By Mike Whitney
A nation’s economy is a reflection pool. The face that looks back from the water; is the face of the culture and the prevailing ethos. 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 despot. 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 shatter into a million pieces. That’s it. It doesn’t take a genius to see 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 F.D.R.
The truth is, the system is cratering and the Fed’s panic-button is “blinking red”. It’s obvious. They are doing everything in their power to keep the train on the tracks, but they’re not succeeding. They’re slashing rates, accepting dodgy collateral (like Commercial paper and shaky mortgage-backed securities) as repos, and they’ve 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 off-load their mortgage-backed junk on the wary public, but that isn’t working either. Nothing is working. Meanwhile, the headwinds keep getting stronger, the waves keep crashing over the bow, and ship-o-state keeps listing perilously on its side. It’s a mess.
The banks are the conduit for the paper-money scam run by the Federal Reserve. It’s a crooked 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 de-link petroleum from the dollar, and investors everywhere 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 still doesn’t work. Never has.
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 we know the truth. 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 most, is that the system is collapsing. It is being slowly 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 positive results derive from tragedy.
There could be anarchy or tyranny or martial law or detention camps. Who really knows? It’s understandable 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 proliferation?
Well, then, 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 troops?
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 Central Bank 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 through 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.
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