Recession, Central Bank Intervention, and Tax Rebates

by: Dark Wraith

Congress recently took upon itself the responsibility for approving of a nice tax rebate check for taxpaying Americans who are then going to go out and spend that money to try to stave off a recession. Unfortunately, by spending that money, all that will happen is that those brave American consumers will throw instant gasoline onto the smoldering fire of spiraling inflation waiting to happen.

Has anyone bothered to ask who's paying for those rebate checks? The U.S. government surely isn't; it bleeds red ink by the hundreds of billions of dollars in budget deficits every year anymore. Ah, of course: it's the Chinese, the Arabs, the Japanese, and the Europeans who are lending us all those greenbacks for the rebates, just like they've been lending us hundreds of billions of dollars all throughout the years of this irresponsible Presidency; and the Chinese, the Arabs, the Japanese, and the Europeans have all those greenbacks to lend us is because we gave them those greenbacks in trade for their cheap imports.

And by the way, those who labor under the impression that this is a great time to jump into the stock market are off their rockers. Over the past several months, the Federal Reserve in coordination with foreign central banks has poured close to half-a-trillion dollars into Wall Street, and every last dime of that money has been sopped up by powerful, global traders who then sell off, thereby sending stocks back down to where they were before the money got pumped in.

Essentially, the Fed is handing hundreds of billions of dollars to the wealthy for the privilege to the American economy of preventing a full-blown crash of the equities markets. At the end of the day, all this will do is make the necessary time of reckoning that much more severe and that much more protracted.

Yes, the money all those central banks have been lending us for our beyond-our-means spending came from us. When we buy imports, what we are doing is trading American dollars for foreign merchandise. The foreign merchandise goes into our homes, bellies, and gas tanks, and the American dollars we pay go into the coffers of the foreign central banks; and because American dollars cannot be spent anywhere else except here in the United States, those foreign central banks repatriate those dollars to our shores by buying our corporations, our shopping malls, our land, and other assets, and by lending huge sums of money to our companies, our consumers, and our government at every level from the municipal to the federal. In the past few months, as our own central bank scrambled frantically to stop the United States stock markets from collapsing in a major crash, those foreign central banks stepped in to help by participating in what amounted to massive investment syndicates to push tens of billions of dollars into the top end of the Wall Street banking and investment system. Much of that money those foreign central banks directly infused vanished within a matter of hours or days as the stock indices went up temporarily, and then dropped right back down to where they had been before the infusions. In other words, the money pumped the stocks up, and then the profit takers sold off to skim the gains, effectively drawing the foreign central bank infusions right back out of the system.

More recently, those foreign central banks holding hundreds of billions of dollars participated substantially in the bailout of Bear Stearns, notwithstanding the mainstream media's treatment of the bailout as having been done by the Federal Reserve, which in reality participated in its most significant role by taking the bad mortgage-backed securities off the books of Bear Stearns and putting the mess into the portfolio of the Fed.

If that sounds like bad business all the way from the part where we're being bailed out by foreign central banks holding dollars they got by selling us cheap imports to the part where our Federal Reserve is now in the business of sopping up the bad investments of a major Wall Street firm, then you are well on your way to being as cynical as the author of this article.

Enjoy those rebate checks, good readers. It's the least you can do for your children and grandchildren, who will be the ones who pay for them.


The Dark Wraith has spoken.