FROM EIR DAILY ALERT
Subjecting the Hysteria Defending the Fed, to LaRouche’s Wisdom
Dec. 23, 2018 (EIRNS)—On Saturday night Dec. 22 Treasury Secretary Steve Mnuchin tweeted a comment from President Donald Trump:
“I have spoken with the President and he said ‘I totally disagree with Fed policy. I think the increasing of interest rates and the shrinking of the Fed portfolio is an absolute terrible thing to do at this time, especially in light of my major trade negotiations which are ongoing, but I never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so.’ ”
By then, however, the eruption of anxiety from Wall Street directions, that Trump might cut down the authority of Fed Chair Jay Powell or of the Federal Reserve as a whole, had perhaps exceeded even that of neo-conservatives over the President’s order to withdraw troops from Syria.
Typical of the wild assertions was Senator (and Wall Street veteran) Mark Warner (D-VA), however: “Any action taken to dismantle the independence of the Fed would ... threaten the institutions that protect our rule of law.”
But the Federal Reserve’s record since at least 1987, when Alan Greenspan took over from Paul Volcker, has been a continuous game of debt bubble pumping, financial crash, pumping up larger bubble, another crash, and so forth.
Lyndon LaRouche, in an April 26, 2006 article in EIR entitled “Characteristics of the Current Crisis: How the World Has Changed,” wrote that six days earlier,
“I issued my warning that, unless a drastic policy-change intervened, the world as a whole was now on the course toward a systemic monetary-financial collapse”—the so-called Great Financial Crash which was in full view a year after LaRouche wrote. Moreover, reviewing “four stages of decline” since the policies of President Franklin Roosevelt, LaRouche attributed the fourth stage to Alan Greenspan and the Federal Reserve.
“This Fourth Phase came into being during 1987, in the 1929-style, October collapse of the New York stock bubble. That stock-market crash occurred on the watch of Federal Reserve Chairman Paul Volcker. Volcker’s nominated successor, Alan Greenspan, took charge. It was Greenspan who crafted the Fourth and fatal phase, leading into the presently threatened, imminent general collapse of the world’s present monetary-financial system.
“The Greenspan ‘bubble,’ otherwise known as the ‘financial derivatives’ scam, which has been cast in the tradition of the John Law bubbles of early Eighteenth-Century Europe, has become a highly complicated structure; but, the essence of the problem it represents can be fairly summarized as follows.
“The included effect of the process leading into the 1929-style, October 1987 stock-market crash, was the depleting of the cash available to the private banking system. Greenspan’s engineering used the Federal Reserve pumping of a mortgage-based securities bubble in Fannie Mae and Freddie Mac operations, as a way of pumping cash back into the banks. This, and the associated boom in inflationary real-estate speculation, has represented the principal axis of an accelerating inflation in the U.S. and Europe, among other locations. This, combined with the role of Japan’s virtually zero overnight lending rate, has emerged as the base for the build-up of a highly inflationary, implicitly cancerous mechanism known as ‘the carry trade.’ This operated within a global environment shaped by Greenspan’s role as architect of a system of gamblers’ side-bets, known as financial derivatives, including so-called credit derivatives.”
