ArticlesJanuary 10 2012
Author : Z.K. Abdelnour
Are we witnessing another financial crisis or a grand theft repeat with mythical proportions?
It is clear to everyone today that Central banks around the globe have acted in desperation to boost liquidity in the system, which has sparked the recent rally in the equity markets.
What’s great for the banks isn’t so good for everyone else though, as adding that flooding to the banking system with liquidity doesn’t do anything to solve the real problem of ballooning, unmanageable debt levels.
The Fed’s latest actions in cooperating with foreign central banks to undertake liquidity swaps of dollars for foreign currencies is another reason why Congress needs enhanced power to oversee and audit the Fed. Under current law, Congress cannot examine these types of agreements. Those who would argue that auditing the Fed or these agreements with central banks harms the Fed’s independence should reevaluate the Fed’s supposed independence when the Fed bails out Europe so soon after President Obama promised US assistance in resolving the Euro crisis.
As per Congressman Ron Paul, rather than calming markets, these arrangements should indicate just how frightened governments around the world are about the European financial crisis. Central banks are grasping at straws, hoping that flooding the world with money created out of thin air will somehow resolve a crisis caused by uncontrolled government spending and irresponsible debt issuance. Congress should not permit this type of open-ended commitment on the part of the Fed, a commitment which could easily run into the trillions of dollars. These dollar swaps are purely inflationary and will harm American consumers as much as any form of quantitative easing.
It seems that the Fed is behaving today much as it did during the 2008 financial crisis, only this time instead of bailing out politically well-connected too-big-to-fail firms it is bailing out profligate government spending. Citizens the world over deserve better than this. They deserve sound money that cannot be manipulated and created out of thin air by central planners who promise printed prosperity. Fiat money caused this European crisis and the financial crisis before it. More fiat money is not the cure. The global fiat currency system has proven itself a failure, we need real monetary reform. We need sound money.
Many have predicted that it is only a short-term measure to kick the can down the road. But the numbers themselves show that the bailout might not even be having a sufficient short-term effect. In fact, money markets and the cost of protecting bank bonds from losses show investors are concerned the almost $1 trillion rescue plan announced by European leaders may not be enough to contain the region’s sovereign debt crisis.
My personal opinion?
The bailout is not a cure-all. In the short term, raising taxes and cutting spending is going to imply further recession and further deflationary pressures in the euro zone. In the longer-term, it creates huge moral hazard risks. Most importantly, the real problem is that there appears to be no impetus towards a longer term solution. How do you solve imbalances within the eurozone? Without a plan to develop a plan on that front, this is simply rearranging the deck chairs on the Titanic.
Of course, the myriad fraudulent schemes (using derivatives and other means) to hide the problems of Greece, Italy and other countries are still continuing to some extent. And the size of the too big to fails means they can take down companies or nations using high-frequency trading, short-selling, credit default swaps and other means. Indeed, the bailout won’t really help because “Goldman can create shorts faster than Europe can print money”.
Therefore, without fundamental reform of the financial system, there can be no true and lasting European recovery.
Indeed, the fact that China coordinated its big cut in reserve requirements on the same day that the big Western central banks and Japan extended swap lines shows the magnitude of panic among world economic leaders.
When you see such coordinated action by all the major Central Banks in the world, you know the situation is much worse than you are being told by the ruling oligarchy. The confidence and trust is gone. Every major bank in the world is insolvent, whether it be in the U.S., Europe or China. These Central Banks are owned and controlled by the very banks they are bailing out. They are telling you they have it under control. They do not. They have lost control. The debt is too great and will destroy the economic system of the world.
This is a last ditch effort by those in power to grab the last vestiges of middle class wealth. The stock market will soar today, benefitting bankers, politicians, and the 1%. They have solved nothing. The debt remains. The debt will not be paid.
Oil, food and commodity prices immediately soared on this announcement and they will keep soaring as long as there is no long term real solution; not a band aid. Again, the wealthy will get richer and the average American will be destroyed by inflation on the things they need to live. So I guess the party is still going on with no end in sight.This isn’t a financial crisis ….it’s a grand bank robbery repeat with mythical proportions and the general public as usual has no clue of what’s happening out there.
Well, now you know.
Ziad K. Abdelnour is the author of the latest "ECONOMIC WARFARE" book, a precious resource for 2012. You can find more on the book and purchase it on Amazon