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It is clear that Democrats are continuously left to clean up the economic mess of Republican administrations. And in the process like President Obama in 2010, Democrats pay the price for the pains as they build the path to rebuilding from the next financial meltdown.
While Republicans will lie about false consequences of Democratic policies (death panels, throwing grandma over the cliff, long waiting lines & times, socialism, etc.) to stymie or attenuate their effectuation, Democrats tend to be more highminded and truthful. What we are poor at is providing a proactive narrative.
I hate to talk about this during the holidays but I must. It is said that one must not discuss religion or politics during gatherings, especially in these times. I think one, however, should make an exception to discuss policies or occurrences that affect the financial security of one’s family & friends.
My good friend Tim Danahey, former Coffee Party USA colleague, and a strong Politics Done Right (PDR) listener/supporter sent me an email that knowing him had an urgency. I have been following the story in the background and of course one of my KPFT listeners, MOD, has been bringing it up. When MOD and Tim, and PDR intersect on a subject, I think it warranted a show.
“You need to cover this story [Trump and the Stock Market Are the Winners in the Fed’s Repo Loan Binge; Here’s the Losers],” Tim Danahey said.
The S&P 500 Index and the Dow Jones Industrial Average set new record highs every single day last week. This occurred despite the Federal Reserve justifying its unprecedented hundreds of billions of dollars each week in cheap loans to Wall Street’s trading houses as necessary to stem a “liquidity” crisis.
You can’t have a liquidity crisis when the stock market is setting record highs for an entire week. Those two things just don’t correlate.
The Fed, through its money spigot, the New York Fed, began sluicing these funds to Wall Street on September 17, the day the overnight borrowing rate in the repurchase agreement (repo) loan market spiked from 2 percent to 10 percent. This was the first such intervention by the Fed since the financial crisis. The repo market is where banks, hedge funds and money market funds loan each other money overnight on the basis of good collateral like U.S. Treasury securities.
An unprecedented spike to 10 percent in the repo market is a harbinger that one or more of the borrowers in this market is in trouble and lenders don’t want the exposure so they are backing away from lending. This is how free markets are supposed to work. They are supposed to be allowed to send pivotal warning signs from time to time through an efficient pricing mechanism.
But instead of allowing the free market and efficient pricing components to function, the Fed cut this short and drew a dark curtain around this part of the market by flooding cheap, electronically-created money to Wall Street’s trading houses.
On December 12, the New York Fed upped the ante. It announced that over the next month it would shower the trading houses (primary dealers) on Wall Street with a cumulative total of $2.93 trillion in short-term loans.
It is ironic that we do not have a problem using some tenets of Modern Monetary Theory to ensure liquidity for those who continue to put our flawed economic system in dire straits. But we can never use it to inflate the economy to support infrastructure and so much more even as one could consider them collateralized in some aspects.
The print media has been covering this form of corporate socialism. Check it out here, here, and here. However, it simply has not gotten the coverage warranted where most people would be watching, mainstream cable and broadcast media.
I replied to Tim right away, “I was just talking to a guy on air at KPFT about it but this article is boss. Will do it tomorrow.”
“Thanks. For all the Trump supporters citing the economy, how can you not have a vibrant economy with a trillion-dollar deficit?” Tim said. “Every person in America is paying $3000 a year to support this economy. A family of four is paying $12,000 a year to support this economy. A real leader guides a healthy economy that mildly swings between deficits and surpluses. Enough said. Have a wonderful Christmas. Terrible Tim.”
We are seeing harbingers of the 2008 meltdown or worse. If the crash comes before the 2020 election, it will be spun off as the fear of Democrats taking over the presidency. If it comes after a very unlikely Trump win, the crisis will likely be used to further institute a fascist state. If the crash comes after the Democratic win it will be spun as Democrats causing it with the possibility of putting on the progressive brakes.
As Democrats start explaining that they will be providing the policies the polls say people want along with the current method to pay for it, they must explain to Americans that the current stock market rise is really a fraud. They must explain the presidential stock market manipulation by tweet, the corporate socialism of cheap money to the corporatocracy as Americans’ consumer interest rates go through the roof.
As you meet family members and friends throughout the holidays and beyond, inform them of the shenanigans the Fed is doing as it provides cheap money to the banksters and how the market is being juiced. Let them know the seeds of the next economic meltdown is already planted.
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