Reply #23: Big money has no party allegiance, and neither does the Fed. [View All]

[54anickel]

Gore wasn't the target of the hikes - wage earners were. The two party system is a fallacy - a simple diversion to keep the working class occupied and at each other's throats. Big money backs a favorite pony on each side of the partisan fence.

:tinfoilhat: It's been speculated that Carter was the last dark horse to slip through their gate - he was never meant to win - and they've patched that gate since. Of course he was easy for them to take down and ended up being the perfect scapegoat for the economic upheaval they would stir up as they set up the deal with the House of Saud for the petro-dollar. Some say Dean was headed for that same "gate" as Carter and that was why he was destroyed so quickly.

Anyway, enough tinfoil. Here's an article I posted in the SMW thread regarding those interest rate hikes you claim were directed at Gore. Greenspin could/should have increased margins to prick the bubble but, having the best interests of big money at heart, he instead raised the interest rates.

http://www.epinet.org/content.cfm/Issuebriefs_Ib136

snip>

Wages - the Fed's real target
Given the absence of inflationary signals, the lack of historical precedent, and the Fed's disinclination to target the stock market bubble directly, it does not appear that preventing an outbreak of inflation - at least as most Americans would understand the term - is the root motivation behind the Fed's recent interest rate increases. Rather, it seems to be aiming at preventing wage increases.

The Fed's defenders would of course argue that that is exactly how one prevents "wage-price" spirals from taking off. But as economist Jamie Galbraith has pointed out, every episode of accelerating inflation since 1960, with the exception of the lifting of Vietnam-era price controls after Richard Nixon's re-election, were led by prices, not by wages.

The current effort to slow down the economy, therefore, appears to be targeted at weakening the bargaining position of labor vis-à-vis capital. Indeed, throughout this economic expansion of the 1990s, we have seen a shift of market incomes from wages to profits. This shift has been so pronounced that economist Jared Bernstein has calculated that, even if labor costs were to accelerate to rising 1% faster than productivity (as opposed to their current slower growth rate), it would take four years before wages and profits went back to their respective shares in the decade of the 1980s.

It is reasonable to ask the following: if the expansion of profits and the subsequent reallocation of income from labor to capital that occurred throughout the 1990s did not by itself raise inflationary concerns, why should a potential swing back to labor's favor?

The Fed is unlikely to enlighten us. But it is obvious that Federal Reserve Boards have historically considered themselves defenders of the interests of those who invest for a living as opposed to those who work for wages. This one is no exception.

snip>

Greenspan himself has said on several occasions that job insecurity has been a significant factor in limiting labor's earnings during the expansion and thus adding to profits and the profit expectations that have fueled the stock market. From this perspective, raising interest rates to raise the unemployment rate, as opposed to targeting margin requirements, insures that labor's share remains depressed even as the financial markets are forced to undergo a correction.