What's The Fed Really Up To?

The Fed and the strong dollar policy
By Henry C K Liu

A misleading impression has been given by recent press reports that the June 3 speech by Federal Reserve Chairman Ben Bernanke marked a Federal Reserve departure from a long tradition of nonintervention on the exchange value of the dollar, in response to the Treasury's renewed declaration that a strong dollar is in the national interest of the US.

The reality is that the Fed has a long tradition in supporting the lead of the Treasury in intervening on the exchange value of the dollar, albeit not always to keep the dollar strong. The Exchange Stabilization Fund (ESF) was established at the Treasury Department by the Gold Reserve Act of 1934 as part of the New Deal. Section 7 of the Bretton Woods Agreements Act of 1945 as signed by 28 nations obliged members to make subscription payments in gold or equivalent currencies for shares in the International Bank for Reconstruction and Development (World Bank). It required an amendment to the Federal Reserve Bank Act of 1913 to maintain the exchange value of the dollar, making ESF operations permanent.

Since then, the ESF has managed a portfolio of domestic and foreign currencies for the purpose of foreign exchange intervention to allow the US to influence the exchange rate of the dollar without directly affecting the domestic money supply. The ESF holds of three types of assets: dollars, foreign currencies, and Special Drawing Rights (SDRs) in the International Monetary Fund (IMF). As of April 30, 2008, the ESF was holding assets totaling US$51.2 billion of which $40.8 billion was retained profit.

By law, the Secretary of the Treasury is the chief international monetary policy official of the United States. The Federal Reserve has separate legal authority to engage in foreign exchange operations. Federal Reserve foreign exchange operations are conducted in close and continuous consultation and cooperation with the Treasury Secretary to ensure consistency with US international monetary and financial policy.

The Treasury and the Fed have closely coordinated their foreign exchange operations since early 1962, when the Federal Reserve commenced such operations at the request of the Treasury. Operations are conducted through the Federal Reserve Bank of New York, as fiscal agent of the US and as the operating arm of the Federal Reserve System.

Read the entire four part essay here: http://www.atimes.com/atimes/Global_Economy/JF18Dj02.html

Follow the history of deceit and con that has followed the US Federal Reserve since it's inception in 1913. What is the Fed really up to? It may now be in over it's head...