Bloomberg Writes: Buffett Calls Fed History’s Greatest Hedge Fund
Billionaire investor Warren Buffett compared the U.S. Federal Reserve to a hedge fund because of the central bank’s ability to profit from bond purchases while accumulating a balance sheet of more than $3 trillion.
“The Fed is the greatest hedge fund in history,” Buffett told students yesterday at Georgetown University in Washington. It’s generating “$80 billion or $90 billion a year probably” in revenue for the U.S. government, he said. “And that wasn’t the case a few years back.”
The central bank has been buying $85 billion of bonds a month to help the U.S. recover as it emerges from the deepest slump since the Great Depression. Chairman Ben S. Bernanke and other Fed policy makers unexpectedly opted this week to sustain that pace of asset purchases instead of tapering it, saying they need to see more signs of lasting improvement in the economy.
The Fed remitted $88.4 billion to the U.S. Treasury Department last year. The payments have ballooned as the central bank built its balance sheet during the past five years.
The Fed “is under no pressure, none whatsoever to have to deleverage,” Buffett said. “So it can pick its time, and if you have somebody wise there — and I think Bernanke is wise, and I certainly expect his successor to be — it can be handled. But it is something that’s never quite been done on this scale. It will be interesting to watch.”
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This article is a must read for everyone. If it doesn’t illustrate to you that our credit finance depended US Economy is nothing more than a huge FRAUD, nothing will.
Here is how the FRAUD works.
- Mr. Bernanke sits in his comfortable leather chair at the FED, pushes a computer button on his keyboard and BOOM, about $85 Billion (yes, billion) appear out of thin air. That happens every month.
- Mr. Bernanke then pushes another button on the keyboard and buys $85 Billion worth of US Treasury. Every month. (AKA. Lending to the US Government)
- The US Government then proceeds to pay interest on such “out of thin air” money and that goes to the FED.
- The FED then turns around and pays the interest money back to the US Government. Net of fees of course(which I don’t even want to go in here).
Does anyone know how I can get into this free money business?
Keep in mind that most if not all financial institutions (including banks) in the US are currently making money off of this scheme.
So, what’s the problem?
Well, all of this happens on the money that never actually existed in the first place. We can talk about structural problems that this action leads to, such as currency debasement and inflation, but for our purpose lets concentrate on something else.
This does, in fact, make the FED the largest hedge fund in the world. Excuse me, not a hedge fund, but a Ponzi Scheme (since they are creating money out of thin air). Usually this goes uninterrupted until and unless the confidence goes away. At that point, the Ponzi Scheme collapses within a very short period of time.
As of the right now the FED has an substantial amount of confidence from both domestic and international investors. Will that continue? Probably, until one day it doesn’t. When will that day come? No one knows, but when it does the whole thing will collapse within a short period of time. No doubt about it.
The only problem is, instead of these fraudsters playing with just your retirement account, these guys play with the entire US Economy. When it goes…and it will….everything will collapse.
And they put Bernie Madoff and Martha Steward in jail? These guys are not even on the same planet when it comes to defrauding the American people.
So, is Mr. Buffett smoking something and doesn’t see this? Of course he sees and fully understands the stated above. However, he owns/runs a huge conglomerate that depends on growth and stability of the overall US Economy. For him to say anything else but what he said would be foolish. But not for me.
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