Welcome to the New Financial Order

So, now we know.  Seven Hundred BILLION taxpayer dollars.  Wow.

The Federal Government, led by Treasury Secretary Henry Paulson, is going to spend that amount to buy up bad debt and illiquid securities from banks and financial institutions.

The first question that pops into my head, is that if this debt is so bad and so “toxic” that banks can’t give it away, why the heck is the government buying it for $700 billion?  That just doesn’t make any sense at all.

Also, along with this new, at least somewhat thought out, bail out scheme, the Treasury Secretary and only the Treasury Secretary will have the power to allocate and spend the money.  This power will have no checks and balances, and the plan spells out that the Treasury can not be reviewed or have any legal action taken against it.

With these new powers, our entire economic future rests in the hands of two unelected officials, the head of the Federal Reserve, and the head of the Treasury.

The Federal Reserve already has an exempt status from any checks and balances.  It can not be audited, and has absolutely zero transparency.  In fact, they do not even report how much money is in the financial system any more.  So nobody knows how much of an impact their printing of hundreds of billions dollars is really having on the overall money supply.  How much sense does this make?

Also, the Treasury Secretary Henry Paulson was the COO of Goldman Sachs before taking the public job.  Who do you think his allegiance is to?  How can he bail out big Wall Street banks without any regulation?  He’s a Wall Street insider with unbridled power to give our tax dollars away to his buddies at Goldman and other firms!

I’m not an economist in any way, but it seems that things are broken.  And all I hear is that Wall Street needs more oversight.  This is a diversion so the Fed and now Treasury Department can run our financial system like a dictatorship.

It was not Wall Street’s fault for the mess we’re in.  The Federal Reserve is the biggest culprit.

Former Fed Chair Alan Greenspan artificially lowered interest rates to 1% at a time when borrowing should have gotten more costly.  This led to easy credit and increased borrowing by everyone, from home owners to banks.  The entire system got flooded with so much debt that when they had to finally pay the bills, they couldn’t.  People are losing their homes to foreclosure and banks are failing or being bought out.

Then to make matters worse, rather than letting the market take it’s course, the Fed has been printing billions and billions of dollars trying to put a band aid on a huge problem.

Here’s what needs to happen:

1.  Take the money printing power away from the Federal Reserve.  Only Congress can print money, according the Constitution.  That money is supposed to be based on gold or silver as well, but that is probably impossible to go back to at this point.  Congress granted the power of creating money to the Fed, but that does not mean that Congress isn’t still responsible.

If bills come to my house in my name, but I tell my wife to pay them and she forgets, it still effects me.  Just because I passed responsiblity doesn’t mean I’m off the hook.  Congress shouldn’t be given a free pass either.  There needs to be more accountablity.

2.  Make the Fed more transparent.  We need to know how much money is in the system at least once a year.  Then we will know how much of an effect their printing of billions of dollars has on the money supply.

Every dollar the Fed prints makes the money in our bank accounts worth less.

As American citizens and taxpayers, we should be allowed to know exactly what the Fed is doing.

3.  Cap the amount of money that can be printed every year.  Once we know how much money is out there, Congress should impose a cap on how much money can be created.  Maybe it’s nothing.  Maybe it’s 1%.  But we need a limit.

How is anyone around the world going to have faith in the dollar if we keep creating more out of thin air.  If they knew that no more dollars were going to be printed, they would have faith that their money would increase in value over time.

This would be a great start to re-establishing the dollar in the eyes of the rest of the world.  It would also put more buying power in the bank accounts of every American.  Sure, there are more problems with the system that I will address in later posts.  But this is a start.  What do you think?

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