What Every Student in America Needs to Know About the Federal Reserve

oftwominds.com
People are confused about the Fed, and I think it would be better if everybody had a clear understanding of what the Federal Reserve is and what it is not.

First of all, the Federal government thinks of the Federal Reserve as a service bureau, whose function it is to print money that the government can spend. As long as the Federal Reserve performs that function--reliably printing, let's say, a trillion or more each year to top off the Federal budget--then Congress will be happy with the Federal Reserve (their rainmaker) and will follow its advice and try to keep it happy.

It should be emphasized here that the whole Keynesian smokescreen and sideshow has very little to do with the reality of the relationship here. The Federal Reserve's job is not just to lend Uncle Sam some money during a recession so as to provide temporary stimulus. The Fed is a milk cow for Uncle Sam. Its job is to give milk all the time.

So to summarize this first point, the Fed is a service bureau for the Federal government whose job it is to provide the government with freshly printed fiat every year. This job has very little to do with the Keynesian prescription of how to deal with a recession.

The Fed is also a service bureau to the big banks that own it. Its job is to give unfair advantage to those banks, either by granting them low-interest loans that can be rolled over into infinity, or by buying their bad debts and disposing of them properly, or by doing any number of other special favors for them that increase their profits and executive bonuses. The Fed is not independent in the sense that it is self-governing. It must provide service to the banks who own it and to the Federal government, which controls its legal environment. Big banks have owned and controlled the Fed since its inception in 1913.

Summary: The Fed is also a service bureau to the big banks. It is not as independent as it proclaims itself to be; it provides services for its owners. Its owners have a profit motive. Read more >>

A Majority Of States Are Now Insolvent: Quantifying The Disastrous Unemployment Situation

Zero Hedge

Zero Hedge recently highlighted the ever increasing Federal outlays on unemployment insurance, leading to questions on whether the true unemployment rate, as indicated by actual cash outlays, may be materially higher than indicated in increasingly dubious governmental reports. One proposed alternative has been that the Federal government is directly subsidizing standalone states' depleted unemployment insurance trust funds. Using data provided by ProPublica we have been able to confirm that indeed standalone states are for the most part now bankrupt and have no reserves left in their coffers when it comes to funding ever increasing insurance benefits. As ProPublica indicates, there are now 26 states which have depleted their trust funds, among these are the usual suspects including California, Michigan, New York, Pennsylvania and Ohio, which now rely exclusively on borrowings from the Federal government to prevent the cessation of insurance payments to recently unemployed workers. Currently all states collectively posses $10.7 billion in trust fund assets(with the bulk held by less impacted states such as Washington ($2.6 billion), Louisiana ($1.1 billion) and Oregon ($1.1 billion). On the other hand, 26 states currently rely exclusively on the Federal Government, and have borrowed a combined $30 billion through December to fund payments. ProPublica estimates that another 8 states will be insolvent within 6 months, as their trust funds also approach 0.

The chart below demonstrates the amount of borrowing per state, as well as trust fund holdings.

Another way of visualizing the damage can be seen on the following chart which highlights

The most bankrupt states are California, with $6.8 billion in borrowings, Michigan ($3.4 billion), New York ($2.4 billion), Pennsylvania ($2.2 billion) and Ohio ($1.9 billion).

A chart demonstrating the collapse in California's trust fund, coupled with the relentless increase in the state's unemployment rate, together with Benefits paid out and actual Revenue gained (if any). Note that the April/May tax revenue collection spike, unlike in prior periods, did nothing to boost the trust fund in 2009.

So what is happening on the Federal side of the ledger? Recall that in December the government spent $14.65 billion in Unemployment Insurance Benefits, which was a 24% jump from the $11.8 billion in November. How is January shaping up? Through January 28th, the Federal Government had spent a total of $13.85 billion for this outlay. Once we get the Friday additional data, we will update our previous chart" we expect the final number to be about $14.1 billion, roughly in line with the December total.

At this point there is no question that the vast majority of the hardest hit states now subsist exclusively due to the generosity of the Federal Government, which in turn, courtesy of a 50%+ indirect take down of each and every Treasury auction (now that QE is over), is at the full mercy of foreign investors, yet as we pointed out, their custody holdings at the Fed have started declining. If the government is unable to finance its profligate ways, and today's budget announcement by Obama is just the icing on the cake, look for states to gradually reign in unemployment checks whether they like it or not, which would likely lead to some very interesting demonstrations of the broader population's lack of solidarity with Mr. Blankfein's $100 million, or whatever it may end up being, bonus number. Our advice to California readers who believe they are owed a refund: file your taxes ASAP - the market for IOUs still has to be properly securitized by JP Morgan.

Aussie Govt refuses to underwrite doctors' liability for vaccinations

SMH
Julie Robotham Medical Editor
THE Federal Government's plan to immunize the population against swine flu is in chaos because insurers may not cover doctors who administer the jab. Inadequate testing and the possibility of spreading other infections means there is too high a risk patients will sue, the insurers say.

Despite weeks of crisis talks, the Government has refused to underwrite doctors' liability for the vaccinations and medical groups say the program - due to start as early as mid-September - cannot proceed unless doctors are insured. The president of the Australian Medical Association, Andrew Pesce, said: ''The indemnity issue needs to be sorted out or else the vaccination program won't go ahead … In the environment we're in, someone has to be held accountable for rare vaccine reactions that may occur …

''If the Government decides there is a priority need to roll out the vaccine, then it has a duty to indemnify the doctors who provide it.'' A spokesman for the Royal Australian College of General Practitioners, Ronald McCoy, said the wrangling could undermine community confidence in the vaccine's safety. ''It's the public's health that's at risk here,'' he said.

The Health Minister, Nicola Roxon, announced in May an order with vaccine supplier CSL for 21 million doses - enough to protect at least half the population from the flu strain. Analysts' estimates suggest that contract may be worth up to $120 million.

But the insurers believe the distribution of the vaccine in multiple-dose vials exposes people to unnecessary risk of blood-borne infection from other recipients. As well, they believe the possibility of rare side-effects has been inadequately explored. These issues, they say, will make it hard for doctors to advise people whether or not to have the injection, exposing them to patient complaints that they were not properly informed.

The chief executive of the Medical Indemnity Industry Association of Australia, Ellen Edmonds-Wilson, said it was up to individual insurers ''to make an assessment of the risk [from] the drug'', which she noted had not yet been approved by the Therapeutic Goods Administration.

Medical defence organisations MDA National Insurance and Avant Mutual Group said they were still considering whether to indemnify members who gave patients the vaccinations. Avant's general manager of claims, Lisa Clarke, said the entire industry was ''in ongoing discussions with the [health department] on the proposed roll-out.''

A spokeswoman for the Medical Indemnity Protection Society, Elda Rebechi, said the company would cover doctors, but warned them to ''appropriately advise patients that the vaccine is untested and may have [currently] unknown consequences … We do not know the risk [or] benefit of the vaccine versus contracting the disease.''

Other companies told the Herald they would insist on a federally funded doctors' insurance scheme.