Federal Reserve Bets on Dollar to Fail

In Alan Grayson, Dollar Demise, Fed Reserve, Federal Reserve, Foreign Central Banks, foreign currency, HR 1207, Ron Paul on October 14, 2009 at 3:46 am

Is the Federal Reserve betting on the dollar to fail?  There is stunning new evidence that The Fed is greatly benefiting from the collapse of the dollar.   For the first time ever, The Fed’s balance sheet grew by over $500B by swapping currencies with foreign central banks. Consequently, they profit tremendously when the dollar falls against those currencies. It appears to be blatant manipulation of U.S. Dollars by the very entity that creates them. In other words, The Fed is literally betting on its own product to fail.

Fed Chairman Bernanke admits this is a new practice for The Fed and even claims they also make interest on these swaps with foreign central banks. However, those same foreign banks are now following The Fed’s lead (or orders) to dump the dollars they just received at record rates, according to an October 12th investigative article by Bloomberg. This is putting massive downward pressure on the strength of the dollar.

The  Bloomberg article says:

Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.

World leaders are acting on threats to dump the dollar while the Obama administration shows a willingness to tolerate a weaker currency in an effort to boost exports and the economy as long as it doesn’t drive away the nation’s creditors. The diversification signals that the currency won’t rebound anytime soon after losing 10.3 percent on a trade-weighted basis the past six months, the biggest drop since 1991…

Intercontinental Exchange Inc.’s Dollar Index, which tracks the currency’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, fell to 75.77 last week, the lowest level since August 2008 and down from the high this year of 89.624 on March 4. The index, at 76.104 today, is within six points of its record low reached in March 2008.

And many predict continued demise of the dollar  as the trend to dump dollars continues to gain steam.

“The diversification out of the dollar will accelerate,” said Fabrizio Fiorini, a money manager who helps oversee $12 billion at Aletti Gestielle SGR SpA in Milan. “People are buying the euro not because they want that currency, but because they want to get rid of the dollar. In the long run, the U.S. will not be the same powerful country that it once was.”

The Fed is betting on its own product to fail. Incidentally, they’re betting on America to fail.  They’re shorting their own stock as if they plan for the end of the dollar experiment.  And as a private for-profit entity, The Fed is only accountable to PROFIT like every other private company on the planet.  They seem to have complete disregard for the ramifications to the American people.

The good news is that Ron Paul (R-TX) and Alan Grayson (D-FL) are beginning to ask the tough questions and have received nearly 300 house sponsors for HR 1207  to Audit The Fed. Meanwhile, the private Federal Reserve appropriately hired former Enron head lobbyist, Linda Robertson, to protect them from the investigation.

Fed Chairman Ben Bernanke ridiculously contradicts himself while being interrogated by Grayson.  Bernanke first claims that the authority of The Fed to give $500B+ to foreign central banks “is not an emergency authority of any kind.”  When Grayson exposes the Fed’s balance sheet to reveal no previous history of this activity, Bernanke then admits “it was zero before the crisis.”  Any poker player will tell you Bernanke’s lip biting at the end of his clearly uncomfortable explanation is a major tell of a nervous bluffer.

Their bluff is finally being called and it will soon be common knowledge that the Fed is a private for-profit company that manipulates the global economy for its ends only.  It will be fascinating to observe, but painful to live.


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