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10 Reasons Why Lindsay Lohan Is Right About The Federal Reserve And The Price Of Food

10 Reasons Why Lindsay Lohan Is Right About The Federal Reserve And The Price Of Food

The American Dream
July 1, 2011
Lindsay Lohan

Does Lindsay Lohan understand monetary policy better than Ben Bernanke does? The other day, her Twitter account sent out the following message: “Have you guys seen food and gas prices lately? U.S. $ will soon be worthless if the Fed keeps printing money!” Well, it turns out that it was a “sponsored tweet” that Lohan was paid to send out, but in a subsequent tweet Lohan explained that “i actually do care about gas and food prices, so whether it’s an #ad or no, it’s important for people to be aware of it.” Okay, so we probably will not see Lohan at any “End the Fed” rallies, but it turns out that in her own bizarre way she has brought a little bit of attention to some very important issues. Food and gas prices are skyrocketing, and a lot of the blame for that can be placed on the shoulders of the Federal Reserve.

So does Lindsay Lohan really understand what is going on in the world of economics?

Of course not.

But if we can get celebrities talking about the Federal Reserve and rising prices that is a good thing.


Well, because Americans listen to celebrities. When a top celebrity says something controversial it gets a lot of attention. The more attention that we can draw to the problems the Federal Reserve is creating the better.

The reality is that the Federal Reserve has been at the heart of our economic problems for decades but most Americans don’t understand the Fed or how it works. The more Americans that get educated about the Federal Reserve the better.

The following are ten reasons why all Americans should be concerned about the Federal Reserve and rising food prices….

#1 What we are witnessing right now is part of a long-term inflationary trend. Since the Federal Reserve was created in 1913, the U.S. dollar has lost over 95 percent of its value. An item that cost $20.00 in 1970 would cost you $116.48 today. An item that cost $20.00 in 1913 would cost you $456.49today.

#2 Over the past couple of years, the Federal Reserve has used a process called “quantitative easing” to pump hundreds of billions of new dollars into the financial system. This has helped push the cost of food, gas and just about everything else up. Even though “QE2? has now come to an end, the Federal Reserve has announced that they are going to continue to “reinvest” hundreds of billions of dollars into the financial system.

#3 The Federal Reserve is not the only central bank that has been doing this sort of thing. Sadly, central banks all over the world have been recklessly printing money over the past several years. This is creating inflation all over the planet.

#4 Prices are going up but wages are not. One recent survey found that 9 out of 10 U.S. workers do not expect their wages to keep up with soaring food prices and soaring gas prices over the next 12 months.

#5 We have already seen a tremendous amount of food inflation in the United States during the last 12 months. According to a recent CNBCarticle, over the past year many of the most popular foods in America have absolutely skyrocketed in price….

Coffee, for instance, is up 40 percent. Celery is 28 percent higher while butter prices rose 26.4 percent. Rounding out the top five are bacon, at 23.5 percent, and cabbage, at 23.3 percent.

#6 In many areas of the world food inflation is far worse than it is in America. Over the past year, the global price of food has risen by 37 percent and this has pushed approximately 44 million more people around the world into poverty.

#7 When the Federal Reserve and other central banks create new money, it usually goes to big banks and major financial institutions first. So what have the big banks and the major financial institutions been doing with this new money? Well, they have been sinking a lot of it into hard assets such as oil, precious metals and agricultural commodities. Over the past 12 months, almost every single agricultural commodity has risen substantially in price. For example, the global price of wheat has approximately doubled over the past year. But it is not just wheat that has been skyrocketing. Check out what a recent Bloomberg article had to say about what has been happening to many key agricultural commodities over the past year….

Corn futures advanced 77 percent in the past 12 months in Chicago trading, a global benchmark, rice gained 39 percent and sugar jumped 64 percent.

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#8 Many areas of the world are experiencing severe drought right now, and this is also harming food prices. For example, the Horn of Africa is experiencing the worst drought that it has seen in 60 years.

#9 The United States is also having crop problems as well. All of the flooding, wildfires and tornadoes that we have seen this year have certainly not helped things. There is even a major “east coast stink bug epidemic” which is causing chaos for large numbers of farmers. In general, U.S. agricultural production has not been blessed this year. It just seems like there is crisis after crisis.

#10 A lot of agricultural production that would go for food is now going for other purposes. For example, almost a third of all corn grown in the United States is now used for fuel. This is putting a lot of stress on the price of corn.

So how concerned about food prices should we be?

Well, renowned investor Jim Rogers recently put it this way….

“We’ve got to do something or we’re going to have no food at any price at times in the next few years.

That doesn’t sound good.

But it is not just the price of food that is going up.

The price of gas has also gotten crazy.

Right now, the average price of a gallon of gasoline in the United States is approximately $3.54.

One year ago, it was $2.76.

Thankfully, the price of gas has actually come down a bit recently. Earlier this year it hit $3.99.

Sadly, back in the 90s you could go to just about any gas station and fill up for about a dollar a gallon. Over the past couple of years we have gotten comfortable with outrageous gas prices, but the reality is that what we are seeing now is part of a very disturbing long-term trend….

Health care costs are also spinning out of control. In a recent article about health care statistics, I noted some of the stats that show that the price of health care in the U.S. has been absolutely soaring. The following are a couple of those statistics….

*According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980. Today they account for approximately 16.3%.

*The United States spent 2.47 trillion dollars on health care in 2009. It is being projected that the U.S. will spend 4.5 trillion dollars on health care in 2019.

Education has also gotten insanely expensive as well. In a recent article I wrote entitled “Is College Worth It?“, I noted that since 1978 the cost of college tuition in the United States has gone up by over 900 percent. Some have even described the growing costs of tuition and the burden of student loan debt as a giant college conspiracy.

Today, Average yearly tuition at U.S. private universities is up to $27,293. That number has soared by 29% in just the past five years.

Unfortunately, it appears that things are going to get even worse. Thanks to dramatic budget cuts by many state governments, it is being projected that college tuition costs are going to rise even faster this year.

All of these rising prices are really squeezing the budgets of families all across America.

Things are getting really tough out there.

So if food prices keep going up this rapidly, what are we all going to eat?

Well, one scientist claims that he has been able to create an “edible steak” out of human feces.

How gross is that?

But don’t laugh – if the price of food keeps going up this rapidly many Americans might have to literally eat garbage someday.

The U.S. economy is in the middle of a long-term economic decline and thousands more Americans fall out of the middle class every single day.

Until the past couple of years, the vast majority of Americans believed that things would always be wonderful in America.

Now that has completely changed.

According to a new poll by CBS News and The New York Times, 39 percent of Americans believe that the U.S. economy has now entered a “permanent decline”.

As prices continue to rise, the number of American families that will not be able to put food on the table is going to continue to go up. Already there are 44 million Americans on food stamps. People are going to get desperate. Society is going to continue to crumble.

So yes, there are lots of reasons why Lindsay Lohan and everyone else in America should be very concerned about the Federal Reserve and the price of food.

Once our economic prosperity is gone it is going to be incredibly difficult to get back.


Foreign Banks Tapped Fed’s Lifeline Most as Bernanke Kept Borrowers Secret

Foreign Banks Tapped Fed’s Lifeline Most as Bernanke Kept Borrowers Secret
By Bradley Keoun and Craig Torres – Apr 1, 2011 1:19 AM ET

March 31 (Bloomberg) — Bloomberg reporter Bob Ivry discusses the release of the Federal Reserve’s discount-window lending records and Goldman Sachs Group Inc.’s borrowing history. He speaks with Matt Miller on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)
Foreign Banks Tapped Fed’s Secret Lifeline Most Crisis Peak

Dexia SA borrowed as much as $33.5 billion through its New York branch from the Fed’s “discount window” lending program, according to Fed documents released yesterday in response to a Freedom of Information Act request.

U.S. Federal Reserve Chairman Ben S. Bernanke’s two-year fight to shield crisis-squeezed banks from the stigma of revealing their public loans protected a lender to local governments in Belgium, a Japanese fishing-cooperative financier and a company part-owned by the Central Bank of Libya.

Dexia SA (DEXB), based in Brussels and Paris, borrowed as much as $33.5 billion through its New York branch from the Fed’s “discount window” lending program, according to Fed documents released yesterday in response to a Freedom of Information Act request. Dublin-based Depfa Bank Plc, taken over in 2007 by a German real-estate lender later seized by the German government, drew $24.5 billion.

The biggest borrowers from the 97-year-old discount window as the program reached its crisis-era peak were foreign banks, accounting for at least 70 percent of the $110.7 billion borrowed during the week in October 2008 when use of the program surged to a record. The disclosures may stoke a reexamination of the risks posed to U.S. taxpayers by the central bank’s role in global financial markets.

The caricature of the Fed is that it was shoveling money to big New York banks and a bunch of foreigners, and that is not conducive to its long-run reputation,” said Vincent Reinhart, the Fed’s director of monetary affairs from 2001 to 2007.

Separate data disclosed in December on temporary emergency- lending programs set up by the Fed also showed big foreign banks as borrowers. Six European banks were among the top 11 companies that sold the most debt overall — a combined $274.1 billion — to the Commercial Paper Funding Facility.

Bank of America

Those programs also loaned tens of billions of dollars to each of the biggest U.S. banks, including JPMorgan Chase & Co. (JPM), Bank of America Corp., Citigroup Inc. and Morgan Stanley.

The discount window, which began lending in 1914, is the Fed’s primary program for providing cash to banks to help them avert a liquidity squeeze. In an April 2009 speech, Bernanke said that revealing the names of discount-window borrowers “might lead market participants to infer weakness.”

The Fed released the documents after court orders upheld FOIA requests filed by Bloomberg LP, the parent company of Bloomberg News, and News Corp.’s Fox News Network LLC. In all, the Fed was ordered to release more than 29,000 pages of documents, covering the discount window and several Fed emergency-lending programs established during the crisis from August 2007 to March 2010.

Public Outrage

The American people are going to be outraged when they understand what has been going on,” U.S. Representative Ron Paul, a Texas Republican who is chairman of the House subcommittee that oversees the Fed, said in a Bloomberg Television interview.

What in the world are we doing thinking we can pass out tens of billions of dollars to banks that are overseas?” said Paul, who has advocated abolishing the Fed. “We have problems here at home with people not being able to pay their mortgages, and they’re losing their homes.”

The Monetary Control Act of 1980 says that a U.S. branch or agency of a foreign bank that maintains reserves at a Fed bank may receive discount window credit.

David Skidmore, a Fed spokesman, declined to comment.

Wachovia Corp. was the only U.S. bank among the top five discount-window borrowers as the crisis peaked.

The Charlotte, North Carolina-based bank borrowed $29 billion from the discount window on Oct. 6, in the week after it nearly collapsed, the data show. Wachovia agreed in principle to sell itself to Citigroup Inc. on Sept. 29, before announcing a definitive agreement to sell itself to Wells Fargo & Co. (WFC) on Oct. 3. The Wells Fargo deal closed at the end of 2008.

Wells Fargo spokeswoman Mary Eshet declined to comment on Wachovia’s discount-window borrowing.

Bank of Scotland

Bank of Scotland Plc, which had $11 billion outstanding from the discount window on Oct. 29, 2008, was a unit of Edinburgh-based HBOS Plc, which announced its takeover by London-based Lloyds TSB Group Plc in September 2008.

The borrowings in 2008 didn’t involve Lloyds, which hadn’t completed its acquisition of HBOS at the time, said Sara Evans, a spokeswoman for the company, which is now called Lloyds Banking Group Plc. (LLOY)

“This is historic usage and on each occasion the borrowing was repaid at maturity
,” Evans said. “The discount window has not been accessed by the group since.”

Other foreign discount-window borrowers on Oct. 29, 2008, included Societe Generale (GLE) SA, France’s second-biggest bank; and Norinchukin Bank, which finances and provides services to Japanese agricultural, fishing and forestry cooperatives. Paris- based Societe Generale borrowed $5 billion that day, and Tokyo- based Norinchukin borrowed $6 billion.

Bank of China

We used it in concert with Japanese and U.S. authorities in the purpose of contributing to the stabilization of the market,” said Fumiaki Tanaka, a spokesman at Norinchukin.

Bank of China, the country’s oldest bank, was the second- largest borrower from the Fed’s discount window during a nine- day period in August 2007 as subprime-mortgage defaults first roiled broader markets. The Chinese bank’s New York branch borrowed $198 million on Aug. 17 of that month, while two Deutsche Bank AG divisions borrowed $1 billion each, according to a document released yesterday.

Arab Banking Corp., then 29 percent-owned by the Libyan central bank, used its New York branch to borrow at least $1.1 billion from the discount window in October 2008.

The foreign banks took advantage of Fed lending programs even as their host countries moved to prop them up or orchestrate takeovers.

Dexia received billions of euros in capital and funding guarantees from France, Belgium and Luxembourg during the credit crunch.


Dexia’s outstanding balance at the Fed has been reduced to zero, Ulrike Pommee, a spokeswoman for the company, said in an e-mail.

This information is backward-looking,” she said. “We experienced a great deal of tension concerning the liquidity of the dollar at the time of the crisis. The Fed played its role as central banker, providing liquidity to banks that needed it.

Depfa was taken over in October 2007 by Hypo Real Estate Holding AG, which in turn was seized by the German government in 2009. Oliver Gruss, a spokesman for Depfa’s parent company, didn’t respond to requests for comment.

Many foreign banks own large pools of dollar assets –bonds, securities and loans — funded by short-term borrowings in money markets. The system works when markets are calm, said Dino Kos, former executive vice president at the New York Fed in charge of open-market operations. In times of stress, banks can be subject to sudden liquidity squeezes, he said.

‘Playing With Fire’

They are playing with fire,” said Kos, a managing director at Hamiltonian Associates Ltd. in New York, an economic research firm. “When the market dries up, and they can’t roll over their funding — bingo, you have a liquidity crisis.”

The potential for dollar shortages remains. As the Greek fiscal crisis roiled financial markets last year, the Fed had to open swap lines with the European Central Bank, the Swiss National Bank, the Bank of England and two other central banks to make more dollars available around the world. That move was partially the result of U.S. money market funds shrinking their exposure to European bank commercial paper.

To contact the reporters on this story: Bradley Keoun in New York at [email protected]; Craig Torres in Washington at [email protected]

To contact the editor responsible for this story: David Scheer at [email protected]

G Edward Griffin on Glenn Beck – END THE FED

The Creature from Jekyll Island – The History of the Fed

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Creation of First and Second Central Bank

The first U.S. institution with central banking responsibilities was the First Bank of the United States, chartered by Congress and signed into law by President George Washington on February 25, 1791 at the urging of Alexander Hamilton. This was done despite strong opposition from Thomas Jefferson and James Madison, among numerous others. The charter was for twenty years and expired in 1811 under President Madison, because Congress refused to renew it.

In 1816, however, Madison revived it in the form of the Second Bank of the United States. Years later, early renewal of the bank’s charter became the primary issue in the reelection of President Andrew Jackson. After Jackson, who was opposed to the central bank, was reelected, he pulled the government’s funds out of the bank. Nicholas Biddle, President of the Second Bank of the United States, responded by contracting the money supply to pressure Jackson to renew the bank’s charter forcing the country into a recession, which the bank blamed on Jackson’s policies. Interestingly, Jackson is the only President to completely pay off the national debt. The bank’s charter was not renewed in 1836. From 1837 to 1862, in the Free Banking Era there was no formal central bank. From 1862 to 1913, a system of national banks was instituted by the 1863 National Banking Act. A series of bank panics, in 1873, 1893, and 1907, provided strong demand for the creation of a centralized banking system.

Creation of Third Central Bank
History of the Federal Reserve System

The main motivation for the third central banking system came from the Panic of 1907, which caused renewed demands for banking and currency reform. During the last quarter of the 19th century and the beginning of the 20th century the United States economy went through a series of financial panics. According to many economists, the previous national banking system had two main weaknesses: an inelastic currency and a lack of liquidity.In 1908, Congress enacted the Aldrich-Vreeland Act, which provided for an emergency currency and established the National Monetary Commission to study banking and currency reform. The National Monetary Commission returned with recommendations which later became the basis of the Federal Reserve Act, passed in 1913.

Federal Reserve Act
Newspaper clipping, December 24, 1913

The head of the bipartisan National Monetary Commission was financial expert and Senate Republican leader Nelson Aldrich. Aldrich set up two commissions—one to study the American monetary system in depth and the other, headed by Aldrich himself, to study the European central banking systems and report on them.[27] Aldrich went to Europe opposed to centralized banking, but after viewing Germany’s monetary system he came away believing that a centralized bank was better than the government-issued bond system that he had previously supported.

In early November 1910, Aldrich met with five well known members of the New York banking community to devise a central banking bill. Paul Warburg, an attendee of the meeting and long time advocate of central banking in the U.S., later wrote that Aldrich was “bewildered at all that he had absorbed abroad and he was faced with the difficult task of writing a highly technical bill while being harassed by the daily grind of his parliamentary duties.” After ten days of deliberation, the bill, which would later be referred to as the “Aldrich Plan”, was agreed upon. It had several key components including: a central bank with a Washington-based headquarters and fifteen branches located throughout the U.S. in geographically strategic locations, and a uniform elastic currency based on gold and commercial paper. Aldrich believed a central banking system with no political involvement was best, but was convinced by Warburg that a plan with no public control was not politically feasible. The compromise involved representation of the public sector on the Board of Directors.

Aldrich’s bill was met with much opposition from politicians. Critics were suspicious of a central bank, and charged Aldrich of being biased due to his close ties to wealthy bankers such as J. P. Morgan and John D. Rockefeller, Jr., Aldrich’s son-in-law. Most Republicans favored the Aldrich Plan, but it lacked enough support in Congress to pass because rural and western states viewed it as favoring the “eastern establishment”. In contrast, progressive Democrats favored a reserve system owned and operated by the government; they believed that public ownership of the central bank would end Wall Street’s control of the American currency supply. Conservative Democrats fought for a privately owned, yet decentralized, reserve system, which would still be free of Wall Street’s control.

The original Aldrich Plan was dealt a fatal blow in 1912, when Democrats won the White House and Congress. Nonetheless, President Woodrow Wilson believed that the Aldrich plan would suffice with a few modifications. The plan became the basis for the Federal Reserve Act, which was proposed by Senator Robert Owen in May 1913. The primary difference between the two bills was the transfer of control of the Board of Directors (called the Federal Open Market Committee in the Federal Reserve Act) to the government. The bill passed Congress in late 1913 on a mostly partisan basis, with most Democrats voting “yea” and most Republicans voting “nay”.