From Volume 38, Issue 31 of EIR Online, Published August 12, 2011

Global Economic News

Fed Promises More Free Monopoly Money

Aug. 10 (EIRNS)—In an attempt to stop a financial panic, the Federal Reserve FOMC promised free monopoly money to banks for two more years. After the Aug. 9 FOMC meeting, the Federal Reserve put out a statement that, first, downgraded their forecast to "slow growth, unemployment high for years"; and second, promised "extremely low levels for federal funds rate until at least mid-2013". That would make at least five years of zero-interest-rate discount-window policy.

It should be noted that one of the major directions in which the discount-window money is going is Europe, whose bankrupt banking system the Obama Administration has pledged to support, whole hog.

While Fed chairman Bernanke was unable to ram through the QE3 policy which he is known to have wanted, hyperinflation, with austerity, nonetheless remains the core of the policy.

"We're now in a hopeless situation in respect to hyperinflation," Lyndon LaRouche stated in an Aug. 2 discussion with associates. "The whole system is, essentially, hyperinflated. You have a very tiny margin of actual production. Tiny!... There's no real industry. There's no economy, U.S. economy; it's essentially been destroyed. Therefore, all these so-called 'nominal values,' monetary values, are a lie! There's almost no value left."

In the lead-up to the Aug. 4 ECB press conference, the banks applied huge pressure to get major liquidity pumping going in Europe, QE3 style—more than ECB chief Jean-Claude Trichet ultimately announced. A Commerzbank study stated that "The ECB would be the only institution able to fend off a disorderly default and disintegration," although they admit that this could "open a bottomless pit that could be used by investors as a 'get-out-of-jail' card"—an appropriate image, given that we are dealing with Monopoly money in any event. The Washington Post echoed: "The ECB would need to step in with a massive program to buy up Italian and Spanish debt ... while extending more liquidity to big banks in both countries.... If the crisis is not contained, analysts fear profound repercussions for the global economy, up to and possibly including a fresh worldwide financial crisis."

Japan: The government announced on Aug. 4 that it was expanding its asset-purchase fund by 50%—from 10 trillion yen ($126 billion) to 15 trillion yen ($189 billion)—while also intervening in currency markets to sell yen in order to stop the currency's rise.

QE3 Pumps Commodity Markets Beyond Insanity

Aug. 2 (EIRNS)—Heinrich Hiesinger, the new CEO of Germany's Thyssen-Krupp steel firm, says in an interview with this week's issue of Der Spiegel that steel production has become increasingly difficult because of the high incalculability of metal market prices. Nickel has become a target of the most excessive commodity speculation, with prices for a ton of the metal rising from $7,000 several years ago, to $55,000 in the recent period.

"Nickel prices are no longer coupled to the real business, but predominantly depend on financial market speculation," Hiesinger said. "At the London Metals Exchange, traders are trading today 30 times more nickel than is used in reality." It should be noted that 30 times real use is already quite a large bubble, and that is only the nickel bubble.

In Chicago, wild corn-futures trading is underway, with no connection to real food usage. Thousands of phantom bushels are traded daily for speculators to make a killing as the price goes either up or down. Now they want even more opportunity for killer profits, the only answer to which, is food price controls, now!

In July, the CME Group (Chicago Mercantile Exchange), held a hearing where they proposed to raise the daily trading limit on corn futures up to 40 cents, from its current 30 cents. In addition, this means that when the limit is reached, either up or down, then the next day, the corn futures market can trade at a 60-cent limit. In market-speak, this food-gambling, is called "price discovery."

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