The Fed is Worthless; Junk Wall Street & Green Policy

September 18, 2015

Lyndon LaRouche had the following comments upon being briefed on the responses to EIR from several economists on the Fed's non-action regarding interest rates, and Janet Yellen's lying justification of that non-action:

I have always warned about this. The Federal Reserve system and Wall Street are the heart of the problem. They are totally bankrupt, and yet they hold political control over the government, while in fact they are worthless. We must start by demonstrating that Wall Street is of far less value than they represent—in fact, they are bankrupt. We need an overall reform that eliminates Wall Street.

The United States refuses to recognize the truth, that Wall Street is preventing a recovery. We must write it down to its true near-zero value. We have a more extreme case than FDR faced when he closed down Wall Street, but it must be wiped out or there will be no recovery.

In Europe, the Green policy is the most aggravating factor in keeping Europe down. There is a match between getting rid of the Green policy and dumping Wall Street.

"Chaos" is an understatement of this thing. People won't listen—we must shut down Wall Street. To do so we must throw Obama out of office. Look at Wall Street in the 1920s and 30s, and see what FDR did. The situation is far worse now than in FDR's time. There are nothing but pseudo values in the banks—write them down!

Go back to Bertrand Russell's influence at the beginning of the 20th Century, together with the assassinations of American presidents. Bush, Cheney, Obama—four terms of this—would every week issue reports on the "easing" that week, every week getting more and more quantitative easing, instead of putting the whole thing through bankruptcy then and there.

We have lowered the productivity of labor, with the Green policy and the quantitative easing. Now Wall Street is hopelessly bankrupt. It's not the dinasaurs going extinct—it's the bankers.



Fed Makes Error Based on Lie

Behind the froth of the stock markets' very negative reaction to the Federal Reserve Open Market Committee's Sept. 17 "flinch," as it's called, there is a relatively more fundamental problem, noted by serious economists. The Fed, and specifically Chair Janet Yellen in her "explanation," lied about its reasons for leaving short-term U.S. interest rates unchanged, now at zero for nearly seven years.

Yellen acknowledged that the FOMC members, as a body, pushed their idea of when they might raise rates further into the future, and that one of them even thought they would push the discount rate further down, into negative territory, by early 2016. But she claimed that "economic headwinds from abroad," and specifically from China's economy, were the main reason for this.

An immediate response came, for example, from Bremer Landesbank chief economist Folker Hellmeyer and from Bank of India chairman Raghuram Rajan: Yellen's statement could not be true. The Fed itself has downgraded its projection for the U.S. economy from 3% growth this year, to 2.1%; the estimate of China's growth has been shaved only from 7.0% to 6.9%. It is the falling U.S. economy, not China's, which made the Fed keep Wall Street's punchbowl full of liquidity. Hellmeyer added, in his note to clients, that the Chinese Finance Ministry had responded to the Fed: "The recovery of the U.S. economy is not stable."

An American economist told EIR that the Fed had made a serious error by claiming to have based its decision not on the state of the U.S. economy, but on forecasts, however dubious, about a foreign economy, specifically China's. The result would be "chaos" regarding the Fed's future decisions, and the impression that U.S. short-term rates might stay at zero indefinitely, or even go negative.

The Federal Reserve itself is at the center of the U.S. economic prostration, having created a financial and economic system based entirely on money asset appreciation; i.e., Wall Street banks' speculation. It may now set off a whole new round of quantitative easing spasms, by the ECB and Bank of Japan in particular, rapidly leading to trans-Atlantic financial collapse.