Saturday, June 20, 2009

Resignation of David M. Walker

The most important economic indicator of things to come: The Fall of Rome

Posted by sakerfa on June 18, 2009

Since the global financial meltdown seems to be the main concern with our corporate world, let’s begin with this topic.

David M. Walker and the Fall of Rome

There have been a few major economic events in the last few years, but I consider the resignation, in March 2008, of David M. Walker from his commission of Comptroller General of the United States and head of the Government Accountability Office to be the harbinger of what is to come.

Walker resigned 5 years before the end of his 15-year term expired. His reasons for resigning were that he was limited to what he could do and that the United States was in danger of collapsing in much the same manner as the Roman Empire.

“Drawing parallels with the end of the Roman empire, Mr Walker warned there were ‘striking similarities’ between America’s current situation and the factors that brought down Rome, including ‘declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government’.”

For months before his resignation he traveled the country educating Americans about the financial crisis and the pending bankruptcy of the United States.

60 Minutes segment with David Walker originally broadcast on March 4, 2007

Walker’s resignation six years prior to the end of his 15 year term was a few orders of magnitude greater than the Chief financial officer of the largest non-governmental corporation in the world resigning (more on this later). The position is so crucial to the functionality of the corporate structure of the United States of America that it’s subject to Senate confirmation.

The selection process is somewhat unusual. A commission made up of congressional leaders presents the president with at least three candidates for the job. The commission is made up of: the Speaker of the Houses, president pro tempore of the Senate, the Senate majority and minority leaders, the House majority and minority leaders, and the chairmen and ranking minority members of the Senate Homeland Security and Governmental Affairs and the House Oversight and Government Reform committees. The president chooses one of the three candidates for the job. His nominee must be approved by the Homeland Security and Governmental Affairs panel and then confirmed by the Senate.”

What transpired with Walker jumping ship and in the first three months of 2008 was nothing short of the beginning of the largest consolidation of wealth in the history of the United States. Walker’s resignation removed the last obstacle for those controlling US fiscal policy to readily make available cheap money. From August 2007 to December 2008 the Federal Reserve lowered the Primary Discount Rate from 6.25% to 0.5%. What followed was a blank check to bailout and buyout banks, defusing a global financial Chernobyl in the derivatives markets some have argued, while at the same time impoverishing American citizens, and eliminating the middle class (more on these later).

Elizabeth Warren: The Coming Collapse of the Middle Class

From 2007 to early 2008, when US national debt was sitting around $9 trillion, Walker compared what was happening to the US with the collapse of the Roman Empire. Let’s see what’s happened since then?

The Largest Ponzi Scheme in History

As of 2 June 2009, the US federal debt is now sitting at well over $11 trillion. This amount does not include the extra $10 trillion to $14 trillion that US taxpayers will eventually be required to pay back for buying toxic assets.

“Make no mistake – we are selling off our future and the future of our children to prevent the bondholders of U.S. financial corporations from taking losses. We are using public funds to protect the bondholders of some of the most mismanaged companies in the history of capitalism, instead of allowing them to take losses that should have been their own. All our policy makers have done to date has been to squander public funds to protect the full interests of corporate bondholders. Even Bear Stearns’ bondholders can expect to get 100% of their money back, thanks to the generosity of Bernanke, Geithner and other bureaucrats eager to hand out the money of ordinary Americans.”

Buying up toxic assets is known as The Troubled Asset Relief Program (TARP) – “a program of the United States government to purchase assets and equity from financial institutions in order to strengthen its financial sector.” When Congress approved this program, “Fed Chairman Ben S. Bernanke and then Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. The Federal Reserve so far is refusing to disclose loan recipients or reveal the collateral they are taking in return.”

In the following video “Rep. Alan Grayson asks the Federal Reserve Inspector General about the trillions of dollars lent or spent by the Federal Reserve and where it went, and the trillions of off balance sheet obligations.” The Inspector General, Elizabeth Coleman, states that her office is not tracking this information. In essence, she is confirming that we are witnessing the largest Ponzi Scheme in history unfold in real time.

These numbers, however, are a little misleading. The American public is largely unaware that the true deficit of the federal government is approximately “$65.5 trillion in total obligations”, exceeding global GDP.

The following 2008 documentary, “I.O.U.S.A. – One Nation. Under Debt. In Stress.,” does an excellent job explaining why the current fiscal policy in the United States is unsustainable, and recommends some very painful solutions to resolve the problem.

Keep in mind that all of the above debt is exclusive of the personal debt that US citizens may carry. So even though many, including myself, have compared what is happening to the United States to what happened during the Great Depression, a more accurate comparison was given by Walker, the 2008 recipient of the American Institute of Certified Public Accountants’ highest award and the person holding the highest accounting position in the United States from 1998 to 2008, and he compared the collapse of the United States to the Fall of Rome.

Let me rephrase this another way, if you were an accountant, then professionally speaking, David M. Walker is who you would aspire to be, and he bailed ship in 2008 stating that the game was over for the United States of America.

I hope the above explains the magnitude of our current economic metamorphosis. It will be one of the main themes for our conversation.

to be continued…

Source: http://www.chycho.com/?q=Rome

The above is Part 3 of a conversation about the state of the world:

Source: The Peoples Voice