'Fed creates money for interest not jobs'
Thu Jul 28, 2011 7:48AM
Interview with Michael Burns, economic analyst
The Federal Reserve has paid trillions of dollars to all kinds of financial institutes, supposedly expecting them to create jobs for Americans, but instead the money goes to buying government bonds for interest.
Press TV has interviewed Michael Burns, an economic analyst, about why America and its economy are on the brink of collapse and whether there are any permanent solutions to the current crisis.
Press TV: Let's get the views of economic analyst Michael Bruns in New York, tell us Michael, if you can briefly, how did the US, the world largest economy come to this catastrophic default on its debt? What has gone wrong?
Burns: One thing, decidedly the law requires that the debt should be raised on a sequentially basis, but more over, or most importantly, this is the third time that American people feel they are being lied to with very severe consequences.
The first time was in 2003 with the weapons of mass destruction that Iraq was supposed to posses, an out-right misstatement, a lie in a minds of many.
The second time was in 2008, when there was this great uproar over the world economy collapsing and resulting in the taxpayer having to financing the big, inflated salaries and bonuses of Wall Street, that was stick in a heart of confidence of American people.
And we have to face this non-sense of chicken in sky is going to fall, well it is not goanna fall, and that is how American people view it,... many of them.
And with this noise from Washington, this hysteria, if you will, and there are many of our citizens that are dickens about it, and not responding.
Press TV: Michael Burns tell us about the Federal Reserve. Let's see what they have done. Since 2008, the time of financial crisis, the US Federal Reserve is giving away an estimated USD8 to USD16 trillion to the large banks and other financial corporations, which was supposedly for job creation, why hasn't this created jobs? And in turn why hasn't the US economy picked up?
Burns: Well, it hasn't created jobs because... What the Federal Reserve did was just run the printing press, they just created money and they pushed it to the banks. The banks take this money with practically zero interest rate, and put it in government bonds at 4%, almost [banks] printing money themselves, what they don't do is not lent it out.
And the reason they didn't lend it out is because the corporations are very nervous about creating jobs, and that is for two reasons.
Number one, during this recession, they were able to use the computer technology to eliminate and make far more efficient their management structure, so they do not need the new jobs.
And second of all, they are concerned about the potential mischief by Obama Administration in terms of raising taxes.
Press TV: Tell us about the Federal Reserve, that money that they paid to help the banks and other institutions,...basically they[banks] have rebounded, and in return, they[banks] were suppose to have helped the economy in terms of creating jobs, wasn't it? We are talking about the US Federal Reserve, which by the way it is not part of the US Government, and many people don't even know that.
Burns: Well, the Federal Reserve has a limited function. The job of the Federal Reserve is to check the market and they have done that.
They also have an ability to expand the money supply, and they have done that.
They also have an ability to control short term interest rate. And they have done that, and even brought that [interest rate] down to practically zero, as a result the banks are now sitting on all this cash, and the corporations are also sitting on a lot of cash, they just not creating jobs, because the demand isn't there.
MH/GHN
