The Federal Reserve has been pursuing policies which, we are told, are working. Really? Working for whom?
Firstly, while we focus upon the Federal Reserves policies here it should be noted that this is not a uniquely American phenomena. Both the European Central Bank and the Bank of England have been pursuing pretty much the same policies. With almost identical results.
I believe that the current financial, monetary and banking system is utterly destructive and serves only the interests of an elite financial and corporate oligarchy?
Think this is a bit extreme or some sort of deluded conspiracy theory? Let’s look at the statistics.
Basically the firefighting that followed the financial crisis of 2008 (which was a credit or rather debt crisis) has been based upon two primary principles.
Quantitative Easing: This basically means that the central banks (the Fed in the U.S) pump money into the economy by buying assets, primarily in the form of government bonds. The money they use to purchase these assets comes from. . er . .nowhere.
Really! The money is simply created on the central banks balance sheet as debt. It’s just numbers on a screen. Some of you may think this is barely credible (I can barely believe it myself) but you don’t need to take my word for it. Here’s Alan Greenspan (former head of the Federal Reserve) on the feds solution to buying more bonds.
Step 2: Supression of Interest Rates: So the recipients of this made up money, namely the banks and large financial institutions, have more money to spend. The idea being that they then feed this money into the real economy. The so called trickle down effect.
However, at the same time, the injection of all this cash into the purchase of assets reduces their yield with the aim of suppressing interest rates. This then, supposedly, enables borrowers to obtain cheaper credit from the banks releasing that money into the economy.
So that’s it, money created out of thin air to sure up failed financial institutions. These failed institutions, who original lost all the money in the first place with profligate speculation on bad loans and complex financial derivative products, are then entrusted to drip feed this new money into the wider economy.
So how’s that plan been going?
Firstly let’s look at the amount of money the fed has pumped into the U.S economy between 2009 and the start of this year.
That’s an amount of $4,000,000,000,000. Theoretically that’s money which is made available, through the banking system, to stimulate the economy.
So with all this cheaply available capital in the economy you might expect some real improvements for everyday, hard working citizens to start emerging. For example you may expect employment to improve, people to have more money to spend (disposable income) and so on.
So let’s look at the number of people of working age who are either in employment or seeking employment as a percentage of the population.
This would seem to indicate that despite the Federal Reserves policies unemployment remains a real problem. And unemployment means poverty for millions.
However what about those people who are working hard everyday to support themselves and their families. Surely some of the money (which is government debt don’t forget and that means the taxpayer is liable) must have improved incomes.
Lets see, in real terms adjusted for inflation how U.S families disposable incomes are growing.
Once again the trend seems to be the opposite of what the Fed stated purpose was. Namely to stimulate the real economy.
Clearly this poses a question. With $4T extra floating around in the economy but with no appreciable change in employment rates and a continuing slide in ordinary peoples incomes, quite simply, where’s all the money gone?
Seeing as the Fed effectively gave this money to the banks and the financial sector maybe if we look at their profits we may get an idea where that money is.
And what about the large corporations whose profits are reflected in the value of their stock.
So what we are left with is the inescapable conclusion that what the Federal Reserve (and other central banks around the globe) have done is create money, in the form of debt, and give it to the financial sector so that they can increase their profits.
Meanwhile ordinary people have to work harder and longer for diminishing returns in order to pay back the interest on the loans that their own government has made to private financial institutions that were “too big to fail.”
Not only that but the scale of this debt has meant the government spending in other areas has been dramatically cut. Hospitals close, welfare is cut and older people lose their pensions.
We are being farmed like cash cows by faceless corporations who have stacked all the cards in their own favour.