With three more financial outlets collapsing under the economical
meltdown last week, queues of angry people outside banks with
no access to their money, inflation at its highest rate for 27
years and scores of economists predicting a recession may tip
into a full blown depression, president Bush reacted by declaring
that the economy is still fundamentally sound.
"I think the system basically is sound, I truly
do," Bush said. "And I understand there's a lot of nervousness.
. . . But the economy is growing, productivity is high, trade
is up, people are working. It's not as good as we'd like, but
. . . to the extent that we find weakness, we'll move."
Bush joked that he had now heard of $4.00 per gallon
gas, after he notoriously denied any knowledge of those forecasts
in a press briefing in March.
A sound system seemingly encompasses one that has
led to 27
year highs for inflation rates. A report released
by the Labor Department today revealed that on a 12-month basis
the producer price index soared 9.2 percent in June, the largest
increase since June 1981.
The report also showed that consumer prices rose
in June by the biggest amount since September 2005 in the aftermath
of Hurricane Katrina, as gasoline prices surged. Prices
were up 5 percent from a year ago, the biggest year-on-year
rise since 1991.
Watch the Bush press conference:
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Fed chairman Ben
Bernanke responded by telling Congress that his outlook
for better growth and cooling inflation remained subject to a
"high degree of uncertainty."
The figures confirm what economists such as former World Bank
head turned economic whistleblower Joseph
Stiglitz have long predicted, we are in a sustained
period of "stagflation".
As Gary Thayer, Chief economist at Wachovia Securities points
out, "This increases concern that the Fed is not going to
be able to lower interest rates if the economy remains weak. And
as long as the economy remains weak, it will be hard for the Fed
to raise rates to fight inflation."
Stiglitz has previously hit out at Bernanke, charging him with
failing to counter the deterioration of the real-estate market
by procrastinating over interest rate cuts.
Bernanke has also come under heavy
criticism from Congressman Ron Paul who held the
Fed head to task over his refusal to address the decline of the
dollar and its clear link to inflation.
"Inflation comes from the unwise increase in the supply
of money credit....to argue that we can continue to debase the
currency, which is really the policy of that you're following,
purposely debasing value of currency - which to me seems so destructive....it
just puts more pressure on the federal reserve to create capital
out of thin air in order to stimulate the economy and usually
that just goes into mal-investment," said Paul.
Americans are now witnessing the fallout from this destructive
economic system that The Fed, the president and the White House
still refer to as fundamentally sound.
No where has this been more evident than outside branches of
failed IndyMac banks across America where furious customers have
for hours in order to get access to their money,
to no avail.
This could herald the new image of America with
news that “U.S. regulators are bracing for dozens of American
banks to fail over the next year.”
According to an
International Herald Tribune report, “Troubles
are growing so rapidly at some small and midsize banks that as
many as 150 out of the 7,500 banks nationwide could fail over
the next 12 to 18 months.”
"In a country that holds itself up as a citadel of free
enterprise, Washington has morphed from being the lender of last
resort into effectively the only resort for home loans for millions
of Americans engaged in the largest transactions of their lives."
Goodman succinctly states.
Bush went on to blame Congressional democrats for
the economic crisis and concluded with the rather telling statement
"it's been a difficult time... but we will come through this
challenge stronger than ever before."