Credit to the author: projectavalon.net...
The following graphs are from: greshams-law.com...
In the 1920's the Fed lowered rates to create an artificial level of prosperity. From 1921 to 1929 the Fed increased the money supply to 62%. And it
inverted the Treasury bond yield, that means the Fed set and encouraged short term rates over long term bond lending. This is the same policy they did
right before the 2008 crash. The Fed also added to the stock market a new financial practice called the margin loan. The clause associated with the
loan stated that the loans can be called in at any time and had to be paid within 24 hours of that time. Also many other new but very risky financial
practices were created at the time. Then in 1929 Rockefeller, Benard Burack, and other insiders pulled out of the market and called in all of their
loans. Next, 16,000 banks collapsed and they took control of them all. Afterwards the Fed set money supply to a record low, and it led to the Great
Ben Barnanke admitted that the Fed had caused the Great Depression:
"I would like to say to Milton Friedman and Anna Schwartz: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to
you, we won't do it again."-Ben Bernanke
I will not post the graph of the WW2 era, as its apparent that WW2 provided full employment and made economic recovery as mobilization occurred. This
ended the Great Depression, and America experienced a prosperous era of dominating global trade (1950's and 60's). Europe at the time was in ruins and
had to rebuild according to the Marshall Plan, in which the USA gave fiscal aid to help Europe in re-construction. So the USA went to have an economic
hegemony for 2 decades.
The 70's experienced a recession due to the Oil Crisis. The economy recovered in the 1980's, but not because of Reagan's supply side economics. Paul
Volcker, chairmen of the Federal Reserve, increased interest rates to control inflation. He brought inflation from a peak of 20% in 1981, and lowered
it to 3.2% in 2 years. Reaganomics did deregulate the economy that resulted in the Savings and Loans Crisis. Reagan then had to bail out the financial
sector. Reagan used Volcker's forced artificial prosperity to his advantage and won a second term.
But deregulation didn't stop there. It did cause growth in the economy, including the dot com boom (but remember Volcker saved the US from inflation,
not Reagan). Continued deregulation repealed the Glass Steagall Act in 1999. Actually, GS worked well in regulating the economy since 1933, for a
period of 66 years. Recessions weren't that severe in that length of time, except the Oil Crisis. But Wall street lobbyists convinced the government
that GS was no longer practical. GS prevented the merging of banks into bigger banks. Citigroup had merged earlier that year and it was considered
illegal by the GS Act. But it was repealed and Citigroup was allowed to exist in the market.
The 2000's experienced artificial prosperity in similarity of the Roaring 20's.
The 2008 mortgage crisis was the result of monetary and fiscal policy.
During the last decade the Fed pursued inflationary policies and set rates to an all time low at 1%. This created an economic and housing boom. The
investment financial sector flourished (mortgage backed securities, derivatives, credit default swaps) and credit was easy. Then the Fed hiked its
rate to 5.25% in 2006, inverting the Treasury bond yield. "Inverting the bond yield lowers short term lending rates, but yields profit lower than the
long run investment yields." (Inverting the treasury bond yield is a policy that was also enacted before the 1929 downfall.) Now lending was much less
profitable, housing prices fell, foreclosures occurred, and the market crashed.
The government helped create the housing bubble as well. They created legislation that made lenders to work with low income individuals. Lenders were
threatened to not discriminate against disadvantaged borrowers. Government also sponsored Fannie Mae and Freddy Mac and the Federal Housing
Administration to "lower the lending standards". At this time Congressmen Chris Dodd and Barney Frank lobbied for less regulation on Fannie Mae and
This created artificial prosperity and artificially high housing prices. When reality hit, the bubble burst. Actually, the Fed pulled the vital card
(raising the rate to 5.25%) to cause the whole house of cards to fall.
The Repeal of Glass Steagall allowed banks to merge into bigger banks. And as the mortgage crisis came along, the government bailouts were "necessary"
because banks were "too big to fail". The GS Act repeal created corporate welfare. The resulting bailouts made big checks to the heads of these firms
all from the expense of taxpayer money. The big banks then bought out the small banks that failed, and became much bigger than before. Their game is
all about consolidating the oligopoly.
The Wall Street lobbyists spent immense amounts of money to repeal GS and to push for Reaganomics and deregulation. They also lobbied against the Dodd
Frank Bill, the Wall Street Reform and Consumer Protection Act. Dodd Frank ended up to be some crappy, watered down legislation. Since it has been
enacted in 2010, they have lobbied as much as they could to cut off the new Dodd Frank regulation. They engage in strict deregulation-"Reagan" type of
lobbyism. They will never give up on eliminating regulation.
Government intervention, the Federal Reserve, and deregulation all forced this downturn to happen. To me, it seems like they designed and intended
this to happen. And they made sure that they wouldn't suffer that terribly when the market fell, by repealing Glass Steagall and enacting "too big to
fail" corporate welfare policy.
The above image is from: blog.mint.com...
As the big picture became clearer to me, the LIBOR scandal has come into the media. LIBOR is the greatest fraud in financial history. But the
exposition of this crime was probably planned to upheld an ex-Goldman Sachs banker into the Bank of England. Now they control the important Western
banks, the Fed, the European Central Bank, the Bank of International Settlements, and now the Bank of England. (Know that the top financial
institutions are led by ex-CEO's of big banks only to manipulate rates to ensure the 1%'s profits in the financial sector).
edit on 4-8-2012 by
Ruffian because: (no reason given)