Economy on a Scaffold

Weekend Edition
August 7 - 9, 2009


When "Not Bad" is the New "Good"

Economy on a Scaffold

By MIKE WHITNEY

We're making this way too complicated. It's simple really.

The Fed has only one tool at its disposal; to create more money. Typically, the way the Fed adds to the money supply is by lowering interest rates. When the Fed lowers rates below the rate of inflation; they're basically selling dollars for less than a buck. That's a good deal, so, naturally, speculators jump on it and trigger a credit expansion. What follows is a frenzy of market activity that ends in a housing, credit, tech or equity bubble. Eventually, the bubble bursts and the economy goes into a tailspin. Then, after a period of digging-out, the process resumes again. Wash, rinse, repeat. It's always the same.

The moral is: Cheap money creates bubbles; and bubbles move wealth from workers to rich motherporkers. It's as simple as that. That's why the wealth gap is wider now than anytime since the Gilded Age. The rich own everything.

The Federal Reserve is the policy arm of the big banks and brokerage houses. Period. Ostensibly, its mandate is to maintain "price stability and full employment". Right. Anyone notice how many jobs the Fed has created lately? How about the dollar? Is it really supposed to zig-zag like it has been for the last decade? The central task of the Fed is to shift wealth from one class to another. And it succeeds at that task admirably.

The Fed's "mandate" is public relations claptrap. Bernanke hasn't lifted a finger for homeowners, consumers or ordinary working stiffs. All the cash is flowing upwards...according to plan. The Fed is a social engineering agency designed to serve as the de facto government behind the smokescreen of democratic institutions. Does anyone that a black, two year senator with no background in foreign policy or economics is calling the shots?

http://www.counterpunch.org/whitney08072009.html

only as long as the ultra rich had their income taxed at 90%. As long as that was happening, there was a disincentive to greed. As long as they weren't turning from multi millionaires into billionaires, there wasn't a bunch of hoarded money looking for the next big thing and creating bubbles, pulling out and leaving the little people who invested late holding the bag.

The problems are wealth concentration combined with deregulation and depressed wages on disappearing jobs.

Until and unless all these problems are corrected, we'll continue to be an oligarchy.

The problems are wealth concentration combined with deregulation and depressed wages on disappearing jobs.

Until and unless all these problems are corrected, we'll continue to be an oligarchy.