Financial crisis or financial sting ...

So the time has come to inquire as to who exactly these regulators are?

This question is not difficult to answer. The Reserve Banks throughout the Western world are the regulators. In all Western countries they not only control the production and flow of money but also the price of it; they set the interest rates on that money. With the last decrease in the interest rate by the Australian Reserve Bank it was embarrassing to hear both our Prime Minister and Treasurer “begging” the retail banks to do the right thing and pass on the full reduction in rates.

This should not be the case.

It now appears as though there will be a series of inquiries into the financial situation, but these will merely serve as a form of entertainment until the industry is about to move on.

Alan Greenspan, the ex Chairman of the Federal Reserve Bank, has now admitted before the US Congress that he was wrong to believe the banking industry in America would self-regulate, although he did claim that the system had worked successfully for 40 years. So the lack of oversight is well and truly admitted.

So to whom do we turn for recourse? Clearly we cannot avoid the question as to why there was no regulation or oversight from the Reserve Banks. The serious power resides with the Reserve Banks and if they are negligent in their duty then they set the standard for the rest of the industry.

As to how we prevent this from happening again, the suggestions are already coming out of Europe with the Prime Minister of Great Britain, Gordon Brown, stating words to the effect that in order to prevent this happening again there needs to be more global supervision of the banking industry.

Many won't agree and say all that Gordon Brown's proposal will do is cause greater centralisation of the banking systems of the various countries. If Gordon Brown's “solution” goes through then any hope of recovery will be lost forever, or given its best spin, made infinitely more difficult.

This present crisis is not yet over and in the near future we can expect to read about severe damage being done to hedge funds, even more so than today. To date the accumulated losses by investors and taxpayers is in the trillions of dollars. So it is a matter of urgency that a genuine solution is found.

Perhaps Ben Chifley had it right when he passed the Commonwealth Banking Act of 1945 and the Banking Act of 1945. It's just a great pity that this legislation never came to be effective. If it had we wouldn't be in the position that we are today and without doubt we would live in a far more stable and robust democracy than we presently do.

I believe it is timely to reflect on the words of Thomas Jefferson, President of the United States (1801-1809), who said (1802):

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.

These very words are not only relevant in the United States today, but also in our great nation, but will our Federal Government bite the bullet and enact legislation that returns the control of “currency” to the Parliament, and removes the unfettered ability to issue “currency” by private banks and other financial institutions with the stroke of a pen.