Can the Next Eco. Recession Be Worse than 2008?
During the 2008 financial crisis , central banks around the world, including the US Federal Reserve, ran the printing press to inject billions of dollars into the global financial system. This money, produced for the occasion, created a global debt of $ 325 trillion, more than three times the world's GDP. This artificial money has been accumulated by banks and large corporations, lent by these banks at usurious interest rates, used to service unsustainable debt or to buy back shares, for the benefit of the elites who drew millions. The money thus manufactured has not been invested in the real economy. No products have been manufactured or sold. The workers did not reach the middle class with income, social security and permanent pensions. No infrastructure project has been launched. The money thus produced has inflated new, huge financial bubbles built on debt and covered by a crumbling financial system destined for bankruptcy.
What will trigger the next crash? The $ 13.2 trillion of unsustainable debts of US households? Unsustainable debt of $ 1.5 trillion students? The billions that Wall Street has invested in hydraulic fracturing, which has spent $ 280 billion more than it has reported? Who knows. What is certain is that a global financial crash, which will overshadow the collapse of 2008, is inevitable. And this time, with interest rates close to zero, the elites do not have a bailout. The financial structure will disintegrate. The world economy will enter a deadly spiral. The fury of a betrayed and impoverished population will, I fear, reinforce the right-wing demagogues who promise revenge against the world's elites, the renewal of morality, the return to the roots of a mythical epoch when immigrants, women and color knew where their place was, and finally a Christian fascism.
The 2008 financial crisis, as noted by Truthdig Nomi Prins economist and columnist , has "turned central banks into a new class of power brokers ." They plundered national wealth and hoarded thousands of billions to become politically and economically unavoidable. In his book Collusion: How Central Bankers Rigged the World, [ Collusion: How Central Bankers Have Scammed the World , But, she writes, central bankers and the world's largest financial institutions are engaging in fraudulent manipulations on world markets and making what it calls "counterfeit money," to inflate speculative bubbles. make a profit in the short term while leading us to "a dangerous financial precipice".
"Before the crisis, they were 'autopilot', particularly the Federal Reserve, which is supposed to be the main regulator of the big banks in the United States," Prins said at our meeting in New York. "In doing so, she bears the terrible responsibility for the financial crisis. She became a deregulator instead of a regulator. In the wake of the financial crisis, the solution that was proposed to save the economy from a great depression or a recession, whatever the terminology of the moment, was to make virtual dollars in the thousands of billions. "
According to researchers at the University of Missouri , the Federal Reserve has entrusted approximately $ 29 trillion of this money manufactured to US banks. Twenty-nine trillion dollars! We could have offered free tuition to all students or free universal health care, restored our infrastructure in ruins, made the transition to clean energy, canceled student debt, raised wages, saved homeowners Over indebtedness, create public banks to invest in low rates in our communities, guarantee a minimum income for all, create an extensive job creation program for the unemployed and underemployed. Sixteen million children would not go to bed hungry.
The mentally ill and the homeless - an estimated 553,742 Americans are homeless every night - would not be left homeless or locked up in our prisons. The economy would recover from the hair of the beast. Instead, $ 29 trillion of fabricated money has been turned over to financial scammers who are about to erase almost all of it and plunge into a depression comparable to that of of the 1929 world crash .
Kevin Zeese and Margaret Flowers write on the Popular Resistance website: "One-sixth of that amount could provide a basic income of $ 1,000 a month, which would cost $ 3.8 trillion a year, double the social security benefits for bring them to $ 22,000 a year, which would cost $ 662 billion, offer $ 10,000 in bonus to US public teachers - $ 11 billion - free higher education institutions for all high school graduates - $ 318 billion - as well as nursery schools for all - 28 billion. Improving Medicare and opening it up to all would save the nation billions of dollars over a decade. "
An emergency clause in the Federal Reserve Act of 1913 allows the Federal Reserve (Fed) to provide liquidity to a troubled banking system. But the Federal Reserve did not stop at the creation of a few hundred billion dollars. It has flooded the financial markets with a senseless monetary creation. This had the effect of giving the impression that the economy was reviving. And for the oligarchs, who, unlike us, had access to this phony money, it was the case.
The Fed has reduced interest rates to almost zero. Some European central banks have introduced negative interest rates , which means that they would pay borrowers to accept debt. The Federal Reserve, by a clever game of writing, has even allowed troubled banks to borrow at zero rates to buy US Treasury bills. The banks then returned these bonds to the FED, which paid them a 0.25% interest. In short, the Fed lent money to the banks at an interest rate of almost zero, then the Fed paid them interest on the money they had borrowed. The Fed has also acquired from banks worthless mortgage assets and other toxic assets. Since the Fed authorities could make as much money as they wanted, it did not matter how they spent it.
"It's like going to a garage sale and saying," I want this bike without wheels. I'll pay you $ 100,000. Why ? Because it's not my money, "said Prins.
"These people rigged the system," she said about the bankers. "There is money made at the top. It is used to inflate financial assets, including equities. It must come from somewhere. Because money is cheap, there is more borrowing by business and government. "
"Where will you tap to pay back? She asked. "In the nation, in the economy. You capture money from the real economy and social programs. You impose austerity. "
Given the astronomical amount of money creation that they will have to pay back one day, banks have no other option than to lend to everything [to ensure future income]. That's why when you are exposed on your credit card, the interest rate rises to 28%. That is why, if you declare yourself in personal bankruptcy, you remain liable for your student loan, and that while a million people a year are missing on their student loans, and the default rate of these borrowers should reach 40 % by 2023. As a result, wages stagnate or even fall, while prices, whether for health care, pharmaceuticals, banking fees or basic utilities, soar . The imposed debt increases to feed the beast until, as in the case of the subprime crisis , the predatory system succumbs due to large-scale bankruptcies.
For example, as for all financial bubbles, one day the extremely optimistic forecasts of profits from industries such as hydraulic fracturing will no longer be a recognized justification for continuing to inject funds into companies in difficulty, burdened with debt they can never repay.
"The 60 largest prospecting and production companies are not generating enough revenue to cover their operating and capital expenditures," writes Bethany McLean in an article entitled The Next Financial Crisis Lurks Underground [The Next Crisis In the New York Times , this industry is declining. "On average, from mid-2012 to mid-2017, they together recorded a quarterly deficit of $ 9 billion. "
The global financial system is a time bomb. The question is not whether it will explode, but when it will explode. And when that is the case, global speculators will no longer be able to use money creation to deal with the debacle, which will lead to massive unemployment, high prices for imported products and most essential services, and a devaluation that will that the dollar will be almost useless, because it will be abandoned as a world monetary reserve .
This fabricated financial tsunami will turn the United States, which is already a bankrupt democracy, into an authoritarian police state. Life will be worthless, especially of the most vulnerable - undocumented workers, Muslims, racialized poor, girls and women, anti-capitalist and anti-imperialists who will be labeled as agents of foreign powers - who will be demonized and persecuted because made responsible for the collapse. The elites, in a desperate attempt to cling to their unbridled power and obscene wealth, will dismember what remains of the United States.