Friday, October 1, 2010

The FED and Money- An Explanation for Dummies

I am a dummy. Chances are, you are too. If you can accept that premise without a lot of angst, chances are we are going to get some place.

For the record, I am a retired Police Chief with a degree in law enforcement. That hardly qualifies me as a financial expert or an economist. I want to state this up front because that is the white elephant in this room. I have traded stocks and options most of my adult life. I schooled myself, which is to say, I read and studied a lot- I had some success and some failures.

In 2008, I watched an extraordinary event. I watched in amazement as the former CEO of Goldman Sachs and then Treasury Secretary, Hank Paulson, literally stole 1 trillion taxpayer dollars in a matter of days and delivered it in the form of bailouts to private banks and an insurer, American International Group.

I am going to keep this simple. Paulson and the government broke the law. Rather than let these banks fail, and put them into receivership as the law requires, Paulson and the government actually delivered our money to save them. I believed, and still do, that what I witnessed was the greatest grand theft that has ever occurred in the history of our planet.

What they will tell you was that the trillion dollar bailout was absolutely necessary to keep the world from collapsing.

What I am going to tell you is that explanation is complete and utter nonsense. Bullshit. Nobody offered nor did anyone ask for alternatives. The whole thing was done in a matter of days- executed with precision just before President Obama arrived and just before Paulson's departure.

I was writing on my home town blog at the time. I wanted the banks to fail. In fact I had shorted a couple of banks and Countrywide for a time. I found myself in countless arguments with people. I discovered two things. I didn't know jack shit about money and the FED nor did any of the people I was arguing with. All I remember back then was everybody was angry and frustrated and nobody really knew enough about money or the FED to realize just what the hell had just happened. Even the brokers and mortgage originators I spoke with knew very little outside their fields of expertise.

What happened in the fall of 2008, was that I realized that this whole country had either been duped or was just stupid. Granted I wasn't in a Harvard frat house but how could all of the people I knew, plumbers, cops and teachers, lawyers, mortgage bankers, brokers, and doctors all be so clueless about our money and the FED? A few of them knew a little, most did not. Were we all that stupid? Perhaps.

I came to believe that people don't understand anything about the FED and money and quite frankly- the topic bores them. You cannot possibly hope to evoke any kind of united effort to change the most unnecessary and morally corrupt system ever conceived if the people you need for support are all not reading from the same sheet of music. Arguing about things, less than certain, was fracturing any hope of establishing a concentrated effort to identify the villain and cure the problem.

My willingness to work at this does not have a damn thing to do with any love for economics. It has to do with getting ripped off and plunged into debt. That pisses me off. Thus began my two year self styled history, economics, and politics obsession. To a lesser degree, some theory, finance, statistics, and graph reading. To say I spent a few thousand hours on line and in libraries would be accurate albeit a little wasteful. Uncovering what I needed to know should not have taken all that time.

An old time cop once told me, "Son, we are just cops. We don't know everything. But it's our job to find those who do." No shit. That's how this two year mess started.

So I am going to try and explain our "money" system and the FED in a simple way that will not bore you to death. I am going to embed and list references. I am going to keep my opinions to a minimum and hopefully produce something that you will easily understand in terms that will not baffle you. I am not going to waste time talking about economists Keynes, Hayek, or Von Mises. I invite anyone reading to offer criticism with any available references. Hopefully I can do this all in three or four parts. I should tell you that there is good news and good news.

The world really is on the verge of economic collapse. That imminent collapse is why we need to educate ourselves. Necessity really is the mother of invention and I see that as a good thing. The other good news- there is an easy solution to avoid economic collapse. The bankers just don't want you to know what that is. There's no power or money in it for them.

No comments: