The Federal Reserve is the silent partner in the bloodletting
By Mike Whitney
Online Journal Contributing Writer
Dec 13, 2007, 00:11
A nation's economic system is a reflection pool. The
face that looks back from the water is the face of the culture and the prevailing
It's no different with America. The stewards of the US
economic system -- Paulson and Bernanke -- are inextricably linked to a
political/military establishment which has been thoroughly marinated in a
culture of violence and corruption. Paulson's �Marshall Plan� for subprime
homeowners is just the gloved hand of the autocrat. The other hand is still
busy gouging out eyes at Guantanamo, or clubbing foreign nationals at CIA black
sites, or dropping incendiary bombs on schoolchildren in Falluja. It's all the
same. The culture of war and demagoguery has its roots in the economic system.
Its financial leaders are just as culpable as any low-ranking GI at Abu Ghraib.
The Paulson plan has nothing to do with saving working class
people from the ravages of foreclosure. Oh, no. The Bush administration is
ideologically opposed to helping people in need. We know that already. Just
look at Katrina. The real purpose of the proposed �bailout� is to allow enough
people to keep making minimal payments on their mortgages so the banking system
doesn't collapse in a heap. That's it. It's a sign that desperation has set in
at the Federal Reserve. The last time the government orchestrated a bailout of
this magnitude was during the '30s. And, guess what? George Bush is no Franklin
The truth is, the system is reeling and the Fed is in a
state of panic. They are doing everything in their power to keep the train on
the tracks, but nothing is succeeding. They've slashed rates,
accepted dodgy collateral (like commercial paper and shaky mortgage-backed
securities) as repos, and extended the length of the repos indefinitely, which
is the same as �monetizing� the debt. Paulson has tried to set up a Super SIV
to help the major investment banks offload their mortgage-backed junk on the
wary public, but that isn't working either. Nothing is working. Meanwhile, the
economic headwinds keep getting stronger, the waves keep crashing over the bow,
and ship-o-state keeps listing perilously on its side. It's a real mess.
The banks are the conduit for the paper money scam run by
the Federal Reserve. It's a shabby business run by the same people who
send our kids to war while rewarding themselves with tax cuts. It stinks. Now
the system is in dire straights. Are we supposed to feel bad?
Foreign central banks and investors are dumping their
dollars and dollar-backed assets, the Gulf States are threatening to delink
petroleum from the dollar, and investors everywhere now know they've been
ripped off by a shoddy mortgage-laundering swindle that got the �green light�
from US regulators. It's a bad scene all around. And now the chickens are
coming home to roost.
The meltdown in the real estate market continues to send
tremors through Wall Street. Trillions of dollars in complex bonds (CDOs and
MBSs) are being downgraded as foreclosures increase and housing inventory
soars. Banks, insurance companies, pension funds, bond insurers, hedge funds
are all among the living dead. Many are already insolvent and many more will
follow. It's just a matter of time. The foundation of the financial markets is
crumbling. The scheme to transform the liabilities of loan applicants with bad
credit into a reliable source of fat profits has failed. Alchemy doesn't work.
The subprime crisis and (subsequent) credit crunch
originated at the Federal Reserve. The Fed triggered a speculative frenzy by
lowering interest rates below the rate of inflation for over 31 months between
2002 and 2004. Trillions of dollars were fed into the banking system creating
the biggest equity bubble in history. Now that the housing bubble is crashing
to earth -- and trillions of dollars in shaky bonds are headed for the landfill
-- the Fed is trying to distance itself from any responsibility. But its
fingerprints are everywhere. The plan was authored and executed by the Fed
and that's where the blame lies. Everyone else is just a bit player.
What matters now, is that the system is collapsing.
It's slowly getting crushed by the accumulated weight of its own corruption.
When the system crashes, the flag will be lowered over Guantanamo Bay, the
present oligarchy of racketeers will be removed from office, and the troops
will come home from Iraq. Sometimes tragedy produces a positive outcome.
There could be anarchy or tyranny or martial law or
detention camps. Who really knows? It's perfectly normal that the
public is worried about �what could happen� in the near future. But, consider
this: can we continue moving in the same direction that we are now? Can we keep
pouring the blood of innocent people all over the planet while claiming to own
the world and all of its resources? Can we keep ignoring the
species-threatening challenges of global warming, peak oil and nuclear
And, is there any chance that the media, the congress, the
courts, or the president will come to their senses; chart a different course,
restore civil liberties, stop the human rights abuse, and withdrawal the
So tell me, dear reader, what hope is there for change apart
from a full-system economic collapse?
Political systems do not have to be perfect to be
acceptable. I'm not naive. But, for many of us, there are basic moral criteria
that have to be observed to win our support. The Bush administration has
elevated killing, torture and kidnapping to a level of state policy. This is
unacceptable by any standard, and, yet, all the levers of power are controlled
by people who support the present doctrine.
Isn't that so?
The United States is not a beacon of hope or a light unto
the world. It is a menace and a growing threat to survival on earth. America's
political and military belligerence is just an extension of a domineering
economic system which serves the sole interests of the rich and powerful. The
Federal Reserve plays a critical role in this paradigm. Nation's don't go to
war without the blessing of their main financial institutions. The �big money�
guys are the silent partners in the plunder and bloodletting.
The men who own and oversee the US financial system created
the cancer which is presently devouring it from the inside. Now the tumor has
metastasized and spread throughout the entire organism. The situation is
irreversible. The economy is on its last legs and headed for a fall. US
political leaders will have to accept a world in which America is just one of
many states of equal power and significance. Military funding will slow to a
dribble. The killing will stop. Finally.
Whitney lives in Washington state. He can be reached at email@example.com.
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