New $600B Fed Stimulus Fuels Fears of US Currency War

[CHIMO]

MICHAEL HUDSON: Well, the object of warfare is to take over a country’s land, raw materials and assets, and grab them. And in the past, that used to be done militarily by invading them. But today you can do it financially simply by creating credit, which is what the Federal Reserve has done. It’s created $600 billion. It hasn’t gone into the economy. The head of the Fed is known as "Helicopter Ben" because he talks about dropping money into the economy. But if you see helicopters, they’re probably not your friends. Don’t go out and wait for them to drop the money, because the money is all going electronically into the banks. And the Fed has said, we want to give the banks so much money that they will lend it out so you can begin to bid up prices on real estate again and pull the banks out of the real estate negative equity that it’s in. So the purpose, according to the Fed, is to raise the price of real estate, to inflate asset prices. But that’s not happening. The actual banks have lent less today than they did in 2007. So the money is going abroad. And it’s going abroad not really to buy foreign companies so much, but to speculate in currency.

Now, the Fed and the Congress, two weeks ago, said, "We want China to raise its currency by 20 percent." This would create billions and billions of dollars of bonanza for Wall Street banks, and it would enable them to earn their way out of debt by essentially looting the China central bank, the Brazilian central bank, the Turkish central bank and the other central banks, because you can now borrow money in America at one percent. So you’d put down, let’s say, a billion dollars of your own—a million dollars of your own money, borrow $99 million of the bank’s money—that’s $100 million. You would buy Chinese currency, RMB, for $100 million. You then say, "Raise your currency by 20 percent," which is what the Fed has asked them to do. That means that your million dollars now has turned into a $20 million gain, because $100 million is now worth $120 million. You’ve made a 200 percent profit. And for Wall Street, they deal in billions, not millions. And so, this would enable the banks to make up their money by buying out, essentially, foreign currency. They’re doing the same in Australia. It’s currency gamble.

http://www.democracynow.org/2010/11/5/new_600b_fed_stimulus_fuels_fears
http://play.rbn.com/?url=demnow/demnow/demand/2010/nov/video/dnB20101105a.rm&proto=rtsp&start=00:07:52

Interesting. His example actually returns 2,000%.

[jtuck004]

1. Ok, so we had an $800 billion stimulus, and we loaned

$23 trillion to the banks from which they may have kept about $3.2 trillion, and that doesn't even account for the Treasuries they were given for certain toxic assets on which they have earned (and are earning) billions of dollars.

And a pathetic, useless for job creation, giveaway to the banks for which Bernenke and Geithner should be ridden out of town on a rail except everyone appears too gutless and stupid $600 billion quantitative easing is going to start a currency war?