The Fed might be feeding zombies

Interesting analysis the one by Mary Bottary I just stumbled upon at The Huffington Post.

There is an ongoing lawsuit by Bloomberg (the financial media giant) against the US Federal Reserve (known simply as the Fed), trying to force it to disclose the assets it is taking as guarantee for its loans. Legally the the Fed can only loan against investment grade assets but there are serious doubts that many such guarantees are anything but toxic assets without real value.

Bloomberg has won twice in court but it seems that the appeal chain will continue.

The ammount of public money being lent to financial institutions, estimated in 2-3 trillion US dollars, dwarfs the infamous bail-out of some 700 billion for the "too big to fail". The impression, unless those assets are disclosed and happen to be good (a most unlikely case, I'd say), is that the Fed is feeding zombie financial institutions with no real solvency.

The same author brings her analysis further at Global Research, with several links that I still have to explore in depth and even the fashion widget of the decade: a financial crisis tracker!

She there says that the flow of public money to the zombie banks is as large as 4.6 trillion dollars, nothing less than 32% of the US GDP (2008) and 130% the federal public budget of this country.

Of that public money a good deal is being used directly against the interest of the poorer US citizens, by artificially keeping the housing market high. The apportion of public money diverted to this endeavour is nothing less than 1.5 trillion dollars: double than the official bail-out.

In brief: yet another bubble, this one of a "defensive" nature and massively supported by public money. The great global Capitalist financial engineering ponzi scheme that has ruled our lives for the last decade (or probably the last several decades) is being kept under artificial support by the public institutions in charge to prevent such thing from ever happening.

Reality always beats fiction but this is not different from the best of the tales of the Grimm Brothers: the Emperor's clothes. A great lie has been spread but the truth is just before our eyes: the flamboyant neoliberal economy doesn't really exist anymore, at least at many many levels.

However some still believe that the economy is more financial engineering than real economy, that offer can stand alone by mere illusionism without a real demand to buy its products (a very clear and central case is the housing market... or rather lack of market... and not just in the USA), that the people can be robbed endlessly and still be consumers.

Sorry to inform you that such thing is impossible. This was understood by Marx and even by capitalists such as Henry Ford but was at some point this basic economical principle was ignored altogether. Now all the efforts are put to prevent the bubble to explode, as it should already have done, because they feel, with reason that the result will be more than just problematic. But there's no other way and we must face reality.

If the patient has to die, it's time to disconnect the artificial support. Because there's no new life without death and anyhow even the best health care cannot grant immortality.

There are no eternal orders, only Chaos is eternal.

Change must happen and the sooner we allow it, the less painful it will be.