Frank-Dud Finance Dance

When is a law not a law?  When it is a bag over your head.

The Financial Regulation Bill.. aka The Frank – Dodd Bill is 2,315 pages requiring 399 rule-makings and 47 studies by yet unconstituted commissions. One familiar with the ways of Washington DC would see this as a tremendous opportunity to lean on lobbyists and the “legal community” to fund the next election cycle.   But fix the financial system: no.

The good part (politically) is the consumer protection agency, although it is housed at the Federal Reserve, is a gesture toward lessening the retail end of getting screwed.   Un-addressed is getting a wholesale screwing, leaving the too big to fail crowd in control… and it is not a big group: Goldman-Sachs, Morgan-Stanley, Bank of America, and Wells-Fargo.
They call the shots, get the money at Zero to 1/4 of one percent interest and loan it out at….5% if you are annointed and the sky is the limit if you are not.  They buy up small banks one after another.

Meanwhile the “high frequency trading” world is un-scathed, with hedge funds trading in the milliseconds. Sorry about your pension being on the down-side of the next ‘flash crash’.

Some wag has mentioned that CEO’s have difficulty relating to stockholders that own their stocks for less than 60 seconds.

A question that arises from this is: What is property?   What is ownership…. when everything is transitory and momentary. It is a grave question that casts light on the shadow banking concept: Hedge Funds, derivatives and all.  When eveything is owned momentarily, as a trading chip, and the ultimate bag man is the taxpayer….. why are we still projecting ownership on the banks?  They Blew It!  We picked up the pieces.  So why do we think the banks own everything?  Perhaps it is habit.   They are the authors of the chain-letter, but neither  are they authors, nor creators of  productive activity.  They have been seen as the permission keepers,  and have been granted the power to create money, via loan creation, which is authorized Not by the Treasury, but by the Federal Reserve Act of 1913.  Arrgh.  I am entering the swamp of history.   I cannot here deeply illumine you on this simple but elusive point, namely, that beyond the gold, and silver standard as we have been since FDR and Nixon; money has been created only by the creation of loans and that had been done, not through the US Treasury which only mints coins, but the cartel of the ‘money center’ banks mentioned at the top of this article.      Oh, and the interest to pay on the loans, that is not created, thus our constant need to ‘grow’.  And when loans end (due to default or the loan gets paid off), that money  that was created: ends,  it is un-created..

I confess, I cannot explain the whole financial charade to you in one post, but can recommend a book that can, namely:  Web of Debt, by Ellen Hodgson Brown.   Interestingly written, historic, and a story well told.

Anyhow  we seem to be entranced in the projection of authority, of (phantom) ownership.

How?

It is the banks that own the houses, becaused they borrowed the money from the Federal Reserve system at less than one percent and loaned it out at 5 to 19%, while the builder built it ( at a fraction of the sale cost) and the banks then sell that monthly cash flow to some sucker in the the ‘securitized’ world, perhaps your pension.    OK,  if I say any more  all our brains will hurt.

Let is be said that the Frank-Dodd bill, is not close to law, for nothing is settled within the devils in the details 2000  plus pages, except 399 rule makings yet to make. I would suggest making contact with your senator or representative and say you want a 100 page bill that separates banking from trading, that breaks up banks that are “too big too fail” and thus too big to govern,  and to prohibit derivatives beyond the first degree. (yes, I will explain this later)

Business will not prosper, until the game is unrigged.

Tune in to a subsequent post for insight into the world of derivatives.

July 4th 1789, The First Act

“Looking back we can recall that the very first act of the first Congress was a tariff, signed, sealed and delivered by George Washington, July 4, 1789. The great majority of that first Congress were farmers.  They lived close to the soil and they understood the physical economy.  No less than five Founding Fathers became presidents, while the Tariff of 1789 was anchored in the statue books.

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“George Washington spoke for the free people he led.  Their safety and interests required the nation to promote the manufacturing they needed for self-sufficiency, otherwise they would surrender their independence and sovereignty.   The suggestion that foreigners could provide military supplies was a reflection on the mental acuity of those holding such an opinion, according to Washington.

“John Adams, Thomas Jefferson, James Madison, James Monroe, none found a bit of dissatisfaction with protection.  Indeed, Andrew Jackson, Abraham Lincoln and presidents down the line to Theodore Roosevelt and William Howard Taft agreed….”

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__ Charles Walter wrote this in 2003 in his introduction to his analysis of money, markets, banks and prosperity in America in his book:  “Unforgiven…. the American Economic system Sold for debt and war”.

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I believe what America was then, would be called an “emerging market” today.

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Imagine for a quick minute, if we charged a tariff on every gallon of oil imported onto this land of the United States, or for any oil used by our military equal to the value that is lost by its use: carbon injection, pollution, smog, spills, wars, accidents.

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While I had the good fortune to meet Charles Walter in 2008, about a year before his passing, I was tremendously impressed with his depth of understanding of the triad of economics, how money works, and prosperity.   You will note that in academia  Economics  and Finance and Small Business are separate majors.    It is just recently that I have had the chance to delve into his book: Unforgiven.   Charles Walter was the publisher and editor of Acres magazine,  www.acresusa.com   a publication concerned from the very early years with organic farming.

He was known for both his work in economics and agricultural economics, which as an academic may share with you, usually have their offices at opposite ends of the campus.

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Charles, like Thomas Jefferson and some of the Founders leaned toward the Physiocratic way of thinking.  It was a French creation that honored the production from the land and was good in that realm.   The French version was flawed in some other aspects, namely that they did not value manufacturing.  Some opine today that Capitalism too has its flaws.    Adam Smith published his Wealth of Nations in 1776, which was after the revolutionaries had their tea party, and struck out to remove their colonial shackles, which, by the way were economic.

What relation do you think tariffs have with self-sufficiency, and do you think self-sufficiency  is important?