The Unitary Federal Reserve – Crisis Choreography

Along with much of the world, I have watched with increasing disquiet as the United States of America morphed under President Bush into a lawless soft dictatorship more like the USSR than the USA.  Under his theory of the “unitary executive” the laws that Congress enacted were disapplied by signing statements and secret legal opinions.  The protections of the Constitution were eroded and marginalized by police powers and warrantless surveillance.  International treaties governing the protection of sovereignty, rules of war and the universal rights of man were distorted by unilateral interpretation and willfully hidden misconduct.  Court rulings and judicial review were avoided, and where forced, were ignored or overridden or negated by executive pardon.  Transparency and audit became a joke with refusals to cooperate with tribunals or to comply with supeonas or produce evidence.  This lawlessness has not made the world or the United States or its allies safer in the age of terrorism as it has degraded and confused what we might have hoped to defend.

Just as we here in the rest of the world hoped we might breathe easy with the end of the Bush administration in sight, and several creditable candidates for president coming forward, the lawless unitary executive has expanded to embrace the Treasury and the Federal Reserve, debasing and contaminating the financial markets globally with its spread to our own central banks and market authorities and destabilizing our banks and investment markets.  Once again in the name of crisis and expediency the laws are ignored, decisions are taken in secret, extra-judicial reapportionment of property and contract is mandated by executive fiat, and legislative review and judicial intervention are impossible. Over the past year every financial crisis has been met with lawless and Enron-esque innovation by the Federal Reserve and Treasury, and this week was arguably more extreme.

After this week’s secret and unaccountable and extra-legal moves by the US financial authorities, I will not be holding any assets in the United States.  I do not understand the rules.  I doubt any rules will be applied fairly to all the players.  I cannot be sure who the umpire works for, or what principles the umpire thinks they should uphold.  I will not play the game.*

Let’s look at a timeline of some of the decisions I would class as extra-legal or Enron-esque:

The (Selectively Leaked) Discount Rate Cut (August 2008)

Super SIV (October 2007)

Term Auction Facility (December 2007)

Bear Stearns/JP Morgan bailout and subsidy (March 2008)

Primary Dealer Credit Facility (March 2008)

Reverse MBS Swaps (April 2008)

Equity investment and collateral (September 2008)

Executive Repeal of 23A (September 2008)

AIG nationalisation (September 2008)

Expansion of the Fed Balance Sheet through unprecedented Treasury refinance without appropriation by Congress (September 2008)

Central bank dollar liquidity draws (September 2008)

Resolution Trust Company Redux (next)

And that’s just the list of actions we know about.  Much may have been orchestrated and influenced behind the scenes in  credit markets and traded equities and commodities.

At no stage have any of these significant enhancements to the prerogatives of the Federal Reserve, these derogations of explicit statutory limits, these stark departures from past authority and conduct, been the subject of democratic legislative proposal or review, or even public consultation and comment.  In the name of exigency, they have all been sprung as fait accompli on a shocked financial community, and since been treated as unquestionable and unreviewable.  Every initiative introduced as a temporary measure has become a permanent fixture.

The unitary executive of the Bush presidency eroded and disregarded the civil rights of Americans and others.  The unitary Federal Reserve disregards the property and contract rights of Americans and others.  Arguably the actions of the Federal Reserve over the past year represent the largest state confiscation of wealth in the history of man, dispossessing currency investors, equity investors, bond investors and taxpayers of literally trillions of dollars of current and future wealth by executive fiat.

The hypocrisy of the Bush administration criticizing Chavez while defending Paulson and Bernanke should be the stuff of late night stand up comedy.

And the answer to the crisis so created, according to those in authority in Washington and Wall Street, is to give more concentrated power with less review and less oversight to the Federal Reserve.  The reforms now being discussed in Washington are aimed at (1) gutting the SEC so that it can no longer challenge the Fed’s primacy in investment bank and financial conglomerate prudential supervision, oversight of clearing and settlement systems, market integrity and stability and introducing “principles based” regulation so that no one well connected need ever worry about prosecution or conviction ever again; (2) gutting the FDIC so that it can no longer challenge the Fed’s determination of capital adequacy or prudential supervision at insured banks or restrain cross-affiliate financing or excessively risky activity within bank holding company groups; (3) gutting the CFTC so that the Fed has primacy to oversee risk management in all OTC and exchange-traded derivatives clearing and margin; and (4) providing explicit powers to the Federal Reserve to promote “market stability” by means which shall be secret, unreviewable, and above challenge in the courts; and (5) making the Federal Reserve the prime global regulator for review of the regulatory and prudential supervision arrangements everywhere else in the world through mandated “harmonization” of global standards as a quid pro quo for foreign market recognition and access.

Stalin couldn’t have drafted a better plan for central control of the global economy after wreaking such havoc and devastation.

Up until this week I thought the gold bugs a bit mad.  I couldn’t see the sense of holding something that couldn’t be spent but could be seized (as gold was seized in the 1940s).  I still think they are a bit mad, but I am actively looking for any alternative to currency and market investments as a medium of exchange and store of value.  Given the very public concerns now being expressed in China and Russia, I am keeping company I would have once thought very surprising indeed.

For now the ECB, Bank of England and others are content to cooperate with the Fed, but as the chaos deepens and it becomes clear that the losses are to be allocated principally outside the US borders to those foolish enough to hold assets the Fed’s policies degrade and debase, they will begin to question and to look to each other for common interest and alignment.

The loss of 1200 lives on the Lusitania was deliberately allowed to justify US entry into World War I.  The attacks on Pearl Harbour were known in the White House three days before the bombs fell, but were ignored to justify entry into World War II.  Tonkin Gulf was a fraud.  WTC hijackers were financed by US allies and WTC 7 was . . . whatever.  Saddam’s weapons of mass destruction were fabricated in the forgery shop of Ahmad Chalabi’s Iraqi National Congress.  You get the idea.

Not all catastrophic events were willful or anticipated, but all were used to force through an agenda that was pre-agreed by a powerful elite that stood to profit from a preferred course of policies that could only be pursued in the undemocratic atmosphere of crisis.  Crisis prevents objective determination of the public interest.  Crisis undermines both markets and democracy.

I no longer believe that every financial collapse is unanticipated or without behind the scenes orchestration of effects.  I no longer trust the authorities to act fairly, honestly, in the public interest.

In the past year and just this past week, trillions of dollars of wealth have been allocated or misallocated, preserved, appropriated or destroyed by central bank fiat.  If we really have nations of laws and not men, capitalist markets and not command economies, then it’s essential we peek behind the curtain to ask by whom and why and hold them accountable.

Lawlessness has not enhanced our security as citizens, and lawlessness will not enhance our security as investors or depositors either.  Banks and markets require regulation in the public interest, and determination of the public interest requires transparency, accountability and the rule of law. _____________________________

*  For those cynics out there, let me remind you I gave up trading in January this year.  I had a small amount of cash in a US dollar account.  That account is now closed.

Hat tip to Joe Mason, for expressing similar views here on RGE Finance and Banking yesterday: Crisis Policy is Redrawing the Boundaries of our Financial System – and not necessarily in productive ways

And, as ever, thanks to the courageous Professor Roubini for providing a forum for views challenging the orthodoxy.

37 Responses to "The Unitary Federal Reserve – Crisis Choreography"

  1. Guest   September 19, 2008 at 3:52 am

    I have some trouble understanding exactly what flavor of capitalism you find palatable. Granted, Fed/Treasury went beyond their statutory mandate. I suppose we can get into our time machine and undo their mischance, then flash forward and put Ben and Hank in the dock. And again using said machine flash even farther forward to avoid the stock market crash, bank run and breadlines we managed to re-engineer.Certainly, it’s an article of 19th century Liberal faith, which I take it you adhere to, that the Invisible Hand is also the Even Hand. And I hasten to join you in a loud chorus of denunciation of extra-legality both political and economic. But the duly constituted government of the United States handed over to the financial establishment the Keys to the Kingdom some time ago and it was all done legal and proper, as we say. The walls separating commercial and investment banking, banking and brokerage, original and derivative securities, real and phony profit — these distinctions were fudged in the name of the efficient market and were cheered by the Street and the City. The latest crisis interventions are just the cheese cart after dinner at the Ritz.Will you wait for the Russia or China to set us straight. Besides the fact that their rulers can answer for a longer and frequently more heinous string of intrusions on the market (including the acquisition of controlling corporate interest by rigged auction and putting the competition in prison), they have shown themselves to be rowing with us in the same lifeboat, in the same direction. Our creditors will be content to extend their influence over time and behind the scenes, for as well we know, once you are deep enough in debt your banker is your partner.Personally I am appalled by authoritarianism of the last several years. When questions of war and peace, torture and humanity are concerned it has been a travesty. To lump these together with the much more defensible and sensible steps that have been taken by the Fed/Treasury is to conflate two very different questions. I’m sure that some in the market saw their good bets go bad as the result of economic intervention. I think that some of these people will in the end recognize that their more fundamental interests in life were preserved rather than violated.

  2. London Banker   September 19, 2008 at 4:02 am

    @ Guest on 2008-09-19 03:52:20I am anything but a free market purist. I believe in government regulation of banks and of markets in the interest of protection of the public’s savings and investments. The government of the past twenty years ceased to serve the public interest, having been co-opted by the lobbyists serving Wall Street. The Federal Reserve ceased to serve the public interest, blithely fuelling serial credit bubbles and hiding the expansionary monetary policies with rigged hedonic adjustments and fudged monetary indicators.I want sound banks, sound markets and sound public servants to police them.

  3. vikas   September 19, 2008 at 5:38 am

    LB, et alBrad Setser’s post today persuades me that private capital flight out of the Banana Republic is well underway. Adios greenback. I expect currency/capital controls at the border next.

  4. London Banker   September 19, 2008 at 6:52 am

    @ vikasMany thanks. I checked Brad’s blog before writing this week, but that post has come up since.

    Negative private inflows is another name for private outflows. For emerging economies, those outflows are called capital flight.

  5. Vikas   September 19, 2008 at 9:12 am

    BTW, allocated AU accounts in London seem like a reasonable hedge, so last time I was there, I started the process of opening one. Has Britain ever outlawed holding gold like FDR did?

  6. lenny   September 19, 2008 at 9:39 am

    From Wayne Madsen ReportSeptember 18, 2008 — AIG is “special case”The U.S. government’s bail out of insurance giant American International Group (AIG) comes as no surprise to intelligence community insiders. In fact, AIG has been at the center of a number of CIA operations for decades. The federal government’s $85 billion “bridge” loan to AIG essentially makes the United States government an 80 percent stakeholder in AIG, a move that will prevent external players from peering into AIG’s myriad intelligence operations on behalf of the CIA, according to an insider who has followed AIG’s overseas operations for a number of years.As Attorney General of New York state and as Governor, Eliot Spitzer made AIG a prime target for his investigations. That ended when Spitzer was brought down in a sex scandal involving a prostitution ring.AIG’s chairman, before he was forced to resign amid scandal, was Maurice “Hank” Greenberg. In 1962, Greenberg was hired by AIG’s founder, Cornelius Vander Starr, the uncle of President Bill Clinton prosecutor Kenneth Starr, as the chief of AIG’s North American operations. Greenberg eventually took over as AIG’s chairman, as well as assuming the Chairmanship and CEO position of Starr’s other firm, C. V. Starr and Company. Greenberg retained control of C. V. Starr and Company after having stepped down as AIG’s chairman in 2005.Greenberg, a close friend of Henry Kissinger, was considered a potential CIA director in 1995 after James Woolsey resigned. Perhaps it was Greenberg’s past connections to Whitewater Independent Counsel Starr’s uncle Cornelius that dissuaded Clinton from giving Greenberg the keys to Langley’s top executive washroom.However, Greenberg and AIG had a long association with the CIA, according to WMR’s sources. AIG’s intelligence operations in Asia even pre-date the CIA and its predecessor, the wartime Office of Strategic Services (OSS).i Greenberg has served as a member of the National Intelligence Council.Cornelius V. Starr started AIG as “American Asiatic Underwriters” in 1919 in Shanghai. Starr moved AIG from Shanghai to New York after the Communists came to power in 1949. Ironically, AIG is back in China through its ownership of People’s Insurance Company of China. AIG also owns AIG Korea Insurance.Ever since the days of Ken Starr’s uncle Cornelius, AIG has, on behalf of U.S. intelligence, kept tabs on rising players on the Asia political scene, particularly in China, Japan, Korea, Singapore, Hong Kong, Taiwan, and other countries. The quid pro quo for AIG is that it has weathered the storms generated by Spitzer and the global financial melt down from the strong support from the U.S. government in return for permitting the mining of data from AIG’s insurance files by the CIA.Greenberg has maintained close relations with the Beijing leadership over the years. However, his dealings with the CIA are also well known to the Chinese intelligence services. In fact, Chinese intelligence is aware that Greenberg has allowed AIG to be used as a major “placement” operation for a number of the CIA’s Asia-based non-official cover (NOC) officers.The CIA’s analysts who concentrate on Asia have also enjoyed routine access to a huge AIG database maintained in San Francisco. AIG’s new building in Hong Kong was intended to be a major outpost for CIA agents assigned the China “beat.” However, Chinese intelligence succeeded in thoroughly wiring the building with surveillance systems and AIG’s China operations were blown. Chinese intelligence could not believe how sloppy Greenberg and the CIA were in handling the Hong Kong operation.With the U.S. government now in control of AIG, the Bush family will breathe particularly easier. On June 20, 2005, WMR reported the following concerning the connection between Greenberg and the Bushes:”The investigations of the secret Bush money tranches are coming to the fore as New York Attorney General Eliot Spitzer focuses in on the scandal involving Maurice “Hank” Greenberg and the inflation of the worth of American International Group (AIG) through shady affiliates, including AIG reinsurer Coral Re of Barbados. Greenberg was the CEO of AIG but was forced to step down amid the Spitzer probe. AIG was founded from Asia Life/CV Starr, a Shanghai-based international import/export and insurance firm founded in 1919 by Cornelius V. Starr, an Office of Strategic Services (OSS) operative in Southeast Asia during World War II. AIG’s largest shareholder is Starr International Company (SICO), an off-shore corporation incorporated in Panama with headquarters in Bermuda. Kenneth Starr, the independent counsel who prosecuted President Clinton, is the nephew of Cornelius Starr. Greenberg inherited the CEO job and Chairmanship from Starr as well as the $3.5 billion Starr Foundation.”

  7. Anonymous   September 19, 2008 at 10:14 am

    Vikas: I don’t believe so, no. VAT (Value Added Tax) has been charged in the past, but not since the year 2000.

  8. artichoke   September 19, 2008 at 10:16 am

    If not in the USA, where will you hold your assets?UK doesn’t look much better. Russia looks worse. The problems may be caused to some extent by this strategy of reallocating losses outside the USA, but nevertheless they are real.So … where?By the way congratulations on a courageous piece of writing.

  9. London Banker   September 19, 2008 at 10:29 am

    @ VikasGold ownership was outlawed in the UK after the war as well. It was only re-legalised in the 1970s. Spread betting was originally a retail investor means of owning gold indirectly – which is why the name of the first spread betting operation was International Gold Index (now IG Index).

  10. NICOLAS   September 19, 2008 at 11:35 am

    Ha Ha Capitalism at its socialist best and who said the markets are not rigged? The FED and the Wall Street cronies are protecting themselves but at WHO’S EXPENSE?3 places Switzerland Luxembourg San MarinoCheers

  11. London Banker   September 19, 2008 at 12:12 pm

    @ JennyMany thanks for the AIG history and CIA links. I had a dim recollection of it somewhere in the back of my mind, but the detail clarifies the intense interest of the Fed in taking over AIG rather than seeing it break up and sold off.@ ArtichokeMany thanks for the kind words. I’m not sure where to put money at the moment. The mattress is gaining appeal.@ NicolasYou forgot to mention Dubai.

  12. DAvid Pascoe   September 19, 2008 at 12:20 pm

    My comment: Speaking of keys to the kingdowm, what we see is a failure of democratic self government that took place long ago when a democratic REPUBLIC was converted into a pure democracy. Those that wanted something from government participated and those that didn’t, did not.In the final analysis we are all to blame.

  13. Guest   September 19, 2008 at 12:37 pm

    Well said for a Brit socialist. By the way, Mr. Banker, have you looked at the UK-to-US immigration figures lately? Why are your white citizens leaving jolly ole England in mass? Why do so many americans now have a brit accent? Could you kindly explain this to your readers?Ah, it so easy to blame everything on the latest whipping boy without looking at the groundwork past presidents laid.

  14. Gloomy   September 19, 2008 at 1:41 pm

    Another great post, LB. I also though the gold bugs were nuts until a few months ago and have been accumulating GDX ever since. Irrational events make irrational thoughts rational.

  15. Guest   September 19, 2008 at 3:00 pm

    Apropos one of your comments to Nouriels blog posting, that “Paulson and Bernanke are doing for American’s property and contract rights what Bush did to their civil rights.” I fully agree with that.I think the developments you list here, and the developments regarding civil rights since 9-11, are tied to an attempt by the government to consolidate power. These are the type of developments that are carried out in order to strengthen the government, in preparation to a war situation.

  16. artichoke   September 19, 2008 at 3:01 pm

    What about China? With the ban on short selling the US stock market is looking more and more like the Chinese markets. But they’ve already had their crash, ours may be still ahead.

  17. OuterBeltway   September 19, 2008 at 4:50 pm

    Thanks LB.That AIG-CIA post, while it’s very credible, doesn’t seem all that big a deal to me. Many U.S. and U.K. corporations serve as platforms for external intel ops. This is common strategy, employed by every power that has international commercial operations. You can be sure that the CIA or other intel services know how to package their activities in innocuous wraps, knowing fully that someone “else” may ultimately gain access to the data or physical files.I don’t believe the security issue was the prime motivation for the AIG “save”. It just doesn’t wash.Nevertheless, I do agree with your general premise that the current stampede is not accidental, and yes it certainly has all the earmarks of “buffalo”. I do believe that an enormous amount of decision-making has taken place entirely outside the public’s eye, and that this is bad public policy.Therefore, it is especially important for all concerned to contact your congress-person and demand “no enabling legislation that isn’t subject to retrospective review”. It is entirely possible to enact temporary provisions which provide short-term relief, and still protect the nation from fraud. I will be writing my representatives today.LB, thanks again, very much, from your friends on this side of the pond. We surely do appreciate your efforts.

  18. vikas   September 19, 2008 at 6:37 pm

    @ LB,in your comments on Nouriel’s blog you mentioned news about Russia, China, Japan, and the Gulf countries forming a creditors consortium. This is obviously a very important event.Do you have a link? I didn’t see it on Bloomberg or the FT, but maybe it was buried deeper inside…Thanks in advance.vikas

  19. vikas   September 19, 2008 at 6:37 pm

    @ LB,in your comments on Nouriel’s blog you mentioned news about Russia, China, Japan, and the Gulf countries forming a creditors consortium. This is obviously a very important event.Do you have a link? I didn’t see it on Bloomberg or the FT, but maybe it was buried deeper inside…Thanks in advance.vikas

  20. vikas   September 19, 2008 at 6:38 pm

    @ LB,in your comments on Nouriel’s blog you mentioned news about Russia, China, Japan, and the Gulf countries forming a creditors consortium. This is obviously a very important event.Do you have a link? I didn’t see it on Bloomberg or the FT, but maybe it was buried deeper inside…Thanks in advance.vikas

    • London Banker   September 20, 2008 at 3:40 am

      I read it through a link to Jim Willie at Goldseek (no endorsement of veracity, but makes sense and aligns with observed coordinated creditor pressure during Fannie and Freddie resolution):

      FOREIGN CREDITORS UNITEA hidden initiative has been in progress for the last two weeks. Foreigners are forced to supply credit for the Untied States. Nations led by Russia, China, Arabs, and Japanese are meeting to form a formal committee. They have a common purpose, to maintain and manage massive US$-based debt securities in danger. Their continued credit support is hampered by three magnificent factors, each a show stopper. 1) The US banks are insolvent, 2) The Wall Street bankers export fraudulent bonds, and 3) The USMilitary has acted with chronic aggression in violation of established contracts, international treaties, and disrespect for sovereign boundaries. So they are working to organize a committee of giant USTreasury Bond creditors. They wish to confront the US debtor with a single voice. Regard this important step as a prelude to possible default of the USTreasurys. It is one thing to be in trouble from insolvency. Add corruption from export of fraud, and you have a bigger problem. Throw in military aggression, complete with misreporting by a controlled press, and you have a crisis in need of almost immediate remedy. My argument has been made for four years, that foreign held US debt creates a threat to national sovereignty. Since when are the Chinese our friends and allies? They are business partners turned rivals, now adversaries. Since when are Russians our friends and allies? They are energy and metals suppliers, betrayed by treaty violations, now adversaries, even on the military front. Since when are Arabs our friends and allies? For three decades an uneasy partnership has been in existence, one that has turned into a blatant protection racket. The endless concocted war on terrorism is seen by Arabs as a war on Islam.

      Even if it weren’t true yesterday, it will be true by Monday. Instead of a Paris Club for creditors of 3rd world debt, we’re going to see a Shanghai Club for creditors of 1st world debt. Those living in the great debt states of US and UK had better hope that their bankers are more benevolent than ours were.

  21. vikas   September 19, 2008 at 7:34 pm

    oops, sorry everyone for the multiple posts…. erratic WiFi connectivity….

  22. Guest   September 20, 2008 at 2:54 am

    When the U.S. government owns all mortgages, the real estate market will be completely subject to political, rather than financial, concerns. Will foreclosures be outlawed? Will loan term easements and principal reductions become standard campaign issues?(from:

    • Guest   September 20, 2008 at 1:49 pm

      now the government will have a tool against anyone classified as “terrorist”.By the way most likely the government will soon have ownership of all mortgages, with some people even wondering “how come they now own our mortgage, too…we were not subprime?”U.S.A. has entered the dark side.

  23. Guest   September 20, 2008 at 3:12 am

    Just like the former USSR where gov’t owned housing and parceled it out according to status etc. Fascinating to watch this unfold in reverse. Will Americans accept closing the borders?

    • Guest   September 20, 2008 at 3:56 am

      yup, and it is the same government that has continuously worked on reducing the civil rights since 9/11…thus we have the government right to retain people indefinitely, NSA/FBI spying on U.S. citizens, etc

  24. Ted   September 20, 2008 at 3:22 am

    From John Mauldin’s newsletter:”Want to get really mad? Up until 2003, all investment banks were allowed only 12 to 1 leverage. Then in 2004, the SEC basically gave five banks (and only five banks) the ability to lever up 30 or even 40 to 1. Bet you can guess the five banks. Bear, Lehman, Merrill, Morgan and Goldman. Three down.”How many of you guys knew this ? I sure as hell didn’t, and I guess that was the point. If this *was not* done in stealth, the public would have immediately cried foul. Which SEC chairman approved this in 2004 ? This is precisely where the mess started. This guy needs to be jailed, along with the heads of the investments banks who pressured him to loosen the restrictions. The executive comp now offshored in swiss bank accounts needs to be returned.What business model can sustain 30-40 times leverage ? This is an obvious crime.

    • Guest   September 20, 2008 at 1:35 pm

      Looks like the SEC chairman back in 2004 was William H. Donaldson.But his successor Christopher Cox also had a role in the development of this crisis.SEC Chairman Had Major Role In Financial Meltdown,0,7972516.column

    • Anonymous   October 23, 2008 at 7:26 pm

      Wasn’t it also the ACORN bullies who pressed the bankers into giving mortgages to unqualified home buyers that can take some of the blame for our sub prime financial woes?

  25. Guest   September 20, 2008 at 12:15 pm

    DictatorshipSec. 8. Review.Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

  26. PeterJB   September 20, 2008 at 6:26 pm

    LBI cross-post this here from Roubini’s main blog: hope you don’t mind.@AfAYes, it is incredible that which is unfolding and totally unbelievable that both Ben and Hank did not suspect a coming economic crisis. Many of us knew this years ago so can we believe that the FedRes with all its computers, PhD’s, Db’s, intelligence, data, real-time information, etc., etc., didn’t know?No. I have stated that Greenspan knew and found the FedRes solution in invading Iraq – and promoted the Iraq invasion (matter of public record). SOooo, Ben knew!And, I strongly suspect, as I have earlier posted here, that whatever is going down, it involves morphing the FedRes into the Catholic (Universal Centre – etymological definition)) bastion of global finance, along similar lines of the Church of Rome, before it. Refer to my previous post on this subject, in a previous thread.This is logical and in accord with human behaviour as well as being consistent with the USA PNAC, Globalization intentions (stated) and hegemonic and belligerent “leadership” of the USA to date.!So, if true, we end up with a Global Authority (after sucking in the whole of the United Nations, including the World Bank, the IMF and the BIS, etc.,) that actually – with all its priests of economic religion – allowed the US economy to tank in the first place, having the singular global authority over all nations through a system of papal membership – headed by a POPE; the first to be Mr. Ben Benanke – Long Live the Pope.This Temple of the craven will be run by its member banks; Bishops, Cardinals, etc., complete with ritual, superstition, dogma and smoking incense pots carried by the alter boys…What a travesty of sanity; of intellect; of basic intelligence; of culture???This early morning I believe that I am now correct in this projection of intent, er, supposition, hypothesis, theory, suspicion; whatever.To be sure: the USA economically is finished; as a world power it is finished; the dollar is finished; the USA is now a rogue state and what happens next will be panic and desperation, aided by the sudden realization by leaders of Nations around the World as to what the USA and the FedRes is up to. I expect many Central Bankers to flee their countries in order to save their lives from agreeing to acts of treason.As I have also written on this Blog numerous times, the USA will now degenerate into a state of civil unrest, revolution, perhaps even civil war. It is a sad time and regretful, if it does come to pass, but,AfA, et al, we have discussed all this here previous to this day.For the first time in my life, I believe that this day was planned in a conspiratorial environment and it reeks of a dark and dank stench of a bankers’ mind; that is to say, totally without intellect or merit; crasse.Gold and Silver look like the only good bets to me.Ho hum

  27. mjs   September 20, 2008 at 10:34 pm

    Regarding the United States economy: all bets are off, which of course means that all bets are on.++++

  28. Guest   September 21, 2008 at 3:50 am

    The (seletively leaked)Discount Rate Cut link requires a “rge” login, but doesn’t connect; the link is broken.

  29. Anonymous   September 22, 2008 at 5:14 am

    As an alarmed US citizen, I am trying to figure out how to protect my retirement so that I can continue volunteer work. Is it best to take a large position in gold and silver by holding GLD and SLV?

    • Anonymous ibid.   September 22, 2008 at 12:07 pm

      Anon, this was my comment on the Roubini board. I’d be interested to see London Banker’s response: the main point is to set aside enough cash to pay your bills for about the next five years. If you have a recession-proof job (e.g., undertaker, e.g., barber, e.g., prostitute, e.g., bartender), then you have few worries.Once you have covered your basic needs, and sets aside some cash for opportunistic buying, one wants at least some assets that are resistant to both inflation and deflation, because we may see both. The asset that probably does best in that regard is carefully-selected raw land and real estate in places like New York City that aren’t likely to see major demographic shifts. However, it’s risky and requires payment of taxes. Gold and silver are a problem because present tax law treats them as collectibles, with high capital gains. Miners are a problem because they hedge. Only if one understands their hedging structure can one invest sensibly. New technology and emerging markets should also be considered. They may be very volatile, but as long-term holds, they’re more likely to go up than down. And then there’s always investing privately. If you have a recession-proof business, that could be an excellent place to invest. As always, diversify, because plenty of companies will go bust.Alas, only about 1 person in 100 and probably fewer is able to take this advice. How many of us can afford to go 5 years without perhaps needing to tap our investments?

  30. One-Eyed Fiona   September 22, 2008 at 9:51 am

    @London BankerThank you for articulating the anger & fear that many of us have but keep hoping it is just our own personal paranoia.Your remarks that “Not all catastrophic events were willful or anticipated, but all were used to force through an agenda that was pre-agreed by a powerful elite that stood to profit from a preferred course of policies that could only be pursued in the undemocratic atmosphere of crisis. Crisis prevents objective determination of the public interest. Crisis undermines both markets and democracy.” is as good a précis of Naomi Klein’s “Shock Doctrine” as any I’ve seen and this viewpoint needs better dissemination.Cheers,One-Eyed Fiona