From Volume 38, Issue 12 of EIR Online, Published Mar. 25, 2011

U.S. Economic/Financial News

Bernanke Keeps Fed on Suicidal 'QE2' Course; QE3 To Follow

March 15 (EIRNS)—The Federal Reserve's Open Market Committee (FOMC) announced today that it would continue its current, disastrous policy of Weimar-style hyperinflation, which is guaranteed to annihilate the United States and its economy if allowed to continue.

"The Committee decided today to continue expanding its holdings of securities as announced in November," the official statement reads dryly, meaning that the $600 billion in "quantitative easing" would be maintained through June. The Fed is currently halfway through the planned purchases, having bought about $304 billion of Treasuries as of March 9. The Fed also left its benchmark interest rate in the range of zero to 0.25%, where it has been since December 2008—as expected.

Although no decision was announced today about continuing with further quantitative easing ("QE3") when QE2 runs out in June, Bernanke and his London masters have already made the decision (to be announced in late April) to damn the torpedoes, and proceed full steam ahead and issue another $1 trillion in Monopoly money to try to keep the trans-Atlantic system afloat.

Although no "torpedoes" appeared at this meeting of the FOMC—the decision was unanimous, as it was at the Jan. 25-26 FOMC meeting—there is open disagreement with Bernanke's quantitative easing policy from Dallas Fed President Richard Fisher, Philadelphia Fed President Charles Plosser, and others. That—not to mention the rapid implosion of the entire world financial system, and the attendant mass strike—makes the outcome of the next FOMC meeting on April 27 entirely unpredictable, regardless of London's intent.

Federal Budget Stalemate Is a Form of 'Credit Squeeze'

March 15 (EIRNS)—The continuing game of "chicken" between the Democrats and the Republicans over the "debt ceiling" and the temporary Continuing Resolutions to kept the Federal government functioning, is leaving Federal agencies, and the citizens who depend on them, in limbo. Agencies are operating at half-power, not sure if they will have a budget, or how much of one, in a week, or in a month. An article in Tuesday's New York Times puts some faces to the figures, and underlines the collapsing reality.

The Federal Head Start (pre-school) program is currently renewing grants at only 60% of last year's levels, leaving parents to wonder, or scramble for alternate care for their children; the Social Security Administration has suspended plans to open eight new hearing offices for disability appeals; the Federal Transit Authority is "parcelling out grants" in three-month allotments ("no way to run a railroad"); the Army and Marines have imposed a hiring freeze on civilians; biomedical researchers at the National Institutes of Health are sitting idle, not knowing what their grants will be; and even farmers are finding long lines and delays, because the USDA has imposed a hiring freeze on seasonal workers. The Securities and Exchange Commission (SEC), "has been particularly hard hit," says the Times, since its budget has been frozen, though its duties (under Frank-n-Dudd) have been greatly expanded.

NASA's CFO, Elizabeth Robinson, described the desperation: "Most agencies have pushed the renewal of major contracts into the winter and spring. Uncertainty has slowed down our spending. That uncertainty takes a toll." This has forced recipients into a no-win situation. Southern Nevada Regional Transportation Commission has only received 40% of its usual federal grant, forcing them to defer purchases of buses and security systems. "We don't know what our financial future is beyond the next couple of months, said the director. "You can't enter into a lease ... because you don't know if you will have the money."

CFTC Won't Say Whether It's Investigating 85% Food Inflation

March 16 (EIRNS)—After huge increases in food commodity prices in February were reported today, U.S. Commodity Futures Trading Commission (CFTC) chairman Gary Gensler would not comment on whether CFTC has an investigation underway of futures and derivatives speculation driving up commodity hyperinflation. The public finger is pointing at Federal Reserve chairman Bernanke's "QE2" money-printing policy, which is putting hundreds of billions into bank reserves of some of the same big banks known to be "cornering" commodity futures and derivatives contracts.

The U.S. Bureau of Labor Statistics reported a 1.6% one-month jump in all producer prices in February, indicating a 15% annual producer-price inflation rate over the first two months of 2011. But the inflation of food prices—in this case "finished consumer foods" sold to wholesalers and retailers—was 3.9% in February alone. And the prices of fresh and dry vegetables went up 48.7% in that one month.

The UN Food and Agriculture Organization's food price index went up 3.4% in January; it hasn't published the index for February yet. Agricultural commodity prices have now surged 85%, on average, since last July. This is even faster than energy materials, up 18% in the past three months.

A spokesman for the CFTC, whose funds Congressional Republicans are axing, said March 16 that, "The Commission neither confirms nor denies the existence of any investigation" of the commodity speculation driving prices through the ceiling and hundreds of thousands out into the streets worldwide.

Dodd-Frank, and the Fed, Have Made the Big Banks Bigger

March 18 (EIRNS)—Bloomberg Government was set to release a report today showing that the biggest banks are even bigger post-financial-collapse, post-TARP, and post-Dodd-Frank. These banks—deemed "too big to fail" back when the Congress had to pass TARP—have only gotten bigger in the last few years. Politico writes: "The largest banks have grown larger since the financial crisis, and the number of too big to fail banks will increase by 40% over the next 15 years, according to data compiled by Bloomberg." Today, the top 10 banks now hold 77% of all U.S. bank assets.

The Fed meanwhile is doing what it can to help the process of helping the banks. It lifted a number of controls on selected banks today, allowing banks that passed the phoney "stress tests" of 2009 and another round this year (the results are to be kept confidential), to raise their dividends, and to buy back shares the government bought. JP Morgan, Wells Fargo, US Bancorp, and American Express are among the expected winners of the stress tests. The Wall Street Journal acknowledges that this will "widen the divide between weak and strong in the banking industry."

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