Forex Exchange

The fight between Harry Reid and John Boehner's dueling debt plans is high melodrama. But the fact is that both plans would likely result in a credit downgrade for the U.S. Huffington Post notes : CNN's Erin Burnett relayed word from her sources on Wall Street that the newest Republican plan would not satisfy the credit rating agencies, which have soured on the idea of a short-term solution to the debt ceiling debate.... "I think it is important to emphasize that most people think both of the plans are really Band-Aids and don't deal in any significant way with the spending and cost issues in the country," Burnett said. "The issue was that Speaker Boehner's plan does not cut enough spending right away. Harry Reid's plan would cut about $2.7 trillion. Just because it is bigger than Speaker Boehner's plan is really the reason the Boehner plan may still trigger a downgrade." Burnett was far from equivocal. At one point she added that...

I noted yesterday that the Federal Reserve has admitted that its 12 member banks are private - not governmental - entities. Reader Siesta00000 sent me the following post with links to C-Span video of two of the Federal Reserve's senior counsel stating in court that this is true [I've edited for readability]: During the second circuit court of appeals case for FOX News & Bloomberg v. Board of Governors lawyers in defense of the Fed make some revealing statements during the arguments. At about 13:45, the Fed lawyer stated: "We do not believe the Federal Reserve Board is an agency, the Board of Governors, . . . the Federal Reserve Bank excuse me." (He made the mistake of saying the Federal Reserve Board when he meant the Federal Reserve Bank.) *** He admitted the Federal Reserve Banks were not Federal Agencies in a court of law. Watch the lawyer's statement: here [video will play automatically once you click, but may take awhile to load. The videos are ...

As I've repeatedly noted, U.S. credit could well be downgraded even if a debt ceiling deal is reached. See this , this , this and this . As Zeke Miller and Yves Smith note, the Chicago Mercantile Exchange has announced that it will give less credit for U.S. treasury bills and foreign sovereign debt posted as collateral. This could be the first tangible effect of weakening U.S. credit. Note: Technically, the CME downgraded treasury bills based upon concerns about volatility, not their inherent worth.

Addison Wiggin notes : Whatever agreement emerges from the backroom dealing [on the debt], it is now almost sure to include what we’ve labeled a “stealth default” on Social Security. The White House quietly put out the word two weeks ago that it’s on board. Congressional Republicans think it’s a super idea, too. “There hasn’t been any economist anywhere that says we shouldn’t do that,” says Sen. Tom Coburn (R-Okla.). Of course, they don’t call it a stealth default. They call it “chained CPI.” This stealth default has occurred before. When Social Security was in trouble in 1983, one of the Greenspan Commission’s fixes included an adjustment to the consumer price index known as “substitution.”http://www.blogger.com/img/blank.gif It works like this: If steak gets too expensive and you start buying hamburger instead… well, your price of beef hasn’t really gone up and your cost of living is unchanged. This is one of the reasons official CPI is running 3.6%, but if it w...

The Wall Street Journal noted last week: Swiss bank UBS said that gold, which cracked the $1,600 a troy ounce mark on Monday, will be the only precious metal with a supply deficit this year, as demand outstrips inventory for the first time since 2020. See this for background.

Much of the tens of trillions in bailout money and "easy" money from quantitative easing went to foreign banks (and see this , this and this ). Indeed, Ron Paul noted recently that one-third of all fed bailout loans - and essentially 100% of loans from the New York Fed - went to foreign banks. The New York Fed is the most important Fed bank. As Bloomberg pointed out in 2020: The New York Fed is one of 12 regional Federal Reserve banks and the one charged with monitoring capital markets. It is also managing $1.7 trillion [now up to at least $1.9 trillion] of emergency lending programs [and accepting collateral from the banks in return]. However, the country's most powerful "agency" - the Federal Reserve - is actually no more federal than Federal Express . The Fed itself admitted (via Bloomberg): While the Fed’s Washington-based Board of Governors is a federal agency subject to the Freedom of Information Act and other government rules, the New York...

Ryan Grim has an update on his story about the "Super Congress", which I discussed yesterday: The Super Congress amounts to an institutionalization of the gang structure that exists informally in the Senate, where a small number of lawmakers write legislation behind closed doors and then announce it to the public। Legislation written by the Super Congress would be extremely difficult for individual members of Congress to stop. No wonder both liberals and conservatives hate the proposal. Indeed, the Founding Fathers' vision of prosperity has been destroyed - and we've gone from the "wealth of nations" to the "debt of nations" - at least in part because our political system has been subverted by non-Constitutional committees and entities. For example, the country's most powerful "agency" - the Federal Reserve - has admitted that its 12 member banks are private , not government entities .