During September and October, the country experienced an electronic-bank run. Americans, rightfully, lost trust in all financial institutions and began withdrawing their money. The Fed has done the only thing it knows how to do: print money. It’s doubled its balance sheet to $2.3 trillion.

The overly complicated chart below shows that the Fed is a privately controlled institution that’s essentially under the direction of the biggest banks in the country. Whose best interests do you think it’s looking out for? Zero-interest rates penalize senior citizen savers in order to save reckless borrowers.



The only competent Fed Chairman in the last 40 years, Paul Volcker, had this to say about the actions of Ben Bernanke in the last year:

“The Federal Reserve has judged it necessary to take actions that extend to the very edge of its lawful and implied powers, transcending in the process certain long-embedded central banking principles and practices. What appears to be in substance a direct transfer of mortgage and mortgage-backed securities of questionable pedigree from an investment bank to the Federal Reserve seems to test the time-honored central bank mantra in time of crisis: lend freely at high rates against good collateral; test it to the point of no return.”

Since these words were spoken, the Fed has gone way beyond its lawful and implied powers. Look at its balance sheet as of last week - it’s more than doubled in the last few months. The Fed’s busy making loans – with your money -- to financial institutions throughout the world.

Transparency is essential for financial systems and democracies to function. But instead, Bernanke is withholding the names of those banks that have borrowed from the Fed, and what collateral was put up for the loans. Over $2 trillion of your money has been lent out, with no accountability whatsoever.

Bloomberg News has sued the Fed to obtain this information under the Freedom of Information Act. But the Fed is covering up its actions because it knows that the collateral it’s accepted is worthless. These are criminal actions with intent to deceive the American public. The government and Federal Reserve work for us, not vice versa.



Thank You Sir, May I Have Another

Last week, the Fed decreased its discount rate to .25% - the lowest in history. It also announced that it would use any means necessary to re-inflate our bubble economy. Deflation is not a bad thing for most Americans. Cheaper gas, food, cars and flat-screen televisions are nice.

For people and countries without debt, deflation is just fine, but that doesn’t describe US consumers or the US government. Deflation -- when you’re a country that has $10.6 trillion in debt -- will annihilate the debtor. Bernanke is attempting to inflate us out of this mess.

As an expert on the Great Depression, Bernanke believes that fiscal and monetary expansion will save the country. There’s one significant, historical difference, however. When the crisis hit in1929, total US debt as a percentage of GDP was about 200%, and we were a net-exporter nation. We enter this crisis with total US debt exceeding 350% of GDP, and a trade deficit of $700 billion.



The Fed and the Barack Obama administration are about to add trillions of debt to already record amounts. The brilliant James Grant sums up the dilemma:

“If the Fed is going to create boatloads of depreciating, non-yielding dollar bills, who will absorb them? Who will finance the Obama administration's looming titanic fiscal deficits? Who will finance America's annual surplus of consumption over production (after 25 more or less continuous years, almost a national trait)? Inflation is a kind of governmentally sanctioned white-collar crime. Every crime needs a dupe. Now that the Fed has announced its plan to deceive, where will it find its victims? Today's policy makers allow, there are risks to "creating" a trillion or so of new currency every few months, but that is tomorrow's worry. On today's agenda is a deflationary abyss."