Hedge-fund Hogs, Lunatic Leverage and Banks Gone Beserk
by Loretta Napoleoni
Author of Rogue Economics: Capitalism’s New Reality (Seven Stories Press) Just released!
April 15, 2008
Exclusive to Gregpalast.com
In the beginning there was Alan Greenspan. Appointed by Ronald Reagan in the late 1980s as chairman of the Federal Reserve, Greenspan was a Master of the Universe, a title he earned by working for decades on Planet Wall Street. Greenspan took office as Fed chairman while the Evil Empire of Moscow was collapsing; after years of ruthless conflict, known as the Cold War, the Confederation of the Free World gained victory and Greenspan was tasked with helping Western capitalism colonize Planet Earth. Worshipped by Western high finance – the Supreme Council of the Free World – Greenspan was considered the High Priest of future profits.
Greenspan eagerly got to work. His most popular move was to pursue a deflationary policy. He began cutting interest rates, which reduced the cost of capital. This was music to Wall Street ears. Victory over the Evil Empire had opened its borders for workers who had until then been trapped inside; these workers quickly joined the Western Europe labor force. In the space of a few years, the West’s labor supply doubled and salaries began falling. As labor costs shrank, profits rose.
Each time the storm of a crisis linked to globalization gathered on the horizon, Greenspan dismissed it by cutting the interest rate. This happened in the late 1980s with the Mexican …more