Now Have Americans Had Enough of the Federal Reserve?

March 3, 2020 (EIRNS)—According to all-knowing financial media this morning, the Federal Reserve Board’s “emergency” decision at 7:30 a.m. to cut the Federal funds rate by one-half percent, was both “expected” and “a surprise.” That’s the expert side of it.

The Fed governors, as usual, were pursuing very mysterious remedies for ailments that, since the financial crash of 2007-08, chronically afflict the stock and bond markets, the big City of London and Wall Street banks, and their “shadow banking” partners. These remedies are Greek to the rest of us—they are poisons, in fact—and today they didn’t even work on seasick Wall Street; but they did manage to make the dangerous plunge in U.S. Treasury interest rates even worse. The Fed found itself besieged by banks and shadow banks demanding emergency liquidity loans at 8:30 a.m., a historic $180 billion worth. It provided $120 billion, but the rates at which the banks will trust each other with a loan for a day—supposed to drop half a point in obedience to the Fed’s decision—actually went up.

The “coronavirus emergency” statement which started all this came at 7:00 a.m., by the finance ministers and central bank governors of the G7 countries—all honorable women and men. But no one should believe that the Federal Reserve actions which followed, had to do with fighting the coronavirus or “supporting the economy.” They had to do with fighting the plunge in stock markets, supporting the most speculative units of the big banks and Wall Street investment firms, and fighting off the grim danger of an “inverted yield curve” on the bond markets.

For American citizens? Their businesses will have an even harder time getting loans from the local banks, which don’t make commercial loans with interest margins this low. Home prices and rent increases, far outstripping wages for a decade now, will rise even faster. The little remaining interest income on their savings—if they have any—will disappear, just when it looks like the stocks in their 401K and pension plans are heading south again. If they work for a large business—say, a hotel chain—that gets whacked by the coronavirus epidemic, that business will be encouraged by the Fed’s actions to go deeper into debt to buy its own stock and keep it from swooning.

This is what Fed chair Powell at his press conference today called “supporting households and businesses.”

The monetary scheme in which the Federal Reserve is playing its part, does not work, and hasn’t worked for 50 years except to deindustrialize the country. Unless we nationalize the Fed right now to create a Reconstruction Finance Corporation or national infrastructure bank, it will ruin, not support the economy.

What would work, is a Roosevelt-style RFC issuing credit to build and equip many new hospitals, bring steel blast furnaces to life, advance nuclear and plasma technology research, create full-time productive jobs, work with the EximBank to provide cutting-edge healthcare facilities to developing countries, and similar productive activity.

After this morning, we should be Fed up with what we have.