Credit crunch is just the beginning

“You have a real business oriented government...looking like a socialist country now, where all of the financial sector is going to be owned by the state at the rate that we’re going,” said Trillion Dollar Meltdown author Charles Morris.

Morris credits former Chairman of the Federal Reserve Alan Greenspan for much of the recent financial turmoil. In 2000, amid the dot-com bust, the U.S.’s Gross Domestic Product dropped considerably. In response the federal funds rate, the interest that banks are charged, was lowered to the point that it passed the consumer price index.

While the market rapidly picked up in 2002, the Federal Reserve did not adjust the funds to meet inflation over two years. As a result the banks were charged a disproportionately low amount of interest and took advantage of the misstep, essentially treating their loans from the Federal Reserve as free money.

“We have notion that the credit crunch is just the first step,” said Morris.