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Every day more light is shed in the dark corners of our banking system.  Today I thought I’d share this tid bit.  While Americans lose their jobs, houses and ability to sustain themselves the Federal Reserve was busy handing out $500B in “currency swaps” to 14 foreign central banks all over the world. Watch the following clip and judge for yourself the kind of message that’s being conveyed:

Everyone is welcome to correct me if I’m wrong here, but I was under the impression that the Federal Reserve had a mandate to maintain stable employment and fight inflation. It seems to me that these kind of actions actually ensure the polar opposite end result. Ben is deliberately printing tons of dollars, shipping them overseas and taking foreign currency in exchange in order to supposedly facilitate a more liquid, lower interest lending facility for US dollar-based loans. This is not part of the Federal Reserve’s mandate nor does it seem as though it could be a constitutionally sound policy.

When Ben was asked about the Federal Reserve’s opposition to an audit of their programs and balance sheet, he responded by alluding that interest rates would rise if there was any attempt to oversee the actions of the Fed. This is a veiled threat and can not be taken as anything less. Our economy is now being held hostage.

The crisis in the United States is reaching a silent boiling point in the struggle between the citizenry and the largest banks.  Revealed today in a story breaking across various news agencies, the United States has potentially indebted itself by nearly $24 trillion dollars through various bail out programs since 2007.  This is effectively bankrupting our entire country and if allowed to continue will ruin any chance of a sustainable recovery.  We are already on the heels of a major change in how we live, work and save money.

Debtor nation

If this amount of debt is incurred on a federal level it is twice our GDP.  That is completely out of bounds with any kind of spending plan that is sensible.  It puts the creditors of our nation in to a very difficult position, because they understand we’re debasing the world’s reserve currency to buy our way out of a financial catastrophe instead of facing the pain and making constructive changes.  These $24T in financial commitments could literally strangle our nation’s economy for decades.

Some things never change

Wall Street is back to its old tricks.  Goldman is making “record profits” amid a crisis where its competition conveniently perished under the watch of former CEO Hank Paulson as Treasury Secretary.  Now Morgan Stanley is repackaging subprime mortgage debt as AAA while JP Morgan, Barclays and others are leasing supertankers full of crude oil.  All of these actions are benefiting the banks at the expense of tax payer dollars that provided the cushion so that these companies could continue to sustain their existence.

Time to wake up

Most of the time people turn off the TV, put down the newspaper or close their browser when they encounter the intentionally dull financial news.  They want to focus on the here and now, not projections of profit or bailout recapitalization.  It’s understandable that in a functional society people would have the luxury of ignoring the banking system because they have some implicit trust, a notion of safety, about where their money sleeps.  This relationship should no longer be taken for granted and the institutions holding the dollars we cherish as our future savings may be participating in the largest, most sophisticated power and money grab the world has ever seen.

A repeat performance of the bear market rally breakdown seems to be in the works now.  The first downside target is 875, then I believe we could see a large sell off to around 775-800 if that level breaks.  After that a retest of the lows is almost certain.  The image below illustrates the pattern on a three month / one day bar chart.  There may be some support at the 200 day moving average around current levels as the market is oversold.  A bounce before continuing downward is not out of the question.