Amatuers and experts will repeat the call:  "The Fed needs to do something to save our economy!"  Libertarians will grimace, politicians will nod, and bankers left standing will walk away laughing all the way to spend their gains.

Consumers face constantly rising living costs, stagnant wages, depressed home values - need I go on?  Consumer spending is down sharply, and confidence is headed in the same direction.  The dollar is "disconnected from fundamentals" but the fundamental everyone overlooks is confidence.  Americans, we spend beyond our means.  The world knows it, so just quit denying it.  Perhaps because of our financial and economic strength, or perhaps because of our military influence throughout the world, we've been able to pull this off for a long time.  

We always paid the minimum balance on the credit cards, and we even invented a constantly inflating currency that would allow us to cut corners on our debt agreements.  The international financiers sighed, took the dollars, signed the next loan, and quietly hoped that some day the dollar would rise again.

The Fed - independent of diplomatic pressure, voter outrage, or even real political oversight - has finally crushed that illusion for good.

No longer do Chinese economic planners or Saudi princes believe that tough talk or sweet deals could force America to raise the dollar.  The fact is, a rising dollar would be almost as destructive to our debt-based economy as the currently crashing one is.  Either way, America ends up consuming fewer goods when the global economy reaches equilibrium.

The Federal Reserve has done no less than undermine global confidence in America's credit-worthiness.  While talk of "government intervention" may create blankets of confidence among the voting population, it is hard to dispute the fact that the current bubble crisis is directly related to the Fed's policy of prolonged double-bottom interest rates.

No investment = no market.  The last vestiges of capitalism die with a whimper as few self-interested individuals are willing to play a game rigged against them.  

It should be no surprise then that the Federal Reserve has become not only the lender of last resort, but also the capitalist of last resort.  If there is no one to force hostile takeovers and eliminate competition - the Fed will do it.  If the stock market is tanking and someone needs to make a huge deal to rally confidence - the Fed will do it. 

As the banks crash and burn in the fallout of the Fed-created bubble, the Federal Reserve is the only institution wealthy enough to scoop up the failed banks even though they are available for almost nothing.  Insider trading?  RICO?  Maybe.  This could possibly be the largest theft in human history. 

For more information about the history of the Federal Reserve check out this link.

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Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved.