Greasing the "Money Machine"

May 4, 2008

The Federal Reserve’s easing of monetary policy has caused more trouble than it has solved. Their decision to make cheap money available when people and companies didn’t want to borrow had unintended consequences: it drove the dollar sharply lower, stoked inflation and caused borrowing costs to those with less than stellar credit to actually rise.  High commodity prices of grains, gasoline, oil and even things like construction materials aren’t the result of demand outstripping supply but, rather of market speculation set off by the Fed and a  “do nothing” President who’s only mission at this late date of his presidency is to keep his friends happy when the door closes behind him.

As for inflation, admittedly, it’s not hard to find excuses to justify the rise in prices after the fact.  It’s speculation and has been for at least the past two years that’s causing the price of everything to rise. The presidential candidates are not addressing the core issue which is WHY? Fact is it takes some “guts” to step forward and demand a fair price for commodities such as oil.  How? Put the word out that the United States is prepared to suspend the trading in US dollars of commodity contracts on the Mercantile Exchange.  In order words, send a message to everyone that we will not tolerate the greedy speculation that is at the heart of the problem. That being said, the President’s partner in the oil business namely the royal family of Saudi Arabia announced that it won’t expand capacity.  The oil is there but with production now yielding about $120 per barrel, there’s no incentive to find more as new production might drive down prices as demand for oil from the slowing US economy drops. 

The stimulus package is, in my opinion, not going to solve the problems facing our reckless economy. The first of the $110 billion from the money machine reached taxpayers last week either via direct deposit or through the mail. My question is: Stimulate what? More precisely, where is that money going?  Americans have buried themselves under a record amount of credit card debt that is approaching $1 trillion.  That’s up 24 percent since 2003.  Last year alone, banks rang up revenue of $18 billion from late payment penalty fees. Stretched to the breaking point with credit card balances, consumers are slowing down spending. 

Despite the Federal Reserve lowering rates seven times since September, credit card rates have not fallen in kind.  Consumers are getting shafted.  Most of the funny money that American’s will receive will go not to make purchases to stimulate the economy, but rather to catch up on their unpaid bills and late mortgage payments.  Banks are getting a break from the Fed, which is lowering the cost of their money, but they’re not passing along those lower rates to most customers.  Doesn't anyone care about what's in the best interests of the people?

Something to think about:

How soon before the oil producers in the world

take control of the world’s economy?