Saturday, January 8, 2011

IT’S OFFICIAL: Fed Governors Are High On Crack

Federal Reserve Governor Elizabeth Duke said the rise in Treasury bond yields reflects investor confidence in a strong recovery—

“Anyone up for a game of Frogger?”:
Fed Governor Elizabeth Duke
—and my my my, how this fits in so nicely to the fairy tale the Bureau of Labor Statistics is telling everybody about improving employment numbers (see below), as well as the pop in the dollar and the drop in commodities across the board that we experienced late last week.

But here’s a little question: Is investor confidence returning—or are bond-holders freaking out that the Treasury market might tank at any moment?

That’s the $8 trillion dollar question. Because the Federal government has a $1.267 trillion dolalr deficit, and more $1 trillion-plus deficits as far as the eye can see—right on through to at least 2014. And all this, while the Federal Reserve is busy buying up 60% of this fiscal year’s Federal government deficit—and yields are still rising.

The take-away? There is a borderline, where wishful thinking crosses over into regions akin to smoking crack.

So the real question is: Are the drugs Governor Duke taking bought and paid for by the Fed? Or does she herself motor down to Anacostia for that sweet-sweet crack she must be on?

And does she get a bulk discount rate, so as to keep all the Trolls of the Eccles Building happily supplied with the drugs they simply must be taking over there?


  1. So it seems I am the first to post a comment on this very productive blog...

    Fed governors are not alone on drugs these days. There are also those who sell their gold to buy more paper, the bears who start to become bulls because of some positive stats and so on...

    Their drug is easlily available; it's called optimism. It helps to escape from realism.

  2. The national economy, since 1913, is based upon a Ponzi scheme.

    Every “dollar” in circulation is created based upon debt. Congress gives T-securities (bills, bonds, or notes) to the Federal Reserve, and the Fed credits the Treasury’s account with the value of the securities. Voila !!! New fiat money. Congress can spend up to the limit of the account and the Fed will honor the checks.

    The problem is that the arrangement obligates the US to pay interest on the principal thus generated. The interest has never been generated. It does not exist. It is impossible to culminate the agreement. The only way the interest can be paid is to generate more principal and pay the interest on the initial securities from the principal on the later securities. It is the classic Ponzi, par excellence.

    If a Ponzi scheme does not expand, it totally collapses. Additional expanding at this time, whether the Open Market Committee buys existing securities on the open market or Congress spends more deficit, merely postpones the inevitable collapse.

    Mathematical details on the rip-off by the Fed, including how the Fed obtains the ENTIRE VALUE of ALL issued securities (off of the accounting records) is posted at


Knock yourself out!

The cult of stability is a culture of death.