Paul Krugman: Partying Like It's 1929

A Brief History of the Privately owned and operated Federal Reserve ...

And what has happened since the privately owned and operated Federal reserve was established in 1913 ?

-1914 - 1920 easy money inflation ... 1921 Severe Crash

-1922 -1929 leveraged easy money inflation ........... Great Depression 1929-1940 .... 1933 Gold bullion confiscated ...

- Massive borrowing for war - Fed appeased 1940-1962

- 1963-1970 WWII debt paid, Fed not happy ... Kennedy tries Silver ... Viet Nam ramps up government spending ...

- 1971-1979 Nixon goes off gold, The Fed allows inflaion to reach 20%

- 1980 - 1986 Volcker raises interest rates to 20% to stem the tide of the previous Fed incompetence. Economy dives ... Reagan spending goes crazy,, biggest non war deficits ever.

- 1987 Greenspan causes stock market drop and lays seeds for the S&L Crisis and the bond crisis.

- 1989-1991 S&L and bond market crisis due to deregulation ...

- 1991 - 1997 further deregulation even though Congress has asked the Fed, Greenspan to regulate loan underwriting ... Greenspan does nothing begins inflating again ...

- 1998 - 1999 LTCM crisis due to leverage and derivatives leads to Asian crisis and Russian default ... The Fed inflates more, deregulates more, ,stocks go hyper bolic.

- 2000-2003 Stock Market Crash, more Fed deregulation, Fed endorses tax cuts, lowers interest rates to 1%. Iraq War funding and Tax Cuts send budget and debt hyperbolic.

- 2004-2006 Fed endorses exotic loans, refuses to regulate loan underwriting ... Derivatives markets become trillion dollar markets for the banks , the Fed declines to regulate or even offer a framework.

- 2007 Real Estate crash begins, Fed says everything is fine ....

Thomas Jefferson

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

I note that Mr. Krugman, Clinton champion that he is, neglected to mention that the foundation for our current situation (which he describes wonderfully) was laid by the repeal of Glass-Steagall under Bill. Nor does he mention that Glass-Steagall was enacted to keep the shady behavior of banks in the 20's from repeating itself.

Learning from history is not so much about what you get out of it as it is what you leave out of it.

We need regulation to return to almost every facet of American life,be it financial,environmental,transportation,voting.........etc.The need for harsh penalties is even more important.If someone sticks me up with a gun and takes my money it doesn't affect my financial future much further than a week to a month.That criminal act could possibly get the guy 20 years in prison depending on circumstances and the laws in place where the crime occurred.Somehow in a our zeal to punish the criminal we have decided to throw the book at him.Yet when a respected businessman is allowed to reduce thousands of peoples assets to nothing affecting not only their clients futures but their families too, it's looked upon as"white collar crime" .That includes children unable to attend college,healthcare gone,entertainment gone,home gone,all around poverty.These "white collar criminals" are slapped on the wrist with a fine or at worst contact their political cronies and spend time in a country club prison for a short period of time.They have to suffer the agony of dinner w/o fine wine(or maybe not).In all honesty if one man is responsible for bringing misery to so many people and directly or indirectly causing the deaths of many of his/her clients, shouldn't there be a possible life sentence or even death penalty in play?.These criminals are well educated and they are the ones that a stiff penalty would deter the most.Deterence would be built into their psyche if they saw harsh penalties and complete financial ruin come to the families of "white collar criminals".Shouldn't their family have to pay the same burden as a retired couple left penniless?Shouldn't real shame be brought to bear on these swindlers instead of a 12 step program and book deals.

I think the difference between 29 and today is that in 29, the gov didnt take taxpayer money and shower failing companies with it, rewarding them for all their mistakes and greed that helped drive the economy into the ground. Also, the same type of people who in 29 felt guilt over their mistakes, some to the point of diving out windows or committing other forms of suicide are not found in todays Wall Street environment. There is no guilt for CEOs and upper management in todays failing companies. Nowadays these people make millions , if not billions in bonuses while the ships they captain sink faster than the Titanic, but are quickly floated to the surface with taxpayer money . Nope, Bernie will not fix this. Tax payer money might slow it, even stall it for a little while, but even that will run out sooner or later, and that is what this is all about isnt it? Run the Gov and the country into Reagans glorious economical Train Wreck so we have no choice but to give up all NON-corporate social programs and create an entire country of poor people in debt and willing to work for the lowest wages to keep from losing what little they have , thanks to the Bush Bankruptcy laws.

Milton Friedman and Ronald Regan are dead; let their obsolete supply side, top down economic theories die with them. David Stockman in an interview with Tom Brokaw during the Regan funeral said and I quote, "supply side, was a failure because President Regan blew up the deficit". Milton Friedman came of age and was embraced as an economist just prior to Great Depression, and I would argue that his economic theories in large part lead us into it, at least in the United States. The stock market crash of 1929 was caused by the efforts of Hubert Hoover trying the to cool down the economy way to fast.

We need a Public Central Bank. A bank that will not charge us interest on our own money. A bank that will honor its fiduciary duty to the public. A bank that will truly be independent of the interests it regulates.

The privately owned and operated Federal Reserve has throughout its ninety-five-year history promoted the interests of its members over the good of the country. Over the last twenty years we saw bubble after bubble, panic after panic, each more serious than its' predecessor and yet the mantra was always "free markets," "less regulation" and more "financial innovation." And for what? The profits of their member banks who own all the shares of the corporation known as the Federal Reserve.

This crisis is far from over, and in the meantime the public is subsidizing the very interests that caused the disaster. The problem is that there are much bigger catastrophes looming. Tens of trillions of dollars of Credit Default Swaps and hundreds of trillions of dollars in derivatives that are in a market that is not regulated and has no financial standards for counterparties and no legal framework for determinations. Our entire gross domestic product is only about 14 trillion. The loss of even a small percentage of these markets will bankrupt the country. The failure of the Federal Reserve to regulate these behemouth markets is in itself reason enough to give them the boot.

We need a Public Central Bank that will act in the interest of the country, a fiduciary duty that has always taken a back seat in the privately owned and operated Federal Reserve.

One of the primary contentions of Friedman was that Markets regulate themselves. As a casual observer of the ongoing financial commotion I couldn't help but notice the truth to this statement. Indeed the Markets, those who buy and sell financial instruments, were in the process of this "Self Regulation". The sellers had fraudulently passed off trillions of dollars in junk bonds as AAA paper. They had billions more on their books and in their managed funds. When the true nature of these highly denominated rolls of toilet paper became known last Summer and Fall, the Market rightly revalued them to nothing. This presented a problem to the criminal entities we all know and love as the Wall Street Brokerage Houses. The Market, in its infinite wisdom, did its job and was effectively puting these Racketeers out of business.

The Federal Reserve and the Treasury Department seeing that the Market was functioning set about injecting Socialism into the system. This was accomplished by first making money cheaper to borrow then loaning billions to the corrupt institutions. When the Market refused to roll over the Fed did what it had never done before, it took the worthless junk bonds that the Market had refused to buy as collateral for taxpayer dollars. When investors voted with their feet to flee one of the Houses of Ill Repute, the Fed agreed to buy outright billions of worthless paper with taxpayers dollars.

Thus when the Market that Free Enterprise lauds dared to rear its ugly head it was decapitated by Socialism in the name of Free Enterprise. Now as a homework assignment, lets all reread our Milton and find the chapter where he claims sweatshops are good.

It is 1929, and George W. Bush is Warren G. Harding, Calvin Coolidge and Herbert Hoover on steroids...with alcoholism induced brain damage!

I hope that the failing economy turns out to be a bigger issue than the candidate's pastors. Given that the falling dollar, the slowing economy and increases in inflation are all related to money borrowed to fight the war it would be reasonable to choose a different party th run the White House. However, this may turn out to be less important the pastor problem.