from Prophet Chris Hedges

The Rich get Rich and the Poor get Poorer. But what happens to wealth
when the bubble bursts?
Carl Jarvis
***

Conjuring Up the Next Depression

Mr. Fish / Truthdig

During the financial crisis of 2008, the world's central banks, including
the Federal Reserve, injected trillions of dollars of fabricated money into
the global financial system. This fabricated money has created a worldwide
debt of $325 trillion, more than three times global GDP. The fabricated
money was hoarded by banks and corporations, loaned by banks at predatory
interest rates, used to service interest on unpayable debt or spent buying
back stock, providing millions in compensation for elites. The fabricated
money was not invested in the real economy. Products were not manufactured
and sold. Workers were not reinstated into the middle class with sustainable
incomes, benefits and pensions. Infrastructure projects were not undertaken.
The fabricated money reinflated massive financial bubbles built on debt and
papered over a fatally diseased financial system destined for collapse.

What will trigger the next crash? The $13.2 trillion in unsustainable U.S.
household debt? The $1.5 trillion in unsustainable student debt? The
billions Wall Street has invested in a fracking industry that has spent $280
billion more than it generated from its operations? Who knows. What is
certain is that a global financial crash, one that will dwarf the meltdown
of 2008, is inevitable. And this time, with interest rates near zero, the
elites have no escape plan. The financial structure will disintegrate. The
global economy will go into a death spiral. The rage of a betrayed and
impoverished population will, I fear, further empower right-wing demagogues
who promise vengeance on the global elites, moral renewal, a nativist
revival heralding a return to a mythical golden age when immigrants, women
and people of color knew their place, and a Christianized fascism.

The 2008 financial crisis, as the economist Nomi Prins points out,
"converted central banks into a new class of power brokers." They looted
national treasuries and amassed trillions in wealth to become politically
and economically omnipotent. In her book "Collusion: How Central Bankers
Rigged the World," she writes that central bankers and the world's largest
financial institutions fraudulently manipulate global markets and use
fabricated, or as she writes, "fake money," to inflate asset bubbles for
short-term profit as they drive us toward "a dangerous financial precipice."

"Before the crisis, they were just asleep at the wheel, in particular, the
Federal Reserve of the United States, which is supposed to be the main
regulator of the major banks in the United States," Prins said when we met
in New York. "It did a horrible job of doing that, which is why we had the
financial crisis. It became a deregulator instead of a regulator. In the
wake of the financial crisis, the solution to fixing the crisis and saving
the economy from a great depression or recession, whatever the terminology
that was used at any given time, was to fabricate trillions and trillions of
dollars out of an electronic ether."

The Federal Reserve handed over an estimated $29 trillion of this fabricated
money to American banks, according to researchers at the University of
Missouri. Twenty-nine trillion dollars! We could have provided free college
tuition to every student or universal health care, repaired our crumbling
infrastructure, transitioned to clean energy, forgiven student debt, raised
wages, bailed out underwater homeowners, formed public banks to invest at
low interest rates in our communities, provided a guaranteed minimum income
for everyone and organized a massive jobs program for the unemployed and
underemployed. Sixteen million children would not go to bed hungry. The
mentally ill and the homeless-an estimated 553,742 Americans are homeless
every night-would not be left on the streets or locked away in our prisons.
The economy would revive. Instead, $29 trillion in fabricated money was
handed to financial gangsters who are about to make most of it evaporate and
plunge us into a depression that will rival that of the global crash of
1929.

Kevin Zeese and Margaret Flowers write on the website Popular Resistance,
"One-sixth of this could provide a $12,000 annual basic income, which would
cost $3.8 trillion annually, doubling Social Security payments to $22,000
annually, which would cost $662 billion, a $10,000 bonus for all U.S. public
school teachers, which would cost $11 billion, free college for all high
school graduates, which would cost $318 billion, and universal preschool,
which would cost $38 billion. National improved Medicare for all would
actually save the nation trillions of dollars over a decade."

An emergency clause in the Federal Reserve Act of 1913 allows the Fed to
provide liquidity to a distressed banking system. But the Federal Reserve
did not stop with the creation of a few hundred billion dollars. It flooded
the financial markets with absurd levels of fabricated money. This had the
effect of making the economy appear as if it had revived. And for the
oligarchs, who had access to this fabricated money while we did not, it did.

The Fed cut interest rates to near zero. Some central banks in Europe
instituted negative interest rates, meaning they would pay borrowers to take
loans. The Fed, in a clever bit of accounting, even permitted distressed
banks to use these no-interest loans to buy U.S. Treasury bonds. The banks
gave the bonds back to the Fed and received a quarter of a percent of
interest from the Fed. In short, the banks were loaned money at virtually no
interest by the Fed and then were paid interest by the Fed on the money they
borrowed. The Fed also bought up worthless mortgage assets and other toxic
assets from the banks. Since Fed authorities could fabricate as much money
as they wanted, it did not matter how they spent it.

"It's like going to someone's old garage sale and saying, 'I want that
bicycle with no wheels. I'll pay you 100 grand for it. Why? Because it's not
my money,' " Prins said.

"These people have rigged the system," she said of the bankers. "There is
money fabricated at the top. It is used to pump up financial assets,
including stock. It has to come from somewhere. Because money is cheap
there's more borrowing at the corporate level. There's more money borrowed
at the government level."

"Where do you go to repay it?" she asked. "You go into the nation. You go
into the economy. You extract money from the foundational economy, from
social programs. You impose austerity."

Given the staggering amount of fabricated money that has to be repaid, the
banks need to build greater and greater pools of debt. This is why when you
are late in paying your credit card the interest rate jumps to 28 percent.
This is why if you declare bankruptcy you are still responsible for paying
off your student loan, even as 1 million people a year default on student
loans, with 40 percent of all borrowers expected to default on student loans
by 2023. This is why wages are stagnant or have declined while costs, from
health care and pharmaceutical products to bank fees and basic utilities,
are skyrocketing. The enforced debt peonage grows to feed the beast until,
as with the subprime mortgage crisis, the predatory system fails because of
massive defaults. There will come a day, for example, as with all financial
bubbles, when the wildly optimistic projected profits of industries such as
fracking will no longer be an effective excuse to keep pumping money into
failing businesses burdened by debt they cannot repay.

"The 60 biggest exploration and production firms are not generating enough
cash from their operations to cover their operating and capital expenses,"
Bethany McLean writes of the fracking industry in an article titled "The
Next Financial Crisis Lurks Underground" that appeared in The New York
Times. "In aggregate, from mid-2012 to mid-2017, they had negative free cash
flow of $9 billion per quarter."

The global financial system is a ticking time bomb. The question is not if
it will explode but when it will explode. And once it does, the inability of
the global speculators to use fabricated money with zero interest to paper
over the debacle will trigger massive unemployment, high prices for imports
and basic services, and a devaluation in which the dollar will become nearly
worthless as it is abandoned as the world's reserve currency. This
manufactured financial tsunami will transform the United States, already a
failed democracy, into an authoritarian police state. Life will become very
cheap, especially for the vulnerable-undocumented workers, Muslims, poor
people of color, girls and women, anti-capitalist and anti-imperialist
critics branded as agents of  foreign powers-who will be demonized and
persecuted for the collapse. The elites, in a desperate bid to cling to
their unchecked power and obscene wealth, will disembowel what is left of
the United States.

Chris Hedges