Congress to Challenge Federal Reserve

Many of you have heard us wonder aloud MANY times how it is possible for the Federal Reserve (which has no money...but what they create out of thin air) to "buy" U.S. Treasury's.  Last year not only did they buy just a little, but they bought fully 60% of all the Treasury's issued.

Also remember when that when the mortgage and banking industry almost collapsed in 2008 that the Fed "bought" billions of dollars worth of failed mortgage paper.

Sounds like a classic Ponzi scheme.  The good thing about Ponzi schemes is that they work really well as long as no one understands that they are the suckers in the scheme.  Once they do find out...the whole thing falls apart at an amazingly fast pace.

Another issue to be concerned about is what is happening to the value of the U.S. dollar.  Remember, the dollar only retains value because the demand for them exceeds the supply.  But if the Federal Reserve continues to "create" trillions of them and the supply begins to exceed the demand, you WILL have problems.

Now notice who wrote this recent article for the Wall Street Journal.

Mr. Melloan, a former columnist and deputy editor of the Journal editorial page, is the author of "The Great Money Binge: Spending Our Way to Socialism" (Simon & Schuster, 2009).

Brady's Sound Dollar Act would also end another pernicious step taken by the Fed after the 2008 crash: credit allocation. The Fed bailed out the banks and housing industry by mass purchases of the toxic mortgage-backed securities that were responsible for financial sector freeze-up. The Sound Dollar Act would limit the Fed to purchases of Treasury securities.

Decision makers would have to find ways other than credit allocation to clean up messes made by ill-considered government policies, such as the federally enforced subprime lending that poisoned the mortgage-backed security market in 2008. There were indeed other ways available in 2008, but Mr. Bernanke, New York Fed President Timothy Geithner (now Treasury secretary) and Treasury Secretary Henry Paulson chose the easy way out.

The Sound Dollar Act is full of good ideas, but it can't become law until next year and only then if there is a new president and a more favorable Congress. The dollar crisis may not wait. The Fed has become the lender of first resort to a financially irresponsible government. As the Fed creates new money to finance massive federal deficits, further price inflation is a sure bet. Congress is finally getting serious, but it's very late in the day.

Here;  http://online.wsj.com/article/SB10001424052702303592404577362364258212648.html

Yes friends...it is very late in the day.  Mr. Melloan sure has that right.