Posted on 03/18/2010 5:40:35 AM PDT by combat_boots
Does anyone remember me ranting at the time of the TARP's passage about an obscure little sentence that allowed Bernanke to set the reserve ratio on the banks to zero?
Well, Bernanke's Congressional testimony yesterday garnered a footnote on the issue, specifically:
Given the very high level of reserve balances currently in the banking system, the Federal Reserve has ample time to consider the best long-run framework for policy implementation. The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.
Right. The cost is that you have to actually have something called "capital" behind your loan book, and you had a velocity limiter as well.
This is simply unbelievable. To call such a thing a "distortion" is the worst sort of outrage to come from a central banker.
Reserve requirements have largely become a quaint subject since Greenspan effectively eliminated them by allowing almost-unlimited marketing and use of "sweep accounts." But nonetheless they remain one of the checks and balances on potential bank runs destroying a firm's cash position without warning.
The sheer lack of recognition and understanding that we're in this mess almost exclusively due to excessive leverage in all parts of our financial system is beyond ridiculous - especially for an agency that now wants to be granted even more power of oversight and "regulation."
"I'm sorry" isn't good enough when you operate from a perspective that someone else (in this case the taxpayer) gets to clean up your messes, and this sort of philosophical idiocy will do nothing but guarantee that we'll have much bigger banking messes in our future.
They are effectively saying we will loan money that doesn’t exist. Which effectively means they are making monopoly money. No big surprise here. They are just making it clear that they are the arbiters and creators of wealth. Anybody in their right-mind knows this is insane and will lead to default through printing.
I can’t help but be dumbfounded watching the markets climb like crazy, while nearly a 1/2 million people lose their job every week. The only thing holding this Ponzi scheme up is the complicity of the Fed Reserve, the US Treasury, and the stupidity of the American consumer.
One of these days, the REAL bubble is going to pop. The real bubble is the US Treasury note. In my opinion this is the last refuge of the Ponzi scheme known as the western economy. Watching and waiting. Hopefully i will be able to see the oncoming collapse and cash out in food, bullion and other REAL assets when that time comes.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.