China’s state media today reports on the real reason behindthe Wall Street meltdown and a subject that the mainstream US media dare notmention - the Federal Reserve’s overissuance of currency - which theChinese say is part of a wider agenda to justify increased control over theglobal economy.

The Bush administration [2] today announced a planto use hundreds of billions of dollars of taxpayer money to buy up up badmortgages and other debts. The process of injecting more fiat money into analready over-inflated system had the desired effect - the Dow Jones shot up 450points - but the dollar, following a brief jump, began to plummet.

According to numerous Chinese state media news sources today, theFederal Reserve’s continued zeal for propping up the market by injectingillusory liquidity is part of an agenda to gain trust and grease the skids forincreased government intervention in financial markets.

China Finance , China News and Chaobao Financial News, all state ownedmedia outlets, slammed the Fed for taking action that will only make long termeconomic conditions worse and devalue the dollar by “creating money thatdoes not exist which leads to the inflation of liquidity,” a policycontrary to China’s position as a holder of vast reserves of US dollars.

The analyst quoted by Chaobao Financial News highlighted“that when there is market failure, the paramount purpose of governmentintervention should be saving the market for the benefit of the people: Relief,Recovery and then Reform,” and that “Protecting the rights ofpeople who are suffering in the housing market and as a result of high oilprices should be treated as a priority.”

The analyst added that by concentrating on saving just a few largefinancial companies, the Fed is creating wider financial chaos while arousinganger and suspicion by “only protecting and encouraging largecompanies’ wrong doing.”

CEIBS Professor of Economics and Finance Xu Xiaonian told aconference yesterday that “The fundamental source of Wall Street’smeltdown is caused by Federal Reserve overissuing currency.” He cautionedthat the US government has already exceeded its scope in terms of interventioncompared with their usual policy.

Similar sentiments were echoed by economist Zuo Xiaolie, who saidthat the amount of money injected into the market will have little real impact,but that such measures are a “Narrow minded way that the Federal Reserveuses to diversify the pressure of currency adjustment to other countries, whichleads to the devaluation of the dollar, causing imbalance in the globaleconomy.”

“The amount of money that has been put into the market cannot fundamentally save the market,” said Xiaolie, adding that the movewas merely part of an agenda to “regain the trust and justify futurefurther intervention in the economy.”

On Wednesday, China’s official People’s Dailynewspaper, the voice of the ruling Communist party, said that the US had unleashedeconomic “weapons of mass destruction” and set off a“financial tsunami” by allowing Wall Street lenders to trade insubprime debts and unstable financial derivatives, according to a [4] Press TV report.

[5] China has previously threatened to liquidate its vast holding of US treasuries, amounting to$1.33 trillion, if Washington imposes trade sanctions to force a yuanrevaluation. The Communist power has also repeatedly expressed its anger at theFed’s indifference to the weakening dollar. If China were to dump thedollar it would likely set in motion a chain of events that would lead to acollapse of the greenback.

We know we are in trouble when the Chinese Communist Party soundlike bastions of sound money policy and fiscal conservatism in comparison tothe Bush administration and the Federal Reserve, who in creating more money outof thin air continue to bail out their friends on Wall Street while theeconomic future of hundreds of millions of American citizens is sold down theriver.

SOURCES

Chaobao Financial News: [6] http://www.usqiaobao.com/zhuanlan/2008-07/24/content_127956.htm

China Finance: [7] http://www.caijing.com.cn/2008-09-18/110013626.html