In his latest article, former Assistant Treasury Secretary Dr. Paul Craig Roberts says, “The Fed is the great deceiver.” Why is he making this shocking accusation? Greg Hunter asks him to explain in the text below and more extensively in the video at the bottom.

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Fed Laundering Treasury Purchases to Disguise What’s Happening-Paul Craig Roberts
By Greg Hunter On May 14, 2014

By Greg Hunter’s USAWatchdog.com 

In his latest article, former Assistant Treasury Secretary Dr. Paul Craig Roberts says, “The Fed is the great deceiver.”   Why is he making this shocking accusation?   The reason is tiny Belgium’s whopping purchase of $141 billion in Treasury bonds earlier this year.   Dr. Roberts explains, “We know that Belgium didn’t have any money to buy $141 billion worth of bonds over a three month period.  That sum comes to 29% of the Belgium GDP.  So, they don’t have a surplus in their budget that is 29% of their GDP, and they don’t have trade or current account surplus in that amount.  In fact, everything is in the red.  Their budget deficit is in the red, and their trade and current accounts are in the red.  So, Belgium didn’t have the money, and yet, they managed to pick up $141.2 billion in U.S. Treasuries over a three month period.  So, where did they get the money?”  Dr. Roberts, who holds a PhD in economics, goes on to say, “We know their central bank couldn’t have printed euros to buy the bonds with because the Belgium central bank can’t print euros.  Belgium is part of the euro system and has lost the ability to create its own money.  So, the only source for that kind of money would have been the Federal Reserve. The Federal Reserve thought it needed to hide the fact it was buying $141 billion in bonds over a three month period when it was officially reducing or tapering the quantitative easing down to $65 billion.  It didn’t want to have to admit it was really purchasing $112 billion a month, almost double the announced purchases.” 

Dr. Roberts also says, “I think also the Fed did not want it to get out that some large country is unloading Treasuries.  Somebody dropped over $100 billion in Treasuries in one week.  If that was a large holder and that became known, it could panic smaller holders and you could see a stampede, and the Fed could lose control of interest rates.  So, I think the Fed thought the best thing to do is launder its purchase through a different country; and, thereby, disguise what is actually happening.” 

Why is the Fed worrying about the shell game of Treasury purchases?  Dr. Roberts says, “I think there wasn’t any buyer for the $104 billion in one week.  So, if that kind of bond sale sat unattended, interest rates would rise; and so, the Fed had to buy the bonds in order to protect its interest rate policy.  But, if it outright bought them and this was known, then it starts to interfere with the ‘tapering’ that it promised to do because all of a sudden it’s not ‘tapering,’ at least not for those three months.  It signals somebody is unloading Treasuries, and that could stampede others.  What it indicates is they are not feeling all that confident that the dollar is on such a sound footing, or the U.S. financial system is on all that much sound footing that they can openly step in and take up that type of purchase.” 

On the steep drop in GDP growth of a paltry .1% in the first quarter, Dr. Roberts says, “What I find most amusing about this is they had to claim some real growth in the first quarter; so, they eked out .1%.  Now we know they got that by rigging the inflation number they used to deflate the gross domestic product (GDP).  The real GDP in the first quarter, properly deflated, was negative and probably also in the fourth quarter.  Most likely, this coming quarter, they are not going to be able to hide the fact that it is negative. . . . I am convinced the first quarter was negative, and I don’t see how it could possibly go positive in the second quarter.” 

On Fed Head Janet Yellen’s rosy outlook on the economy, Dr. Roberts debates, “I don’t see how she can see that the economy is going to start growing.  What is going to make it grow?  Why should investors invest money when consumers don’t have any money?  There are not retail sales.  I think it is just part of the rah, rah talk.  Everywhere else in the world is going down the tube.  So, what’s going to push the American economy up?–Nothing that I know of.” 

On the Ukraine crisis, Dr. Roberts says, “I think Washington badly miscalculated this whole Ukraine business.  It was an act of hubris, arrogance and stupidity.  They are mad at Russia for blocking their attack on Syria and blocking their attack on Iran. They said ‘we’ll teach them.’  We’ll give them trouble in their own backyard and not to get in our way anymore.”  The threat of sanctions has made the Russians realize the dollar system is not in their interest, and they are going to leave it. . . . If any significant part of the world stops using the dollar, the price of the dollar falls because demand for dollars falls, and the import cost for America would rise.  When you see how import dependent we are, it would mean a substantial rise in the real cost of living for most Americans.”  

Join Greg Hunter as he goes One-on-One with Dr. Paul Craig Roberts. 

(There is much more in the video interview.)

Obama’s Stimulus Plan Is Failing, Not because the Solution Is More Tax Cuts (as Claimed by Republicans), but because the Stimulus Is Way INSUFFICIENT!

The American Recovery and Reinvestment Act of 2009 (ARRA), based largely on proposals by President Obama (but weakened by the centrists), was passed by Congress in its conference version on February 13, 2009 and signed into law by the President on February 17, 2009.

Paul Krugman, 2008 Nobel Prize winner in Economic Sciences, wrote on February 8th:

Even if the original Obama plan — around $800 billion in stimulus, with a substantial fraction of that total given over to ineffective tax cuts — had been enacted, it wouldn’t have been enough to fill the looming hole in the U.S. economy, which the Congressional Budget Office estimates will amount to $2.9 trillion over the next three years.

Yet the centrists did their best to make the plan weaker and worse.

One of the best features of the original plan was aid to cash-strapped state governments, which would have provided a quick boost to the economy while preserving essential services. But the centrists insisted on a $40 billion cut in that spending.

On the eve of the House passing the conference version, Krugman summarized ARRA this way:

...In both the House and the Senate, the vast majority of Republicans rallied behind the idea that the appropriate response to the abject failure of the Bush administration’s tax cuts is more Bush-style tax cuts.

And the rhetorical response of conservatives to the stimulus plan — which will, it’s worth bearing in mind, cost substantially less than either the Bush administration’s $2 trillion in tax cuts or the $1 trillion and counting spent in Iraq — has bordered on the deranged.

It’s “generational theft,” said Senator John McCain, just a few days after voting for tax cuts that would, over the next decade, have cost about four times as much.

It’s “destroying my daughters’ future. It is like sitting there watching my house ransacked by a gang of thugs,” said Arnold Kling of the Cato Institute.

And the ugliness of the political debate matters because it raises doubts about the Obama administration’s ability to come back for more if, as seems likely, the stimulus bill proves inadequate.

For while Mr. Obama got more or less what he asked for, he almost certainly didn’t ask for enough. We’re probably facing the worst slump since the Great Depression. The Congressional Budget Office, not usually given to hyperbole, predicts that over the next three years there will be a $2.9 trillion gap between what the economy could produce and what it will actually produce. And $800 billion, while it sounds like a lot of money, isn’t nearly enough to bridge that chasm.

Officially, the administration insists that the plan is adequate to the economy’s need. But few economists agree...

It is becoming more and more apparent every day that the stimulus provided by ARRA is, as Krugman has long predicted, frightfully inadequate. Today’s news that the unemployment rate came down a tic last month doesn’t begin to tell the full story. The graph at the top of this post (taken from the 19 June 2009 issue of Science magazine and modified to show today’s data) shows that since the passage of ARRA the unemployment rate has gotten WORSE relative to the “Projected Without Recovery Plan” ...and worst still when compared with Obama’s “Predicted With Recovery Plan.”

But the unemployment rate is only part of the picture. The other part has to do with the production and spending that comprise the Gross Domestic Product (G.D.P.). Two days ago, a column in the New York Times explained the situation with reference to the second graph at the top of this post:

Chump Change in the Latest G.D.P. Report
by Casey B. Mulligan

On Friday, the Bureau of Economic Analysis released its advance estimate of real G.D.P. for the second quarter of 2009. Although some say it provides some of the first evidence of the stimulus law’s efficacy, a close inspection of the results shows that the government sector’s contribution to real G.D.P. growth so far has been trivial at best.

G.D.P. measures the total amount produced and spent in the nation during a particular time frame, like a year or a quarter of a year, indicating the country’s economic fitness. Real G.D.P. for the first quarter of 2009 was sharply lower than it was in 2008’s last quarter, which was itself sharply lower than the quarter before that. Thus, it came as a bit of a surprise that second-quarter real G.D.P. was not also sharply lower, but rather was pretty close to what it was in the first quarter.

Some advocates were quick to congratulate the stimulus law that was passed in February, claiming that “The marked improvement in this quarter relative to last is largely due to the American Recovery and Reinvestment Act (ARRA).”

A closer inspection of the B.E.A.’s estimates gives no support for this claim. The chart [above] shows the change in the United States’ real G.D.P. from the first to the second quarter, broken into five expenditure categories: private domestic purchases, net exports, defense, federal nondefense purchases and state and local government purchases.

We were told that the stimulus law would invigorate the economy by spending on federal nondefense programs and helping state and local governments maintain and grow their public services. Stimulus advocates point to the fact that these spending categories indeed grew from the first to the second quarter, as shown in the chart by the fact that those two bars point upward. (Perhaps they believe that tax cuts and unemployment insurance have important effects, but these are not separate G.D.P. categories — they are included in whatever category the recipient spends them).

However, the chart also shows that these types of purchases were trivial. Real federal nondefense purchases increased by a mere $4 per American, while state and local government purchases increased by a mere $8 per person. Real defense purchases increased by $17 per person, which seems large when compared to the other government purchase categories, but is trivial by any other measure.

Another reason that we know that the stimulus bill had not yet delivered on its promise: employment plummeted from the first to the second quarter. We can continue to grade the stimulus law as the economy further evolves, but it finds no congratulations in the second quarter’s economic performance as measured.

--- Casey B. Mulligan is an economics professor at the University of Chicago.

APOCALYPSE SOON

The lights are about to go out on our American democracy, simultaneous with the economic destruction of the American middle class.

RE our democracy, watch this interview with Naomi Wolf,

author of Give Me Liberty – A Handbook for American Revolutionaries

http://www.youtube.com/watch?v=_XgkeTanCGI&feature=email

You will hear Naomi say more than once, “This is going to scare you to death, because I’m scared to death.” But she is quick to assure us that there is still hope, if only ordinary Americans of all political stripes pull together and reject the fascist coup that is just a couple months from finalization. The U.S. in this moment is very much like Germany in February of 1933.

RE our economy, read A Futile Bailout as Darkness Falls on America

by Paul Craig Roberts,

former Assistant Secretary of the Treasury in the Reagan administration, Associate Editor of the Wall Street Journal editorial page, and Contributing Editor of National Review.

http://www.counterpunch.org/roberts10062008.html

Here is a striking excerpt:

According to statistician John Williams [http://www.shadowstats.com/section/commentaries] who measures inflation, unemployment, and GDP according to the methodology used prior to the Clinton regime’s corruption of these measures, the US unemployment rate is currently at 14.7 per cent and the inflation rate is 13.2 per cent. Consequently, real US GDP growth in the 21st century has been negative.