The Federal Reserve Is Paying Banks NOT To Lend 1.8 Trillion Dollars To The American People

Michael Snyder
Economic Collapse
July 2, 2013

Did you know that U.S. banks have more than 1.8 trillion dollars parked at the Federal Reserve and that the Fed is actually paying them not to lend that money to us?  We were always told that the goal of quantitative easing was to “help the economy”, but the truth is that the vast majority of the money that the Fed has created through quantitative easing has not even gotten into the system.  Instead, most of it is sitting at the Fed slowly earning interest for the bankers.  Back in October 2008, just as the last financial crisis was starting, Federal Reserve Chairman Ben Bernanke announced that the Federal Reserve would start paying interest on the reserves that banks keep at the Fed.  This caused an absolute explosion in the size of these reserves.  Back in 2008, U.S. banks had less than 2 billion dollars of excess reserves parked at the Fed.  Today, they have more than 1.8 trillion.  In less than five years, the pile of excess reserves has gotten nearly 1,000 times larger.  This is utter insanity, and it will have very serious consequences down the road.

Solar flares closing in on Earth

Auroras already arcing across sky in Scandinavia

www.wnd.com  –  by F. Michael Maloof

WASHINGTON – The massive sunspot identified as AR1654, which is spewing solar flares, has scientists saying that a portion of a coronal mass ejection is expected to brush Earth’s magnetic field, creating what observers say are bright auroras around the Arctic Circle.

Already, scientists say, the CME’s arrival on the solar winds is creating auroras arcing across the skies of northern Scandinavia.

Scientists from the National Aeronautic and Space Administration and the National Oceanographic and Atmospheric Administration say this reveals the potential for a solar storm maximum as the sun approaches the height of its latest 11-year cycle this year and next.

Flares are expected to continue into 2020.

Scientists at these space-watch agencies say that if Earth gets a direct hit from one of these solar flares – some of which can be up to four times the size of Earth – the damage could be enormous.

The United States alone would sustain damages up to $2 trillion the first year to the nation’s electric grid-dependent critical infrastructures. In addition, it could leave some 160 million people – more than half the population of the United States – starving because of the collapse of food and fuel delivery systems.

In addition, it could take from four to 10 years to recover.

They say they would expect high casualties because of America’s dependence on electric power, electronics and digital telecommunications and information networks.

Further, there are thousands of so-called SCADAs – Supervisory Control and Data Acquisition Data systems, or automated control systems – which control large sections of industry and commerce.

All of these systems are vulnerable to an electromagnetic pulse, or EMP, a high-intensity burst of electromagnetic energy for which solar flares are but one source. Another source would be from a high-altitude nuclear explosion.

Other forms of electromagnetic energy include gamma rays, X-rays, ultraviolet radiation, visible light, infrared radiation, microwaves and radio waves.

SCADAs are referred to as the “ubiquitous robots of the modern age” and are vital to the interdependence of the critical infrastructures that comprise modern society.

According to the congressionally mandated 2008 EMP commission, these automated control systems and their mutual interdependence are two of the most important aspects of America’s modern infrastructures. They pose the greatest vulnerability in all of the country’s infrastructures.

The SCADA systems are especially used in such critical infrastructure applications as electrical transmission and distribution, water management, and oil and gas pipelines.

America is crisscrossed with thousands of miles of pipelines, and if a SCADA were to fail, it could cause explosions in natural gas pipelines and serious leakage.

“The magnetic canopy of sunspot AR 1654 is in a state of unrest, relentlessly shifting, reconnecting and crackling with minor flares,” according to a report from NASA’s Solar Dynamics Observatory.

Scientists described this magnetic canopy as exhibiting eruptions that looked like “flash bulbs at a rock concert.”

“The sunspot’s magnetic field, illuminated by the extreme (Ultra-Violet) glow of hot plasma and flares, has a ‘beta-gamma-delta’ configuration,” NASA said. “That means it harbors energy for power X-class eruptions.”

Scientists said the “behemoth” sunspot AR 1654 stretches some 112,000 miles, the equivalent of 14 Earth diameters from end to end.

The flares could create M-class flares and a “risk” of X-class flares, the biggest there are, the scientists said.

NOAA rates the flares as A-class, followed by C, M and X, which is the most severe. A-class is the smallest and, like a Richter scale for earthquakes, each letter represents a 10-fold increase in energy output. X-class is 10 times an M-class and 100 times a C-class.

These solar flares are giant explosions on the sun’s surface that send electromagnetic energy in high-speed particles into space.

A C-class storm and smaller flares are too weak to noticeably affect Earth. M-class flares can cause brief radio blackouts at the poles and minor radiation storms that could endanger astronauts.

But the highest risk from such solar storms will be to the national electrical grid system.

The resulting power surges from solar particles could blow out huge transformers which take a long time to replace, even under normal circumstances. In addition, such large transformers no longer are made in the United States but come from abroad. Private utilities do not keep spares of these large transformers due to their tremendous cost.

The situation would be especially precarious for the nation if hundreds would be destroyed, and need replacement, all at once.

NASA estimates that if Earth had a direct hit from a solar flare, the U.S. could lose some 350 such large transformers which would take years to replace.

In spite of the historical knowledge of these various storms over the years, NASA said that the nation’s electric power grids remain vulnerable to disruption and damage by severe space weather and have become even more so in terms of both widespread blackouts and permanent equipment damage requiring long periods of time to restore.

The reason is that electric power and more intricate and sophisticated electronics are the cornerstone of a modern society. This technology is the basis on which all other infrastructures and services depend.

“Collateral effects of a longer-term outage would likely include, for example, disruption of the transportation, communication, banking, and finance systems, and government services; the breakdown of the distribution of potable water owing to pump failure; and the loss of perishable foods and medications because of lack of refrigeration,” according to NASA. “The resulting loss of services for a significant period of time in even one region of the country could affect the entire nation and have international impacts as well.”

According to NOAA, geomagnetic storms not only affect electrical transmission equipment, damage transformers and transmission lines but can leave entire grids without power. In oil and gas pipelines, rapidly fluctuating geomagnetic fields can induce currents into the pipelines. Once that occurs, flow meters in the pipeline can transmit false flow information.

This in turn could lead to a buildup of tremendous pressure that could cause explosions in the pipeline and fires.

With new, more sophisticated technologies being used in more complicated systems, space weather will become all the more important to monitor, predict and prepare for its consequences.

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China poised to play debt card – for U.S. land

Communist nation could control American land as ‘development zones’

www.wnd.com  –  by Jerome R. Corsi

NEW YORK – Could real estate on American soil owned by China be set up as “development zones” in which the communist nation could establish Chinese-owned businesses and bring in its citizens to the U.S. to work?

 That’s part of an evolving proposal Beijing has been developing quietly since 2009 to convert more than $1 trillion of U.S debt it owns into equity.

Under the plan, China would own U.S. businesses, U.S. infrastructure and U.S. high-value land, all with a U.S. government guarantee against loss.

Yu Qiao, a professor of economics in the School of Public Policy and Management at Tsighua University in Beijing, proposed in 2009 a plan for the U.S. government to guarantee foreign investments in the United States.

WND has reliable information that the Bank of China, China’s central bank, has continued to advance the plan to convert China’s holdings of U.S. debt into equity owned by China in the U.S.

The Obama administration, under the plan, would grant a financial guarantee as an inducement for China to convert U.S. debt into Chinese direct equity investment. China would take ownership of successful U.S. corporations, potentially profitable infrastructure projects and high-value U.S. real estate.

The plan would be designed to induce China to resume lending to the U.S. on a nearly zero-interest basis.

However, converting Chinese debt to equity investments in the United States could easily add another $1 trillion to outstanding Obama administration guarantees issued in the current economic crisis.

As of November 2012, China owned $1.17 trillion in U.S. Treasury securities, according to U.S. Department of Treasury and Federal Reserve Board calculations published Jan. 16.

Concerned about the unrestrained growth in U.S. debt under the Obama administration, China has reduced by 97 percent its holdings in short-term U.S. Treasury bills. China’s holding of $573.7 billion in August 2008, prior to the massive bank bailouts and stimulus programs triggered by the collapse in the U.S. mortgage market, dwindled to $5.96 billion by March 2011.

Treasury bills are short-term debt that matures in one year or less, sold to finance U.S. debt. Holdings of Treasury bills are included in the $1.17 trillion of total Treasury securities owned by China as of November 2012.

In addition to a national debt in excess of $16 trillion, the U.S. government in 2010 faced over $70 trillion in unfunded obligations, including Social Security and Medicare benefits scheduled to be paid retiring baby boomer retirees in the coming decades, with unfunded obligations showing no sign of being reduced with Congress at a deadlock over reducing federal government spending.

Yu Qiao observed that if the U.S. dollar collapsed under the weight of proposed Obama administration trillion-dollar budget deficits into the foreseeable future, holders of U.S. debt would face substantial losses that the Financial Times estimated “would devastate Asians’ hard-earned wealth and terminate economic globalization.”

“The basic idea is to turn Asian savings, China’s in particular, into real business interests rather than let them be used to support U.S. over-consumption,” Yu Qiao wrote, reflecting themes commonly suggested by Chinese government officials. “While fixed-income securities are vulnerable to any fall in the value of the dollar, equity claims on sound corporations and infrastructure projects are at less risk from a currency default,” he continued.

The problem is that, in a struggling U.S. economy, China does not want to trade its investment in U.S. Treasury debt securities, with their inherent risk of dollar devaluation, for equally risky investments in U.S. corporations and infrastructure projects.

“But Asians do not want to bear the risk of this investment because of market turbulence and a lack of knowledge of cultural, legal and regulatory issues in U.S. businesses,” he stressed. “However if a guarantee scheme were created, Asian savers could be willing to invest directly in capital-hungry U.S. industries.”

Yu Qiao’s plan included four components:

1. China would negotiate with the U.S. government to create a “crisis relief facility,” or CRF. The CRF “would be used alongside U.S. federal efforts to stabilize the banking system and to invest in capital-intensive infrastructure projects such as high-speed railroad from Boston to Washington, D.C.
2. China would pool a portion of its holdings of Treasury bonds under the CFR umbrella to convert sovereign debt into equity. Any CFR funds that were designated for investment in U.S. corporations would still be owned and managed by U.S. equity holders, with the Asians holding minority equity shares “that would, like preferred stock, be convertible.”
3. The U.S. government would act as a guarantor, “providing a sovereign guarantee scheme to assure the investment principal of the CRF against possible default of targeted companies or projects”.
4. The Federal Reserve would set up a special account to supply the liquidity the CRF would require to swap sovereign debt into industrial investment in the United States.

“The CRF would lessen Asians’ concern about implicit default of sovereign debts caused by a collapsing dollar,” Yu Qiao concluded. “It would cost little and help the U.S. by channeling funds to business investment.”

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