‘Silver Circle’ Plot Predicted Real-Life Federal Reserve PolicyMarch 19th, 2013
In Silver Circle, a Federal Reserve associated bureaucratic agency called the Department of Housing Stability (or HOUSTAB) creates conflict with the film’s protagonists by seizing homes in an effort to stabilize property values. A bank called the Strategic Housing Reserve then controls the seized properties.
It’s worth noting that the Silver Circle script was written before the real-life Federal Reserve started QE3, its first asset-buying plan in which it began monthly purchases of $40 billion worth of tainted financial products, consisting mainly of mortgage-backed securities. This policy has since continued and accelerated, filling the Fed’s balance sheet with mortgages, much like that of the Strategic Housing Reserve from Silver Circle. While it’s unlikely that Fed officials were inspired by the movie, since it premieres in a week-long event starting this Friday, March 22nd at Cinema Village in New York City (therefore they likely haven’t seen it), the parallels are uncanny.
The US Federal Reserve and Ireland’s National Asset Management Agency Buy Bad Mortgages
When a central bank sets interest rates unnaturally low, excessive levels of credit flood into the marketplace. This causes some consumers to behave irrationally by spending too much money they don’t have on things they can’t afford and don’t really need. When this happens across the entire marketplace, speculators jump on board to profit on the resulting price inflation that occurs when increasing levels of debt chase products.
Suppliers begin to increase inventories in response to rising prices, and this is where the catastrophe begins. In the real-world housing market, low rates set in ’99 caused developers to build houses just for speculators to flip them, even though no actual consumer waited on the other side of the transaction. Malinvestment results in this kind of chaos.
The Federal Reserve first attempted to solve the housing collapse by simply lowering interest rates further, but consumers and businesses seemed disinterested in taking on more debt. When this failed, the private banking cartel took it up a notch by promising to spend $40 billion a month on bad mortgages. In 2009, Ireland took a similar course and created the National Asset Management Agency to purchase overvalued properties at their unnaturally-high prices.
When Fiction and Reality Collide
Federal Reserve actions have changed American monetary culture forever. Rather than having a currency backed by a redeemable hard asset, US citizens now must use a dollar backed by bad mortgages that will never sell at current prices. This is a similar policy to the one carried out by Silver Circle‘s villainous and fictional Fed Chair Victor Brandt. The main difference is that the real-life Fed isn’t physically seizing the homes it buys yet — mortgage-backed security ownership doesn’t entitle any particular investor to an ownership claim over the property itself.
However, the Fed is set to lose money if interest rates are raised, and these asset purchases may be a big part of the reason why. The market will eventually realize the real prices of all these homes, still buoyed by quantitative easing, and, when it does, the Federal Reserve’s balance sheet will suffer devastating losses. Let’s hope that, when it does, we don’t start to see more events from the plot of Silver Circle coming to life.
Find out where you can see Silver Circle by checking our theater and special screening schedule on our event page. Also, don’t miss our New York City premiere event followed by a Q&A featuring Peter Schiff.