First we laughed about it. Then we blew up about it. Then we became delusional about it. Now it's here.
Financial armageddon has arrived in the past two weeks. First the U.S. Treasury Department nationalized Fannie Mae and Freddie Mac, agreeing to throw the weight of the entire U.S. Treasury behind the faltering duo that guarantee a $5 trillion share of the U.S. mortgage market. The markets prepared for the worst. Then Black Monday arrived.
After last-ditch efforts to arrange a shotgun wedding for the ailing investment bank fell through, Lehman Brothers filed for bankruptcy on Monday morning, becoming the largest bankruptcy in U.S. history. This triggered the biggest drop on U.S. markets since 9/11, and was quickly followed by comparisons to the Great Depression by billionaire financial wizards.
Oh, and did we mention the Federal Reserve just took over the largest insurance company in the U.S. to prevent the "worst financial collapse in history"?
For those who wondered what the beginning of a depression looks like, you now know.
As a result, Joe Sixpack and Sally Soccermom are suddenly interested in learning the financial jargon that is starting to affect their lives. New words to Google (or, better yet, Scroogle) include:
Collateralized Debt Obligations.
Credit Default Swaps.
And, of course, derivatives.
But there's one more exotic invention of the financial wizards behind the curtain that it would benefit us to learn more about: money.
It's a question that even children know enough to ask and adults don't know enough to answer: "Where does money come from?" For those who answered "from trees," I hate to break it to you but you are not original and comedy is not your strong point. Perhaps it is time to finally grow up and find out the answer to that question. After all, if we can't understand this, the single most basic financial instrument in the economy, how can we hope to understand the Byzantine arts of global finance?
The startling truth is that money is created out of nothing by shareholders of private banks in the form of debt, payable (with interest) back to them. I will allow you to re-read that line a few times for its significance to sink in.
Once that fact has sunk in, with all of its implications and corollaries, it would be best to start your own research into the matter. You would be hard-pressed to find a better introduction to the subject than the brilliant documentary Money as Debt or a better explanation of the history and structure of the monetary system than that offered in the equally brilliant documentary The Money Masters.
Once the simple fact that money itself is a fiction created by and for the private profit of the bankers themselves is revealed, we can see money for what it is: an abstraction meant to stand in for the real wealth that was once stored in valued commodities like gold. That paper money has no intrinsic value is difficult for the average person today to comprehend, but would not have been so bizarre to those who lived in the Weimar Republic.
From this fundamental abstraction, the bankers concoction of paper money backed up by law has been leveraged out in the form of loans. In recent years, the loans themselves have been packaged up and traded as investments, and investments have been based on the fluctuation of value in these investments. By this point we are already talking of a fourth level abstraction (an abstraction of an abstraction of an abstraction of an abstraction).
If this seems confusing, rest assured that it was always intended to be so. Even the vast majority of those who partook in these financial games had little idea who created the game or what is purpose was. They were too busy trying to learn the rules. Now that ignorance has served to bring about the start of a financial collapse that can only domino from this point.
For those unfortunate souls in the population who don't happen to be a stakeholder in a major international bank, there may indeed be little you can do at this point to stop the financial meltdown. But this may well really be the last chance for you to take the advice of those who have seen this coming for a long time and stock up on basic supplies like storable foods. The next step is to inform yourself and inform others of what is happening around you.
Rest assured, there is a plan behind the seemingly random events we see unfolding before us...and the same bankers who have been fooling us all along hope you don't find out about it.
Related works from The Corbett Report:
Breaking The Economy In Order To Fix It (article)
How To Fix the Economy (podcast episode)