With the first Red Pill diary we saw how there was a deliberate policy since Reagan took office to ease credit.
The result of the policy was financial casino bordering on melt down and technological revolution funded by investment from the easy credit. But its not so easy as one diary to get people to see the matrix. What if I told you one of the primary authors of the policy, 1987 Reagan appointee Alan Greenspan, knew what was coming:
When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market, triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's.
Since Greenspan believed that government guided falling interest rates cause market collapse, why was he leading just such a decline in primary rate?
I can only think of two answers to that question:
- Greenspan was part of the Citigroup / Robert Rubin / Goldman Sachs wolf pack and lowering interest rates raised their profits.
- Greenspan kept the interest rate pedal depressed to spur innovation.
I'll let Greenspan himself, from April 7, 2000, explain more (bold is mine):
Yet the veritable explosion of spending on high-tech equipment and software, which has raised the growth of the capital stock dramatically over the past five years, could hardly have occurred without a large increase in the pool of profitable projects available to business planners.
As our experience over the past century and more attests, such surges in prospective investment profitability carry with them consequences for interest rates, which ultimately are part of the normal process that balances saving and investment in a noninflationary economy. In these circumstances, rising credit demand is naturally reflected in an increase in corporate borrowing costs and that has, indeed, been our recent experience, especially in longer-dated issues. Real interest rates on corporate bonds have risen more than a percentage point in the past couple of years. Home mortgage rates have risen comparably. Given the persistent strength of private credit demands, market interest rates would have risen even more were it not for the emergence of a sizable unified budget surplus following a long period of chronic deficits. More recently, the Administration and the Congress have wisely chosen to wall off the social security trust fund surplus and to allow it to pay down Treasury debt to the public. This action will surely contribute to sustaining the rapid private capital formation we have experienced in recent years.
The Federal Reserve has responded to the balance of market forces by gradually raising the federal funds rate over the past year. Certainly, to have done otherwise--to have held the federal funds rate at last year's level even as credit demands and market interest rates rose--would have required an inappropriately inflationary expansion of liquidity.
So in normal speak this speech, given to the National Technology Forum, says that business won't start using new technology without easy money available for new projects. Greenspan made that easy money available. But when the time came to raise rates to prevent "an inappropriately inflationary expansion of liquidity", the tech bubble was already bursting and the only way to keep the technology party going was to continue to lower rates.
Do you think that is air [of free markets] you are breathing? The rule that the US government can only help people by going through a Wall Street osmosis layer is purely imposed by the oligarchy. We will explore that principle in Red Pill - Third Dose that will discuss methods of wealth defense from Winters Oligarchy.