That's a video that everyone that cares about the future of this nation should watch carefully. It's Democratic Rep Alan Grayson from Florida grilling Fed Chairman Bernanke about something called "liquidity swaps". Ask one thousand people what a liqudity swap is and I doubt more than one will have heard of it. All one thousand will have no experience trading them. That's because a "liquidity swap" is something only central bankers trade. That should scare everyone.
That's because, according to the testimony, Rep Grayson said that between 2007 and the end of 2008, liquidity swap trading increase from $23 billion to $553 billion and there was virtually no trading in liquidity swaps prior to 2007.
Think of a liquidity swap as a way for the Central banks of the world to trade currency without having those trade affect the currency market. In other words, through liquidity swaps, Central banks trade currency outside the currency system. Instead of a central bank buying dollars on currency exchanges, they buy dollars from the Federal Reserve which keeps them in reserve. Does that sound like a good idea? Does it sound like a good idea to allow central unelected bankers trade currency without having those trades affect the currency markets? Whether or not this does or doesn't have an impact is entirely up for debate? Congressman Grayson asked if it was mere coincidence that the nominal Dollar exchange rate shot up 20% at the exact same time that the Fed was making these swap transactions in earnest. The Federal Reserve chairman answered that it was.
Central banks, lead by the Fed, have their own shadow lending market created and run just by themselves. The Federal Funds Rate, for instance, is only available to banks in the Fed System. They even have their own shadow currency market as illustrated by the "liquidity swaps". These selected groups of central bankers simply create financial tools that are available only to themselves and then trade these vehicles amongst themselves. Here in the U.S. at least, their activities are left largely unscrutinized. There is very little oversight of our central bank, the Federal Reserve.
H.R. 1207, the act that would force a full audit of the Fed, is very popular but has little hope of passing. As such, the people of the country know very little of the trillion dollar transactions that the Fed engages in. Furthermore, the Fed uses dubious authority to create all of these shadow markets. In the clip referenced, Bernanke alludes back to the Federal Reserve Act of 1913. That was created nearly a century ago and it gave no specific authority for a "liquidity swap" because a liquidity swap was a figment of the imagination of bankers then. Yet, it's now being traded in half trillion dollar amounts by a group of central bankers that have absolutely no oversight.
Again, in the clip, Bernanke acknowledges that authority was given by the Federal Open Markets Committee. That is the group of Federal Reserve regional chairmen and the Chairman himself. None of these people is elected. More than that, they face little scrutiny. The Fed has never gone through the sort of forensic audit that most other government institutions are required to go through.
This exchange received nearly no scrutiny itself. Shouldn't everyone be concerned that our central bank has suddenly decided to make a monumental new investment in a shadow currency market? Such a monumental transaction should require the greatest of transparency. Instead, its hidden, given the least of acknowledgement, and downplayed by the chairman when questioned about it.
Everyone must understand once and for all that the most powerful force in the world today is the Federal Reserve bank. It controls the money supply. There is no more greater power than that. Unlike the president, the bank faces no election. It barely faces an audit. Almost none of its financial transactions are ever scrutinized. This exchange is a rarity and most exchanges amount to financial worship. Until the Federal Reserve is reigned and controlled so that its power is signficantly diminished the future of our economy is in constant threat by a central bank that is drunk on power.