Oil Shocks and Greater Power for the Federal Reserve

How do you keep power when you cede the political ground?

By holding the financial controls over a country's economy.

Think it couldn't happen here? -- have you looked at what the Federal Reserve has been up to lately?

Naomi Klein gives one example of how it can happen when the population is not astute to financial shell game. In her Shock Doctrine, Klein tells the story of South Africa and how the ANC basically won the government but lost all power.

How?

Without knowing what they were doing, the ANC gave up control over the central bank: "If the central bank (in South Africa called the Reserve Bank) was run separately from the rest of the country, it could restrict the ANC's ability to keep the promises" it had long made to the African population:

Besides, if the central bank was not accountable to the ANC government, to whom, exactly, would it be accountable? THe IMF? The Johannesburg Stock Exchange? Obviously the National Party was trying to find a backdoor way to hold on to power even after it lost the elections.

...snip...

'They never freed us. They only took the chain from around our neck and put it on our ankles.' Yasmin Sooka, a prominent South African human rights activist, told me that the transition 'was business saying, 'We'll keep everything and you [the ANC] will rule in name....You can have political power, you can have the facade of governing, but the real governance will take place somewhere else.' 256-7

Klein's premise, is of course, that shocks such as coups, hurricanes, terrorist attacks, hyperinflation (such as a sudden horrific increase in the price of oil) soften the populace to seek and support anyone who seems to have a solution. Please, give yourself plenary powers, Mr. President, just protect us from the terrorists.

Or, more currently, Please, Mr. Bernanke, Plunge Protection Team and the Federal Reserve, give your self plenary powers over our economy, just do whatever you need to do to protect us from the credit crisis, the oil shocks, the subprime mess.

As the populace is in shock -- the neoliberals slam through reforms that essentially rob that very populace of their government's ability to regulate and oversee -- to keep the speculators from sucking all the money and assets out of a country and its people and then depositing it in numbered Swiss bank accounts.

So here today in America, we're having our own little economic coup.

Oil Prices Rise / Credit Crisis / Sub Prime Mess!

Just give the Federal Reserve more power and all will be safe.

... safe, that is, for the very wealthiest 1% who clutch their gucci bags and munch their godiva chocolates.

If you don't think that something as staid and stuffy as the central bank could have such power -- check out this little find from Avahome:

How Does the Fed Affect You?:
... the Fed directly affects your stock and bond mutual funds and your loan rates. By having such an influence on the economy, the Fed also indirectly affects your home's value and even the possibility that you may get laid off.

Keep your eyes peeled for anything that "privatizes" institutions paid for with our tax dollars. Watch for major corporations who hold huge US taxpayer dollar funded contracts to move their headquarters out of the country ( perhaps even joining Haliburton with its corporate headquarters in Dubai).

As my Better Half has been saying: "Look out Martha, they're loading the gold onto Airforce One."

There's no extradition from Paraquay.

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I think the pendulum is about to swing the other way now that all of the profits have been skimmed, tucked away in the Cayman Islands, and the only thing on the horizon is loss for miles.

First one up - nice big nationalization of Freddie Mac. Just in time to pay all of the losses out of the Treasury. Once Freddie starts to turn a profit again, the old "free marketists" will rear their phony heads again and demand it be privatized.

On a recent discussion thread, I've forgotten where, someone quite rightly pointed out the only truly free market in the world without any constraints, regulation, or oversight was in Darfur. And companies aren't exactly lining up to invest there.

Bingo!

There's an excellent essay over at London Banker, that more or less addresses the same topic.

Snake Oil and Deflation
By London Banker

The difficulty is that the policies which financed highly leveraged unproductive works are extremely popular to the extent of representing the culture of at least two generations. While a deflationary recession/depression will make such policies even more costly and destructive than they have been in getting us to the critical point of failure, the same policies are such basic political drivers that without a culture change political and economic change become almost impossible.

It should be obvious that borrowing short through commercial paper to lend long on mortgages and credit cards to bad credits with inadequate collateral is not a sound business model. And yet somehow the alchemy of securitisation with a sprinkling of AAA pixie dust was widely accepted as turning financial lead into gold. It should be obvious that a house, once built, is not a productive asset as it produces no revenue but instead absorbs a high proportion of its owner’s income on mortgage interest, property taxes, maintenance and utilities.

Much much more...

thanks for the link and for introducing me to London Banker, bookmarked.

and give the link to his site again (London Banker) ... it's awesome:

It will be a very brave politican indeed that says that the financial sector should not be government subsidised with tax breaks on interest, tax breaks on unproductive speculation, tax avoidance through off-shore registration of hedge funds and private equity, and other magnanimous means of raising election year contributions.

In short, the system which has for sixty years precipitated the greatest debt cycle in history may be inadequate to address the greatest deflationary cycle in history if it chooses to prescribe the same snake oil which sickened the economy in the first place rather than the balanced (fiscal) diet and (strict economy) excercise we all know would be better for us.