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OpEdNews Op Eds    H2'ed 4/28/14

Piketty Is Rickety On Government Complicity

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Billionaires have admitted that they are the beneficiaries of QE. For example, billionaire hedge-fund manager Stanley Druckenmiller said the following about QE:

"'This is fantastic for every rich person,' he said Thursday, a day after the Fed's stunning decision to delay tightening its monetary policy. 'This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.'

"'Who owns assets--the rich, the billionaires. You think Warren Buffett hates this stuff? You think I hate this stuff? I had a very good day yesterday.'

"Druckenmiller, whose net worth is estimated at more than $2 billion, said that the implication of the Fed's policy is that the rich will spend their wealth and create jobs -- essentially betting on 'trickle-down economics.'

"'I mean, maybe this trickle-down monetary policy that gives money to billionaires and hopefully we go spend it is going to work,' he said. 'But it hasn't worked for five years.'"

And Donald Trump said: "People like me will benefit from this."

Economics professor Randall Wray writes:

"Thieves ... took over the whole economy and the political system lock, stock, and barrel. They didn't just blow up finance, they oversaw the swiftest transfer of wealth to the very top the world has ever seen."

Economics professor Michael Hudson says that the big banks are trying to make us all serfs.

Economics professor Steve Keen says:

"This is the biggest transfer of wealth in history," as the giant banks have handed their toxic debts from fraudulent activities to the countries and their people.

Money "Creation" Stuffs Bankers' Pockets with Money

The advent of central banks hasn't changed this formula. Specifically, the big banks ("primary dealers") loan money to the Fed, and charge interest for the loan. The banking system is founded upon the counter-intuitive but indisputable fact that banks create loans first, and then create deposits later.

In other words, virtually all money is actually created as debt. For example, in a hearing held on September 30, 1941 in the House Committee on Banking and Currency, the Chairman of the Federal Reserve (Mariner S. Eccles) said: "That is what our money system is. If there were no debts in our money system, there wouldn't be any money."

And Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta, said:

"If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon."

Debt (from the borrower's perspective) owed to banks is profit and  income from the bank's perspective. In other words, banks are in the business of creating more debt ... i.e., finding more people who want to borrow larger sums. Debt is central to our banking system. Indeed, Federal Reserve chairman Greenspan was so worried that the U.S. would pay off its debt, that he suggested tax cuts for the wealthy to increase the debt.

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