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Overnight Wonder

The end of the year is as good of a time as any to look back and summarize what happened over the last year.  In the process of doing that I came across a tidbit of information that clearly deserves a post of its own.

From March 2008 through 2009 the Federal Reserve acted quickly.  Most people weren’t even aware of the crisis until October, but the Fed was on it.  Emergency overnight loans at low interest rates were the cornerstone of their effort, quietly fronting interest-free scratch to investment houses that were in deep trouble.

How much did they loan out?  Sen Bernie Sanders sponsored a bill that forced the Fed to tell us.  It turns out it was $9 Trillion – that’s money on top of the $4.7 Trillion that we knew was used to get the economy rolling.  All together the total “stimulus” is about 1 year’s total production in the USofA.

Why did they make so many overnight loans?  To answer this we have to go back to March of 2008 to understand what was happening.  The Fed – and everyone else – were still trying to keep the crisis quiet and under control.  I didn’t focus on it until June 2008, when it was clear that Merril-Lynch was in serious trouble.  By then it was far too late to save them, but the Fed was trying hard.

We still would not know the size of this effort had it not been for Sen. Sanders.  But what is clear, more than anything, is that there was indeed a sense of urgency in the institutions that manage our economy long before most people were aware of it.  Claims that “No one saw this coming” that were made from October 2008 on have been finally dispatched.

But there’s far more to this story than even $9 Trillion, which comes on top of $4.7 Trillion in “stimulus”.  The Fed would not loan this much money out at low rates without a strong sense of urgency – or even panic.  Compare that to the relative calm that our has infused our politicians and politics ever since, freezing our public institutions into inaction over arcane details focused on “talking points”.

The disconnect is chilling – and great fuel for conspiracy theorists.

The difference between a Recession and a Depression is often listed as a mere matter of magnitude. These are only words and we can define them any way that appears useful to us.  It is clear, however, that the magnitude of the economic problem is much larger than anyone has been willing to discuss publicly.  Those in charge do not want public involvement, possibly “meddling,” in their affairs and have downplayed the situation – at the same time they used every trick in their book to conjure about one year’s production out of thin air.

That’s how I came to call this a “Managed Depression”.

Control over the language, which is to say the terms we use to talk about this, is the smallest part of opening up the discussion of what is happening.  We clearly have to wrest this away from “experts” and into the light of day.  Sen. Sanders did his part, and now it’s up to us to make some use of this information.  Control over the media, the information, and even the language of this problem have kept us as a people from focusing on what really needs to happen.

It is impossible to summarize what happened in 2010 without understanding the tremendous effort that is going on to keep the economy under control.  It changes how we look at what our leadership has been doing and makes an otherwise simple year-end exercise very enlightening.

Want more information on a point?  Follow the links!  I’d love to know what you think of all of this.  Thanks!

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13 thoughts on “Overnight Wonder

  1. What your telling us here is that these crazy-big numbers you’ve been throwing around just tripled and that we would never have known how much they threw at this if the Fed could have kept it quiet.

    This is really serious and no one is talking about it. They must all be scared sheep. I can’t believe that this isnt getting more press.

  2. Dale, that’s an excellent way to look at this revelation. If the tab triples every time we ask how big it is we have to wonder when we will get the whole answer.

    Here’s another way to look at this – at a total of $13.7 Trillion (that we know of) the total emergency/stimulus/etc was about $100,000 for every household in the US.

  3. This is all so scary I guess I can see why no one wants to talk about it but I can’t believe how much money this is.

  4. Good job. Don’t know if you’ve read recently that the employment studies have gone to five years of unemployment from the previous standard of two. This is where I really get frustrated. Income security. The linkage between work and income where there may be no or few jobs. The hostage taking that occurred over income taxes etc. etc.

  5. This piece got a bit lost in the holidays, which I think is a shame. The problems that are identified in this little tidbit of news are breathtaking in many ways, but it was successfully buried.

    Unemployment is a nearly permanent condition now, and that has to be solved for us to move on to the new economy. When I see valuations like $6B for Groupon (turned down!) and $50B for Basefook (Facebook) I think we haven’t learned a damned thing.

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