classical economics
for analysis,  forecasting
and policy design

Killing Granma's Economy
By Wayne Jett © August 22, 2009
    Federal Reserve chairman Ben Bernanke’s stated unwillingness to preside over the “second Great Depression” is insufficient to keep it from happening. Unless Bernanke does more to persuade President Obama and Wall Street that financial fraud must be cleaned up, at least temporarily, the mighty tempest of new liquidity flowing from the Fed will not return the staggered private economy to health.
    Presently the unprecedented increase in liquidity furnished by the Fed is doing little or nothing to provide greater access to bank credit for medium and small businesses. Banks remain unwilling to lend to private borrowers because, as banks regulated by the Fed and FDIC, they are threatened by seizure if their loan-to-capital ratio is deemed unacceptable.
    Facing this severe risk to shareholders, banks elect to take low cost liquidity from the Fed and buy Treasuries, thereby funding the tremendous run-up in federal debt by Obama and Congress. Only yesterday, the White House adjusted upwards its estimate of the federal deficit over the next ten years by about $2 trillion to more than $9 trillion, matching the earlier estimate of the CBO.
    This is debt of a scale capable of nothing other than plunging the U. S. into third world debtor status, where the International Monetary Fund regularly imposes high-tax regimes from which populations never recover. High taxes, low wages, low living standards, poverty, disease, crime, falling birth rates, government suppression – these are earmarks of nations which fall into the abyss prepared for them by mercantilist elite of Wall Street, who dominate U. S. government officials and policies.
     As monetary liquidity continues to flow away from business and into government, the private economy can only shrink and weaken as government grows. This must be considered intentional policy, as it matches government-growth/private-shrinkage policies clearly reflected in pending legislation dubbed "cap-and-trade" (HR 2454), which would take control of all energy sources and uses, and "health care reform," which would take control of one-seventh of the U. S. private economy. As previously noted, elitist control of U. S. health care, including medical and pharmaceutical research, could halt and reverse advances in human longevity. Though this may seem morbid in the context of elitist media treatment of the subject, human population growth control remains a primary element of the elitist paradigm.
     For credit to flow again to private business, banks and other publicly traded businesses must be protected from fraudulent trading practices still rampant in U. S. financial markets. In addition, federal regulators must stop assisting the predators with accounting rules and propaganda designed to make the banks appear unsound and unstable. For that to occur, banks and publicly traded firms must prevail upon Congress to make it happen. So far, predators still have the whip-hand, but at least the assault is being confronted.
Concessions and Lies
    Evidence continues to accumulate that Wall Street has captured Washington. Only today, Treasury secretary Timothy Geithner is reported to have conceded that the federal government has "been forced to do extraordinary …, offensive things to help save the economy.”  With the Journal’s journalistic integrity bolstered by presence of new media (DIGG) in the interview, Geithner was actually called to answer for the role of former Treasury secretary Henry Paulson in the “collapse” of Lehman Bros. and the bailout of AIG, which funneled billions of taxpayer funds into Paulson’s former employer Goldman Sachs.
    The Journal rushed to note that neither Geithner nor Fed chairman Bernanke ever worked for Goldman Sachs, although a Goldman director, Stephen Friedman, was chairman of the board of directors at the Federal Reserve Bank of New York where Geithner served as president. Thus, Friedman of Goldman Sachs essentially hired Geithner as president of the New York Fed – by far the most powerful of all Fed regional banks – which gave Geithner his all-important boost towards eventual appointment as Treasury secretary. No reason for Geithner to feel beholden to Goldman or to Paulson, who was Goldman's CEO while Geithner worked for Friedman at the New York Fed. Right?
    All this leads to Geithner’s repetition of Wall Street’s perennial slogan that “government needs policy makers who understand financial markets and are able to help craft efforts that protect taxpayers.” Then the Journal provides this final gem from Geithner, a statement that “will live in infamy:”

“’These are deeply honorable men, great public statesmen willing to come serve their country in very challenging times and they did exceptionally good things for the country,’ Mr. Geithner said.” (Emphasis added.)
    Wall Street’s elite have told equally big lies in the history of this country, but this one is right up there in the major whopper category. If Americans ever overcome elitist domination of government under which they now exist, this statement may be etched in marble over the entry to a graveyard where malefactors were interred in the process. ~