The Federal Reserve Opposes More Congressional Oversight and Audit Proposed By Senator Rand Paul — Audit The Fed and Then End The Fed — Videos

Posted on February 8, 2015. Filed under: American History, Banking, Blogroll, Business, College, Economics, Education, Employment, Faith, Family, Federal Government, Federal Government Budget, Fiscal Policy, Foreign Policy, Freedom, government, government spending, history, History of Economic Thought, Homes, Illegal, Immigration, Inflation, Investments, Law, Legal, liberty, Life, Links, Macroeconomics, media, Microeconomics, Monetary Policy, Money, Money, People, Philosophy, Photos, Politics, Press, Raves, Resources, Strategy, Talk Radio, Tax Policy, Taxes, Unemployment, Video, War, Wealth, Welfare, Wisdom, Writing | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

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Story 1: The Federal Reserve Opposes More Congressional Oversight and Audit Proposed By Senator Rand Paul — Audit The Fed and Then End The Fed — Videos

rand Paul

janet-yellen

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Rand Paul – Audit the Fed!

Major Move! House Passes Bill to Audit Federal Reserve!

Senator Vitter (R-LA) asks Janet Yellen about Audit the Fed (S.209)

Rand Paul on Janet Yellen, Transparency At The Fed, And Nsa Spying Bloomberg

Rand Paul: ‘Audit the Fed’ – CNBC 5/22/2013

Audit the Fed. by Ron Paul. Harry Reid gets slammed –

Fed fires back at Rand Paul

The Federal Reserve is lashing out at Sen. Rand Paul’s plan to give Congress more oversight over the central bank, a proposal that could gain traction in the new Republican-led Congress.

The Kentucky Republican reintroduced his “Audit the Fed” legislation last month with 30 co-sponsors, including other potential 2016 GOP hopefuls, Sens. Ted Cruz (Texas) and Marco Rubio (Fla.).

The proposal — once championed by his father, former Rep. Ron Paul (R-Texas) —would subject the central bank to an audit by the Government Accountability Office (GAO).

Regional bank presidents from around the country are decrying the plan, which they argue could damage the economy.

“Who in their right mind would ask the Congress of the United States — who can’t cobble together a fiscal policy — to assume control of monetary policy?” Richard Fisher, president of the Federal Reserve Bank of Dallas, said during an interview with The Hill.

Fed Chairwoman Janet Yellen has already vowed to fight the legislation, and President Obama would likely veto it.

Still, Fed watchers note that Paul has become emboldened by the new Republican majority in Congress. And he possesses an ever louder national microphone, as he moves closer to a 2016 presidential run.

Together, those factors could elevate the issue in the coming months, a prospect that has spurred strong words from bank officials.

Philadelphia Fed President Charles Plosser told The Hill that financial auditing “already exists” for the Fed, and warned that Paul’s plan would empower Congress “to audit and question monetary policy decisions in real time.”

“This runs the risk of monetary policy decisions being based on short-term political considerations instead of the longer-term health of the economy,” Plosser said.

Paul pushed back against the criticism, saying Fed officials “will say and do anything to keep their business hidden from the American people.”

For Paul, the legislation allows him to burnish his Republican-libertarian credentials.

And he appears to want to make it part of his early presidential campaigning. On Friday, Paul will hold an Audit the Fed rally in Des Moines, Iowa, as part of a weekend trip to the early presidential caucus state.

The issue could give Paul an opening to tap into the public’s mistrust of the government, more than six years after the federal bailouts that followed the 2008 economic crisis.

“This secretive government-run bureaucracy promotes policies that have impacted the lives of all Americans,” Paul said. “Citizens have the right to know why the Fed’s policies have resulted in a stagnant economy and record numbers of people dropping out of the workforce.”

Fisher said lawmakers are looking to shift blame, having proven “unable to get together with their own colleagues on a working fiscal policy or construct a regulatory regime that incentivizes investment and job creation.”

“So they simply find it convenient to create a boogeyman out of an entity that does its job efficiently — the Federal Reserve,” Fisher said. “To some outsiders the Fed appears to be some kind of combination of Hogwarts, the Death Star, and Ebenezer Scrooge — especially to those who don’t take the time to read the copious amounts of reports and speeches and explanations we emit.”

The twelve presidents of the Fed’s regional banks are well connected, their boards of directors stacked with influential business leaders. They are likely to intensify their opposition to Paul’s proposal.

On Wednesday, Cleveland Fed President Loretta Mester criticized the legislation as “misguided” during public remarks in Columbus, Ohio.

“They really are about allowing political considerations to influence monetary policy decisions,” Mester said in her speech. “This would be a tremendous mistake, because it would ultimately lead to poorer economic performance.”

Yellen, who met with Senate Democrats last week on Capitol Hill, is scheduled to testify before Congress later this month. The appearance will be her first since Republicans seized control of the Senate, and she will likely face questions on the legislation.

Senate Banking Committee Chairman Richard Shelby (R-Ala.), whose panel has jurisdiction on the bill, has also said he is interested in holding hearings on the issue.

http://thehill.com/policy/finance/231822-fed-fires-back

Rand Paul Slams Federal Reserve’s Secrecy, Reintroduces Bill to ‘Audit the Fed’

Sen. Rand Paul is reviving his push to audit the Federal Reserve.

The Kentucky Republican and presumptive 2016 presidential candidate said he wants to bring several of the Fed’s monetary activities under congressional oversight.

In a statement released Monday, Paul said it was time to end the secrecy behind the Fed. He believes an audit is the best way to do it.

“[An] audit of the Fed will finally allow the American people to know exactly how their money is being spent by Washington.” Paul said.
He slammed the Fed’s current operating practices, saying it works “under a cloak of secrecy and it has gone on for too long.”

Paul concluded that “the American people have a right to know what the Federal Reserve is doing with our nation’s money supply.”

>>> Much More to Friedman Than Rule-Based Monetary Policy

Calls for a Fed audit increased after the 2008 financial crisis. The ensuing collapse in the housing market and financial industry sparked an ongoing effort to bring more sunlight to the agency.

Norbert Michel, a research fellow in financial regulations at The Heritage Foundation, told The Daily Signal he agreed with the senator.

“There is no justification for secrecy,” Michel said. “They should have a full policy audit and the Federal Open Market Committee’s full transcript, not just the minutes, should be released.”

Although the main goal of Paul’s legislation is to have a full audit of the Fed, completed within six months, there are several other reforms he’d like to implement. They include eliminating restrictions on the Government Accountability Office’s ability to conduct oversight and giving Congress oversight of Fed policies like quantitative easing.

>>> House Republicans Attempt to Lift ‘Veil of Secrecy’ From Federal Reserve

The bill has already gained popularity in the Republican caucus with 30 co-sponsors, including Sens. Ted Cruz, R-Texas, and Marco Rubio, R-Fla., potential presidential rivals in 2016.

“The Fed has expanded its balance sheet fivefold, yet economic growth is still tepid, businesses are sitting on cash, and median income and household wealth are depressed,” Cruz noted in a statement.

Cruz also slammed the Fed for its secrecy.

“Enough is enough,” Cruz said. “The Federal Reserve needs to fully open its books so Congress and the American people can see what has been going on. This is a crucial first step to getting back to a more stable dollar and a healthy economy for the long term.”

http://dailysignal.com/2015/01/29/rand-paul-slams-federal-reserves-secrecy-reintroduces-bill-audit-fed/

The Pronk Pops Show Podcasts Portfolio

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Secretary Lew Opposes Proposed Congress’ New Law That Prioritizes Payments of Treasury Securities — Videos

Posted on April 30, 2013. Filed under: American History, Blogroll, Business, College, Communications, Economics, Education, Federal Government, Federal Government Budget, Fiscal Policy, government, government spending, history, Inflation, Investments, Law, liberty, Life, Links, media, People, Philosophy, Politics, Rants, Raves, Tax Policy, Taxes, Video, Water, Wisdom | Tags: , |

Rep. Yoder questions Treasury Sec. Lew

Treasury Chief Warns of New World If US Defaults on Any Bills

The United States might run into trouble accessing debt markets if it defaulted on any of its financial obligations, even if it were able to keep up payments on government bonds, Treasury Secretary Jack Lew told Congress.

Lew was responding to questions about a bill in the U.S. House of Representatives that would prioritize payments on government bonds and Social Security if the United States hits its debt limit, in order to avoid a credit default.

If passed, the law would make it easier for Republicans to use a fight over the nation’s legal borrowing limit, known as the debt ceiling, to try to extract spending cuts from President Barack Obama.

“The thing I would urge you to consider is, you enter a world we’ve never been in once the United States is not meeting its obligations,” Lew told a House subcommittee. “We cannot assume markets will function in an orderly way if that (happens).”

The current suspension of the debt limit expires on May 19, although the Treasury can use emergency cash-management measures to push off the day of reckoning into August. The date could fall even further in the future given unexpectedly strong tax revenues and the possibility of a big payment to the Treasury from housing finance giants Fannie Mae and Freddie Mac.

Lew has said it is impossible to try to pinpoint when exactly the use of these emergency maneuvers would be exhausted due to a delayed tax filing season and uncertainty about the effect of steep government spending cuts known as the sequester.

Once the United States reaches its debt limit, the government faces the prospect of defaulting on financial obligations, and potentially its debt, which could shake up markets and damage the economy.

Staff at the International Monetary Fund warned that failure to smoothly raise the U.S. debt ceiling could do serious damage to the global economy.

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Jumping off the fiscal cliff and bouncing back towards peace and prosperity with bungee budgets!–Videos

Posted on December 4, 2012. Filed under: American History, Blogroll, Business, College, Communications, Economics, Education, Employment, Federal Government, Federal Government Budget, Fiscal Policy, Foreign Policy, government spending, history, Inflation, Investments, Language, Law, liberty, Life, Links, Macroeconomics, media, Monetary Policy, People, Philosophy, Politics, Psychology, Public Sector, Raves, Resources, Security, Strategy, Tax Policy, Taxes, Unemployment, Unions, Video, War, Wealth, Weather, Wisdom | Tags: , , , , , , |

bungee_jumping_off_fiscal_cliff

FISCAL CLIFF, OH NOES!!

World’s Tallest Bungee Jump HD (Backwards)

Aussie tourist’s bungee cord snaps

Fiscal Cliff: What Republicans, Democrats Agree on So Far

Dan Mitchell Commenting on Republican Weakness in Fiscal Cliff Negotiations

Grover Norquist: Obama “Thinks Somebody Made Him King”

Peter Schiff: Many Other Cliffs Await the US Economy – CNBC 12/05/2012

“Grover Norquist confident Republicans will abide by no tax pledge” Grover Scares The GOP

Fiscal Cliff solution: Simpson-Bowles?

Fiscal Cliff GOP Plan Offered by John Boehner White House Rejects Plan

Obama – Finally An Aggressive Progressive?!

White House ‘Reluctantly’ Willing to Go Off Fiscal Cliff?

Obama On Rejecting GOP Plan: It’s Just A Matter Of Math’

Sen. Hatch: Obama’s “fiscal cliff” plan a “bait and switch”

Joe Scarborough Hammers Fiscal Cliff Offer: Was It Necessary For Obama ‘To Be So Provocative?’

Charles Krauthammer Fiscal Cliff Analogy: Obama Offer Worse Than Appomattox

Timothy Geithner ‘This Week’ Interview: Fiscal Cliff is in the GOP’s Court

Dr. Coburn on OUTFRONT with Erin Burnett Regarding Speaker Boehner’s Offer and Fiscal Cliff

Fiscal Cliff Hangout – Nov. 30, 2012

The Engineered Fiscal Cliff

Jumping off the fiscal cliff and bouncing back towards peace and prosperity with bungee budgets!

By Raymond Thomas Pronk

The year-end fiscal cliff time bomb of massive tax increases and huge spending cuts is ticking louder and louder.

On Nov. 29, President Barack Obama sent Treasury Secretary Tim Geithner to Congress to present his opening proposal to increase tax revenues by $1.6 trillion over the next 10 years, a possible extension of the temporary Social Security payroll tax cut and increased presidential power to raise the national debt without limit. Obama would support $600 billion in spending cuts including $350 billion from Medicare and other health programs.

However, Obama wants an additional $200 billion in new spending outlays for jobless benefits, aid for struggling homeowners and at least $50 billion for public works infrastructure projects—another stimulus package. In summary, Obama wants four times as much in tax increases as spending cuts.  Obama’s so-called balanced approach offer was dead on arrival in the Republican-controlled House..

House Speaker John Boehner, R-Ohio, and other Republican leaders responded by sending Obama the GOP plan in a Dec. 3 letter that includes $800 billion in higher tax revenues over the next decade. The letter pointed out that Erskine Bowles, co-chair of Obama’s debt commission, recommended a balanced middle ground approach that included significant spending cuts as well as $800 billion in new tax revenue.

However, the GOP plan would keep the Bush marginal tax rates for all brackets, including those for higher income earners in place. The Republican letter pointedly said,

“The new revenue in the Bowles plan would not be achieved through higher tax rates, which we continue to oppose and will not agree to in order to protect small businesses and our economy.”

The Republican plan would also cut over ten years $600 billion from costly health care programs including Medicare, $300 billion from national defense and domestic programs and another $300 billion from other proposals including forcing federal workers to contribute toward their pension plans. The Republican plan would produce an estimated $2.2 trillion in savings over 10 years.

Neither the Democratic nor Republican proposals to avoid the year-end fiscal cliff would balance the budget in the next ten years. The Republicans as much as admitted this in their letter by stating, “This is by no means an adequate long-term solution, as resolving our long-term fiscal crisis will require fundamental entitlement reform. Indeed, the Bowles’ plan is exactly the kind of imperfect but fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs.”

The president after reading the Republican proposal letter, rejected the GOP plan out of hand because it did not increase the marginal tax rates on those earning more than $250,000, the majority of whom are successful business owners who create wealth, income and jobs.

The table below summarizes the failed 10 year record of both political parties in controlling government spending that have produced massive fiscal-year deficits and an ever increasing national debt.

Summary of Tax Receipts and Spending Outlays of the

United States Government for Fiscal Years 2002-2012

[in million of dollars]

Fiscal Year Tax Receipts Spending Outlays Deficits (+)  or Surplus (-)

2002

1,853,225 2,011,016 157,791
2003 1,782,108 2,159,246 377,139
2004 1,879,783 2,292,628 412,845
2005 2,153,350 2,472,095 318,746
2006 2,406,675 2,654,873 248,197
2007 2,567,672 2,729,199 161,527
2008 2,523,642 2,978,440 454,798
2009 2,104,358 3,520,082 1,415,724
2010 2,161,728 3,455,931 1,294,204
2011 2,302,495 3,601,109 1,298,614
2012 2,449,093 3,538,446 1,089,353
Source: Department of the Treasury, Final Monthly Treasury Statements of Receipts and Outlays of the United States Government for Fiscal Years 2002-2012, table 1.

Neither the Democratic Party led by President Obama, Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi nor the Republican Party led by House Speaker Boehner, House Majority Leader Eric Cantor and Senate Minority Leader Mitch McConnell, are capable of balancing the budget of the U.S. government.

U.S. government budget deficits are financed or paid for by the issuing of debt in the form of Treasury bills, notes or bonds by the Department of the Treasury. The sale of Treasury securities results in an increase in the national debt and an increase in the interest that must be paid by the American people to those who purchase the Treasury securities.

The Federal Reserve, the central bank of the United States, has been artificially suppressing interest rates for more than four years, to near zero rates (.25 percent) for federal funds, money loaned overnight by commercial banks to each other. Once inflation or a rise in the general price level hits the economy, interest rates will quickly rise to market levels. The interest paid by the federal government on its Treasury securities will quickly double and triple to more than $750 billion per year.

Until the U.S. government lives within the means of the American people by balancing its budget, the economy:

(1)   will grow at relatively low rates between 1 and 2 percent per year,

(2)   have persistently high unemployment rates in the 8 to 10 percent range,

(3)   and inflation or price increases will exceed 3 to 6 percent or more per year.

Economists describe such a situation as stagflation, a portmanteau of stagnation and inflation

Forget about the fiscal cliff. Focus on economic growth and job creation. Balance the budget.

A balanced budget is one in which total spending outlays equal total tax receipts. A budget deficit is one in which total spending outlays exceed total tax receipts. A budget surplus is one in which total tax receipts exceed total spending outlays.

Balance the U.S. government’s budget by Sept. 30, 2016, the end of fiscal year 2016, by cutting total government spending $250 billion or about 7 percent per year for four years until the budget is balanced or in surplus.

Federal government spending outlays would be capped at the following fiscal-year levels:

The Bungee Budgets

Balancing The United States Government Budget

By Sept. 30, 2016

Estimated Tax Receipts, Spending Outlays, Deficits, and Surpluses

[in million of dollars]

Fiscal Year Estimated Tax Receipts* Estimated Spending Outlays**  EstimatedDeficits (+)  or Surplus(-)
2013 2,475,000 3,288,000 813,000
2014 2,500,000 3,038,000 538,000
2015 2,525,000 2,788,000 263,000
2016 2,550,000 2,538,000 -12,000
*Estimated tax receipts are based on the current Internal Revenue Code being extended for four years and increasing tax receipts of $25 billion per fiscal year.**Spending outlays are reduced $250 billion from the previous fiscal year.

Extend the so-called Bush marginal tax rates for four years or until the current complex Internal Revenue Code and regulations are replaced by either a single flat income tax or a broad-based national consumption retail sales tax—the FairTax. The proposed bungee budgets for fiscal years 2013-2016 require leaders with courage, vision and wisdom to pass and implement them. The possibility of the above proposal being passed by Congress and signed into law by the president are slim and none.

Today the U.S. has a national debt exceeding $16 trillion and unfunded liabilities for Social Security and Medicare exceeding $63 trillion according to the latest report of the trustees of both programs. The unfunded liability is the amount the government has promised in benefits looking indefinitely into the future less the payroll taxes and premiums the government expects to collect.

The U.S. government’s national debt and unfunded liabilities now exceed $80 trillion or more than five times the total estimated U.S. real gross domestic product for 2012. The U.S. warfare and welfare state has already fallen off the fiscal cliff and is accelerating toward a default on its Treasury debt.

Yet the political theater in Washington, D.C., over the phony fiscal cliff crisis will continue into 2013. The American people deserve the leadership they voted for in November. Now the American people will pay the price as the economy heads toward another recession. The party is over. Happy New Year!

Raymond Thomas Pronk is host of the Pronk Pops Show on KDUX web radio from 3-5 p.m. Fridays and author of the companion blog http://www.pronkpops.wordpress.com.

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More GORE–Great Obama Recession Economy–Government Treasury Securites Downgraded From AAA to AA+ With A Negative Outlook By Standard & Poor’s Rating Agency–Too Little Too Late–The Austrian School of Economics Was Right!–Videos

Posted on August 6, 2011. Filed under: Blogroll, Communications, Life, Links, People, Philosophy, Politics, Private Sector, Public Sector, Rants, Raves, Security, Strategy, Talk Radio, Taxes, Unemployment, Unions, Video, War, Wealth, Wisdom | Tags: , , , , , , , , , , , , , , |

 

 

Research Update:
United States of America Long-Term Rating
Lowered To ‘AA+’ On Political Risks And
Rising Debt Burden; Outlook Negative

Overview

· We have lowered our long-term sovereign credit rating on the United
States of America to ‘AA+’ from ‘AAA’ and affirmed the ‘A-1+’ short-term
rating.
· We have also removed both the short- and long-term ratings from
CreditWatch negative.
· The downgrade reflects our opinion that the fiscal consolidation plan
that Congress and the Administration recently agreed to falls short of
what, in our view, would be necessary to stabilize the government’s
medium-term debt dynamics.
· More broadly, the downgrade reflects our view that the effectiveness,
stability, and predictability of American policymaking and political
institutions have weakened at a time of ongoing fiscal and economic
challenges to a degree more than we envisioned when we assigned a
negative outlook to the rating on April 18, 2011.
· Since then, we have changed our view of the difficulties in bridging the
gulf between the political parties over fiscal policy, which makes us
pessimistic about the capacity of Congress and the Administration to be
able to leverage their agreement this week into a broader fiscal
consolidation plan that stabilizes the government’s debt dynamics any
time soon.
· The outlook on the long-term rating is negative. We could lower the
long-term rating to ‘AA’ within the next two years if we see that less
reduction in spending than agreed to, higher interest rates, or new
fiscal pressures during the period result in a higher general government
debt trajectory than we currently assume in our base case. 

http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8

President Obama’s Statement on Credit Downgrade  

 

 

Peter Schiff: Welcome to the Twilight Zone

 

 

Obama Has Dictatorial Power To Confiscate Europe’s Gold

 

S&P: Why we downgraded the U.S.

 

 Ron Paul On Neil Cavuto: Talks about The AAA Rating Downgrade To AA+

 

S&P Downgrades US Credit Rating From AAA

 

S&P Downgrades US Credit Rating (First Time IN HISTORY)

 

Deficits, Debts and Unfunded Liabilities: The Consequences of Excessive Government Spending

 

 

The Austrians Were Right

 

Peter Schiff on Charles Adler (8/5/11)

 

 

“The market going down has nothing to do with S&P downgrade” Jim Rogers

 

The Fed’s ‘Fictitious’ Debt – Can the US Treasury just stiff the fed?

 

Peter Schiff On Freedom Watch- 1 8 2011 – The US will default through inflation

 

Peter Schiff – ‘Recession is coming back’

 

Peter Schiff: More Money is about to be Dropped from Helicopters

 

AAA-rmageddon: S&P downgrade knocks off US credit crown

 

S&P downgrades US debt outlook-On the Edge with Max Keiser-04-29-2011-(Part1)  

S&P downgrades US debt outlook-On the Edge with Max Keiser-04-29-2011-(Part2)

 

Interview on Credit Rating Agencies

 

The essence of the problem is simply massive Federal Government spending  and not too little tax revenues.

President Obama’s is one of the primary causes of the problem with his ridiculous budget proposal that was voted down in the Senate by 97 Senators voting No!

President  Obama’s call for a  ” balanced approach” to the budget or massive tax increases in 2013 and beyond as the economy enters another recession is a firm indication that he is an economic illiterate, out of touch with economic reality and deserves to be fired next November for incompetence and the damage his economic policies to the American people.

Instead of running deficits over the next ten years of $7,000 to $8,000 billion and increasing the national debt by another $7,000 to $8,000 billion, the size of the Federal Governments needs to cut by about 30% to 50% and the national debt reduced over the several decades.

This would require actually cutting entitlement programs ( Social Security, Medicare, Medicaid, and welfare), national defense spending, and all other spending by permanently closing between eight to ten Federal Departments, many agencies, and hundreds of government programs.

Also the Federal income tax system needs to be replaced by the FairTax to encourage economic growth by increasing savings and investment which would in turn reduce unemployment and the Federal deficit.

The FairTax: It’s Time

Lugar Cosponsors the FairTax

Neither the Democratic or Republican political establishments have the vision, will or courage to do this.

While the majority of the  American people are prepared for and calling for a huge downsizing of the Federal Government, the political ruling class is opposed to any significant reduction in the size and scope of the Federal Government.

For both political parties most of their campaign contributions come from those companies and individuals who directly benefit from an ever larger and expanding Federal Government and a National Debt.

This includes bankers and financial institutions, the military industrial complex, lawyers, lobbyists, unions, just to name a few of the big campaign contributors.

 

S&P downgrades US credit rating from AAA

“…The United States has lost its sterling credit rating from Standard & Poor’s.

The credit rating agency on Friday lowered the nation’s AAA rating for the first time since granting it in 1917. The move came less than a week after a gridlocked Congress finally agreed to spending cuts that would reduce the debt by more than $2 trillion — a tumultuous process that contributed to convulsions in financial markets. The promised cuts were not enough to satisfy S&P.

The drop in the rating by one notch to AA-plus was telegraphed as a possibility back in April. The three main credit agencies, which also include Moody’s Investor Service and Fitch, had warned during the budget fight that if Congress did not cut spending far enough, the country faced a downgrade. Moody’s said it was keeping its AAA rating on the nation’s debt, but that it might still lower it.

One of the biggest questions after the downgrade was what impact it would have on already nervous investors. While the downgrade was not a surprise, some selling is expected when stock trading resumes Monday morning. The Dow Jones industrial average fell 699 points this week, the biggest weekly point drop since October 2008. …”

http://finance.yahoo.com/news/SampP-downgrades-US-credit-apf-2107320979.html

Background Articles and Videos

 

Treasury Bond Prices and Yields

 

The Gold Standard Before the Civil War | Murray N. Rothbard

 

The Case for a 100 Percent Gold Dollar (Part 1 of 2) by Murray N. Rothbard

 

The Case for a 100 Percent Gold Dollar (Part 2 of 2) by Murray N. Rothbard

 

Open Market Operations

Open market operations–purchases and sales of U.S. Treasury and federal agency securities–are the Federal Reserve’s principal tool for implementing monetary policy. The short-term objective for open market operations is specified by the Federal Open Market Committee(FOMC). This objective can be a desired quantity of reserves or a desired price (the federal funds rate). The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.The Federal Reserve’s objective for open market operations has varied over the years. During the 1980s, the focus gradually shifted toward attaining a specified level of the federal funds rate, a process that was largely complete by the end of the decade. Beginning in 1994, the FOMC began announcing changes in its policy stance, and in 1995 it began to explicitly state its target level for the federal funds rate. Since February 2000, the statement issued by the FOMC shortly after each of its meetings usually has included the Committee’s assessment of the risks to the attainment of its long-run goals of price stability and sustainable economic growth.For more information on open market operations, see the article in the Federal Reserve Bulletin(102 KB PDF).http://www.federalreserve.gov/monetarypolicy/openmarket.htm

Federal Funds Target Rate
Month/Day 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Jan 1 6.50% 1.75% 1.25% 1.00% 2.25% 4.25% 5.25% 4.25% 0%-0.25% 0%-0.25% 0%-0.25%
Feb 1 5.50% 1.75% 1.26% 1.00% 2.25% 4.50% 5.25% 3.00% 0%-0.25% 0%-0.25% 0%-0.25%
Mar 1 5.50% 1.75% 1.25% 1.00% 2.50% 4.50% 5.25% 3.00% 0%-0.25% 0%-0.25% 0%-0.25%
Apr 1 5.00% 1.75% 1.25% 1.00% 2.75% 4.75% 5.25% 2.25% 0%-0.25% 0%-0.25% 0%-0.25%
May 1 4.50% 1.75% 1.25% 1.00% 2.75% 4.75% 5.25% 2.00% 0%-0.25% 0%-0.25% 0%-0.25%
Jun 1 4.00% 1.75% 1.25% 1.00% 3.00% 5.00% 5.25% 2.00% 0%-0.25% 0%-0.25% 0%-0.25%
Jul 1 3.75% 1.75% 1.00% 1.25% 3.25% 5.25% 5.25% 2.00% 0%-0.25% 0%-0.25% 0%-0.25%
Aug 1 3.75% 1.75% 1.00% 1.25% 3.25% 5.25% 5.25% 2.00% 0%-0.25% 0%-0.25% 0%-0.25%
Sep 1 3.50% 1.75% 1.00% 1.50% 3.50% 5.25% 5.25% 2.00% 0%-0.25% 0%-0.25%  
Oct 1 3.00% 1.75% 1.00% 1.75% 3.75% 5.25% 4.75% 2.00% 0%-0.25% 0%-0.25%  
Nov 1 2.50% 1.75% 1.00% 1.75% 4.00% 5.25% 4.50% 1.00% 0%-0.25% 0%-0.25%  
Dec 1 2.00% 1.25% 1.00% 2.00% 4.00% 5.25% 4.50% 1.00% 0%-0.25% 0%-0.25%

http://www.moneycafe.com/library/fedfundsrate.htm

United States Treasury security  

“…A United States Treasury security is government debt issued by the United States Department of the Treasury through the Bureau of the Public Debt. Treasury securities are the debt financing instruments of the United States Federal government, and they are often referred to simply as Treasuries. There are four types of marketable treasury securities: Treasury bills, Treasury notes, Treasury bonds, and Treasury Inflation Protected Securities (TIPS). There are several types of non-marketable treasury securities including State and Local Government Series (SLGS), Government Account Series debt issued to government-managed trust funds, and savings bonds. All of the marketable Treasury securities are very liquid and are heavily traded on the secondary market. The non-marketable securities (such as savings bonds) are issued to subscribers and cannot be transferred through market sales.

History

The U.S. government knew that the costs of World War I would be great, and the question of how to pay for the war was a matter of intense debate. The resulting decision was to pay for the war with a balance between higher taxes (see the War Tax Act) and government debt. Traditionally, the government borrowed from other countries, but there were no other countries from which to borrow in 1917: U.S. citizens would have to fully finance the war through both higher taxes and purchases of war bonds.[1]

The Treasury raised funding throughout the war by selling $21.5 billion in ‘Liberty bonds.’ These bonds were sold at subscription where officials created coupon price and then sold it at Par value. At this price, subscriptions could be filled in as little as one day, but usually remained open for several weeks, depending on demand for the bond.[1]

After the war, the Liberty Bonds were reaching maturity, but the Treasury was unable to pay each down fully with only limited budget surpluses. The resolution to this problem was to refinance the debt with variable short and medium-term maturities. Again the Treasury issued debt through fixed-price subscription, where both the coupon and the price of the debt were dictated by the treasury.[1]

The problems with debt issuance became apparent in the late-1920’s. The system suffered from chronic oversubscription, where interest rates were so attractive that there were more purchasers of debt than supplied by the government. This indicated that the government was paying too much for debt. As government debt was undervalued, debt purchasers could buy from the government and immediately sell to another market participant at a higher price.[1]

In 1929, the U.S. Treasury shifted from the fixed-price subscription system to a system of auctioning where ‘Treasury Bills’ would be sold to the highest bidder. Securities were then issued on a pro rata system where securities would be allocated to the highest bidder until their demand was full. If more treasuries were supplied by the government, they would then be allocated to the next highest bidder. This system allowed the market to set the price rather than the government. On December 10, 1929, the Treasury issued its first auction. The result was the issuing of $224 million three-month bills. The highest bid was at 99.310 with the lowest bid accepted at 99.152.[1]

Foreign countries later started to buy U.S. debt as an investment of their surplus U.S. Dollars. There is fear that foreign countries hold so many bonds that if they stopped buying them, the U.S. economy would collapse; however, the reality is that more bonds are transferred in a single day by the Treasury than are held by any single sovereign state.[2] The perception of this dependence furthers belief that the U.S. and China economies are so tightly linked that both fear the consequences of a potential slow down in China’s purchase of those bonds. In her 2010 visit to China, the U.S. Secretary of State Hillary Clinton called on authorities in Beijing to continue buying U.S. Treasuries, saying it would help jumpstart the flagging U.S. economy and stimulate imports of Chinese goods.[3]

As the economic recession continues, more doubts arise over the real value of U.S. treasury securities. Though carefully worded, Chinese premier Wen Jia Bao’s warning about possible devaluation of Chinese held U.S. bonds was taken very seriously by Washington:

“Of course we are concerned about the safety of our assets. To be honest, I’m a little bit worried” … “I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets.”[4]Chinese premier, Wen Jiabao, said at a news conference after the closing of China’s 2009 legislative session.

However, it is important to note that such comments, while critical, were very likely indicative of Chinese “gesturing” ahead of the April 1st G-20 Economic Summit. As of April 2009, the U.S. dollar had rallied YTD against all other major world currencies. On March 18, 2009, the Federal Reserve used quantitative easing “to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.”[5]

Marketable securities

 Directly issued by the United States Government

 Treasury bill

“Treasury bill” redirects here. Note that the Bank of England issues these in the United Kingdom.

Treasury bills (or T-Bills) mature in one year or less. Like zero-coupon bonds, they do not pay interest prior to maturity; instead they are sold at a discount of the par value to create a positive yield to maturity.[6] Many regard Treasury bills as the least risky investment available to U.S. investors.

Regular weekly T-Bills are commonly issued with maturity dates of 28 days (or 4 weeks, about a month), 91 days (or 13 weeks, about 3 months), 182 days (or 26 weeks, about 6 months), and 364 days (or 52 weeks, about 1 year). Treasury bills are sold by single-price auctions held weekly. Offering amounts for 13-week and 26-week bills are announced each Thursday for auction, usually at 11:30 a.m., on the following Monday and settlement, or issuance, on Thursday. Offering amounts for 4-week bills are announced on Monday for auction the next day, Tuesday, usually at 11:30 a.m., and issuance on Thursday. Offering amounts for 52-week bills are announced every fourth Thursday for auction the next Tuesday, usually at 11:30 am, and issuance on Thursday. Purchase orders at TreasuryDirect must be entered before 11:00 on the Monday of the auction. The minimum purchase, effective April 7, 2008, is $100. (This amount formerly had been $1,000.) Mature T-bills are also redeemed on each Thursday. Banks and financial institutions, especially primary dealers, are the largest purchasers of T-bills.

Like other securities, individual issues of T-bills are identified with a unique CUSIP number. The 13-week bill issued three months after a 26-week bill is considered a re-opening of the 26-week bill and is given the same CUSIP number. The 4-week bill issued two months after that and maturing on the same day is also considered a re-opening of the 26-week bill and shares the same CUSIP number. For example, the 26-week bill issued on March 22, 2007, and maturing on September 20, 2007, has the same CUSIP number (912795A27) as the 13-week bill issued on June 21, 2007, and maturing on September 20, 2007, and as the 4-week bill issued on August 23, 2007 that matures on September 20, 2007.

During periods when Treasury cash balances are particularly low, the Treasury may sell cash management bills (or CMBs). These are sold at a discount and by auction just like weekly Treasury bills. They differ in that they are irregular in amount, term (often less than 21 days), and day of the week for auction, issuance, and maturity. When CMBs mature on the same day as a regular weekly bill, usually Thursday, they are said to be on-cycle. The CMB is considered another reopening of the bill and has the same CUSIP. When CMBs mature on any other day, they are off-cycle and have a different CUSIP number.

Treasury bills are quoted for purchase and sale in the secondary market on an annualized discount percentage, or basis.

With the advent of TreasuryDirect, individuals can now purchase T-Bills online and have funds withdrawn from and deposited directly to their personal bank account and earn higher interest rates on their savings.

General calculation for the discount yield for Treasury bills is

\text{Discount Yield} (%) = \frac{\text{Face Value} - \text{Purchase Price}}{\text{Face Value}} \times \frac{\text{360}}{\text{Days Till Maturity}} \times 100[%]

 Treasury note

This is the modern usage of “Treasury Note” in the U.S., for the earlier meanings see Treasury Note (disambiguation).

Treasury notes (or T-Notes) mature in one to ten years. They have a coupon payment every six months, and are commonly issued with maturities dates between 1 to 10 years, with denominations of $1,000. In the basic transaction, one buys a “$1,000” T-Note for say, $950, collects interest over 10 years of say, 3% per year, which comes to $30 yearly, and at the end of the 10 years cashes it in for $1000. So, $950 over the course of 10 years becomes $1300.

T-Notes and T-Bonds are quoted on the secondary market at percentage of par in thirty-seconds of a point (n/32 of a point, where n = 1,2,3,…). Thus, for example, a quote of 95:07 on a note indicates that it is trading at a discount: $952.19 (i.e., 95 + 7/32%) for a $1,000 bond. (Several different notations may be used for bond price quotes. The example of 95 and 7/32 points may be written as 95:07, or 95-07, or 95’07, or decimalized as 95.21875.) Other notation includes a +, which indicates 1/64 points and a third digit may be specified to represent 1/256 points. Examples include 95:07+ which equates to (95 + 7/32 + 1/64) and 95:073 which equates to (95 + 7/32 + 3/256). Notation such as 95:073+ is unusual and not typically used.

The 10-year Treasury note has become the security most frequently quoted when discussing the performance of the U.S. government bond market and is used to convey the market’s take on longer-term macroeconomic expectations.

Treasury bond

“U.S. Bonds” redirects here. For the singer/performer, see Gary U.S. Bonds.

Treasury bonds (T-Bonds, or the long bond) have the longest maturity, from twenty years to thirty years. They have a coupon payment every six months like T-Notes, and are commonly issued with maturity of thirty years. The secondary market is highly liquid, so the yield on the most recent T-Bond offering was commonly used as a proxy for long-term interest rates in general.[citation needed] This role has largely been taken over by the 10-year note, as the size and frequency of long-term bond issues declined significantly in the 1990s and early 2000s.[citation needed]

The U.S. Federal government suspended issuing the well-known 30-year Treasury bonds (often called long-bonds) for a four and a half year period starting October 31, 2001 and concluding February 2006.[7] As the U.S. government used its budget surpluses to pay down the Federal debt in the late 1990s,[8] the 10-year Treasury note began to replace the 30-year Treasury bond as the general, most-followed metric of the U.S. bond market. However, because of demand from pension funds and large, long-term institutional investors, along with a need to diversify the Treasury’s liabilities – and also because the flatter yield curve meant that the opportunity cost of selling long-dated debt had dropped – the 30-year Treasury bond was re-introduced in February 2006 and is now issued quarterly.[9] This brought the U.S. in line with Japan and European governments issuing longer-dated maturities amid growing global demand from pension funds.[citation needed]

 TIPS

Treasury Inflation-Protected Securities (or TIPS) are the inflation-indexed bonds issued by the U.S. Treasury. The principal is adjusted to the Consumer Price Index (CPI), the commonly used measure of inflation. When the CPI rises, your principal adjusts upward. If the index falls, your principal adjusts downwards.[10] The coupon rate is constant, but generates a different amount of interest when multiplied by the inflation-adjusted principal, thus protecting the holder against inflation. TIPS are currently offered in 5-year, 10-year and 30-year maturities.[11]

Federal Reserve holdings of U.S. Treasuries

For the Quantitative easing policy the Feds holding of US treasuries increased from $750 billion in 2007 to over $1.5 trillion by June 2011. Source Federal Reserve Bank of Cleveland. [12]   …”

http://en.wikipedia.org/wiki/United_States_Treasury_security

 

Understanding the Financial Crisis – very well explanation!

 

Deconstructing the Subprime Crisis

Jeremy Siegel on the Resilience of American Finance

Franklin Allen on Lessons from the Subprime Crisis

Understanding The Debt Crisis In The U.S.

 

 

CNN: Understanding the Crisis

 

Understanding the Financial Crisis

 

Stein Says Economy to Accelerate; U.S. Downgrade Likely

 

Related Posts On Pronk Palisades

Weak Obama Recovery Ends–Great Obama Recession Economy Or GORE Starts–Labor Participation Rate in July 2011 Hits 27 Year Low of 63.9%–Over 130,000 Workers Leave Workforce In July 2011–No Jobs!–Videos

 

 

 

 

 

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