Fedbucks Coming to a Theater Near You This Summer!

We are nearing the time in early summer when the entertainment industry rolls out its new blockbusters and flops. June is also that time when the Fed had said it will roll-out its own special feature (and likely future flop) — the platform that will be used as part of its eventual central bank digital currency (CBDC).

The Fed is about to introduce a system that allows immediate processing of transactions between banks to take away whatever float you thought you might have had left between the time when you ran your debit card or wrote a check to the time it cleared the bank. The Fed has even talked about the system as being able to ultimately take banks out as the middlemen from all financial transactions, though it is hard to see how or why banks (the Fed’s owners) would ever go along with that.

The buck, as we have known it, stops with the new Fedbuck

As we near what appears to me to be a preliminary step for a Fed digital dollar or CBDC, it is not surprising that the Financial Times ran an editorial capitalizing on the collapse of Silicon Valley Bank to argue that the time for a Fed CBDC has arrived. After all, if we had a digital Fed dollar, we wouldn’t need to muck around with those high-risk cryptos that helped bring down SVB — one of the arguments I said the Fed would eventually use to sell us on CBDCs once cryptos created some trouble and their CBDC was ready to roll.

So, let me catalog some of the Fed’s worst recent flops in this article.

First, let me say I can wholeheartedly agree with the opening of FT’s editorial:

As Matthew Klein so memorably puts it, banks are “speculative investment funds grafted on top of critical infrastructure. This structure is designed to extract subsidies from the rest of society by threatening civilians with crises if the banks’ bets are ever allowed to fail. [The SVB bailout] is a reminder that those threats usually work.”

I’m with former US regulator Sheila Bair, who slams her successors for ruling the SVB situation a risk to the entire US financial system: “Is that system really so fragile that it can’t absorb some small haircut on these banks’ uninsured deposits?”

But even if you agree with retroactively guaranteeing SVB’s uninsured depositors, you must admit it reflects a policy failure. If all bank deposits should always have the government’s backing in full, then why didn’t we abolish outright the deposit insurance limit of $250,000, which is now presumably only notional?

Financial Times

Where we disagree is everywhere the editorial goes after that. The very fact that banks all seem to exist to rake as much money out of our own funds with fees as they can and to invest those funds at some risk for no reward back to depositors in over a decade for that risk gets turned into FT’s justification for turning to a CBDC that cuts banks out of the money:

Ultimately, then, the SVB crisis should make us ask: what is the point of banks? If providing safe storage of money for business depositors requires them to hold riskless assets with no effective duration, they may as well simply hold central bank reserves. Or — what amounts to the same thing — be promised access to cash … from the Fed against the full value of government bonds, which is what the central bank’s latest emergency programme offers. But these are very roundabout ways to secure economic stability, which we now seem to say require completely safe business deposits in arbitrary amounts. If we need those deposits to be backed by central bank reserves or something very much like them, what is gained by interposing private banks out to make profits on the intermediation?

This strikes me much like saying, “Since the Fed did such a deplorable job of supervising banks and mucked them up so bad with their interest hikes, which they, of all people, should have known would put the liquidity of bank reserves at risk should the banks face runs, all money should exclusively be handled by the mismanaging Fed alone.”

So, we leap from putting the bloody-mouthed fox in charge of all the chickens to the following conclusion:

A central bank digital currency would provide precisely what seems to be missing today: a means by which businesses could keep cash completely safe, without any need for banks.

Completely safe? When has anything the Fed has done been completely safe? Are we supposed to believe money transactions that occur exclusively between individuals or businesses and the Fed would be “completely safe” because the Fed did such a superb job of seeing the present banking problems coming, which it, alone, was creating? Sure, the banks that failed had a responsibility to manage the risk of their reserves held in Treasuries getting devalued, but the Fed, which created that risk, certainly had a responsibility to make certain all banks were, in fact, managing it. The Fed, in fact, has a track record of never seeing anything coming that it needs to see and that it should be most skilled at seeing. (See: “The Fed Never Sees it Coming! They Just Cause it!“)

Of course, as I laid out in an earlier article, the senate, in its oversight pulled the usual maneuver of giving the Fed a free pass on its failure as the Fed blamed the banks and complimented itself on the great job it did with the rescue that would never have been needed in the first place, had the Fed done its regulatory job and used even half of the average banker’s individual brain power to recognize the problem the Fed was clearly creating. (See: “The Senate Inquisition Fried the Bank Regulators Over EASY.”)

In spite of these abject failures, the FT editorial says we should now trust the Fed with even greater and more direct power over everyone’s money:

Here is an answer to those who dismissively ask what the use case is for a CBDC: it would eliminate the type of systemic risk identified by US regulators in which ordinary business depositors doubt the safety of their deposits.

Are you kidding? My first concern would be that the Fed will lose track of all of my money, and with no record kept outside the Fed, I’d have no proof I ever had it. My second concern would be that the government would vaporize it all through the Fed if it thought me a bad person, which, of course, it would never do by mistake. But, really, the biggest overarching concern is that the Fed has been such a failure at managing the money it already has. Forget the bank failures where the Fed can try to blame the banks. Look at the money failure, where the value of the dollar is plummeting due to forced-Fed inflation.

I don’t fully trust my deposits at a bank; but, at least, there the Fed is only the regulator and the backup system. There are others between me and the Fed with record of my deposits and who must be dealt with to get to my money, who also have some business reason that the Fed would ever have to care about how customers care about how they are managing the security of their money. That security from government having too direct an access is what made Swiss bank accounts very popular back in the old days when the Swiss knew how to manage money.

Famous Fed flops

With some help from Rudy Havenstein’s central bank of humor, let me give you a few reasons the Fed would be the last I’d trust to have sole management of US money:

First, he quotes the Bank of England’s chief economist, Huw Pill, who lives up to his last name by prescribing for all of us that we … just get over it:

People in the UK need to accept they are poorer.

Huw, who cannot even spell his first name right, is, indeed, a real pill. Just accept it. The central bank made a tiny mistake that is eating deep into your paycheck. Just get used to that.

Just accept what central bank planning has brought in this new wave of massive inflation that is devouring your paycheck and bank account, and put these same people exclusively in charge of all your money and all your ability to transact.

Havenstein quotes a Scotsman to tell you what you’ll be if you make yourself this servile to any central bank (from the movie Trainspotting):

Some hate the English. I don’t. They’re just wankers. We, on the other hand, are COLONIZED by wankers. Can’t even find a decent culture to be colonized BY. We’re ruled by effete arseholes.

Substitute the word “wankers” for its most natural rhyming counterpart in this script — “bankers.” Central bankers to be specific.

The English type of central bankers, however, are no worse than this guy among the “We never see it coming” crowd of the Fed’s most elite banksters:

How? How could they have been surprised to the upside by inflation? I wasn’t. I doubt you were! They pumped well over a TRILLION dollars directly into the hands of individuals and businesses during a time when shortages were guaranteed by global Covid lockdowns, and they are surprised that THEY created inflation??? They were surprised to find that too much money chasing too few goods was a surefire recipe for high inflation. That is as basic as inflation gets — like a gold boomtown where everyone is mining gold (money) and no on tending shops to provide goods, so an apple will cost you ten bucks.

These people who are surprised that well over a trillion extra dollars put directly in the hands of individual and business consumers (mostly to pass along as pay to individual consumers) would cause inflation to the upside … these are the ones FT’s writer thinks we should turn into the only people in charge of managing all money and all transactions?

The view over all of this looks nice from where the Fed stands (but note the sign for these three Fed members who clearly do not understand guardrails, such as how to regulate banks from the most dominant and obvious risks being created by themselves right now):

Indeed, the rails are not for standing on.

One has to think that Powell, Brainard and Williams, shown there at Jackson Hole, couldn’t balance a bank account, much lest balance on that top rail.

Of course, it was not taking interest rates back up that created the SVB failure and other bank crashes, it was taking them so stupidly low (TO ZERO) for so many years that caused the problem by creating so much dependency on low interest throughout the financial system in order to keep the fake recovery perking along. That low-interest bonds eventually became the only kind the banks had left to hold in reserves! The Fed should have seen that coming, too. Some of us did and warned them for years about the low-interest dependency they were creating; but, of course, the Fed does not listen to any of us. Obviously, once the Fed started raising all interest rates, banks would find 100% of their low-interest assets nearly untradable if they needed to cash them in.

With just a modicum of financial/bank understanding, anyone could have known the Fed was laying in this crisis for years. So, these Fed failures prove the Fed is either entirely corrupt or every Fed member is dumber than the paper they print their money and that the blood in their veins runs as cold as the ink they use for their money. And you want to give those buffoons or crooks total charge of every aspect of the monetary system. Based on how they didn’t see something so obvious, they are not qualified to run a Koolaid stand, much less a single bank, and far less still, the entire financial system.

The gist of the present financial failure is this: The Fed kept its foot to the floor on the financial accelerator as shortages were developing all over the world, even as housing prices were skyrocketing far worse than they did leading up to the last housing crisis and as stocks were blowing up in price at a blow-off-top rate that was steeper and higher than anything ever seen in history. They still kept their foot flat to the floor as producer-price inflation grew for months, and I documented the rise in producer-price inflation here month after month, so it was easy to see. Then, as MONTHS of producer price inflation finally started to pass through to consumers, the Fed continued to lamely claim the inflation, rising month after month, would all be transitory. Every member of the Fed walked I lockstep on this. And those are the idiots someone wants to give total control over money?

Randy Woodward makes it more than clear in the video above why the recent banking collapse was made inevitable by the Fed and why you can anticipate more to come as they keep devaluing bonds by rolling them off their balance sheet and by raising interest rates, which is to say, lowering the value of existing bonds held by banks that offer much lower interest.

So, let’s put these criminal clowns in charge of every aspect of money? Let me present to you the current three most famous Fed flops:

The trifecta of Criminal Central Banksters at their arraignment, confi-dently awaiting the judge’s dismissal of any case brought against them.

Alternatively …

The Federal Reserve is not a cabal of evil geniuses dedicated to bringing down the global order so as to create a new one with its Wall Street masters in complete control. They are instead a clown-show, a remedial class of halfwits and empty suits opining on topics they would in a just society be banished from entirely.

—Jeff Snyder in “You Can’t Make This Up”

Arguably, too many of them are obsessed with their models, tweaks, thumb-dials and everything else, most infamously, John Williams, who without any manifest understanding of financial markets, was made President of the New York Fed.

–Grant William in “The End Game Pt 2: The Lord of Dark Matter”

So, either way — corrupt or dumb — why would you give them MORE control over money? What is really needed is that they have their control and influence diminished to simply managing money for ZERO inflation.

Here is an image I’ve posted before that was the original schematic for the Fed’s creation:

To the Fed, their creation of endless boom-bust cycles of destruction where you suffer the consequences is a laughing matter:

“I like to say that we injected cocaine and heroin into the system, and now we’re maintaining it on Ritalin. How’s that?”

[LAUGHTER]

—former Dallas Fed President, Richard “Dick” Fisher, on Squawk on the Street

Or, as I have long called it, “FedMed.”

You’ll be in good hands with Fedbucks because these guys know how to have fun … with your money. That is because they think of it all as their money since they create and manage it, while all you do is earn it, use it daily, and, therefor, need it. So, yeah, let’s just turn all of our money over to the likes of our national treasure and favorite former Fed fraternity freak / sorority sister, Janet “Let it All Slide” Yellen:

What is not to like about that?

Liked it? Take a second to support David Haggith on Patreon!