The housing market is freefalling, setting new records every day for foreclosures, inventory, and declining prices.
The financial model has been a great success from the vantage point of the top of the economic pyramid looking down? The economy has polarized to the point where the wealthiest 10% now own 85% of the nations wealth. Never before have the bottom 90% been so highly indebted, so dependent on the wealthy. Rich power has exceeded that of any time in which economic statistics have been kept.
You have to realize that what theyre trying to do is to roll back economic understanding and human morality which culminated in Progressive Era legislation, as well as the New Deal institutions. Theyre not trying to make the economy more equal, and theyre not trying to share power. Their greed is infinite. So what see is a re-assertion of pre-industrial, feudal values. The economy is being set back on the road to debt peonage. The Road to Serfdom is not government sponsorship of economic progress and rising living standards; its the dismantling of government, the dissolution of regulatory agencies, to create a new feudal-type elite.
The former Soviet Union provides a model of what the neoliberals would like to create. Not only in Russia but also in the Baltic States and other former Soviet republics, they created local kleptocracies, Pinochet-style. In Russia, the kleptocrats founded an explicitly Pinochetista party, the Party of Right Forces (Right-- as in right-wing).
The Fed has turned maintaining order-- into a euphemism for consolidating power by the financial sector and the FIRE sector generally (Finance, Insurance and Real Estate) over the real-- economy of production and consumption. Its leaders see their job as being to act on behalf of the commercial banking system to enable it to make money off the rest of the economy. It acts as the Board of Directors to fight regulation, to support Wall Street, to block any revival of anti-usury laws, to promote free markets-- almost indistinguishable from outright financial fraud, to decriminalize bad behavior and most of all to inflate the price of property relative to the wages of labor and even relative to the profits of industry.
The Feds job is not really to impose the Washington Consensus on the rest of the world. Thats the job of the World Bank and IMF, along with the covert actions of the CIA and the National Endowment for Democracy. You dont need monetary policy to do this only massive bribery. But call it lobbying-- and the promotion of democratic values.
The Fed and other government agencies, Wall Street and the rest of the economy form part of an overall system. Each agency must be viewed in the context of this system and its dynamics and these dynamics are polarizing, above all from financial causes.
So we are back to the magic of compound interest,-- now expanded to include free-- credit creation and arbitraging.
The problem is that none of this appears in the academic curriculum. And the silence of the major media to address it or even to acknowledge it means that it is invisible except to the beneficiaries who are running the system.
My own model would be to make central banks part of the Treasury, not simply the board of directors of the rapacious commercial banking system.
This should start with a repeal of the Clinton Administrations repeal of Glass-Steagall
In order for the American people or any other people to assert greater control over monetary policy, they need to have a doctrine of just what a good monetary policy would be. The Chicago Boys have succeeded in censoring any alternative to their free-market rationalization of asset stripping and economic polarization.
excerpted from Michael Hudson @ Counterpunch
