The “Crash of 2007-8” is underway -- and the Fed is our pilot
How Far Will the Crash Go and What Do we Do Now? Part II of III
| Richard C. Cook, who worked in the Carter White House, NASA, and the Treasury Department, suggests the Fed is waltzing us to a recession that they hope to manage. This article appeared on website of Global Research, August 18, 2007. |
by Richard C. Cook
Neither the Federal Reserve nor the U.S. government believes they have an obligation to gather or publish data that will help the public gauge the effects of today's crises on their homes or jobs. Some might call this negligence a crime against democracy. In fact the Federal Reserve made tracking even more difficult by ceasing to report the M3 macro-currency numbers, but researchers have shown that growth in M3 is soaring while M1 goes down.
What appears to be happening right now is that the Federal Reserve, which oversees the U.S. economy on behalf of the financial, corporate, and government elites, is deliberately trying to squeeze as much debt out of the economy as it can. It is doing this with interest rates that are high relative to actual conditions, while trying to avoid the Armageddon scenario.
The Fed is carrying out its “soft-landing” policy by holding credit tight while introducing “liquidity” into the markets on a day-by-day basis through use of overnight “repos” and by cutting the discount rate for bank borrowing. Conservative columnists like George Will and Bob Novak watch and shake their pom-poms from the sidelines.
But “liquidity” is just a fancy name for more loans. The one thing we can be certain of is that every loan bears interest charges which someday, somehow, will have to be paid by a person who works for a living.
And if you wondered where the Fed got the $34 billion in liquidity it pumped into the markets on Friday, August 10, you weren’t the only one. The answer is that the Fed has a secret room upstairs where it keeps a large “printing press.” It’s legalized counterfeiting, but as with any counterfeit money, if people accept it in trade it acts just like the real stuff -- for a while.
The danger, which many commentators are pointing to, is that the Fed will ignite a hyperinflation, which may be what is happening and may actually be intentional because it devalues debt. It’s what happens when debt is used to pay off debt and is in fact an invisible tax. Such inflation is difficult to discern, again because of the government’s rigged statistics. The most important indicator to watch is the price of oil, which doesn’t show up in “core inflation.”
But there are signs that the “soft landing” is working, such as a modest increase in U.S. exports. Reflecting the weak dollar, China is now charging more for its own exports, which will stimulate our industry here at home. And the Fed’s discount rate cut last Friday [August 17] sparked a modest stock market rally.
Meanwhile, there is a debate over whether quasi-public agencies like Fannie Mae and Freddie Mac should be used to spread the housing market losses across the entire taxpaying population. While society as a whole is made poorer, many individuals who might have lost their homes or jobs are spared some pain. So it’s hard to argue against it. But this type of bail-out would benefit individual homeowners more than the big banks, so the conservative politicians and commentators oppose it.
But there’s a bigger picture. The strategy of the Fed is likely to allow the recession to proceed but it does want to get the economy moving again before the downturn goes too far. In fact they probably plan to do it in time for the 2008 presidential election.
The Fed wants to see a recovery in place by then so the American public will go back to sleep and elect another politician who will steadfastly protect the privileges and powers of the magnates who, through the Fed, rule the world. Even if a new president has some progressive ideas, he or she won’t be able to alter much if a recovery has started.
Part III: Where Do We Go From Here?
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Richard C. Cook, a frequent contributor to Global Research, is a retired federal analyst who worked twenty-one years with the U.S. Treasury Department. His articles have appeared on Economy in Crisis, Dissident Voice, and Atlantic Free Press. He is the author of “Challenger Revealed: An Insider’s Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age”.
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Also see: How Far Will the Crash Go and What Do we Do Now? Part I
Bush Administration Expecting a Recession?
Wasting Billions on Military Spending |
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