Thursday, October 3, 2019

While you're laughing at the clowns you become aware of a hot breath on the back of your neck

In case you've been pre-occupied laughing at the Orange Clown as he's being chased around the circus ring by Keystone Kops with butterfly nets, it's time to look around and notice that the lions are out of their cages. There are a few people trying to keep the lions busy by tossing them steaks but that's only going to work for a little while.

I'm referring of course to the pending collapse of the banking system and in turn the teetering economy that it's been propping up.  The Federal Reserve was recently forced to inject $80 billion into the overnight lending market when the the lowest bid interest rate jumped from 2% to over 10%. Remember this is banks lending to other banks, when the best deal any bank can get is to pay credit card rates to get an overnight loan you know things are bad. 

Apparently the Fed's willingness to jump in has calmed the savage beasts for now but the central bankers are not in a position to fix any of the underlying problems. Low wages have created an economy propped up by ever increasing debt and then you add on forced debt in the form of student loans and medical debt and this gives you a balloon that's eventually going to pop.

Trump has been demanding that the Fed cut interest rates and they have but Trump sees other countries with negative interest rates and he wants that too. Negative interest rates are when you actually pay people to take a loan, the idea being that if you maintain spending, the economy will right itself and not roll over like a sick goldfish. Sprinkling more fish flakes or rather shoveling them into the tank isn't really going to help. 

Trump has been cutting the margin that banks are required to maintain in reserve in order to get them to lend more and the hedge fund dark money lenders that have over half of the corporate market are using Trump's tax cut money to overextend business loans. With paper thin margins any disruption will cause this money to stop flowing you'll see a sudden rash of corporate bankruptcies and then the cascade of failures across the economy will start. 

The Bush crash was never really resolved, Obama wrapped it up with duct tape but the Republicans successfully blocked any real change. Not that the corporate Dems are interested in any real change either. If the progressives don't come to power in the next election we are all truly screwed. 

The Green New Deal, cancelling student debt as well as eliminating medical debts and co-pays through a universal Medicare system will go a long way. Infrastructure spending, a protectionist trade policy, a realistic minimum wage and a return to unionized labor will fix our worst problems.

All of this hinges on taking power away from billionaires, Republican and Democrat, nothing less will work.  -