How Right-Wing Libertarians, John Birchers and Conspiracy Freaks Are Trying to Hijack OWS

[AdHocSolver]

12. Spare me your nonsense!

My comments explain what the Federal Reserve ACTUALLY does, not what the propagandists claim it does.

If the Fed actually acted to help the people of the U.S. (the 99 percent) rather than the wealthiest 1 percent, then this country would not be in the economic situation we have now.

Let's consider inflation for example.

Up until the early 1980's, before Greenspan took over the Fed under Reagan, the Fed policy was to raise interest rates to combat inflation. What was the source of inflation that worried the Fed? It was not rising consumer prices. It was rising wages.

By raising interest rates, the Fed wanted to stifle business expansion, the idea being that this would increase the unemployment numbers and create a pool of excess labor that would bid down wages.

There was a down side for Wall Street in this policy. Increased interest rates for depositors caused the middle class to forgo putting money in risky stocks, and prefer the safety and better yields of bank deposits. Moreover, high interest rates reduced activity in the real estate markets and depressed house prices.

Then some Wall Street "genius" developed a solution that would help Wall Street rip off the 99 percent with little or no downside for the 1 percent.

Instead of raising interest rates, lower the interest rates. Cheap money encourages people to play the stock market (better returns to counteract the greater risk). The more money the middle class throws at the stock market (irrespective of how worthwhile the stock actually is -- remember Enron?), the higher the stock price will rise.

Cheaper money translates into cheaper mortgages which means lower monthly payments. This means people are encouraged to spend more for a house than they could otherwise afford which means increased house prices which means high real estate commissions. Moreover, banks created the balloon mortgage since they didn't want people to get a good deal. The banks merely wanted buyers to commit to spending more than they could actually afford. The banks would cash in three years later when the buyer's mortgage rate and payments went considerably higher.

To counteract the problem of rising wages in a "booming" economy, Wall Street would outsource jobs to low wage countries such as Mexico (NAFTA) and China. This would create a surplus of workers in the U.S. and keep wages down.

While wage inflation has become wage deflation, consumer prices have risen considerably, as anybody who has been to a supermarket lately can attest.

This scheme of Wall Street depended heavily on the collusion of the Federal Reserve. The Fed is NOT a central bank that works for the country as a whole. It is a captive of Wall Street that plays its role in enhancing the wealth of the 1 percent at the expense of the 99 percent.