From the Jewish controlled Federal Reserve bank a new plot hatches

Time to kick the money lenders out of the Temple?

The Federal Reserve doesn’t need the public to save , it has quantitative easing in which it can simply create more money out of thin air, the only cost being paper and ink. The plan now is to stop interest payments being made by banks and replace that with charges , or negative interest rates.

Craig Roberts  


Former Treasury Secretary Timothy Geithner, a protege of Treasury  Secretaries Rubin and Summers, has received his reward for continuing  the Rubin-Summers-Paulson policy of supporting the “banks too big to  fail” at the expense of the economy and American people. For his service  to the handful of gigantic banks, whose existence attests to the fact  that the Anti-Trust Act is a dead-letter law, Geithner has been  appointed president and managing director of the private equity firm,  Warburg Pincus and is on his way to his fortune.

A Warburg in-law financed Woodrow Wilson’s presidential campaign.  Part of the reward was Wilson’s appointment of Paul Warburg to the first  Federal Reserve Board. The symbiotic relationship between presidents  and bankers has continued ever since. The same small clique continues to  wield financial power.

Geithner’s career is illustrative. In the 1980s, Geithner worked for  Kissinger Associates. In the mid to late 1990s, Geithner served as a  deputy assistant Treasury secretary. Under Rubin and Summers he moved up  to undersecretary of the Treasury.

From the Treasury he went to the Council on Foreign Relations and  from there to the International Monetary Fund (IMF). From there he was  appointed president of the Federal Reserve Bank of New York, where he  worked to make banks more profitable by allowing higher ratios of debt  to capital, thus contributing to the financial crisis.

Geithner arranged the sale of the failed Wall Street firm of Bear  Stearns, helped with the taxpayer bailout of AIG, and rejected saving  Lehman Brothers from bankruptcy in order to create the crisis atmosphere  needed to more fully subordinate US economic policy to the needs of the  few large banks.

Rubin, a 26-year veteran of Goldman Sachs, was rewarded by Citibank  for his service to the banks while Treasury Secretary with a $50 million  compensation package in 2008 and $126,000,000 between 1999 and 2009.

When a person becomes a Treasury official it is made clear that the  choice is between serving the banks and becoming rich or trying to serve  the public and becoming poor. Few make the latter choice.

As MIchael Hudson has informed us, the goal of the financial sector  has always been to convert all income, from corporate profits to  government tax revenues, to the service of debt. From the bankers  standpoint, the more debt the richer the bankers. Rubin, Summers,  Paulson, Geithner, and now banker Treasury Secretary Jack Lew faithfully  serve this goal.

The Federal Reserve describes its policy of Quantitative Easing — the  creation of new money with which the Fed purchases Treasury debt and  mortgage backed securities — as a low interest rate policy in order to  stimulate employment and economic growth. Economists and the financial  media have parroted this cover story.

In contrast, I have exposed QE as a scheme for pumping profits into  the banks and boosting their balance sheets. The real purpose of QE is  to drive up the prices of the debt-related derivatives on the banks’  books, thus keeping the banks with solvent balance sheets.

Writing in the Wall Street Journal (“Confessions of a Quantitative  Easer,” November 11, 2013), Andrew Huszar confirms my explanation to be  the correct one. Huszar is the Federal Reserve official who implemented  the policy of QE. He resigned when he realized that the real purposes of  QE was to drive up the prices of the banks’ holdings of debt  instruments, to provide the banks with trillions of dollars at zero cost  with which to lend and speculate, and to provide the banks with “fat  commissions from brokering most of the Fed’s QE transactions.” (See: )

This vast con game remains unrecognized by Congress and the public.  At the IMF Research Conference on November 8, 2013, former Treasury  Secretary Larry Summers presented a plan to expand the con game.

Summers says that it is not enough merely to give the banks interest  free money. More should be done for the banks. Instead of being paid  interest on their bank deposits, people should be penalized for keeping  their money in banks instead of spending it.

To sell this new rip-off scheme, Summers has conjured up an  explanation based on the crude and discredited Keynesianism of the 1940s  that explained the Great Depression as a problem caused by too much  savings. Instead of spending their money, people hoarded it, thus  causing aggregate demand and employment to fall.

Summers says that today the problem of too much saving has  reappeared. The centerpiece of his argument is “the natural interest  rate,” defined as the interest rate at which full employment is  established by the equality of saving with investment. If people save  more than investors invest, the saved money will not find its way back  into the economy, and output and employment will fall.

Summers notes that despite a zero real rate of interest, there is  still substantial unemployment. In other words, not even a zero rate of  interest can reduce saving to the level of investment, thus frustrating a  full employment recovery. Summers concludes that the natural rate of  interest has become negative and is stuck below zero.

How to fix this? The way to fix it, Summers says, is to charge people  for saving money. To avoid the charges, people would spend the money,  thus reducing savings to the level of investment and restoring full  employment.

Summers acknowledges that the problem with his solution is that  people would take their money out of banks and hoard it in cash  holdings. In other words, the cash form of money provides consumers with  a freedom to save that holds down consumption and prevents full  employment.

Summers has a fix for this: eliminate the freedom by imposing a  cashless society where the only money is electronic. As electronic money  cannot be hoarded except in bank deposits, penalties can be imposed  that force unproductive savings into consumption.

Summers’ scheme, of course, is a harebrained one. With governments  running huge deficits, who would purchase bonds at negative interest  rates? How would pension and retirement funds operate? Would they also  be subject to an annual percentage confiscation?

We know that the response of consumers to the long term decline in  real median family income, to the loss of jobs from labor arbitrage  across national borders (jobs offshoring), to rising homelessness, to  cuts in the social safety net, to the transformation of their full time  jobs to part time jobs (employers’ response to Obamacare), has been to  reduce their savings rate. Indeed, few have any savings at all. The US  personal saving rate is currently 2 percentage points, about 30%, below  the long term average. Retired people, unable to earn any interest on  their savings from the Fed’s zero interest rate policy, are being forced  to draw down their savings in order to pay their bills.

Moreover, it is unclear whether the savings rate is an accurate  measure or merely a residual of other calculations. With so many people  having to draw down their savings, I wouldn’t be surprised if an  accurate measure showed the personal savings rate to be negative.

But for Summers the plight of the consumer is not the problem. The  problem is the profits of the banks. Summers has the solution, and the  establishment, including Paul Krugman, is applauding it. Once the  economy officially turns down again, watch out.

This column first appeared as a Trend Alert, Trends Research Institute

Paul Craig Roberts was Assistant Secretary of the Treasury for  Economic Policy and associate editor of the Wall Street Journal. He was  columnist for Business Week, Scripps Howard News Service, and Creators  Syndicate. He has had many university appointments. His internet columns  have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.

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