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Wednesday, December 24, 2008


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Elvin “Pete” Sill

To paraphrase Winston Churchill, “There is a specter haunting America, that specter is Financialism”.

 Today this country, likely followed by the world, stand at the threshold of an economic disaster of epic proportions. The American people are being kept in the dark by both  public and private sector officials about the magnitude of the problem for fear of causing economic and social panic.

 Specifically, the size and scope of potential debt liability associated with the ongoing “toxic debt” financial meltdown  is astronomical - in excess of $50,000,000,000,000 - fifty trillion dollars.  Keep in mind that a trillion dollars is a thousand billion dollars.  The ultimate figure could be far higher than $50 trillion, depending on how you count the monetary value of the many investments and other financial instruments that are now increasingly coming into play as this crisis  unfolds.

 Current bailout efforts are not strategically or effectively directed  towards addressing the totality of this problem. Indeed the current randomized patchwork approach offered by the U.S. Treasury and the Federal Reserve are increasing the magnitude of the crisis by creating several inadequate and competing Federal fiscal and monetary funding plans supporting various entities including selected insurers, investors and lenders while excluding others from assistance. Continued piecemeal approaches will only worsen the ultimate final outcome.

 This approach is inadequate both in quantity and effectiveness because of the Nations leaders, both public and private,  refusal to acknowledge and address the overriding problem, the massive toxic debt overhang currently facing us and how to eliminate it without destroying the economy.

 The  political, financial and media elites are keeping this critical fact from the public because they feel that revelation of the scope of the problem will cause financial, and social panic with the attendant consequences. They use public relations propaganda phrases like “prevent total  melt down,” “too big to fail”, “do something now solve the problem later,” “it is not a bailout but an infusion of capital”, etc.

 There is questionable logic to this approach, in that sooner or later the truth must be told.  Throwing tens of trillions of dollars at random aspects of the problem squanders precious national capital assets,  leaving less capacity to address the real end game threat which is “how do we achieve the total elimination of the trillions of dollars of toxic debt currently being held by and/or affecting virtually every one.

 Our leaders must ask very tough questions, and provide believable answers to questions like:

 How did this state of affairs happen? How could the investing public be duped to such a degree?  Is it a failure of long-trusted national institutions?  Do we all share blame? Is the middle class destroyed? Is Wall Street destroyed? Was the combination of massive and prolonged balance of payments deficits, foreign ownership of U.S. national debt part of the problem? Did Federal financial regulators fail? (How did they fail? By eliminating safeguards such as reducing bank reserves to capital ratios requirements, eliminating the up-tick rule making stock short selling the rage, eliminating income tax regulations designed to prevent corporate financial manipulation of balance sheet bottom lines.) What was the impact of the cancellation of the Glass-Steagall Act of 1933 that separated commercial and investment banks? Did self-regulation of financial institutions fail?  Is our current national separation of monetary and fiscal policy management systems adequate to survive in world of massive dynamic change? Private sector regulatory reviews were redolent in all banking and financial firms, layers of internal review were in place, private rating agencies were trusted - did they all fail?

 The list goes on and on. The answers to the above questions are “yes”. They all failed to some degree. We as responsible citizens are all in this mess together and it will only be as united nation that we will pull ourselves through it.

 The first step is to demand the whole truth from our responsible public and private sector officials. How we manage this crisis of confidence in our national institutions and the future role of government in our lives will also be  crucial questions that will  have to be  resolved quickly. Nothing short of a full disclosure of the problem will be acceptable if the problems are ultimately to be successfully resolved.

Elvin “Pete” Sill, Scottsdale, Az. December 10, 2008

Mr. Sill is a former Federal employee with experience in regulatory and national security programs.

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