“To improve our money system it is neither necessary nor wise to destroy our present system. It is only necessary to produce a better product and to introduce it gradually.”

-Dr. Edward Popp,  The Great Cookie Jar, 1978

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From Bluecommonwealth.com

It is worth asking, too, what happened to all the gold in Fort Knox as a result of the more-or-less secret gold carry trade enacted by the US Treasury in the 1990′s. As one investment advisor has said, “…just wait until Pres. Obama asks how much of the original Fort Knox gold still remains the unencumbered property of the U.S. government. Surprise, surprise.” In other words, even if the gold is still there, do we actually own it any longer? Therefore, what is the ultimate backing for all those dollars Bernanke continues to create out of thin air? Or, are we like Zimbabwe?

The Federal Reserve, remember, is organized in fact by the banks themselves, it is not fully an accountable part of the government’s executive chain of command, and some think it has become more powerful than the Presidency itself. Bernanke, on his own, has completely re-written its mission so that the Fed is now the “lender of last resort.” He has doubled the size of its balance sheet of assets and liabilities, and, by making huge special loans to selected big banks, changed its makeup from 2007′s safe holdings of Treasury notes and bonds and a little gold, selling off half of the Federal Reserves’ Treasuries to fund additional loans, and encumbering what was left with “off balance sheet” swaps of some $220 billion—- isn’t that a nice bureaucratic way of saying Enron accounting has taken up residence in the federal government? Result: the Federal Reserve’s balance sheet went from $800 billion of reliable assets to maybe $250 billion of “unencumbered” Treasuries.

On the liability side, the Fed has borrowed and acquired deposits to fund the loans to equal the amount of the new currency “printed.” In two months the Fed has added almost $1 trillion new credit to the economy. Also, there are the Fed’s new inventions of the MMIFCPFF (Commercial Paper Funding Facility) which in 2 months has already purchased $300 Billion in commercial paper; and TALF (Term Asset-Backed Securities Loan Facility) to lend $200 billion to support mortgage-backed securities, all of which will amount to, for starters, another trillion dollars of credit. All of this is completely beyond the old framework of government as provided for by the Constitution, and its products sound as exotic and dangerous as all the fancy derivatives invented by similar Wall Street geniuses (MMIF? Sounds like such creatures as the CDS’s or Credit Default Swaps of Wall Street in not being fully understood, perhaps?) The Federal Reserve can “create” money like this, but the US Treasury cannot; what it spends must be paid for out of future taxes or other receipts. (Money Market Investor Funding Facility) to guarantee up to 90 percent of $600 Billion in loans to that sector; the

What strikes me is not so much the obvious mess we’re in, but what must lie ahead. There is more at work under the surface than simply another “recession” or “adjustment.” What we have here is a major historical change. Several historians/financial writers believe that in 2008 the US economy and financial structure took a lethal hit. Henry C. K. Liu, writing in Asia Times Online, ( http://www.atimes.com/atimes/China_Business/JL05Cb01.html) said that the credit crash “turned out to be a catastrophic, global financial perfect storm,” which may even “spell the end of the cowboy finance capitalism of the past two decades in which risks are socialized and gains privatized, with debt manipulated to act as phantom capital.” In other words, death to the “free market” greed-sanctified, globalized corporation-dominant economic philosophy so beloved of Republicans (and the DLC).

This does not, I think, mean the end of corporate dominance, however. Not even the virtual nationalization of banks means creeping socialism; it may instead mean the opposite: that the banks and/or corporations are in fact formally taking over the government through the back door—- creeping corporate feudalism, in other words. It is happening so fast, so subtly, so unremarked upon, that the final sea change to our republic will have occurred and be in place before we the poor slob people even know what has happened.

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