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A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner.
The PBS Frontline documentary “The Warning” makes a broader point about the indefensible behavior by Wall Street intelligentsia and in particular Greenspan, Rubin, Summers, and Geitner. This elite group knew exactly why the derivatives market should be regulated, and the dangers of the excessive use of credit in the financial system. Thus, the central questions are:
1.) Why did they let it happen?
2.) Why were they so callous about the impending global effects on everyday people?
3.) Why does the world, including the American tax payer, whose left with the bill time and time again, tolerate such egregious behavior from bankers?
4.) How could U.S. politicians allow this to happen when their duty is to govern?
It’s no wonder some people believe Wall Street is a huge Ponzi scheme and their 401 K savings should be withdrawn and moved from monetary assets into real assets.
It’s quite clear that the U.S. economy depends on consumption, and that bankers, including the Fed (i.e, there’s nothing Federal about the Fed. It’s a private bank!) want to perpetuate the debt burden of ordinary citizens.
The large-scale government intervention in the economy is going to end badly.
By Ron Paul
Any number of pundits claim that we have now passed the worst of the recession. Green shoots of recovery are supposedly popping up all around the country, and the economy is expected to resume growing soon at an annual rate of 3% to 4%. Many of these are the same people who insisted that the economy would continue growing last year, even while it was clear that we were already in the beginning stages of a recession.
A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.
Anytime the central bank intervenes to pump trillions of dollars into the financial system, a bubble is created that must eventually deflate. We have seen the results of Alan Greenspan’s excessively low interest rates: the housing bubble, the explosion of subprime loans and the subsequent collapse of the bubble, which took down numerous financial institutions. Rather than allow the market to correct itself and clear away the worst excesses of the boom period, the Federal Reserve and the U.S. Treasury colluded to put taxpayers on the hook for trillions of dollars. Those banks and financial institutions that took on the largest risks and performed worst were rewarded with billions in taxpayer dollars, allowing them to survive and compete with their better-managed peers.
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