Friday, November 19, 2010

God's own check cashing store

Where are the jobs? This was the reverberating chant from Republicans during the campaign, but now that they can set the agenda the answer is no where. Conservative Republicans upset that the Fed is injecting cash into the economy are putting forward a bill to change the existing mandate of the Fed. Since 1977 the Federal Reserve has been required to keep down unemployment and simultaneously control price inflation. The Republicans like high unemployment and the collapsing economy doesn’t have any inflation.

During Alan Greenspan’s reign as Fed Chairman he put the two mandates into a blender and came up with the “mandate to control wage inflation“. His mission as the representative the billionaire class was to eliminate the middle class in favor of creating more working poor. He was very successful, as George Bush noted when ambushed by a middle-aged women who stated that she had three jobs he responded, “Three jobs? Well idn’t that just the American way…”.  And you thought George didn’t pay attention in briefing sessions.

In reality there isn’t much the Fed can do to create jobs with the economy in shambles but they could make things a lot worse, especially now that the Republicans can stop the government from doing anything meaningful and they want to make sure the Fed isn’t tempted to do anything constructive either.

It’s hard to say what effect this latest printing of money is intended to do. They are only buying longer term Treasury bonds with stated goal of lowering interest rates but interest rates already range from cheap to free now. Perhaps one could glean something from who they are buying them from? The best source for Treasury bonds is from the Treasury Department auction, they sell a lot of them every week.

The Fed is instead buying them on the open market with the intention of paying more than the current price to “lower“ interest. The interest rate is the inverse of the price since the interest was included in the original price of the bond. To pay “lower interest” the Fed has in effect give a gift to who ever sells them their bonds.

We don’t know yet who is selling their bonds. Someone cynical might assume the big Wall Street banks are the beneficiaries. How about rich people? The Bush family has much of its fortune in Treasury bonds. Then there’s China with 900 billion (they have been quietly selling for sometime) Japan has a similar amount as do the Arab sovereign wealth funds.

It’s possible the Fed is simply doing its job to protect the money supply by heading off a massive dumping of US debt that would put us a Greek like condition of soaring interest rates. You can bet what they’re not trying to do is create jobs. They are trying to keep the investor class from finding out they are holding a lot of worthless paper.

With US having been turned into a third world country that produces nothing and sells its resources to maintain the lavish lifestyle of the 1% at the top, the “full faith and credit” of the United States of America isn’t worth what it used to be. “In God we Trust” on the money is now a poignant reminder that should read, “your reward will be in heaven” because they won’t cash your check here.


SanMigMike said...

"By the people, for the people..." Didn't know when I was told that years ago that "people" were businesses and that the "people" that it is "for" is that one percent.

We are screwed! Check in on us many years did it take the Chinese to go from great to not so great to great again? Can we beat that? We spent a pretty small time at the top of the heap in a historical sense so I don't think we will beat the Chinese run from rich to poor to rich.