Money At The Speed Of Light

FAST MONEY

By Melvin J. Howard

Not many people understand the financial system including sometimes your local bank manager surprised? Don’t be a lot of the retail bankers have limited knowledge of what happens upstairs in the corner office of their institution. The real action goes on behind the scenes on the bank’s trading floor these group of individuals are type A personalities and very creative. With a couple of key strokes billions of dollars fly around the world in minutes if they can package it they will trade it.

The first goal of the financial system is to facilitate the flow of funds from savers (entities with a surplus of funds) to investors (entities with a deficit of funds). What is the distinction between real assets and financial assets.

A real asset is an entity that generates a flow of goods or services over time. Examples include land, people, factories, inventions, business plans, goodwill with consumers, reputation. Anything that generates a flow of goods or services counts real assets need not be tangible.

A financial asset is a piece of paper, or, in the modern world, an account on a computer, that gives the owner of that piece of paper or account a claim to flow of goods or services generated by a real asset. Examples include currency ($), stocks, bonds, bank deposit, bank loans, options, futures, etc. Ultimate investors sell financial assets to savers; they use the proceeds to buy real assets (buying real assets is the same thing as investment). Sometimes people sell financial assets to finance consumption too.

Given this first role, the financial system is the place where savers (or, more generally, economic agents with a surplus of funds relative to their immediate need for those funds) meet investors (or, more generally, economic agents with a deficit of funds relative to their immediate need for those funds). The financial system channels funds from savers to investors. In equilibrium, savings = investment.

Important to note the term “investors” is often used loosely. When a firm builds a factory or when a person buys a house that is investment. When a person buys stock, that is, strictly speaking, savings. However, the purchase of a share of stock is commonly called investment, and stockholders are called investors. Agents can invest using their own money, using indirect finance, or using direct finance. When agents invest out of their own funds (i.e. by spending past accumulated savings), they bypass the financial system entirely.

When agents use indirect finance, funds come from a financial intermediary, which are then invested (or spent on consumption goods). A financial intermediary is a firm that pools the savings of many agents and then passes those funds through to agents that want to spend them. The intermediary is the middleman, not the ultimate source of funds. When an agent uses direct finance, funds are provided to the investors directly, without the use of an intermediary. For example, firms sometimes sell share of stock directly to the public in an IPO.

Flow of funds through the financial system

Indirect Finance

Financial Intermediaries

The line between direct and indirect finance has become increasingly blurry as banks and other financial intermediaries have begun to securitize their assets. Securitization involves removing an asset (or often a pool of assets) from the balance sheet of an intermediary by selling the asset to a “conduit” firm, known as a Special-Purpose Vehicle (SPV), that in turn pays for these assets by issuing securities (bonds) into the capital market. The SPV typically issues senior and subordinated bonds. The most junior bonds absorb all of the losses on the assets (or pool of assets); if there are more losses than can be absorbed by the most junior loans, then the next most junior bonds begin to absorb losses, etc.

The six steps toward securitization:

1. Set up a legally separate trust (SPV) to serve as a conduit for cash flows;

2. Sell designated loan or pool of loans to the trust (SPV);

3. Have the trust (SPV) issue securities that represent claims to the cash flows generated from the pool of loans, and sell those securities to the public;

4. Contract with a servicing organization to collect the loan payments and forward those to securities owner (this outsourcing feature is optional);

5. To improve the price received for the securities, two approaches can be taken:

a). arrange for credit enhancement by the bank or another reputable third party so that the securities can be highly rated;

b). strip and reassemble the cash flows from the loan pool based on either timing (as in mortgage-backed securities), or seniority (as in collateralized loan obligations).

6. Make sure a liquid secondary market exists for the securities, or convey to the purchaser the right the put (re-sell) the securities back to the bank on good terms.

Typically, the bank that originated the assets continues to service those assets (i.e. collect payments, effect workouts if the borrower defaults). In some cases, such as securitization of loans to businesses, a bank will purchase the lowest rated bonds issued by the SPV. Now how do all of the funds get transferred into my account if you ever had a bank or brokerage account chances are SWIFT was involved.

WHAT IS S.W.I.F.T.

S.W.I.F.T. (the Society for Worldwide Interbank Financial Telecommunication) provides financial data communication and processing services to support the business activities of worldwide financial institutions for securities, payments, foreign exchange and money markets, as well as trade finance. As of January 2010, over 9,700 institutions use S.W.I.F.T. to communicate with each other 24 hours a day. S.W.I.F.T. operates in 209 countries. When brokers were admitted in 1987, the members created and began using the Category 5 (CAT 5) message standards to structure settlement instructions, confirmations and safekeeping information for securities transactions. Owned by nearly 4,000 of its user banks, S.W.I.F.T. also connects other categories of non-bank financial institutions engaged in the securities industry, including:

· Securities broker/dealers

· Investment managers

· Securities exchanges

· Central domestic securities depositories and clearing organizations

· Central cross-border securities depositories and clearing organizations such as Cedel and Euroclear

· Trust Companies and Fiduciary Service Providers

· Custody and Nominee Services Providers

· Registrars

· Transfer Agents

· Investment managers were granted full participant privileges in June 1992, S.W.I.F. As participants, investment managers have the right to use the S.W.I.F.T. standards, access the S.W.I.F.T. network, and indirectly participate in setting the future direction of S.W.I.F.T.

Economic Plans Will Not Work With Out One Key Ingredient TRUST

IN THE MARKET WE TRUST

BY MELVIN J. HOWARD

Economics has a reputation by pretending to be an exact science rather than what it really is global psychology. The truth is economics leaves out the aggregate behaviour of humans. It seeks to cloak its uncertainties and shifting fashions with mathematical formulae and elaborate econometric computerized models. This much is certain; people operate within markets, free or regulated, patchy or organized. They attach numerical (and emotional) values to their inputs (work, capital) and to their possessions (assets, natural endowments). They communicate these values to each other by sending out signals known as prices. The market is people many of them and there is no calculation for how individuals will behave to an exact science. But scientists are working on it but until that day comes we have to rely on good old fashion trust.

Yet, this entire edifice the market and its price mechanism critically depends on trust. If people do not trust each other, or the economic "envelope" within which they interact - economic activity gradually grinds to a halt like the credit markets. Banks will not lend to Banks or corporations or the retail section. There is a strong correlation between the general level of trust and the extent and intensity of economic activity. Francis Fukuyama, the political scientist, distinguishes between high-trust and prosperous societies and low-trust and, therefore, impoverished collectives. Trust underlies economic success, he argued in a 1995 tome. Trust is not a monolithic quantity. There are a few categories of economic trust. Some forms of trust are akin to a public good and are closely related to governmental action or inaction, the reputation of the state and its institutions, and its pronounced agenda. Other types of trust are the outcomes of kinship, ethnic origin, personal standing and goodwill, corporate brands and other data generated by individuals, households, and firms.

Trust in the market

To transact, people have to maintain faith in a relevant economic horizon and in the immutability of the economic playing field or "envelope". Put less obscurely, a few hidden assumptions underlie the continued economic activity of market players. They assume, for instance, that the market will continue to exist for the foreseeable future in its current form. That it will remain inert - unhindered by externalities like government intervention, geopolitical upheavals, crises, abrupt changes in accounting policies and tax laws, hyperinflation, institutional and structural reform and other market-deflecting events and processes. They further assume that their price signals will not be distorted or thwarted on a consistent basis thus skewing the efficient and rational allocation of risks and rewards. Insider trading, stock manipulation, monopolies, hoarding - all tend to consistently but unpredictably distort price signals and, thus, deter market participation.

Market players take for granted the existence and continuous operation of institutions - financial intermediaries, law enforcement agencies, courts. It is important to note that market players prefer continuity and certainty to evolution, however gradual and ultimately beneficial. A venal bureaucrat is a known quantity and can be tackled effectively. A period of transition to good and equitable governance can be more stifling than any level of corruption and malfeasance. This is why economic activity drops sharply whenever institutions are reformed.

Trust in other players most important

Market players assume that other players are (generally) rational, that they have intentions, that they intend to maximize their benefits and that they are likely to act on their intentions in a legal (or rule-based), rational manner.

Trust in market liquidity

Market players assume that other players possess or have access to the liquid means they need in order to act on their intentions and obligations. They know, from personal experience, that idle capital tends to dwindle and that the only way to, perhaps, maintain or increase it is to transact with others, directly or through intermediaries, such as banks.

Trust in others' knowledge and ability

Market players assume that other players possess or have access to the intellectual property, technology, and knowledge they need in order to realize their intentions and obligations. This implicitly presupposes that all other market players are physically, mentally, legally and financially able and willing to act their parts as stipulated, for instance, in contracts they sign. The emotional dimensions of contracting are often neglected in economics. Players assume that their counterparts maintain a realistic and stable sense of self-worth based on intimate knowledge of their own strengths and weaknesses. Market participants are presumed to harbor realistic expectations, commensurate with their skills and accomplishments. Allowance is made for exaggeration, disinformation, even outright deception - but these are supposed to be marginal phenomena.

When trust breaks down like now it is often the result of an external or internal systemic shock - people react expectedly. The number of voluntary interactions and transactions decreases sharply. With a collapsed investment horizon, individuals and firms become corrupt in an effort to shortcut their way into economic benefits, not knowing how long will the system survive. Criminal activity increases.

People compensate with fantasies and grandiose delusions for their growing sense of uncertainty, helplessness, and fears. This is a self-reinforcing mechanism, a vicious cycle which results in under-confidence and a fluctuating self-esteem. They develop psychological defense mechanisms. Cognitive dissonance ("I really choose to be poor rather than heartless"), pathological envy (seeks to deprive others and thus gain emotional reward), rigidity ("I am like that, my family or ethnic group has been like that for generations, there is nothing I can do"), passive-aggressive behavior (obstructing the work flow, absenteeism, stealing from the employer, adhering strictly to arcane regulations) - are all reactions to a breakdown in one or more of the four aforementioned types of trust. Furthermore, people in a trust crisis are unable to postpone gratification. They often become frustrated, aggressive, and deceitful if denied. They resort to reckless behavior and stopgap economic activities. In economic environments with compromised and impaired trust, loyalty decreases and mobility increases. People switch jobs, renege on obligations, fail to repay debts, relocate often. Concepts like exclusivity, the sanctity of contracts, workplace loyalty, or a career path - all get eroded. As a result, little is invested in the future, in the acquisition of skills, in long term savings. Short-termism and bottom line mentality rule. The outcomes of a crisis of trust are, usually, catastrophic. Economic activity is much reduced, human capital is corroded and wasted, brain drain increases, illegal and extra-legal activities rise, society is polarized between haves and haves-not, interethnic and inter-racial tensions increase. To rebuild trust in such circumstances is a daunting task. The loss of trust is contagious and, finally, it infects every institution and profession in the land. It is what brings down great empires. It is my summation no matter what government is in power, nor matter new rules, new people and procedures. Trust is the key ingredient of market stability and our Quantumnomic future.

QUANTUMNOMICS

The missing equation of economics the human condition

By Melvin J. Howard

The boom bust cycle of the markets have got me thinking that the classical economic models have got built in flaws and there needs to be a new paradigm of change on how we look at global markets. What if we say for instance that science and physics played a major part in how we interact with the world and financial markets? I have termed this new theory of mine (QUANTUMNOMICS) combining quantum theory mechanics with economic analysis. I have been thinking about this theory for some time and studying everything I can about physics especially at the sub atomic level in order to refine my theory. Classical logic or the classical view of logic demands that every statement be either true or false. Questions on whether a statement can be judged to be true or false is something absolute. It depends only on the statement and not the observer doing the judging. I argue when human interaction is involved that their perception or their understanding of a statement becomes their reality. Now take this and multiply it by thousands in terms of market participants you have now set off a chain reaction of one person’s reality becoming others reality. Now the founders of quantum theory such as Einstein and Bohr, Heisenberg and Schrodinger did not always agree about reality and its relationship to the observer. Since their time more studies have been made to bring all their theories together in what is called the unified field theory encompassing classical physics and quantum mechanics.

Quantum theory gets even more puzzling because it challenges our view about relationships in terms of connectivity and separation. The idea that we are not separate but are all connected. At the time I was unaware of anyone taking this approach to economics except George Soros the famed founder of the Quantum Fund. He called his theory reflexivity when I found out about his book the Alchemy of Finance I felt that I finally found a home he was before his time in terms of his theory but to me right on the mark. He hypothesizes that boom and bust patterns has an asymmetrical shape. It starts slowly and accelerates gradually to a wild excess that is followed by a twilight period and then by a catastrophic collapse. When the process is complete, neither the trend nor the bias remains the same. The process does not repeat itself, and then there is a regime change. That’s where we find ourselves today in this past global credit crisis. Economics seeks to be an analytical science but financial markets are complex and cannot be understood on the basis of an analytical approach on its own. There are many dynamics going on at the same time. There is something incomplete about how we now look at economics globally. Imagine if we had two kinds of currency, the first of which was exchangeable into a concrete entity such as gold, while the other had no worth in terms other than paper. What if we were allowed to mix the two kinds of money in our bank accounts? The economy would be based on a contradiction, and could not survive for very long, does this sound ridiculous? In fact the communist government experimented with such a currency, one convertible into other currencies and one not. They discovered that the system is unstable in the absence of complicated and artificial restrictions on the use of two kinds of money. My world view has always been different from the collective. I have always challenged the status quo I have never been satisfied with that is just the way things are line. I like to know why they are that way and how do you come to that conclusion. I am constantly challenging myself with theories to take what science and physics have given us thus far and to shape it in a model that can be explored by others for their input. Quantum theory is not perfect but it is the best science that has come out in the last 100 years.

THE FED CONTROLS THE MOST POWERFUL TRUST

The Depository Trust the most powerful Trust in the world

By Melvin J. Howard

There are Trusts and then there is the Depository Trust Company. The DTC is one of the best kept secrets. The average person has no clue that this financial institution is the most powerful banking corporation in the world. The general public has no knowledge of what the DTC is or what they do and why would they? How can a private banking trust company hold assets close to $40 trillion and be unknown?  The Depository Trust Company (DTC) is the world's largest securities depository.  In 2009, DTC settled transactions worth more than $299 trillion, and processed 299.5 million book-entry deliveries it retains custody of more than 3.5 million securities issues worth almost $34 trillion, including securities issued in the US and more than 120 foreign countries and territories. The DTC is the largest limited trust company in the world. The DTC is a brokerage clearing firm and transfer center. It’s a private bank for securities. They handle the book entry transactions for all banks and brokers. Every bank and brokerage firm must secure their membership with the DTC. Yes, you read that correctly. The DTC is a private bank that processes every stock and bond (paper securities) for all U.S. banks and brokerage houses. Just how did this private bank and trust company get such a broad range of financial power and clout? The DTC is a privately owned depository bank for institutional and brokerage firms only. They process all of their book entry settlement transactions. It's required by the Federal Reserve that DTC handle all transactions". The Federal Reserve. The FED, as they are more commonly called, mandates that the DTC process every securities transaction in the US. It's no wonder that the DTC (including the Participants Trust Company, now the Mortgage-Backed Securities Division of the DTC) can lend out a couple of hundred billion here and there. The "DTC is partly owned by the New York Stock Exchange on behalf of the Exchange's members. It is operated by a separate management and has an independent board of directors. It is a limited purpose trust company and is a unit of the Federal Reserve.

Now let’s see how the system works, you visit or call a stock broker or bank and instruct them you want to purchase some shares of common stock or a small municipal bond, for example. They will set up a brokerage account for you and act as your agent with full durable power of attorney (which you must legally sign over to them) to conduct business on your behalf, upon your buy or sell instructions. The broker will place your stock or bond purchase into their safekeeping under a "street name". The broker or bank must then send the transaction to the DTC for ledger posting or book entry settlement under mandate by the Federal Reserve System. Simply put, the Depository Trust Company absolutely controls every paper asset transaction in the United States as well as the majority of overseas transactions, and they now physically hold ( as of 2009) 99% of all stock and bond book-entrys in their street name. The DTC was created in 1973 as a user-owned cooperative for post-trade settlement. Their members are banks and broker/dealers, whom I refer to as participants. They handle listed and unlisted equities, including 60,000 equity issues and 270,000 corporate debt issues, equating to more than 78% of shares outstanding on the New York Stock Exchange (NYSE). They also have more than 95% of all municipals on deposit. All pension funds and other institutional 'managed funds' are comprised of paper asset investments such as stocks, bonds, and mutual funds. These certificates are technically in the name of DTC's private holding company. The FED carries tremendous clout globally. Fed Funds, or Fedwire, is a mighty weapon when it comes to smoothing out global markets.

Without Common Wealth Private Wealth Could Not Happen

The Self Made delusion  

By Melvin J. Howard  

If someone starts with modest resources, does well in business, and makes a fortune, isn't it fair to attribute that wealth to individual merit? Not really. Here is another question why do some people succeed and others don't? Is it luck? Is it talent? That's the question Malcolm Gladwell sets himself to in his book Outliers. The answer he finds is, often, none of these. To make his point, Gladwell compares Christopher Langan to Robert Oppenheimer.

Langan has an astronomical IQ of 195 but he has not been able to parlay that into significant academic or business success. On the other hand is J. Robert Oppenheimer, the theoretical physicist who headed up the Manhattan Project, America's effort to create an atomic bomb. Yet here was a man who had to talk his way out of an apparent murder attempt while at Cambridge in his twenties. Langham, on the other hand, couldn't even talk his college adviser into letting him transfer classes. Why? Oppenheimer's family and cultural background allowed him to absorb as if by osmosis not only a sense of entitlement but the instincts needed to move successfully among powerful, rich, talented people. Langan had none of that. Some argue for less government intervention in the market economy seem to overlook the fact that the government creates the infrastructure for the markets to function in the first place. Without government created legal and judicial infrastructure, even the most basic contract would not be enforceable, except at gunpoint. Since our whole monetary and trade systems are built primarily on contracts of agreement, modern markets would not exist, and economic development could not happen, without significant government intervention.

Those who also argue for an end to government sponsored re-distributive mechanisms either overlook or dismiss the role of periodic redistribution in sustaining economic prosperity. Without government intervention in redistributing wealth in suitable amounts you step on to a spiral of increasing inequality. "Nothing can preserve the integrity of contract between individuals except a discretionary authority in the State to revise what has become intolerable.

How "Self-Made" are you? Take the test

Where you aided by the following on your way to wealth:

ñLaws concerning property or contracts, and the public agencies that enforce such laws

ñPublic schools or employees educated in public schools

ñEmployees or customers who rely on public transportation

ñRoads, bridges, airports, sewers, water treatment plants, harbors, or other utilities built and maintained at public expense

ñMail systems built and operated at public expense

ñPublic hospitals and government-licensed physicians

ñHealth and safety regulations created and enforced at public expense

ñPolice and fire protection provided at public expense

ñPublic libraries and parks

ñAny public amenities that add value to commercial or residential real estate

ñGovernment contracts

ñGovernment-provided business incentives

ñRegulatory agencies, such as the Federal Trade Commission or the Securities and Exchange Commission, that sustain trust in the stock market

ñA government-granted license permitting the exclusive use of a broadcast channel

ñThe Internet

ñA form of currency legitimated and backed by a stable government

ñSocial welfare programs that keep the poor from rebelling

ñThe U.S. military

If we use these criteria to determine who can legitimately claim to be "entirely self-made," the number is in fact, precisely zero. If not for the legal and political arrangements that we create and maintain as a society with contributions from us all, costs to us all, and benefits to us all  and if not for what we call "the public infrastructure," nobody could accumulate wealth. In short, there can be no private wealth without common wealth.

The Truth

Wealth always depends on collective effort. Why? Because of what the "entirely self-made" myth implies: If I have amassed a fortune solely through my individual talent and hard work, then it is wrong for the government to take any of it away. By further implication, taxation is wrong, and progressive taxation is really wrong. Casting "the government" as an evil empire that confiscates the fruits of one's labors also serves the interests of the division class. Working-class and middle-class people who embrace this view are less likely to take an interest in government as a means to build, protect, and fairly employ the nation's common wealth. By helping to portray government as the enemy of individual initiative and prosperity, further plays to the insecurities of the middle and lower class.  

Class difference

In a competitive, individualistic society like the U.S., the "entirely self-made" illusion is seductive. It gives us the pleasure of taking credit for our successes. It also mitigates the guilt that can come from recognizing our own class privilege. The "entirely self-made" myth is handy for both self-congratulation and self-absolution. But we should reject the mythology not just because it's wrong, but because, unlike many other comforting myths about American society, this one has especially pernicious consequences for democracy and community. At worst, it can make us feel that we have no right to democratic control of our common wealth.

If we recognize that all private wealth depends on our common wealth, then we incur two obligations. One is to contribute our fair share and the bigger the rewards we derive from society, the bigger that share should be. The other obligation is to participate in protecting our common wealth and determining how it is used. We should not let those decisions be made only by a few self-serving people and then laugh all the way to the bank.

Why does one person get not only much higher pay but also health benefits, greater authority, flexible work hours, higher social status and a more comfortable work environment while doing interesting work, yet the other person does the least desirable work for less pay, no benefits, virtually no authority, with very low status, often in a brutal work environment? None of the reasons we often give to justify this hierarchy hold up when scrutinized. For example, we may say that the professional went to school to earn a higher paying, higher status job. But that does not take into account the different opportunities that people have for education nor that  academic ability may be the result of upbringing, conditioning or heredity none of which the individual has any control over. And none of this explains why people who spend all of their time moving money around electronically do not really produce anything and in fact may actually be destroying the work of others yet they get compensated at astronomical levels. Neither the Wall Streeters, the professionals nor the immigrant workers got to where they are all by themselves. Each was helped, or hurt, by others, including others far removed from them in the economic system.

The wealthier we are, the higher our status in the system, the easier it is to delude ourselves that we got there all by our own effort. In the modern world, where everyone is connected to each other, being entirely self-dependent cannot be the road to success. We must be able to depend on each other to be successful both as individuals and as a society.

Many point to the great inventors throughout history, like Henry Ford, as examples of self-made men being wildly successful without others’ help. While it is true that many rise from humble beginning, they need help from others to rise to the top. Ford was a great innovator, but he needed outside investments to allow him to create Ford. He even benefited greatly, both directly and indirectly, from the federal government. He was awarded 161 patents that allowed him to profit from his inventions, and transportation investments from various levels of government to build roads and highways throughout America helped fuel demand for his cars for decades. This myth is popular with the unenlightened for many reasons. Small-government advocates like the concept because it fits nicely with their narrative. A country where any individual can flourish without any outside help requires no government spending on medicine for the poor and elderly. No need for public education; they can educate themselves. No need for scientific research grants; if the free market wanted a cure for polio so badly, it could fund the needed research.

There is nobody in this country who got rich on his own. Nobody. You built a factory out there — good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory. … Now look. You built a factory and it turned into something terrific or a great idea — God bless! Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.” Elizabeth Warren, candidate for US Senator.

The Secret Beginnings Of The World Bank And The IMF

The invisible hand of influence

By Melvin J. Howard

The U.S. Treasury's $12 billion loan to Mexico back in January 1995 brought to public a fund many new little about since its authorization by the Gold Reserve Act of January 31, 1934. The design of the ESF, as set forth in the statute, contributed to its secrecy and obscurity THE EXCHANGE STABILIZATION FUND. Its stated mission was to stabilize the exchange value of the dollar, but it has also assumed other roles that had no mandate, like lender to favored countries it has since become a unlimited power of purchase over anything. A statistical profile of the ESF accounts for the growth of its working balance from $200 million in 1934 to $105 billion in assets in 2009 including $58.1 billion in Special Drawing Rights (SDR) from the International Monetary Fund. Harry Dexter White head of the fund at the time was a major architect of the International Monetary Fund and World Bank. White was entrusted with the management of the U. S. Treasury’s $2 billion stabilization fund. He represented the Treasury on the Economic Defense Board, was a trustee of the Export-Import Bank in Washington, D.C. and was a member of the government’s Committee for Reciprocity Information, which was involved in reciprocal trade agreements with foreign countries. I stumbled on this fund when I was in the middle of my  NAFTA challenge. What I noticed was that Nafta included a provision for the North American Financial Group, a consultative group to "stabilize" exchange rates between signatory countries. Formed as a side agreement to Nafta in early 1994, the NAFG supported the peso's exchange rate with a $6 billion line of credit. That kept the peso massively overvalued and enabled the Mexican central bank to rapidly inflate the money supply.

NAFTA’S TO BIG TO FAIL BAIL-OUT

Nafta made the bailout inevitable just like the to big to fail banks there was too much at stake economically, politically, and financially after the treaty's passage in 1994. The collapse of Mexico’s peso would have meant NAFTA was dead on arrival. In the end there was no choice the two economies were intertwined in trade, in commerce, in the movement of people. What made the loan to Mexico so unique was that it did not require Congressional authorization but could be made at the discretion of the Secretary of the Treasury, with the approval of the President. In February 1996, the Treasury Department announced that it was suspending payment of interest on government securities in the ESF's portfolio in order to create additional borrowing power for the government under the debt ceiling that Congress was refusing to raise history has a way of repeating itself. These actions brought the fund to public notice after it had remained so long in obscurity. The fund began operations as of April 27, 1934, financed by $2 billion of the $2.8 billion paper profit that the government realized from devaluation, that is, from raising the price of gold to $35 an ounce from $20.67. This sum was deposited to its account with the Treasurer of the United States (Treasury AR 1935, Exhibit 40, p. 265). The fund was authorized to deal in gold and foreign exchange in order to stabilize the exchange value of the dollar, to invest any portion of the fund not currently required for stabilization purposes in direct obligations of the United States, and to add any earnings from sales and interest on its investments to the sum available for its use.

Of the $2 billion set aside for ESF capital, only $200 million was made available for its working fund. The $1.8 billion was shown in the gold asset and liability statement of the Treasurer of the United States as gold  credited to the ESF. The residual $200 million was presumably initially deposited in a special account at the NewYork Federal Reserve Bank, but by June 1934 the ESF had reduced the deposit by investing $38 million in U.S. Treasury bonds, $20 million in gold (the bulk held at the U.S. Assay Office), and $30 million in silver.

The act creating the ESF excluded it from the congressional appropriation process once its initial capitalization was in place. It was intended to be self-financing, and was not required to seek annual congressional funding for its operations. The self-financing arrangement contributed to the secrecy of ESF actions, since the fund did not have to justify its expenditures during annual appeals to Congress for appropriations.The fund was conceived to operate in secrecy under the exclusive control of the Secretary of the Treasury, with the approval of the President, "whose decisions shall be final and not subject to review by any other officer of the United States. The intention was to cloak foreign exchange market intervention. However, the Secretary of the Treasury was willing to reveal information on stabilization loans to favored countries that the ESF negotiated loans that had no mandate in the statute yet essentially created a foreign affairs role for the Treasury.

Her Majesty's Treasury

If you have secrete fund we will match that secrete fund with our own. The British was the first to start their cloaked fund. So the ESF could base the secrecy of its operations on the British Exchange Equalisation Account (EEA), formally initiated July 1, 1932. It was described as "an anonymous and secret body whose actions are not open to continuous scrutiny and criticism. The House of Commons did not know and could not be told what the EEA was doing. Suspicion of the purpose of the EEA was a motive for the establishment of the ESF. U.S. officials believed that the EEA was used to depreciate the pound, not to smooth fluctuations in its exchange rates, its official purpose. Each fund would have liked to know what the other's intentions and actions were.

Since 1979 the ESF's administrative expenses have been subject to the budget process. In addition, the ESF is audited annually, with the report originally submitted to the President, not to Congress. That later changed so that Congress could also receive reports of the ESF's operations. Although Congress has required the President to give it information about ESF transactions, the constitutionality of the ESF has not been challenged. The ESF in its original design belongs and rest with the Executive Branch, of the United States (The President).

Your Problem Is My Problem

In September 1936 the United States, United Kingdom, and French governments simultaneously issued declarations accepting a devaluation of the French franc and agreeing to use appropriate available resources to avoid disturbance of international exchanges resulting from the readjustment. The three governments agreed to guarantee exchange rates for twenty-four hours at a time, authorities of the stabilization funds announcing each morning the price at which they would convert into gold at the end of the day on a reciprocal basis the foreign currency balances the others had acquired. The United States, which had previously sold gold at $35 an ounce, plus handling charges, only to gold-standard countries, announced it would sell gold to stabilization funds. The arrangement eliminated exchange risk for the authorities while preserving exchange-rate flexibility. Belgium, the Netherlands, and Switzerland were soon added to the nations complying with the Agreement and eligible to buy gold from the United States. Examination of the list of countries that have been granted loans over the years, leads doubt that they have resulted in stabilization. The legacy of the ESF is that lending programs dominate the operation of the IMF. Support for weak currencies that the IMF provides raises concerns of moral hazard. Whether IMF lending has good or bad consequences is up for debate or whether ESF is used as a black ops slush fund or war chest you be the judge I hereby issue this executive order.

Memorandum on Use of the Department of the Treasury’s Exchange Stabilization Fund To Support a Guaranty Facility for Certain Money Market Mutual Funds

December 12, 2011

Memorandum for the Secretary of the Treasury

Subject: Use of the Department of the Treasury’s Exchange Stabilization Fund To

Support a Guaranty Facility for Certain Money Market Mutual Funds

Pursuant to section 10(b) of the Gold Reserve Act of 1934, as amended, 31 U.S.C.

5302(b), I approve the use of funds from the Exchange Stabilization Fund to provide up

to $50 billion as a guaranty facility for certain money market mutual funds, consistent with your recommendation to me and the terms and conditions set out in your memorandum to me dated October 16, 2011.

Melvin J. Howard

Question do you know what I just authorized to be funded?

The President Of The United States Of America

Ladies And Gentlemen The President

By Melvin J. Howard

How many laws do you live under? Thousands. We all live under thousands of laws. Now, in your lifetime, how many of those laws have you written, proposed, voted on, or been consulted upon? For the vast majority of people, the answer is none. None. And do you have any friends or relatives that have written any of those laws, or proposed them, been consulted, or voted on them? Most people would say no. So in a system of majority rule (democracy), how is it that you are living under laws you never wrote or voted for? And if they are being written, someone must be writing them. And if it isn’t the majority participating in those law-making stages, it is the minority. Which minority? Well, in the U.S. it is the senate, house, president, and advisors. Are there any legitimate laws proposed by majority groups and brought to senate? Yes, of course there are laws made that truly represent the majority view. Are there any that are manipulated in by special interest groups and passed as law for the masses? Yes, there are plenty of laws passed that in no way serve the majority and only serve a powerful minority (that is part of the whole point of spending vast amounts of money for a candidate). Enter President Obama he is doing something different then any other President he is actually making ordinary citizens apart of the process. Let’s face it until he came a long we didn’t know what the heck was going on in the white house. The fact is President Obama is intellectual  and has charisma irks some. 

Never the less for whatever critics that the President might have I for one love the transparency. It’s unprecedented the white house is open to the public. It’s refreshing to get information direct from the President. So whether it’s on Leno or 60 minutes I will take it. What I am trying to say we live in a system. The system has defaults and exceptions. If you live by default, you will experience the default states of the system. If you live by your own code, you will experience your own results. In this system, there are laws and structures that put everyone ‘in their place’ within the system. This is the default of the system.

We are under thousands of laws, of which you had nothing to do with the creation of most. You just wake up every day and get your new laws issued to you on TV during news. You accept them as the truth about the way things are – not realizing that your acceptance is what makes them come alive. Millions of people do that simultaneously across the country, all watching the same TV news program, and a new law comes into effect because each one of you just didn’t question it. This works almost all the time. You are predictable in your response. You just believe it is for your own good, or that you can't change it, and you do as told, becoming the default. You have given away your power to experience your own truth and make up your own mind. Original thought is replaced by rehashing what you have been told. We have done that for the last 20 years. Once you make a habit out of this, you become predictable. You even forget how to have original thought that is not tainted by your past experience (which was also tainted by other people’s past experiences). Advertising works and it works because of this reason – predictable, trained response to certain scenarios. Companies spend millions of dollars on one 30-second appearance of an ad during the Super Bowl because they know it works. As an individual, you don’t want to admit that adverts and media influence your behavior strongly, yet you can admit that the population is influenced. Nobody wants to admit that they are influenced. But don’t you make up part of the population?

 In this system, you have a government. This government also decides on who prints your money.  Your government also sets your education curriculum up. You cannot legally study outside of the education system framework set up. You must follow the system. Even the corporations where you get your ‘jobs’ force you to have followed the education system. Who writes the education system? The government (which is elected through corporate power). This education system tells you how to live your life, how to get jobs, what you are worth, what you should do and think. It prepares most people for jobs – for dependence. Few walk out of it and start self-reliant enterprises. Which is odd when you consider that each human being has a unique thumb print, unique mind, and unique everything. So each being would, if he or she followed their hearts, produce in a unique and thus self-reliant way. As long as they don’t try to conform to one way of doing things for everybody, logic tells you they would be able to do what they love and be self-reliant in it because no one else would be able to duplicate them. If fact, we all know of someone who succeeded wildly by doing what they love and doing it they’re way with persistence. Americans can come out of this loss of confidence if they just look inside themselves and not on outside forces.

Everything in nature is unique and self-reliant. Only we human beings require employment to live! Don’t you find that strange? No other creature in nature requires employment to live. Self-reliance is the natural state of all beings for they are extensions of the Almighty Creator, all part of the One. So, your education system is written and maintained as is by the government. Its effects as we see them are the majority walking out programmed to look for jobs and scared to death of being self-reliant. Correlate this with the fact that 2% of the world’s most powerful people own, influence or control about 75% of the resources in use, resources that need people to work them, and you may see a pattern there. And correlate this with the fact that they also have a hand at the government set up and the money supply and printing, and you may see another pattern there. This is not an attempt to point to any one conspiracy or anything. This is not a conspiracy theory far from it.  But the facts as they are showing us that there are people who are aware and those who are not. And those who are aware have goals, some with very large global goals, which they pursue. Some goals may be noble and some not. And nothing is impossible. And the laws of cause and effect always work. No matter how ridiculous the situation itself sounds, they work. What is amazing about the education system is that everybody knows that it trains people to know certain facts but leaves them unprepared for the world. Everybody says, “Why don’t they teach us how to make money, how to live with other people, basics of humanity?” And everybody knows that the leaders of the nation read self-development books and materials, because they work. For example, the book Think and Grow Rich has been a classic must-read for the most powerful people ever since the 1930s. Yet none of its principles ever made it into the education system, even though the leaders know the principles very well because they read that book and apply it. The knowledge you would pay thousands of dollars for in a weekend seminar is so simple yet empowering, but no one ever puts it into the education curriculum.

Why? Did you know that, for all of humanity’s history, powerful civilizations have always been led by a small group of people, families or dynasties? All over the world, this same pattern has been in place since 8,000 B.C. Always, the one thing that differentiated the masses under control with the controllers was always a lack of awareness, a withholding of knowledge there is no excuse for that today. Has this pattern stopped, or are we in delusion? As you can see, there is never anyone to blame as such. The masses have to accept the delusion for it to work. So the idea of victim and victimizer is inaccurate, although fairness, in human terms, may not be present.

The whole point  I am making of all this is to show you that if you live by default, within the system, you will get the default results of the system. Awareness and making your own choices is the only way you can have your own results. But there is more. You can extend your own wealth and freedom by helping others see theirs, and by adjusting your system to make it more efficient and easier for you. The U.S. spends $1.03 billion on military expenditure per day! The whole world including the U.S. spends $3 billion per day on the military. The U.S. makes a handgun every 20 seconds (and guess who owns the gun factories). All this is done in the name of peace. The means of war are the means of war, and the means of peace the means of peace. You cannot confuse the two and think one will create the other. You cannot use the means of war to make peace. Cause and effect dictate it to be impossible. Peace is only achieved when people choose peace, truly, in their hearts and mind. The more weapons you make, the cheaper they get and the more available they become. Just like faxes and mobile phones. At one time, very few people had nuclear weapons. Now anyone with $100,000 can get a small one in the black market. You can buy an AK47 assault rifle in Afghanistan for $15. The more you make of anything, the cheaper and more available it becomes. You cannot increase peace by spending more on the military – you simply guarantee conflict that way. Simple economics. (By the way, every time there is a war, the national debt increases and the Federal Reserve Bank are owed more by the taxpayer.

What people have yet to realize is that democracy is not necessarily freedom. Democracy simply means majority wins. Even the dictionary defines it as that. Majority rules. Majority of what? People? Money? Right now, it is money. So the one with the most money rules. The golden rule, right now, is that the one with the most gold rules. You find this applying in almost all democracies. Even in ‘poor third-world countries’, money is always used to ensure the results of elections. Majority rules. Democracy. Interesting concept. 

 Freedom, each being recognizes the sovereign divinity within other beings. Within that simple boundary, each being is free to do, as they like. In other words, you are free to be free, to deal with your own consciousness, to live and let live.

And so is everyone else. The idea that one is free because they live in a democracy is a contradiction. Look up the words freedom and democracy in a dictionary:

·        Freedom: The condition of being free; the power to act, speak, or think without externally imposed restraints.

·       Democracy: The doctrine that the numerical majority of an organized group can make decisions binding on the whole group.

Find your freedom within you. You are built with it. Just like, as all of life, you are built with self-reliance capabilities. You can be wealthy and free through many means and for varying periods of time, but you most easily and effectively do so with your own inner power, wealth and freedom. Everyone has that. You cannot blindly rely on the system – you can't wait for the government to do it all for you get up off that couch. President Obama is doing his part now its time to do yours. You will simply become a default output if you do anything. The government has pluses and minuses. There are parts of it that can help you on your path and parts that can hinder you. But at the end of the day, you have to stand up for yourself. You have the inherent uniqueness and capability to! Humans are still evolving. We are not even civilized yet (can you imagine a civilized society that somehow gets innocent children at birth and manages to turn them into people full of fears, children who shoot each other?); we are only just learning to use our reasoning capabilities; we are a race at the adolescent stage of evolution. Democracy is not the end stage – it was simply a stepping-stone to something bigger.