Going Broke: ZIRP and the Imploding Speculative Economy

05-25-2010 • OfTwoMinds.com/blog

The grand experiment of the State controlling the private economy has failed. The grand experiment was to eliminate capitalism (risk, loss, destruction of wealth via competition) from "Capitalism" and thus banish pesky competitors to the Plutocratic Elites, and vanquish the business cycle of rising and falling demand and credit from affecting the State's collection and redistribution of taxes. As the needs of the Savior State, its various fiefdoms and the financial Power Elites exceeded the production of the real economy, the State/capital partnership expanded globally in order to stripmine the unplundered resources, assets and populations not yet burdened with debt. As I wrote in the chapter The Crisis of Predatory Global Capitalism (also in Survival+ The Primer), the exploitation implicit in "globalization" was Neoliberal Capitalism's Last "Fix." The over-extended, over-indebted, over-capacity, over-indulged domestic populations were no longer able to borrow and buy enough goods to fuel the astounding over-reach of the State and its Power Elite partners. The "fix" was to go abroad and exploit/stripmine others' resources, labor and assets, and introduce them to the addictive charms of easy credit at low introductory rates. Once globalization (essentially an updated, "improved" version of colonialization) harvested the easy fruit, global capital returned home to stripmine the domestic citizenry via various asset bubbles which incentivized speculation and consumption funded by massive borrowing. Let us be crystal-clear about the purpose of zero interest rate policy (ZIRP): to destroy all incentives for saving and capital accumulation, and to reward and incentivize borrowing, leverage and speculation. More credit means more debt, which means more fees for Wall Street, more fees and interest payments to the banks, and more taxes to the Savior State. Only the borrowers lose. Once the housing bubble collapsed, taking down most of the remaining wealth of the "middle class" (now nothing but a useful fiction to the financial Power Elites and the State), the Federal Reserve pushed the credit lever to maximum via its Zero Interest Rate Policy (ZIRP) and abundant credit to banks.