Thanks to Reckless 'CARES' Act, Fed Is Printing Cash to Buy Corporate Junk Bonds

P. Gardner Goldsmith | August 12, 2020
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In June, we reported on one of the disasters hidden in the toweringly unconstitutional “Coronavirus Aid, Relief, and Economic Security” (CARES) Act – the pandering, $2.2 TRILLION “stimulus” pork-spending statute that the D.C. jaw-swingers passed in April to “help America” handle government shutdowns ordered in frenzied response to COVID19.

That disaster was the move to tell the Federal Reserve it could buy corporate bonds, and now, Americans are beginning to hear about the practice – and it’s as bad as we feared.

As I wrote then, Americans are now shackled with a single entity given the monopoly on the issuance of currency. Here, in the supposed “Land of the Free,” this government-granted monopoly lends to all banks, buys U.S. bonds, and controls interest rates, and now, it can literally buy debt instruments from corporations. It can create money out of nothing and directly hand it to special corporations.

According to Jeff Cox, of CNBC, this is precisely what the Fed has started to do.

The Federal Reserve in July bought up more bonds from blue-chip companies including Microsoft and Coca-Cola, while it added to its positions in junk debt and made its biggest Main Street loan to a ski resort and casino in the Pocono Mountains.

For those who are unfamiliar with political-economics (read: virtually everyone in politics), this is fascism. It is the combination of the state and businesses, allowing certain big businesses to gain favors (called Rent Seeking) at the expense of competitors and consumers, even as politicians direct more and more of the economy according to political whim.

Practically, this process allows the Fed, with its government imprimatur, to shower money on businesses by buying their bonds, and if the businesses can’t pay back later, all they have to do is issue more bonds, and the Fed can buy those – which is precisely the process the Fed and the US government use to prop up the US spending monster and its concomitant debt.

Writes Fox:

Though the Main Street initiative has the capacity for $600 billion in loans, the first month saw just 13 companies gain approval, with a total value of just over $92 million. That has come amid criticism that the standards are unattractive to both borrowers and lenders, despite the Fed reporting that it formulated the program after feedback from thousands of sources.

That’s pretty speedy analysis of “thousands” of sources. Can you read that fast?

Does it worry anyone that this closes the circle on corporate cronyism? That, literally, there is no possible way to stop a bank that can create its OWN CASH from handing it to special interests, even when consumers themselves have opted NOT TO GIVE THEM OUR BUSINESS?

And, as I mentioned in June, this doesn’t just apply to “business” corporations. It also means that the Fed can buy bonds from bankrupt states, which means massive expansions of reckless state spending, more cronyism, and more concentration on state government, rather than on private initiative and risk analysis, for business ventures.

This literally is no different than the economy of Communist China.

So, a year from now, when prices for pretty much everything have increased upwards of 50 percent, just remember, this was part of the poison, and remember, the only way to prevent this kind of glad-handing cronyism is to completely disconnect the state or any state-granted monopoly, from the currency people decide to use in free commerce.

One cannot have free commerce if the currency one uses is mandated by the state and manipulated by cronyist banking interests and politicians.

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