November 2013        

Printing money to support the debt bubble


It has been reported that credit hedge funds have bought up the bulk of the $1,200 billion American junk bond market since 2008, using debt to purchase them, thus increasing the total amount of private-sector debt in the American economy.
     This development brings huge risks to the United States, which is recognised in a recent report by the Federal Reserve System (the US central bank). With the market dominated so heavily by investors who act fast and in herds, any faltering could trigger a mass selling off by these hedge funds, potentially bringing about another financial crisis in the United States.
     The dilemma, of course, is that the US government wishes this debt to be bought up and reduced gradually over time, and so it encourages its purchase and stabilisation through the massive amounts of capital it is injecting monthly into the markets.
     So, in essence, the Federal Reserve’s capital is being used to support the highly speculative, volatile and unproductive profits of hedge funds that deal in hundreds of billions in junk debt.
     If the Federal Reserve stops this support, the hedge funds will withdraw, causing another debt-led financial crisis. Continuing this support will provide the pretext for the continuing assault on the public sector and public services and drive privatisation, again to the benefit of the same money-men.
     In the United States, just as in Ireland, the debt is being used to attack workers, jobs and services and to provide profit-creating opportunities for an increasingly desperate and struggling capital.
     People can either allow themselves to be enslaved by capital’s debt or repudiate the debt and begin to free themselves. That is the choice.
[NL]

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