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They've been rumbled. The very shaky foundations of the entire house of cards have been exposed. The vast fraud against lower and middle income households that is the financial system, and, ultimately, government has been laid bare. Surely everyone can now see that? No? That doesn't surprise me. Just as there was very little outcry in this country when former Governor of the Bank of England Eddie George revealed that their commission on independence in 1997 was not just to maintain an inflation target but also to see to it that house prices continued to rise by keeping money as cheap as possible for as long as possible.

In my opinion, whatever the consequences in the short term, it would be better if Fannie and Freddie were allowed to die gracefully even as their lives have been a disgraceful deceit. What have they done that is so bad that a normally forgiving person like me would be calling for the corporate equivalent of the death penalty? The seemingly innocent practice of underwriting mortgages is in fact a key factor in the creation of the property price bubble and in the transfer of wealth from poorer to richer.  Yes that's right, redistribution the wrong way!  Without that underwriting the front line lenders would have been more cautious in their lending stabilising prices and not stretching households to the financial limits just to have a home over their heads.

Oh, what a clever idea, you still say perhaps - after all, it surely helps more people buy a home. And that's what Fannie and Freddie were supposed to do, by offering an implicit government guarantee people who would previously not have been considered for a mortgage got to join in the jamboree. And that's the problem - a government guarantee. They, the state, have pledged an eye-wateringly close to unlimited amount of money, that's *our* money of course, to make us have to pay more for our homes to the banks who effectively create the credit in the first place and line the pockets of landowners. And this in a nation that is still so relatively empty as to have marginal land in abundance so other land values should still be relatively stable other things being equal.

But those other things are not equal, the cycle of lending inflates the broad money supply so over time reducing the value of the asset that very system conspired to make you pay so much for in the first place. And all this is only possible because of the enclosure of land, the privatisation of the entitlement to and collection of the value that the whole of the community creates at any particular unique location.

At best, Fannie and Freddie are shining witnesses to the power of unintended consequences - I am sure the New Dealers whose brainchild they were earnestly believed they were helping: at worst, they can be seen as part of a conspiracy between government and those who own the financial system and its institutions to transfer vast amounts of wealth from Average Joe to the richest few. Add the evidence of Eddie George that in the UK the past ten years' property price boom was deliberate though unannounced political policy and it's harder to rule out conspiracy over cockup.

Either way, Fannie and Freddie should go, and go quickly, and, as they say, be buried in a closed casket to boot. It will unleash financial turmoil of unprecedented ferocity I am sure. But it will be the herald of death to a fundamentally flawed, corrupt and downright fraudulent system that continues to benefit a tiny few at the expense of the vast majority. I was introduced to a new, to me, term at the weekend, the Kondratiev wave. Looking at the vast amounts of money involved in the current potential crisis, the fact that the asset bubble is bursting as production is also slowing and there's ever decreasing amounts of money available to maintain existing economic activity, and I'm beginning to wonder if Kondratiev wasn't on to something.

This is a huge opportunity. An opportunity to reinvent a stable monetary system more suited to a globalised world of trade and increasing aspiration amongst a whole new world of consumers, a world in which, of necessity, economic activity is shifting relatively away from the west, from the existing reserve currency and its close followers and towards the east and the global mass of population.

And that, dear reader, is why I am likely to die waiting. An opportunity those who wield power would prefer us to miss.

Remind me again, was it not Frankenstein's monster that was brought to life with jolts of electricity? So, is giving Cardinal O'Brien a pacemaker not "an unprecedented attack on the sanctity and dignity of human life" after all...

BBC NEWS | Scotland | Cardinal O'Brien gets pacemaker:

The leader of the Roman Catholic Church in Scotland has had a pacemaker fitted following recent heart problems. Cardinal Keith O'Brien was fitted with the device under local anaesthetic at Edinburgh Royal Infirmary. The 70-year-old, who suffers from a heart murmur, had experienced dizzy spells in recent weeks and fainted prior to Palm Sunday mass.

On Friday he will attend a public meeting to campaign against the government's Fertilisation and Embryology Bill. At his Easter Sunday mass the cardinal accused Prime Minister Gordon Brown of "an unprecedented attack on the sanctity and dignity of human life", and warned the research could lead to experiments of "Frankenstein proportions".

Over at the Latin lovers collective David has been trying to fathom why anyone would call Milton Friedman a "liberal". I responded with a long comment that really deserves to be a post of its own on my blog...

See, I actually think Milt is much misunderstood and misrepresented. Just like Smithy. I've seen him make the "claim" that a company's only duty is to create profit for its shareholders. And there's a but. He is talking about the sole legal obligation, indeed the founding rationale, of the law that created incorporated companies in the US.

When incorporation was first enshrined in US law it was in response to the sort of abuses that marked out things like the South-Sea Bubble in the UK. Investors would be conned into parting with their money and then the merchant adventurer would go off and do what he pleased with their money. The same happened in the early US and so they created a legal framework that was solely intended to protect the stockholder from the conmen that sought to part them from their money - business could not get investors without that certainty that if they clubbed together to form a corporation their interests would be legally protected.

His line is actually a philosophical one that a corporation has no moral conscience, that it's not really a "person" - I get the impression he doesn't like the later case law in the late c19th US that made a corporation into a legal person. But, he says, those people who go to make up a corporation, employees, managers and most importantly stockholders do have moral consciences and crucially that it's the process of making money that allows them to exercise that moral conscience for good.

I don't think that's a bad way to look at it actually. We occasionally, in the Oxfordshire Social Enterprise Forum, have to define "social enterprise', and lots of people say such is a "not for profit company". But a preferred phrase amongst social enterprise "practitioners" is that it is a "more than profit company". Profit has become in some circles a dirty word. But Friedman's line, and that of social entrepreneurs, is that it's what you do with that profit that could be dirty or could be good. In Friedman's case, in US law, the point is that it is simply not up to the corporation itself to decide for the stockholders what to do with that profit, for good or bad. Every corrporate entity, in order to justify the trust that investors and members put into it, must make a profit to be able to carry on trading, but what those "real people" involved decide to do with their profit is what counts.

For me though, it was "Free to Choose" that made me think differently of Milt. To me before then he was the academic heavyweight that gave justification to some of the worst aspects of Thathcerism. But then I read him describe how people could take control for themselves. His example was education. He suggested, for example, that something as precious as the education of our children should not be left to the state, and advocated parents and teachers getting together and forming PTA co-operative schools to put them in control locally.

And this is Adam Smith's line as well in my opinion. He said that the state should get involved, amongst other things, when something needed doing that was too big for a person or small group of associated people to arrange for themselves. And I would say that the whole story of the twnetieth century welfare state has been usurping the right, and ability, of groups of people to get on and arrange such things for themselves or amngst themselves. As John Howson reminded us when we had that consultation on the public services policy paper in the Town Hall in Oxford, state schools are legally merely the "default" option. The obligation legally is on parents to ensure their children are educated, and they are allowed to go private, to home-school, whatever, but that the state provides a fall-back. But the way state education has developed in this country at least we have had our minds numbed to the idea that there are other options. That is what one could describe as enslavement by conformity.

I believe there are other areas where Milton Friedman has been done a disservice by his connection with Reaganomics and Thatcherism. He does change his mind. But those who took his ideas and made them their political ideology don't like to hear that. Monetarism is a case in point. Friedman has had a long standing philosophical problem with fiat money. I think he's really a "hard money" advocate - one who believes that stable money means something still backed with a relatively fixed amount of some precious specie such as gold. His adaptation of this to the inflationary pressures and policies of the seventies was to advocate tight control of fiat money which became the mantra of the political monetarists - they even made a song out of it to educate the great British unwashed in the late seventies - "We'll count our blessings if we apply/Tight control to our money supply". But since then Friedman has said that if he were to go through it all again he probably would not have placed such a heavy emphasis on control of money supply.