Community | November 06, 2010 | 49 comments

New $600B Fed Stimulus Fuels Fears of US Currency War

source: http://www.democracynow.org/2010/11/5/new_600b_fed_stimulus_fuels_fears

treewolf39
The Federal Reserve will pump $600 billion more into the US economy and keep interest rates at historical low levels. The short-term impact of the Fed’s move, known as quantitative easing, has been a jump in stock prices across the globe. Many nations, however, have accused the United States of waging a currency war by devaluing the dollar. We speak to former Wall Street economist and University of Missouri professor Michael Hudson. "The object of warfare is to take over a country’s land, raw materials and assets, and grab them," Hudson says. "In the past, that used to be done militarily by invading them. But today you can do it financially simply by creating credit, which is what the Federal Reserve has done." [includes rush transcript]

JUAN GONZALEZ: President Obama is leaving today for a ten-day visit to Asia, with scheduled stops in India, Indonesia, South Korea and Japan. In South Korea, Obama will attend the G20 meeting, where US monetary policy is expected to be high on the agenda.

On Wednesday, the Federal Reserve said it will pump $600 billion more into the US economy and keep interest rates at historically low levels. The short-term impact of the Fed’s move, known as quantitative easing, has been a jump in stock prices across the globe, but many nations have accused the US of waging a currency war by devaluing the dollar. Brazil’s president-elect Dilma Rousseff said, quote, "The last time there was a series of competitive devaluations, it ended in World War II."

China has accused the US of uncontrolled money printing. By devaluing the dollar, the Fed is cheapening the price of US exports and making foreign imports more expensive. In addition, the low interest rates are encouraging US corporations to make massive investments overseas, cheaply buying up foreign real estate, natural resources and stock.

AMY GOODMAN: Our next guest, Michael Hudson, says finance has become a new form of warfare. Michael Hudson is Distinguished Research Professor at University of Missouri, Kansas City. A former Wall Street economist, he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire.

Michael Hudson, welcome to Democracy Now!

MICHAEL HUDSON: Thank you.

AMY GOODMAN: Why warfare?

MICHAEL HUDSON: Well, the object of warfare is to take over a country’s land, raw materials and assets, and grab them. And in the past, that used to be done militarily by invading them. But today you can do it financially simply by creating credit, which is what the Federal Reserve has done. It’s created $600 billion. It hasn’t gone into the economy. The head of the Fed is known as "Helicopter Ben" because he talks about dropping money into the economy. But if you see helicopters, they’re probably not your friends. Don’t go out and wait for them to drop the money, because the money is all going electronically into the banks. And the Fed has said, we want to give the banks so much money that they will lend it out so you can begin to bid up prices on real estate again and pull the banks out of the real estate negative equity that it’s in. So the purpose, according to the Fed, is to raise the price of real estate, to inflate asset prices. But that’s not happening. The actual banks have lent less today than they did in 2007. So the money is going abroad. And it’s going abroad not really to buy foreign companies so much, but to speculate in currency.

Now, the Fed and the Congress, two weeks ago, said, "We want China to raise its currency by 20 percent." This would create billions and billions of dollars of bonanza for Wall Street banks, and it would enable them to earn their way out of debt by essentially looting the China central bank, the Brazilian central bank, the Turkish central bank and the other central banks, because you can now borrow money in America at one percent. So you’d put down, let’s say, a billion dollars of your own—a million dollars of your own money, borrow $99 million of the bank’s money—that’s $100 million. You would buy Chinese currency, RMB, for $100 million. You then say, "Raise your currency by 20 percent," which is what the Fed has asked them to do. That means that your million dollars now has turned into a $20 million gain, because $100 million is now worth $120 million. You’ve made a 200 percent profit. And for Wall Street, they deal in billions, not millions. And so, this would enable the banks to make up their money by buying out, essentially, foreign currency. They’re doing the same in Australia. It’s currency gamble.

JUAN GONZALEZ: Well, and meanwhile, the impact, because obviously this decision was made the day after the elections at the Fed meeting, they saw what the political landscape was. There wasn’t going to be any kind of stimulus coming from Congress, so they had to come up with a stimulus for Wall Street the day after the elections. But the impact on the American people of maintaining these historically low interest rates—you know, as we were talking earlier before the show, if you have a little bit of money in a savings account right now, you’re getting virtually no interest. So you’re, in essence, being pressured to end up going into the stock market to be able to get any kind of return on your money—those who still have savings. The same thing with the pension funds. What’s happening to the American people as a result of this same kind of policy?

MICHAEL HUDSON: Well, if they have money to put in pension funds or savings, they’re only able to get about one percent, if they keep it safe. Otherwise, they’re taking a risk in the stock market. But the key is not simply lowering interest rates. The idea is to flood the economy with credit so the banks will lend out more debt. And if the Fed’s policy works, then housing prices are going to go back up so high that most consumers are going to have to pay 40 percent of their income for housing. They’re going to have to pay more money for credit card debt. The purpose is to help the banks make money at the expense of the economy. It’s not to help the economy at all. That’s the really important thing. When they say the economy, they mean—the Fed means its constituency: the banks. And the banks’ product is debt. And that’s what they’re trying to produce.

AMY GOODMAN: Is this inflationary?

MICHAEL HUDSON: It will inflate asset prices. It won’t inflate consumer prices. It’s actually deflationary for consumer prices, because if you’re an American consumer and you spend 40 percent of your income for housing, 15 percent for debt service to the bank, 11 percent goes out in your FICA wage withholding, and about ten to 15 percent in actual income taxes, that means that the average American has maybe one-third or a quarter of their salary to actually spend on goods and services. So they have to spend so much on debt service and finance and insurance and real estate that there’s no money to buy goods and services, so that’s why so many stores are closing throughout the cities on the big shopping streets. It’s deflationary for the economy, inflationary for the people who have wealth, inflationary for the banks. And it’s the banks really at the expense of the economy.

More transcript and video at the link....
http://www.democracynow.org/2010/11/5/new_600b_fed_stimulus_fuels_fears
  1. groups:
    Community,   Monetary Matters
  2. tags:
    Inflation,  the fed
  3.     
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49 comments // New $600B Fed Stimulus Fuels Fears of US Currency War // Video

  • bjlkjljk
  • Incredulous
    • 0
      Incredulous  
    • bjlkjljk:

      out of control spam, getting worse, not better
      can't believe you are incapable of controlling this
      Obviously, we can all see WHEN it is occurring,

      funny, this doesn't happen on other news sites....

    • 1 year ago
  • Eddie_Miller
  • Gravity_Man
    • 0
      Gravity_Man  
    • Image
    • Incredulous:

      Hmm, Yup. looks like yer classic out of control spam alright. I don't really need a handbag right now. What we need is one of those new full poster scanners top of the line and nuthin else.

      My question is though, if the US went completely off of external crude oil suppliers and returned to manufacturing our own underwear and jock straps, we wouldn't need the rest of the world period, so what they did with their currency wouldn't mean a toaster popup. So there ya have it, our new superweapon => threatening total and complete isolationism Forever.

      For evah, without paying off our debts just like they never paid off their debts to us for saving their World War II hides. Payback is {fill in word here}.

      Read it an WEEP foreign debtors => http://science.slashdot.org/story/10/11/06/1452259/Not-Transparent-Aluminum-But-...

    • 1 year ago
  • treewolf39
    • 0
      treewolf39  
    • Gravity_Man:

      That looks very interesting. I would agree with what you are saying but the people elected to express the peoples will have other ideas; like selling us out the rest of the way.

    • 1 year ago
  • juicie
  • fgdgdfg
  • Incredulous
    • 0
      Incredulous  
    • fgdgdfg:

      out of control spam, getting worse, not better
      can't believe you are incapable of controlling this
      Obviously, we can all see WHEN it is occurring,

      funny, this doesn't happen on other news sites....

    • 1 year ago
  • GENERALNATTY
    • +1
      GENERALNATTY  

    • america has been at this financial warfare thing for decades , in the past they would use far more aggressive and intrusive tactics , because of america's monopoly on economic and military power they have essentially used every dirty trick in the book to get there way and if you didnt like it , they would threaten to damage vital relations with a country who dared to challenge u.s authority, people around the world are well aware of this fact.

      On the world scene the nation that prides it self on freedom and democracy more often than not stopped democratic nations from enacting policies not to u.s liking and prevented them from exercising financial and moral policies based on there culture , the united states has essentially been a dictator and extorter.

      But now with emerging powers the world has choices, and if the united states doesnt get there act together and quit trying to rip people off it will be the one left at the shit end of the stick , every leader with a brain is diverifying there portfolio and essentially avoiding the u.s dollar like it has anthrax and they would be morons not too.

      The financial dictatorship is becoming a democracy with parties to vote for , and the u.s better get there head out of the sand , start making changes and campaign.

    • 1 year ago
  • treewolf39
  • xgfdhh
  • Incredulous
    • 0
      Incredulous  
    • xgfdhh:

      out of control spam, getting worse, not better
      can't believe you are incapable of controlling this
      Obviously, we can all see WHEN it is occurring,

      funny, this doesn't happen on other news sites....

    • 1 year ago
  • jjyj9
  • Incredulous
    • 0
      Incredulous  
    • jjyj9:

      out of control spam, getting worse, not better
      can't believe you are incapable of controlling this
      Obviously, we can all see WHEN it is occurring,

      funny, this doesn't happen on other news sites....

    • 1 year ago
  • doxu12
  • Incredulous
    • 0
      Incredulous  
    • doxu12:

      out of control spam, getting worse, not better
      can't believe you are incapable of controlling this
      Obviously, we can all see WHEN it is occurring,

      funny, this doesn't happen on other news sites....

    • 1 year ago
  • uhvggh
  • Incredulous
    • 0
      Incredulous  
    • uhvggh:

      out of control spam, getting worse, not better
      can't believe you are incapable of controlling this
      Obviously, we can all see WHEN it is occurring,

      funny, this doesn't happen on other news sites....

    • 1 year ago
  • mitekillem
    • 0
      mitekillem  

    • Amazing! - Why didn't they do this BEFORE the election.
      -Oh...right. Republicans don't want to regulate the Fed Resv.

      I bet Republicans will take credit for this.

    • 1 year ago
  • treewolf39
  • dszfgfh
  • Incredulous
    • 0
      Incredulous  
    • dszfgfh:

      out of control spam, getting worse, not better
      can't believe you are incapable of controlling this
      Obviously, we can all see WHEN it is occurring,

      funny, this doesn't happen on other news sites....

    • 1 year ago
  • mikiy
  • Incredulous
    • 0
      Incredulous  
    • mikiy:

      out of control spam, getting worse, not better
      can't believe you are incapable of controlling this
      Obviously, we can all see WHEN it is occurring,

      funny, this doesn't happen on other news sites....

    • 1 year ago
  • Gravity_Man
    • 0
      Gravity_Man  

    • Half of that $600B(ill-ion) will go to the Nation's airports to pay for all the new-fangled scanners. A missed opportunity though => they could've fostered many new business start-ups by contracting out the scanning....

    • 1 year ago
  • neocongo
    • -2
      neocongo  

    • Hmmm no mention of China's repression of it's currency for years to keep its exports high, high, high. They have been asked repeatedly to let the value of their currency float like the rest of the worlds' major economies, and have repeatedly said no.

      The WW II and currency war references are really unnecessary fear mongering.

    • 1 year ago
  • treewolf39
    • 0
      treewolf39  
    • neocongo:

      For me I see this as inflation. You cannot just introduce new money into the system without devaluing all the currency. This will cause prices to go up. Maybe not a lot but prices of goods increase every time new money is dropped into the economy. Keeping interest rates low only help those who have money to invest. Sense the banks are only giving credit to people with capital, this printing is to stimulate the banks, not the middle class. We need jobs which require development.

    • 1 year ago
  • Gravity_Man
    • 0
      Gravity_Man  
    • treewolf39:

      Where I live all the professionals like Realtors, doctors and dentists, they all pretend this valley is not being affected by all that stuff you guys are talking about. They all pretend the Roanoke Valley is The Land that Time Forgot.

      Therefore no apartment prices comes down. In fact my Lease renewal slipped in my door last week contains an increase. And that was a week before this move was announced. That's because their brain only works forward => our money to their pockets.

      We live inside an insulated discarded old refrigerator. So the Fed and all of you anywhere but here can play the silly old games with currency all ya want because here in Roanoke Virginia the shaft is in our gut where it's always been and the professionals here intend it to remain.

      It must be a religious mantra with them or something but it's also raw red communism at work because all the dentists agree on prices and all the doctors agree on prices and all the hospitals and clinics charge similar fees. The State (Commonwealth) of Virginia is nothing but a Russian outpost, damn the Capitalist torpedoes and full speed ahead into the Poor, ramming speed.

      I'm not complaining just explaining. Communism won out here long ago, approximately 6 decades ago. I finally decided they could all take a flying leap off the Mill Mountain Star and stopped going to any of em. I went 4 years without meds, should've died according to them. I haven't been to a dentist since one took me for $1500.00 back in 2002 I hope she spent it sparingly.

      I had a row of real tiny infections at the root of each tooth but they were sitting right next to the nerve exiting the tooth. Closest I ever came to committing suicide. I asked her if she couldn't take a needle and inject a little antibiotic next to each tooth and knock em out but of course she couldn't do that.

      And Medicare doesn't pay doctors to do teeth. My balls were in their vise and they all knew it but, hahaha, after they took all my right upper teeth I took my disability check and KEPT IT. They can go swim with the sharks. And oh yeah, the dental providers are all Communists also.

      When you boys discover America let me know. I might row over there.

    • 1 year ago
  • Gravity_Man
    • 0
      Gravity_Man  
    • treewolf39:

      And then when things turn around they'll turn to each other and in a long southern-satisfied drawl say Yup, weathered another one. Laughs on them this time.

      People out here now know what Communism is really like. We aren't buying their services like we used to. We're all staying away from the realtors, the doctors, the dentists, the hospitals AND their sheep fleecing clinics.

      Que sera people, que sera, the bell tolls for us now. We don't need your kind any more. Yup.

    • 1 year ago
  • treewolf39
    • 0
      treewolf39  
    • Gravity_Man:

      The title is a bit misleading. The War is against the American people and the currency is the weapon being used against them. Our currency needs value. How does our GDP grow when we keep producing less as a collective whole? You watch, the products people have to buy from corporations will slowly start to go up in price. Overall it is like making ten dollars an hour(after taxes) and only having the buying power of nine.

    • 1 year ago
  • treewolf39
    • 0
      treewolf39  
    • Gravity_Man:

      Sometimes you make me cry in empathy with the pain you have experienced. I need dental work badly but I am without the means to afford the cost. Mexico is my only hope but I can not seem to get enough work to even get there.

    • 1 year ago
  • Gravity_Man
    • 0
      Gravity_Man  
    • treewolf39:

      You know man, it isn't the physical pain. It's the mental bashing a person takes when he KNOWS what the other person should do and they refuse. That's why I stand out so much, because only ONE named Satan knows how to attack a logical thinker like myself.

      It's brain bashing he goes for, spirit bashed against the rocks, bludgeoning of the soul, bleeding from the mind. Stabbing deep into the brain as only he knows how to do best.

      I get it from doctors, hospitals, ahh => "SPECIALISTS" hahaha

      And they all have the roulette table wired.

      My time comes.

    • 1 year ago
  • Gravity_Man
    • 0
      Gravity_Man  
    • treewolf39:

      Satan did the same thing to my Dad. I watched him take the same bashing. When he died you never seen so many people in a funeral procession. They knew my Dad was a cut higher than most. The funeral home had to pull out a second signing book. Dad never made much money but everybody knew how smart he was.

      He wasn't the only one like that here in Roanoke either. There was these two brothers and one was a successful Realtor, but the other chose to be a homeless wino. They did an article in the Roanoke Times back in the 1970's or so about them. They said the brother's IQ was above measuring.

      There's something about this Roanoke Valley that chooses deliberately to not want men like us to blossom, even when the job market tanks and the residents starve. That's why the high school dropout rate has been higher here than most every other place in the country. Been this way for the past 5 decades.

      Young people here in Roanoke see the game is rigged. Especially after reading about my engines on the Internet and them not being backed or built, then watching factories close one after the other. Young people are smart too. They see plenty well.

      They also know won't a piece of that pie ever get here.

    • 1 year ago
  • AsiaSuperLoop
    • +2
      AsiaSuperLoop  

    • American consumer culture, which some might say is the culture itself, depends on the ability to borrow cheaply from foreign exporters, largely from the Asian region.

      The depreciation of USD is necessary to promote American exports. At the same time Asian exporters will lose their appetite for funding American consumption culture.

      Stimulus? In the short term yes, but monetary expansion is a blunderbuss when in truth there are many narrowly defined structural economic problems.

      I sense backfire in the long run, a contraction rather than stimulus.

      There's no substitute for structural change and development.

    • 1 year ago
  • freecrack
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