There has been a raging debate about whether we have inflation or deflation. Likely, we have both. It depends on whether you define inflation as monetary inflation or price inflation. It is confusing because the press commonly uses inflation to mean prices going up and economists use it as meaning the money supply is going up (which eventually causes a bubble or prices generally to go up). For a more detailed explanation read Inflation, Deflation and Chaos.
The controversy centers around whether the Fed’s many actions to add liquidity to banks and restart the credit markets are inflationary. Those who say the actions are not inflationary say that the Fed is not increasing the supply of money and credit because the fed is taking collateral of equal value from the banks and, in any event, the loans are temporary. Those who say that it is inflationary include those who point out that the loans are proving not to be temporary and the collateral given to the Fed by the banks is garbage – so the banks are getting more than they are giving up. That means that the Fed is supporting the inflated values of paper held over from the credit bubble or they are adding new, good money to the system, which is an increase in value over the garbage it replaces. So it would seem to be important to know whether the collateral taken by the fed is worth the money loaned on it or whether the collateral is garbage as some allege.
Bloomberg, the financial news service, submitted a Freedom of Information Act request to the Fed to disclose information about the collateral it has taken from the banks. The Fed refused because much of its activity was undertaken using the Federal Reserve Bank of New York. So Bloomberg sued to get the information. It is noteworthy that the Fed argues that the Federal Reserve Bank of New York is not subject to the FOIA because the New York Fed is not a government agency. This is another official confirmation that the Federal Reserve System is a cartel of private banks, as I reported to you in March. Bloomberg is not giving up and political pressure is building for them to disclose the information.
The Fed is refusing to reveal information vital to us all – we need to know whether to be alert for and plan for the inflation that is going to be caused by the Fed’s actions. It is also refusing to allow the public to know whether taxpayers’ money is being poured down a black hole by taking clearly inadequate collateral from entities that under any rational accounting rules are already serious financial risks if not bankrupt.
As if granting a monopoly over money and credit to a cartel of private banks were not bad enough, allowing the national deficit to explode in one year and taking your money and giving it away in secret (part of which funds the bonuses of the clowns responsible for this mess) is beyond outrageous.
Secrecy is important when the enemy is a hostile foreign power. However, the enemy here is you -- they don't want you to know because you would act rationally to defend yourself and demonstrate that they are not acting upon your behalf but on behalf of their twisted concept of the greater good. In other words, the information is important to your financial well-being, which the government has placed in peril, and they don't want you to know it.
Making the citizenry the enemy is not unprecedented. When gold was confiscated in the 1930s, the World War I vintage Trading with the Enemy Act was amended to declare domestic gold “hoarders” enemies of the state when the President declared a “national emergency,” a term which is left undefined. Note the consistent position of the government that the current financial crisis is a national emergency.
As a general proposition, the politicians are learning that they can always get more power in an atmosphere of crisis. So the power-hungry will seek out and elevate crises before they seek more power. There are a great many potential crises out there, and there are a great many people promoting their special issue as an emergency. Just yesterday, former Vice President Gore said that President Obama “must make this January to begin an emergency rescue of human civilization from the imminent and rapidly growing threat posed by the climate crisis.” When someone cries emergency and crisis, it is a signal for you to look out. Once they frighten the population into giving the government more power and impairing the freedoms citizens once enjoyed, they never give them back.