Topic: Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts (Read 4746 times)

rugrats, and now you're telling me about honesty constantly twisting my words and putting claims that I didn't make in my mouth. And now you appear to be a telepath stating that I didn't know about Fedwire. Lol, you must be kidding me.
So yep, I'll move on.

I've already countered this with my Japanese/Egyptian example earlier on
Remember Fedwire=domestic.
Consider, the seller and buyer's banks can choose not to use Fedwire and use other clearing houses to conduct their trade.

I have been very patient with you Roadtrain. If you don't see that, it's not my problem.
You're not an honest debater, because you keep sniping off my comments to avoid responding to them.
You are presenting a frankly ridiculous claim.

1. You keep trying to hide behind the word 'figure'. Did you not write that foreign companies trading with U.S. companies need to have bank account in the U.S.? That statement in itself ends the argument. If all the dollars are locked away in the U.S., how the heck are companies outside the U.S. getting paid?

2. You didn't read the links. You didn't even know about Fedwire before I brought it up.

3. No, you were operating under the impression that the Federal Reserve operated some kind of a "payment system" before you learned about Fedwire. Read your own words. It was necessary to explain to you that they are not the same.

4. Liquidity swaps mean currencies are traded outside of their home countries. It's all there. There is nothing vague about it.

5. No, you didn't know that. You said the Fedwire is "fundamentally different" because it uses RTGS.

6. Simple. You claim the Feds have access to all the dollars in the country. It doesn't. Private wealth, i.e., dollars held in banks are not under it's control.

7. My links contradict your weird assertion repeatedly, over and over again.

8. I've established it repeatedly, even in this post. But you lack the grace to admit that you were wrong and you continue to spout inanities in an attempt to prove some ridiculous notion.

9. So you concede that the dollars do leave the country then? The fact that they came back is a given. Trade doesn't flow in one direction.

You won't comment on the rest because you can't answer it without conceding that dollars do leave the country.

You were wrong. Move on. Everyone makes mistake sometimes.

Maybe this example will help you get my idea.

Lets imagine a Chinese company selling goods to the USA. Here are the ways they can get their revenue:
1. Company has a bank account at an american bank, which has an account with the Fed;
2. Company has an account at a chinese bank, which has a subsidiary in the US, which has an account with the Fed;
3. Company has an account at a chinese bank, which has an account at the import-export bank, which has an account with the Fed;
4. Company has an account at a chinese bank, which has an account at the import-export bank, which has an account with PBOC, which has an account with the Fed;
5. etc...

These examples might not be precise, but they show that when you're transacting dollars, the long chain of intermediaries link your dollars to the U.S.

rugrats, you don't argue kindly, so don't ask me to do the same.
I never said so, stop claiming that. That was a figure.
Don't you understand the word "imagine"? Where is the word "must" what you repeatedly put in my mouth?

I've read your links. Honestly, they didn't give me anything new. That's why I asked for your explanation as if it could shed some light on the issue.

Again, I never said they are the same. I said that Fedwire is operated by the Fed. C'mon, I know they're not equivalent.

Be more concrete, what's your point here?

I know that, and?

Tell me the point of your statements concerning our discussion.

Neither do yours contradict mine.

Have you established that in your head only?

This article states that the dollars somehow "leak" but given the BOP requirements, they must come back in form of loans, investments, etc.. That's exactly what I mean, dollars do no "leave" or "leak" the U.S.

Sorry, I won't comment the rest, we seem to be discussing different ideas...

1. Please stop cherry picking my quotes. Kindly respond to my posts in its entirety.
2. Please read the links I've provided. Please don't ignore them and then ask for an explanation. I honestly can't believe we're still on this subject. I hope you're not just arguing for pride.
3. The Federal Reserve and the Fedwire are not the same. One is a central bank, and the other is a payment system facilitating fund transfers between reciprocal domestic agents. Useful reading to differentiate between central banks and clearing houses: http://www.chicagofed.org/digital_assets/others/events/2014/annual_over_the_counter_derivatives_symposium/tucker_clearinghouses_new_central_banks_tucker_2014.pdf
4. Fedwire works alongside other clearing houses, especially for international transfers. However, the Federal Reserve has it's own liquidity swaps program with several central banks. Guess what they're swapping? http://www.federalreserve.gov/monetarypolicy/bst_liquidityswaps.htm
5. Fedwire's RTGS system is not unique - nearly all first world central banks performs RTGS - as well as those in the majority of developing coutries.
6. Central banks, banks, financial institutions, and private corporations are different entities. Central banks, like the Federal Reserve, DO NOT have access to private wealth - even in Communist nations.
7. Your own link above does not contradict what I said.

8. Let's do a quick recap:
I originally said the U.S. Federal government might implement currency controls as one of the options to circumvent a dollar debt crisis with China.
You say dollars do not leave the Feds and the U.S.. You say foreign companies trading with U.S companies must have local bank accounts.
We've already established that both of these assertions are incorrect.

9. A concise summary on the subject: What happens to the US dollars used to buy imports?

Let me end this by presenting a few more questions for you to ponder on.
• Why do you think the Chilean and Malaysian governments implemented currency controls if it has no effect on their currency outflow?
• Why do commercial banks in U.S. are required by federal law to seek coverage of the Federal Deposit Insurance Corporation?
• Why do you think some people hide their dollars - electronically - in bank accounts in Switzerland, the Cayman Islands or the Bahamas, if it's still in the U.S?
• Why is money laundering an issue if the Feds has control of all of the dollars?
• Why do the Federal government blacklist banks or bank accounts of terrorist organizations if the Feds have control of these funds?

CPI changes based on the demand and supply of goods and services. It will increase when the economy grows so quickly that growth in economic demand will outpace growth in economic supply AND there is not enough incentives to keep money in savings type products.

I can't agree here. Fedwire is fundamentally different from the rest because it's a real-time gross settlement system and is directly operated by Federal Reserve banks. It doesn't employ any netting or bundling. It's actually the backbone for the whole US dollar payment system. As the base money is transacted via Fedwire, any other payment systems ultimately rely upon it.

As the Fed is a source of dollars and it controls the dollar payment system, how can dollars leave the U.S.? Maybe if you explain that, we can reach to an agreement.

As long as China holds large amounts of USD, they will not allow this to happen.

AFAIK, there's never been a proven correlation between more USD being created and CPI increasing. Ever. CPI seems to be almost entirely dependent on economic dynamism and a RNG.

Well, that is the work of the government and its aids. We should not be surprised by it.

Roadtrain, the Fed "payment system" you spoke of is actually Fedwire, which is similar in nature to CHIPS, SWIFT and ACH.
These are clearing houses that facilitate transfer of funds between endpoints with reciprocal arrangements.

To make it easier for you, think of fund transfers before the internet, when telex, telegraphic, fax or even phone instructions between reciprocal parties are conducted, including those by Fedwire - hence the use of routing codes in the form CHIPS UID, Fedwire ABA, IBANs and SWIFT BIC to transfer funds to specific designees.
Settlements, netting and novation via direct transfers, basket of currencies or instruments are thereafter conducted to balance book shortfalls of endpoint agents.
Actual settlements DO take place on regular basis, and funds are not held in trust.

For your reading pleasure:
• Page 100-106, THE DEPARTMENT OF THE TREASURY BLUEPRINT FOR A MODERNIZED FINANCIAL REGULATORY STRUCTURE 
• Transparency and Compliance for U.S. Banking Organizations Conducting Cross-Border Funds Transfers 

Now, going back to my original statement of currency controls to restrict the outflow of dollars, there are precedents - similar frameworks were enacted in Chile (1991-98) and Malaysia (1998 - now).

• INTERNATIONAL BORROWING, CAPITAL CONTROLS AND THE EXCHANGE RATE: LESSONS FROM CHILE
• Did the Malaysian Capital Controls Work?

Your words.

One day if the US cannot afford the goods from China, USD is useless.

Considering that Industrial & Commercial Bank of China has a subsidiary in the US, that well may be that simple. Anyway, the bank must somehow have access to the US payment system, either directly or through intermediaries.

It means that they have amassed some dollars that they can use. It's like a bank account.
Some portion of these reserves is placed at the Fed directly, yes. Reserves can also be managed by intermediary financial institutions (custody services).

I think they don't. It's usually done via SWIFT, i.e. by using payment orders between banks. Anyway, the banks need to somehow have access to the dollar payment system, either directly or via intermediaries

I doubt it, but everything is linked to the Fed payment system anyway.

I don't, and I never did. It was just a figure.

Just to be clear,

(i) Are you saying that when, say, a Bank of America branch in New York is instructed to transfer US$1 million to the Industrial & Commercial Bank of China in Guangdong, the Federal Reserve merely change the ownership of said funds in its "payment system"? Do they automatically create third-party accounts for ICBC as well in their payment system?

(ii) What do you think it means when countries say they have $xxx million US dollar reserves?
Does that mean the Feds has internally allocated US$xxx million in its "payment system"?

(iii) When a Japanese company pays for a product supplied by an Egyptian company in US$, do the affected parties (or their banks) contact the Feds to facilitate said payment?

(iv) Does the Feds directly participate as middlemen in foreign exchange trades between brokerages?

I am really, really trying to understand what you are trying to argue with me here.

Edit: Also, are you still maintaining that foreign companies have to open U.S bank accounts to trade with American companies?

Money flows are virtual. When money "flows" from an American company to a Chinese one, it only changes the ownership, but it all happens over the U.S. payment system, namely the Fed payment system. If not directly, then via intermediaries.

As I said, only physical dollars can actually leave the country. You'd better tell me what implications it has on the U.S.

You're laboring under a flawed assumption, RoadTrain.
Actually, dollars do leave the country, either electronically or physically - every minute of every single day.
Foreign exporters are not required to hold bank accounts in U.S to conduct trade.
Flip to page 14 (Table 2), and you can see the entire foreign direct investment (not trade) outflow of dollars from the U.S. for the period between 2007-2012.

I mean, the only way to 'remove' dollars out of the U.S. is to convert them to cash, load a tanker with it, and sail away.
But today, when dollars are mostly electronic, they are not 'leaving' U.S., they remain in the financial system.

Imagine an Asian export company that sells goods to the U.S. The dollar revenue they receive is credited to their account in some U.S. bank. It's still in the U.S.

I'm sorry, but I'm not quite sure I get what you're saying.
Billions of USD exit the United States daily.
Enforcing capital control is the only method to stem the outflow.

Well, there's no reasonable way to remove these dollars out of the country.

Or, the Federal government can impose some form of currency controls, preventing instrument holders from removing their dollars out of the country.
Or, the Federal government can just impose a payment moratorium on Chinese-held instruments under some made-up pretext.

Either way, it remains in China's best interest to remain on friendly economic terms with the United States.

They really don't have many other options for investments to use their massive trade surplus. The Euro is really only the viable option, however it's face is not certain and it has come close to breaking up in recent years. The next widely traded currencies are the british pound and the yen which are really too small for the Chinese to buy in any significant quantities. 

Exactly. The simple accounting principles tell us that Chinese are accumulating dollars because they have to, not because they want to.

China is a net exporter of goods to the US. This essentially forces them to be a net buyer of US dollars. If they did not do this then their currency would get too strong which they do not want (and would hurt their own economy)

The day they decide so, the current account will finally be in balance, and there will be no need for additional foreign funds.

Either way, the system will rebalance, but it doesn't imply there will be default.

The day foreign countries like China decide they have enough USD, the government may find it difficult to manage its high debt levels.

These "new economics" has been in play since 1971, the year Bretton-Woods collapsed.
The fiat money economics that's in play today is a good example of market-driven money creation (money is created by lending). These QE's by Fed are meaningless as they can't change the amount of money in the economy unless the private sector is willing to borrow. That's why they fail to induce any significant inflation.

The same thing is with government debt. It's in there because domestic private and foreign sectors are willing to save. There are no any shenanigans in this, sectoral balancing is a simple thing that anyone can manage understand.

Why the private sector is willing to save and unwilling to borrow is a different question. The reasons can be cyclical or structural. E.g. in Japan it's structural, while in the U.S. it turns out to be cyclical.

Just because the market turned doesn't mean that the Fed paid a fair value for those bonds at that time. If the Fed hadn't stepped in, banks would have sold those assets at a much lower value (which would have been the market price).

The federal reserve actually made money on bonds sold by AIG to the tune of several billion dollars, earning a very good ROI. The prices on bonds that the fed purchased were also artificially deflated and did not reflect the NPV value of the bonds in question. The banks were essentially forced to sell because they were facing a liquidity crisis and would have made more money if they had held onto the bonds

Bailout does not equate to corruption.

who is responsible for this? I think there are many parties involved in the action of this bailout, all blame each other for sure, no one wants to be responsible, there must have been enjoying this bailout action, hopefully The federal reserve can find people who is responsible for the actions of this bailout ... 

LOL, the answer to his question is no. Period. When the banks were "bailed out" they were not given any money at all; they were lent money (sometimes under favorable conditions) which they had to repay. It is really not accurate to say that banks were given a $16 trillion bailout as this is not the value that banks received from these loans

Yes, if it was other people's money and you are "systemically important".

Can we get a bailout on the money we have lost the last few months in btc?

The ability of a government to service it's debt depends on the "market's" faith in a  country's ability to repay their debts. As soon as the "market" starts to believe that the country is not going to be able to repay their debt the country will effectively lose access to capital markets and will incur a debt crisis.

Totally agree. When the national debt keeps increasing as a proportion of GDP, you know you are in trouble. Any external shock, which impacts GDP growth, could result in the debt becoming unserviceable. This is the reasons why some countries have a fiscal responsibility law.

BS.

Thats the amount which was lend. The EU made the same. Thats providing the banks with money. Its normal process. Its like mining Bitcoins, Morons.

Economists and Libertarians both must be scratching their heads at this type of information.

Bottom line is that it is a complete mystery that these loans haven't created more than just a yawn in the global economy.

Either:

1. It is only a matter of time before these new dollars have the classic negative impacts that we expect when a government basically prints money by the truck load.

OR

2. Every economist and Libertarian needs to adjust their views on fiat money, printing and the like.

I think #2 is more likely as I don't see a global collapse of value. It just hasn't happened. Doubling my gas and milk prices in 7 years is not enough for me to buy into an economic collapse around the world.

Can't we agree, there are certainly some new economics in play here that we don't have our heads wrapped around yet?....

Oh my, what a bold and explosive statement you have there.

National debts come into existence when governments spend more than what they earn.
These deficits are funded by direct loans from financial institutions, national trusts, bonds, LGs and other monetary instruments.
These loans have to be paid back, with interests, usually through tax increases, draconian spending cuts or, more loans.
National debt is never a good thing, especially one caused by chronic budget deficits, because it usually screams of incompetence, at the very least.

And the more that is borrowed, the more that needs to be paid back. Which is why IR's cannot be anyhthing other than in the 0% range. If they go up, then it's insolvency, prevented only by the ability to print.

This is true. Additionally the more we borrow, the more we have to tax our citizens, which depresses our economy.

Oh dear. This comment is symbolic of something, but I'm not sure what. A sign of the times I guess.

http://www.youtube.com/watch?v=lu_VqX6J93k

The white house has zero control over what the senate votes on. This is determined by senate leadership which happens to include Harry Reid, who will not bring any bills that do not fit liberal policy to vote

I don't know if you've been following the news, but the House of Representatives (US) has just voted in favor 333-92 for the Federal Reserve Transparency Act, aka Audit The Fed. I created a Government petition:
http://wh.gov/iiFlu

Please, if we can get 100k signatures, then we may be able to get the white house to force a vote in the senate! Please share

You guys do realize this article is from 2 years ago, right?

It was really no secret that the Fed spent trillions on bailouts. I think the $16 trillion figure is somewhat inflated though. It is also important to note that all the money used to bail banks out has been paid back with interest (except the money lent to the automakers - it was really given to the UAW).

I wouldnt call it shocking though. This is why we have Bitcoin where everything is clear and public

Is there a website that doesn't have any pictures of Guy Fawkes on it that could truthfully summarize the findings and state them for regular people to read?

either that or the financial system will be reset via a large war. US and R-USsia are working on it, Ukraine might be just a stage for a play, a show. 

 This is the kind of news that makes me bullish on Bitcoin.  It's news like this that should be discussed at length by the average person.  Nothing will change if people don't have a clue where the problems started or who plays the major roll in causing the problems.

Under the table dealing. Got to love the GOV.

interested . this will be bigger . its btc will touch 5k next year .
i believe it will happened .

Need an accountant or an auditor to explain what all these numbers mean.

Throwing a big number around doesn't mean anything without proper context.

So where this total comes from exactly?

Sorry, "fabrication" was a very poor choice of words. "Misleading" or "out-of-context" are better descriptions. Here is an explanation of why the $16 trillion amount needs to be considered in context.


In other words, the Fed didn't loan anyone $16 trillion.

Another FUD.
Right on the page 130
That's just a sum of transaction amounts, not that it says much.

We will have to wait and see whether any action is taken on this.
At least, it has become public now.

The link provided the source of the audit http://www.sanders.senate.gov/imo/media/doc/GAO%20Fed%20Investigation.pdf

How is that a fabrication? It is written black on white at page 131.

How accurate is the news and figure on the report?

The link doesn't look like a reliable source.

Here is the report: http://www.sanders.senate.gov/imo/media/doc/GAO%20Fed%20Investigation.pdf

Title said it all. Shocking and outrageous.

http://www.sott.net/article/250592-Audit-of-the-Federal-Reserve-Reveals-16-Trillion-in-Secret-Bailouts