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Go back some 20 years ago. As a result of the Dot.com bust—which we had forecast in the October 1999 Trends Journal that it would crash by the second quarter of 2020, which it did—the nation was in recession and equities were tanking.
Contrary to popular belief, the U.S. Federal Reserve began to prop up the U.S. economy beginning not with the Great Recession in 2007, but on 11 September, 2001, when terrorists destroyed the World Trade Center, Wall Street on Parade (WSOP) reported.
The day before the attacks, NASDAQ was in free-fall, continuing an apparent collapse: it had lost two-thirds of its value, significantly due to revelations that companies that had recently gone public were judged to be “crap” and “dogs” in the view of the banks that had handled the stock offerings. As Wall Street on Parade noted, the Nasdaq stock market was already in the midst of a full-scale implosion, having lost 66 percent of its market value and wiping out $4 trillion of wealth the day before the terror strike.
Beginning on 11 September, the Fed channeled $100 billion every day for three days to major banks and brokerage firms, both to keep NASDAQ solvent and to keep the financial system intact during the market turmoil following the terrorist attacks, records of the Congressional Research Service show.
“The Fed lent funds directly to banks through the discount window,” a report by the Federal Reserve Bank of St. Louis said.
“The $45 billion in discount loans outstanding on September 12 [2001] dwarfed the $59 million average of the previous 10 Wednesdays.
“As a regulator, the Federal Reserve—along with the Comptroller of the Currency—urged banks to restructure loans for borrowers with temporary liquidity problems. To assist such restructuring, the Fed made additional funds available.
“The Fed passively extended credit to the economy through its role in clearing checks,” the report continued.
“When the Fed clears checks, it credits the receiving bank before debiting the bank making the payment. ‘Float’ describes the amount of money that has been credited to check depositors but has not yet been debited from the check writers.
“The float totaled almost $23 billion on September 12, some 30 times the average float over each of the 10 previous Wednesdays.”
The Fed created an additional $90 billion in liquidity by setting up 90-day dollar swap agreements with the Bank of Canada, Bank of England, and the European Central Bank, according to a report by the Federal Reserve Bank of Chicago.
On 17 September, 2001, when financial markets reopened for the first time after the attack, the Fed announced it was reducing its Fed funds rate and discount rate by one-half of a percentage point each; on 2 October, it cut each by the same amount again, and then again on 6 November, dropping the Fed funds rate to 2.0 percent and the discount rate to 1.5 percent.
On 11 December, both rates were trimmed by another quarter of a percentage point, bringing the Fed funds rate to 1.75 percent, its lowest rate in 40 years.
One bank was so grateful that it sent “a thousand packages of Lifesavers candy to each of the 45 Fed offices,” according to the Chicago Fed’s 2001 annual report.
On 14 September, Wall Street banks were overdrawing their Fed accounts by $150 billion, a record and more than 60 percent above typical amounts, an internal Fed report found, and the Fed and its regional banks waived overdraft fees for these de facto loans, WSOP said.
Another internal Fed report, this one drafted in September 2002, noted that New York City received $11.2 billion to help cover the cost of debris removal and “direct aid to affected individuals and businesses,” which the report did not name, “just over $5 billion in economic development incentives…and another $5.5 billion for a variety of infrastructure projects.”
Immediately after the Twin Tower disaster, “the Fed begins to flood the financial system with record levels of liquidity by executing repurchase agreements [repo loans]. These overnight loans, collateralized with government securities, seldom top a few billion dollars each day,” the Chicago Fed’s 2001 annual report stated.
However, on 12 September, “the Fed injects $38 billion, more than double the previous record.” The next day, “the Fed shatters that mark with $70 billion. The next day, the Fed injects…$81 billion,” the report noted.
Which banks received what volumes of Fed support have never been disclosed, nor has “which banks borrowed $495.7 billion in repo loans in one day last year,” WSOP pointed out.
TREND FORECAST: As Gerald Celente has often noted, “When all else fails, they take you to war.” As the hard facts and data prove, America’s stock markets were crashing and the economy was diving deep into recession before the terror strikes of 9/11. Yet, the facts of an economic and market meltdown prior to the attacks are long forgotten.
There are still many unresolved issues regarding who knew what and when before the planes allegedly brought down the Twin Towers, collapsed building 7 and struck the Pentagon.
For additional observations, we suggest you read “Another Look at 9/11: Ask Not ‘What Happened?’ But ‘Who Did It?’” by former intelligence officer of the CIA and Executive Director of the Council for the National Interest, Philip Giraldi.
And, we also note this since it can, and will happen again. When equities and economies crash, there will be a 9/11, 2.0 type of incident that the government will use to divert the public’s attention from the financial calamity that was long coming and instead focus on attacking—as President George W. Bush did back then—the “evil doers.”
And just as the masses followed murderous Bush in the Afghan War and the Iraq War that he lied them into, so too will they follow their leaders into the next War on Terror or the War Against the Terribles… in a country near you.