The “protected class” is granted “safe harbor” only because their bets are so risky that to let them fail could crash the economy. But why let them bet at all?
This is a sequel to a Jan. 15 article titled “Casino Capitalism and the Derivatives Market: Time for Another ‘Lehman Moment’?”, discussing the threat of a 2024 “black swan” event that could pop the derivatives bubble. That bubble is now over ten times the GDP of the world and is so interconnected and fragile that an unanticipated crisis could trigger the collapse not just of the bubble but of the economy. To avoid that result, in the event of the bankruptcy of a major financial institution, derivative claimants are put first in line to grab the assets — not just the deposits of customers but their stocks and bonds. This is made possible by the Uniform Commercial Code, under which all assets held by brokers, banks and “central clearing parties” have been “dematerialized” into fungible pools and are held in “street name.”
This article will consider several proposed alternatives for diffusing what Warren Buffett called a time bomb waiting to go off. That sort of bomb just detonated in the Chinese stock market, contributing to its fall; and the result could be much worse in the U.S., where the stock market plays a much larger role in the economy.
Continue readingFiled under: Ellen Brown Articles/Commentary | Tagged: derivatives, FINANCE, investing, money, stock market | 4 Comments »
WEB OF DEBT BLOG 
How a Fed Overhaul Could Eliminate the Federal Debt Crisis, Part II: Curbing Fed Independence
There has been considerable discussion in recent years about reforming, modifying, or even abolishing the Federal Reserve. Proposals range from ending its independence, to integrating its functions into the U.S. Treasury Department, to dismantling it and returning monetary policy to direct congressional or Treasury oversight.
The Federal Reserve Board Abolition Act (H.R. 1846 and S. 869, 119th Congress, 2025-2026), introduced by Rep. Thomas Massie in the House and Sen. Mike Lee in the Senate on March 4, 2025, calls for abolishing the Fed’s Board of Governors and regional banks within one year of enactment, liquidating Fed assets and transferring net proceeds to the Treasury. It echoes earlier efforts like Ron Paul’s 1999 bill to “end the Fed”, but the odds of its passing are slim.
Less radical are proposals to curb the independence of the Federal Reserve. Former Fed governor Kevin Warsh is considered one of five finalists to take over as chairman after Jerome Powell. In a July 17 CNBC interview, he called for sweeping changes in how the central bank conducts business, and suggested a policy alliance with the Treasury Department.
Substantial precedent exists for that approach, both in the United States and abroad. In the 1930s and 1940s, before the Fed officially became “independent,” it worked with the federal government to fund the most productive period in our country’s history. More on that shortly.
Continue reading →Filed under: Ellen Brown Articles/Commentary | Tagged: economics, economy, Ellen Brown, Federal Reserve, FINANCE, Inflation, investing, NATIONAL INFRASTRUCTURE BANK, public banking, quantitative easing | 10 Comments »