From Mike Whitney of Counterpunch

The Greatest Propaganda Coup of Our Time?

There’s good propaganda and bad propaganda. Bad propaganda is generally crude, amateurish Judy Miller “mobile weapons lab-type” nonsense that figures that people are so stupid they’ll believe anything that appears in “the paper of record.” Good propaganda, on the other hand, uses factual, sometimes documented material in a coordinated campaign with the other major media to cobble-together a narrative that is credible, but false.

The so called Fed’s transcripts, which were released last week, fall into the latter category. The transcripts (1,865 pages) reveal the details of 14 emergency meetings of the Federal Open Market Committee (FOMC) in 2008, when the financial crisis was at its peak and the Fed braintrust was deliberating on how best to prevent a full-blown meltdown. But while the conversations between the members are accurately recorded, they don’t tell the gist of the story or provide the context that’s needed to grasp the bigger picture. Instead, they’re used to portray the members of the Fed as affable, well-meaning bunglers who did the best they could in ‘very trying circumstances’. While this is effective propaganda, it’s basically a lie, mainly because it diverts attention from the Fed’s role in crashing the financial system, preventing the remedies that were needed from being implemented (nationalizing the giant Wall Street banks), and coercing Congress into approving gigantic, economy-killing bailouts which shifted trillions of dollars to insolvent financial institutions that should have been euthanized.

What I’m saying is that the Fed’s transcripts are, perhaps, the greatest propaganda coup of our time. They take advantage of the fact that people simply forget a lot of what happened during the crisis and, as a result, absolve the Fed of any accountability for what is likely the crime of the century. It’s an accomplishment that PR-pioneer Edward Bernays would have applauded. After all, it was Bernays who argued that the sheeple need to be constantly bamboozled to keep them in line. Here’s a clip from his magnum opus “Propaganda”:

“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country.”

Sound familiar? My guess is that Bernays’ maxim probably features prominently in editors offices across the country where “manufacturing consent” is Job 1 and where no story so trivial that it can’t be spun in a way that serves the financial interests of the MSM’s constituents. (Should I say “clients”?) The Fed’s transcripts are just a particularly egregious example. Just look at the coverage in the New York Times and judge for yourself. Here’s an excerpt from an article titled “Fed Misread Crisis in 2008, Records Show”:

“The hundreds of pages of transcripts, based on recordings made at the time, reveal the ignorance of Fed officials about economic conditions during the climactic months of the financial crisis. Officials repeatedly fretted about overstimulating the economy, only to realize time and again that they needed to redouble efforts to contain the crisis.” (“Fed Misread Crisis in 2008, Records Show”, New York Times)

This quote is so misleading on so many levels it’s hard to know where to begin.

First of all, the New York Times is the ideological wellspring of elite propaganda in the US. They set the tone and the others follow. That’s the way the system works. So it always pays to go to the source and try to figure out what really lies behind the words, that is, the motive behind the smokescreen of half-truths, distortions, and lies. How is the Times trying to bend perceptions and steer the public in their corporate-friendly direction, that’s the question. In this case, the Times wants its readers to believe that the Fed members “misread the crisis”; that they were ‘behind the curve’ and stressed-out, but–dad-gum-it–they were trying their level-best to make things work out for everybody.

How believable is that? Not very believable at all.

Keep in mind, the crisis had been going on for a full year before the discussions in these transcripts took place, so it’s not like the members were plopped in a room the day before Lehman blew up and had to decide what to do. No. They had plenty of time to figure out the lay of the land, get their bearings and do what was in the best interests of the country. Here’s more from the Times:

”My initial takeaway from these voluminous transcripts is that they paint a disturbing picture of a central bank that was in the dark about each looming disaster throughout 2008. That meant that the nation’s top bank regulators were unprepared to deal with the consequences of each new event.”

Have you ever read such nonsense in your life? Of course, the Fed knew what was going on. How could they NOT know? Their buddies on Wall Street were taking it in the stern sheets every time their dingy asset pile was downgraded which was every damn day. It was costing them a bundle which means they were probably on the phone 24-7 to (Treasury Secretary) Henry Paulson whining for help. “You gotta give us a hand here, Hank. The whole Street is going toes-up. Please.”

Here’s more from the NYT:

“Some Fed officials have argued that the Fed was blind in 2008 because it relied, like everyone else, on a standard set of economic indicators. As late as August 2008, “there were no clear signs that many financial firms were about to fail catastrophically,” Mr. Bullard said in a November presentation in Arkansas that the St. Louis Fed recirculated on Friday. “There was a reasonable case that the U.S. could continue to ‘muddle through.’ (“Fed Misread Crisis in 2008, Records Show”, New York Times)

There’s that same refrain again, “Blind”, “In the dark”, “Behind the curve”, “Misread the crisis”.

Notice how the Times only invokes terminology that implies the Fed is blameless. But it’s all baloney. Everyone knew what was going on. Check out this excerpt from a post by Nouriel Roubini that was written nearly a full year before Lehman failed:

“The United States has now effectively entered into a serious and painful recession. The debate is not anymore on whether the economy will experience a soft landing or a hard landing; it is rather on how hard the hard landing recession will be. The factors that make the recession inevitable include the nation’s worst-ever housing recession, which is still getting worse; a severe liquidity and credit crunch in financial markets that is getting worse than when it started last summer; high oil and gasoline prices; falling capital spending by the corporate sector; a slackening labor market where few jobs are being created and the unemployment rate is sharply up; and shopped-out, savings-less and debt-burdened American consumers who — thanks to falling home prices — can no longer use their homes as ATM machines to allow them to spend more than their income. As private consumption in the US is over 70% of GDP the US consumer now retrenching and cutting spending ensures that a recession is now underway.

 

On top of this recession there are now serious risks of a systemic financial crisis in the US as the financial losses are spreading from subprime to near prime and prime mortgages, consumer debt (credit cards, auto loans, student loans), commercial real estate loans, leveraged loans and postponed/restructured/canceled LBO and, soon enough, sharply rising default rates on corporate bonds that will lead to a second round of large losses in credit default swaps. The total of all of these financial losses could be above $1 trillion thus triggering a massive credit crunch and a systemic financial sector crisis.” ( Nouriel Roubini Global EconoMonitor)

Roubini didn’t have some secret source for data that wasn’t available to the Fed. The financial system was collapsing and it had been collapsing for a full year. Everyone who followed the markets knew it. Hell, the Fed had already opened its Discount Window and the Term Auction Facility (TAF) in 2007 to prop up the ailing banks–something they’d never done before– so they certainly knew the system was cratering. So, why’s the Times prattling this silly fairytale that “the Fed was in the dark” in 2008?

I’ll tell you why: It’s because this whole transcript business is a big, freaking whitewash to absolve the shysters at the Fed of any legal accountability, that’s why. That’s why they’re stitching together this comical fable that the Fed was simply an innocent victim of circumstances beyond its control. And that’s why they want to focus attention on the members of the FOMC quibbling over meaningless technicalities –like non-existent inflation or interest rates–so people think they’re just kind-hearted buffoons who bumbled-along as best as they could. It’s all designed to deflect blame.

Don’t get me wrong; I’m not saying these conversations didn’t happen. They did, at least I think they did. I just think that the revisionist media is being employed to spin the facts in a way that minimizes the culpability of the central bank in its dodgy, collaborationist engineering of the bailouts. (You don’t hear the Times talking about Hank Paulson’s 50 or 60 phone calls to G-Sax headquarters in the week before Lehman kicked the bucket, do you? But, that’s where a real reporter would look for the truth.)

The purpose of the NYT article is to create plausible deniability for the perpetrators of the biggest ripoff in world history, a ripoff which continues to this very day since the same policies are in place, the same thieving fraudsters are being protected from prosecution, and the same boundless chasm of private debt is being concealed through accounting flim-flam to prevent losses to the insatiable bondholders who have the country by the balls and who set policy on everything from capital requirements on complex derivatives to toppling democratically-elected governments in Ukraine. These are the big money guys behind the vacillating-hologram poseurs like Obama and Bernanke, who are nothing more than kowtowing sock puppets who jump whenever they’re told. Here’s more bunkum from the Gray Lady:

”By early March, the Fed was moving to replace investors as a source of funding for Wall Street.

 

Financial firms, particularly in the mortgage business, were beginning to fail because they could not borrow money. Investors had lost confidence in their ability to predict which loans would be repaid. Countrywide Financial, the nation’s largest mortgage lender, sold itself for a relative pittance to Bank of America. Bear Stearns, one of the largest packagers and sellers of mortgage-backed securities, was teetering toward collapse.

 

On March 7, the Fed offered companies up to $200 billion in funding. Three days later, Mr. Bernanke secured the Fed policy-making committee’s approval to double that amount to $400 billion, telling his colleagues, “We live in a very special time.”

 

Finally, on March 16, the Fed effectively removed any limit on Wall Street funding even as it arranged the Bear Stearns rescue.” (“Fed Misread Crisis in 2008, Records Show”, New York Times)

This part deserves a little more explanation. The author says “the Fed was moving to replace investors as a source of funding for Wall Street.” Uh, yeah; because the whole flimsy house of cards came crashing down when investors figured out Wall Street was peddling toxic assets. So the money dried up. No one buys crap assets after they find out they’re crap; it’s a simple fact of life. The Times makes this sound like this was some kind of unavoidable natural disaster, like an earthquake or a tornado. It wasn’t. It was a crime, a crime for which no one has been indicted or sent to prison. That might have been worth mentioning, don’t you think?

More from the NYT: “…on March 16, the Fed effectively removed any limit on Wall Street funding even as it arranged the Bear Stearns rescue.”

Yipee! Free money for all the crooks who blew up the financial system and plunged the economy into recession. The Fed assumed blatantly-illegal powers it was never provided under its charter and used them to reward the people who were responsible for the crash, namely, the Fed’s moneybags constituents on Wall Street. It was a straightforward transfer of wealth to the Bank Mafia. Don’t you think the author should have mentioned something about that, just for the sake of context, maybe?

Again, the Times wants us to believe that the men who made these extraordinary decisions were just ordinary guys like you and me trying to muddle through a rough patch doing the best they could.

Right. I mean, c’mon, this is some pretty impressive propaganda, don’t you think? It takes a real talent to come up with this stuff, which is why most of these NYT guys probably got their sheepskin at Harvard or Yale, the establishment’s petri-dish for serial liars.

By September 2008, Bernanke and Paulson knew the game was over. The crisis had been raging for more than a year and the nation’s biggest banks were broke. (Bernanke even admitted as much in testimony before the Financial Crisis Inquiry Commission in 2011 when he said “only one ….out of maybe the 13 of the most important financial institutions in the United States…was not at serious risk of failure within a period of a week or two.” He knew the banks were busted, and so did Paulson.) Their only chance to save their buddies was a Hail Mary pass in the form of Lehman Brothers. In other words, they had to create a “Financial 9-11?, a big enough crisis to blackmail congress into $700 no-strings-attached bailout called the TARP. And it worked too. They pushed Lehman to its death, scared the bejesus out of congress, and walked away with 700 billion smackers for their shifty gangster friends on Wall Street. Chalk up one for Hank and Bennie.

The only good thing to emerge from the Fed’s transcripts is that it proves that the people who’ve been saying all along that Lehman was deliberately snuffed-out in order to swindle money out of congress were right. Here’s how economist Dean Baker summed it up the other day on his blog:

“Gretchen Morgensen (NYT financial reporter) picks up an important point in the Fed transcripts from 2008. The discussion around the decision to allow Lehman to go bankrupt makes it very clear that it was a decision. In other words the Fed did not rescue Lehman because it chose not to.

 

This is important because the key regulators involved in this decision, Ben Bernanke, Hank Paulson, and Timothy Geithner, have been allowed to rewrite history and claim that they didn’t rescue Lehman because they lacked the legal authority to rescue it. This is transparent tripe, which should be evident to any knowledgeable observer.” (“The Decision to Let Lehman Fail”, Dean Baker, CEPR)

Here’s the quote from Morgenson’s piece to which Baker is alluding:

“In public statements since that time, the Fed has maintained that the government didn’t have the tools to save Lehman. These documents appear to tell a different story. Some comments made at the Sept. 16 meeting, directly after Lehman filed for bankruptcy, indicate that letting Lehman fail was more of a policy decision than a passive one.” (“A New Light on Regulators in the Dark”, Gretchen Morgenson, New York Times)

Ah ha! So it was a planned demolition after all. At least that’s settled.

Here’s something else you’ll want to know: It was always within Bernanke’s power to stop the bank run and end to the panic, but if he relieved the pressure in the markets too soon (he figured), then Congress wouldn’t cave in to his demands and approve the TARP. Because, at the time, a solid majority of Republicans and Democrats in congress were adamantly opposed to the TARP and even voted it down on the first ballot. Here’s a clip from a speech by, Rep Dennis Kucinich (D-Ohio) in September 2008 which sums up the grassroots opposition to the bailouts:

“The $700 bailout bill is being driven by fear not fact. This is too much money, in too short of time, going to too few people, while too many questions remain unanswered. Why aren’t we having hearings…Why aren’t we considering any other alternatives other than giving $700 billion to Wall Street? Why aren’t we passing new laws to stop the speculation which triggered this? Why aren’t we putting up new regulatory structures to protect the investors? Why aren’t we directly helping homeowners with their debt burdens? Why aren’t we helping American families faced with bankruptcy? Isn’t time for fundamental change to our debt-based monetary system so we can free ourselves from the manipulation of the Federal Reserve and the banks? Is this the US Congress or the Board of Directors of Goldman Sachs?”

But despite overwhelming public resistance, the TARP was pushed through and Wall Street prevailed. mainly by sabotaging the democratic process the way they always do when it doesn’t suit their objectives.)

Of course, as we said earlier, Bernanke never really needed the money from TARP to stop the panic anyway. (Not one penny of the $700 bil was used to shore up the money markets or commercial paper markets where the bank run took place.) All Bernanke needed to do was to provide backstops for those two markets and, Voila, the problem was solved. Here’s Dean Baker with the details:

“Bernanke deliberately misled Congress to help pass the Troubled Asset Relief Program (TARP). He told them that the commercial paper market was shutting down, raising the prospect that most of corporate America would be unable to get the short-term credit needed to meet its payroll and pay other bills. Bernanke neglected to mention that he could singlehandedly keep the commercial paper market operating by setting up a special Fed lending facility for this purpose. He announced the establishment of a lending facility to buy commercial paper the weekend after Congress approved TARP.” (“Ben Bernanke; Wall Street’s Servant”, Dean Baker, Guardian)

So, there you have it. The American people were fleeced in broad daylight by the same dissembling cutthroats the NYT is now trying to characterize as well-meaning bunglers who were just trying to save the country from another Great Depression.

I could be wrong, but I think we’ve reached Peak Propaganda on this one.

(Note: By “good” propaganda, I mean “effective” propaganda. From an ethical point of view, propaganda can never be good because its objective is to intentionally mislead people…..which is bad.)

Share

Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/news/2014-03-01/greatest-propaganda-coup-our-time

, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Just a week ago, Ben Bernanke stumbled when he almost admitted that "forward guidance worked in theory, but not in practice," and while the Fed is sticking to its guns with lower for longer "forward guidance" to replace "as much money as you can eat" quantitative easing; and the ECB promising moar for longer; the Bank of England's Mark Carney just threw them all under the bus by u-turning on his employment-based forward guidance strategy. Having previously established thresholds for his monetray policy guidance, as the FT reports, he has now ditched those plans (as we warned he might "lose his credibility" here) as the British economy is "in a different place" now. And still, we are supposed to trust these bankers to run the world? Perhaps most interesting is the FT changed its title on the story very quickly!

 

Via The FT,

 

Mr Carney signalled the policy U-turn in a series of TV interviews while attending the World Economic Forum in Davos. However, he added that he had no plans to raise interest rates “immediately”.

 

 

Speaking to the BBC’s Newsnight in response to the news this week that UK unemployment had fallen to 7.1 per cent, almost to the point the BoE said it would consider a rate rise, the bank has decided not to revise its 7 per cent unemployment threshold but drop the idea completely.

 

 

The BoE followed the Federal Reserve in announcing forward guidance last August in a bid to make monetary policy “more effective”. It said it would not consider a rate rise in the UK at least until unemployment fell to 7 per cent from the rate last summer of 7.9 per cent.

 

The BoE forecast that it was most likely that unemployment would fall to the 7 per cent threshold only in 2016. Recognising a serious forecasting error has caused red faces at the BoE and created confusion over the policy, Mr Carney will address the subject again on Friday and Saturday.

 

 

Commenting on the huge errors in the bank’s forecasts, Mr Carney said: “If our forecast is going to be wrong, it’s better to be wrong in that direction”.

 

What is perhaps more interesting is the fact that the FT changed the title of the story very quickly…

 

Before…

 

After…

 

It seems someone at the BoE did not like it…

Share

Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/news/2014-01-23/bank-england-folds-forward-guidance

, , , , , , , , ,

How to Kill a Dollar 

Courtesy of Phil of Phil’s Stock World 

How do you kill the Dollar?

That’s the question that was on everyone’s mind last week. The smallest indication of Dollar strength caused a Global equity meltdown. As Stock World Weekly has been pointing out all year, and as evidenced by this 2-year chart of the Dow relative to UUP (Dollar index), essentially our entire 40% rally since last summer was at least augmented by QE2’s 20% weakening of Dollar buying power. 

If we give the market the benefit of the doubt and say there should be a 1:1 relationship between the Dollar losing buying power and the price of equities (which are priced in Dollars) rising, then we could assume that 20% of the rise in the market was “natural” while the other 20% was inflated due to the weak Dollar.  BUT – you have to take into account the double boost that is given to commodity companies who get paid more for what they sell. That’s tremendous over- PRICING of the energy, mining and agricultural sectors.  Our exporters also greatly benefited from the strong Dollar and that benefit will reverse itself should the Dollar reassert it’s strength.  (You can review our Billions of Dollars of profitable trade ideas in the Weekly Wrap-Up, many of which will be useful again this week if we keep falling!) 

Obviously, no one is ready for this. The weak Dollar was pretty much the only reason we had the pretense of a global recovery.  It made it look like there was a demand for commodities (there was not), it made it look like there was a demand for American goods (there was not) and it made it look like we were paying our debts, which we were – but with discounted Dollars that were being created by the Federal reserve at a rate of over $50Bn per month.  

In fact, the Fed has expanded its balance sheet (ie. printed money) by $2Tn since October of 2008.  As you can see from the chart on the left (from the Cleveland Fed), there have been huge increases this year in “Long-Term Security Purchase” (T-Bills) as QE2’s primary purpose was to keep our lending rate artificially low by faking a demand for the $140Bn a month of debt paper that is being issued by the Treasury.

This chart just covers the first four months of the year and you can see Long-Term Security Purchases (in Red) grow from $700Bn to $1.3Tn in 5 months of QE2 (beginning in December).  This has not been an issue of the Fed putting training wheels on the bike for us – this is the Fed drugging us, sitting us on the floor, playing a video of a bike ride and pretending we are ready to go on our own.  

Clearly we are not ready at all!  Just the threat of the removal of QE2 has caused the global economy to begin to wobble and we’ve fallen 7.5% in 30 days and we can’t get up.  The Dollar hasn’t actually gone anywhere – it has simply stopped going down.  We spiked to a low of 72.95 at the beginning of May and are now back to the 75 line, that’s up 2.5% from where we called a market top due, in fact, to the Dollar bottom call we made at the same time.  Now we are, hopefully, about halfway through a correction IF they can get the Dollar to stop at the 77.50 line, which is the falling 200 dma.  We discussed this last night in Member Chat so I won’t go back over it, but it’s all very dependent on whether or not we can slow this descent of the Global Markets and stop them from breaking critical technical support (as I mentioned last Tuesday, S&P 1,266 is the single most important line that needs to hold).  

The entire financial sector threw a temper tantrum starting with JPM’s Jaimie Dimon, who whined almost as much as Bernanke as he spun his little tale of banking woe if Uncle Ben should cut off his QE2 money and leave him at the hands of the evil regulators and their “rules” that might stop him and his pals from destroying the Global Economy (again).  That sent XLF down to new lows and the financials are down over 10% since early April. We’re now playing them for a bounce this week in to option expiration day on Friday.  What Dr. Bernanke and Mr. Dimon both seem to forget is we used to regulate banks just fine under the Glass-Steagall, which worked well for almost 70 years until it was repealed and replaced by the Gramm-Leach-Bliley Act that paved the way for a decade of Bankers Gone Wild.  

So here we are, 11 years after Gramm-Leach-Bliley began the destruction of the Global Economy, and what are we going to do about it?  We’ve created a monster and that monster is the heart of our economy – we can’t kill it.  We could have/should have let it die back in 2008 when the whole system was collapsing but, instead of spending $8Tn on unemployment and infrastructure (enough to give 150M US workers $53,333 each!), we gave it to the Banksters so that they could get back on their feet and, hopefully, eventually, trickle down some of their wealth on the rest of us.  

Of course it’s stupid.  It’s also stupid that we have the World’s lowest EFFECTIVE Corporate Tax Rate and that our top 400 households (who average $300M a year in income) pay an average of 16.6% in taxes while the average family earning over $1M a year pays an average of 22.8% in taxes – 33% LESS than families earning $50,000-250,000 a year!  Our ENTIRE deficit is right there – in our lack of collections, not our excess of spending, which is in-line as a percentage of GDP with the rest of the World.    

Keep in mind that the 11.2% per Million ($112,000) that a wealthy family doesn’t pay, represents 11.2% MORE that 10 families earning $100,000 have to pay ($11,200) to balance out the revenues. This does not even take into account regressive taxes like Social Security, Medicare, Sales Taxes and Property Taxes – all of which disproportionately tax the poor as a percentage of their income.  For people with fixed mortgages, rising property taxes are the number one reason families can no longer afford their “mortgage payment“. 

This was a very clever offshoot of the Reagan Revolution, where home ownership was encouraged under the Tax Reform Act of 1986 while, at the same time, the Government “de-centralized” and shoved a huge portion of the tax burden away from the Federal Government (where income is taxed progressively) and down to the Local Level, where regressive taxes were the norm.  Over the past 24 years, this has shifted over $2Tn worth of tax payments from the top 1% to the bottom 90%.

Well, no use crying over spilled middle-class dreams, is there.  What we have now is an economy that is almost entirely driven by Banking Interests so, if we want our markets to be strong, we need to do what is good for the banks.  At the moment, that means keeping the Dollar as weak as possible. All the stops were pulled out this weekend, beginning with Jean-Clade Junker on Saturday, who lashed out at the US – calling our debt levels “disastrous.”  That managed to knock the Dollar down from Friday’s 75.30 level back to the 75 mark in early EU trading and at 9:30 this morning we hear from the Fed’s Fred Lacker and then, at 7 pm, it’s Fred Fisher’s turn to give us an Economic Update.  

On the other side of the pond, Bundesbank’s Jens Weidmann says a Greek default would not destabilize the Euro saying:  “If the commitments are not met, that cancels the basis for further funds from the aid package.  This would be Greece’s decision, and the country then would have to bear the surely dramatic economic consequences of a default. I don’t think this would be sensible, and it would surely put partner countries in a difficult situation. But the euro would even in this case remain stable.”  Weidmann’s depiction of a default as a liveable outcome contrasts with warnings from fellow ECB officials Lorenzo Bini Smaghi and Christian Noyer, as well as European Union Economic and Monetary Affairs Commissioner Olli Rehn, who described it as a “Lehman Brothers catastrophe” last week – causing the Euro to hit new lows for the month.  

Meanwhile, heading a little further East, China’s June CPI will not hit a record high of 5%. According to the China Securities Journal, it is now likely to hit 6%. Meanwhile, our friends at the IBanks have boosted their bullish bets on Agriculture for the third consecutive week. If all goes “well”, maybe we can shove China’s food inflation high enough to push the CPI over 7% in July! It doesn’t do any good to burst the oil bubble if all the money just moves into a food bubble. We made great money betting that just 369,000 oil futures contracts were unsustainable at $101+, now there are 759,974 net long Ag positions. This can get really, really ugly if they can’t find some way to knock the Dollar back down.  

Let’s be careful out there.  

 

Try out PSW’s Stock World Weekly, free, here >

Share

Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/article/how-kill-dollar

, , , , , , , , , , , , , , ,