Monday, January 25, 2010

Volcker Half the Way to Freedom’s Vision?

In the middle of January, 2009, the “Group of 30” (check out this cast of characters) which was formed in 1978, is Chaired by Paul Volcker and comprises a group of central bankers and others, released what it calls “Financial Reform – A Framework for Financial Stability.”

Group of 30 Reforms - Volcker

What you find inside are 18 clear and concise recommendations for financial reform.

Amazingly, many of them are very close to the recommendations contained within the monetary reform framework of Freedom’s Vision Outline.

They are worth looking at, as they give some insight into the direction Volcker may take the administration if they are willing to listen. They address a lot of key issues including: Deposit concentration, Hedge Funds, Simplification of international structure, Risk management, Liquidity Risk Management, Fair Value Accounting, Off-Balance-Sheet Vehicles, Rating Agencies, OTC Transparency, Structured Products, and Freedom and Sharing of information.

In my opinion, the most important of all the above suggestions is the importance of freedom and sharing of information. Transparency is the one concept that provides the ultimate check and balance. Without it, the citizens are in the dark and vulnerable to manipulation.

While I give praise to the items addressed by this distinguished group, we must consider the items that were NOT addressed and ask why!

Let’s start with “structured finance,” another term for derivatives. Their solutions do not address how to lessen the risk of the massive derivatives that currently permeate the globe. Why? Because they don’t have an answer, they cannot support removing them because they know the banks that many of their members represent would fail should they be removed. This is the beauty of the Freedom’s Vision plan in that it provides a unique method to cleanse the system and ensure the risk does not return, while at the same time ensuring the survival of ALL banks through the transition period.

There are also massive unstructured debts that permeate the system. How does a country heal when every level of the economy, its citizens, its businesses, its local, state, and federal governments are all saturated with debts and future liabilities? Again, they fail to mention how we get from here to there and what effect imposing their changes would have on the entire world.

This is because their proposals only go half the way there. They are dangerous standing alone because they will cause deleveraging without actually addressing the root cause of our debt backed money system.

“It’s not WHAT backs our Money, it’s WHO CONTROLS the QUANTITY!”
- Bill Still

Velvet Revolver – The Last Fight: