And now for a little exercise in (meta)physics for over the weekend.

Economists schooled in the theories of von Mises and Hayek have been warning of the dollar’s imminent collapse for some time now. Images of Germany in October 1923 (or Zimbabwe this year) illustrate governments’ fiscal policies run amok. And yet, the U.S. Dollar as a reserve currency maintains itself in relation to other benchmark currencies around the world. There doesn’t seem to be much sign of weakness in this corner of the otherwise lumbering economy.

And that’s what’s so worrying.

For some reason, I’ve been noticing flash-points in nature. Such as the moment enough heat interacts with the compounds atop a match head, causing a swift flare-up of enormous size compared to the chemicals. Or a thick, grey cumulus cloud passing overhead, looming dark and threatening, suddenly releasing a torrential downpour without warning. I believe these are examples of the second law of thermodynamics in action.

Flash-points occur in the man-made world as well, sort of metaphysical copies of natural law. And can happen with similar, unexpected violence.

In the early morning hours of April 26, 1986, workers at the Chernobyl nuclear power plant decided to test the safety procedures of Reactor 4. They reduced its power to bare minimum levels, to see how the reactor would behave if it had to be depowered in an emergency.

After the test, the workers increased power to bring it back online. The reactor remained at the bare minimum.

The workers increased the power a little more, expecting the reactor to kick in. But it didn’t. Still at bare minimum power. The supervisor nodded for another increase. And another. The workers brought up the power to normal operating level. And…

BANG!

A flash-point had been surpassed. Suddenly. Unexpectedly.

It wasn’t gradual. It wasn’t measurable. It just happened. It was a property of physics that hadn’t fully been taken into account.

The rest is history. Thousands dead. Mass contamination. An unforgettable, historic disaster.

Back to the present day, and the worst of the economic crisis appears to be in the past. The new administration warns of more clean-up ahead. This involves continuing to create huge amounts of credit out of thin air, and floating vast loans with bonds “promising to pay” at some time in the future.

Investors, well, those who survived the slaughter of autumn 08, appear confident in the dollar. It’s their last refuge. Stocks have been flat, and commodities have remained in the basement. So what’s left except the greenback?

While investors are pumping their hopes into the dollar, the government has not seen fit to change its ways. In fact, it intends to fight fire with a daisy-cutter and triple the actions that brought on this crisis in the first place.

The Fed has widened the credit line like the Grand Canyon, the Treasury department is floating their loans in record auctions, and investors are buying them up, insecure about the path they’re treading but certain there is nowhere else to put their money.

Like a financial Reactor 4, the sluggish banking system is being injected with more and more credit. More and more cash will be have to be disbursed. More and more government-backed securities will choke the marketplace.

They will spend more, and buy more, and print more…

Question is, when is the flash-point? The point at which the banking system melts down faster than Reactor 4, spewing hyper-inflation all across the world?

At what point will the last refuge of the global investor crumble, and her/his investments get consumed in a conflagration entirely made by an irresponsible, unrealistic government completely at the mercy of an unpredictable but inviolable natural law?

Most importantly, do the movers and makers of this imminent exercise in natural physical laws understand what’s happening? Federal Reserve Chairman Bernanke seems to think he can shut the pressure valve in time to stop an explosion. He must think the Fed can call in its loans and raise interest rates just as the irruption begins.

But nature has a funny way of defying expectations while still remaining true to physics. The dollar may well go Chernobyl one early morning while the rest of us are tucked in bed.

It remains for We the People to hold onto our umbrellas and hope the next torrential downpour won’t be in worthless greenbacks.

Cosponsors of H.R. 1207, the Federal Reserve Transparency Act of 2009, stand at 282 representatives, and the push is on to get at least eight more to add their names to the bill. Once that happens, the bill can no longer be held in committee by the Chairman (Rep. Barney Frank) but must pass to the floor for debate and vote. Now, when nearly two-thirds of the House backs Rep. Ron Paul’s “fed transparency” measure, Rep. Frank is left with no choice but jump on the bandwagon, as the Wall Street Journal reports:

Nearly two-thirds of the House has co-sponsored Mr. Paul’s bill. Fed Chairman Ben Bernanke opposes the bill as written, saying it would compromise the Fed’s ability to set interest rates free of political interference. “A perceived loss of monetary-policy independence could raise fears about future inflation, leading to higher long-term interest rates and reduced economic and financial stability,” Mr. Bernanke testified last month.

Not that Rep. Frank wants to jump on the bandwagon. Pressured by the magic number “290″ closing in fast, Frank is searching for some sort of deal to soften the potential blow to the reputations of many, many powerful friends in the Federal Reserve.

Mr. Frank has said any audit would release details of Fed transactions with financial institutions only after a lag. “If that was made instantly, you would have a lot people trading off of that and it would have too much impact on the market,” he said earlier this month. “So we will probably have that data released after a time period of several months, enough time so it wouldn’t be market sensitive.”

Rep. Frank’s concerns are superfluous simply because the quantity of records to be investigated is so vast, it will take years to sift through before a complete picture of the last decade can be put together.

I myself can’t help but wonder what Rep. Ron Paul will have to deliver in return for Frank’s favor:

In an interview Friday, Mr. Paul said Mr. Frank agreed to allow a vote on the bill and to work on language that would allow the Government Accountability Office, the investigative arm of Congress, to audit the Fed’s monetary-policy operations. While details are unresolved, the discussions increase the likelihood that some version of Paul’s bill will pass the House. “Barney told me, ‘It’s going to come. You’re going to get what you want,’ ” Paul said. “We’re going to have some hearings and we’ll get a vote.”

Opponents of H.R. 1027, especially Fed Chairman Ben Bernanke, insist secrecy is the keystone to banking success. However, the Federal Reserve is only one of thousands of banks to turn over private account information to the IRS every year in order to track possible money laundering and tax evasion. So the concept of banking privacy is really a two-way street.

Rep. Paul ensures that specific private data will not become public knowledge, but just the workings of the banking complex. Especially during the height of the mortgage boom, when the Fed played a central role in disbursing vast amounts of credit to already wobbly enterprises.

Naturally, Rep. Rosa DeLauro’s name is still nowhere to be found on the list of co-sponsors. Letters to her office from constituents always come back marked “I will keep your opinion in mind.” As this is critical work to uncover one of the gravest disasters in America’s financial history, the Congresswoman’s absence could be considered obstructive. But why?

The White House Budget Office has admitted the bleakest estimates on the scale of the budget deficit (now standing $2 trillion higher than it forecasted a few months back) are correct. Now the Congressional Budget Office (CBO) Director Douglas W. Elmendorf has released a statement on the issue. Supporters and donors to Rep. Rosa DeLauro should take a long, hard look at what Mr. Elmendorf is saying, especially since the Congresswoman has been the most vocal supporter of uncontrolled spending:

Today CBO issued its annual summer update of the budget and economic outlook. CBO estimates that the federal budget deficit for 2009 will total $1.6 trillion, which, at 11.2 percent of gross domestic product (GDP), will be the highest since World War II. That deficit figure results from a combination of weak revenues and elevated spending associated with the economic downturn and financial turmoil. The deficit has been boosted by various federal policies implemented in response, including the stimulus legislation and aid for the financial, housing, and automotive sectors.

The Boaz ItsHaky for Congress campaign has consistently predicted this would happen, owing to the anticipated reduction in tax revenues. And we’re unhappy to be proven correct. But why has our Congresswoman failed to admit her spend, spend, spend policies are simply wrong?

Earlier, the GOP House Leader Boehner released a statement on the New Federal Deficit Projections:

“Today’s reports confirm what the White House has been trying to hide: the Democrats’ out-of-control spending binge is burying our children and grandchildren under a mountain of unsustainable debt. Instead of putting the brakes on Washington’s spending habits as they promised they’d do, Democrats have stepped on the accelerator and spent taxpayer dollars with reckless abandon all year, refusing to make tough choices and putting all the sacrifice on future generations. That’s not leadership; it’s negligence.

“The costly government-run health care plan put forth by President Obama and Speaker Pelosi is just the latest in a long line of expensive Democratic experiments that will add to the deficit, raise taxes on families and small businesses, and cost more American jobs. It’s time for the Administration and congressional Democrats to face the consequences of this dangerous fiscal agenda and change course.

“Republicans have proposed better solutions to curb out-of-control spending and control the debt on behalf of middle-class families, including a fiscally-responsible federal budget that includes strict annual caps on federal spending and forces Congress to live within its means on a yearly basis, something the Democratic-controlled Congress has refused to do. Republicans are ready to work in a bipartisan way to get control of our budget. For the sake of our children and grandchildren, let’s hope this Administration and the Democrats in charge of this Congress are as well.”

And the former CBO director doubts new deficit numbers to be released on Tuesday even before they’re released:

Former Congressional Budget Office Director Douglas Holtz-Eakin says the Obama administration’s claim that the Obama’s updated figures on the deficit that will be released Tuesday are “spin and nothing more.”

“Bottom line, the budget outlook is worse, and dangerous,” Holtz-Eakin writes to Boehner.

Times are getting tougher for the world’s most secretive and unaccountable banking cartel. According to Bloomberg:

The Federal Reserve must make records about emergency lending to financial institutions public within five days because it failed to convince a judge the documents should be exempt from the Freedom of Information Act.

Manhattan Chief U.S. District Judge Loretta Preska rejected the central bank’s argument that the records aren’t covered by the law because their disclosure would harm borrowers’ competitive positions. The collateral lists “are central to understanding and assessing the government’s response to the most cataclysmic financial crisis in America since the Great Depression,” according to the lawsuit that led to the ruling.

Openness would be a positive development, but it is unlikely to be as clear as we hope because it would harm the Federal Reserve’s advantageous position with some of the biggest bailout recipients, most of whose former employees now work for the Fed.

Congresswoman Rosa DeLauro finally got on the bus and praised the President for his efforts to reform the tax code. As her press release put it, this reform is designed to curb the abuse of offshore tax shelters and eliminate tax incentives for shifting jobs overseas.

“That our tax code contains advantages for creating jobs overseas and opportunities to avoid paying taxes, defies common sense. Tax havens allow individuals and businesses to avoid paying their taxes, which results in an extra burden for those who do pay their share. We need to close the loopholes so that offshore tax havens and tax shelters will no longer be an option to hide income and assets.”

We can thank the Congresswoman for taking a position, but she takes it with a vindictive tone, as though legal tax havens are a crime and she’s part of the posse.

“I welcome President Obama’s efforts to restore balance to our tax code and look forward to working with my colleagues to take steps to fix our broken system.”

One problem is, the potential side-effect of taxing income earned overseas is that whatever corporations still call America home may depart for cushier places to situate their headquarters. A great many white collar jobs could be transferred to Dubai or Ireland, especially those in the Tech industry, as the AP reports:

Collectively, HP, IBM, Cisco, Microsoft and Google lowered their tax bills by a combined $7.4 billion in their last fiscal years by taking advantage of lower tax rates outside the United States, according to an analysis by The Associated Press. Through the years, these five tax companies have avoided U.S. income taxes and foreign withholding taxes on a combined $72 billion in undistributed earnings from their foreign operations.

Another problems is U.S. competitiveness in the global market, as the Wall Street Journal points out:

The President’s plan would limit the tax deferral on income earned abroad by tightening the rules, limiting allowable deductions and restricting eligibility for foreign-tax credits. Congress long ago created the corporate tax deferral to compensate for this competitive disadvantage. Under deferral, a company doesn’t have to pay the U.S. corporate rate until it repatriates its earnings. America now has the worst of both worlds: a high statutory rate and a tax code so riddled with complexity that it is both expensive to administer and inefficient at collecting revenue. The explicit goal of this plan is to reduce the incentive for U.S. companies to invest abroad, which Mr. Obama derisively calls “shipping jobs overseas.” This “solution” is antigrowth, job-destroying, protectionist and unlikely to raise the tax revenue he predicts.

Question is, why does Rep. DeLauro leap at idea of taxing corporations now? Why hasn’t our Representative opposed the hemorrage of blue-collar American jobs overseas? Why hasn’t she offered solutions to our broken system in the past?

This isn’t something that’s happened overnight, and yet Rep. DeLauro only “got the picture” early this year. Rep. DeLauro has had ten terms in Congress to push on saving American jobs, to encourage consumers to buy American goods, to promote manufacturing in America, but unfortunately, she has failed to do so.

After all of the disasters that have stricken America’s banking sector, the institution that made it possible should be audited: the Fed’s books should be flung open and examined line by line. But Title 31 USC Sec. 714, the law that created the Federal Reserve Banking System, forbids an audit on grounds of privacy for the borrowers of federal funds.

That is to say, all of the giant banking cartels that were borrowing from the Fed to buy up toxic mortgage assets and then sell them off to mutual funds, investment firms, hedge funds, and ponzi schemes at an enormous profit are protected from scrutiny. To paraphrase Chairman Ben Bernanke, secrecy has always been the foundation of banking, and changing that would undermine the very system he’s trying so hard to resuscitate.

Enter H.R. 1207, the Federal Reserve Transparency Act. It was written by Rep. Ron Paul, who is a well-known opponent of the Fed. In fact, every year he ritually submits a bill to repeal the Federal Reserve Act as a matter of duty. Concerning the Fed’s business practices, Rep. Paul says:

Since its inception, the Federal Reserve has operated without sufficient transparency or accountability to the American people. In fact, current law specifically excludes the Fed from audit or real congressional oversight. No government agency has such an utter lack of sunshine.

The Federal Reserve has created and dispersed trillions of dollars in response to our current financial crisis. Of course, I am among the most outspoken critics of the bailouts, but Americans across the nation, regardless of their opinion of the TARP program, want to know where that money has gone and exactly how much has been spent.

Currently, H.R. 1207 has 230 cosponsors, and is receiving its broad support not only because there is a general outrage over what the most powerful and unaccountable banking system has done, but because the legislation itself is so simple:

The bill removes a line from the original Federal Reserve Act of 1913. It is the subsection that forbids the Fed to be audited. Short, effective, impacting. This is the sort of commonsense legislation We the People can have confidence in. Naturally, Rep. Rosa DeLauro’s name is nowhere to be found among its cosponsors.

Instead, Mr. Obama chose to let House Democrats write the bill, and they did what comes naturally: They cleaned out their intellectual cupboards and wrote a bill that is 90% social policy, and 10% economic policy. (See here for a case study.) It is designed to support incomes with transfer payments, rather than grow incomes through job creation.