Federal Reserve policymakers appear less inclined to launch a fresh round of monetary stimulus as the U.S. economy gradually improves, according to minutes for the central bank’s March meeting.

Economic growth has strengthened slightly, Fed officials noted, but they remained cautious about a broad pick up in U.S. activity, focusing heavily on a still elevated jobless rate.

Despite this caution, only “a couple” of members thought additional monetary stimulus might be needed to support the economy if it loses momentum or inflation remains too low for too long.

That was a much less robust showing than in January, when a few members saw a possible need for additional easing before long, while another contingent thought that stimulus might be required if economic conditions worsened.

Only last week, Fed Chairman Ben Bernanke had kept alive the idea of more stimulus when he warned business economists about the risks that long-term unemployment could lead to prolonged economic malaise in the United States. Investors had interpreted those comments as suggesting Bernanke leaned toward a third round of bond buys, known as quantitative easing or QE3.

The latest Fed’s minutes sent a different message by toning down support for further stimulus, which hammered U.S. stocks, bonds and gold, and pushing the dollar higher.

“The minutes threw water on the resurrected notion that QE3 was still very much on the table,” said Clark Yingst, chief market analyst at Joseph Gunnar & Co. in New York.

CONTINUED at Yahoo Finance.

Ben Bernanke has decided that he needs to teach all of us why the Federal Reserve is good for America and about why the gold standard is bad.  On Tuesday, Bernanke delivered the first of four planned lectures to a group of students at George Washington University.  But that lecture was not just for the benefit of those students.  Officials at the Fed have long planned for this lecture series to be an opportunity for Bernanke to “educate” the American people about the Federal Reserve.  The classroom was absolutely packed with reporters and just about every major news organization is running a story about this first lecture.  So the Federal Reserve is definitely getting the publicity that it was hoping for.  You can see the slides from the presentation that Bernanke gave to the students right here.  It is pretty obvious that one of the primary goals of this first lecture was to attack those that have been critical of the Fed over the past few years.  In doing so, Bernanke “stretched” the truth on more than one occasion.

The entire event was staged to make Bernanke and the Federal Reserve look as good as possible.  Prior to his arrival, the students gathered for the lecture were actually instructed to applaud Bernanke….

The 30 undergraduates at George Washington University sent up a round of applause. It was, they’d been told beforehand, “appropriate, even encouraged, to politely applaud” Tuesday’s guest lecturer.

But as noted above, this lecture was not for the benefit of those students.  AUSA Today article even admitted that “addressing the public directly” was one of the real goals of this lecture….

For Bernanke, the GW lectures serve a dual function:

They give him a chance to reprise the role of professor he played for more than two decades, first at Stanford and then at Princeton, where he eventually chaired the economics department.

And they give him a way to expand his mission of demystifying the Fed. As part of that campaign, Bernanke became the first Fed chief to hold regular news conferences and conduct town-hall meetings.

In addressing the public directly, Bernanke has also sought to neutralize attacks on the Fed, some of them from Republican presidential candidates.

So what did Bernanke actually say during the lecture?

Well, you can read all of the slides right here, but the following are some of the highlights….

On page 6 of the presentation, Bernanke makes the following claim….

“A central bank is not an ordinary commercial bank, but a government agency.”

Well, that is quite interesting considering the fact that the Federal Reserve hasargued in court that the Federal Reserve Bank of New York is not an agency of the federal government and that the various Federal Reserve banks around the country are private corporations with private funding.

So did the Federal Reserve lie to the court or is Ben Bernanke lying to us?

And what other “agency” of the federal government is owned by private banks?

It is even admitted that the individual member banks own shares of stock in the various Federal Reserve banks on the Federal Reserve website….

The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations–possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.

The Federal Reserve always talks about how it must be “independent” and “above politics”, but when they start getting criticized they always want to seek shelter under the wing of the federal government.

It really is disgusting.

On page 7 of the presentation, the following statement is made….

“All central banks strive for low and stable inflation; most also try to promote stable growth in output and employment.”

Well, on both counts the Federal Reserve has failed miserably.

Right now, if inflation was measured the same way that it was back in 1980, the annual rate of inflation would be more than 10 percent.

And when you take a longer view of things, the inflation that the Federal Reserve has manufactured has been absolutely horrific.

Even using the doctored inflation numbers that the Federal Reserve gives us, the U.S. dollar has still lost 83 percent of its value since 1970.

The truth is that inflation is a “hidden tax” that is constantly destroying the value of every single dollar that you and I hold.  Those that attempt to save money for the future or for retirement are deeply penalized under such a system.

As far as employment goes, the total number of workers that are “officially” unemployed in the United States is larger than the entire population of Portugal.

The average duration of unemployment is hovering near an all-time record high and almost every measure of government dependence is at an all-time record high.

So the Federal Reserve is failing at the exact things that Bernanke claims that it is supposed to be doing.

But instead of directly addressing many of the specific criticisms that have been leveled at the Fed, Bernanke instead chose to spend much of his lecture talking about the problems with adopting a gold standard.  The following are statements that were pulled directly off of the slides he used during his speech….

-”The gold standard sets the money supply and price level generally with limited central bank intervention.”

-”The strength of a gold standard is its greatest weakness too: Because the money supply is determined by the supply of gold, it cannot be adjusted in response to changing economic conditions.”

-”All countries on the gold standard are forced to maintain fixed exchange rates. As a result, the effects of bad policies in one country can be transmitted to other countries if both are on the gold standard.”

-”If not perfectly credible, a gold standard is subject to speculative attack and ultimate collapse as people try to exchange paper money for gold.”

-”The gold standard did not prevent frequent financial panics.”

-”Although the gold standard promoted price stability over the very long run, over the medium run it sometimes caused periods of inflation and deflation.”

-”In the second half of the 19th century, a global shortage of gold reduced the U.S. money supply and caused deflation (falling prices). Farmers were squeezed between declining prices for crops and the fixed dollar payments for their mortgages and other debts.”

Bernanke spent more time on the gold standard during his speech than on anything else.  At one point during the lecture, Bernanke made the following statement….

“To have a gold standard, you have to go to South Africa or someplace and dig up tons of gold and move  it to New York and put it in the basement of the Federal Reserve Bank of New York and that’s a lot of effort and work”

Bernanke even blamed the gold standard for the Great Depression.  On a slide entitled “Monetary Policy in the Great Depression”, Bernanke made the following claims….

•The Fed’s tight monetary policy led to sharply falling prices and steep declines in output and employment.
•The effects of policy errors here and abroad were transmitted globally through the gold standard.
•The Fed kept money tight in part because it wanted to preserve the gold standard. When FDR abandoned the gold standard in 1933, monetary policy became less tight and deflation stopped.

Bernanke seems to want to frame the debate over monetary policy is such a way that the American people are given only two alternative systems to consider: the Federal Reserve and a gold standard.

But the truth is that there are a vast array of both “hard money” and “soft money” systems that would not include a central bank or a gold standard at all.

So the truth is that the American people would have many different systems to choose from if they wanted to shut down the Federal Reserve and set up something new.

In the past the U.S. government has issued debt-free money and it could certainly do so again.

But in his lecture, Bernanke did not even mention how the Federal Reserve creates money or how whenever new money is created more debt is created.

Under the Federal Reserve system, the money supply is designed to continually increase, and whenever more money is created more debt is also created.

In a previous article I discussed how more money is created on the federal level….

For example, whenever the U.S. government wants to spend more money than it takes in (which happens constantly), it has to go ask the Federal Reserve for it.  The federal government gives U.S. Treasury bonds to the Federal Reserve, and the Federal Reserve gives the U.S. government “Federal Reserve Notes” in return.  Usually this is just done electronically.

So where does the Federal Reserve get the Federal Reserve Notes?

It just creates them out of thin air.

Wouldn’t you like to be able to create money out of thin air?

Instead of issuing money directly, the U.S. government lets the Federal Reserve create it out of thin air and then the U.S. government borrows it.

Talk about stupid.

The designers of the Federal Reserve system intended to trap the U.S. government in a debt spiral that would expand perpetually.

So has their design worked?

Well, just look at the chart below….

Today, the U.S. national debt is more than 5000 times larger than it was when the Federal Reserve was first created.

So I guess you could say that the results have been spectacular.

The Federal Reserve system also greatly favors the big Wall Street banks that it is designed to serve.

When those big banks get into trouble, the Federal Reserve snaps into action.

According to a limited GAO audit of Fed transactions during the last financial crisis, $16.1 trillion in secret loans were made by the Federal Reserve to the big Wall Street banks between December 1, 2007 and July 21, 2010.

The following list is taken directly from page 131 of the GAO audit report and it shows which banks received money from the Fed….

Citigroup - $2.513 trillion
Morgan Stanley - $2.041 trillion
Merrill Lynch - $1.949 trillion
Bank of America - $1.344 trillion
Barclays PLC - $868 billion
Bear Sterns - $853 billion
Goldman Sachs - $814 billion
Royal Bank of Scotland - $541 billion
JP Morgan Chase - $391 billion
Deutsche Bank - $354 billion
UBS - $287 billion
Credit Suisse - $262 billion
Lehman Brothers - $183 billion
Bank of Scotland - $181 billion
BNP Paribas - $175 billion
Wells Fargo - $159 billion
Dexia - $159 billion
Wachovia - $142 billion
Dresdner Bank - $135 billion
Societe Generale - $124 billion
“All Other Borrowers” - $2.639 trillion

What about all the rest of us?

Did we get bailed out?

No, we were told that if Wall Street was rescued that the benefits would trickle down to the rest of us.

Unfortunately, that has not exactly worked out.  In article, after article, afterarticle I have detailed the horrible economic suffering that the American people are still going through.

But what Bernanke and the Fed have done is create inflation in commodities such as oil which is affecting the household finances of nearly everyone in America.

The average price of a gallon of gasoline in the United States is now up to $3.87.  That is an all-time record high for the month of March.

So far in 2012, the price of gasoline in the United States has risen by 17 percent.

Thanks Bernanke.

Over the past several decades, every time there has been a major spike in gasoline prices in the United States, a recession has always followed.  If you doubt this, just check out this amazing chart.

So will we soon see another recession?

If we are lucky.  Hopefully the next downturn will not be a full-blown depression.

The truth is that the Federal Reserve does not help us avoid booms and busts.  Rather, it creates them.  The Fed was at the heart of the housing bubble which helped bring on the last financial crisis when it crashed, and the current ultra-low interest rate policies of the Fed are creating more bubbles which will have devastating long-term consequences.

So Bernanke does not have anything to be proud of, and his track record has been absolutely nightmarish.

Hopefully the American people will not believe the propaganda and will take an honest look at the Federal Reserve.

When you take an honest look at the Federal Reserve, there is only one rational conclusion: Congress should shut it down, lock the doors and throw away the key.

Source: The Economic Collapse.

The Federal Reserve has operated almost entirely behind closed doors as it rewrites the rule book governing the U.S. financial system, a stark contrast with its push for transparency in its interest-rate policies and emergency-lending programs.

While many Americans may not realize it, the Fed has taken on a much larger regulatory role than at any time in history. Since the Dodd-Frank financial overhaul became law in July 2010, the Fed has held 47 separate votes on financial regulations, and scores more are coming. In the process it is reshaping the U.S. financial industry by directing banks on how much …

CONTINUED at the Wall Street Journal.

The policies that the Fed embarked on in late 2007 are a sharp departure from the old way of performing monetary policy. In fact, it is difficult to state that the Fed is any longer in the business of traditional monetary policy — understood in the United States as aiming for low inflation and smoothed output volatility. A new breed of monetary policies better referred to as “quasi-fiscal” policies has become the norm.

The Fed’s policies have a fiscal flair to them for two reasons.

First, no longer are output and inflation the primary concerns. The Fed has framed any reference to inflation over the past four years in the context of either:

1. the low levels of price inflation erasing inflationary fears from pursuing unorthodox monetary policies, or
2. the threat of deflation, thus creating the “need” for monetary expansion to ward off its ill effects.

Inflation has not been a direct concern in the sense that the Fed’s role is to control it. Instead, it has been viewed as a constraint on Fed policies to pursue other ends.

Concerns about maintaining output have likewise taken a backseat. Monetary economists (Fed officials included) conventionally viewed monetary policy as a tool to minimize the output gap. During recessionary periods, just the right dose of monetary expansion should tempt employers to increase production and hire workers. The attention now, however, is on keeping banks capitalized through monetary expansion. By not allowing the bad debts on banks’ balance sheets to bring them to insolvency, the Fed is hoping to stave off a contagious banking crisis. The Fed is seemingly less directly concerned with maintaining output, and more with keeping banks afloat (which, admittedly, officials think will translate into employment).

The second reason that the Fed has been taking on decidedly fiscal activities is that its policies are directly affecting its own finances. Traditional monetary policy left the Fed’s balance sheet intact. Until this recession, the textbook explanation of how the Fed alters the money supply held true: it bought or sold Treasury bills, and the money supply correspondingly increased or decreased. By purchasing assets of lesser quality over the recession, the Fed has endangered its own balance sheet in the name of strengthening those of the preferred members of the banking system.

CONTINUED at The Ludwig von Mises Institute. Written by David Howden.

A combination of several factors, including a declining dollar and the Federal Reserve’s announcement that it would keep interest rates at virtually zero until late 2014, helped to send gold and silver prices soaring to multi-week highs. Analysts expect the upward trend to continue as paper currencies founder and gloomy news continues to dominate the economic headlines.

The spot price for gold was around $1,725 by 2 p.m. Eastern time after jumping more than $60 since the day before, up almost 30 percent from a year ago and more than 7.5 percent over the last 30 days. It smashed through $1,700 on Wednesday for the first in six weeks.

“At the moment everything points to even higher prices, given the strong risk appetite, the better mood among market players, the strong equity markets and the weak dollar,” Commerzbank analyst Daniel Briesemann told Reuters.

Analysts said the single most important factor behind gold’s strong rally was the Federal Reserve. On Wednesday, the privately owned central bank promised to keep short-term interest rates at rock bottom until late 2014, extending the date from its previous pledge to keep rates down until mid-2013.

Also bullish for gold — and bearish for the U.S. dollar, of course — was Fed boss Ben “helicopter” Bernanke’s veiled threat to unleash more so-called “Quantitative Easing,” known in simpler terms as creating new “money” out of thin air and pumping it into the economy by purchasing bonds. The dollar immediately took a hit against other major currencies.

“The framework makes very clear that we need to be thinking about ways to provide further stimulus if we don’t get improvement in the pace of recovery and a normalization of inflation,” Bernanke said during a quarterly news conference after the Fed’s report was released. Analysts and central bank critics, already concerned about massive monetary “easing” in recent years, lambasted the idea that more money would solve the economic problems plaguing America.

“If the Federal Reserve thought the economy was improving, it wouldn’t need this artificial prop to keep sustaining it,” said Euro Pacific Capital head Peter Schiff, noting that wild money printing was helping to drive the nation and its economy off a cliff. “The President and the Federal Reserve are now conspiring to create a much bigger crisis.”

The Fed claimed it would be targeting a 2-percent rate of annual inflation for 2012. However, few analysts take the government’s “Consumer Price Index” (CPI) measure of inflation seriously — especially as Core CPI, one of the most frequently cited figures, omits price increases in key sectors like food and energy.

According to Schiff, the government’s claim based on CPI that inflation for 2011 was 3 percent is completely bogus. It was actually much higher, he said, noting that officials were using phony measures like the CPI to mask the true rate of inflation. And it is likely to be even higher in 2012 before eventually morphing into a full-blown currency and debt crisis in the coming years.

“The reason they have to keep [interest rates] so low is to artificially support a phony economy,” Schiff explained. “This economy is a disaster waiting to happen — the only thing standing between us and economic Armageddon is zero-percent interest rates.”

But it can’t go on forever, and the longer rates are kept so low, the worse the looming crisis will be. For now, Schiff, whose business trades gold and silver, said investors should protect their assets by purchasing precious metals “before the price goes any higher.”

An analysis by Bloomberg published on Wednesday showed that gold — which has increased every year for more than a decade — provided the best return on investment over the last five years when adjusted for volatility. And heavy-hitting financial firms cited in the report including Goldman Sachs and Morgan Stanley are forecasting that gold prices will keep rising to around $2,000 in 2012 or 2013.

“People are still very under-invested in gold, and so there is a huge scope of that increasing,” explained UniCredit analyst Jochen Hitzfeld, the most accurate precious-metals forecaster tracked by Bloomberg over the past two years. Other experts noted that gold is widely and accurately perceived as a safe-haven in times of economic turmoil.

While gold prices have been extraordinarily volatile — spot prices hit $1,923 in September before crashing to $1,523 by the end of 2011 — the longer-term rally has so far been relatively consistent over the past decade. Just 10 years ago, gold was worth less than $300 per ounce.

Silver, which has also seen drastic price fluctuations, was less than $5 per ounce 10 years ago. In 2011, it surged to an all-time high of around $50 before dropping back down to about $33.35 today. The U.S. dollar, meanwhile, has not been doing so well — even when measured against other depreciating paper currencies.

Even billionaire investor George Soros, whose well-publicized sale of some 99 percent of his gold holdings during the first quarter of 2011 spooked precious-metals investors, has jumped back into the market. According to Securities and Exchange Commission (SEC) filings cited by Bloomberg, the hedge-fund manager had increased his stake in SPDR Gold Trust, an exchange-traded fund tracking gold prices, to almost 50,000 shares as of September 30.

Central banks around the world were also buying up multi-ton quantities of gold bullion, according to data cited in news reports. And the trend shows no signs of slowing down.

In other bullish news for the precious metal, unconfirmed reports indicate India has started purchasing oil from Iran using gold rather than U.S. dollars. China could follow, too, according to news reports.

“It shows the exodus from the dollar is gaining speed,” noted precious-metals and currency trader Simit Patel on the investment analysis site Seeking Alpha. “With the major economies of the world facing $7.6 trillion in bond payments due this year, I think the tipping point for a shift out of dollars and into a new monetary system backed by gold is not as far off as it may seem.”

With the steep drop in prices during the last few months of 2011, some analysts and traders were reluctant to get back in the precious-metals market before the appearance of a solid bottom had solidified. But the big banks and respected analysts are forecasting that as long as the fundamentals — out-of-control money printing, sovereign-debt crises, wild government spending, and more — remain the same, gold and silver prices could see massive gains in 2012.

Source: New American.

*Taken from Business Insider.

Very important point from Goldman’s Dominic Wilson on yesterday’s “Twist” announcement. Essentially he argues that the part of the operation where the Fed is going to sell $400 billion of short-dated bonds is irrelevant. Only the buying part really effects anything:

Despite the discussion of whether QE3 will follow, for all intents and purposes, QE3 has already begun with yesterday’s shift. While the Fed has been careful to frame the latest shift as a “twist” that leaves its balance sheet neutral, as we have described before the policy is economically more or less equivalent to outright asset purchases. This is because the decision to sell short-dated securities in exchange for bank reserves – the additional transaction relative to the prior purchase program – is largely irrelevant given that the two are very close substitutes when interest rates at the front end of the treasury curve are close to zero (the US 3-year yield is only about 35bp). So yesterday’s policy announcement is not materially different in economic terms from an announcement to buy $400bn of longer-dated USTs through “printing money”. And in fact, given the tilt towards longer durations, the size of purchases is not meaningfully different from QE2.

As for why markets have reacted to negatively:

CONTINUED..

*Taken from Prison Planet. Written by Paul Craig Roberts.

If the Fed stops QE, confidence in the US dollar would rise. Money would flow into US investments, both supporting the US stock market and helping to finance the large US budget deficit. Gold and silver prices would decline. Negative dollar expectations would be squeezed out of oil and grain prices, although drought, flood, and supply factors would continue to impact grain prices and the administration’s wars can impact oil prices.

If a halt to QE coincided with more European sovereign debt problems, the dollar might regain a lot of the ground that it has lost.

Looked at from this perspective, the Fed should halt its bond purchases, and people should bail out of their bullion investments and commodity speculations.

But there are other factors in play–the economy and continuing solvency worries about financial institutions. At a June 22 news conference, Federal Reserve chairman Ben Bernanke said: “Some of the headwinds that have been concerning us, like the weakness in the financial sector, problems in the housing sector, balance sheet and deleveraging issues, may be stronger and more persistent than we thought.”

CONTINUED..

*Taken from the Wall Street Journal.

Dallas Fed President Richard Fisher, a well-known policy hawk, is all over the wires and airwaves this morning ahead of the much-anticipated speech by Ben Bernanke this afternoon.

Some highlights from Fisher’s comments:

• The economy doesn’t need more stimulus after QE2 ends in June.
• Recent weak data are merely a temporary soft patch.
• The economy is going to grow at a 3% to 4% pace in the second half.
• The Fed is not to blame for higher food and energy prices, which he concedes may have hurt economic growth in the first half.
• The weak May jobs report isn’t a “game-changer” that will bring on QE3 or other policy changes.

All about what you’d expect from the Fed’s leading hawk. But it’s probably not all that different than what you’ll hear from the more centrist Bernanke this afternoon. Mr. Fisher is a voting member of the Fed’s policy setting committee this year, and he hasn’t objected to what the Fed has done so far.