It was another week in which the debt crisis rolled over financial institutions worldwide and people's lives like an out of control freight train. On Tuesday, the US stock market received a gift from the Federal Reserve Bank in the form a half percent interest rate, twice the amount most analysts expected.
There is panic in high places. They know this crisis is far more serious than most of us realize, and that it will not address the sub-prime problem or bring relief to the millions facing foreclosures and a tighter economic noose around their necks.
It will, say many financial wizards, lead to higher inflation which is a way of making our money worth less. The dollar's status as a currency took another wack.
One analyst quoted on page one in the New York Times called it "shock therapy," the very term writer Naomi Klein explores in her new book on "disaster" capitalism showing the link between the shock therapy once doled out in mental hospitals, shock and awe bombing, shock interrogation techniques whose aim is to "disorient" prisoners and shock strategies used in economic policy that has devastated so many countries in which it was imposed.
Now it has come home to the US-the country that has been exporting it overseas.
On a recent Democracy Now show, Klein explained:
"The history of the contemporary free market was written in shocks.".... "Some of the most infamous human rights violations of the past thirty-five years, which have tended to be viewed as sadistic acts carried out by anti-democratic regimes, were in fact either committed with the deliberate intent of terrorizing the public or actively harnessed to prepare the ground for the introduction of radical free-market reforms."
The only difference here is that, so farm there have been no serious reforms proposed and the market is anything but free. With its interest cut, the Fed bails out and rewards the very institutions that were profiting on ill gain profits from predatory lending.
In some countries, people are starting to stir. Americans remain too caught up in the primaries and the war on one end, and the new wave of OJ mania on the other to take action against the looting of their pocket books. We are becoming a shell-shocked nation.
A Cheer For The People
We saw customers at a credit-starved mortgage bank in London lining up in the streets to pull their money out and the Bank of England pumping money in just a day after warning others, in the name of "moral hazard" rules, not to bail out lenders.
The Times of London carried a cheer by Libby Purves for those demanding their money arguing "salute the queuers for their nerve, patience and admirable impermeability to patronizing advice.
For how dare the stuffed suits, financial and political (and indeed journalistic), use expressions like "Don't panic" and "Keep calm". The withdrawers are perfectly entitled to choose who looks after their lavishly pretaxed savings. Some of them actually need money right now - like the chap on the news who wanted to pay his builder - and others just prefer not to rely on an institution that goes begging to the "lender of last resort".
By their presence on the streets, most of it not at all panicky in demeanour, the queuers utter a resounding raspberry to the financial industry and its political masters. It is time someone did.
(When Will Americans do something similar? One weak but promising shift in the political wind: Obama's Speech on Wall Street on Monday.)
"Extraordinary" Says The Economist
The world's top business magazine The Economist noted:
A Century ago, the depth of a banking crisis was measured by the length of the queue outside banks. These days, financial panics are more likely to be played out through heavy selling in share, bond or currency markets than old-fashioned bank runs. That makes the sight on the morning of Friday September 14th of a queue of people waiting (patiently in most cases) to take their money out of Northern Rock, a wounded British mortgage bank, all the more extraordinary.
Yes, folks, "extraordinary" is the word, as this crisis becomes frighteningly global.
The People In The Know Know....
Bankers know how bad it is. Here's Jim Glassman of JP Morgan: 'The credit-market storm is a far more dangerous thing that anything we've seen in memory." More and more news reports are glum.
Here's the Sydney Morning Herad in Australia reporting on "How Bad Debt Infected the World.":
"The foreclosure butterfly flapped its wings in smalltown USA and the hurricane built and tore through world banking."
Here's the Independent on Sunday drawing a parallel with the Great Crash of 1929:
"In his classic work The Great Crash: 1929, J K Galbraith put the decline down to the bad distribution of income; the bad corporate structure; the bad banking structure; the dubious state of the foreign balance; and the poor state of economic intelligence. He might have been writing about George W Bush's world rather than that of Herbert Hoover."
Remember: you can't rely on what officials are saying to calm us. One financial website noted: "the time to panic is when officials say, "don't panic."
Remember Andrew Mellon, Hoover's Treasury Secretary who said famously: "I see nothing in the present situation that is either menacing or warrants pessimism."
The comment was made on 31 December 1929, just after the Wall Street crash and ahead of the Great Depression.
No, I am not expecting or hoping for a depression. Who would? But the parallels are eerie, and I am not the only one making them.
Will The Interest Rate Cut Help?
On Tuesday, The Federal Reserve bank cut the interest rate for first time in four years, seeking, they said, to prevent a housing slump and turbulent markets from triggering recession.
Bloomberg's Financial News explained the Fed's "dilemma:"
While a quarter-point reduction in the federal funds rate may not be enough to bolster growth and investor confidence, a half-point cut might fan inflation and be perceived as giving in to pressure from Wall Street firms that made bad bets, especially in the market for securities backed by subprime mortgages.
(NOTE: The cut was a half point deal. What do you think that means? ....Yup, the current crisis is scarier to them than future inflation which rich people can handle and yes, they did give in to pressure.)
Bernanke and fellow policy makers ``are really caught,'' said Robert Eisenbeis, a former research director at the Fed's bank in Atlanta who attended meetings of the rate-setting Federal Open Market Committee before retiring early this year. ``The Fed needs to avoid the perception of bailing out the markets, lenders or borrowers.'''
"Needs to avoid"?? Huh? No it doesn't. It is not in the PR business and in the air cared not a whit about image, but at the same time, it is all a "perception game." It looks like something good was done. It wasn't.
Look at what the experts were saying before the Fed overacted:
The Wall Street Journal: "Too Much Hope May Be Pinned On Rate Cut"
They say the rate cut "would offer little immediate help for the fundamental problems weighing on the country's economy and financial markets."
The Economist: "In the short term, lower interest rates will not achieve all that much."
So why all the hype?
Perhaps because symbolically this looks like the government is coming to the rescue. The cut will help stock sales, as it already has when the market soared. It will bail out bankers, but not the people who are suffering under the burden of debt and foreclosures.
No one is talking about how to create economic inequality, lower prices, control gas and food cots and raise wages for working people. No one.
I wonder why. "Don't be naive, a friend said, the FED is not there to help us. It is run by bankers, for bankers. It's part of the problem, not the solution." True-but what will we do to help ourselves or is it already too late.
That is shocking!
We've had enough. The 1% own and operate the corporate media. They are doing everything they can to defend the status quo, squash dissent and protect the wealthy and the powerful. The Common Dreams media model is different. We cover the news that matters to the 99%. Our mission? To inform. To inspire. To ignite change for the common good. How? Nonprofit. Independent. Reader-supported. Free to read. Free to republish. Free to share. With no advertising. No paywalls. No selling of your data. Thousands of small donations fund our newsroom and allow us to continue publishing. Can you chip in? We can't do it without you. Thank you.