The Financial-Speculative Bubble Takes over the U.S. Economy
Aug. 21, 2020 (EIRNS)—The U.S. Federal Reserve, directed by the City of London and Wall Street, between mid-March and the end of May pumped $3 trillion through quantitative easing into the U.S. financial system.
The money pumping had two purposes: to prop up the decrepit, virtually bankrupt, U.S. and world corporate bond market; and to deliberately build the largest speculative and wildly dangerous stock market bubble in history, which it succeeded in doing.
During the mid-March to May 31 period, the money pumping completely distorted the value of the Standard and Poor’s 500 stock index. In the time frame, the stocks of six companies—Amazon, Apple, Microsoft, Facebook, Alphabet (the parent company of Google) and Netflix—rose 43%, while the value of the other 494 stocks in the Standard and Poor’s 500 collectively fell 4%. But because the value of these six companies, representing the power of speculation and Silicon Valley, is so disproportionately large, the value of the S&P index overall rose 5%. Thus, the “value” of six companies can eclipse that of the other 494 companies.
This process is taking over and deconstructing/degenerating the U.S. economy. For example, during the second quarter, U.S. spending on information technology equipment, software, and research and development exceeded $1.3 trillion, reaching a record 50% of total capital spending, according to the U.S. Commerce Department. Traditionally, in the American System, capital spending means U.S. companies’ purchases of advanced machine tools, turbines, expanding electricity generation capacity, advanced capital goods. Now, under this bubble, it represents the purchases of goods for these six companies, and the Silicon Valley fake service economy.
At the same time, there was a huge leap in the nation’s wealthiest families, while tens of millions of citizens lost their jobs. For the nation’s 600-plus billionaires, during the mid-March to May 31 period, their wealth increased by $434 billion, according to Americans for Tax Fairness. The elite 10% of American households own 84% of the value of all stocks. But, at the same time, 30-32 million Americans who had to work for a living lost their jobs, putting them in dire straits.
While the City of London, Wall Street, and the Federal Reserve said they were applying quantitative easing, to “help” the economy, they were carrying out one of the most criminal acts of this century. It had almost nothing to do with fighting the effects of COVID-19, which was the pretext. In fact, Federal Reserve Chairman Jerome Powell has admitted such was its goal in purchasing $3 trillion in assets in order to pump out money. At the Federal Open Market Committee (FOMC) press conference on July 29, Powell said, “We understand, accept and are fine with the fact that those asset purchases are fostering a more accommodative stance of monetary policy, in order words, that they inflate asset prices.”
As Lyndon LaRouche said repeatedly, the speculative bubbles in stocks and bonds must be “surgically lanced and dried out,” so that the U.S. physical economy may survive.