Very Disturbing article

OKay I just read something very disturbing and frightening reguarding our money and it's security on Garth Turner's blog. Since I can't figure out how to post it, I'll just copy and paste it.

From: http://www.garth.ca/weblog/

Toxic Cash

While the government cowers and the opposition squirms, while Stephen Harper licks his wounds and Stephane Dion contemplates rejection , while the economy disintegrates, houses devalue and Parliament is dark, there is something else for you to worry about. Something big. Disturbing.

Do you know what’s backing your money? You should. Because in the last 90 days this has changed drastically. There’s a big gamble been taken by politicians which was never explained, never debated, never questioned, and yet could affect us all.

Here is the way the system is supposed to work, and until this autumn, did.

* Our money’s printed by the Mint and backed by the Bank of Canada. The central is expected to hold assets equal to the amount of cash in circulation, which is more than $50 billion.
* Because our nation no longer owns gold reserves, our money is backed by the safest of securities, long-term government bonds and Treasury bills. This is what gives our money true value. At least, until recently.

But in the last 90 days, without public notice, the Bank of Canada has sold off more than $11 billion of those secure T-bills, plus cashed in billions more of its bonds. As stock market researcher John Paul Koning discovered last week, the central bank now lists on its balance sheet a stunning $32.4 billion in “other” assets, which comprises a whopping 42% of everything it owns.

That means more than two-fifths of the total assets backing our money supply is – what, exactly?

Well, let’s flip back a month to the middle of November, when finance minister Jim Flaherty announced the federal government was purchasing $50 billion in residential mortgages from the Big Six banks, following an earlier deal to buy another $25 billion in mortgages. “At a time of considerable uncertainty in global financial markets, this action will provide Canada’s financial institutions with significant and stable access to longer-term funding,” he said, adding, “with no additional risk to the taxpayer.”

So, the “other” assets the Bank of Canada has swapped for secure, near-cash holdings appear to be tens of billions of dollars in high-ratio mortgages. The money to buy those assets apparently came from the central bank, through CMHC, and ended up in the vaults of the Big Six banks. It’s also believed that the Bank of Canada has been buying up other commercial bank liabilities, such as credit card debt.

In fact, the central bank was at it again yesterday. On its web site, the Bank of Canada announced its buying another $1 billion in “private sector money market instruments” on Monday.

So, what are these mortgages with tens of billions that now stand behind a good chunk of our money? They are loans given to people who bought houses with little or no money down, many of whom purchased before October 15th, when it was still okay to buy a home with a 0% down payment and to take out an amortization of 40 years. The government, under intense criticism that these were Canadian equivalents of the disastrous US subprime mortgages, chucked them two months ago.

So, here we are. The Big Banks have unloaded tens of billions of dollars in potentially toxic assets to the Bank of Canada, which cashed in ultra-secure investments to hand over cash. The federal government orchestrated this in order to make the commercial banks more secure. But in doing so, what’s it done to our currency? As Koning wrote in an article in the Financial Post last week, “Our central bank has swapped a sure thing: a large chunk of liquid and non-volatile AAA-rated government debt, for a slew of ‘other’ assets whose nature remains uncertain to everyone but bank insiders, assets which are inherently more volatile and less liquid than government debt.”

That this compromising of our money supply could happen is alarming. That it could take place without citizens being told is shocking.

Why didn’t the finance minister explain his actions? Did he understand them? Where were the opposition watchdogs? What happens now if unemployment and falling house values turn some of those mortgages worthless, as happened in the US?

Let’s hope this comes to light on the floor of the House of Commons.

Oh wait. It’s been locked.