The New York Times ran a recent article about income disparity in the U.S., this time focusing on geography. It seems that the Atlantic corridor, centered in New York City and Washington, DC, has far and away the greatest concentration of household wealth per square mile, and has benefited also as income disparity has turned into a runaway freight train.
The Federal Reserve is not going to push the economy into Zimbabwean hyperinflation. That’s pure bunkum. The Fed’s plan is to weaken the dollar to boost exports and to force China to let its currency appreciate to its fair-market value. The policy should help to lower the US’s bulging current account deficit. By purchasing $600 billion in US Treasuries (QE2), the Fed effectively reduces the supply of risk-free assets, which sends investors into riskier assets like stocks and commodities. Is there an element of class warfare in the policy?
Barack Obama recently issued an executive order imposing a wave of sanctions against Libya, not only freezing Libyan assets, but barring Americans from having business dealings with Libyan banks.
So raise your hand if you knew that the United States has been extending billions of dollars in aid to Qaddafi and to the Central Bank of Libya, through a Libyan-owned subsidiary bank operating out of Bahrain. And raise your hand if you knew that, just a week or so after Obama’s executive order, the U.S. Treasury Department quietly issued an order exempting this and other Libyan-owned banks to continue operating without sanction.
We’ve seen behind the curtain, as the Fed waved its magic liquidity wand over Wall Street. Now it’s time to enlist this tool in the service of the people.
The Fed’s invisible hand first really became visible with the bailout of AIG. House Speaker Nancy Pelosi said in June 2009:
“Many of us were, shall we say, if not surprised, taken aback when the Fed had $80 billion to invest — to put into AIG just out of the blue. All of a sudden we wake up one morning and AIG has received $80 billion from the Fed. . . . So of course we’re saying, Where’s this money come from? ‘Oh, we have it. And not only that, we have more.’”
What if the greatest scam ever perpetrated was blatantly exposed, and the US media didn’t cover it? Does that mean the scam could keep going? That’s what we are about to find out.
I understand the importance of the new WikiLeaks documents. However, we must not let them distract us from the new information the Federal Reserve was forced to release. Even if WikiLeaks reveals documents from inside a large American bank, as huge as that could be, it will most likely pale in comparison to what we just found out from the one-time peek we got into the inner-workings of the Federal Reserve. This is the Wall Street equivalent of the Pentagon Papers.
The deficit hawks are circling, hovering over QE2, calling it just another inflationary bank bailout. But unlike QE1, QE2 is not about saving the banks. It’s about funding the federal deficit without increasing the interest tab, something that may be necessary in this gridlocked political climate just to keep the government functioning.
On November 15, the Wall Street Journal published an open letter to Fed Chairman Ben Bernanke from 23 noted economists, professors and fund managers, urging him to abandon his new “quantitative easing” policy called QE2. The letter said: Continue reading →
The Federal Reserve’s QE2 is being met with near universally condemnatory reviews. The Fed’s effort to buy up $600 billion in government bonds is being seen as a shot in the dark for the foundering Obama administration. With the “austerity-minded”, Tea Party influenced Republicans measuring the drapes and curtains, for new and improved cushy offices in the United States Capitol; Obama appears to be running an end-around the anticipated policy gridlock that these “preeminently qualified”, so-called stewards of the national public trust are widely anticipated to bring about.
The Federal Reserve is proposing another round of “quantitative easing,” although the first round failed to reverse deflation. It failed because the money went to banks, which failed to lend it on. To reverse deflation, the money needs to be funneled directly to state and local economies. The Fed may not be authorized to “monetize” state bonds, but it COULD buy bonds issued by state-owned banks.
In 2002, in a speech that earned him the nickname “Helicopter Ben,” then- Federal Reserve Chairman Ben S. Bernanke famously said that the government could easily reverse a deflation, just by printing money and dropping it from helicopters. “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent),” he said, “that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Later in the speech he discussed “a money-financed tax cut,” which he said was “essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.” You could cure a deflation, said Professor Friedman, simply by dropping money from helicopters.
Housing is on the rocks and prices are headed lower. That’s not the consensus view, but it’s a reasonably safe assumption. Master illusionist Ben Bernanke managed to engineer a modest 7-month uptick in sales, but the fairydust will wear off later this month when the Fed stops purchasing mortgage-backed securities and long-term interest rates begin to creep higher. The objective of Bernanke’s $1.25 trillion program, which is called quantitative easing, was to transfer the banks “unsellable” MBS onto the Fed’s balance sheet. Having achieved that goal, Bernanke will now have to unload those same toxic assets onto Freddie and Fannie. (as soon as the public is no longer paying attention)
Bernanke’s cash giveaway has helped to buoy stock prices and stabilize housing, but market fundamentals are still weak. There’s just too much inventory and too few buyers. Now that the Fed is withdrawing its support, matters will only get worse.
Of course, that hasn’t stopped the folks at Bloomberg from cheerleading the nascent housing turnaround. Here’s a clip from Monday’s column:
After a year-long investigation, court-appointed bank examiner Anton Valukas has produced a deadly 2,200 page report which details the activities that led to the Lehman Brothers bankruptcy. The report is a keg of dynamite. The question now is whether anyone in government has the nerve to light the fuse. Valukas provides powerful evidence that Lehman executives were involved in “balance sheet manipulation” by implementing an arcane accounting procedure called “Repo 105” which masked the bank’s true financial condition from investors and regulators.
According to Valukas, Lehman was “Unable to find a United States law firm that would provide it with an opinion letter permitting the true sale accounting treatment” using Repo 105. So, Lehman executives went outside of the country in an effort to enlist the support of a London law firm that would approve the procedure.
Is there enough evidence to indict Ben Bernanke and Alan Greenspan on charges that they aided and abetted the banks and other financial institutions in the sale of fraudulent loans to investors?
That depends on whether there is sufficient proof to show whether the two men KNEW that the nation’s lenders were engaged in large-scale predatory lending and chose to do nothing. As we’ll see, both Greenspan and Bernanke were warned repeatedly about the mortgage/derivatives scam by credible professionals and industry regulators, but failed to act.
“Obama’s Republican Class War Presidency” with financial economist, Michael Hudson, on Obama’s State of the Union Speech and its economic consequences. The reappointment Federal Reserve Chairman, Ben Bernanke.
If the economy deteriorates in the L-shaped “hockey-stick” rut that many economists forecast, what political price will President Obama and the Democrats pay for having returned the financial keys to the Bush Republican appointees who gave away the store in the first place? Reappointing Federal Reserve Chairman Ben Bernanke may end up injuring not only the economy but also the Democratic Party for years to come. Recognizing this, Republicans made populist points by opposing his reappointment during the Senate confirmation hearings last Thursday, January 27 – the day after Mr. Obama’s State of the Union address.