By Peter Papaherakles
American Free Press

American Free Press exclusive report.

On Nov. 27 Bloomberg released an explosive report revealing that the Federal Reserve lent $7.77 trillion to the top U.S. banks during 2008-2009 virtually debt free. By taking advantage of these rates, the banks earned an estimated $13 billion.

The report goes on to say that although the banks had received a $700 billion TARP (Troubled Asset Relief Program) bailout from the government in the fall of 2008, they did not want to reveal the real depth of their insolvency. The Fed secretly worked with the top banks and on Dec. 5, 2008 lent them another $1.2 trillion to help them get on their feet again.

“The banks continued to borrow tens of thousands of dollars” says the report. “Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.”

This report is so full of lies and half-truths it’s not funny. What are these mysterious “guarantees and lending limits?” These top banks in essence split all this money amongst themselves. Citigroup got $1.76 trillion, Morgan Stanley $1.36 trillion, Merrill Lynch $1.28 trillion…on down the line.

The banks that received this money are called Primary Dealers and they enjoy a cozy relationship with the Fed. One could even say they are the Fed. They are JP Morgan Chase, Goldman Sachs, Citigroup, Bank of America, Morgan Stanley, Merrill Lynch and Wells Fargo. The private banks that comprise the misnamed Fed are JP Morgan Chase, Goldman Sachs, Rothschild of London, Rothschild of Berlin, Warburg of New York, Warburg of Amsterdam, Kuhn Loeb of New York, Lazard Brothers of Paris, and Israel Moses Seif of Italy.

Notice That JP Morgan and Goldman Sachs are in both groups and the rest are surely interrelated also. So in essence the banks lent themselves money that belongs to us. If the Fed lent $7.77 to the U.S. at no interest – which is how it is supposed to work – then the economy would be up and running overnight.

Another big lie is that these banks were ever in need of a bailout. In 2008 they all made billions in profits. JP Morgan made $15.4 billion, Goldman Sachs $11.6 billion and Bank of America $15 billion. In contrast, GM sustained a $38 billion loss and still stayed afloat.

The report also does not mention that when the Fed was audited in the summer, it was revealed that it was not $7.77 trillion that was secretly lent out by the Fed, but a staggering $17 trillion! Most of the money went to overseas banks. The European Central Bank alone received an eye-popping $8 trillion and the Bank of England almost another trillion.

Through the sleight of hand known as fractional reserve banking, these banks can lend many times more money than they have and collect interest on it. In the U.S they can legally lend ten times as much, and in Europe 33 times. Usually they lend way more than that. Goldman Sachs, aka the Vampire Squid, has been indicted for lending 333 times more! With this kind of leverage the banks had the ability to turn the $17 trillion into at least $400 trillion! And that’s if they followed the rules. That’s “crazy money” when one considers that the whole world only produces about $60 trillion per year.

All this really reveals a very significant secret. That money is not what we think it is. It is all a grand illusion run by those who get to create it. They decide how much to make available and to whom. By convincing us that we have run out of money, they are creating the illusion of bankruptcy, thus making serfs out of all of us.

The whole “financial crisis” we are seeing in Europe and in the U.S. is all smoke and mirrors. If the Fed can create trillions in virtually interest free money for all their banker friends, surely they can do the same for the government they allegedly represent. There is no depression. The Fed is simply driving us into the ground while their friends earn untold billions from our misery.

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By Thomas Woods
TomWoods.com

Ron Paul was asked about student loan programs, which have made debt slaves out of countless kids, in his excellent interview on Meet the Press. Here’s an excerpt from Rollback, my book from earlier this year, that amplifies his points:

We know all about the easy-money policies that lured people into crushing amounts of mortgage debt, but we hear less about how those same policies have encouraged impossible amounts of debt related to higher education, for undergraduates and graduate students alike – especially in the wake of the financial crisis, when the job picture for these students is so bleak. (Many of them have indeed found employment, to be sure, but not quite the jobs they were looking for.)

In early 2009, Forbes magazine told the story of Joel Kellum and Jennifer Coultas, who met at the California Western School of Law and were later married. When they graduated in 1995, their combined debt was $194,000. Each got a six-figure job. But even with one of them moonlighting, they managed to come up with only $145,000 in loan payments. That reduced the principal of the loan by $21,000. Just $173,000 to go.

When they divorced last year, the couple cited the crushing burden of law school debt as a key factor in ruining their marriage. “Two people this much in debt just shouldn’t be together,” said Kellum.

Or there’s Mindy Babbitt, who enrolled at Davenport University in her mid-20s to get a degree in accounting. She borrowed $35,000 at 9 percent interest, and assumed the income she could command with her degree would make it all work. Instead, the entry-level job she found upon graduating barely kept her above water. She deferred her loan payments, and for a while was out of work. At age 41, she told Forbes she despaired of ever paying off her loan. She earns $41,000 per year – $10,000 more than the average high school graduate. But by now her student loan balance has risen to $87,000.

Continue reading…

Watch the video interview of Ron Paul on Meet The Press:

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Thomas E. Woods, Jr., is the New York Times bestselling author of 11 books, most recently Rollback: Repealing Big Government Before the Coming Fiscal Collapse and Nullification: How to Resist Federal Tyranny in the 21st Century. A senior fellow of the Ludwig von Mises Institute, Woods holds a bachelor’s degree in history from Harvard and his master’s, M.Phil., and Ph.D. from Columbia University. Learn more about Tom Woods here.

By Ron Paul
Wall Street Journal-Opinion

The Fed fails to grasp that an interest rate is a price, the price of time: attempting to manipulate that price is as destructive as any other government price control.

To know what is wrong with the Federal Reserve, one must first understand the nature of money. Money is like any other good in our economy that emerges from the market to satisfy the needs and wants of consumers. Its particular usefulness is that it helps facilitate indirect exchange, making it easier for us to buy and sell goods because there is a common way of measuring their value. Money is not a government phenomenon, and it need not and should not be managed by government. When central banks like the Fed manage money they are engaging in price fixing, which leads not to prosperity but to disaster.

The Federal Reserve has caused every single boom and bust that has occurred in this country since the bank’s creation in 1913. It pumps new money into the financial system to lower interest rates and spur the economy. Adding new money increases the supply of money, making the price of money over time—the interest rate—lower than the market would make it. These lower interest rates affect the allocation of resources, causing capital to be malinvested throughout the economy. So certain projects and ventures that appear profitable when funded at artificially low interest rates are not in fact the best use of those resources.

Eventually, the economic boom created by the Fed’s actions is found to be unsustainable, and the bust ensues as this malinvested capital manifests itself in a surplus of capital goods, inventory overhangs, etc. Until these misdirected resources are put to a more productive use—the uses the free market actually desires—the economy stagnates.

The great contribution of the Austrian school of economics to economic theory was in its description of this business cycle: the process of booms and busts, and their origins in monetary intervention by the government in cooperation with the banking system. Yet policy makers at the Federal Reserve still fail to understand the causes of our most recent financial crisis. So they find themselves unable to come up with an adequate solution.

In many respects the governors of the Federal Reserve System and the members of the Federal Open Market Committee are like all other high-ranking powerful officials. Because they make decisions that profoundly affect the workings of the economy and because they have hundreds of bright economists working for them doing research and collecting data, they buy into the pretense of knowledge—the illusion that because they have all these resources at their fingertips they therefore have the ability to guide the economy as they see fit.

Nothing could be further from the truth. No attitude could be more destructive. What the Austrian economists Ludwig von Mises and Friedrich von Hayek victoriously asserted in the socialist calculation debate of the 1920s and 1930s—the notion that the marketplace, where people freely decide what they need and want to pay for, is the only effective way to allocate resources—may be obvious to many ordinary Americans. But it has not influenced government leaders today, who do not seem to see the importance of prices to the functioning of a market economy.

The manner of thinking of the Federal Reserve now is no different than that of the former Soviet Union, which employed hundreds of thousands of people to perform research and provide calculations in an attempt to mimic the price system of the West’s (relatively) free markets. Despite the obvious lesson to be drawn from the Soviet collapse, the U.S. still has not fully absorbed it.

The Fed fails to grasp that an interest rate is a price—the price of time—and that attempting to manipulate that price is as destructive as any other government price control. It fails to see that the price of housing was artificially inflated through the Fed’s monetary pumping during the early 2000s, and that the only way to restore soundness to the housing sector is to allow prices to return to sustainable market levels. Instead, the Fed’s actions have had one aim—to keep prices elevated at bubble levels—thus ensuring that bad debt remains on the books and failing firms remain in business, albatrosses around the market’s neck.

The Fed’s quantitative easing programs increased the national debt by trillions of dollars. The debt is now so large that if the central bank begins to move away from its zero interest-rate policy, the rise in interest rates will result in the U.S. government having to pay hundreds of billions of dollars in additional interest on the national debt each year. Thus there is significant political pressure being placed on the Fed to keep interest rates low. The Fed has painted itself so far into a corner now that even if it wanted to raise interest rates, as a practical matter it might not be able to do so. But it will do something, we know, because the pressure to “just do something” often outweighs all other considerations.

What exactly the Fed will do is anyone’s guess, and it is no surprise that markets continue to founder as anticipation mounts. If the Fed would stop intervening and distorting the market, and would allow the functioning of a truly free market that deals with profit and loss, our economy could recover. The continued existence of an organization that can create trillions of dollars out of thin air to purchase financial assets and prop up a fundamentally insolvent banking system is a black mark on an economy that professes to be free.

Read the full article.

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Dr. Ron Paul, 14th District of Texas Congressman, is the author of several books, including Challenge to Liberty; The Case for Gold; and A Republic, If You Can Keep It. He has been a distinguished counselor to the Ludwig von Mises Institute, and is widely quoted by scholars and writers in the fields of monetary policy, banking, and political economy. He has received many awards and honors during his career in Congress, from organizations such as the National Taxpayers Union, Citizens Against Government Waste, the Council for a Competitive Economy, and countless others. Dr. Paul is seeking the Republican 2012 Presidential nomination.
RonPaul.org