U.S. Collective Dictatorship Enlarges

Bernanke makes Schacht look like a piker. In the U.S., the Fed has no statutory limits on its finance! It is openly financing whatever institutions it pleases. It has extended $56 billion to AIG company, another $298 billion for the commercial paper of various companies, and $407 billion to banks using its own holdings of Treasury securities. The critics of these loans are vastly outnumbered by those applauding the Fed’s inflation as the means of saving America. The sycophants eagerly await the Fed’s next moves. The Fed is preparing the way by leaking to the press hints of "unconventional steps." These will involve interventions in markets such as mortgage markets. Bernanke and Company seem to have none of the fear that Schacht had of inflation or being held responsible for inflation.

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We are entering upon a sequence of events that will, in the end, transform the American economy even more than now into a slow-growth, no-growth, inflationary, regulated, stalled, and inefficient economy. It will be a miracle if the Fed’s expansion is brought under control and reduced. The Fed will maintain its lending and even expand it. This can only atrophy both the banking system and the capital markets. Inflationary pressures are bound to build up, and that will lead to economic controls. The Treasury will look for ways to regulate capital markets still further, and this will undermine them. There is no worse signal than the Treasury’s intrusion into maintaining zombie institutions that should fail and be re-organized. This has already happened in the cases of Fannie Mae and Freddie Mac.