Authored by: Paul Craig Roberts
I have never known the Federal Reserve to make a good decision. Indeed, disastrous decisions are the Fed's hallmark. There are many such disasters. Among them the Great Depression, the decade-long consequence of the Federal Reserve Board's failure to prevent the shrinkage of the US money supply. See: https://www.hoover.org/research/feds-depression-and-birth-new-deal
In more recent times, we had Brooksley Born, head of the Commodities Futures Trading Commission (CFTC), blocked from regulating over-the-counter derivatives and credit default swaps that resulted in financial panic and economic collapse. Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, Deputy Treasury Secretary Larry Summers, and SEC Chairman Arthur Levitt conspired to have Congress block Brooksley Born from doing her job. The four dumbshit officials told Congress that "markets are self-regulating." When questioned by Congress, Greenspan admitted that his ideology "had a flaw." http://www.shoppbs.pbs.org/wgbh/pages/frontline/warning/interviews/born.html
The Federal Reserve has abandoned effective financial regulation and helped to kill the 1933 Glass-Steagall Act that had kept commercial and investment banking separate. Ironically, the formerly progressive Democrat Party, in the clutches of the Clintons, repealed the progressive Glass-Stegall Act in 1999, thus setting up the line of financial troubles that caused the Fed to pump out money for 12 years to stabilize the financial system. Gretchen Morgenson and Joshua Rosner's 2011 book, Reckless Endangerment documents the failure of financial regulation.
Michael Lewis's books, such as Flash Boys (2014), demonstrate that the financial sector no longer serves any public purpose. All the years, while the Federal Reserve was printing money hand over fist to keep the financial system intact, Wall Street made its money by front-running stock purchases.
In 1890 monopolies were regarded as restraints on trade, and efforts were made to prevent them with the passage of the Sherman Anti-Trust Act, followed by the passage of two subsequent anti-trust acts. Enforcement was spotty, and the act was not always well applied, but the monopoly was recognized as undesirable.
Today that is not the case. Globalization produced the view that only large corporations and banks could compete globally. Consequently, the Sherman Anti-Trust Act became a dead letter law. US monopolization of finance became an essential foundation of US world hegemony.
This brief account brings us to the present day. The current Federal Reserve Board has confused a shortage of goods and services due to Washington-induced supply constraints with excess demand inflation and is raising interest rates to reduce aggregate demand. This policy is nonsensical.
The incompetent Biden regime's Covid lockdowns and Russian sanctions caused significant reductions in supply. Businesses were closed, and many failed to reopen. Supply chains were disrupted. Sanctions against Russia reduced the energy supply, thus kicking up its price and the price of everything dependent on energy–essentially everything.
The Federal Reserve's policy of raising interest rates raises costs higher. Everything dependent on credit costs more, including home mortgages. The Biden regime's sanctions against Russia are the source of the most significant part of the higher prices because of their impact on energy costs.
Far from reducing inflation, the Federal Reserve's policy benefits private capital firms by driving prospective homeowners out of the housing market by raising the interest cost of carrying a mortgage, thus aiding private capital companies to purchase housing for cash and turn them into rental units.
The rental income is sheltered by depreciation, and when the properties are depreciated, they are sold, the money is reinvested in new purchases, and the process begins again. Homeownership by individuals cannot be depreciated, and home ownership by individuals has declined. Is the Federal Reserve in bed with the private capital companies or just incompetent?
Washington's Russian sanctions are being used to destroy European businesses, thus removing European competition with US firms. Consider just two aspects of the sanctions: European firms have been forced to break off good business relations with Russia, and those with operations within Russia have had to abandon them. Europe, especially Germany, is being cut off from energy, thus endangering not only living standards but the existence of domestic industries.
There are reports that the US is using the lure of plentiful and relatively cheap energy to recruit German car makers and other industries to relocate to the United States. In other words, the US is trying to recover from the disaster of relocating its industry offshore in Asia by using "Russian sanctions" to relocate Europe's industry to the US.
Washington's EU puppets long ago ceased to think and just follow orders. The German car companies want to survive and will exit if survival requires leaving Germany.
The deindustrialization of Germany and Europe would significantly reduce the pressure of NATO on Russia. Europe's desolate industry would have no money to purchase weapons from American weapons corporations and no means of equipping soldiers. The Kremlin, of course, might again ruin things for itself by coming to Europe's energy rescue. The Russians will end up with Goody Two Shoeing themselves to ruin.
If the Kremlin keeps its nose out of it, Washington will succeed in cutting Europe off from energy and relocating European industry to the US.
The significant defect of Western peoples is that they always take their governments' policies at face value. It doesn't occur to them that the government is covering up a dark plan with a moralistic campaign against Russia that requires Western sacrifices.
Conservatives tend to attack natural explanations as unpatriotic, and woke liberals attack the truth as misinformation. As no media serves as a watchdog, there is no obstacle to dark agendas.
Washington's "Russian sanctions" are quickly destroying Europe. See:
A quarter of Europeans on the Brink of Ruin, New Survey Finds
This article was printed from TradingSig.com