Post by unlawflcombatnt on Jul 31, 2007 22:13:19 GMT -6
Below are excerpts from a very comprehensive article from Globalresearch.ca., titled
The Crashing U.S. Economy Held Hostage[/b]
Our Economy is on an Artificial Life-support System
By Richard C. Cook
July 7, 2007
"Remember when the U.S. was the world’s greatest industrial democracy? Barely thirty years ago the output of our producing economy and the skills of our workforce led the world.
What happened? It’s hard to believe that in the space of a generation our character and capabilities just collapsed as, for example, did our steel and automobile industries and our family farming. What then are the causes of the decline?
Here’s how I would put it today: our economy is on an artificial life-support system, a barely-breathing hostage in a lunatic asylum. That asylum is the U.S. and world financial systems which are on the verge of collapse.
The inmates are the world’s central bankers, along with most of the financial magnates big and small. The fact is that the economy of much of the world is in a decisive downward slide which the financiers cannot stop because the systems they operate are the primary cause. As often happens, the inmates rule the asylum.
The problems aren’t confined to the U.S. Unemployment worldwide is increasing, debt is rampant, infrastructures are crumbling, and commodity prices are rising.
In such an environment, crime, warfare, terrorism, and other forms of violence are endemic. Only the most naïve, self-centered, and deluded jingoist could describe such a scenario in terms of the freedom-loving Western democracies being besieged by the “bad guys.”
Rather what is happening highlights the growing failures of Western globalist finance whose impact on political stability has been so corrosive. As many responsible commentators are warning, we are likely to see major financial shocks within the next few months. The warnings are even coming from high-flying institutional players like the Bank of International Settlements and the International Monetary Fund.
We may even be seeing the end of an era when the financiers ruled the world. At a certain point, governments or their military and bureaucratic establishments are likely to stop being passive spectators to the onrushing disorder. It is already happening in Russia and elsewhere.
The countries that will be least able to master their own destiny are those like the U.S. where governments have been most passive to economic decomposition from actions of their financial sectors. The financiers are the ones who for the last generation have benefited most from economies marked by privatization, deregulation, and speculation, but that may be about to change. Whether the change will be constructive or catastrophic is yet to be seen....
For a while we were floating on the housing bubble, but those days are now history when, according to a Merrill-Lynch study, the artificially pumped-up housing industry, as late as 2005, accounted for fifty percent of U.S. economic growth.
As everyone knows, the Federal Reserve under Chairman Alan Greenspan used the housing bubble, like a steroid drug, to pump liquidity into the economy. This worked, at least for a while, because consumers could borrow huge amounts of money at relatively low interest rates for the purchase of homes or for taking out home equity loans to pay off their credit cards, finance college education for their children, buy new cars, etc.
When the final history of the housing bubble is written, its beginnings will be dated as early as 1989-90, when credit restrictions on the purchase of real estate first began to be eased. According to mortgage industry insiders interviewed for this article, they began to be taught the methods for getting around consumers’ weak credit reports and selling them homes anyway in the mid to late 1990s.
The Fed started inflating the housing bubble in earnest around 2001, after the collapse of the dot.com bubble, which failed with the stock market decline of 2000-2002. Then, over a trillion dollars of wealth, including working peoples’ retirement savings, simply vanished.
Also according to mortgage specialists, it was in March 2001, two months after George W. Bush became president, that a “wave of intoxicated fraud” started. Mortgage companies began to be instructed, by the creditors/lenders, on how to package loan applications as "master strokes of forgery," so that completely unqualified buyers could purchase homes....
The bubble was coordinated from Wall Street, where brokerages “bundled” the “creatively-financed” mortgages and sold them as bonds to retirement and mutual funds and to overseas investors. Portfolio managers were directed to buy subprime bonds as other bonds matured. It’s the subprime segment of the industry that has now collapsed, triggering, for instance, the recent highly-publicized demise of two Bear Stearns hedge funds....
The subprime bonds were known to be suspect. One reason was that they were based on adjustable rate mortgages that were actually time bombs, scheduled to detonate a couple of years later with monthly payments hundreds of dollars a month higher than when they were written. Many of these mortgages will reset to higher payments this October.
Purchasers were lied to when they were told they could re-sell their homes in time to escape the payment hikes. Now the collapse of the market has made further resale at prices high enough to escape without losses impossible....
Of course bundling and selling the mortgages relieved the banks which originated the loans from exposure, pushing a considerable amount of the risk onto millions of small investors. This was in addition to the normal sale of mortgages to quasi-public agencies like Freddie Mac and Fannie Mae.
Was it a scam? Of course. Did the Federal Reserve know about it? They had to. Did Congress exercise any oversight? No.
What did the White House know?
Amy Gluckman, an editor of Dollars and Sense, reported in the November/December 2006 issue: “During the Clinton administration, Greenspan was relatively ‘unembedded’—averaging only one meeting per month at the White House….
“But when George W. Bush moved into 1600 Pennsylvania Ave., Greenspan’s behavior changed....His visits rose to 4.6 a month in 2002 and 5.7 in 2003.
“Whatever White House officials were whispering in Greenspan’s ear, it worked: Greenspan abruptly changed his tune on tax cuts, lending critical support to Bush’s massive 2001 and 2003 tax giveaways, and he loosened the reins by cutting Fed-controlled interest rates repeatedly beginning in January 2001, a gift to the Republicans in power.”
Along the way, the bubble caused housing prices to inflate drastically, which officialdom touted as economic “growth.”...
But this source of liquidity for everyday people has been maxed out, like our credit cards, and there is nothing to replace it. There is no cash cushion anymore, because years ago people stopped earning enough money for personal or household savings....
What we are seeing are the results of an economic crime on a fantastic scale that implicates the highest levels of our financial and governmental establishments. It spanned three presidential administrations—Bush I, Clinton, and Bush II—though the worst of it came with the surge of outright lending fraud after 2001.....
THE BUBBLES ARE ONLY SYMPTOMS
These bubbles are symptoms. They are created because our wage and salary earners lack purchasing power due to stagnant incomes and various structural causes. These causes include the outsourcing of our manufacturing industries to China and other cheap labor markets and the super-efficiency of the remaining U.S. industry which is able to manufacture products with ever-fewer workers....
Now, for the first time in modern U.S. history, there are no new economic engines at all. The last real engine was the internet which has now reached maturity with marginal players being weeded out.
Our biggest sources of new private-sector jobs today are food service, processing of financial paperwork, health care for the growing numbers of retirees, and menial low-paying jobs, like landscaping and building maintenance. These are increasingly being performed by immigrants who are also underpricing U.S. citizens in many service jobs like childcare and auto repair.
Today the rank-and-file of our population must increasingly turn to borrowing in order to survive. Only the banks and the credit card companies are the beneficiaries. The total societal debt for individuals, businesses, and government is over $45 trillion and climbing. This is happening even while the real value of wages and salaries is decreasing.
What I have just been saying is bad enough, but here’s where the real lunacy enters in.....
The entire article can be found at
The Crashing U.S. Economy Held Hostage
The Crashing U.S. Economy Held Hostage[/b]
Our Economy is on an Artificial Life-support System
By Richard C. Cook
July 7, 2007
"Remember when the U.S. was the world’s greatest industrial democracy? Barely thirty years ago the output of our producing economy and the skills of our workforce led the world.
What happened? It’s hard to believe that in the space of a generation our character and capabilities just collapsed as, for example, did our steel and automobile industries and our family farming. What then are the causes of the decline?
Here’s how I would put it today: our economy is on an artificial life-support system, a barely-breathing hostage in a lunatic asylum. That asylum is the U.S. and world financial systems which are on the verge of collapse.
The inmates are the world’s central bankers, along with most of the financial magnates big and small. The fact is that the economy of much of the world is in a decisive downward slide which the financiers cannot stop because the systems they operate are the primary cause. As often happens, the inmates rule the asylum.
The problems aren’t confined to the U.S. Unemployment worldwide is increasing, debt is rampant, infrastructures are crumbling, and commodity prices are rising.
In such an environment, crime, warfare, terrorism, and other forms of violence are endemic. Only the most naïve, self-centered, and deluded jingoist could describe such a scenario in terms of the freedom-loving Western democracies being besieged by the “bad guys.”
Rather what is happening highlights the growing failures of Western globalist finance whose impact on political stability has been so corrosive. As many responsible commentators are warning, we are likely to see major financial shocks within the next few months. The warnings are even coming from high-flying institutional players like the Bank of International Settlements and the International Monetary Fund.
We may even be seeing the end of an era when the financiers ruled the world. At a certain point, governments or their military and bureaucratic establishments are likely to stop being passive spectators to the onrushing disorder. It is already happening in Russia and elsewhere.
The countries that will be least able to master their own destiny are those like the U.S. where governments have been most passive to economic decomposition from actions of their financial sectors. The financiers are the ones who for the last generation have benefited most from economies marked by privatization, deregulation, and speculation, but that may be about to change. Whether the change will be constructive or catastrophic is yet to be seen....
For a while we were floating on the housing bubble, but those days are now history when, according to a Merrill-Lynch study, the artificially pumped-up housing industry, as late as 2005, accounted for fifty percent of U.S. economic growth.
As everyone knows, the Federal Reserve under Chairman Alan Greenspan used the housing bubble, like a steroid drug, to pump liquidity into the economy. This worked, at least for a while, because consumers could borrow huge amounts of money at relatively low interest rates for the purchase of homes or for taking out home equity loans to pay off their credit cards, finance college education for their children, buy new cars, etc.
When the final history of the housing bubble is written, its beginnings will be dated as early as 1989-90, when credit restrictions on the purchase of real estate first began to be eased. According to mortgage industry insiders interviewed for this article, they began to be taught the methods for getting around consumers’ weak credit reports and selling them homes anyway in the mid to late 1990s.
The Fed started inflating the housing bubble in earnest around 2001, after the collapse of the dot.com bubble, which failed with the stock market decline of 2000-2002. Then, over a trillion dollars of wealth, including working peoples’ retirement savings, simply vanished.
Also according to mortgage specialists, it was in March 2001, two months after George W. Bush became president, that a “wave of intoxicated fraud” started. Mortgage companies began to be instructed, by the creditors/lenders, on how to package loan applications as "master strokes of forgery," so that completely unqualified buyers could purchase homes....
The bubble was coordinated from Wall Street, where brokerages “bundled” the “creatively-financed” mortgages and sold them as bonds to retirement and mutual funds and to overseas investors. Portfolio managers were directed to buy subprime bonds as other bonds matured. It’s the subprime segment of the industry that has now collapsed, triggering, for instance, the recent highly-publicized demise of two Bear Stearns hedge funds....
The subprime bonds were known to be suspect. One reason was that they were based on adjustable rate mortgages that were actually time bombs, scheduled to detonate a couple of years later with monthly payments hundreds of dollars a month higher than when they were written. Many of these mortgages will reset to higher payments this October.
Purchasers were lied to when they were told they could re-sell their homes in time to escape the payment hikes. Now the collapse of the market has made further resale at prices high enough to escape without losses impossible....
Of course bundling and selling the mortgages relieved the banks which originated the loans from exposure, pushing a considerable amount of the risk onto millions of small investors. This was in addition to the normal sale of mortgages to quasi-public agencies like Freddie Mac and Fannie Mae.
Was it a scam? Of course. Did the Federal Reserve know about it? They had to. Did Congress exercise any oversight? No.
What did the White House know?
Amy Gluckman, an editor of Dollars and Sense, reported in the November/December 2006 issue: “During the Clinton administration, Greenspan was relatively ‘unembedded’—averaging only one meeting per month at the White House….
“But when George W. Bush moved into 1600 Pennsylvania Ave., Greenspan’s behavior changed....His visits rose to 4.6 a month in 2002 and 5.7 in 2003.
“Whatever White House officials were whispering in Greenspan’s ear, it worked: Greenspan abruptly changed his tune on tax cuts, lending critical support to Bush’s massive 2001 and 2003 tax giveaways, and he loosened the reins by cutting Fed-controlled interest rates repeatedly beginning in January 2001, a gift to the Republicans in power.”
Along the way, the bubble caused housing prices to inflate drastically, which officialdom touted as economic “growth.”...
But this source of liquidity for everyday people has been maxed out, like our credit cards, and there is nothing to replace it. There is no cash cushion anymore, because years ago people stopped earning enough money for personal or household savings....
What we are seeing are the results of an economic crime on a fantastic scale that implicates the highest levels of our financial and governmental establishments. It spanned three presidential administrations—Bush I, Clinton, and Bush II—though the worst of it came with the surge of outright lending fraud after 2001.....
THE BUBBLES ARE ONLY SYMPTOMS
These bubbles are symptoms. They are created because our wage and salary earners lack purchasing power due to stagnant incomes and various structural causes. These causes include the outsourcing of our manufacturing industries to China and other cheap labor markets and the super-efficiency of the remaining U.S. industry which is able to manufacture products with ever-fewer workers....
Now, for the first time in modern U.S. history, there are no new economic engines at all. The last real engine was the internet which has now reached maturity with marginal players being weeded out.
Our biggest sources of new private-sector jobs today are food service, processing of financial paperwork, health care for the growing numbers of retirees, and menial low-paying jobs, like landscaping and building maintenance. These are increasingly being performed by immigrants who are also underpricing U.S. citizens in many service jobs like childcare and auto repair.
Today the rank-and-file of our population must increasingly turn to borrowing in order to survive. Only the banks and the credit card companies are the beneficiaries. The total societal debt for individuals, businesses, and government is over $45 trillion and climbing. This is happening even while the real value of wages and salaries is decreasing.
What I have just been saying is bad enough, but here’s where the real lunacy enters in.....
The entire article can be found at
The Crashing U.S. Economy Held Hostage