VHeadline's Washington DC-based commentarist Chris Herz writes: Quite some time ago this column in VHeadline, we predicted the shape of real 21st century socialism: A socialism for the rich. And this week's news vindicate our analysis. So, you Wall Street types, get out your checkbooks and subscribe. Here ... not from the Wall Street Journal ... is where you get the straight skivvy.
Now for what has happened as the New York Stock Exchange teeters on the brink of a new 1929. We should call this the New-New Deal.
Decades of deregulation and subservience to a religion of private enterprise, beginning with the Kennedy Administration has led to the over financialization of the US economy. Simultaneously this deregulation, coupled to a massive flight of capital to cheap labor centers in Asia and Mexico has led to a dismantling of real US industrial productivity. The total subordination, by means of open and public corruption, of the US State cannot be left from mention.
The result has been attempts to mask the situation by, among other things, an overinvestment in real estate, bidding the price of land and housing beyond any reasonable equation with the incomes of the ordinary people who need this product. And in the past few months the system broke under the load of layer upon layer of unsupported and unsupportable debt. Both current accounts (trade) and State budget deficits, all at record levels, aggravated the situation beyond the capacity of any rational financial balance.
There have been recently smaller interventions by the Federal Reserve but over the weekend Lehman Brothers, investment bankers, were allowed to fall, this due to the unpleasant personality of its chairman as much as anything else. I hear that even his peers cannot stand the guy.
Then the Fed acted to contain some of the damage by the purchase of an 80% stake in the faltering AIG Insurance Group to the tune of 85 billions. Nevertheless there was a massive flight from the stock market Monday, probably some intervention by private banks and other institutional investors Tuesday which recovered about 25% of the loss, then another massive sell-off Wednesday.
For some time now the financial governance of the US has been in the hands of a crisis committee of the chairman of the Federal Reserve and the Secretary of the Treasury and some other public and private officials. These men formed with the European Central Bank, the Federal Swiss Bank and the Bank of Japan a consortium in time for the opening of the US market this morning, capitalizing it with some $250 billion. Mostly from the Federal Reserve ... and the fluctuations of the day clearly show massive injections of funds early in the morning and again just after lunch, and then again around 3 p.m. The market closed up some 400 points for the day.
Last night as well, the Federal Reserve obtained another $100 billion from the treasury to replenish its accounts ostensibly for the purpose of seizure of failing banks. But probably to shore up their own increasingly precarious position. Likewise of the highest significance is that unlike the similar crisis committee which attempted vainly to stem the crisis of October, 1929 this one is composed partially of foreign bankers. Likewise also of the highest significance the Chinese central bank, largest holder of official US securities, do not appear to be represented.
Helpfully too, the stock market reacted today very well to the news that the Fed and the Treasury were going to revive the Resolution Trust Agency (the rest of the government now being an irrelevant rubber stamp) which assumed with taxpayers' funds the liabilities of failed thrift institutions in the Reagan/Bush I period and sold them off at great loss to the public thereafter. This New-New Deal for the moneyed classes will be on a vastly larger scale. How much larger no one can yet say. But in those days the US sheeple were sheared for about $380 billion.
And the general financial situation of the USA is today much more dire than it was back then. My guess is the needed reserves must be at least ten times that amount.
We can confidently predict that all remaining US public assets, starting with the Social Security Trust Fund will be consumed as necessary to shore up the positions of the major corporations and the hereditary oligarchy. But these assets no longer are sufficient to maintain these people in the style to which they have become accustomed. It will be interesting to see where and when the next breakdown will occur. Meanwhile the resultant exploding public debt may be compared only to the measurement of interstellar distances.
The relevance to peoples beyond our borders is that anywhere the US dollar is permitted free circulation, any country allowing dependance thereupon, say Venezuela, can expect the export of what must soon be an inflation of a magnitude even more massive than that which is now so evident.
Again, here is where you can read real analysis. Support it!
From the imperial capital
Chris Herz
cdherz44@yahoo.com
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Venezuela is facing the most difficult period of its history with honest reporters crippled by sectarianism on top of rampant corruption within the administration and beyond, aided and abetted by criminal forces in the US and Spanish governments which cannot accept the sovereignty of the Venezuelan people to decide over their own future.
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