Zimbabwe's new finance minister halves spending
By Tony Hawkins in Harare
Published: March 19 2009 02:00 Last updated: March 19 2009 02:00
Tendai Biti, Zimbabwe's new finance minister, yesterday halved spending plans for 2009 and cut revenue projections 40 per cent, in one of the first signs of change under the country's new power sharing government.
Presenting his first budget to parliament, Mr Biti, a member of the Movement for Democratic Change, said the government would now operate on a cash budget basis: "What we gather is what we eat," he said.
As the U.S. joins the U.K. and Japan in creating fiat money out of thin air, thus overtly ratifying once again why going off the gold standard is important for the Merchants of Debt, Zimbabwe has gotten some religion.
Things are different in the former citadel of capitalism, however.
Yesterday, the Fed issued a press release that contained statements worth commenting on:
. . . Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.
DoctoRx here. The statement does not even evidence deflation. The overt statement by the Fed that low inflation will not foster price stability in the longer term is ridiculous. My translation of this language: "The Fed is overtly out to gin up another inflation, thus allowing all the Federal, Agency and other debt to be paid back in cheaper nominal dollars."
In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability.
Translation: "'All available tools' means whatever it takes to keep the financial community well-fed, no matter what the state of the economy, the level of inflation, or even the legality of our actions."
To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.
Translation: "We have no sense of discipline. In addition, we have decided to support the one major part of the economy, the residential housing market, that has no effect on the competitiveness of the U. S. economy internationally, with unlimited sums. Further, we are doing this for two reasons: we have given up any pretense of independence from our creators, the Federal Government; and we must keep our buddies on Wall Street afloat."
The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets.
Translation: "We can hardly keep track of all the lending facilities we have created. Our philosophy is that debt without end is the solution for a crisis caused by too much debt. We also have little interest in whether the Federal Reserve is financially sound, so we will continue to add to our holding of , thus commemorating the one-year anniversary of the Bear, Stearns/JPMorgan Chase bailout wherein we put Bear's junk mortgage-backed securities on our balance sheet and lied through our teeth to Congress that these assets were ultra-high quality."
The Committee will continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of evolving financial and economic developments.
Translation: "We're loving living large!"
We now know why Barack Obama has no concerns about both saving the financial companies, reforming health care, etc., etc., despite projecting a cash deficit for his first proposed budget of about $2 Trillion. By directly monetizing the Federal debt, Ben Bernanke has secured his renomination by demonstrating that he will play ball with any President if that President plays ball with Wall Street.
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