Pam Martens — Fed Minutes Reveal a Dangerous Power Grab by New York Fed

Just when it seemed one could no longer be shocked by the corruption, hubris and lack of accountability in the American financial system, along comes yesterday’s release of the Federal Reserve’s minutes for the October 29-30 meeting of its Federal Open Market Committee (FOMC).

While mainstream media focuses on what the minutes revealed about when the Fed might begin to reduce its monthly $85 billion in bond purchases, receiving scant attention is a brazen power grab boldly stated on page two of the eleven pages of minutes.

Back on October 31, wire services reported that the temporary dollar and foreign currency swap lines that had been put in place between central banks on a temporary basis during the financial crisis had been turned into standing arrangements.

The Associated Press explained the action as follows: “Six of the world’s leading central banks, including the U.S. Federal Reserve, say they will provide each other with ready supplies of their currencies on a standing basis, extending arrangements set up to steady the global financial system during post-2007 turbulence.”

In other words, without public deliberations, an action that was adopted as a temporary, emergency operation, now had become a permanent part of world finance – on the basis of minutes and details yet to be seen by Congress or the general public…..

It gets worse from here.

Wall Street On Parade
Fed Minutes Reveal a Dangerous Power Grab by New York Fed
Pam Martens

Chris Dillow — Complexity & Alienation

Chris Dillow sums it up very nicely. There's a book here in articulating the details and implications.

Stumbling and Mumbling
Complexity & Alienation
Chris Dillow | Investors Chronicle (UK)

Randy Wray — Fed Minutes Reveal FOMC Was Clueless As Economy Crashed In 2007

After the Greenspan fiasco, when Rep. Henry Gonzalez caught him fibbing about recordings of Fed minutes (Greenspan denied that the Fed kept them, but actually did meticulously record and transcribe them), the Fed agreed to release the minutes with a five year lag. They’ve finally released minutes from 2007–the year the crisis began.

We knew they were clueless as US financial markets bubbled to the greatest speculative peak ever from 2000 to 2006, and we knew the Fed waited far too long to act like a central banker when the crisis hit. Now we know that even after the crisis hit, they remained clueless.

Economonitor — Great Leap Forward
Fed Minutes Reveal FOMC Was Clueless As Economy Crashed In 2007
L. Randall Wray

Clueless command system sitting on top of the economy, the worst of all worlds.

Dr.Housing Bubble on how the US command system affects housing

The Federal Reserve has essentially gone Soviet Union on the US housing market. Without a doubt this has caused a mini-boom in the market but is this simply more fumes or something more sustainable? We’ll try to look at current data and try to examine where the market is heading for the rest of 2012.

Read it at Dr. Housing Bubble
The wonderful world of command control US housing – 6 charts highlighting future trends in the housing system. Silent crashing markets, command style housing controls, and Fed top sponsor of maximum leverage.
by Dr. Housing Bubble

I've been complaining about the command system in place at the apex of the economy, with a small groups of unelected, unaccountable, and interested technocrats pulling the levers of monetary policy to micromanage the economy. It's both anti-capitalistic and anti-democratic.

Plus, it doesn't work.

As a commenter recently said, "I'm tempted to say to these very smart people that we're not in a 'liquidity trap,' we're actually in a stupidity trap." Amen.

Note that Dr.Housing Bubble may a good RE analyst, but he doesn't grok monetary economics.

Those that think rising rates would be a sign of inflation or a rising economy need only look at Italy, Spain, and Greece to see if rising rates signal a good economy. No, rates can rise if people lose faith. Fortunately for now, the U.S. is the least ugly girl at the dance so we are able to keep rates ridiculously low. Yet is this a good longer-term strategy? Eventually investors will want their money back (when do we think we’ll pay off that $15+ trillion national debt?).

He doesn't get the difference between nation that is a currency issuer and one that is a currency user, i.e., is borrowing in a currency that it doesn't control. But that doesn't substantially affect his analysis.

UPDATE: See also Mish's Three Key Reasons Housing Not Coming Back: Demographics, Student Debt, No Jobs