The Great No Inflation Hoax
Kevin Phillips, HuffPost
I am talking, of course, about the collectivization of financial risk being promulgated by the Federal Reserve Board and the U.S. Treasury Department and applauded in pin-striped precincts from Park Avenue to Pacific Heights. Described as Wall Street Socialism by the gauche and more precisely identified as the "socialization of risk" by sophisticates, the new fashion leaves the profits of finance in private hands as of yore. It is only the "risk" -- of collapsed currencies, flawed speculation, busted hedge funds or the greedy misjudgments of large banks or brokerage firms -- that is quietly taken up by government entities and all too often shifted to taxpayers who do not understand the pompous phraseology but know full well that Washington will never bail out their hardware store or the widget plant where their son works.
This has been going on for decades -- a major reason why finance has grown and prospered so much compared with most other industries. But it's only been so boldly and shamelessly embraced in the last few weeks. The Federal Reserve insists that "inter-connections" require rescuing large institutions that might knock down other entangled financial dominoes. However, these would not have been so cocky or so inter-connected in their web-spinning if the Fed had not allowed so much greed and gamesmanship for so long. Ex-Fed Chairman Alan Greenspan is often singled out as a culprit, but most of what he did was what most of the financial sector wanted. They, too, loved making 4th of July speeches about the glories of free enterprise and free -- market profits while counting on the government to collectivize the perils of risk. Big, fat and dumb financial institutions could count on being big, fat and bailed-out.
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