Federal Reserve CAUSES Middle East UNREST

[Segami]

Run time: 08:04 https://www.youtube.com/watch?v=2pnx8_4PsOY   Posted on YouTube: February 24, 2011 By YouTube Member: JesusDillinger Views on YouTube: 4172   Posted on DU: February 26, 2011 By DU Member: Segami Views on DU: 813

 
"...It's being reported that the main reason people are rioting in the Middle East is high food costs. So what caused the high food costs? I'll give you a trillion guesses."


.

[Jim__]

1. This is far too simplistic.

Do the Fed's actions have an effecct on food prices? Sure. But when we look at the policies of the Fed, we also have to look at the alternatives. What would have happened if the Fed hadn't stepped in and increased the money supply? Most of the economists that I've read say we would have had a financial collapse. Which alternative would have had worse consequences? Again, the economists I've read say the financial collapse would have been worse.

And, as the video acknowledges, the problem with the price of food is due to speculation. Yes, there was always some speculation in the commodities market, but, since 1936, it had been strictly regulated. The market for a commodity had to be dominated by the physical speculators - entities whose business was directly involved in the production and use of the commodity. BushOne changed this when he started giving letters to financial speculators declaring them physical specualtors, i.e. effectively, speculation in commodities markets is no longer regulated.

And, there are reasons why economies always come off the gold standard. Under certain conditions, it fails. An economy needs flexibility. The regulations that were implemented after the Great Depression of the 30s worked quite well. We are back on a financial roller coaster largely because we have been eliminating those regulations.

Would the mideast have erupted if food prices were not increasing? I don't know. Would that cop have slapped that Tunisian vendor and would he have burned himself to death? I don't know. If so, would people have just ignored that? I don't know. Was the critical factor here the role of social networking? I don't know.

What I do know is that there are critical issues that this video completely ignores. Fed bashing is easy; but the analysis needs to run a little deeper to be convincing.

[earthside]

2. It is more complicated ...

... and sinister.

It still comes back to the Federal Reserve's pumping massive amounts of credit and debt into the economy, the massive tax cuts for the wealthy -- all leading to way too much pixelated 'money' sloshing around looking for some kind of return.

So, yes, in the end Ratigan is correct.

Matt Taibbi in "Griftopia" explains what happened in 2008 and is still happening with commodities speculation:

http://peakenergy.blogspot.com/2009/07/taibbi-on-great-american-bubble-machine.html">Taibbi on "The Great American Bubble Machine" - PeakEnergy.Blog.Spot.com

In 1936, however, Congress recognized that there should never be more speculators in the market than real producers and consumers. If that happened, prices would be affected by something other than supply and demand, and price manipulations would ensue. A new law empowered the Commodity Futures Trading Commission - the very same body that would later try and fail to regulate credit swaps - to place limits on speculative trades in commodities. As a result of the CFTC's oversight, peace and harmony reigned in the commodities markets for more than 50 years.

All that changed in 1991 when, unbeknownst to almost everyone in the world, a Goldman-owned commodities-trading subsidiary called J. Aron wrote to the CFTC and made an unusual argument. Farmers with big stores of corn, Goldman argued, weren't the only ones who needed to hedge their risk against future price drops - Wall Street dealers who made big bets on oil prices also needed to hedge their risk, because, well, they stood to lose a lot too.

This was complete and utter crap - the 1936 law, remember, was specifically designed to maintain distinctions between people who were buying and selling real tangible stuff and people who were trading in paper alone. But the CFTC, amazingly, bought Goldman's argument. It issued the bank a free pass, called the "Bona Fide Hedging" exemption, allowing Goldman's subsidiary to call itself a physical hedger and escape virtually all limits placed on speculators. In the years that followed, the commission would quietly issue 14 similar exemptions to other companies.

Now Goldman and other banks were free to drive more investors into the commodities markets, enabling speculators to place increasingly big bets. That 1991 letter from Goldman more or less directly led to the oil bubble in 2008, when the number of speculators in the market - driven there by fear of the falling dollar and the housing crash - finally overwhelmed the real physical suppliers and consumers. By 2008, at least three quarters of the activity on the commodity exchanges was speculative, according to a congressional staffer who studied the numbers - and that's likely a conservative estimate. By the middle of last summer, despite rising supply and a drop in demand, we were paying $4 a gallon every time we pulled up to the pump.

[freedom fighter jh]

3. Not mentioned: who gets the value of the extra money

Extra money is "printed." (Not quite the right word, because the money is only created electronically.) Then, according to Wikipedia (in their piece on quantitative easing), "the central bank credits its own bank account with money it creates electronically." The Federal Reserve, our central bank, is a private institution. The value of that money goes to a bank, not to the government to use.

The government can then borrow the money -- at interest.

[The Northerner]

4. K&R

[xchrom]

5. recommend