The One Percent Power Elite and their proxy political party argue austerity to justify automatic budget sequester cuts (except for what inconveniences Congress) of $2.4 Trillion dollars, cutting food stamps by $40 billion dollars, de-funding CHIP child health care by $13.3 billion dollars, government furloughs--and all the while 47 million Americans are in poverty.
And yet while enacting all these cuts to aggregate demand the Federal Reserve (Fed) has printed about $4 trillion dollars for the banks in a “stimulus” program called “Quantitative Easing (QE). This is free money transferred to Wall Street banks as the Fed buy collapsed mortgage bonds above their pre-collapse market values. The exact price is a secret. If we add to QE, special auction give aways and zero interest rate money the Fed has made available to Wall Street since 2008 it is estimated between $10 to $20 trillion dollars have been given to the banks with no strings attached.
Some economists call this money given away by the Fed to private banks a “stimulus” but it is really a massive scam by the banks off loading their toxic mortgage bonds onto the American people which will mean austerity and depression forever. The scam can be done in broad daylight because people don’t understand QE purchases; the off loading of bad debt is disguised as “stimulus” so the victims think they will somehow benefit from the mysterious bond purchases; and QE is administered as monetary policy by monetary specialists that isn’t subjected to critical review by democratic processes unlike fiscal budgetary policies. The empirical evidence shows that the four doses of QE in the last five years and provided very little stimulus.
QE is frequently called a Keynesian stimulus remedy, but Keynesians like James Galbraith disagree. If anything, the monetary policy of QE is closer to Milton Freidman’s school of economics. The economic collapse isn’t just a down turn of the classic business cycle, but goes much deeper to being a creditability trap. The 2008 economic collapse was the result of massive systemic fraud many times larger than the Enron scam. Keynesian economist, James Galbraith, believes the remedy to this economic collapse must be more radical, more systematic, and more overreaching than simply applying a fiscal stimulus fix.
“I have considerable difficulty with framing desirable policy simply in terms of stimulus. I am sensitive to medical metaphor. This one is a jab with a syringe full of amphetamine. It is something you might doe to wake up an otherwise healthy individual that is lethargic, or sleeping in. It is not an effective approach for organ failure. The metaphor implies if you just spent taxes, cut interest rates, build up the money supply, or whatever your favorite stimulate of choice is, and do this for a short period of time then the system will kick back into motion and you will have a sustained and substantial recovery. I don’t think this is true. I don’t think this was true from the beginning of the meltdown. We suffered something we have not experienced since the thirties which was the collapse of the stability of the financial sector, the viability of the financial sector, its trustworthiness, and of the solvency of the American Middle Class because their housing values fell below their mortgages. They are not in the market to borrow so there isn’t a foundation for private sector to takeover. What you need instead? You need something which is a strategic approach. Something which is a long-term approach that builds new institutions. And we will have to dismantle some banks to make way for them which is not something that gives me a great deal of heartburn. We should of done it when the political opportunity was there and not waiting five years until they are entrenched once again with their bonuses and lobbyists…Roosevelt did not miss that opportunity in March of 1933. We are going to have to build up institutions that will let us do things that need to be done: jobs, the foreclosure crisis, energy, environment and climate change—the challenges we all know we face.” (40:00 to 42:50 minutes).
So what are the real purposes of the Fed’s QE buying of toxic bank mortgages besides getting rid of these bad bank loans? The Wall Street banks are getting billions of dollars from the US government treasury and at the same time loading the government down with bonds that will eventually implode in a Greek style collapse. This is not a bug, but a feature. The unregulated shadow-banking sector with $1.2 quadrillion in derivatives provide a infinite set of financial triggers that can be pulled at anything to start an economic collapse by which the banks will profit immensely thanks to Congress. Obama and the Democrats are oblivious to the trap the nation has stepped into. An amendment to the Bankruptcy Reform Act of 2005 called “Safe Harbor” guarantees banks special bankruptcy protection by giving derivatives “super-priority” over all other claims, “including tax, and wage claims, deposits, real secured credit and insurance claims. Critically, it ensures immediacy (liquidity) for their holders.”
This is Wall Street’s true end game. This is why Wall Street is withholding credit and not investing in productive domestic businesses because they know the future plan. With the US government collapsed, banks will have trillions of dollars to buy up government assets (privatization) for pennies on the dollar. It will be Disaster Capitalism amplified to the level of Armageddon chaos. Wall Street will not have to worry about government interference into shadow banking speculative activity. No more government deficit spending, or troublesome corporate taxes. The national economy will become a “toll booth” rentier state economy. The new laws of the Trans-Pacific Partnership (TPP) Agreement will become the new standards for global corporate behavior. The One Percent Elite will have their money safely stored in offshore havens, with their heavy industrial capital assets overseas. The local police forces have been trained in urban warfare for decades, and militarized with Pentagon weaponry at their disposal to keep domestic order once the populace realizes what is happening. Most of government spending will have already been shutdown by Congress with a series of de-funding legislation so transition from a government ran by Washington to a gangster quasi-government on Wall Street will be seamless. The American Coup by Wall Street’s weapons of financial mass destruction will have been completed and a new era of Neoliberalism begun.