Let’s talk about the latest Fed Trading Scandal
If you were a fly on the wall listening in on Federal Reserve Open Market Committee interest rate decisions being made, you would be in a position to make a fortune in the bond market.
Some years frantic Fed policymakers changed interest rates more than 20 times, each change representing a potential windfall for insider traders.
But, as justifiable the fury over insiders profiting from early knowledge of Fed policy changes, it pales in comparison to the Fed’s willful destruction of the American people’s wealth, savings, and retirement funds when paper money replaced gold.
The latest Fed scandal that may involve insider trading has seen the resignation of two Federal Reserve bank presidents. Last week, Robert Kaplan, President of the Dallas Fed, and Eric Rosengren, President of the Boston Fed, both resigned when news of their substantial personal trading activities became public.
Reports indicate that Kaplan made repeated trades of “over $1 million” in S&P 500 futures, as well as making “over $1 million” trades in a litany of individual stocks. Rosengren is reported to have actively traded in and out of Real Estate Investment Trusts in amounts of $1,000 to $50,000 at the same time he was making public statements in his official capacity about pandemic risks to the real estate industry
These regional bank presidents, 12 of them across the nation, occupy seats on the Fed’s policy-making committee on a rotating basis. It stands to reason that each would have market-moving information about highly confidential monetary deliberations.
Now comes word that Fed Vice Chairman Richard Clarida made personal trades that critics say were exceedingly coincidental. He moved millions from a bond fund into two equity funds the day before his close associate, Fed Chairman Powell, announced that it would intervene “to support the economy.”
There is much in its history to support suspicions of profiteering from leaked confidential Federal Reserve inside information. Former Fed officials have long been rumored to have access to inside information as having financial analysts with relationships with those at the Fed.
Although such stories pop up from time to time, the investigations never seem to go anywhere. Generally, the Fed investigates itself and finds it has done nothing wrong. Whether the latest cases involving Fed officials are actionable or if they will be swept under a rug remains to be seen, but the Fed’s Inspector General has become involved, and Senator Elizabeth Warren is asking the SEC to investigate.
But there is a bigger Federal Reserve scandal, according to former Congressman and Presidential candidate Ron Paul, that is hiding in plain sight. These recent trades, he said, “pale in comparison to the biggest Fed scandal — the Fed’s impoverishment of ordinary Americans, enrichment of the elites, and facilitation of government debt and deficits.”
Paul pointed to the Fed’s destruction of the U.S. dollar, which has lost 97% of its purchasing power under the Fed’s money printing regime and a general increase in prices. This inflation appears to be a mystery to the Fed, which hasn’t seen inflation’s resurgence and misdiagnoses it as well.
That was evident when Powell tried to explain his confusion about inflation’s return but did so without mentioning the $4 trillion the Fed has digitally printed in the last 18 months. Yet, as Dr. Paul reminded us, “rising prices are a symptom, not a cause, of inflation. Inflation is the very act of money creation by the Fed.”
Those rising prices that diminish the average American’s standard of living are not the only result of the Fed’s manipulation of the money supply. The manipulation also distorted economic signals, producing results such as booms, bubbles, and busts.
Inflation has always benefited the well-connected elites who receive the Fed’s newly created money before the new money causes widespread price increases. The true motivation behind Fed policies was revealed by former Fed official Andrew Huszar in 2013. Huszar, writing for the Wall Street Journal, confirmed that quantitative easing kept stock prices high, instead of helping Americans struggling with the aftereffects of the 2008 meltdown.
Other beneficiaries of the Fed are big-spending politicians. The Federal Reserve’s purchase of federal debt instruments keeps the federal government’s debt servicing costs manageable. This is why, despite Chairman Powell’s recent suggestion that the Fed will soon begin “tapering” its purchases of Treasuries, the Fed is unlikely to significantly reduce its purchase of Treasuries or allow interest rates to significantly increase.
The Fed’s track record is thick with malfeasance. Whether any is judged to be criminal remains to be seen. But it all stems from the right to create “money” from thin air. It appears that Fed actions, official like the printing of trillions of dollars, to unofficial, including perhaps cronyism and trading on inside information, are growing more brazen as our prosperity wanes.
In times like this, it is best to move to the safety of gold. After all, they can’t print gold.
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