A Critical Turning Point In American History

We progress, marching forward leaving behind us a trail of yesterdays, filled with events large and small, assembling memories, but some of the more momentous occurrences rise to a superior level which we include in our collective “history.” In that wake of our advance some of those momentous waves swell further, rising to become events that only hindsight can identify as pivotal moments in that shared recollection.

Such hindsight is not always 20/20. We may be aware of the events as they unfold, but their significance and impact on our march forward is not always self evident and years may pass before they become so. Self-serving motivations too often imbue the retrospective lenses with prisms which deliver infinite varieties of perspectives. 

For over four years we have been instructed by those supposedly most knowledgeable and most insightful, occupying positions of leadership advancing society forward beyond the now and into the great unknown, that a new and magically wondrous elixir named “QE” would be the salve to all anxieties. It matters little that QE stands for Quantitative Easing, and may as well conjure up notions of a long-reigning monarch, since its true long-term consequences appear beyond our collective comprehension. Nevertheless, its impact is not as benign as one queen’s influence on ‘her people’. With minimal scrutiny or analysis by most of our media, but with the unrestrained approval of Congress and the Administration, The Federal Reserve proceeds with its unrestrained expansionary monetary policy. It pretends that this is good medicine for a Nation yearning for a return to economic growth, unaware that a printing press, while capable of printing unlimited dollars, cannot print a single job. It also pretends that its expansionary fiscal policy is enabling the hoped-for purchase of homes and cars. It pretends that low interests rates render the escalating debt load inconsequential. The reality is very different.

QE, QE1, QE2, QE3, and QE4 ad infinitum, indulge the Federal government’s insatiable expectations of unrestrained spending. The Fed will continue to buy up billions in Treasuries and Mortgage Backed Securities from member banks well into the future (on your behalf – and remember that those major too-big-to-fail banks are still burdened with toxic debt). The Fed’s actions will also enable Tim Geithner to sustain his schemes for financing friends of the Administration such as he did the unions in the GM bailout, or the brilliantly invested hundreds of millions in Solyndra.

The QE program is to continue until unemployment falls below 6.5%, or inflation rises above 2.5%, and the interest rate of 0% will be held until at least 2015. Other than those who watch their savings shrink each month, does anyone care? Not Congress, certainly. We may have structurally experienced the boiling frog metaphor.

The mandate of The Fed is supposedly to support job creation and to keep inflation in check. It pretends to be concerned with inflation while creating truckloads of debt. How is this not going to produce run-away inflation in the long-term? It can be argued that real inflation has been running at well above the government published 2% – your own cost of all goods will provide some indication. Additionally, 0% interest has not and will not launch a rush to banks for loans. 0% interest is, however, rewarding The Fed’s friends with the cheapest money they’ve ever had access to, enabling them to make money without risk – enabling never before seen executive bonuses. This action by Ben Bernanke in fact works against new or riskier businesses looking for loans from their local B. of A. or Wells Fargo bank managers.

‘Liquidity’ is not the barrier preventing the creation of jobs by corporate America, large or small. What else do we know?

•  We know that larger corporations are refraining from investing in capital goods and are only tepidly bankrolling increased productivity.
•  We know that most of the bank reserve increases since 2008 are sitting idly on the sidelines, as is a vast amount of corporate cash.
•  We know that current unemployment is ‘structural unemployment,’ which could mature into a long-term malignant disorder. 
•  We know that new dollars created without the ‘backing’ of relative increases in economic activity (gold was once used as backing), places excessive downward pressure on the value of all dollars. 
•  We know that one major constraint to job growth is the current lack of confidence, and that uncertainty can be diminished, even eradicated, with energized leadership. 
•  We know that unrestrained government spending stimulates very little confidence, and fear expands to fill that void, stifling ‘job creation’ by companies afraid to stray from the secure status quo. 
•  We know that The Fed’s activities have resulted in relative decreases in the dollar’s purchasing power manifested in our increased prices for staples such as gasoline and food, and for those who can afford to, the purchase of gold. As recently as late 2008 you could purchase an ounce of gold for under $1,000. Today that ounce costs between $1,650 and $1,700. 
•  We know that The Fed actions have aggressively replaced personal ‘interest income’ with ‘dividend income’ since 2008. 
•  We know that rates of inflation have been understated by the Federal Government, just as the rates of unemployment have been understated. 
•  We know that Congress will not cut back on expenditures and we know that the current Administration is steadfast in its advance of more spending. 
•  We know that the unfunded future liabilities of Social Security and Medicare present a financial challenge far greater than the current total National debt. 
•  We know that The Fed has independent control of the printing presses and provided the  Washington Treasury with seemingly unrestrained amounts of magic cash (read ‘ability to spend’) through debt loaded onto the backs of all taxpayers, while at the same time restraining and suppressing the economy. 
•  We know that most of the political establishment in Washington has been unable to resist the temptations driven by self-interest and is willingly, and knowingly acceding to overindulgent debt financing. 
We know, but are we in denial?

Are we pretending and rationalizing those nasty gremlins away by convincing ourselves that the all-knowing elected leaders, their appointees and their friendly neighborhood banking masterminds will solve our worse problems?  Are we convinced that the Washington centers of influence will somehow coalesce supernal erudition into a pathway around the inevitable economic implosion which our love affair with debt has created?  Surely there must be good reason for some experts to be promoting profligate spending.  No?  Are we accepting rationalizations from QE believers that unlike the personal debt borne by consumers, the Federal government can simply, though carefully, arrange to have printed evermore of the world’s favorite currency to nurse its debt affliction?  With other nations also devaluing their currencies such as the Yen or the Euro, almost in lockstep with the U.S., are we clasped together with them in an only-slightly-out-of-phase race to the bottom?

We must be convinced that experts know something we don’t and that they have grasped concepts which eluded Thomas Jefferson when he wrote in 1814, “We are to be ruined now by the deluge of bank paper.” In a world where opinion has transplanted knowledge, authenticity is infused into unworthy illusions.  Does a majority of Society really believe that it cannot accept reductions in deficit spending while it refuses to acknowledge the need for financial diligence over growing government and unaffordable entitlement programs?  Does Washington really reflect the Nation’s wishes?  What is clear, is that personal considerations, personal influence and personal wealth have vanquished the halls of power in the Capital.

The political leadership has succumbed to the irresistibly seductive ‘Easy Money’ of the incomparably powerful and historically unprecedented Federal Reserve. There is nothing subliminal about the seduction which has taken full and absolute control of Washington. There has been nothing subtle or concealed about the production of new debt, and there has been no subtlety of process in the devaluation of the dollar.  Washington’s addiction is unmistakable, and particularly disturbing is that this addiction has so far had few serious consequences for those holding positions of power.

How did we get here?

Let’s recall some of the more infamous proclamations of just over four years ago. Assertions such as, “this is truly a once-in-a-lifetime economic nightmare,” and “the world’s most cataclysmic financial crisis since the Great Depression,” or how about, “world’s impending financial Armageddon.”  These unnerving and sinister shrieks instilled fear into the consciousness of every resident on Capitol Hill.  The perplexed and readily pliant media ensured that the apprehension blossomed into an epidemic. Admonitions of terror were used by Hank Paulson, then Treasury Secretary and formerly CEO of Goldman Sachs, and Ben Bernanke, currently Chairman of The Fed, who only months earlier in mid 2008 had proclaimed that all was well in the economy and that there was no chance that the subprime market problems would impact the broader economic health of the Nation. And their views on the taxpayer backed Fannie Mae, Freddie Mac and AIG, . . . what, me worry?  And yet, here we were, listening to fear, terror, panic, foreboding and threats. And what were the titans of Wall Street demanding as shivers ran up and down the spines of Washington’s decision makers?  A blank check made out to cash with no conditions.  “Too big to fail” along with, “bailout,” became household terms.

The shivering spines turned into talking heads on every evening news outlet in the Nation, parroting that the once-in-a-lifetime impending armagedon had, “left us no choice.”  The money was borrowed, the checks were cashed by friends of The Treasury and The Fed, and then the declarations evolved.  We heard from politicians with newfound bravery, “whew that was close, but weren’t we great, we saved the Nation from doom,” and the ‘inside’ players changed chairs with Geithner replacing Paulson at Treasury.  Across the country almost everyone with a keyboard and a microphone could repeat the chant, “we were on the edge of a cataclysmic crisis, but The Fed and Treasury saved the day.”  The cry had a rhythm and a plurality accepted this new gospel.  A new Administration moved through 2009 and 2010 with an acceleration of long-term financial commitments and borrowing, along with unrestrained check cashing particularly in favor of friendly ‘contributors’.  The Nation had stepped over a threshold and into a new paradigm.

The Nation had become desensitized.   Its elected officials and the banks had surely known something the rest of us did not comprehend.  On the Hill, the affliction spread as a realization that astronomically huge amounts of money could be created seemingly out of thin air and thrown at, . . . well just thrown at whatever might help re-election, and there would be no consequences – at least none in the near-term, and the future would take care of itself.  Epoch-forming levels of debt were created in the comforting expectation that The Fed would take care of ‘managing’ just the appropriate maximum.  It might even administer the creation of an infinite amount of dollars since, apparently, there would be no cost, no downside.  We were in a new era.  We are in a new era.

A decision made in fear and in panic changed the consciousness of Washington.  The new paradigm of increased spending and debt by trillions of dollars, would have no consequence. At least not to the current Washington. This shift, however, will see the next President step into an Oval Office presiding over an America encumbered with an estimated debt North of $20 trillion.  Whatever the amount, there is no will on Capitol Hill to change the narrative, and to the long-term detriment of a misled Nation, there is a deeply entrenched addiction which refuses to be curbed.  As for the value of the dollar in four years?  You will know by the real cost of living to which you will have been subjected.

The constitutionally mandated separation of powers between the Administration and all of Congress with which the Framers so presciently endowed an eagerly awaiting Nation, has been trampled by effectively maneuvered, yet elected, debt junkies.  IMHO, America has been bowed by, and has capitulated to, egocentric forces which do not hold its best interests to heart.

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The Fed and Indentured Citizens

In 1913 Congress abdicated its Constitutional responsibility over currency on behalf of the people when it created the monster called The Federal Reserve System. In creating a private joint stock entity, Congress not only surrendered jurisdiction over the dollar, it also relinquished control, oversight, and authority over the institution intended to manage the citizens’ currency. Decisions hastily made in environments of illiteracy, panic, and fear, and driven by energies with ulterior motives, rarely turn out well for those who succumb.

Section 2A of The Fed’s Monetary Policy Objectives states, “The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” This ill-defined and loose agglomeration of feel-good nonsense might have tasted better if someone had appended “and preserve motherhood and apple pie,” but such addition would not have improved it. When we consider such additional elements as the fact that, as originally established, the notes issued by The Fed were obligations of the U.S. Treasury (read taxpayer) rather than that of the member banks, well, what could go wrong? 

The Fed’s ‘objectives’ reads as if it was written by The Fed so that no repercussions could possibly result from its own failures. Well beyond the bounds of sanity and far from purview of effective diligence, an isolated institution was formed and exists to command and supervise the currency of the most powerful Nation on Earth. This authority reports to no one. It plays footsies with Congress and with the Administration, but it acts in its own best self interest, as all human endeavors are wont to do. As some of us strongly suspected just prior to the last Presidential election, and as we can now with hindsight confirm, Bernanke and The Fed used their capacity to print dollars in an undisguised effort to support the re-election of pro-Bernanke-pro-Fed-pro-free-money Barack Obama. There is no question that the most powerful financial institution on Earth has strayed well beyond any of the intentions which created it, regardless how unenlightened they might have been. 

 If America was a company and you were its CEO, would the above noted Section 2A provide sufficiently focused objectives for your currency? Not if you were capable of simultaneously walking and chewing gum it wouldn’t. Monetary policy should have One objective – Stability. Simple, clear, unambiguous, stability. And inflation? 0%. Not 1.0% or 4.5%, but zero. 

 Who should be in control? The people. Who represents the people? Congress. Who is in control? A small group of individuals running a small group of too-big-to-screw-up international banks. No-one could possibly mount an intellectual or intuitive argument supporting the assumption that such individuals, their desires and the desires of the institutions under their charge, hold dear the altruistic benevolence of their “fellow human beings.” I cannot say “their fellow Americans” since some of the “owners” of The Fed are not American institutions. Go figure. 

Still, is this any way to run a railroad? Not if we look at the state we are in. Not if we critically assess the reality which has been created over a long process of fiscal mismanagement. Not if we understand that unprincipled individuals have too long politicized the dollar, which was easily done once it was unhooked from the hard commodity, gold. Not if we critically appraise the devastation which The Fed has rendered on a Nation with the complicit approval of self-servers in Washington. 

Politicians of the Congressional and White House variety have evidently been more than enthusiastic in allowing inflation and devaluation of the dollar to proceed apace since the de-coupling of the dollar. The banks behind The Fed controlled the game and were only too eager to comply (as in, OK fine, we’ll go along with it but it’s your idea). There were hundreds of billions to be made through debt guaranteed by taxpayers. There were new illiterate and willing generations to be converted to serfdom with the help of standard wavers such as the New York Times. A bigger chicken in every pot and a larger roof over every head, all acquired through debt. The bigger the debt, the greater The Fed’s profits. And what of the savers? . . . Completely destroyed and pushed toward risky investments. 

The dollar has not been stable and in fact has moved in direct opposition to the best interests of all Americans. It has steadily lost value over the long term. For example, when we are provided obfuscating rationales for the high price of oil (up 400% in a decade), we are being lied to. The truth along the vector of veracity is much closer to the reality that the dollar is dropping in value, however such realization might instill doubt of our long term trends toward prosperity. 

It has been in the best interest of the banks which own The Fed and all member banks, to manipulate interest rates to their advantage. The trends of the dollar (read: your earning power) through the past half century against hard assets such as gold or oil tell a tale of unrelenting plundering and evidences the failure of misguided interventionism. Nevertheless, the worst consequence has been an acceptance of indebtedness. Indebtedness has contaminated all human enterprise. From personal debt, to corporate debt, to State debt, to National debt, the burden overwhelms current and future intents to repay. Total debt floats somewhere well North of $100 trillion. 

In a country where the term “Freedom” has resonated profoundly from its very inception, and throughout its history, the citizens of The United States of America now find themselves subservient to a foreign entity they have no control over. Without economic freedom, freedom is simply an ephemeral concept promoted and repeated as a feel-good mantra mesmerizing the population. Awaking to overwhelming indebtedness is tantamount to waking up to enslavement. 

As we wait for the moment when it becomes widely evident that The Fed has become completely ineffective and we are forced to confront the unavoidable crisis of debt yields rising significantly, some alternatives should and must be considered. 

The ubiquitous nature of today’s technologies, software, computers, phones, and networks, present us with possibilities which brilliant economic minds of the past could not dream of, and too many current ones refuse to. We should no longer regard the current monetary system as the sacred and hallowed domain of a few bankers. Congress should immediately mount a full frontal attack on The Fed and retrieve the control it long ago held. Once Congress has recuperated full jurisdiction and authority over the Nation’s currency, it should then enact laws allowing for the formation of competing bank notes including digital currency to be issued by private entities in an open and fee market. But first, let’s get back mastery over that most critical instrument so pervasive in all human activity – our currency. America should not be the only developed country in the world without sovereignty over its currency.

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• Geithner's Waterloo?

When Tim Geithner became Treasury Secretary he was appointed even though he had skipped on taxes and paid $42,702 to make up his omission. He pretended at the time that this failure to pay taxes owed for a number of years had simply been an oversight. Anyone really paying attention at the time, and applying reasonable judgment, was astonished. The Former head of the New York Fed was being placed into the control seat of the Nation’s Treasury.

Not a single taxpayer in the Nation who trudges through the annual process of filing income taxes believed Geithner’s excuses on this egregious wrong doing. The MSM however slobbered all over itself protecting Obama’s nominee, pretending that when someone so busy and so smart is working so selflessly for his country, he can forget to pay his taxes. That was a lie. Average wage earners, millionaires and billionaires do not forget to pay their taxes - minimize them as much as they can, but they don’t forget.

From your very first job you knew, we all knew, to pay income taxes owed. We are all intimately familiar with that annual date with destiny - tax time. Still, Geithner was given a pass. We don’t need to get into the details here of the additional distaste his judgment left us with when we discovered he had hired of an undocumented housekeeper.

Was this a telltale? Yes it was - look to what someone did yesterday, and you’ll know what he or she will do tomorrow. It’s called listening. It’s called paying attention. It’s called basic human common sense. We find ourselves with an MSM void such competence, and too broad a sector of the electorate willing to forego such proficiency.

We skip forward to this week’s Congressional hearings, and witness our same Tax avoiding Treasury Secretary, the very same person who pushed for the bailout of AIG, slipping on a pair of Gretzky skates, racing circles around the rink, and slapping pucks at the foreheads of the questioning House Financial Services Committee. Gretzky would have been envious. How dare a bunch of Representatives ask impudent questions of Geithner about something so complex as Libor?

So we were entertained. Geithner admitted knowing that the Libor rate was vulnerable to exploitation - this was at least six years ago. He knew it was being manipulated and did some speed-skating. "That was the best alternative available at the time, and you can't say now with confidence that that choice in any way disadvantaged the American taxpayer," Geithner said. It gives you a genuinely balmy feeling, doesn’t it, knowing the astute mind of Geithner is looking after your interests? No? How about this then, “I think it's quite unlikely, but we're going to take a careful look at that." When? After November? After all, Geithner was only head of the New York Fed when he discovered this monstrosity.

If that is not enough to summon your favour, it gets better, “and we felt, and I still believe this, that it was really going to be on the UK to take responsibility.” Geithner basically said, “it wasn’t my job.” Keep in mind that JP Morgan, Citigroup, and B of A, participate in the daily Libor interest rate setting. Oh, and the first two are supervised by the New York Fed. But, hey, “it’s not my job.”

The Representative asking if Geithner was aware of wrongdoing, was met with a, "We don't know that. But I think that is a question you need torefer to the enforcement agencies." Again, when? When will this fraud be taken seriously and be arduously investigated? When another Attorney General replaces Holder?

Should taxpayers care?Aside from the fact that almost everything you spend money on is affected inone way or another by the Libor rate, it also happens that the Libor rate was used for the $182 billion bailout of AIG and the trillion dollar emergency Term-AssetBacked Securities Loan Facility program. Geithner said it "was the best alternative available at the time." He knew the Libor interest rate was being manipulated, but this genius now claims there was nothing better. Why? Because he was winking and nodding? In response, a committee member used the phrase, “someone dropped the ball,” so as to not offend Geithner's ego and sensitivities. Dropped the ball?

Dropping the ball is forgetting the sandwiches on your picnic. Dropping the ball cannot and should not refer to defrauding the taxpayers of billions of dollars through interest rate “fixing.” Dropping the ball cannot and should not refer to defrauding the borrowers around the world of billions of dollars through conspiring on the fixing of interest rates. Because he knows no one will really investigate the Too Big To Analyze theft, Geithner sanctimoniously hides behind the shield, "We don't know at this point what impact that behaviour had [in moving] the rate up or down for investors or borrowers.” Well, that settles it then. No one will do any due diligence, and no one will renegotiate interest rates on any of the billions used inbailouts and backed by the Nation’s taxpayers.

There remains the remote possibility that the man who fought against the notion of breaking up the largest banks, today thinks the bankers looked after the best interests of taxpayers. Well, that is until we recall that we already knew what he was. We learned that before he was officially appointed, and it was before that that he knew of the Libor dishonesty.

We can be confident that Geithner is watching attentively as Paul Tucker, the Deputy Governor of the Bank of England, gets grilled in the UK by the Treasury Select Committee overthe Libor rate scandal. Tucker will inevitably invoke “market confidence” as being the overwhelming concern at the time, but if he’s asked of his discussions with the likes of Geithner, he may have to slip on some Gretzkys.

Truth emanating from mouths of those who initiate fabrications with such ease will be hard to come by. How about not placing individuals in positions of power who in the past have had such difficulty with truth? We already know what they will do.

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• Another Misstep On Obama’s New Battle Front

There is little argument that the concluding G-20 meeting has been an international beat-up slugfest on America. Effective and substantial Strategic Planning is critical in the success of any significant endeavor. It should be ever-present when addressing the country’s economic long-term health.

Obama and his advisors fumbled once again on the international scene. Unfortunately, this time the fumble was on an economically critical battlefront.

The Fed continued its artificial manipulation of the economy by announcing that at the stroke of a pen filled with dollar printing ink called the Quantitative Easement Quill, a tidy $600 billion will be added to the float. While there is urgency in taking decisive action to stimulate hiring across the country, The Fed’s bond purchase program could have waited announcement another few days, particularly since it will be implemented over a very extended period. The Fed may in fact decide to scale back on the total amount depending on how the economic activity trend reacts.

Currency fluctuations have not been the source of the current economic crisis, but have been the outcome of such things as the overwhelming export of never to return jobs to inexpensive-labor-gives-us-cheap-products countries, AND we can artificially inflate national wealth by enforcing the financing of a home-for-each-citizen program.

Announcing the easement (read: circumlocutive euphemism for Inflative) just prior to G-20 gave China a major pass at the meeting, and in fact, pushed it to stand shoulder-to-shoulder with America’s “friends” pounding on America. The G-20 meeting should have been more about China’s maintenance of a weak Renminbi, and protectionism, rather than about the U.S.’s wholesale weakening of King Dollar.

The Bernanke announcement resulted in a verbal assault on America by everyone from China to Germany. America’s defense was left to representation by a President not familiar with things economic. It isn’t even clear that China’s real relative exchange rate hasn’t appreciated recently given the rapidly rising prices within China. Just like The Fed, whose complete independence from Congressional control or real oversight enables it to go wherever it wishes to go, so too China will ignore all bended-knee implorations from Obama and Geithner.

Now to make matters doubly difficult, the Administration is shouting into the deaf ears of its trading partners and geopolitical friends. China will continue on its merry way, and it has firmly confirmed that it would completely ignore the Administration when it admonished Obama as he went out the door with a, “Don't make others take the medicine for your disease,” (Yu Jianhua, a director general of China's Ministry of Commerce). The opportunity presented by the G-20 meeting to coagulate forces to pressure China is now passed, and the situation has been made worse for America.

This Administration really must take some classes on Effective Negotiating.

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• Policy Development By Panic

American taxpayers should not read anything into today’s stock market supposed reactions to the President's verbal and policy attacks on banks. Markets have little to do with realities of the broader world and its economics. The Presidential attacks, however, should be very troubling to taxpayers for more profound reasons.

Obama is vociferously attacking “risk taking,” that very human characteristic at the heart of America’s success. Observing his address, it is evidently something he doesn’t have a good grasp of. It is also very, very obvious that the President does not understand business, or economics, even at their simplest denominations. The economy and its future progress is very dependent on risk taking.

This post has written repeatedly against the abuse by Wall Street, and has called for the re-instatement of “the Glass-Steagall Act (except as it pertains to the Fed) that was for the most part repealed in 1999 eliminating the restrictions of affiliations between banks and “investment banks,” … and don’t listen to any bankers who tell you different with stories about diversification reducing risk, or banks being completely capable of regulating themselves.” There is no need for knight-on-horse-saving-the-day-grandstanding. Congress should restore the act, but in the meantime, we can sit back and enjoy the theatre as the President shows us how to distinguish market making from proprietary trading within the banks.

Obama’s rhetoric of new populist policies against banks, comes across as a simplistic attempt to flirt with what he thinks is Main Street’s perception of banks. This also smells of the disingenuous, given this Administration’s early actions during the “bailout” debacle, that gave so much credence, and amperage, to the too-big-to-fail idiocy. It obstinately, and uncomprehendingly, provided hundreds of billions for the creation of financial behemoths. No preconditions were established, nor were any strings attached to the money. Wall Street played with this Administration, as it did with the Bush Administration, and helped itself to taxpayer-borrowed cash. This President should be taught that failure, big or small, is part of the long road to both personal and business success.

Contrary to Obama’s claims, the financial meltdown was NOT caused by the reckless abandon of speculative bankers mired in greed. It was the direct result of cheap money from The Fed, being pushed onto consumers with little, or no credit, by a Congress, which believed in the mantra, “everyone should own a home.” If anything, we would like to hear about some reigning in of Fannie Mae and Freddie Mac, . . . just for starters. The greed which drove the likes of Goldman Sachs, Morgan Stanley and City Bank beyond the fringes of ethical boundaries was not the root cause of the disaster the world is now burdened with.

Obama’s attack on banks is a knee-jerk reaction in response to the devastating Democrat loss of the Massachusetts Senate seat this week. This breathes the fragrance of panic. The President evidently has no idea how to approach the most important concern on the minds of his constituents – stimulating the creation of jobs. He should stay away from teleprompters for a few weeks, and educate himself on the workings of businesses, and the economy. Then he should surround himself with advisors who have actually managed a wide variety of successful enterprises. The result should then be a speech, without teleprompter, impassionedly promoting American business and ingenuity to the national and international community.

What America will definitely not need is a lecture on what its core values should be.

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• America, End Your Fear Of Wall Street

Few Americans have the time to educate themselves on the operations of those who control the most critical elements at the heart of the Nation’s well being. The Kings of Wall Street have long coveted the absolute supremacy they now enjoy over the largest economy in the world. Their road to ascendancy has been long and methodical, but with the collapse of the mortgage and equity bubbles, the past year’s actions by those pillars of persuasive absolutism on Wall Street confirm that their dominance is unprecedented in American history.

A vast majority of Americans must have been astounded by Bernanke’s recent response to Congress’s request that the Government Accountability Office (GAO) audit the Federal Reserve’s financial transactions and assets. The following was the heart of Bernanke’s response, “… auditing ... would be highly destructive to the stability of the financial system, the dollar and our national economic situation.” The GAO is a legislative branch agency organized under the U.S. Congress. How is it possible that Bernanke would have had the guts to tell Congress to go fly a kite? This is the same Federal Reserve whose power Obama wants to expand? Does he really have a good grasp of the true nature of Wall Street and the functions of its insiders? Perhaps the $14 million he received from Wall Street bankers, investment firms and securities brokers during the election campaign are clouding his perception.

Bernanke not only screamed an emphatic, "no," but he had the gall to threaten Congress and the American people with economic destruction. How is such arrogance and power remotely possible? While it might be tolerated if coming from the oval office, it should not be tolerated from a banker. It is also, for anyone who is watching, an obnoxious affront to the Constitution as articulated in Article I, Section 8, “The Congress shall have power to … coin money, regulate the value thereof, and of foreign coin, and … to borrow money on the credit of the United States.” Does this resemble anything we have witnessed during the past year? Not remotely.

Through a century of market ups and downs, interest rate fluctuations, mergers, acquisitions, political influence, lobbying and positioning insiders to the most powerful government and government related institutions, the Kings of Wall Street have nurtured and advanced their isolated power to a point where they are responsible to no one. After the Fed created hundreds of billions in bailout dollars to purchase unaudited toxic waste from its “friends,” these same friends paid themselves billions of dollars in bonuses. These were billions more than the amounts they distributed to their own shareholders, and the rationalizations were as asinine as the bonuses. Obama’s wishful thinking and promises of “oversight and transparency,” over trillions of Fed dispensations, have long been attenuated by the dissonance of fear. Stating that the Fed and Wall Street’s autonomy is complete, would be a gross understatement.

When Bernanke told Congress and the world that if AIG was not bailed out, the international economic order would come tumbling down, did the majority of his listeners believe him? Absolutely. Panic was being incessantly pounded into the public’s consciousness. Unless a handful of senior players from the banking sector didn’t get their way, the underpinnings of the global economy would disintegrate, and the world as we knew it would come to an immediate halt. Paulson chanted the refrain, and shortly thereafter so did Geithner, whose performance made sure that the message was delivered with the requisite amount of perspiration and earnestness accentuating the urgency. Above all, he underscored the fear.

Individuals, who could not care less about the health of America, just as they never cared about their firms’ clients, control the economic engines of this country. Their egos dictate their actions, and satisfaction of abnormal greed is the compelling priority. The details of the business, and its legalities, … be damned. Have we forgotten that when Lehman Brothers collapsed overnight, no one knew there had been a problem? None of its executives were familiar with the extent of the calamity when it hit their firm, nor did their books indicate where assets might be hiding or what claims might exist against them. Transparency? Due diligence? Forget being a shareholder looking for information since the senior executives, the CEO and the Board of Directors were oblivious. Was there any conscious human being near the top of the Lehman ladder who cared enough to raise doubts? Would he or she have been listened to? Not likely.

When you are too preoccupied picking out the leather for your new executive jet, or refurnishing your third mansion in Cap D’Antibe, you don’t have time to spend on corporate incidentals such as the details of an audited financial statement. Even if there had been a spare moment, you’d have to fly to that Bridge tournament in Chicago, … or some other urgent pastime where your “friends,” or your ego expect an appearance.

There is a culture of omnipotence that has been very pervasive throughout all of Wall Street’s major firms during the past two decades. It has reached a level of absolute and supreme potency within a few of its more majestic mindsets like those at the top of firms such as Goldman and Morgan. These firms have by design created complex webs of interwoven corporate entities, crossing geopolitical borders with questionable practices beyond the boundaries of laws and oversight. Theirs has been a comfortable ride, since there is no will on the part of any government to provide intrusive oversight to the investment banking giants, therefore effective oversight is simply an ephemeral, wishful thought on the part of a cornered public.

The Morgan Stanley acquisition of Bear Stearns with a $30 billion taxpayer guarantee was a sweet gift handled between the boys, with little evidence of hard-nosed negotiating on behalf of American taxpayers. Obviously, reasonableness also never entered the room. Bailouts for Citigroup, AIG, Bank of America, Citigroup, and AIG were negotiated between friends, some friends only pretended to be working on behalf of the American taxpayers. When Treasury, The Fed and the heads of the major Wall Street firms, particularly Goldman Sachs and Morgan Stanley, came together to make deals, their actions were not “negotiations” as defined in any normal dictionary. Who really represented taxpayer interests? No one. The Third Side, the taxpayer who will foot the major risk, was not in the room. Not only were taxpayers not in the room, but they were also swindled. There is no other way to describe the one sidedness of the structures that taxpayers were handed.

Taxpayers recapitalized banks under insanely bad terms and conditions, where they unwittingly guaranteed toxic asset, as occurred in the Citigroup bailout or when B. of A. acquired Merrill Lynch. Did anyone question B. of A.’s use of TARP funds to “acquire,” competitors? No-one representing taxpayer interests seemed to care, and quite to the contrary, Merrill’s losses were purposefully concealed from both investors and regulators. Did anyone negotiate hard with these banks, B. of A., Goldman and Citi, when as creditors to Chrysler, they forced its destruction instead of allowing the government to provide it with deals as sweet as the ones they had received themselves? Not much. Geithner and Bernanke were evidently not close friends of any Chrysler executives or employees residing in Detroit. They were, however, friends and colleagues of Wall Street.

We have written elsewhere on this post about Too Big To Fail, however, with the taxpayer’s willingness (through inept government) the crisis has created ever-larger monsters on Wall Street. America’s vast banking system has become weak and remains weak other than for those at the top of its food chain. The controlling players have not changed, and the economic contraction will continue. We have become numbed to the fact that when banks fail, the public pays. A few companies, under the aegis of a small band of individuals created the perfect environment for the implosion of the banking system through massive risk taking. Congress cheered actively from the sidelines. The Wall Street hands that were in large part responsible for the crisis now dictate government actions, and have effective control over the public purse. In the meantime, the Fed, standing squarely on the backs of all taxpayers, is doing the job of large banks that still refrain from injecting credit into the economy.

While megabanks trade publicly, there is a dearth of verifiable, or incisively auditable value that can be placed on them since it appears none of their executives know the extent of the worthless paper lurking deep in their bowels, and none of them would tell you if he knew. Admitting the size of the toxic assets would require enormous write-downs, and would affect their bonuses as well as the values of the company shares.

We should not get swayed into believing that Too Big To Fail is simply a remote concept dealing with enormous corporations with global reach. Too Big To Fail refers to individuals at the top of these financial giants with all of the substantial power that the companies they manage can wield. Too Big To Fail encapsulates the stupidity that brought the world to the brink of collapse. We are just a couple of mergers away from a global financial power that will be impossible for any government to regulate, although regulation already seems nonexistent for any of the current top players on the Street.

The markets are technically driven and managed by systems that maximize profits for those who control them, using technologies that very creative talent produced. There is no ceiling to that creativity, and no end to what might be done to restructure the financial underpinnings and superstructure of the nation’s economy. The talent is available, and all that is required is willingness to do so. Constitutionally there are possibilities, but relinquishing control over money is not an alternative Wall Street will readily agree to, yet, reversing the process is within the purview of Congress.

The key to minimizing the future damage that the kings of Wall Street might further inflict on the Nation is to bring their power and influence into the realm of reasonableness. This means bringing their propensity for size to within reason for any organization involved in pure “banking,” and focusing their attention to providing large and small companies with the services, particularly credit, which they require to remain open for businesses.

There is a lesson to be learned from the current debacle, while the window remains very clear, and before time and retrospect blur the current reality into a distorted sequence of lies as the months advance. In order of priority, the following should be considered for a sound America going forward.

1. Take back control of The Fed. Humans will be human therefore there are no guarantees that the people’s representatives will act with foresight, however, they will accountably serve under the canopy of transparency, and due diligence, rather than submit to the beck-and-call of those whose billions in annual bonus money stagger the imagination.
2. Take back control of money.
3. Segregate “Banking,” from “Investment Banking,” and everything else that seems to attach itself to the once-upon-a-time credibility of banking. Reinstate the Glass-Steagall Act (except as it pertains to the Fed) that was for the most part repealed in 1999 eliminating the restrictions of affiliations between banks and “investment banks,” … and don’t listen to any bankers who tell you different with stories about diversification reducing risk, or banks being completely capable of regulating themselves. We have seen the evidence. One very intelligent provision contained in the act is section #32 that prohibits banks from having interlocking directors. Such decree could well be applied to other industries where “Board of Directors,” has simply become an incestuous and corrupt exercise.
In the same process, throw out that brilliant piece of Congressional ingenuity called the Gramm-Leach-Bliley Act.
4. Cap the size of banks so that their executives more naturally demonstrate concern for soundness of lending decisions, and the well being and success of their regional customers. Banking should be a service, and should not be a casino where the management can pilfer the till as has been repeatedly demonstrated wantonly by the major Wall Street firms.
5. Allow the FDIC to do its job, and instruct it to play serious hardball with the risk takers who come into its line of sight.

This is not minor tweaking of the system. This is also not a call for the establishment of a consumer protection agency to police all things financial from credit cards to mortgages. Common sense dictates implementation of a structural reconstruction. The proposed Consumer Financial Protection Agency would only be an ill-defined expansion of the government payroll, proliferating government reach into more corners of society. This make little sense since there are agencies already entrusted to protect consumers which are not doing their jobs. Proposing the launch of such an inappropriate meddling amoeba is evidence of government ignorance of the realities on Wall Street.

America, your government is lying to you. You’ve been had, and are being had. It has no idea what is going on with your money. Those few bureaucrats who have ensconced themselves in positions of unnatural power and influence, and who manage the joystick, won’t tell you the truth. Even more pathetic is the fact that neither Congress, nor the President, know enough about the mechanics of America’s economy to apply practical judgment decisions in the refashioning of the system, … nor, it seems, do they have the will to act. Considering the fact that the current administration continued the trend of installing those who had a healthy hand in packing the powder keg that ignited into the economic disaster now encumbering the nation, we cannot expect much change. The billions of dollars that politicians received from Wall Street over the past decade through campaign contributions and lobbying, was insurance on their continuing silence, and stifled any burgeoning ethics.

Taxpayers have become disillusioned by the abuse they have endured at the hands of special interests, and the lack of intelligent, common sense response from their elected officials. A broad swath of the electorate is wearied. Congress should pay attention to 2012, and the electorate should demonstrate a little selfishness. Taxpayers should look for some creative thinking instead of the tired old nursery rhymes dispensed from portable pulpits.

Banking is not a magical, abstract, or obscure foreign art, although some of the fringe elements have become complex by design, such as the proliferation of derivative financial instruments. Government is protecting special interests and is NOT forcing a restructuring of America’s financial system. Taxpayers should demand that capitalism be reinstated back into the banking system. They should demand that Wall Street’s power elite end its mortgaging of the American future. Taxpayers should ignore platitudes and bromides from Obama and Congress, and they demand a break-up of Wall Street’s major players.

Taxpayers should be lining up in the next elections to install individuals into Congress, no matter what party they might represent, who will take back control of the most important components of the economy, and ensure that the country has a chance at a sound future. The electorate should not allow the continuing concentration of financial power to accumulate in fewer and fewer irresponsible and egocentric hands.

Take control back from Wall Street, demand transparency, and quit bailing out firms that should be allowed to fail. Stop being mesmerized by the pretense and illusion that was perfected under Alan Greenspan. Take back control of the money supply before another crisis turns a struggling economy with escalating debt, into a long term depressed economy.

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• Bernanke And The Super Fed Say It's Over

The loud, national sigh we heard this week was America gratefully, but suspiciously, acknowledging Ben Bernanke’s claims that, well, it’s over. The Fed Chair is satisfied that the recession is in a turn around mode, or at least stabilizing. Covering his backdoor, he added that America can look forward to a sluggish recovery. Just in case anyone missed it, he added, with all the vigor and compassion of a snail, “Unemployment will stay high for some time. It’s not going to feel like a very strong economy.”

You cannot get more confident than that, can you? With that level of insight you can now go out and make major decisions for your own future, such as, whether or not to buy a house, upgrade your car, perhaps even fly to Europe on the wings of hope. No? This is the kind of foggy thinking and direction we have come to expect from the independent organization that controls America’s most important economic element – America’s money. Did he define an exit strategy for the money being fed into the system? Did he even describe where, or how, that money is doing anyone any good? Not so much.

Bernanke is the same expert who only last year told Congress wonderful fairytales about housing, the markets, and the economy just as the bubble was beginning its implosion. This is the also the Bernanke who, along with Geithner, in a desperate moment of panic made a deal with J.P. Morgan, taking on $30 billion of toxic derivatives from Bear Stearns. Even former Fed Chairman Paul Volcker thought the deal impelled the Fed to, “extend to the very edge of its lawful and implied powers.” What an incredible understatement. The agreement viewable here, was not a loan as claimed, but an outright purchase of an ephemeral mountain of garbage. It was in effect a gift. Did anyone in Congress jump on this breach of law? Of course not. No one would dare question The Fed. Did anyone explain why Lehman was sent over into the abyss, but not Bear? Don’t ask. You don’t want to know. You also won’t be told how it was possible that giant firms including A.I.G., were allowed to gamble with complex derivatives that their own executives didn’t understand. The crumbs leave a trail from Wall Street, all the way to Congress.

You will note that the first signature on the hastily created agreement (linked above) is Tim Geithner’s. You can judge for yourself with a little analysis of Tim’s “signature,” what help such a massive ego (IMHO), will bring to your neighborhood. While you’re at it, also check out Morgan CEO James Dimon’s scribble on the signature line. Let me know what you think he’s all about. Looking at that signature, I doubt anyone really knows, but in the meantime, understand that he has more influence on your life than most of your friends do. These are some of the egos that were so overwhelmed with arrogance, and so confident in self intelligence, that there was nothing that the economic super-bubble would throw at them which couldn’t be handled. As the world economy melted about their ankles, all they could do was panic, and in turn panic everyone around them.

Bernanke, Geithner and their buddies are effectively in charge of taking good care of the largest members of the banking industry. This does not include your pocket book, or your wellbeing. Although Greenspan was vilified, and slapped into anonymity for having completely missed the housing bubble, Bernanke was right there with him promoting almost non-existent interest rates, downplaying obvious dangers of the bloated borrowing, and belittling concerns of inflation. The fact that no one in America was saving a dime since there was no Interest incentive to do so, didn’t seem to matter. In fact, it still does not seem to matter to Bernanke. How much are You getting on your savings account? How’s your borrowing capacity coming along? Getting any good business loans at cheap interest rates lately? Wall Street will make money if you spend, if you churn, but not so much if you build equity in those resources that matter most to You or if you invest in yourself.

When you listen to The Fed Chairman's claim that he can tighten monetary policy, and actuate programs such as selling securities from its portfolio to take cash out of the market, as needed to head off inflationary pressures, .... based on past record, you can now bet against him. Beyond applying common sense to his present prognostications, his track record suggests that he will not be able to reign-in inflationary pressures. You can assume that with the fast expanding money supply, inflation is returning for a visit that may be reminiscent of the late ‘70s. The amounts flying into the system are enormous, and making the assumption that The Fed will be able to “repurchase,” or appreciably retract the process, is to assume the improbable will occur. When Bernanke says things like, “I don’t regret anything we’ve done,” heed the arrogance in the context of the domain which is his sovereignty. Most importantly take everything else he says with a grain of salt, and let's remember that he’s referring to such things as taking taxpayer money/debt for the bailout of institutions that should have been left to flail in the currents of the options available to them in law.

Are we to believe anything Bernanke, or his pal Tim, tell us? Nothing he did or said in the past was either rational, intelligent, or truthful. Alright, so it’s easy to beat up on him. Oh, but wait, he’s still in charge of The Fed. Along with Geithner, he remains in complete control of all things monetary in America. Why? Because neither the President nor Congress have either the knowledge or the backbone to question The Fed and its friends on Wall Street. They certainly don’t have the intellectual or emotional capacity to implement any serious change at the top of the money food chain where it is most needed.

It is unclear what has misfired in the President’s acumen when we hear yesterday from Bernanke that Obama wants to give The Fed new supervisory powers to oversee the financial system. Isn’t that just what you wanted to hear? The same Fed and Bernanke who have been so intuitive, diligent and ingenious over the past decade will be given more power? They don’t report to anyone now, if they’re not in the mood, so how will more influence be of advantage to the overburdened taxpayers, exactly? How about calling for the observance and application of existing laws, or implementing current oversight capabilities before expanding and swelling expensive government bureaucracies? How about appealing to Washington politicians for some demonstration that they understand why taxpayers have elected them? How about demanding a little transparency? Apply the controls available, without inventing new ones, and refrain from creating a Nation dependent on its government (through politicized cronyism) for financial success. Prosperity has no address on that road.

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• Myths Of Debt To Be Corrected For 2009

The year 2008 brought a rude awakening to a population enthralled by a bottomless availability of cash. Mesmerized into debt accumulation we now wonder how we could possibly have overdone it.

As we launch into a new year, it might bode well to be reminded of some of the myths we enjoyed so much these past two decades.

• Debt is your key to achieving the lifestyle you deserve.
This well-oiled refrain was repeated ad nauseum throughout the past quarter century, to the point where the affirmation morphed into an accepted assertion. I borrow, I spend, and therefore I am. The Fed, Congress and the White House have historically presented a united front to convince taxpayers that they should seize all opportunities to consume. It has been the patriotic duty of all citizens to consume impulsively and with abandon, taking absolute custody of the title Consumer.
• Spend yourself into economic recovery.
It appears that all media has bought into this myth. Abundance of noise from economists and pundits has been particularly effective for too long on this one. The economy needs you. Business needs you. There are bonuses to be paid out at the top that will trickle down and stimulate all corners of your economy. Your guilt will get you if you don’t spend everything you can borrow. Forget saving for a rainy day. Forget budgeting, and absolutely reject the concept of finding balance between funding your needs and setting aside money for your future unanticipated emergencies. You don’t want this recession to devolve into a depression, do you?
• The Debt you are drowning in is not your fault.
How could you possibly have known that buying your first home for $500,000 with nothing down and a variable rate mortgage would launch a perfect storm through your future, ravaging your state of mind?
• Wall Street, The Fed, and the World Bank know what they’re doing and they know best what is good for you.
This one requires little delineation here. Dissecting it might even be a little too depressing, and might dissipate the joy of a brand new year. We'll save it for a future article.
• Becoming highly leveraged is a right of passage into nether regions of society.
Leverage’s modern redefinition is imbued with notions of achievement beyond simple debt. It embodies an ultra-modern conversion of water to wine. Wall Street was able to stretch the boundaries of debt with the creation of derivatives, those unfathomable, little understood but outrageously leveraged vehicles that were so effective in creating billion dollar bonuses. With government advocacy, the banking industry distended debt to the extreme boundaries of leverage, inventing unfathomably creative debt instruments hiding behind ambiguous terms such as "derivatives." The beauty of this myth rests in its apparent ability to have magically enchanted the top of the economic intellectual food-chain.
• You should not wait until tomorrow to acquire what you can get today through debt.
Instant gratification has become a firmly entrenched affliction. Capricious satisfaction of wants has transplanted patient and planned fulfillment of needs or considerations for the future. It is almost as if there has been a very deep shift across a broad swath of consciousness, and now the thrill of the chase no longer provides the joy it once did. Have indulgence and consumption become the voyage?

Intuitively we have all known for over a generation that we were living a great paradox. Lifestyles were better than ever, yet in the core of our beings, we all felt an unmistakable angst. Since the mid eighties, each one of us sensed that very conflicting dichotomy between what we were doing, and what we knew was right. We were over-borrowing ourselves into the highest standard of living known to any society in history. Political leadership cynically applauded.

2008 slapped us into acknowledging that our intuitions were right, and that long-term health of an economy requires savings and also requires investments. It has been years since it made any sense to leave money in a savings account to collect interest. Inflation deducted from the interest left a shrunk balance at year-end. Bernanke’s interest rate cut to a half percent, will have little impact on borrowers’ access to loans. Panic set-in, and attitude shift will be slow process. Congress and The Fed should revisit the government's interest rate policies. Taxpayers should be looking forward to making money on their "savings," … in the bank.

We are thinkers, inventors, creators, producers, nurturers, and spiritual beings, who can enjoy a material abundance we ourselves define and frame. We decide the nature and scope of our intellectual and spiritual sufficiency. Rather than giving in to external strafing of our decision making, it is high time each of us gave a little more room to our own individual Intuitive Knowers, abating the consequences of our overwhelming egos and intellects. Human satisfaction and progress should not be measured in GNP growth, or intoxicating accumulation of possessions. The voyage has become exhausting. It is time to sweep aside the myths. It is time for living with less anguish, and acquiescing to the truly profound joys life offers far from the sirens of debt.

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• Bernanke And The Perpetuating Credit Card Swindle

Banks, and whomever else we blissfully accepted a credit card from, have been charging us, all of us, grossly usurious fees. Even those diligent observers faithfully sending off payments before they were due, have long been abused by capricious credit card issuers.

When the Head of The Fed, Ben Bernanke, gets involved because Congress has been asleep, you know the pressure of discontent from tens of millions of Americans is building beyond a sustainable level of annoyance. Ben Bernanke's comment that the rules, “will establish a new baseline for fairness,” is so fraught with meaning one doesn’t know where to begin its appreciation, … well almost.

This is what he might be saying, “We have been exhorting so much out of your pockets for so long through slight of hand, guilt, ... no, make that fear, that we are led to enact a few rules that will do nothing for you. If we present these new rules with enough jaw-dropping appearance of boldness and empathy for your well-being, you will remain oblivious to the vulgarity with which you have been and will continue to be fouled.

“Don’t get yourselves in a knot over this one-half-of-one-percent-rate thing on the sub-slime, I mean sub-prime interest rate the Fed charges its friends, and quit wondering why you can’t get in on that good stuff. It doesn’t concern you, and has nothing to do with you. Never has, never will. That rate has no correlation to the 14% to 36% interest you pay on your credit cards. Such rates are because you are all really terrible at keeping your books in order, and making all your debt payments on time. If you knew what you were doing, you’d never agree to pay such insane rates. You are so oblivious, you could be getting better rates on your street corner. Idiots. Oh, sorry. I didn’t mean that, although, why are there almost three quarters of a trillion credits cards holding a trillion dollars in debt when there are only 300 million men, women and children in this wonderful country of ours? And, NO, I will not go into an explanation of why our friends, the banks, get almost no interest charged on money we lend them, while their credit stinks, and you have to bail them out. It is much too Byzantine a system to be explained. Even my bosses have no clue.

“Ladies and gentlemen the rules regulating credit are complex, though a little feudal. You’ve understood all along that we, umm, I mean the banks and credit card issuers, could set interest rates and fees at whatever levels they wished. Why so much surprise? We are nevertheless pleased to announce that we will reduce re-pricing, a little, well, we won’t reduce it but we want you to be notified when it will happen. Will we check if lenders tell you ahead of time? No. Will you? Not much, no. We are absolutely certain most of you never pay attention to notices or fine print. How many of you can tell me, right now, how much interest you pay on those ubiquitous and so colorful pieces of plastic? … Clueless.

"Let me make something perfectly clear. We do not owe you debt. Debt is not your right. It is a privilege. You should be grateful we even allow you to borrow from us to lever your lavish lifestyles against your future incomes. Right now we’re not so comfortable with your prospects for continuing those incomes, so we are simply making some adjustments. Tweaking the system a little. We also don’t need to see any demonstration parades coming down Avenue of The Americas whining about how you’re hard-done-by, or chanting ‘ban the fed’ or shaking signs with ‘help we’re broke.’

"We are gleefully aware of your lack of familiarity with the term, Saving. It is a term in the English language that refers to economizing or conserving money for the future. Who do you think keeps count? I do. Why? Because tracking details of your habits with microscopic attention enables us to accurately time adjustments in the system. I don’t mean adjustment in prime rates, I mean the establishment of regulations that will instill in your minds an impression of our all-knowing prescriptions for everything financial that ails you.

"This is why we will allow companies to raise interest rates only on new cards and purchases, not on existing balances. I know that you think the interest on the old stuff’s already been jacked through the roof, so what difference can this possibly make? True, but when you add to this the restriction on allocation of payments to account balances with lower interest rates, and reducing cross-card-credit-contamination, now we’re talking vast implications on the credit system. Huge. This is big for you guys. Really. Well, maybe. Hey, we’re doing the best we can here at the Fed, and things are tough everywhere. No one wants to give an inch. That is why we won’t be putting caps on interest rate levels charged by card issuers. Sorry. Oh, and by the way, because we just cannot upset our friends, these new rules will not go into effect for at least a year and half. You know how things are. Congress is so laborious. Each one of those crapulous crackpots wants a piece of the pie before agreeing to anything. They think pork-barreling is their right, … things like that.

“In conclusion, I know deep down in my heart that all of you feel a very strong and emotional commitment to repaying your obligations. We are thrilled to know that you will be making your payments on time and that you will atone for your sins, … umm, that you will extinguish your debt, the principal and the interest. Every penny. Particularly the interest. Yes, make sure you repay the interest. Perhaps I shouldn’t harp on the principal so much.

“We will lend you more as you need it, and the presses, the paper, the ink are churning 24/7 to keep up. Now I must go have lunch with your new leader and explain what I’m doing, again. I wish these guys would just leave me alone, their eyes just glaze over when I talk to them. Merry Christmas, and happy spending. It’s good for the economy.”

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• Revising Government Relationship To Money

In the search for solutions to the global economic turmoil, there is a disconnect between the objective of bankers and financial institutions, and the objective of government (read: people). The global crisis presents an evolving pathology beyond the reach of Paulson, Bernanke or any other imposition. That is the great mystery and abstruse nature of money.

If current examples of frenetic activity on the levers of the financial system are any indication, no one really understands money. The actions have been more akin to transgressions against taxpayers, although where would any forensic audits hope to begin on a course to discover root causes for the overwhelming market, currency or resource price gyrations. Some well enough appreciate how to use or manipulate money, but who really understands its complexities and flux? We all make some use of it, need it, work for it, fight for it, even beg for it, but understanding it is an altogether different exercise. We leave that to the wisdom of economists and Wall Street addressed expertise.

In the past year, banks all over the world have lost billions, and many have slid into bankruptcy. Paulson’s decision to hand billions to bankers, in the hope they would loosen their grip was just that, hope. J.P. Morgan for example acquired depressed financial entities for pennies on the dollar, expanding its presence and reach over the economy. But lend? Not so much. Why should it take risks, when it is still standing after having been more diligent, or gifted with higher levels of awareness than others?

Banks will not lend in this climate of uncertainty when the term rescue has morphed from verb, or name, into an adjective of economy. Paulson did not structure his deals with effective strings attached to ensure the function of providing liquidity to businesses. If the Secretary of the Treasury’s purpose was to stimulate the wheels of commerce on behalf of taxpayers, he is failing. Europe has also taken the bank bailout route in earnest, with each country dispersing enormous percentages of its GDP hoping to diffuse uncertainty and minimize the collapse of banks.

Did anyone listening to the concept of the government acquiring toxic assets from banks not have an intuitive flutter? And with all the talk of mortgages, are we forgetting the careless lending practices that were also applied to car loans and credit cards? Without disputing the overall concept, who could possibly be chosen as the arbiter of moral behavior on such elemental questions as the application of “valuation” on these noxious and nebulous inhabitants at the far reaches of the derivative universe? Walking on water would prove a more plausible expectation. This is not a smear on Paulson. He is human. He will no doubt do what he believes to be right. Paulson’s view is that of a banker. We will not change human nature, nor eliminate greed through regulation. Although perspective can be limiting, and in the existing financial situation may act to further exacerbate the damage, perspective can be modified. This can in turn alter behavior. The banking system may be in crisis, but much of the rest of the economy is not. At least not yet. Is a very different approach worth consideration?

There are endless suggestions floating through the political maelstrom girding an out of control financial implosion that will not be corralled. We are now heading to the $2 Trillion dollar bailout mark with no end in sight, and little substantive ignition of financing activity. On the personal front, taxpayers and workers are on average currently paying interest of 6.95% on car loans, 11.43% on credit cards, with $2.6 Trillion of consumer credit outstanding.

Taking counsel from Abraham Lincoln and Theodore Roosevelt, in the hope that we might prevent reprimand from Thomas Jefferson, may we be so bold as to proffer on the Secretary a few additional suggestions on dealing with the vicious cycle of credit contraction?

Mr. Paulson,

- Send out the whole army of economists and accountants at your disposal, add more as needed, to meet with the critical cogs in the economy, businesses, not the banks.
- Disperse these troops across the country, adding administrative support from state level when needed or appropriate, to meet with companies large and small.
- Don’t ask what they need, that would be insulting since you already know, just ask, “How much and for how long.”
- Assess the reasonableness of the demands based on current audited financial statements of each corporate entity and make a decision on the urgency of the need.
- Cut the check within two weeks, and here’s the key, No Interest. None. Why should banks be the only ones with access to borderline negative interest rates?
- Prorate repayment schedules over a five year window, preferably, but remain flexible and susceptible to the capacity to repay.
- The taxpayers (read: government) aren’t in need of interest on their money. Whether entrepreneurs or employees, they require an economy that continues to thrive, provides them jobs, a roof over their heads and nourishment for their kids. They’ve already been slapped into awareness on the traps of endless credit, they will be more astute from now on. Furthermore, the national currency is not backed by anything other that the strength of the economy, ergo, until there is a change to something like gold, silver or microchips backing the currency, the economy is it. It needs bolstering and we will trust that its resurgence will provide enough gain for us to deal with the cost of escalating debt.
- Take care to ensure that proper documents are signed with equitable collateral.
- Establish very tough regulations and repercussions in order to limit abuse, kick-backs or graft.
- Nationalize the Federal Reserve if you have time, before deploying the distributors. The Fed will be less cantankerous in good time, but you must give it the good news. It will be really good news, since there will be no leveraging with 30+ multipliers on capital to asset ratios, as we have seen over the past two decades in the financial derivative escalations.
- Government will actually have accurate measurements on the money supply, and there will be no concern for where the interest owed will come from, since none will be required. 
In other words, no one needs to fry at the bottom of the financial pyramid. This will also reduce the need to infinitely create new debt.

That’s it, Mr. Paulson. Good luck.
Sincerely,
Your Taxpayers.

While issuing legal tender is in the government’s purview, it does so through creation of bank debt. Banks distribute currency as they see fit. Even The Fed operates under the aegis of the government though it operates privately. Increasing the efficiency of the money creation system, allowing capital to flow and infusing it directly where it will most straightforwardly impact the nation’s engines will ignite recovery. Efficiency is not the primary objective, though under current circumstances, it would appear a necessary one in the mix of considerations. The current monetary and banking infrastructures claim efficiency, while the outcome is evidence otherwise.

The American economy rests on the back of the American worker and consumer. Taxpayers own the government and currency is only a tool enabling commerce. Get it working for you, not against you. With the computing power available and the internet’s ubiquity, the possibilities to become creative on the currency front within economic, political, or other boundaries are endless even to include a large role for banks.

The government just wants its tax. On the next trillion dollars, don’t waste it on the black hole of bad debt. Get this economy thriving again and get it paying its taxes. There will then be hope on the horizon that the principal on trillions of dollars of debt will gradually get paid down.

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• ECONOMISTS, OUR NEW PHILOSOPHER KINGS?

Our mainstream media has been in panic mode for a couple of months, and in its continuing consternation, has clamored for the President Elect to rush, first and foremost, into naming his economic team. “Hurry up, and you better be picking some guys who understand numbers and the economy. We want experts. The best money can buy.” So you turn off the news, and head off to bed confident that although a gloomy, almost mystic storm is brewing outside your window, all will be well. An Economist will figure it out. Some hours later your wake up call is the dawn sending rolling thunder that jolts your home to its foundation. You jump, wide awake, and in a cold sweat. “What the hell is an economist?” The sun is actually attempting to cast light around your drapes.

Once upon a time, "economist" was a term applied to an individual who enjoyed a certain conservative frugality to all human endeavors. Vestiges of that connotation remain with today’s definition, although these cannot be assigned to the modern economist in whose hands we appear to entrust our economic lives, those of our children and those of our grandchildren. Not that some of our more illustrious ancestors might not be addressed today as economists. Certainly Xenophon, Aristotle or Adam Smith wore the mantle well, in addition to being philosophers. Doubtless, each would probably be perplexed by the current definition, and even embarrassed by its most modern incarnation.

Our best known are too often staggering egos, rooted in analytical methods far from the disturbing notion of public discourse and sensibilities, but readily capable of pontification on the state of everything economic. Aided by the most powerful computational powers the world has even known, they interminably scrutinize the minutiae of fractions, macroeconomically dissecting our lives, creating hypotheses felicitous of one theory, or another that each might have subscribed to. The new breed of economist hopes that the consequence of his or her efforts might eventually dissolve into public policy. All struggle to be heard in one way or another, and a few get lucky.

Alan Greenspan for example, was much more than lucky. He was feared. He was clearly not as competent as he believed himself to be, but he was feared, as well as venerated. So discombobulated were four American Presidents on the state of their economies that Reagan, Bush Sr., Clinton and Bush Jr. each capitulated, leaving him insulated, permanently ensconced in office as 13th Chairman of the Federal Reserve. For 19 years Greenspan was arguably the most powerful man in the world, if you place money at the top of the human existence food chain.

Who preceded Greenspan? Paul Volcker, who will now be Obama’s eminence grise.

Aristotles, they are not, but let's cast a slightly more discerning inspection their way, and toward the state of their art. Economists are human with any of the frailties the rest of us might also endure. They are products of their educational systems, and environments limited by the very nature of economics. It is a vast endless field of study. Some concern themselves with wide global movements of goods, people and money. Others might specialize in capital ratios, dealing with banking regulations and interpretations on depository requirements, or the standards of capital and asset risk measurements, with specializations within each area. Others are preoccupied with inflation, and just to complicate matters all countries have individual methods of calculating capital within their boundaries, though they are confined to internationally accepted guidelines. Unfortunately, they either specialize, or they really don’t know anything, and become really, really dangerous.

It was anomalous that a few economists, during the bubble’s inflation, indulged quietly on the more dire economic possibilities, but their squeaks were obscured in the noise of the herd.

We assume that society’s Greenspans can not only be visionaries with insights into mathematical models, but can hover above the fray issuing profound prognostications on the state of our malaise. We assume a dream team of economists crowded around a new Commander In Chief of Change will blend their discordant mix of views into a powerful amalgam. One capable of charting a methodical path out of a labyrinth no one really understands, and no one is taking credit for.

Repeating platitudes on the perils of assumptions would be pointless. Through the kaleidoscope of our bank accounts we are witnessing the evolution of our own wreckage in slow motion.

The first clue as to why our modern day Aristotles of economics are not the oracles we sanction them to be, is that they deal with yesterday. They present the past beautifully, and with more clarity than the Hubble’s brilliant and awe inspiring images of distant galaxies as they existed billions of light years ago. As to what will occur tomorrow, or even later today, our seers are particularly inept. Specialization and compartmentalization are dangerous competences, particularly when compromised by insecure egos.

The second clue resides in the box that hides these enigmatic specialists of the statistical tables. They have perceptibly limited understanding of the nature that is human. The culminating pinnacle of their output is theory. Not practical, but obscure and probably intangible methodologies for hopefully enhancing efficiencies, or exploiting short, mid or long term trends, and biases. Nowhere in the mix that is the economist’s alchemy, can we find a scintilla of any universal principals that might inject percepts of morality into their mental and computational gyrations. Their inclinations fall short on the E.Q. meter, and human nature is not in their catalogue of, “Things I’m An Expert In.”

Now for the third clue. It is not in the nature of the economist to be an entrepreneur. Time spent in research, and analysis also do not allow for long term commercial endeavors. Unfortunately, this limit understanding of where the proverbial rubber meets the road.

The most effective presence at the round table carving a new path out of the maze America is trapped in, would be that of an entrepreneur. One who has had extensive success in the commercialization of goods or services to the broad market over a sustained period of time. One who has demonstrated vision and creativity, as well as capacities to motivate individuals other than himself to reach unexpected productivity. One who in practice and not through vicarious imaginings, has been drenched in all elements that fuel the economic engine driving an economy.

Drawing the curtains to let the sun’s warmth fill the room, you remain hopeful, but know that as the morning news will announce yet another bailout package, you will look elsewhere for telltales of contemporary Voltaires in our midst.

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• WHERE IS THE ECONOMIC LEADERSHIP?

Ben Bernanke delivered a bleak message to Congress today with the usual waffling and back door escapes on any firm statements related to the Nation’s economic future, even its near term prospects. Although, in fairness, we should note that with as much aplomb as he could magnetize from Greenspan’s past performances in front of Congress, he emphatically stated, “accurately assessing and appropriately balancing the risks to the outlook for growth and inflation is a significant challenge for monetary policy makers.” No kidding? How long did his staff stay up to come up with such vapid pronouncements?

How does someone with so little spine get to such position of power and influence? Even as a front man for back room boys he comes off badly. At least when Greenspan double-talked his way through the halls of Congress we could admire the extent of his obfuscating turn of phrase. He said nothing, but he said it with a nonchalance, even a sang-froid that made you smile in wonderment questioning if this guy was human.

America looks for leadership out of the mess it finds itself in, and the best the Fed Chief can do is warn Congress against doing anything about the futures markets, but he does tell lawmakers to tackle the uncertainty in the housing market. So now, Congress, as confused as ever, will head to the commissary for a free meal on the taxpayers, and mumble to itself over the perplexing state of affairs with no answers in sight, and no one to turn to for guidance.

Inflation continues to advance, although to what degree is unclear since it very much depends on what one measures, but the price index is expected to exceed 4%. The food staples are seeing much higher increases however, but since non-food finished goods and services are in the calculation mix, the numbers that have the most impact on the average family are distorted.

The millions of small businesses at the core of the economy are being affected by the credit crunch, but their plight is ignored while they watch major Wall Street firms getting bailed out. Have no fear though, the SEC is actively investigating the subprime meltdown, stock manipulations and short sales, as well as false rumors tainting brokerages and hedge funds. …And heads will roll. OK, well, maybe not. Effective scapegoating is an extremely difficult art to practice. Where is Eliot Spitzer when the Nation needs him?

The recent blame for the housing market deterioration placed on the hapless borrowers who indebted themselves beyond their capacities has not been very subtle. Policy makers’ only planned action is to set restrictions preventing borrowing by the great unwashed. Credit quality standards will be raised. Oh, joy. Is Congress asking the guys who ran those disasters called Fannie Mae and Freddie Mac into bailout territory to return their million dollar bonuses? Congress is mute. Is anyone on The Hill or the White House raising an eyebrow over the usurious interest rates being charged by banks and credit card companies to a majority of clients? Bernanke’s tarot cards predict a late fall interest rate increase to 2.25%, which is a number as foreign to most borrowing taxpayers as the number of stars in the sky.

We cannot expect superhuman talent to accurately read crystal balls, and obviously economics is not a science, but leadership imbued with some common sense is not too much to expect from Washington and its expensive hired help. Leadership, plus some effectively placed oversight.

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