Revolution Monday: A Fed Beyond “Money”?

http://urbansurvival.com/week.htm

 

March 31,  2008

 

You might want to put a big red “X” on today’s date.  It may mark the start of the biggest financial revolution in the nation’s history, and is a landmark in the planned, or otherwise, transition from ‘free markets’ to an emerging ’socialism for the rich’ which is aimed at shifting the cost of bailing out bankers and speculators to the wallets of America’s working class. 

 

It will come packaged as a 200 page set of proposed regulations which  broad new powers to the (not really) Federal Reserve, designating it a “market stability regulator”.  In plain English, it means something like “if it would be in the public’s overall best interests to be a market manipulator, it’s ok.” 

 

Which is to say, if markets are going in a direction not desired by the PowersThatBe, the Fed will have expanded powers to venture out of the singular business of printing the nation’s money (and charging interest on it) into the new realm of regulatory control in commodities as well as securities; it’s billed as the biggest regulatory change since the Great Depression.

 

I’ve demonstrated that we’re already in a Second Depression now; see the Aggregate Index chart here.  The key thing is that unlike the Great Depression, which was marked with high unemployment and massive deflation, this Second Depression has been [human] capitalized, such that a single person working can no longer support a family at a 1950’s standard of living.  Husbands and wives both work just to make rent, and judging by foreclosures, even that’s not enough lately.

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Free markets are marvelous things:  Left entirely to their own, they go through periodic massive economic corrections called Recessions and Depressions.  Sure, they’re uncomfortable as hell, as the Panic of 1873 and the Depression of the 1930’s underscore.  But in socioeconomic terms they periodically destroy malinvestment and wipe out bad debt, just as long waves in economic cycles have done all the way back to the Jubilee Years in the Book of Leviticus.

 

Today, the proposals which will be put forth by the Treasury Secretary will make it clear:  Given the abuses, lying, cheating, misrepresentations, and other morally bankrupt practices that have accompanied the Housing Bubble’s collapse, this administration, along with the political duopoly (republicorps/democorps), will attempt to prop up the financial system so that America can continue its ‘business as usual’ and pass on a continuously higher mountain of debt to future generations, and thus ensure servitude to holders of debt and government in perpetuity. 

 

You don’t still believe in those antiquated limited powers of government as the Framers envisioned envisioned in the Constitution, do you?  Hand me my crack pipe and another bottle of Jack, please.  You just ain’t getting it.

 

“This is New America -  the Land of Do-Overs:  Lie, cheat, and misrepresent CMO/CDO’s?  Oh well:  Here, have some money, which we’ll just print up on the public’s behalf without congressional review, and be on your way.  Just be better (*or at least move clever about it) next time, would you?”

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Consider that the economy operates much like a self-cleaning oven.  You can bake just so much in an oven before it gets dirty.  And, just like baking, sweetheart and crooked financial deals create a little something of a mess (*like pies do when baked), the more sweetheart deals and liar’s paper, the more urgent the need for cleaning.

 

Periodic economic corrections are like putting the oven on “Self Clean” for a cycle.  There’s a lot of smoke, no shortage of fear, and some serious pain to the pan drippings,  But after a while the smoke clears and the oven gets cleaned out.  In the same way, the economy can get back to its natural state of cooking right along.

 

What we awaken to this morning, though, is that the ‘guardians of the oven’ (if I can characterize them as such) have so many sweetheart deals cooking and so much pie baking that instead of letting the self-cleaning cycle take place, they will instead rewrite the manual on using the oven.

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To carry the analogy one step further:  There was a time when all the Fed (whose ownership is a bit murky – we’ll get to that in a minute or two)…all the Fed did was essentially regulate the oven temperature.

 

Today’s proposal will expand the Fed’s role:  By getting into regulation of  areas previously the domain of the Securities and Exchange Commission, the Office of Thrift Supervision and the Commodity Futures Trading Commission to name a few, what the Fed is, in effect, going for is not only control of the oven’s temperature, but also what goes into the oven.  More powers for the PowerrsThatBe.

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Don’t get me wrong:  I don’t want an economic recession or worse, a depression.  But, on the other hand, the US Dollar was been watered down since 1913 from buying a whole dollar’s worth of purchasing power to a scant 4.5918-cents worth.    Fine guardians of the oven, they have been, indeed. 

 

Perhaps the PowersThatBe know National books are best cooked slowly?  Sound money?  Created by Congress?  Did you skip that “New America” concept again?

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A friend who’s a financial writer for one of the MainStream teevee networks thinks I make too much of today’s event, writing in part:

“Revolution tomorrow [Monday]? I don’t think so. Revolution connotes big change and a replacing of the old guard. All I see are more vagaries than specifics in the Executive Summary of what amounts to the the Paulson “Homeland Financial Security” plan. This is typical end of administration clap trap to fool the people into believing that something “sweeping” is being done. This is also vintage Bush playbook – just wrap it all up into a giant government agency. At its darkest, it’s a power grab. What investors and the general public really need is greater transparency and greater tightening of accounting standards so that we and the financial industry no longer have to guess which financial entity is solvent. After all, is the present crisis about solvency where banks are hoarding and not willing to lend to each other in overnight and short term markets? Plus, Paulson is all about slight of hand and controlling information (subprime is largely contained, said he many times last year) and perhaps if we knew the answers to the issue of solvency, many might not be able to handle the truth! But transparency and truth are still better than flying in a cockpit with no instruments and windows. We’re not getting that with this new “sweeping” plan.

…

All of what we hear [Monday] will largely become moot when more financial shoes related to the OTC derivatives mess begin to drop. Ultimately, there will be the stark realisation that even the Fed and Treasury shall be buried once the OTC derivatives start to unravel en masse. It’s an end game that I’m surprised to see has come so quickly to the forefront and to which Paulson is merely firing flares at with a small handgun.”

Perhaps.  But, I think not.  I’m expecting this roll out in the same way the (misnamed) “Patriot” Act did:  Groundwork laid, pretexts presented, and then a sudden crisis   to kick things over onto the new path in emergency/reaction/no deliberations mode.  The OTC derivative meltdown, as my friend mentions, would fit the bill just fine, and I shouldn’t be surprised if it comes along more quickly than my friend expects, too.

 

Meantime, emails are popping up in the inbox right and left explaining in the most graphic terms why the bottom in terms of housing, employment, and the economy is in general, is nowhere near ‘in’ yet:

“I am a real estate/mortgage broker of many years in the Las Vegas market. That this did not all fall in sooner still amazes me. Since 2002 I have been selling out and as of early 2006 was out of all commercial and residential. Last summer, say June, I sat with several local bankers and other well connected individuals having an end-of-week cocktail. It was put forth by several of those at the gathering that the real estate/financial market had clearly crested, that we would see over a 50% correction in most real estate prices in the next couple of years, and that before this was all done entire subdivisions, city tracks of land, and commercial parks would be under management via Federal Reserve bail outs of the securitized secondary market, ala feudal land lease …. That this land may possibly never be owned again privately, but rather leased on a 50 or 99 year arrangement, much like what is done on other federal land. Most everyone laughed, but some of us, yours included took these words as an ominous omen.

…

Let’s not forget peak everything, solar flares increase in a eleven year cycle blow out come 2012, and food shortages, half of the eastern US is on medication, and I keep telling myself this is only the beginning …… OMG OMG

What most people don’t have a clue to including most federal, state and local municipalities (FSLM) , is that anything and everything that had even the remotest dollar value has been securitized to some crazy overvalued amount and sold by the PTB wonker- stooges and sold all around the world to unthinking institutions and people with too much money and no sense.

In October 2007, Judge Boyko {*US Eastern District Court, Ohio – gu] pointed out the obvious and demonstrated the testicular mass in the Deutsche Bank rulings, securities do not have standing in court for which they can seek remedy through foreclosure. Securities are only owned by shareholders and represent a speculative derivative, not ownership/title.

FSLM have been securitizing property tax debt, parking ticket tax debt, income tax debt, blah, blah, blah and selling this worthless, speculative paper by means of the PTB wonker-stooges, who collect great bonuses doing so. FSLM have been creating money out book entries of alleged debt, by use of securitization, to build elaborate, non-sustainable governments. Hence the collapse of the muni bond market.

It is not just the USD that has been overprinted, but through the use of securitization, hedge funds, and other specialized monetary vehicles have been passing this worthless paper to the point that no one has any idea what is out there or what it is worth. It is sooooooooooooooooo bad and irretrievable. FUBAR

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The present financial system is doomed. Likely its successor system will also be dooooomed until a major paradigm change is made towards individual and local community sustainability. I don’t see that happening anytime soon. SO ….. breath deep because in-and-amongst the wreckage of bygone systems of government and thinking are the beginnings of who we will all have to become. Plant your garden, cherish your friends, be prepared and work your dreams. “

Not to worry Hank Paulson, George Bush, and Ben Bernanke are going to save us all.  The price?  Just a little more authority, a little more printing of paper, a little less sound money, and a little more faith in those who rule us, please.  Isn’t it always the same mantra?

 

So, you make the call:  Is today when the next mini-revolution in the seizure of the Constitutional government takes place, as were the days in 1910 on Jekyll Island where the plot was hatched to seize America’s money and have government pay interest on it’s own money to a group of bankers?  Or, is this the dawn of a new prosperity?

 

Sidebar:  Who Owns the Fed? Most people think the Federal Reserve is owned by the government.   It is not.    The Federal Reserve website attempt to persuade that the Fed is somehow part of the government by saying: Who owns the Federal Reserve? The Federal Reserve System is not “owned” by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects. As the nation’s central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as “independent within the government.” The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations–possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year. To be sure, there are lots of folks on the ‘net who have researched the relationship of Fed member/share owning banks to overseas banking interests, the core families of the PowersThatBe, and foreign (*British) government interests, such as this site.   A more moderate (*and well footnoted) assessment may be found in Bill Woolsey’s work at LibertyUnbound.com.

 

Today is like to be a ‘flash in the pan’ kind of financial news event  because if I’m right, we’ll have some major “breaking news” events along shortly, to conveniently overshadow this one so the PowersThatBe can get this implemented under some kind of financial emergency and skip the bothersome discussions with congress.  They don’t matter much lately, anyway.