Gold has spiked over $950, a new high, while oil futures passed the $100 per barrel mark. The battered greenback has taken a beating, and yet, Fed chairman Bernanke is signaling that there are more rate cuts to come. The prospect of a global run on the dollar has never been greater.
The problem far exceeds the Federal Reserve's paltry increases to the money supply or Bush's projected $168 billion “surplus package”. Capital is being sucked out of the system faster than it can be replaced which is apparent by the sudden cramping in the financial system and a more generalized slowdown in consumer spending.
An article which appeared on the front page of The Financial Times [but not in the US media] illustrates how hard-pressed the banks really are: “US banks have been quietly borrowing massive amounts of money from the Federal Reserve...$50 billion in one month”.
The present troubles originated at the Federal Reserve and, ultimately, they are the ones who are responsible for the meltdown. The Fed refused to perform its oversight duties because its friends in the banking industry were raking in obscene profits selling sketchy, subprime junk to gullible investors around the world. They knew about the “massive off balance-sheet positions” which allowed the banks' to create mortgage-backed securities and CDOs without sufficient capital reserves. They knew it all; every last bit of it, which simply proves that the Federal Reserve is an organization which serves the exclusive interests of the banking establishment and their corporate brethren in the financial industry.
[Excerpt of an article by Mike Whitney, Counterpunch]