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Bad Money, Wall Street, Steven Mnuchin, and Michael Hudson, My Take

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I have been studying our US economy for many years, not macroeconomics, but our monetary system, booms and crashes and that sort of stuff. First I studied the US banking system as revealed in Modern Money Mechanics, 1968, published by the Federal Reserve Bank of Chicago. Early on I became a fan of Kevin Phillips and studied some of his books, The Politics of Rich and Poor, Boiling Point, Wealth and Democracy, and most recently, Bad Money. In recent years I found the Levy Institute, UKC, Michael Hudson, and Modern Monetary Theory (MMT) and am working on a book about it. I have written some articles about the 2007-2008 real estate crash at www.OpEdNews.com.

I have also been closely following the COVID-19 virus pandemic recently. (Who isn't?) And lo and behold, the Congress and the Fed have agreed on another $6T giveaway to Wall Street according to Michael Hudson (and who would know better?)*

On Thursday, April 9, Congress and the Fed met in closed session and agreed on a new spending program to be designed and carried out by the Fed. It was announced in the Fort Worth Star-Telegram on Saturday, April 10.

Notice that I use the word "spending", not "lending". A "loan" implies a special transaction that implies pay-back with interest. But this, like the $29T giveaway to Wall Street in connection with the 2007-2008 real estate scam, is an injection of practically zero pay-back money created out of thin air and doled out by the Fed to whomever they wish, never to be seen again. Here again, is a second such giveaway in 2020.

Check out the numerous newspaper articles that discuss this new program. The FWST article (April 10) said,

"The Fed announced that it would use Treasury Department funds recently authorized by Congress to buy municipal bonds and expand corporate bond-buying programs to include some lower rated and riskier debt. "The measures push the Fed far beyond anything it attempted in the 2008 crisis""

A May 14 FWST article had not yet picked up the careful language the Fed had crafted to avoid the words "loan", "lend", and federal "debt". The article noted that the federal debt

"is on course to surpass 100% of GDP this year, the highest level since World War II." OUCH!

On May 20 the Associated Press article headline in the FWST read, Mnuchin, Powell, differ on economic priorities. Mnuchin, Secretary of the Treasury, said the Treasury is now prepared to absorb some losses and that doing so could enable the Fed to take on further risk with the program.

Uhhh-Huhhh" During the 2008-2009 bailout former Goldman-Sachs partner Steven Mnuchin, now Treasury Secretary, made a fortune during the crisis by buying a distressed bank and then foreclosing on tens of thousands of homeowners. (p. 176, Political Mind GamesHow the 1% manipulate our understanding of what's happening, what's right, and what's possible)

Today I reread some of Kevin Phillips' 2008 book, Bad Money, Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism. On pages 31-32 he shows the history of the rise of the US Banks' share of financial services and the decline of manufacturing from 1950-2004. The mortgage-related assets of US banks rose linearly from about 12% in 1952 to about 26% in 1985, and then took off at an exponential growth rate to a value of about 60% in 2004. The milestones in the evolution of critical derivatives from 1972 to 2005 are given in Figure 2.3 on page 35 of Bad Money.

Enough for now...

* click here

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I am a retired physicist and hold a B.S. in Ch. E. as well. I have been an environmental activist since the early 1970s. I was a founding member of the Save Barton Creek Association in Austin, TX. In 2006 I was a member of a select (more...)

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