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Financial Meltdown: The End of a 300 Year Ponzi Scheme by Ellen Brown
Well worth a read - as another facet of the FIRE economy
Well worth a read - as another facet of the FIRE economy
Panic struck on Wall Street, as the Dow Jones Industrial Average plunged a thousand points between July and August, and commentators warned of a 1929-style crash. To prevent that dire result, the U.S. Federal Reserve, along with the central banks of Europe, Canada, Australia and Japan, extended a 315 billion dollar lifeline to troubled banks and investment firms. The hemorrhage stopped, the markets turned around, and investors breathed a sigh of relief. All was well again in Stepfordville. Or was it? And if it was, at what cost? Three hundred billion dollars is about a third of the total paid by U.S. taxpayers in personal income taxes annually. A mere $188 billion would have been enough to repair all of the 74,000 U.S. bridges known to be defective, preventing another disaster like that in Minneapolis in July. But the central banks' $300 billion was poured instead into the black hole of rescuing the very banks and hedge funds blamed for the "liquidity" crisis (the dried up well of investment money), encouraging loan sharks and speculators in their profligate ways.
Where did the central banks find the $300 billion? Central banks are "lenders of last resort." According to the Federal Reserve Bank of Atlanta's Economic Review, "to function as a lender of last resort [a central bank] must have authority to create money, i.e., provide unlimited liquidity on demand."1 In short, central banks can create money out of thin air. Increasing the money supply ("demand") without increasing goods and services ("supply") is highly inflationary; but this money-creating power is said to be necessary to correct the periodic market failures to which the banking system is inherently prone.2 "Busts" have followed "booms" so regularly and predictably in the last 300 years that the phenomenon has been dubbed the "business cycle," as if it were an immutable trait of free markets like the weather. But in fact it is an immutable trait only of a banking system based on the sleight of hand known as "fractional-reserve" lending. The banks themselves routinely create money out of thin air, and they need a lender of last resort to bail them out whenever they get caught short in this sleight of hand.
Running through this whole drama is a larger theme, one that nobody is talking about and that can't be cured by fiddling with interest rates or throwing liquidity at banks making too-risky loans. The reason the modern banking system is prone to periodic market failures is that it is a Ponzi scheme, one that is basically a fraud on the people. Like all Ponzi schemes, it can go on only so long before it reaches its mathematical limits; and there is good evidence that we are there now. If we are to avoid the greatest market crash in history, we must eliminate the underlying fraud; and to do that we need to understand what is really going on.
Where did the central banks find the $300 billion? Central banks are "lenders of last resort." According to the Federal Reserve Bank of Atlanta's Economic Review, "to function as a lender of last resort [a central bank] must have authority to create money, i.e., provide unlimited liquidity on demand."1 In short, central banks can create money out of thin air. Increasing the money supply ("demand") without increasing goods and services ("supply") is highly inflationary; but this money-creating power is said to be necessary to correct the periodic market failures to which the banking system is inherently prone.2 "Busts" have followed "booms" so regularly and predictably in the last 300 years that the phenomenon has been dubbed the "business cycle," as if it were an immutable trait of free markets like the weather. But in fact it is an immutable trait only of a banking system based on the sleight of hand known as "fractional-reserve" lending. The banks themselves routinely create money out of thin air, and they need a lender of last resort to bail them out whenever they get caught short in this sleight of hand.
Running through this whole drama is a larger theme, one that nobody is talking about and that can't be cured by fiddling with interest rates or throwing liquidity at banks making too-risky loans. The reason the modern banking system is prone to periodic market failures is that it is a Ponzi scheme, one that is basically a fraud on the people. Like all Ponzi schemes, it can go on only so long before it reaches its mathematical limits; and there is good evidence that we are there now. If we are to avoid the greatest market crash in history, we must eliminate the underlying fraud; and to do that we need to understand what is really going on.
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