A tale of the tail that wags world’s financial dog
Private coalition of banks controls global money system — and your monetary fate
The U.S. Federal Reserve holds the entire world financial system, including the Canadian parts of it, prisoner through its command of things like the interest rate.
The Federal Reserve is not, as most people assume, a U.S. government department: It is a coalition of private banks. Thus we have a U.S. financial service provider setting the rules for the provision of financial services through the world.
Do you catch the odour of conflict of interest emanating from one of the most important elements of our financial system?
Any Canadian citizen’s net worth, whatever it is, is one ten- thousandth of one hair on the tail that wags the financial dog, the U.S. Federal Reserve.
One of the results of this conflict of interest was the 2008 financial crash and the recession we have had since. Many big U.S. banks, grasping for ever higher profits, took risks that drove them to the very edge of bankruptcy and finally over that cliff.
Their vast risky investments of borrowed money, combined with unethical business practices, exposed the fact that they owed far more than they owned — they were bankrupt, along with millions of their small investors like you and me, even though Canada contributed very little to the disaster.
Except that there was one big difference between the banks’ fate and yours and mine: The banks’ rules ensured that the biggest banks (“too big to fail”), sometimes using unethical trickery, were bailed out at taxpayers’ expense; whereas you and I had to bail ourselves out best we could by losing part of our investments and living with tax increases that spilled-over from the U.S. problems.
How one big bank was able to make this can’t-lose double bet is an interesting study. Look up Goldman Sachs+unethical for a complete explanation. Goldman’s behaviour, according to the U.S. Securities and Exchange Commission, was “unethical, but not illegal.” Using it, they made billions out of the financial collapse, both on its way up and on its way down. Taxpayers and small investors paid for it all.
Today, we hear mutterings to the effect that the Fed should again relax its reserve requirements. Further, we in Canada should take more care of such warnings as rising house prices; perhaps we ourselves have one wheel over the edge of the bankruptcy cliff.
Yet there is a flicker of light in all this blackness, as reported in the June 25 political-economic magazine The Economist. Representative Jeb Hensarling, of the U.S. House of Representatives, has hit the hot buttons when he recommends that the U.S.:
Switch the funding of the Consumer Protection Bureau from the Federal Reserve to Congress and its control out of the hands of bankers, and switch the management of the Bureau from the Fed also to Congress;
Eliminate laws that protect banks from going bankrupt;
Require banks to carry a “hefty” capital reserve (Canada survived the crash better than the U.S. because we kept our reserves above 7 per cent, while U.S. banks were allowed to keep mere fractions of one per cent.);
Let failing banks fail instead of being bailed out by the taxpayers;
Simplify the regulations so that “banks cannot find ways to game complicated rules.”
Three deafening cheers and a tiger for Representative Hensarling. Would he come and run for Parliament in Canada if we paid him what he deserves — perhaps the pay of some banking CEOs who, succeed or fail, get two or three hundred million dollars per year? He’d be worth every nickel of it.
Perhaps then we could shake ourselves free of the Federal Reserve tail that wags the world’s financial dogs, including ours.
Federal Reserve chair Janet Yellen heads up a powerful coalition of private banks. Wednesday she appeared before the U.S. House Financial Services Committee on U.S. monetary policy.