You can't solve a debt problem with more debt (but you can try!).

The money does not exists, it's not there but mysteriously 20 of the richest countries in the world have the confidence to talk about a fund of 2 trillion US$. If they are going to spend that kind of money it must physically exist, no? Answer: no. This is because you, your children and grandchildren must still earn it. The fund will be paid from the tax deductions from your future income. Capice? Your leaders are at the moment stealing a part of your future income. It is called confidence tricking, chicanery, fraud, embezzlement, rackteering, etc, but as long as you believe all is OK and the MSM parrots the success of their masters, nothing will change.


You, the tax payer, are now on the line for additional taxes as you will be the one who has to pay for the mistakes of your political and financial leaders.


you can bet our leaders do not sleep well at night as they know they are in unchartered waters. 


Again, as long as you believe all is OK, nothing will change.

You can however protect yourself as Gold will be going to to $2000 and silver to $100 shortly.


G20 inches toward $2 trillion in rescue funds


(Reuters) - Germany is easing its opposition to a bigger European bailout fund, officials said, smoothing the way for the world's leading economies to secure nearly $2 trillion in firepower to prevent further fallout from the euro-zone's sovereign debt crisis.
Finance leaders from the Group of 20, meeting in Mexico City this weekend, are trying to build up massive international resources by the end of April to convince financial markets they can prevent the euro-zone's deep problems from inflicting more damage on a still-fragile world recovery.
It would mark their boldest efforts since 2008 when the G20 mustered $1 trillion to rescue the world economy from the credit crisis, which blew up in the United States and caused the worst recession since the 1930s.
They are demanding that Europe build up its war chest first and then other G20 countries would contribute extra money to the International Monetary Fund. As Europe's richest economy, Germany's support for a larger European fund is critical.
A senior G20 official said Berlin was prepared to discuss boosting the firewall in March, but it saw no reason to increase the bailout fund for now because the situation in financial markets has been improving.
The plan is to merge Europe's temporary and permanent bailout funds, the European Financial Stability Fund and the European Stability Mechanism, to create one 750 billion-euro ($1 trillion) fund. Increased IMF resources would back that up.
"Everyone in the euro zone and even in European Union is reasonably happy with combining the ESM and the EFSF, even Germany, but it is too early to say if this will be decided at the EU summit at the beginning of March," said Margrethe Vestager, economy minister of current EU president Denmark.
Merging the funds would mark a softening of Berlin's stance. It has warned that a bigger fund would remove pressure on deeply indebted countries to enact the tough fiscal measures and economic reforms needed to bring their budgets under control.
G20 finance chiefs are piling the pressure on Germany as they try to line up the roughly $2 trillion in resources by the time they next meet in April and draw a line under the two-year-old euro-zone crisis.
"I do want to encourage Germany to take that leadership role very seriously and come up with an overall euro zone plan," said Canada's Finance Minister Jim Flaherty.
Some diplomats have said Germany's reticence to back the bigger bailout plan was linked to a key vote on Monday by German lawmakers on Greece's new financial lifeline, another part of the broader push to ring-fence the euro zone crisis.
Europe's problems have weakened the global recovery and roiled financial markets, which have locked highly indebted countries -- Greece, Ireland and Portugal -- out of debt markets and forced them to seek bailouts. Italy and Spain also are under threat, and bank credit has tightened.
German Finance Minister Wolfgang Schaeuble told bankers in Mexico City that he was worried that the root causes of Europe's problems have not been tackled sufficiently and showed no sign that he was ready to announce a shift in course on issues such as common euro zone bonds as well as bigger bailout funds.
"It does not make any economic sense to follow the calls for proposals which would be mutualizing the interest risk in the euro zone, nor in pumping money into rescue funds, nor in starting up the ECB printing press," Schaeuble said.
BIG BAZOOKA
A European agreement during March to merge the EFSF and the ESM to create a $1 trillion war chest would clear the way for other G20 countries in April to meet the IMF's request for $500-$600 billion in new resources, on top of its current $358 billion in funds.
Put together, this would total around $1.95 trillion in firepower. But the G20 has no intention of easing the pressure on Europe by giving it a strong signal now that new IMF money is in the bag.
A G20 communique at the end of the ministerial meetings on Sunday will merely state that the world's leading economies will review the resources of the IMF in April without setting a date for a deal, G20 officials said.
Olli Rehn, European Commissioner for Economic and Monetary Affairs, said more funds are essential. "In order to overcome the crisis, you have to get ahead of the curve and have a big enough bazooka," he told reporters.
"The negotiations are now going on," Rehn said, adding he was confident that a decision to merge the European funds would be taken in March.
A euro zone official said a deal is unlikely to come in time for a summit of European Union leaders next week which could nonetheless reveal some flexibility by Berlin: "What we can expect, at most, is a reference in the conclusions suggesting Germany is not closing the door."
GERMANY NEEDS TIME
Diplomats said Germany appears to be playing for time. It faces a critical vote on Monday to win support in the German parliament for Greece's second rescue package. Many Bundestag members are skeptical that Greece can meet tough fiscal conditions required to bring its public debt down to 120 percent of GDP by 2020.
Similar votes are scheduled in the Netherlands and Finland next week. Germany also wants to see whether enough investors sign up for Greece's debt swap, which Athens wants to complete by March 12, a euro zone official said.
"Most euro zone countries are ready to move now, but I am afraid that Germany will need more time to agree to the increase, mainly to be able to better manage the Bundestag," one euro zone official said.
The United States has said it will not provide more funds for the IMF. But it is not standing in the way of other countries lending to the Fund and is keeping up the pressure on Europe to put forward first more of its own money.
"I hope that we're going to see, and I expect we will see continued efforts by the Europeans ... to put in place a stronger, more credible firewall," Treasury Secretary Timothy Geithner said on Saturday.
Policymakers said they were hopeful that putting in place a strong firewall against further crises in Europe would help strengthen the world economy.
"The economy is somewhat picking up in the world as a whole including Japan and (we) want to put an end to the Europe crisis in the early spring and to accelerate the global economic growth," Japan's Finance Minister Jun Azumi said.

Lessons from "Atlas Shrugged".

Our society needs this book's principles NOW, more than ever.

In "Atlas Shrugged", Ayn Rand described a dystopian United States, where the answer to every perceived flaw and inequity in society was government regulation. 

When this regulation created more problems, the answer was ever more government intervention in society.  Eventually, most of the population was either working for the government or responding to government edicts – few were actually producing anything.  These few (represented by Mr Galt), shackled by the many, quit and the world stopped. Sounds familiar?

The current financial crisis has its roots in interventionist government action:

• laws to promote home ownership for the poor (where the sub-prime loans came from); 
• on executive pay (leading to bonuses as a loophole); 
• anti-monopoly laws (preventing failing banks from being taken over by competitors); 
• the prospect of government bail-outs (discouraging firms from accepting less attractive offers from market sources); 
• government guarantees (encouraging people to accept the highest deposit rates, regardless of risk);
• and half the economy existing in the non-productive state sector (tying down the productive sector).

As Ronald Reagan put it, government is not a solution to our problems, government is the problem.  The interventions by governments around the world have achieved nothing but harm and the accumulation of debt by the Governments will shackle economies for years to come.  Moreover, the clarion calls for even further regulation will lead to unintended consequences, exacerbating the harm.

We are suffering from government failure, not market failure.  The world hasn't stopped, but it has been slowed by government. 

It is time the lessons from Atlas Shrugged were heeded and John Galt set free.

Don't Be Fooled, Folks: It Is ALL About Gold.

Oops! Turns Out the Financial System Is A Scam After All!

 Our thinking has been shaped by 40 years relentless propaganda of the financial media. Time to step back and pull back the curtains.
It is a confidence game.."trust" is the word. The less you know..the better for them.  
A strong Dollar policy can't only come from the Dollar! A weak gold price is also more than welcome. So why not help gold weakness a bit by leasing, swapping or selling gold over a hundred times in the market...on paper of course....in the meantime claiming that the US Dollar is "as good as gold". Read the explanation of the thinking of the monetary underbelly below. What will follow is "hot fury" as finally the people will realise that The Emperor has no clothes...that it is all a BS story...that pensions and savings just do not exists. This is exactly the reason why big companies and financial institutions are not allowed to go bankrupt. To keep the music going....just for a little while. I bet Obama goes on his knees every night and asks The Good Lord to please let the economy grow with 10% soon as only with positive growth figures they can re-start the economy - borrow from our grand children...and cover-up a criminal financial system with the words: -you see, you can trust us, we have nothing to hide-.


Auditing The Fed's Gold

(Goldseek) I have posted a video of something I thought I would never see: all five of the Republican candidates for the U.S. Senate verbally demanding an audit of the Federal Reserve System. You can see it here.

Bernanke is facing what no Federal Reserve chairman has ever faced: public awareness of the Federal Reserve System. From late December 1913, when an almost deserted Senate voted for the Federal Reserve Act, until 2008, when the recession confirmed Ron Paul's warning in late 2007, there was almost no public awareness or even a vague understanding of the Federal Reserve System. The genie is now out of the bottle, where it had been corked since 1913. Ron Paul has uncorked it.

From the November 1910 secret meeting at Georgia's Jekyll Island until Ron Paul's 2007 candidacy for the Republican nomination for President, The Federal Reserve had received a free ride from Congress. There had never been much oversight. That's because FED regulation was an oversight. (The same word is used to convey opposite meanings.)

The Texas Leftist-populist Democrat Wright Patman had been a critic. He had been the chairman of the House Banking Committee until 1975, a year before Paul arrived in Congress. He was a Greenbacker: a believer in a zero-interest economy that achieves this Utopian goal through the use of fiat paper money. Patman was not able to generate much interest in the FED.

Patman did inflict one major wound on the FED. He and California Congressman Jerry Voorhis, another Greenbacker, in the early 1940s persuaded Congress to pass a bill, which Roosevelt signed, that forbids the Federal Reserve from keeping the interest payments from the government bonds it has counterfeited fiat money to purchase. Today, the FED must return to the Treasury all of this money beyond its operating expenses. For 2011, the FED will pay back $77 billion.

A full-scale audit of the FED, if it ever comes, must include an audit of the gold every year. The auditors must see if the gold is in the two vaults. The first vault, at Ft. Knox, is more famous. The more important vault is located at 33 Liberty Street, New York City: the privately owned Federal Reserve Bank of New York. This is the "Die Hard III" vault.

The auditors must do two things. First, they must determine whether there is the same amount of gold as is listed on the FED's books at the fake price of $42.22 per ounce. Second, the auditors must follow the paper trail of ownership. They must make sure that the gold in the vaults is still legally in the possession of the FED.

There is a possibility that the FED has transferred ownership of this gold, through swaps, to European central banks, which have in turn leased – sold – their gold to private buyers. It is not enough to determine that the physical gold is in the two vaults. It is also mandatory to determine whether the FED has indirectly sold the government's gold, which it has held in trust for the government since 1933.

[Note to auditors: pursue this phrase in the FED's statements: "deep storage gold." As to why, read this.]

BERNANKE VS. A FULL-SCALE GOVERNMENT AUDIT

Every FED chairman has resisted any attempt by the Congress to mandate an independent audit of the FED by the General Accountability Office of the U.S. government. Bernanke was adamantly opposed in 2009. He of course did not mention what I regard as the main reason for his opposition to an audit: the missing gold. For all FED chairman, gold is a four-letter word. He mentioned only monetary policy, as if Congress has no authority over monetary policy, despite that ancient "barbarous relic," the U.S. Constitution.

The Congress has recently discussed proposals to expand the audit authority of the Government Accountability Office (GAO) over the Federal Reserve. As you know, the Federal Reserve is already subject to frequent reviews by the GAO. The GAO has broad authority to audit our operations and functions.

This of course was deceptive. First, the FED is audited by a rotating group of private auditing firms, which are appointed by the Office of Inspector General. This rotation system makes long-term accounting continuity far more difficult to achieve. The FED forbids the auditing firm to inspect all of the FED's operations. According to the Federal Reserve Bank of New York,

Operations at each Federal Reserve Bank also are subject to review by the Government Accountability Office (GAO), the audit arm of the U.S. Congress. However, GAO auditors are restricted by law from reviewing monetary policy operations and transactions carried out by the Federal Reserve on behalf of foreign central banks. This restriction was imposed by Congress to assure the independence of the Federal Reserve from political influence.

"Political influence." There is another term for "political influence." That term is "the United States government."

The FED defends this principle: "Monetary policy is far too important to be audited by the government." After all, what claim to such authority does the government have, other than the fact that it created the Federal Reserve System?

Second, a full-scale audit would require Congress to abandon the limitation on its own authority which the banking industry persuaded Congress to impose on itself. This is why Bernanke opposes an audit. He added this in 2009.

The Congress recently granted the GAO new authority to conduct audits of the credit facilities extended by the Federal Reserve to "single and specific" companies under the authority provided by section 13(3) of the Federal Reserve Act, including the loan facilities provided to, or created for, American International Group and Bear Stearns. The GAO and the Special Inspector General have the right to audit our TALF program, which uses funds from the Troubled Assets Relief Program.

As he was giving this testimony, the FED was involved in a court dispute involving a Freedom of Information Act request by Bloomberg News to find out who got the TALF money. Bloomberg News had initiated this lawsuit in November 2008, after the FED had stonewalled on Bloomberg's its May FOIA request. It took a U.S. Supreme Court decision in 2011 to pry this information out of the FED.

Bernanke continued.

The Congress, however, purposefully – and for good reason – excluded from the scope of potential GAO reviews some highly sensitive areas, notably monetary policy deliberations and operations, including open market and discount window operations. In doing so, the Congress carefully balanced the need for public accountability with the strong public policy benefits that flow from maintaining an appropriate degree of independence for the central bank in the making and execution of monetary policy.

The phrase "balanced the need" is a code phrase for "abdicated Congressional authority."

Financial markets, in particular, likely would see a grant of review authority in these areas to the GAO as a serious weakening of monetary policy independence. Because GAO reviews may be initiated at the request of members of Congress, reviews or the threat of reviews in these areas could be seen as efforts to try to influence monetary policy decisions. A perceived loss of monetary policy independence could raise fears about future inflation, leading to higher long-term interest rates and reduced economic and financial stability. We will continue to work with the Congress to provide the information it needs to oversee our activities effectively, yet in a way that does not compromise monetary policy independence.

Or, as he might have said, "Butt out, you twits." Guess what? The twits butted out. I wrote about this at the time.

But now the twits are facing signs of a political rebellion. Millions of voters have figured out that the FED is a scam that is run for the benefit of the largest commercial banks, including foreign central banks. Ron Paul represents this view. A new generation of candidates for Congress is finding that there is no broad constituency in the electorate that comes to the defense of the FED. Most voters still don't have any opinion, but among those who do, the opinion is negative.

The FED has relied on secrecy and obscurity to protect it from criticism for almost a century. That strategy worked until 2008. But Ron Paul was like the little boy at the emperor's parade. "The emperor has no clothes!"

The emperor is Bernanke, a bland academic who surely could use a charisma implant.

This attack is a major break from the past. William McChesney Martin lasted for over 18 years, from Truman to Nixon. He was unassailable. Arthur Burns followed. He smoked a pipe at Congress, and seemed so wise. G. William Miller was a monetary neophyte, but he only lasted 18 months. Carter somehow persuaded him to resign to become Secretary of the Treasury, where he could do no more damage. Then came Paul Volcker, 6 feet 8 and a cigar smoker. He overpowered any critics. Then came Greenspan, the seeming wizard, whose FedSpeak befuddled Congress, and whose policy of inflate and inflate, obfuscate and obfuscate, and warn about inflation worked just fine for 18 years. He departed just in time.

Then came the hapless Bernanke, George W. Bush's gift to the world in 2006. Obama re-appointed him in 2009.He will serve until February 1, 2014. This is good for FED-bashers. He will go down in history as the footnoting scholar who was in charge when the tide of public opinion went from "What's the FED?" to "audit the FED!"

DOUBLE-COUNTING THE GOLD

If the FED is fully audited, it is likely that the audit will reveal that the gold is encumbered. Foreign central banks have leased their gold. This is a phrase for "sold the gold," since the people who borrowed it at 1% per annum then sold it for money and bought government bonds paying 5% or more. They cannot sell these bonds at face value; the bonds have fallen in value. They cannot afford to buy gold in the open market to return the gold to the central banks. The price is already far above what they sold it for.

The central banks dare not demand a return of this gold. The gold is still on their books. The IOUs they received from the borrowers are counted as being as good as gold. The voters do not know that the gold is missing.

In December 2004, an obscure committee with the International Monetary Fund submitted a report on swaps and gold leasing. With respect to accounting for gold leasing, the report admitted that there are no standards. "The statistical implications of gold swaps and gold loans/ deposits are complex and have not been fully worked through. Work is still being undertaken by the Committee to address the implications." What implications? One of them is the issue of double counting.

In particular, gold may be double counted with either a gold swap or gold loan/deposit if the party acquiring the gold were to on-sell it outright, because both the original owner and the outright purchaser would report ownership of the gold. In addition, there is the difficulty of having monetary gold being used in these transactions for purposes other than for reserve assets, and how (de)monetization would apply if the gold is sold for industrial purposes. Moreover, there is a proposal to treat (some) nonmonetary gold as a financial asset, rather than a commodity, and the outcome of that discussion may have further implications on the treatment of gold swaps and gold loans/deposits. Finally, how the "fee" for gold swaps and gold loans/deposits should be treated has yet to be resolved. All these matters are being considered by the Committee and a report will be taken to the AEG in due course.

Nothing has changed.

The Federal Reserve has always denied that it has leased the gold, meaning the government's gold. But the FED is involved in all kinds of swaps with foreign central banks. And remember, quoting the Federal Reserve Bank of New York,

. . . GAO auditors are restricted by law from reviewing monetary policy operations and transactions carried out by the Federal Reserve on behalf of foreign central banks.

Consider the political fallout if it should be revealed that the physical gold in the vault of the Federal Reserve Bank of New York has claims against it. What if it should turn out that the Federal Reserve Bank of New York, which is a privately owned organization, has in some way compromised the government's ownership of its gold?

What kind of pressure would be brought on the assembly of twits by the voters to "get our gold back"? What kind of response from the twits would be likely?

Bernanke would dutifully go to Congress to present his footnotes showing that this was good for the world economy. He would find a warm reception: hot fury.

He really does think that providing footnotes will protect him. This is what he learned in academia. But politicians pay no attention to footnotes.

Bernanke's credibility is nothing like the credibility possessed by all FED chairman except Miller, who is long forgotten. He has been able to fend off calls to audit the FED for four years. But Ron Paul is now a serious contender for the Republican nomination. He keeps returning to one theme above all others: the incompetence of the Federal Reserve. No serious Presidential candidate in history so much as mentioned the Federal Reserve in his campaign speeches.

The media keep brushing off Paul because of this. They keep saying that this issue has no traction with normal voters. But the issue has traction with at least 20% of the voters in the Republican primaries so far. That is more voters than the bureaucrats at the Federal Reserve have ever encountered. They have no idea what to do about this.

CONCLUSION

Paul's candidacy will continue for months. He will continue to hammer on this theme: the Federal Reserve is incompetent. This message will stick, whether or not he gets the nomination. His supporters are like Bruce Willis: die hards.

The Federal Reserve will never again be able to hide from the voters behind a curtain of secrecy. Bernanke is the Wizard of Oz, and Ron Paul is Toto. He has pulled back the curtain. From this time on, whenever you read a report on his testimony before Congress, think of this scene.

The main difference between this scene and a Bernanke speech is footnotes.

MUST SEE VIDEO: Why Rising Debt Will Lead to $10,000 Gold

Bullion Management Group Inc. (BMG) President and CEO Nick Barisheff presents the case for $10,000 gold and how the world’s developing currency crises will affect the gold price in 2012 and beyond at the Empire Club of Canada's Investment Outlook for 2012 on January 5th,

His speech has gained significant amounts of global media coverage and has been very favourably received by the investment community, so please make sure you take this chance to view the 13 minute speech in its entirety.

Barisheff also takes the opportunity to announce the exciting launch of his much anticipated book, ‘$10,000 Gold: The inevitable rise and investors’ safe haven'. Ahead of the book's release later this year, The Author’s Preface is available for download now at www.10000goldthebook.com .

BMG is confident financial advisors, institutional investors, pension funds and individuals alike, on a global basis, will benefit from Nick Barisheff’s expert insight and will find both the speech and the book extremely valuable tools for preserving wealth in these difficult times.

You can also read the speech online at: www.bmgbullion.com/outlook2012.

Open Secret: Panetta admits Iran not developing nukes

Iran is not trying to develop nuclear weapons


With war ships on their way and war drums beating in Washington we learn that:

• The American government is lying about the fact that Iran is developing nuclear weapons
• Reading the blood thirst of the American population in the comment secion of the MSM, the conclusion is that the government propaganda still works.
• Internet will spread the truth and increasingly frustrate the old propaganda machine

That admission by Defense Secretary Panetta proves just how preposterous the US position is. Hopefully Europe has second thoughts over the absurd embargo it is considering later this month.

From Face the Nation:

Chinese Troops In Texas!

A Powerful Message From Ron Paul.

Gold: Five reasons why 2012 will be golden year for investors .

"The gold standard did not collapse. Governments abolished it in order to pave the way for inflation. The whole grim apparatus of oppression and coercion, policemen, customs guards, penal courts, prisons, in some countries even executioners, had to be put into action in order to destroy the gold standard."
-Ludwig von Mises



Commodity Online - The outlook for Gold is bullish for 2012. The European debt crisis, which dominated 2011, will continue to hang over markets in 2012. I’m extremely bearish on Europe. The political and financial systems are inadequate to deal with the serious fiscal and sovereign-debt problems the old continent faces.

Europe and Gold
The risk of contagion is large and the safety mechanism is convoluted (too many countries with too many conflicting interests). Europeans don’t have a handle on the situation; some banks and countries are already insolvent. The situation is extremely precarious.

Europeans will keep kicking the can down the road until it can’t be kicked any longer. When that happens, it’s going to get very ugly very quickly.


In this environment, gold should retain its safe-haven status. Investors will seek to protect their assets by using gold, one of the only currencies that’s a store of value that central banks can’t print at will. The volatility caused by the European markets will push gold prices as high as $2,500 in 2012.

Five reasons why 2012 will be golden for investors:

Gold is an institutionally underowned asset. While investment demand for gold has been increasing year-over-year, the yellow metal is still drastically underowned by many institutional investors. In fact, gold represents only 1.5 percent of all total global assets including equities, fixed income, private equity and real estate.

Increased market volatility boosts gold’s safe-haven status. Following the global turmoil that has been with us since September 2008, volatility has become a permanent staple in the markets. As measured by the VIX index, volatility is at historic highs. This increased volatility is pushing investors toward the safety of gold, which will continue in 2012 and for years to come.

Central banks starting to load up on gold. One of the biggest shifts we’ve seen in the Gold markets is central bank purchases of gold. Up until 2010, global central banks were net sellers of gold assets. Beginning in 2011, many of the world’s leading central banks began aggressive and active purchasing programs to buy gold. Gold purchases in 2011 are up more than 160 percent from the previous year. Indeed, the central banks of Kazakhstan, Mexico, Russia and South Korea all went to the open market to buy gold to diversify away from their dollar holdings.

Emerging market jewelry demand remains very strong. More than 50 percent of gold goes toward the manufacturing of high-end jewelry, and the majority of these purchases are made in emerging markets; particularly in India, China and the Middle East. While these economies could slow down as a result of a European crisis, the amount of wealth creation over the last decade has been staggering, and the high-end consumers who purchase gold should continue their purchases into 2012 and beyond.

Supply extremely tight, accompanied by rising production costs. In addition to all the bullish demand factors, the actual physical supply of gold is draconically tight. Yes, high prices incentivize miners to produce more, but that’s not enough: Ore-grade levels are at historic lows; it takes several years (5-7 years) for a new mine to start producing at commercial levels; and extraction costs are increasing dramatically (labor, energy and environmental costs are all higher). All this means that there’s only 1.5 percent of new gold coming online each year.

When you add up the tight supply scenario with all the bullish demand factors, gold prices have only one place to go, and that is higher.

If you keep your money at Bank of America, you are an idiot

OK, you take the handgranate, I take the pin. Bye!

Bank Of America Takes Sleaze to A New Level

The Golden Truth

If you keep your money at Bank of America, you are an idiot.  BAC quietly moved $53 trillion in derivatives from its holding company to its subsidiary that holds $1 trillion in customer deposits and is insured by the FDIC.  If any part of these derivatives blow up, the Taxpayer will then be on hook for the $1 trillion in deposits. 

I said 8 years ago that we would eventually see things go on in this country that blow your mind.  This is one of them. Although this kind of move is permitted to a very limited degree by the Federal Reserve Act, there is no way in hell that the loophole was intended to permit $53 trillion of shit to affect FDIC-insured deposits.   Of course, the watchdogs who are supposed to prevent this kind of abuse are the same people who benefit from allowing it to occur.

That the BAC upper managment would be so completely devoid of ethics and do something like this is a tragedy.  That Bernanke, Geithner and Obama would allow BAC to do this is a testament to the fact that our system is collapsing.

You can read the details HERE

Why the State Demands Control of Money

 Hans Hermann Hoppe - Ludwig von Mises Institute

Imagine you are in command of the state, defined as an institution that possesses a territorial monopoly of ultimate decision making in every case of conflict, including conflicts involving the state and its agents itself, and, by implication, the right to tax, i.e., to unilaterally determine the price that your subjects must pay you to perform the task of ultimate decision making.
To act under these constraints — or rather, lack of constraints — is what constitutes politics and political action, and it should be clear from the outset that politics, then, by its very nature, always means mischief. Not from your point of view, of course, but mischief from the point of view of those subject to your rule as ultimate judge. Predictably, you will use your position to enrich yourself at other people's expense.
More specifically, we can predict in particular what your attitude and policy vis-à-vis money and banking will be.
Assume that you rule over a territory that has developed beyond the stage of a primitive barter economy and where a common medium of exchange, i.e., a money, is in use. First off, it is easy to see why you would be particularly interested in money and monetary affairs. As state ruler, you can in principle confiscate whatever you want and provide yourself with an unearned income. But rather than confiscating various producer or consumer goods, you will naturally prefer to confiscate money. Because money, as the most easily and widely saleable and acceptable good of all, allows you the greatest freedom to spend your income as you like, on the greatest variety of goods. First and foremost, then, the taxes you impose on society will be money taxes, whether on property or income. You will want to maximize your money-tax revenues.
In this attempt, however, you will quickly encounter some rather intractable difficulties. Eventually, your attempts to further increase your tax income will encounter resistance in that higher tax rates will not lead to higher but to lower tax revenue. Your income — your spending money — declines, because producers, burdened with increasingly higher tax rates, simply produce less.
In this situation, you only have one other option to further increase or at least maintain your current level of spending: by borrowing such funds. And for that you must go to banks — and hence your special interest also in banks and the banking industry. If you borrow money from banks, these banks will automatically take an active interest in your future well-being. They will want you to stay in business, i.e., they want the state to go on in its exploitation business. And since banks tend to be major players in society, such support is certainly beneficial to you. On the other hand, as a negative, if you borrow money from banks you are not only expected to pay your loan back, but to pay interest on top.
The question, then, that arises for you as the ruler is, How can I free myself of these two constraints, i.e., of tax-resistance in the form of falling tax revenue and of the need to borrow from and pay interest to banks?
It is not too difficult to see what the ultimate solution to your problem is.
You can reach the desired independence of taxpayers and tax payments and of banks, if only you establish yourself first as a territorial monopolist of the production of money. On your territory, only you are permitted to produce money. But that is not sufficient. Because as long as money is a regular good that must be expensively produced, there is nothing in it for you except expenses. More importantly, then, you must use your monopoly position in order to lower the production cost and the quality of money as close as possible to zero. Instead of costly quality money such as gold or silver, you must see to it that worthless pieces of paper that can be produced at practically zero cost will become money. (Normally, no one would accept worthless pieces of paper as payment for anything. Pieces of paper are acceptable as payment only insofar as they are titles to something else, i.e., property titles. In other words then, you must replace pieces of paper that were titles to money with pieces of paper that are titles to nothing.)
Under competitive conditions, i.e., if everyone were free to produce money, a money that can be produced at almost zero cost would be produced up to a quantity where marginal revenue equals marginal cost, and because marginal cost is zero the marginal revenue, i.e., the purchasing power of this money, would be zero as well. Hence, the necessity to monopolize the production of paper money, so as to restrict its supply, in order to avoid hyperinflationary conditions and the disappearance of money from the market altogether (and a flight into "real values") — and the more so the cheaper the money commodity.
In a way, you have thus accomplished what all alchemists and their sponsors wanted to achieve: you have produced something valuable (money with purchasing power) out of something practically worthless. What an achievement. It costs you practically nothing and you can turn around and buy yourself something really valuable, such as a house or a Mercedes; and you can achieve these wonders not just for yourself but also for your friends and acquaintances, of which you discover that you have all of a sudden far more than you used to have (including many economists, who explain why your monopoly is really good for everyone).
What are the effects? First and foremost, more paper money does not in the slightest affect the quantity or quality of all other, nonmonetary goods. There exist just as many other goods around as before. This immediately refutes the notion — apparently held by most if not all mainstream economists — that "more" money can somehow increase "social wealth." To believe this, as everyone proposing a so-called easy-money policy as an efficient and "socially responsible" way out of economic troubles apparently does, is to believe in magic: that stones — or rather paper — can be turned into bread.
Rather, what the additional money you printed will affect is twofold. On the one hand, money prices will be higher than they would otherwise be, and the purchasing power per unit of money will be lower. In a word, the result will be inflation. More importantly, however, all the while the greater amount of money does not increase (or decrease) the total amount of presently existing social wealth (the total quantity of all goods in society), it redistributes the existing wealth in favor of you and your friends and acquaintances, i.e., those who get your money first. You and your friends are relatively enriched (own a larger part of the total social wealth) at the expense of impoverishing others (who as a result own less).
The problem, for you and your friends, with this institutional setup is not that it doesn't work. It works perfectly, always to your own (and your friends') advantage and always at the expense of others. All you have to do is to avoid hyperinflation. For in that case people would avoid using money and flee into real values, thus robbing you of your magic wand. The problem with your paper-money monopoly, if there is one at all, is only that this fact will be immediately noticed also by others and recognized as the big, criminal rip-off that it indeed is.
But this problem can be overcome, too, if, in addition to monopolizing the production of money, you also set yourself up as a banker and enter the banking business with the establishment of a central bank.
Because you can create paper money out of thin air, you can also create credit out of thin air. In fact, because you can create credit out of nothing (without any savings on your part), you can offer loans at cheaper rates than anyone else, even at an interest rate as low as zero (or even at a negative rate). With this ability, not only is your former dependency on banks and the banking industry eliminated; you can, moreover, make banks dependent on you, and you can forge a permanent alliance and complicity between banks and state. You don't even have to become involved in the business of investing the credit yourself. That task, and the risk involved in it, you can safely leave to commercial banks. What you, your central bank, need to do is only this: You create credit out of thin air and then loan this money, at below-market interest rates, to commercial banks. Instead of you paying interest to banks, banks now pay interest to you. And the banks in turn loan out your newly created easy credit to their business friends at somewhat higher but still submarket interest rates (to earn from the interest differential). In addition, to make the banks especially keen on working with you, you may permit the banks to create a certain amount of their own new credit (of checkbook money) in addition and on top of the credit that you have created (fractional-reserve banking).
What are the consequences of this monetary policy? To a large extent they are the same as with an easy money policy: First, an easy credit policy is also inflationary. More money is brought into circulation and prices will be higher, and the purchasing power of money lower, than would have been the case otherwise. Second, the credit expansion too has no effect on the quantity or quality of all goods currently in existence. It neither increases nor decreases their amount. More money is just this: more paper. It does not and cannot increase social wealth by one iota. Third, easy credit also engenders a systematic redistribution of social wealth in favor of you, the central bank, and the commercial banks within your cartel. You receive an interest return on money that you have created at practically zero cost out of thin air (instead of on money costly saved out of an existing income), and so do the banks, who earn additional interest on your costless money loans. Both you and your banker friends thereby appropriate an "unearned income." You and the banks are enriched at the expense of all "real" money savers (who receive a lower interest return than they otherwise would, i.e., without the injection of your and the banks' cheap credit into the credit market).
On the other hand, there also exists a fundamental difference between an easy, print-and-spend money policy and an easy, print-and-loan credit policy.
First off, an easy credit policy alters the production structure — what is produced and by whom — in a highly significant way.
You, the chief of the central bank, can create credit out of thin air. You do not have to first save money out of your money income, i.e., cut your own expenses, and thus abstain from buying certain nonmoney goods (as every normal person must, if he extends credit to someone). You only have to turn on the printing press and can thus undercut any interest rate demanded of borrowers by savers elsewhere in the market. Granting credit does not involve any sacrifice on your part (which is why this institution is so "nice"). If things then go well, you will be paid a positive-interest return on your paper investment, and if they don't go well — well, as the monopoly producer of money, you can always make up losses more easily than anyone else: by covering your losses with even more printed paper.
Without costs and no genuine, personal risk of losses, then, you can grant credit essentially indiscriminately, to everyone and for any purpose, without concern for the creditworthiness of the debtor or the soundness of his business plan. Because of your "easy" credit, certain people (in particular investment bankers) who otherwise would not be deemed sufficiently creditworthy, and certain projects (in particular of banks and their main clients) that would not be considered profitable but wasteful or too risky instead do get credit and do get funded.
Essentially, the same applies to the commercial banks within your banking cartel. Because of their special relationship to you, as the first recipients of your costless low-interest paper-money credit, the banks, too, can offer loans to prospective lenders at interest rates below market interest rates — and if things go well for them they go well; and if they don't, they can rely on you, as the monopolistic producer of money, to bail them out in the same way as you bail yourself out of any financial trouble: by more paper money. Accordingly, the banks too will be less discriminating in the selection of their clients and their business plans and more prone to funding the "wrong" people and the "wrong" projects.
And there is a second significant difference between a print-and-spend and a print-and-loan policy and this difference explains why the income and wealth redistribution in your and your banker friends' favor that is set in motion by easy credit takes the specific form of a temporal — boom-bust — cycle, i.e., of an initial phase of seeming general prosperity (of expected increases in future incomes and wealth) followed by a phase of widespread impoverishment (when the prosperity of the boom period is revealed as a widespread illusion).
This boom-bust feature is the logical — and physically necessary — consequence of credit created out of thin air, of credit unbacked by savings, of fiduciary credit (or however else you may call it) and of the fact that every investment takes time and only shows later on, at some time in the future, whether it is successful or not.
The reason for the business cycle is as elementary as it is fundamental. Robinson Crusoe can give a loan of fish (which he has not consumed) to Friday. Friday can convert these savings into a fishing net (he can eat the fish while constructing the net), and with the help of the net, then, Friday, in principle, is capable of repaying his loan to Robinson, plus interest, and still earn a profit of additional fish for himself. But this is physically impossible if Robinson's loan is only a paper note, denominated in fish, but unbacked by real-fish savings, i.e., if Robinson has no fish because he has consumed them all.
Then, and necessarily so, Friday must fail in his investment endeavor. In a simple barter economy, of course, this becomes immediately apparent. Friday will not accept Robinson's paper credit in the first place (but only real, commodity credit), and because of this, the boom-bust cycle will not get started. But in a complex monetary economy, the fact that credit was created out of thin air is not noticeable: every credit note looks like any other, and because of this the notes are accepted by the takers of credit.
This does not change the fundamental fact of reality that nothing can be produced out of nothing and that investment projects undertaken without any real funding whatsoever (by savings) must fail, but it explains why a boom — an increased level of investment accompanied by the expectation of higher future income and wealth — can get started (Friday does accept the note instead of immediately refusing it). And it explains why it then takes a while until the physical reality reasserts itself and reveals such expectations as illusory.

But what's a little crisis to you? Even if your path to riches is through repeated crises, brought about by your paper-money regime and central-bank policies, from your point of view — from the viewpoint as the head of state and chief of the central bank — this form of print-and-loan wealth redistribution in your own and your banker friends' favor, while less immediate than that achieved with a simple print-and-spend policy, is still much preferable, because it is far more difficult to see through and recognize for what it is. Rather than coming across as a plain fraud and parasite, in pursuing an easy-credit policy you can even pretend that you are engaged in the selfless task of "investing in the future" (rather than spending on present frivolities) and "healing" economic crises (rather than causing them).
What a world we live in!