Thursday, May 5, 2011
While the Pentagon has tried to blame our economic problems on foreign terrorists, it is our own corrupt policies which caused them.
Nomi Prins - former managing director of Goldman Sachs and head of the international analytics group at Bear Stearns in London - noted yesterday that we can't blame our bad economic policy on Osama:
What transpired around the killing, or killing announcement, of Osama bin Laden has been astounding. Whether you believe that bin Laden was “taken out” by this NAVY Seal operation, after nearly a decade, two wars, an over 81% increase in the military budget, and thousands of deaths, following the tragic loss of life on 9/11, or whether you believe he was dead and iced years ago and strategically used as a sign of unflappable leadership, is irrelevant. The surrounding uproar was theatre of the extravagant, no matter how you slice it.
But, theatre was invented for distraction, in culture and in politics. So while all the Osama drama was unfolding, the Treasury Department issued another plea for raising the debt ceiling, aka supporting its pro-bank policy. It went something like this: We need to borrow more to pay social security obligations and not default on our debt, so other countries won’t question our ability to manage an economy (as if that hasn’t already happened) and we won’t have to pay more to borrow more. If we don’t – you know what’ll happen – yep, another financial crisis.
Though technically correct, omitting the fact that our leaders chose to float the financial system on such an unprecedented scale with no obvious Main Street benefits - hence the massive and quick debt increase - continues to show an aversion to reality.
Flashback five years. George W. Bush’s second Treasury Secretary, John Snow, plead the same thing. (He wasn’t unique, of course, Congress has acted at Treasury Secretary request to raise the debt ceiling 78 times since 1960, 49 times under Republican presidents, 29 times under Democrats.) Snow threatened he was being forced to cut payments to civil servants, among other things, but didn’t mention the real reason for the debt hike requirement, like the Iraq war or the tax cuts that stifled revenue collection. He had used similar arguments at the end of 2004, at time when the debt ceiling was about half what it is today.
Raising debt ceilings is a bi-partisan institution. The show is always the same. The Treasury Secretary begs Congress. Congress debates than agrees. No one questions the real reasons we pursued the excess borrowing.
Since Snow made his plea, a number of things happened; a continued war, an extra war, a collapse of the financial system, a subsidization of the financial system, a decline in employment, home prices, average wages for most of the population, and an increase in foreclosures, executive bonuses, and personal bankruptcies.
Hitting the debt ceiling isn’t about spending gone haywire because the Social Security and Medicaid buckets are too small for the people that rely on these programs; it’s about the big-ticket items– like recently, bailouts.***
In April 2008, just after federal subsidization of the sale (read: hostile takeover) of Bear Stearns to JPM Chase, and before the rest of the big bailout began, public debt was $5.22 trillion, intragovernmental was $4.08 trillion (56% and 44% of the total debt.) The debt cap then, was $9.815 trillion.
Public debt has nearly doubled since before the big bailout, while intragovernmental debt has increased just 15%. Some (like Geithner, Bernanke, etc.) may argue that this balloon in public debt was required to save our economy, though there’s little evidence of it doing anything but cheaply floating our financial system, not least because nearly half of the additional $4.4 trillion of public debt that was created it is stashed at the Fed as either excess reserves or QE2.
Now that the Osama drama has died down a bit, and Congress returns to economic discourse with Tim Geithner over not whether, but by how much, the debt ceiling will be raised, the partisan bickering will resume its thunderous levels of inanity.
No one on the Hill will question the true why behind the debt – because it would lead back to that mammoth fuchsia elephant - we, the elected and appointed, screwed the country to support the power banks, and we’d do it again, in fact, we already are.
With respect to bin Laden, conflicting stories will go on forever – when did he die?, who’s body is in the ocean? why didn’t Obama release a photo? But with respect to the economy, it’s super clear - our debt ballooned and our economy deflated, to subsidize banks and their practices, period. We can’t blame that on Osama bin Laden.
Of course, the trillions of dollars which Bernanke has given, loaned, guaranteed or otherwise printed up have gone to the big banks (including foreign banks such as the bank of Libya) and wives of Wall Street bigwigs, instead of Main Street. Moreover, our national security apparatus has been hijacked to serve the needs of the biggest businesses, instead of America as a whole.
Additionally, as I noted last year, our economic leaders have themselves acted a little bit like terrorists:
Tyler Durden provides details of how the Fed blackmailed Congress into expanding the Fed's powers:
A reader provides us with the following letter he received from Senator Mikulski in response to dissatisfaction expressed about Bernanke's reconfirmation. The response from the Senator demonstrates [that the Fed is pressuring] gullible and incompetent senators ... to pass law after law that is only in the Fed's, and thus Wall Street's interests, as the alternative would always be a "market nose dive" ....
Thank you for getting in touch with me about Ben Bernanke's nomination to chair the Federal Reserve. It's great to hear from you.
I was advised that rejecting his nomination would cause markets to nose dive, which would hurt retirees and families saving for their future. I am not enthusiastic in my support. But I think Mr. Bernanke understands the job that he still has to do.
Barbara A. Mikulski
United States Senator
And for the counterpoint, here is an example of a Senator who does not fall for the Fed's racket:
Thank you for contacting me. I appreciate hearing your thoughts about President Obama's decision to nominate Ben Bernanke for another four-year term as Chairman of the Federal Reserve (the Fed). I voted against approving Mr. Bernanke, who was nevertheless confirmed by the Senate by a vote of 70-30.
While I have heard the concerns of many that the failure to confirm Mr. Bernanke would have damaged the financial markets and jeopardized our economy recovery, I do not believe that anyone, including Mr. Bernanke, is too big to be replaced. We should not hold our economy hostage to the Wall Street threat that total economic collapse is the sure result of not doing everything they want.
Thanks again for contacting me. Please do not hesitate to do so again about this or any other issue that may concern you.
United States Senator
As I noted in 2009:
Indeed, the New York Times wrote in 2008:
The New York Times wrote on July 16th:In retrospect, Congress felt bullied by Mr. Paulson last year. Many of them fervently believed they should not prop up the banks that had led us to this crisis — yet they were pushed by Mr. Paulson and Mr. Bernanke into passing the $700 billion TARP, which was then used to bail out those very banks.
In his latest trend forecast, Gerald Celente writes:It was the familiar fear tactic — one that had worked in the past and would work again — an economic version of the Bush/Cheney argument for the Iraq War. The people were told that Saddam Hussein had weapons of mass destruction and ties to Al Qaeda. If he wasn’t stopped, the next cloud would be a mushroom cloud.Celente is over-the-top, right? Tin foil hat time, right?
The pretense was different but the game was the same: instill fear in a panicked public and they will follow their leader, regardless of how shallow the reasoning or how big the lie.
Just as the nation was hurried to war before it could be proven that Saddam Hussein had no weapons of mass destruction or Al Qaeda ties, so too there was no time to debate what might happen if the “too big to fail” failed...
While the national pastime of “follow the leader” is always the path of least resistance, it comes at a high cost … financial ruin and/or war and death. In either case, when disaster strikes, the followers typically absolve themselves of any direct moral responsibility for both the outcome and for the role they played in allowing it to happen.
Well, maybe. But Congressmen Brad Sherman and Paul Kanjorski and Senator James Inhofe all say that the government warned of martial law if Tarp wasn't passed:
Bait And Switch
Indeed, the Tarp Inspector General has said that Paulson misrepresented some fundamental aspects of Tarp.
And Paulson himself has said:During the two weeks that Congress considered the [Tarp] legislation, market conditions worsened considerably. It was clear to me by the time the bill was signed on October 3rd that we needed to act quickly and forcefully, and that purchasing troubled assets—our initial focus—would take time to implement and would not be sufficient given the severity of the problem. In consultation with the Federal Reserve, I determined that the most timely, effective step to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity in banks.So Paulson knew "by the time the bill was signed" that it wouldn't be used for its advertised purpose - disposing of toxic assets - and would instead be used to give money directly to the big banks? But he didn't tell Congress before they voted to approve the Tarp legislation? Does that mean that Paulson either actively misrepresented the purpose of the legislation or else committed a lie by omission - holding his tongue even though the fundamental idea behind his bill had changed?
It was a bait-and-switch, whether or not it was an intentional one.
"The rescue is being sold as a must-have emergency measure by an administration with a controversial record when it comes to asking Congress for special authority in time of duress."Isn't that terrorism?
Mr. Paulson has argued that the powers he seeks are necessary to chase away the wolf howling at the door: a potentially swift shredding of the American financial system. That would be catastrophic for everyone, he argues, not only banks, but also ordinary Americans who depend on their finances to buy homes and cars, and to pay for college.
Some are suspicious of Mr. Paulson’s characterizations, finding in his warnings and demands for extraordinary powers a parallel with the way the Bush administration gained authority for the war in Iraq. Then, the White House suggested that mushroom clouds could accompany Congress’s failure to act. This time, it is financial Armageddon supposedly on the doorstep.
“This is scare tactics to try to do something that’s in the private but not the public interest,” said Allan Meltzer, a former economic adviser to President Reagan, and an expert on monetary policy at the Carnegie Mellon Tepper School of Business. “It’s terrible.”
Celente writes today:
So irrelevant had Bin Laden and his jihad rhetoric become that, in the months preceding his assassination, every one of the uprisings occurring throughout the Middle East and North Africa was secular and in direct opposition to Bin Laden’s militant pan-Islamic vision.
In a sentence: There were no practical consequences whatsoever attending the death of Osama Bin Laden. It would do nothing to:
* Help America win losing wars in Afghanistan and Iraq.
* Lower the unemployment rate.
* Stop the US or European nations from sinking deeper into recessions and depression.
* Revive failing real estate markets or solve the debt and deficit crises.
* Lower oil and food prices.
* Reverse the damage or stop the radioactive fallout from Fukushima.
Meanwhile, back in DC, the Chairman of the Fed, Public Enemy No.1, “Osama” Ben Bernanke, will mastermind the destruction of the American dollar, the US economy and the purchasing power of the American people.
Of course, Bernanke has previously admitted that the Federal Reserve caused the Great Depression. And the Fed helped caused the Great Recession as well, given that the Fed:
- Turned its cheek and allowed massive fraud
- Acted as cheerleader in chief for unregulated use of derivatives at least as far back as 1999 (see this and this)
- And for subprime loans
- Allowed the giant banks to grow into mega-banks, even though most independent economists and financial experts say that the economy will not recover until the giant banks are broken up. For example, Citigroup's former chief executive says that when Citigroup was formed in 1998 out of the merger of banking and insurance giants, Greenspan told him, “I have nothing against size. It doesn’t bother me at all”
- Argued that economists had conquered the business cycle, and that modern, technologically advanced financial markets are best left to police themselves
- Preached that a new bubble be blown every time the last one bursts
- Kept interest rates too low
And the question of whether people are going hungry because Bernanke's money-printing is causing food prices to rise is an important one.