September 10, 2014 By Joseph P. Farrell

There's been a strange cluster of articles on the net lately, regarding the usual financial memes: the Fed is insolvent, near bankruptcy, everything's going to collapse on such-and-such a date, the dollar is doomed, and so on.

This time, however, it's coming from some unusual sources. One is, of course, Kentucky US Senator Rand Paul (son of US Congressman Ron Paul, for those in our international readership). There's nothing unusual about that, for the Pauls - both Ron and Rand - have been wanting to audit the Federal Reserve for years (and for that matter, so have most Americans). What is unique about the more recent news, is that now the CIA is weighing in, in the form of financial analyst Jim Rickards:

Senator and CIA Insider Accuse Federal Reserve of Covering Up Secret Bankruptcy

Here's the crux of the matter, according to the CIA financial analyst :

"Rickards shared an alarming collection of charts in the discussion that proved our country has secretly reached, or exceeded, crisis levels in our stock market, with our dollar, and banking system that are more severe than in 1929.

...He examined two charts in particular that specifically place much of the blame for this on the Federal Reserve.

"'What you can see from this first chart is that for over a decade the Federal Reserve steadily grew its capital reserves. Even after the recession struck, on the surface at least, they kept strengthening their financial backing,' he explained.

"'And today they have over $56.2 billion of cash on hand. $56.2 billion sounds like a lot of money, but it's not the full picture.'"


"'You have to compare the cash the Federal Reserve has on hand with the debt they've taken on since the recession. And when you do the picture becomes a lot scarier, because that figure is $4.3 trillion,' Rickards continued.

"'So you have $56.2 billion propping up $4.3 trillion worth of debt. That means the Fed is leveraged 77-1. Prior to our 2008 meltdown that was only 22-1.'"

But there's another huge fly in the ointment: systems analysis, and cycles:

Here’s Why the Market Could Crash–Not in Two Years, But Now

I hope you caught it, but if you didn't, here's the crux of it:

"One ontological feature of complex systems is that they are not entirely predictable. An agricultural monoculture is a good example: we can control all the visible inputs–fertilizer, seeds, water, pesticides, etc.–and conclude that we can completely control the output, but evolution throws a monkey wrench into our carefully controlled system at semi-random times: an insect pest develops immunity to pesticides or the GMO seeds, a drought disrupts the irrigation system, etc.

The irony of assuming that controlling all the visible inputs gives us ultimate control over all outputs is the more we centralize control of each input, the more vulnerability we introduce to the system."

And thus:

"If the economy and the market are indeed systems, then we can predict that any level of control will fail no matter how extreme, and it will fail in an unpredictable fashion that is unrelated to the power of the control mechanism.

"Indeed, we can posit that the apparent perfection of central-bank engineered stability (i.e. a low VIX and an ever-rising market) sets up a crash that surprises everyone who is confident that central-bank monocultures never crash. In the real world, manipulated stability is so vulnerable to cascading collapses that crashes are probabilistically inevitable."

Now, factor into all of this two other things, for remember, neither Senator Paul, nor Mr. Rickards, nor Mr. Smith, are dealing with (1) the role of the hidden system of finance and black budget in their analysis, and hence, with the role of factions within both the finance-capital world nor in intelligence, that deal with that system on a daily basis, and (2) none of the men are focused on the extraordinary reliance of international financial clearing, and for that matter, modern securities and commodities markets, on electronic networks and high frequency trading.

What I am suggesting is that these two factors - the first of which is almost never reckoned with in any financial or economic analysis of the makro-system - or rather, the absence of these two factors, will fundamentally skew and flaw any conventional analysis, and that this, in turn, is why the Fed will never permit a genuine audit, for that would reveal the role of these two factors, and their interconnections.

Indeed, Mr. Smith is correct: we are dealing with a complex system, an organism, and like most organisms, the real functions, the real organs, are not what you see, but what you don't see, the functioning organs beneath the skin, hidden from view.  For contemporary financial analysis to begin to make sense, it will, like the grave-robbing Renaissance anatomists of old, it will have to start looking at the corpses of similar systems in the past.

See you on the flip side.