Mexican Government Successfully Sheds the US Dollar From Its Economy… Aaaay Carumba!

Remember when you could exchange a few of your gringo dollars for a fist full of pesos at any Mexican border town? Cheep beer, food and a great time was what you expected for your dolares. Well... now it seems the Mexican government doesn't want to be caught holding the bag...literally! As in bags of continuously depreciating US greenbacks. 

According to this article, you will not be able to use the trusty Buck. If you plan on making a trip south the question will be: pesos or plastic, Senor? Add that to cartel kidnappings and murders of US citizens and it looks like the fiesta is about over. Hasta la Vista...Baby!

Mexico has always considered the US dollar almost a secondary currency to their Peso as the fact that billions of US dollars spent their way through the Mexican economy in 2009 and 2010 which speaks for itself, but sometimes even the best of friendships come to an end.

The Mexican government in September 2010 enacted a new law which basically restricts the use of US Dollars for almost all purchases inside of Mexico.

In early 2010 travelers and visitors could shop at many of the large US corporations inside of Mexico such as Wal-Mart, Home Depot or even one of the hundreds of American food establishments such as McDonalds or Dominoes Pizza and pay for their meal using US Dollars but under the new law using US Dollars is no longer an option.

Just image the surprise of many Americans being told by Wal-Mart that US Dollars are no longer accepted at their store especially since Wal-Mart is one of the most iconic “American” businesses in the world with such buying power that they set the prices which manufactures must sell them their items for.

Wal-Mart´s buying power is so well known in fact that most people would normally be able to safely assume that with such buying power that Wal-Mart could also force almost any country into allowing them to accept the US Dollar to further their in store sales, but apparently not even Wal-Mart is that powerful.

Therefore it was no surprise that when this story broke in late September of 2010 that Mexico was no longer accepting US Dollars the internet was abuzz with conspiracy theories claiming a banking holiday was in short order or the crash of the US dollar was intimate while others were raising the “BS” flag and claiming Mexico would never stop accepting US Dollars because those dollars were its economic life support but as the year closed out and those “end of the world” predictions didn’t come to pass and the fact Mexico did stop accepting the dollar, well that only left many people wondering what really was going on south of the border.

The Mexican government had made it clear that they will no longer allow ANY businesses to accept US dollars including American companies regardless of the operation or who is paying in American dollars. That’s right, this means if you’re a US citizen and fly into Mexico for vacation or business your hotel is no longer allowed to exchange cash dollars into pesos at the front desk which was customary up until 2011.

Also in Mexico if you travel to a local bank regardless of the bank name or national origin including HSBC from China which is the fastest growing bank in Mexico you are no longer able to exchange US Dollars for pesos. Only account holders at banks have the option of depositing US Dollars into their bank accounts but this is for deposits only and not exchange and then you have to have a special type of account set up that is more costly. Of course even if you do have a special account that allows you to deposit US dollars your bank will charge you a service free for depositing foreign currency into your account and then probably another service fee for a withdrawal but that’s another issue all together.

Ok so many readers are probably asking if the banks no longer exchange money or business are no longer allowed to accept US Dollars then what is a person who has US dollars suppose to do.

For those who have traveled to Mexico there is a good chance you are familiar with Casa de Cambios which are small exchange centers for US dollars and often littered on every corner of any large tourist city or the closer to the border you are, however these Casa de Cambios themselves have come under strict new regulation as well as have been greatly reduced in numbers as more are closing every day faster than “one hour” Kodak film processing centers or Blockbuster video locations.

Part of the new regulations is that anyone exchanging money for any reason must now present a valid government ID which is copied and placed on file with a copy of the transaction and amount of money being exchanged. This additional paperwork and hassles now mean higher operational costs for these businesses which in turn mean those costs will be passed onto the consumers who are often the one that end up paying for everything anyway.

Another drawback is that since there are now fewer Casa de Cambios this means less competition and so the exchange rate doesn’t have to be as competitive or even what the banks posted exchange rate is, after all you really have no other option in exchanging your US dollars. Gone are the days of such advantageous exchange rates that allowed anyone exchanging US Dollars into Pesos additional purchasing power by walking away with more for your money south of the border.

The Mexican government wants everyone to believe that these new laws were enacted because the war on drugs and the inability to track all these US Dollars floating around their economy which they claim the drug cartels are using in a black market way but a closer look indicates something completely different.

As the dollar continues to lose purchasing power so does the ever enjoyed exchange rate the US Dollar held for so long. This is a way to actually help devalue the US Dollar while protecting the Mexican economy from going down with the US financial Titanic that has been taking on way too much water in the form of overspending and red ink.

With the value of the dollar sliding lower each day there are some experts who are predicting the US Dollar to reach a point that it will either collapse or need to be reevaluated but either way the Peso is expected to be worth more than the US Dollar and this looks like it will happen sometime very soon at the rate of how things are changing for the Dollar around the world.

This is why it looks as if the Mexican government is doing everything it can to remove as many US Dollars from their economy so there are fewer US Dollars in circulation inside of Mexico so that when the US Dollar does finally go by the wayside there will be less of a direct affect on the Mexican Economy as a whole.

It has now been almost 5 full months since this law took effect and Mexico has been successful in eliminating millions of US fiat Dollars out of its economy and taking steps to vamp up the removal of all remaining dollars by recently instigating even stricter rules at the Casa de Cambios preventing them from exchanging more than $300.00 dollars per transactions. This means it will be much more difficult for Mexicans to send US Dollars home to their families without enriching the pockets of the bankers and the money transfer companies. These caps on exchanging Dollars will also cause the people to want to get away from the dollar faster as it’s more difficult and costly to do business with dollars.

On a side note it´s also important to note that the Mexican economy grew at a rate of just over 5% in 2010 and by the year’s end many large companies in Mexico were reporting stronger than ever revenue and sales at rates not seen in many years. Many large companies are actually in hiring frenzies and some companies are desperate to fill slots with qualified workers.

Now while some will argue that any cash regardless if it is drug money or laundered is actually good for an economy but most people can also understand it’s not good if that cash you have is losing its value so fast that it isn’t going to be worth the paper it’s printed on so it´s best to get rid of that money as fast as you can.

There has been a rush to sell off US Dollars inside Mexico because the people are sensing a coming financial storm with the US Dollar and they too don’t want to be stuck with worthless paper or allowing that worthless paper to drag down their economy especially while their overall economy is going through a growth trend but until that time does come you will still be able to use your credit and debit cards as those funds are simply automatically converted at the time of a transaction but are not physically in the economic system as fiat paper money but rather electronic funds.

A good conspiracy theorist will argue the point that the removal of paper money and forcing people into electronic transactions and requiring those who do use cash to provide ID to be Orwellian and that the bankers come out winning might have a point to some degree but in Mexico the fiat currency in the form of Peso bills can still be used for most transactions. The irony is that many Americans for so long often use to complain about how so many Mexicans living in the United States were sending US Dollars back to Mexico and how it hurt the US economy. The irony is now those Americans are getting their wish that little if any US dollars are being sent to Mexico and in turn this is actually greatly helping the Mexican economy while drastically hurting and aiding in the devaluation of the US dollar.

SO for those planning to travel to Mexico be sure to take your Kevlar and your American Express card (don’t leave home without it) and remember Visa is everywhere you want it to be, even in Mexico where the Dollar is no longer accepted. 

Article by Von Helman, The People's Voice

David Walker - Former US Comptroller General: Obama Has "No Coherent Strategy" for Tackling Deficit or Creating Jobs

 

Every good fight needs a good strategy. But, the fiscal fight this country has been battling for the last few years hasn’t got one says David Walker – the so-called “Paul Revere” of fiscal responsibility.

“We have no coherent strategy to be able to improve our competitive posture, to be able to generate job growth [or] to be able to deal with our structural deficit,” says Walker, Founder and CEO of the Comeback America Initiative and also the former U.S. Comptroller General.

If Walker is right, the United States is in serious trouble. This year the U.S. deficit will hit $1.5 trillion and if left without remedy will grow to $18 trillion by the end of 2021. (See: Dangerous Debts: Holtz-Eakin “Infinitely” Concerned U.S. Is Next Japan)

President Obama touched on our dire deficit situation during his second State of the Union last week, but Walker felt he did not go far enough.  He believes as the executive of the country President Obama should have laid out specifics on out how to move this country forward. “We heard a lot of talk about it in the State of the Union,” he says. “We hear a lot of talk about it from politicians on both sides of the political aisle. It is time for action. We need results, not rhetoric.”

But, with a newly elected divided Congress, are these results achievable?

Moody’s Investors Services doesn’t think so. Last week the ratings agency expressed concern that even in the face of these dreadful problems, Congress will not be able to find common ground.

Walker does not agree entirely. “There is a growing consensus that we need to do something. There is [just] not a consensus on what needs to be done,” he tells Aaron in the accompanying clip, suggesting we should focus primarily on these actions to fix our long-term structural deficits:

• -- Lower discretionary spending – including defense (excluding war costs) - to 2008 levels adjusted for inflation and population growth.

• -- Set discretionary spending caps.

• -- Set pay-as-you-go rules for both spending programs and tax cuts.

• -- Set debt-to-GDP targets with automatic spending cut/tax surcharge enforcement mechanisms to start in 2013 or 2014.

“Without a strategic planning framework that is future focused, results oriented, geared towards outcomes where we are trying to achieve specific results,” we aren't going to make any real progress, he says. “We have too many career politicians in office that are focused more on getting re-elected rather than keeping America great and keeping the American dream alive."

Still, Walker is optimistic that the voting public is much smarter than politicians give them credit. “When you tell them the truth, the whole truth, and nothing but the truth and help them understand that this country’s future is at risk…they will support action,” he says.

What the country really needs now, he says, is leadership and that leadership must first come from the President of the United States.

Article by Stacy Curtin, Yahoo Finance

Taking Back the Commerce Clause in Virginia. Tenth Amendment Victory!

Here, Here! Our congratulations to the Virginia House of Delegates who voted on fighting for their Constitutional rights - and Won! 

One down, forty-nine to go!

  

Today, the Virginia House of Delegates overwhelmingly passed House Bill 1438 (HB1438), the Intrastate Commerce Act. The bill, “Provides that all goods produced or manufactured within the Commonwealth, when such goods are held, retained, or maintained in the Commonwealth, shall not be subject to federal law, federal regulation, or the constitutional power of the United States Congress to regulate interstate commerce.”

The vote was 65-33.

For decades, using a tortured definition of “interstate commerce,” Congress has claimed the authority to regulate, control, ban, or mandate virtually everything – from wheat grown on one’s own land for personal consumption, to weed grown in an individual’s own home for the same purpose, to guns manufactured, sold and kept in state boundaries, and everything in between. And, unfortunately, the Supreme Court has largely condoned and even encouraged such reprehensible legislative behavior.

But today, Virginia is once again leading the way in saying “Back Off” to the feds – by standing up for the Constitution as the founders gave it to us.

THE COMMERCE CLAUSE

If, like any legal document, the words of the Constitution (and its amendments, too) mean today just what they meant when it was approved by the ratifiers, then we must understand the original meaning of words in Article I, Section 8, Clause 3 of the Constitution – the “Interstate Commerce Clause.” It delegates to Congress the power to:

“regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”

According to Constitutional scholar Randy Barnett, the original meaning of “commerce” was limited to the “trade and exchange” of goods and transportation for this purpose. The original meaning of “to regulate” generally meant “to make regular” -that is, to specify how an activity may be transacted-when applied to domestic commerce, but when applied to foreign trade also included the power to make “prohibitory regulations.” “Among the several States” meant between persons of one state and another.

According to Constitutional scholar Rob Natelson, the commerce clause gave Congress power to regulate interstate commerce — not any “matters that have significant spillover effects across state lines.” The Constitutional Convention rejected the wording of the Virginia Plan, which arguably would have let the Federal government regulate any activity with interstate spillover. In other words, the Founders made the deliberate decision to leave many activities with spillover effects to the states.

Not included in this power to regulate commerce “across state lines” is the authority to regulate activites that are non-economic or solely INTRAstate, which the language of Virginia’s Instrastate Commerce Act addresses.

NO!

With the passage of a bill like HB1438, Virginia would become the first state to reject in one fell swoop the ludicrous and intellectually dishonest constitutional rationale that underpins so much federal activity, and reclaim the rightful authority to regulate commerce within its own borders.

Sources close to the Tenth Amendment Center tell us to expect that a number of other states will attempt to resist this federal overreach with similar legislation in 2011.

Article by Michael Boldin, Tenth Amendment Center

545 vs. 300,000,000

The following was written by Charlie Reese, a columnist for the Orlando Sentinel, as his final column before retiring in August of 2008. It has been passed around the internet since but its message doesn't seem to take hold. Every American needs to read this at least once a year and definitely before voting. Perhaps it should be required reading in schools across this nation so our younger generation will be wise to the workings of  politics when it is their time to vote. 

Thank you Charlie for saying what so many writers should, but won't. 

We have been saying this all along.

Wake up America! This Land is Your Land. Take It Back!

545 PEOPLE--By Charlie Reese

Politicians are the only people in the world who create problems and then campaign against them..

Have you ever wondered, if both the Democrats and the Republicans are against deficits, WHY do we have deficits?

Have you ever wondered, if all the politicians are against inflation and high taxes,WHY do we have inflation and high taxes?

You and I don't propose a federal budget. The President does.

You and I don't have the Constitutional authority to vote on appropriations. The House of Representatives does.

You and I don't write the tax code, Congress does.

You and I don't set fiscal policy, Congress does.

You and I don't control monetary policy, the Federal Reserve Bank does.

One hundred senators, 435 congressmen, one President, and nine Supreme Court justices equates to 545 human beings out of the 300 million are directly, legally, morally, and individually responsible for the domestic problems that plague this country.

I excluded the members of the Federal Reserve Board because that problem was created by the Congress. In 1913, Congress delegated its Constitutional duty to provide a sound currency to a federally chartered, but private, central bank.

I excluded all the special interests and lobbyists for a sound reason. They have no legal authority. They have no ability to coerce a senator, a congressman, or a President to do one cotton-picking thing. I don't care if they offer a politician $1 million dollars in cash. The politician has the power to accept or reject it. No matter what the lobbyist promises, it is the legislator's responsibility to determine how he votes.

Those 545 human beings spend much of their energy convincing you that what they did is not their fault. They cooperate in this common con regardless of party.

What separates a politician from a normal human being is an excessive amount of gall. No normal human being would have the gall of a Speaker, who stood up and criticized the President for creating deficits..... The President can only propose a budget. He cannot force the Congress to accept it.

The Constitution, which is the supreme law of the land, gives sole responsibility to the House of Representatives for originating and approving appropriations and taxes. Who is the speaker of the House? Nancy Pelosi. She is the leader of the majority party. She and fellow House members, not the President, can approve any budget they want. If the President vetoes it, they can pass it over his veto if they agree to.

It seems inconceivable to me that a nation of 300 million cannot replace 545 people who stand convicted -- by present facts -- of incompetence and irresponsibility. I can't think of a single domestic problem that is not traceable directly to those 545 people. When you fully grasp the plain truth that 545 people exercise the power of the federal government, then it must follow that what exists is what they want to exist.

If the tax code is unfair, it's because they want it unfair.

If the budget is in the red, it's because they want it in the red.

If the Army & Marines are in Iraq and Afghanistan it's because they want them in Iraq and Afghanistan ...

If they do not receive social security but are on an elite retirement plan not available to the people, it's because they want it that way.

There are no insoluble government problems.

Do not let these 545 people shift the blame to bureaucrats, whom they hire and whose jobs they can abolish; to lobbyists, whose gifts and advice they can reject; to regulators, to whom they give the power to regulate and from whom they can take this power. Above all, do not let them con you into the belief that there exists disembodied mystical forces like "the economy," "inflation," or "politics" that prevent them from doing what they take an oath to do.

Those 545 people, and they alone, are responsible.

They, and they alone, have the power..

They, and they alone, should be held accountable by the people who are their bosses.

Provided the voters have the gumption to manage their own employees...

We should vote all of them out of office and clean up their mess!

What you do with this article now that you have read it......... Is up to you. This might be funny if it weren't so true. Be sure to read all the way to the end:

Tax his land,
Tax his bed,
Tax the table,
At which he's fed.
Tax his tractor,
Tax his mule,
Teach him taxes
Are the rule.
Tax his work,
Tax his pay,
He works for peanuts anyway!

Tax his cow,
Tax his goat,
Tax his pants,
Tax his coat.
Tax his ties,
Tax his shirt,
Tax his work,
Tax his dirt.
Tax his tobacco,
Tax his drink,
Tax him if he
Tries to think.
Tax his cigars,
Tax his beers,
If he cries
Tax his tears.
Tax his car,
Tax his gas,
Find other ways
To tax his ass.
Tax all he has
Then let him know
That you won't be done
Till he has no dough.
When he screams and hollers;
Then tax him some more,
Tax him till
He's good and sore.
Then tax his coffin,
Tax his grave,
Tax the sod in
Which he's laid...
Put these words
Upon his tomb,
Taxes drove me to my doom...'

When he's gone,
Do not relax,
Its time to apply
The inheritance tax..
Accounts Receivable Tax
Building Permit Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Excise Taxes
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel Permit Tax
Gasoline Tax (currently 44.75 cents per gallon)
Gross Receipts Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
IRS Interest Charges IRS Penalties (tax on top of tax)
Liquor Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Personal Property Tax
Property Tax
Real Estate Tax
Service Charge Tax
Social Security Tax
Road Usage Tax
Recreational Vehicle Tax
Sales Tax
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone Federal Excise Tax
Telephone Federal Universal Service Fee Tax
Telephone Federal, State and Local Surcharge Taxes
Telephone Minimum Usage Surcharge Tax
Telephone Recurring and Nonrecurring Charges Tax
Telephone State and Local Tax
Telephone Usage Charge Tax
Utility Taxes
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax

STILL THINK THIS IS FUNNY? Not one of these taxes existed 100 years ago, & our nation was the most prosperous in the world. We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids.

What in the hell happened? Can you spell 'politicians?'

FBI Misconduct Reveals Sex, Lies and Videotapes (Video)

This CNN article is not unique among reports of misconduct in law enforcement. It does however highlight the double standards that law enforcement agencies practice when dealing with "us", the average citizen, and "them", within their own ranks. 

For most of the abuses documented in this article, the majority of us would have been fired at the very least and prosecuted otherwise. The FBI agents in this article weren’t even slapped on the wrist..they were patty-caked.

Washington (CNN) -- An FBI employee shared confidential information with his girlfriend, who was a news reporter, then later threatened to release a sex tape the two had made.

A supervisor watched pornographic videos in his office during work hours while "satisfying himself."

And an employee in a "leadership position" misused a government database to check on two friends who were exotic dancers and allowed them into an FBI office after hours.

These are among confidential summaries of FBI disciplinary reports obtained by CNN, which describe misconduct by agency supervisors, agents and other employees over the last three years.

Read the FBI documents obtained by CNN

The reports, compiled by the FBI's Office of Professional Responsibility, are e-mailed quarterly to FBI employees, but are not released to the public.

And despite the bureau's very strict screening procedure for all prospective employees, the FBI confirms that about 325 to 350 employees a year receive some kind of discipline, ranging from a reprimand to suspension.

About 30 employees each year are fired.

"We do have a no-tolerance policy," FBI Assistant Director Candice Will told CNN. "We don't tolerate our employees engaging in misconduct. We expect them to behave pursuant to the standards of conduct imposed on all FBI employees."

However, she said, "It doesn't mean that we fire everybody. You know, our employees are human, as we all are. We all make mistakes. So, our discipline is intended to reflect that.

"We understand that employees can make mistakes, will make mistakes. When appropriate, we will decide to remove an employee. When we believe that an employee can be rehabilitated and should be given a second chance, we do that."

Will, who oversees the bureau's Office of Professional Responsibility, said most of the FBI's 34,300 employees, which include 13,700 agents, follow the rules.

"The vast majority of our employees do not lie," Will said. "The vast majority of our employees do not cheat. The vast majority of our employees do not steal. The vast majority of our employees do not engage in the type of misconduct you are describing. There is an occasional employee who will engage in such misconduct, and that employee will answer for it."

However, the internal summaries show that even with serious misconduct, employees can keep their job (names and locations of the employees are not listed in the reports):

-- An employee had "a sexual relationship with a source" over seven months. The punishment was a 40-day suspension.

-- The supervisor who viewed "pornographic movies in the office while sexually satisfying himself" during work hours received a 35-day suspension.

-- The employee in a "leadership position" who misused a "government database to conduct name checks on two friends who were foreign nationals employed as exotic dancers" and "brought the two friends into FBI space after-hours without proper authorization" received a 23-day suspension. The same employee had been previously suspended for misusing a government database.

-- An employee who was drunk "exploited his FBI employment at a strip club," falsely claiming he was "conducting an official investigation." His punishment was a 30-day suspension.

-- And an employee conducted "unauthorized searches on FBI databases" for "information on public celebrities the employee thought were 'hot'" received a 30-day suspension.

Will said she could not discuss individual cases, and added: "I can't even confirm whether or not your information is accurate."

She said the bureau follows established guidelines for punishing employees.

"What we try is the holistic approach of the total employee," she said. "You look at the full record of that employee's career. You look at whatever the division has to say about the employee and you look at the facts in the particular case. 

You look at the employee's disciplinary history as to whether or not they have ever been in trouble. You look at how well they performed in the past, and you try to get a sense of whether or not this is an employee who can be rehabilitated, and if so, a period of suspension is imposed and if not, the employee is removed."

To see complete CNN article and video click here

ENOUGH! Our Government Needs to Stop Trying to Protect Us

This little piece by John Stossel may seem good natured on the surface, but you need to read between the lines to catch the full impact. Your government is not trying to protect you, it is trying to control you. Wake up Americans! You are not sheep. You are citizens! Act like it!

I feel so much safer now knowing that politicians like Jimmy Jeffress want to protect me!

Doctors ask about your family history because it’s one of the best predictors of what will bring your demise. My family history? Being hit by public transportation while distracted. My grandfather was killed by a bus when he was crossing the street while reading. I was hit by a taxi when jaywalking.

Arkansas State Senator Jimmy Jeffress proposed to “make it illegal for you to wear headphones in both ears if you're working out or walking on or near a street.”

He’s not alone. New York City wants to ban texting while crossing the street.

I feel safer already.

[NOT!] No. I don’t. And I feel less free. What’s next: no walking and chewing gum because some Americans can't?
The foolish legislator may have been inspired by this video of a woman falling into a fountain. It’s been viewed millions of times.

Trying to change such behaviors with legislation is pointless and intrusive. So are laws banning texting and using cell phones when driving. Those proposals are more compelling because distracted drivers do kill lots of people. But the laws don’t work. In fact, the laws may even lead to more accidents.

People do all kinds things while driving. They eat, fix their hair, put on lipstick, light cigarettes, and we even saw someone curling their eyelashes. If we must always drive with two hands on the wheel, should we outlaw picking your nose? Just putting on my sunglasses or drinking a sip of coffee takes a hand of the wheel. The radio is a big distraction problem; I'm constantly distracted trying to push the tiny buttons to avoid commercials.

In many states, the proposed laws call for hands-free devices like earpieces, but have you ever tried to put on one of those ear-pieces while driving? That's more of a distraction than the cell phone.

What one person may find to be a distraction may be an easily integrated invention for another. Carmakers keep bringing us new gadgets like navigation systems. While some of these new features may be distracting, we adjust to them. 

Why try to idiot-proof the world by banning new technology?
Just because something is wrong or dangerous doesn’t mean that banning it will solve the problem. Texting is just one of many activities that distract drivers. If I’m not texting, I’m eating, smoking, changing the radio station, trying to figure out the GPS, or simply talking to another passenger. All of these actions take our attention off the road; should they all be banned too? Maybe we are just getting better at multi-tasking? 

If outlawing cell phones didn’t decrease the number of traffic related deaths, and banning texting doesn’t seem to either, why don’t they just leave us alone. Of course, maybe these laws are passed not just to prevent accidents, but to generate tickets that provide funds for governments.

Fortunately, Arkansas’ Jimmy Jeffress has had second thoughts. This afternoon he dropped his proposal.


Article by John Stossel, Fox News

Fed Hides Major Accounting Change. Is This What Is Meant By "Fuzzy Math"?

Just another reason to ban the Federal Reserve! Wake up America... this (and every other) action by an independent banking cartel is bankrupting our country and that of our future generations!

  

Reuters has a very hot story out tonight on an accounting change the Fed snuck into a regular weekly report. It will move off the capital part of its balance sheet any losses the Fed may have on paper it purchased from Goldman Sachs, or anybody else for that matter. Here's Reuters via CNBC (My emphasis):

Concerns that the Federal Reserve could suffer losses on its massive bond holdings may have driven the central bank to adopt a little-noticed accounting change with huge implications: it makes insolvency much less likely.

The significant shift was tucked quietly into the Fed's weekly report on its balance sheet and phrased in such technical terms that it was not even reported by financial media when originally announced on Jan. 6.

But the new rules have slowly begun to catch the attention of market analysts. Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world's most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted.

But they are averting asking the Treasury for money in the future by an accounting gimmick that will simply dump the debt off the capital part of the balance sheet, so it won't be reported as a loss, and make it a liability to the Treasury. More from Reuters:

[According to]Raymond Stone, managing director at Stone & McCarthy in Princeton, New Jersey, "An accounting methodology change at the central bank will allow the Fed to incur losses, even substantial losses, without eroding its capital."

The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability...
 "Any future losses the Fed may incur will now show up as a negative liability as opposed to a reduction in Fed capital, thereby making a negative capital situation technically impossible," said Brian Smedley, a rates strategist at Bank of America-Merrill Lynch and a former New York Fed staffer.

"The timing of the change is not coincidental, as politicians and market participants alike have expressed concerns since the announcement (of a second round of asset buys) about the possibility of Fed 'insolvency' in a scenario where interest rates rise significantly," Smedley and his colleague Priya Misra wrote in a research note.

Bottom line: We all knew the Fed was going to have to do some kind of monkey business to deal with all the junk securities it purchased, here it is: Negative liabilities. Yes, only at your local Fed.

Note: I hasten to add this does not appear to resolve the problem of the Fed going cash flow negative as a result of having to raise interest rates on excess reserve to a point where they are higher than most of the income earning debt they hold. Expect future monkey business on this front.

Article by: Robert Wenzel, Economy Policy Journal