Fed, Treasury Propose the Dissolution of Capitalism

Includes: DIA, KBE, QQQ, SPY, XLF
by: Moon Kil Woong

I have sat back and watched atrocity after atrocity be committed in this downturn. Like all Americans I have watched as public funds have been shifted for private gain, as fraud has been perpetrated, as lie after lie has been paraded in front of Congress, as the Fed has seized all vestiges of Congress’ power to create and control the production and allocation of money supply which is one of the US’s most precious assets, and as Congress and its institutions (including the Fed which is private but is suppose to act on the public’s behalf) bequeath money upon the most unfit institutions rather than the most fit institutions to lead us into the next decade and wonder why nothing works.

So why do I choose to write now? Because now, laid at the feet of the public, is one atrocity that exceeds them all. It is not about money supply which monetarists know can be created at whim by the government as long as they are willing to risk the results (inflation and usually massive corruption as we are witnessing). It is not about taxation, which the government can legally solely whittle away your money to zero, for they can do so by creating more money to the point all your existing money becomes a shadow of its former self.

Rather is is about real assets. It is about the fundamental core of capitalism itself. It is about making your own business, incorporation, employment, and all the functioning of the free market itself. What is being laid at the feet of Congress like some grand trophy is the Fed (representing banking interests) and Treasury (representing banking interests and the executive branch) is their right to seize any company or corporation, irrespective of their solvency if they find it a threat to the greater economy. How is the case made for this type of policy?

Essentially, the Fed and Treasury have created the disease themselves. They have fostered and sustained dying companies they should have gone bankrupt and then into a court trustee so that they can continue to damage the greater economy. They have allowed their brethren financial behemoths to get so large and incur so many bad assets that the entire GDP of the US in one year couldn’t cover their derivatives contracts. And even then, they have then shifted public funds to still keep them from bankruptcy and conservatorship. Justifiably they now argue that the problem is obvious. The bad companies are not being seized and going bankrupt. Thus, rightly, they continue to be a detriment to society. They need to be seized and put into conservatorship so they can be dismantled and cease to cause harm. They mask the fact that they themselves are preventing the normal mechanism for this from operating. The mechanism is bankruptcy.

Rather, they propose, the system is broke and they are the only remedy if given the right to deem any business a threat to fiscal stability. With only the mandate of the President and the Fed which is a private institution whose ownership is kept secret for purposes unknown, they can seize any company they choose. Although you may think this would be the likes of AIG, there need be no change to existing laws to prevent them from seizing the likes of AIG. The government owns an 80% stake of it. It exists at the whim of the government as does all the other justifiable companies for conservatorship like Fannie Mae (FNM) and Freddie Mac (FRE).

Without government support they go bankrupt and into conservatorship tomorrow. So who exactly is this targeted to: GM? But they too would go bankrupt and then into conservatorship without a bailout. Perhaps in the future this could be used to conservatorship good institutions that refuse to support bad ones. Microsoft (NASDAQ:MSFT) to bail out AIG for the good of the country. IBM should support Bank of America (NYSE:BAC). Regardless of the reasons or intents of this proposal. For good or ill. Regardless of whether such power offers openings for abuse or not. The fact that any government institution should abridge the right for the legitimate holders of a company from controlling their assets unless insolvent is a complete dissolution of all capitalist fundamentals. The fact that any American, anyone who studied business, economists, American history, or holds a shred of support for a free market or embraces capitalism should not stand up and demand the resignation of the Fed, Treasury, and anyone supporting this is astounding. Rather, people continue to wonder if the market will fall on a trillion dollar support plan and if some guys get $215 million dollars in bonuses. If tomorrow the public finds themselves run by Stalin it would be hard to say the public didn’t deserve it.

Where is the moral outrage? This proposal strikes at the heart of capitalism more than someone proposing the complete redistribution of everyone’s bank accounts. This deals with ownership of the fundamental core of the economy, business, your jobs, your livelihood and whether the government can seize it in the name of the public interest. In the end, I am a Constitutionslist. I would hope such a policy would be rapidly struck down by the Supreme Court. However, the fact that this could even come out of the mouths of those in power is astounding to no end.

Who’s interests do they have in mind? I can rightly say it certainly is not yours.