Aug 20, 2016 8:56 AM
This week, The Federal Reserve released the minutes from its July meeting a few weeks ago in which they decided to NOT raise interest rates.
These minutes are the official archive of the meeting, providing details about the presentations, debates, and discussions that took place.
They contain very formal sounding language, referring to their near-zero interest rates as "accommodation" in the same way that my high school health teacher preferred to use the more clinical term "copulation" instead of "sex".
As an example, the most recent Fed minutes state:
"members agreed to indicate that they would continue to closely monitor global economic and financial developments."
What in the world does that even mean?
I really get so tired of their forked-tongue garbage.
Interest rates are at 5,000 year lows. There are now 500 MILLION people around the world, in fact, living under NEGATIVE interest rates.
Remember that money is essentially nothing more than a measurement of economic value, in the same way that a meter or a mile is a measure of distance.
Just imagine the chaos if there were some unelected committee of bureaucrats who got together from time to time to change the value of the mile.
Or imagine if, tomorrow morning, they decided that the mile would be shortened by 20%.
Some people would benefit from that arrangement (taxi drivers). Others would be worse off (taxi passengers). There are always winners and losers.
Similarly, there are always winners and losers with monetary policy.
And these unelected central bankers have made a series of very deliberate decisions to forsake one segment of the population (anyone trying to save money) for the benefit of another (those who are heavily in debt, like, ummmm, governments).
They try to wrap their decisions up with fancy sounding language about "accommodation" and 14 pages of fluff like:
". . . the Committee should wait to take another step in removing accommodation until the data on economic activity provided a greater level of confidence that economic growth was strong enough to withstand a possible downward shock to demand."
But if there were some secret minutes detailing the Fed's inner conscience that were leaked to the public, here's what they would really be saying:
"Nothing terribly catastrophic has happened yet, so we have decided to continue screwing responsible savers with interest rates that are at 5,000 year lows so that this dangerous asset bubble can persist, the federal government can continue indebting future generations, and the commercial banks can keep making tons of money, because we are shit scared that even the tiniest 0.25% increase in interest rates will completely derail this totally fragile economy, and that would be really bad for Barack Obama and Hillary Clinton."
sabato 20 agosto 2016
Are Central Banks Secretly Preparing For Another Crisis?
August 19, 2016
A major crisis warning signal just hit.
It concerns "behind the scenes" liquidity for Central banks.
Here's how it works.
When "all is well" in the financial system, foreign Central Banks like to park money at the Fed overnight. The reason they do this is because the Fed offers a special program that yields more interest than money markets.
So when things are calm in the financial system, foreign Central Banks don't need emergency access to capital and so park significant amounts of money with the Fed overnight.
But when things are bad and foreign Central Banks NEED access to capital, this number falls.
As Worth Way notes, this number is falling… in a big way. In fact, any time it's fallen by this much (5.6% year over year) a crisis hits soon after.
A major crisis warning signal just hit.
It concerns "behind the scenes" liquidity for Central banks.
Here's how it works.
When "all is well" in the financial system, foreign Central Banks like to park money at the Fed overnight. The reason they do this is because the Fed offers a special program that yields more interest than money markets.
So when things are calm in the financial system, foreign Central Banks don't need emergency access to capital and so park significant amounts of money with the Fed overnight.
But when things are bad and foreign Central Banks NEED access to capital, this number falls.
As Worth Way notes, this number is falling… in a big way. In fact, any time it's fallen by this much (5.6% year over year) a crisis hits soon after.
Shocking Government Report Finds $6.5 Trillion In Taxpayer Funds "Unaccounted For"
Aug 19, 2016 4:42 PM
Last week, we first touched on a topic which, in any non-banana republic, would be a far greater scandal than what Ryan Lochte may or may not have been doing in a Rio bathroom: namely, government corruption, falsification and potential fraud and embezzlement, which has resulted in the Pentagon being unable to account for up to $8.5 trillion in taxpayer funding.
Today, Reuters follows up on this disturbing issue, and reveals that the Army's finances are so jumbled it had to make trillions of dollars of improper accounting adjustments to create an illusion that its books are balanced. The Defense Department's Inspector General, in a June report, said the Army made $2.8 trillion in wrongful adjustments to accounting entries in one quarter alone in 2015, and $6.5 trillion for the year. Yet the Army lacked receipts and invoices to support those numbers or simply made them up.
As a result, the Army's financial statements for 2015 were "materially misstated," the report concluded. The "forced" adjustments rendered the statements useless because "DoD and Army managers could not rely on the data in their accounting systems when making management and resource decisions."
For those wondering, this is what $1 trillion in $100 bills looks like.
Now multiply by 6.
This is not the first time the DoD has fudged its books: disclosure of the Army's manipulation of numbers is the latest example of the severe accounting problems plaguing the Defense Department for decades. The report affirms a 2013 Reuters series revealing how the Defense Department falsified accounting on a large scale as it scrambled to close its books. As a result, there has been no way to know how the Defense Department – far and away the biggest chunk of Congress' annual budget – spends the public's money.... The Army lost or didn't keep required data, and much of the data it had was inaccurate, the IG said.
In other words, it is effectively impossible to account how the US government has spent trillions in taxpayer funds over the years. It also means that since the money can not be accounted for, a substantial part of it may have been embezzled.
"Where is the money going? Nobody knows," said Franklin Spinney, a retired military analyst for the Pentagon and critic of Defense Department planning, cited by Reuters.
The significance of the accounting problem goes beyond mere concern for balancing books, Spinney said. Both presidential candidates have called for increasing defense spending amid current global tension; the only issue is that more spending may not be necessary - all that is needed is less government corruption and theft.
An accurate accounting could reveal deeper problems in how the Defense Department spends its money. Its 2016 budget is $573 billion, more than half of the annual budget appropriated by Congress. The Army account's errors will likely carry consequences for the entire Defense Department. Congress set a September 30, 2017 deadline for the department to be prepared to undergo an audit.
What's worse is that the "fudging" of the numbers is well known to everyone in the government apparatus. For years, the Inspector General – the Defense Department's official auditor – has inserted a disclaimer on all military annual reports. The accounting is so unreliable that "the basic financial statements may have undetected misstatements that are both material and pervasive."
Not surprisingly, trying to figure out where the adjustments are has proven to be impossible.
Jack Armstrong, a former Defense Inspector General official in charge of auditing the Army General Fund, said the same type of unjustified changes to Army financial statements already were being made when he retired in 2010.
The Army issues two types of reports – a budget report and a financial one. The budget one was completed first. Armstrong said he believes fudged numbers were inserted into the financial report to make the numbers match.
"They don't know what the heck the balances should be," Armstrong said.
Meanwhile, for government employees, such as those at the Defense Finance and Accounting Services (DFAS), which handles a wide range of Defense Department accounting services, the whole issue is one big joke, and they refer to preparation of the Army's year-end statements as "the grand plug," Armstrong said. "Plug", of course, being another name for made-up numbers.
Finally, how on earth can one possibly "not account" for trillions? As Reuters adds, at first glance adjustments totaling trillions may seem impossible. The amounts dwarf the Defense Department's entire budget. However, when making changes to one account also require making changes to multiple levels of sub-accounts. That creates a domino effect where falsifications kept falling down the line. In many instances this daisy-chain was repeated multiple times for the same accounting item.
The IG report also blamed DFAS, saying it too made unjustified changes to numbers. For example, two DFAS computer systems showed different values of supplies for missiles and ammunition, the report noted – but rather than solving the disparity, DFAS personnel inserted a false "correction" to make the numbers match.
DFAS also could not make accurate year-end Army financial statements because more than 16,000 financial data files had vanished from its computer system. Faulty computer programming and employees' inability to detect the flaw were at fault, the IG said.
DFAS is studying the report "and has no comment at this time," a spokesman said. We doubt anyone else will inquire into where potentially trillions in taxpayer funds have disappeared to; meanwhile the two presidential candidates battle it out on the topic of tax rates when the real problem facing America is not how much money it draws in - after all the Fed can and will simply monetize the deficit - but how it spends it. Sadly, we may never know.
Last week, we first touched on a topic which, in any non-banana republic, would be a far greater scandal than what Ryan Lochte may or may not have been doing in a Rio bathroom: namely, government corruption, falsification and potential fraud and embezzlement, which has resulted in the Pentagon being unable to account for up to $8.5 trillion in taxpayer funding.
Today, Reuters follows up on this disturbing issue, and reveals that the Army's finances are so jumbled it had to make trillions of dollars of improper accounting adjustments to create an illusion that its books are balanced. The Defense Department's Inspector General, in a June report, said the Army made $2.8 trillion in wrongful adjustments to accounting entries in one quarter alone in 2015, and $6.5 trillion for the year. Yet the Army lacked receipts and invoices to support those numbers or simply made them up.
As a result, the Army's financial statements for 2015 were "materially misstated," the report concluded. The "forced" adjustments rendered the statements useless because "DoD and Army managers could not rely on the data in their accounting systems when making management and resource decisions."
For those wondering, this is what $1 trillion in $100 bills looks like.
Now multiply by 6.
This is not the first time the DoD has fudged its books: disclosure of the Army's manipulation of numbers is the latest example of the severe accounting problems plaguing the Defense Department for decades. The report affirms a 2013 Reuters series revealing how the Defense Department falsified accounting on a large scale as it scrambled to close its books. As a result, there has been no way to know how the Defense Department – far and away the biggest chunk of Congress' annual budget – spends the public's money.... The Army lost or didn't keep required data, and much of the data it had was inaccurate, the IG said.
In other words, it is effectively impossible to account how the US government has spent trillions in taxpayer funds over the years. It also means that since the money can not be accounted for, a substantial part of it may have been embezzled.
"Where is the money going? Nobody knows," said Franklin Spinney, a retired military analyst for the Pentagon and critic of Defense Department planning, cited by Reuters.
The significance of the accounting problem goes beyond mere concern for balancing books, Spinney said. Both presidential candidates have called for increasing defense spending amid current global tension; the only issue is that more spending may not be necessary - all that is needed is less government corruption and theft.
An accurate accounting could reveal deeper problems in how the Defense Department spends its money. Its 2016 budget is $573 billion, more than half of the annual budget appropriated by Congress. The Army account's errors will likely carry consequences for the entire Defense Department. Congress set a September 30, 2017 deadline for the department to be prepared to undergo an audit.
What's worse is that the "fudging" of the numbers is well known to everyone in the government apparatus. For years, the Inspector General – the Defense Department's official auditor – has inserted a disclaimer on all military annual reports. The accounting is so unreliable that "the basic financial statements may have undetected misstatements that are both material and pervasive."
Not surprisingly, trying to figure out where the adjustments are has proven to be impossible.
Jack Armstrong, a former Defense Inspector General official in charge of auditing the Army General Fund, said the same type of unjustified changes to Army financial statements already were being made when he retired in 2010.
The Army issues two types of reports – a budget report and a financial one. The budget one was completed first. Armstrong said he believes fudged numbers were inserted into the financial report to make the numbers match.
"They don't know what the heck the balances should be," Armstrong said.
Meanwhile, for government employees, such as those at the Defense Finance and Accounting Services (DFAS), which handles a wide range of Defense Department accounting services, the whole issue is one big joke, and they refer to preparation of the Army's year-end statements as "the grand plug," Armstrong said. "Plug", of course, being another name for made-up numbers.
Finally, how on earth can one possibly "not account" for trillions? As Reuters adds, at first glance adjustments totaling trillions may seem impossible. The amounts dwarf the Defense Department's entire budget. However, when making changes to one account also require making changes to multiple levels of sub-accounts. That creates a domino effect where falsifications kept falling down the line. In many instances this daisy-chain was repeated multiple times for the same accounting item.
The IG report also blamed DFAS, saying it too made unjustified changes to numbers. For example, two DFAS computer systems showed different values of supplies for missiles and ammunition, the report noted – but rather than solving the disparity, DFAS personnel inserted a false "correction" to make the numbers match.
DFAS also could not make accurate year-end Army financial statements because more than 16,000 financial data files had vanished from its computer system. Faulty computer programming and employees' inability to detect the flaw were at fault, the IG said.
DFAS is studying the report "and has no comment at this time," a spokesman said. We doubt anyone else will inquire into where potentially trillions in taxpayer funds have disappeared to; meanwhile the two presidential candidates battle it out on the topic of tax rates when the real problem facing America is not how much money it draws in - after all the Fed can and will simply monetize the deficit - but how it spends it. Sadly, we may never know.
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