Federal Reserve Note" for a reason: the Fed controls the money supply. It is an independent government agency that conducts monetary policy, which means it sets short-term interest rates — which means it has immense influence over inflation, unemployment, the strength of the dollar and the strength of your wallet. And ever since global credit markets began imploding, its mild-mannered chairman has dramatically expanded those powers and reinvented the Fed.

Professor Bernanke of Princeton was a leading scholar of the Great Depression. He knew how the passive Fed of the 1930s helped create the calamity — through its stubborn refusal to expand the money supply and its tragic lack of imagination and experimentation. Chairman Bernanke of Washington was determined not to be the Fed chairman who presided over Depression 2.0. So when turbulence in U.S. housing markets metastasized into the worst global financial crisis in more than 75 years, he conjured up trillions of new dollars and blasted them into the economy; engineered massive public rescues of failing private companies; ratcheted down interest rates to zero; lent to mutual funds, hedge funds, foreign banks, investment banks, manufacturers, insurers and other borrowers who had never dreamed of receiving Fed cash; jump-started stalled credit markets in everything from car loans to corporate paper; revolutionized housing finance with a breathtaking shopping spree for mortgage bonds; blew up the Fed's balance sheet to three times its previous size; and generally transformed the staid arena of central banking into a stage for desperate improvisation. He didn't just reshape U.S. monetary policy; he led an effort to "save the world economy."

Continue reading - Ben Bernanke - TIME's Person of the Year 2009

His critics in Congress — liberals and conservatives alike — couldn’t believe it Wednesday.

Fed Chairman Ben Bernanke? Time’s Person of the Year?

“Give me a break,” said Rep. John Conyers (D-Mich.), a frequent Fed critic.

Bernanke's confirmation, while hardly in jeopardy, has become a lightning rod for anger on the left and right over the Fed’s handling of the financial meltdown.

The critics’ argument goes like this: If Bernanke and his number crunchers at the Fed really were such whiz kids, they would have seen the whole financial meltdown coming and headed it off. Instead, the economy was teetering on the precipice and required last-minute heroics by the bearded central banker to save it, moves that make some in Congress deeply uncomfortable.

To that end, the timing of Time’s announcement gave critics fodder for the hottest new bipartisan sport: Bernanke-bashing.

“I find it ironic that a man who has spent the last year rewarding others for failure is now being named Person of the Year for his failures. But if Time magazine is in the business of rewarding failure, Ben Bernanke is their man — he has certainly excelled at that” was the verdict from the Senate’s leading Bernanke critic, Jim Bunning (R-Ky.), the sole senator to vote “no” on Bernanke’s first nomination as Fed chairman in 2006.

Vermont independent Sen. Bernie Sanders also found Time’s choice “ironic,” since in the article bestowing the honor, the magazine discusses how Bernanke, like his predecessor, fell asleep at the switch.

“Bernanke was as clueless as [Alan] Greenspan about the coming storm. He dismissed warnings of a housing bubble. He insisted that economic fundamentals remain strong,” Sanders said, quoting the article at a news conference to discuss his attempt to defeat Bernanke’s renomination.

But, forever the contrarian, Paul said he is “delighted” by Time’s choice.

“I think its very, very good that he’s gotten an award to draw the attention to the Federal Reserve, which really should be looked at with a great deal of skepticism because it’s the Federal Reserve that gave us the crisis,” Paul said in an interview.

“The Federal Reserve Board chairman is literally more powerful than the president because he can work in secrecy; he can have arrangements with other foreign governments, with other central banks; he can do all this on his own. ... This to me is very, very significant, and it should be recognized,” Paul said. “I’m delighted that they are at least pointing the finger in the right direction, although their conclusions are completely wrong.”

Continue reading - Few cheers on Capitol Hill for Time's Ben Bernanke pick

Ron Paul Reacts to Bernanke as Time's Person of the Year

Ron Paul on Fox Business: Bernanke is World's Greatest Counterfeiter

Ron Paul: Ben Bernanke is More Powerful Than Barack Obama

Monday, December 7, 2009

The Hubble Ultra Deep Field in 3D

What an awe-inspiring grandeur, the Universe.
The beauty of the Universe is simply beyond what words can describe.

The Hubble Ultra Deep Field in 3D

Sunday, December 6, 2009

Requiem for the Dollar

Ben S. Bernanke doesn't know how lucky he is. Tongue-lashings from Bernie Sanders, the populist senator from Vermont, are one thing. The hangman's noose is another. Section 19 of this country's founding monetary legislation, the Coinage Act of 1792, prescribed the death penalty for any official who fraudulently debased the people's money. Was the massive printing of dollar bills to lift Wall Street (and the rest of us, too) off the rocks last year a kind of fraud? If the U.S. Senate so determines, it may send Mr. Bernanke back home to Princeton. But not even Ron Paul, the Texas Republican sponsor of a bill to subject the Fed to periodic congressional audits, is calling for the Federal Reserve chairman's head.

I wonder, though, just how far we have really come in the past 200-odd years. To give modernity its due, the dollar has cut a swath in the world. There's no greater success story in the long history of money than the common greenback. Of no intrinsic value, collateralized by nothing, it passes from hand to trusting hand the world over. More than half of the $923 billion's worth of currency in circulation is in the possession of foreigners.

In ancient times, the solidus circulated far and wide. But it was a tangible thing, a gold coin struck by the Byzantine Empire. Between Waterloo and the Great Depression, the pound sterling ruled the roost. But it was convertible into gold—slip your bank notes through a teller's window and the Bank of England would return the appropriate number of gold sovereigns. The dollar is faith-based. There's nothing behind it but Congress.

But now the world is losing faith, as well it might.

Continue reading - Requiem for the Dollar

Saturday, December 5, 2009

Ben Bernanke grilled on his second term renomination in the Senate floor

I definitely agreed with Bunning that Ben Bernanke is the definition of moral hazard! We must put an end to the Fed’s failures, and there is no better time than now. END THE FED!

Sen. Jim Bunning Grills Bernanke, With Response

Sen. Jim DeMint Questions Bernanke During Renomination

The Ed Show - Ron Paul on Bernanke's Renomination