Wednesday, February 25, 2009

Our New Direction

Last night our President outlined his vision for the future of our nation as we struggle to rebuild our economic infrastructure.

Part of this vision requires a re-liquifying of the banking system as we know it today. This is expected to cost the US taxpayers trillions of dollars, and may result in the partial or total "nationalization" of many of our largest financial institutions. Many of the experts see this as a secondary priority. The real issue, they say, is the continued decline in asset prices - houses, commercial real estate, etc. Many of these assets are backed by "financially engineered" products that have no intrinsic value (tied to "hard" assets like gold, silver). As part of the modern day Fractional Reserve monetary system, bankers have been able to create assets out of nothing. Opponents of this system call it "Pluck From Air (PFA)" banking. While this post is not meant to go into detail on how it is done, I do want to point out that this system has been made more impactful and dangerous with the introduction of "shadow banks" (Hedge Funds, Private Equity Funds, etc.). The rise of these alternate sources of capital are now themselves falling victim to rapidly declining asset values, creating a snowball effect and putting further pressure on the Feds to bail them out, as well.

Why have I spent so much time in this blog on the subject of modern day banking? Because the root cause of this latest financial crisis has been around for a long time (back to the Federal Reserve Act of 1913). But deeper than that, the current banking crisis can be traced back to biblical times when "honest scales and honest weights" were used to conduct trade.

Somehow, we have managed to stray from this "righteous trade" system of commerce. It has taken centuries, and various forms of dishonesty to get us to this point.

Let us be the first generation, to commit to acting responsibly, and restore honesty and integrity to our banking system. As President Obama said last night "The time to take charge of our future is here."

Until next post, continue to believe, achieve, receive. SDG- JBHIV

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