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OpEdNews Op Eds    H3'ed 3/10/10

To what extent are rigged bond auctions being used to 'finance' our 'economic recovery'?

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The problem here is that even one more failed bond auction could signal to the rest of the world that the jig is up, that the U.S. is done for, and that it's time to bring the lend-borrow cycle (that has provided much of America's widespread affluence over the past 30 years) to a complete halt.

With the bailouts and this fake "recovery" already looking like it will cost more than $24 trillion before it's all said and done, the Fed and the Treasury don't want to let any more failed bond auctions show up in the headlines -- which is why they've taken their "swindle" to a whole new level -- by deciding not to just to fake the "success" of the recovery, but to fake the success of the bond auctions that are supposed to pay for it!

Exactly how are they doing this? They are doing it by transferring billions of dollars, under the table, to our nation's lenders, and then paying them interest while we borrow back our own cash!

You see, for the scam to keep working, it has to look like foreigners still really want to buy our bonds. So the Fed prints out billions of dollars, then uses a clever buyback strategy to secretly stuff those billions into our foreign lenders' accounts, so that they, our lenders, can keep on pretending they really want to buy more of our debt:

So what's the strategy the Fed uses to make these huge, under-the-table, cash transfers? It works like any other money laundering scam. We reimburse the foreign government lenders for big chunks of bad or toxic "agency debt" -- like for toxic and now largely worthless bonds sold to these governments by failed agencies Fannie Mae and Freddie Mac -- and then these governments write us a check, using the cash we just gave them, to buy more of our treasury bonds. Just so long as our government can keep this shell game under wraps, and keep paying them off under the table, the buyers of our treasury bonds will keep showing up to buy more. You wonder why Fed Chairman Ben Bernanke refused to answer Senator Bernie Sanders' question about where all the additional trillions went, over and above the TARP funding? This is why:

But for how much longer can the Fed and the Treasury Department keep this scam going?

With the U.S. borrowing up to $100 billion through these bond auctions every week, and another bond auction happening, on average, every three days, that's a lot of opportunity for the Fed to "launder" money in this way. So far, the Fed has already used this backdoor cash swap strategy to buy back over $640 billion in toxic assets from our foreign lenders, with the tacit promise that they will in turn show up at the next bond auction and throw some of that cash back our way. (To see chart of Chinese ownership of toxic assets, go to:

However, by this means, American taxpayers are taking a beating twice over -- first, as all that printed money dilutes and weakens even more of our saved-up purchasing power, and second, because our Treasury now has to use our tax dollars to start paying interest on the money of ours that it borrowed back!

The Great "Recovery" Rip-Off, Part Two:

Outright THEFT, Backed by the Fed

What's the boldest "swindle" of all? It's when the Fed throws all caution to the wind and writes themselves a check, made out to "cash.' Example: just recently -- on a Thursday, last August -- agents for the Fed stepped into one of their own bond auctions and snapped up $7 billion of America's own 7-year Treasury notes!!!

And that's after buying more than $7 billion worth the day before; so it was over $14 billion in all, and they paid the tab the way the Fed always does, with freshly printed cash. That's like whipping out your Visa card to pay your American Express bill! And that wasn't the first time they've done this. (Supposedly this practice ended in October of 2009:

Yet early this year, the Fed actually announced that it would buy up to $300 billion worth of its own debt. This is what they call "monetizing the debt." (It's about time most Americans learn what these arcane terms mean! -- and also what the long-term implications and risks are.)

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)

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