Hijacking Reforms

Hijacking Reforms, by Jere L Hough

The Money-Powers (Wall Street & City of London financiers, bankers, and corporations) that are creating the new world economic order are winning their battle.  They may have already won it.  The last step is to create rebellion and revolutionary chaos in the USA, and destroy the Obama administration, and any vestiges of representative government we actually have left.

The militant and authoritarian extreme right has all of the money and media on its side of the ledger, and they are winning the war for the minds of the people.  Make no mistake.   This is not a new war.  It has been going on for thousands of years, and been ratcheted up in the last two or three hundred, and several times since then.  We are now in the final, or nearly final stage.  Soon representative governments will be a memory.  At least this will be so for governments that represent the people.  Huge corporations and the billionaires behind them will be well represented.

There will also be several tiers of supportive ranks of entrepreneurs, managers and high-ranking government and military personnel who will do well.  But the vast bulk of humanity will be either enslaved on some physical or economic level or allowed to starve, drown, or be otherwise thrown away or exterminated in some fashion, from wars, famines, diseases, and any number of other horrors.

This is obviously not a pretty picture, and I wish I didn’t have to describe it.  But it is all but inevitable now.  Why?  I could explain that in many ways, but perhaps the simplest is to say that the “Tea-Baggers” have “hijacked” the reform movements, and are winning false reforms.  That is to say that the radical fascist wealthy elite right has succeeded in not only capturing all the means of production and distribution in our culture, but the production and distribution of information and education as well.  At least they now have enough of it to sway and hypnotize the ignorant masses any way they choose.  The “Tea-baggers” are right wing frauds that have hijacked the reform movements begun by writers and activists like me and other money reformers.  The “Tea-Baggers” are the visible marching throngs of people who have been warned that we must really take back our government and our money.  They are only one group out of thousands that are acting like reform groups but are really funded and organized by those now in control, and who want to see fake and phony “reforms” that leave things in their control, or more so.  Beware these “wolves in sheep’s clothing”.  Jesus did not use that phrase lightly or without cause.  Those that simply want to tear down or destroy legitimate elected governments are among the worst of these pseudo-reformers.

And ignorance is also a huge key.  People have been kept so busy earning a living, caring for their families, or amusing and entertaining themselves that they have failed to inform themselves of the historical, philosophical, social, spiritual and economic principles that form the basis for lasting and successful civilizations whose citizens are capable of governing themselves responsibly.

So the US Constitution our forefathers though provided adequate checks and balances against fatal accumulations of power failed to provide for economic checks and balances.  Wealth and power were accumulated and aggregated into the hands of a few who eventually used corporations, cartels and syndicates to replace the power of the people with their own wealth and money powers.

This, of course, is the short version of the story.  Very long books have been and will be written to supply all the sordid details.

This writing has another point, and an important one.  It is that during the past several hundred years, bankers and financiers who own the interlocking networks of corporations that now rule our world have been waging a massive propaganda war against governments. This war has been especially vicious against democratic or republican representative governments. The reason for this is that only the “people-power” of a strong middle class can protect a society against the aristocratic tyranny of money and wealth.

It is essential that the reader grasp this point.  Vast inequalities in the distribution of wealth create an aristocracy far stronger than any that existed by royal bloodlines in the past.  Free markets cannot exist in the midst of such concentrations of economic power.  They have not existed for a long time now, except in the mythologies the power-brokers spin out to the people, via their corporate mainstream media.

Let me repeat it another way.  Political democracy cannot be sustained without some degree of economic democracy.  This does not mean everyone should make the same wage, or income.  That is a ludicrous idea used to attack attempts to bring economic fairness and justice into the marketplace of ideas.  Industry, education, initiative and creativity should always be rewarded.  These incentives should never be removed, just as concepts of private property should never be abandoned.  However, the economic playing field cannot be sustained when it is a skewed as it now is toward the unrestricted accumulation of wealth and power.

The only real power capable of standing up to the power of wealth is a government of, by and for the people.  That is precisely why the war has been waged to destroy such governments, and why that war is at a fever pitch right now.   Your government has almost, but not quite, been taken over by the money powers.  Whether that happens of not depends on you, and your choices – right now.

The task of the people now is to reclaim its government.   Reclaiming the sovereign right of governments to create and regulate money would be a great place to start.  That means absorbing the privately owned Federal Reserve System into the US Treasury while simultaneously overhauling that government agency.  The US Treasury and all banking operations should be totally transparent to the people and to government oversight and responsibility.  Money could even be created at state government or regional economic levels.

However, the purpose of this paper is primarily to warn people that they are being confused, divided, and conquered.  All predators operate this way.  However the predators we are dealing with are also parasites.  Parasites often end up killing their hosts, and that is happening here.  Wall Street financiers and bankers are not part of the “real economy” of our nation.  Only people who make or create things actually produce real wealth.  Bankers and financiers create “phantom wealth” or paper wealth that always sooner or later bubbles to far and then bursts.   You are being told that your government is your enemy, and all we need do is “take down” the government, and put another, better one in its place and viola!…everything will then be peachy-keen.

If you’ve bought into this lie you’ve been had by the propaganda machine, and need to separate yourself from the Matrix.  You are cheering on Senator Palpatine!  Is that your desire?  Star Wars the movie showed us how entire planets or even systems of planets can be deceived into falling into the dark side.  Yet that is what we are in danger of doing.

Let me repeat.  Government is the only agency that even remotely represents the people of the USA.  It is big money, unregulated power, and nearly unlimited accumulations of wealth that has co-opted your government, and corrupted much of it over to the dark side.

You are being convinced that President Obama has been co-opted, and must be defeated, but I suggest that is the propaganda the dark side wants you to believe in order to bring down all that stands in their way.  They are painting Hitler hair and mustaches on signs of the president.  They are smearing and lying about him and the government and I see these tactics working.  Don’t allow it to happen.  Criticize Obama or his administration all you want.  Honest criticism is the duty of a patriot.  Just make sure you don’t destroy our representative government along with the criticism.

The Money-powers are doing their best to shift the blame fro the economic collapse away from themselves, where it rightfully belongs, to the newly arrived Obama administration.  We wrote about this happening way before Obama was elected, or even got the party nomination.  We foresaw it years and decades ago.  I wrote of this happening when Reagan was bring his supply-side “Voodoo Economics” and de-regulation policies 30 years ago.  De-regulation in general and the repeal of Glass-Steagal in particular allowed the derivatives games and credit default swaps that causes the giant losses that brought down the financial system.  And the unwinding is just beginning.  There is no recovery in process, except that which is being bought on Wall Street with your taxpayer bail-out dollars.  Many more waves are coming over many more years, even under the most far-sighted management of our economy.

But real money reforms along with government reforms could work miracles in a few short years.  But heed my warnings.  Economists, bankers and their accountants and lawyers must not be allowed to direct these financial and government reforms.  That is the fatal mistake I see in our immediate future.  It is once again putting the foxes in charge of the henhouse.  The wolves must not be allowed to guard the sheep!


  • The money powers who are building the new economic world order have hijacked the legitimate calls for real financial and government reforms, and are calling themselves “Tea-Baggers” among other progressive-sounding or patriotic names.
  • Blame for the economic collapse lies squarely with Wall Street and the international cabal of bankers: the IMF, BIS and World Bank, along with all major central banks owned by private stockholders.
  • Those criminals who have perpetuated the largest crimes in history are desperately trying to shift the blame to “government” – all governments.
  • First they corrupt the government to profit from that corruption, then they pass the blame off on the government they bribed and corrupted.  We must find ways to separate the elections process from the money powers.
  • We must also find ways to reduce the obscene disparities in wealth and resources, and better compensate labor for its contributions to the aggregate wealth of the planet.
  • We must not allow rage and anger to destroy hundreds or even thousands of years of the progression of civilization.  We must find ways to extend representative government to more citizens without destroying what we have achieved.
  • We must keep our would-be masters and controllers from putting a “new face” on the evil that has been done over years, decades and centuries by the Moneychangers and financiers.  The scapegoat they are trying to use now is President Obama.
  • Follow the money.  Ask, who benefits?  Find out where the money is coming from and where it is going.  We must find ways to break up monopolies and trusts that are “too big to fail”.  Too big to fail is too big to exist.
  • We have think beyond old stereotypes for our economies if they are to work for everyone.  We may need to rethink the public/private divide and have communities assume ownership of natural monopolies.  We have to find new ways to make monopolies accountable to the people.
  • We must never underestimate the lure of unlimited and unregulated power.  That really is the lure of the “dark side” from which our forefathers wished to protect us.  They left the back door of economic and money power open to the usurpers and usurers.
  • The only safe repository of power is with the people in the aggregate, and in just and reasonable laws – legislation.

Personally I think it would be a good idea to call a constitutional convention every 40 or 50 years, or even more, if it could be done with just representation.  Just representation is the key to it all.  I may post this and then follow up with footnotes and references where needed.  70 years of living research went into this paper.  It is freely given for your best use.

Jere L Hough



The Fed is NOT the Government! Wall Street Financiers, NY FED, International Central Bankers are to Blame.

Bailout Boil-over

Anger, confusion, outrage, misinformation, disinformation, cover-ups, responsibility avoidance, finger-pointing, political posturing, buck passing, ignorance and outright lies – that is what I’m hearing in all the hoop-la over AIG bonuses.

It’s all a dog and pony show, and the real culprits go unnoticed and the main issues are not even being discussed.

After listening all week and all day today to the angry comments about the AIG retainment bonuses, I’ve just about abandoned all hope of saving our republic. There is just too much ignorance about the real causes of the financial meltdown. There has been a corporate feeding frenzy at the public taxpayer trough since the S&L collapse of 1989, and the Enron scandal and throughout the last several decades. It has grown into a Frankenstein Monster in the past decade, but it has taken far too long for the public to become outraged over the criminal excesses coming from Washington and Wall Street. What we are now seeing is the drama over whether the tail is wagging the dog, and which one is Wall Street and which one is Washington, and our real government.

The vast majority of the news MSM TV commentators apparently know little more about the way the Federal Reserve runs the country than the average citizen. Even more appalling is the sad fact that our senators and congressmen seem so ignorant of the nebulous relationship between the Fed and the Government. Reporters are using the terms “Fed” and “government” interchangeably, and this continues to obscure or hide the fact that the “Federal Reserve” is not part of the federal government. The name is deliberately deceptive to give that impression, when the reality is that it a private for profit banking corporation. It is independent of the federal government, even though there is supposed to be some congressional oversight.

Everybody is outraged about the hundreds of millions in bonuses AIG contracted to the key traders in its Financial Services division. What people should be outraged over is the larger issue of who made the decisions to bail out AIG in the first place. It was the Fed’s sole decision, unilaterally, with no approval or oversight from congress to give the first 80 Billion to keep the company from defaulting on its credit default swaps, the worst and riskiest kind of derivatives.

Too Big to Fail? Or Too big to Exist?

Most of that money went out to other counterparties like Goldman Sachs, JP Morgan, Bank of American and so on, all the “too big to fail” financial institutions. IMO, too big to fail is too big to exist. We should have anti-trust and anti-monopoly laws to protect the American people from the kind of financial rape that is now occurring. And financial rape is exactly what it is, and I am not just talking about just $160 million in bonuses. That is just the tip of the iceberg. The entire financial bailout package was a criminal enterprise designed to rape the US taxpayer out of $Trillions. Not that it hadn’t already been going on for 80 years, but the crooks apparently just decided compound interest on the US Dollars they loan to the US was too slow, so they went for the goose what was laying the golden eggs.

It starts with the Federal Reserve Act of 1913, and the handing over of America’s sovereign right to create and manage our nation’s currency to the Federal Reserve System, and all private banks that indulge in the practice of fractional reserve banking. The details are too complex to cover here. See my website for further information.      NEXT:           Here’s what is wrong with our system:   Continue reading

Web Of Debt Introduction

Introductory comments by Jere L Hough

For those who want to fully understand our world’s current financial predicament, the real look at “just how deep the rabbit hole goes”, I have found no other written work as thorough, plain spoken, and balanced as the book, Web of Debt, by Ellen H Brown.

For several years I had been planning to write a book exposing the Federal Reserve System, and the “international central banking syndicate” in ways that the common person with a high school education could easily understand. Finding and reading this literary triumph was both a great reward as well as a disappointment. I realized that I could do no better at explaining this difficult subject of money-creation and control than Ellen Brown had done in the book I was reading. My efforts have shifted now to trying to alert as many people as possible to what is really happening to our world’s economic systems, and why.

Let there be no doubt that those who control the economic systems and therefore, the money that is the life-blood of those systems, are more powerful than transient political leaders of the moment. Those who can collapse a nation’s economy with a nod of the head are more powerful than any president or prime minister, or congress or court. Only an awakened and informed citizenry can retake the power of economic sovereignty that has been taken from them by shrewd, wicked, greedy and deceptive international financiers who are now engaged in a dance of death for power and control over you, your family and future, and everything else we hold valuable and dear.

We can no longer afford to ignore these grave storm warnings of the approaching “perfect storm”. It is no longer coming.  It is here.  Financial and monetary reform can wait no longer.  Ellen H Brown’s peerless book, Web of Debt is the yellow brick road that could take us home.  It’s time we were on our way.    – Jere L Hough, 2009-02-25

Web of Debt
Ellen H Brown


President Andrew Jackson called the banking cartel a “hydra-headed monster eating the flesh of the common man.” New York Mayor John Hylan, writing in the 1920s, called it a “giant octopus” that “seizes in its long and powerful tentacles our executive officers, our legislative bodies, our schools, our courts, our newspapers, and every agency created for the public protection.” The debt spider has devoured farms, homes and whole countries that have become trapped in its web. In a February 2005 article called “The Death of Banking,” financial commentator Hans Schicht wrote:

Continue reading

The Hidden Truth About Money

Hi. Thanks for stopping in. I’m Jere L Hough.  Welcome to my new blog.

My current passion is money and economic reform. I hope to help others make the same paradigm shifts in thinking I’ve gone through since I’ve figured out that money really is the “root of all evil”, and why that proverb is more true today than ever before.

Of course the proverb says “The love of money is the root of all evil”, which needs further clarification. What is not addressed, and what I discovered, is that it is the mechanics of money creation and distribution that are currently at the root causes of our worldwide economic and monetary problems.

In other words the fatal flaws are systemic, and have been so ingrained and institutionalized within our culture and civilization that the corrective surgery could be as fatal as the disease, to use a medical metaphor.

This is not generally well-received news, if it is received at all. Most people that hear it immediately disengage, or turn on their processes of denial. If for not other reason, they just don’t want to think about the complexities of money and economics.

Who could blame them after 300 years of deliberate and massive efforts to abscure the subject of economics, and make it seem totally impenetrable to all but the Greenspans, Bernakes, Volkers, Rubins, Paulsons, Rockefellers, Morgans, Rothchilds, and other financial Gurus of modern times, dating from the era of Adam Smith?

In fact, few people who began reading this will still be reading this far. The eyes glaze over, and the 20 or 30 second attention span possessed by most people is already gone. But there are great rewards for those who stick with us for just a while longer.

You see, economics is not the layer upon layer of impenetrable mystery you have been led to believe by the various competing and confusing schools of economics, or economic thought. John Kenneth Galbraith got it right when he said, “The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it (p15). The process by which banks create money is so simple that the mind is repelled.” – John Kenneth Galbraith, Money: Whence it came, where it went – 1975, p29.

Whoa. What did he say? The banks create money? Haven’t you always thought that the government did that? And why would complexity be deliberately used to “disguise or evade the truth” about money? Why would economists want to “disguise or evade the truth”? What process of money-creation would repel the mind? Who benefits from all this intrigue, evasion and deception? Who profits? Who gains? Who loses?

We are going to answer those questions right here, and in a way that any motivated Middle School student could understand within a few hours of guided study. Let the experts figure out the problems of money and economics you say? Do you really think that is going to happen? It hasn’t happened yet, and it is unlikely to happen, because those with huge vested interests in keeping things as they now are will not let it happen.

Yet the USA, and the rest of the world, is caught up in a vortex or whirlpool of downward spiraling prosperity and economic well-being. Poverty is rising worldwide, and even in the wealthiest nations. Mass denial about the seriousness and causation of the economic crisis exists everywhere. People think that if they don’t think about it, it will just go away. People think that it is just a natural self-correcting economic cycle.

But people are generally wrong, and will tragically pay dearly for their denial, and their refusal to take corrective steps or actions.

Coming up! Answers to: “What did he [John Kenneth Galbraith] say? The banks create money? Haven’t you always thought that the government did that? And why would complexity be deliberately used to “disguise or evade the truth” about money? Why would economists want to “disguise or evade the truth”? What process of money-creation would repel the mind? Who benefits from all this intrigue, evasion and deception? Who profits? Who gains? Who loses?”

Stay tuned.



Jere L Hough

The first thing we must do to fix the economic crisis is to correctly perceive the nature and gravity of the problem. This might seem obvious at first blush, yet it is not widely or generally known exactly what has caused the financial meltdown. The few of us who actually understand the causes of the problem are dismayed and disheartened at the lack of comprehension that is nearly universally displayed, even by the supposedly best economic thinkers of our world, including Nobel Prize winners, and the Heads of Economics Departments at the best universities in the world.

Financial Bailouts and economic stimulus packages will not work, except as a most short-term band-aid. Such short-sighted proposals only highlight the failure to comprehend the true nature of the problem.

Only a few of the hundreds or thousands of prominent books and articles proposed as solutions even come close to apprehending the real underlying cause of the world’s financial and monetary disease, and for the most part the ones that are revealing the truth are unpopular, banned or blacklisted by mainstream media and publishers, widely debunked and ridiculed.

What is this widely scorned truth of the basic cause of our money and financial problems? Continue reading

What Caused our Economic Meltdown?

What Caused our Economic Meltdown?
Jere L Hough

I have been in the process of composing articles like this one for many years. This analysis is one of hindsight, and it is 20-20. But I have been writing of the now unfolding economic collapse for decades, and especially since GWB was elected in 2000. What is happening in our world was fully predictable to even ordinary citizens (such as myself) who had time or the will to access the hard facts and look at them truthfully.

This article has my full endorsement, as far as it goes. However, it doesn’t go nearly far enough to get at the roots of the causes of our economic collapse and all the impending chaos that it will trigger like a chain of falling dominoes. The roots of the problem are so deep that almost no one can find them. They are so ingrained in our current cultural and economic paradigms that they appear ludicrous to the unlearned and PhD alike – even Economics PhDs. Please read the article first, and then see my postscript for the deeper root causes and the true solutions. – Jere L Hough

Once and For All…

Dr. James Glenn

“There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises

Like most Americans I’ve been watching the dramatic, and often titillating, finger pointing exchanges between Wall Street,Congress, the media, and the candidates with a combination of glee, dismay, disgust, and jaw dropping incredulity. Mostly incredulity, because few of these people, pundits, politicians, or patricians has gotten the story right about our recent financial apocalypse. Let me set the record straight, once and for all.

The right likes to blame the mess on “Big Government” (surprise), and ‘The Community Reinvestment Act” passed in 1977 which outlawed “redlining” by consumer banks (cherry picking loan customers), and dictated that they must “serve” all of their market when it came to home loans, not just the most lucrative segments. In other words, they had to provide home loans to marginal customers if they could pass the underwriting guidelines. They also heap blame, not entirely meritless, on Fannie Mae, and Freddie Mac, government sponsored entities (GSEs) which were responsible for providing sub prime loans to many of the now bankrupt subprime mortgage market. The critical point missed by these people is that it was investment banks on Wall Street and Wall Street Bankers and a corrupt irresponsible Fed responsible for the meltdown, not consumer banks, sub prime borrowers, or Fannie and Freddie. Limbaugh, Hannity, and their ilk love to demonize the left with sound bites for simpletons, this latest financial debacle being but another perfect example of their taking extremely complex issues like this latest meltdown and its causes, and disgorging simplistic, vacuous, incoherent, and incorrect ruminations to their rabid listeners.

The right has part of this story right however. It was Ronald Reagan’s “big government” of the 80s, which ran up the first trillions in our now 11 trillion dollar debt, which set the ball rolling on our current meltdown. Reagans “deregulation” and “privatization” mantra, aided and abetted by that banking shill, Alan Greenspan, who he appointed as chief fed head, that “deregulated” the S&Ls, which lead to the property bubble of the late 80s, a housing collapse, and the recession of 90-91. This cost the taxpayer approximately 500 billion. Sound familiar? Greenspan just last week, under glaring Congressional testimony, admitted that his long held beliefs regarding deregulation, and banks, and Wall Street being able to “police” themselves, had “proven to be “incorrect.” His “model” of the world was erroneous he says. Thank you Sir Alan for the scintillating confession. A day late and two trillion dollars short. Thus the grubby grasping at “deregulation” by those self serving miscreants in the 80s, as a panacea for everything from the common cold, to world war, set the stage for what was to follow.

On the heels of “deregulation” of the S&Ls came “securitization” in the 90s, which banks and brokerages dreamed up to shift investment risk from themselves to “investors”. Securitization you see allowed banks to “bundle” asset classes for resale. One of the most lucrative of these “asset classes” was mortgages, which could now be taken off the banks balance sheets and sold to investors. This effectively absolved the banks of any responsibility in performing their traditional job, i.e., underwriting good loans by correctly assessing credit risk. Banks balance sheets were freed up, and their reserves replenished so they could “turn” their inventory (mortgages) virtually as fast as they could be written. They no longer kept the mortgage so who cared about credit risk? They just wanted their 1-2% origination fee that came with each loan. Profits soared. Add deregulation, and securitization, to a somnambulant, laizzez faire Fed, the evisceration under Bush of the regulatory and rating agencies, and a rapacious Wall Street, and we had the makings of a tremendously explosive financial meltdown cocktail.

The real coup de gras came in the 90s with the creation of exotic and mostly unregulated financial instruments called “derivatives” which allowed Wall Street to take an asset, like a mortgage, and “leverage” it many, many times over (30-60:1), ostensibly for “risk management” but just as often for pure speculation. Warren Buffet recently called these derivatives “weapons of financial mass destruction” and many, myself included, have been warning about the unregulated, opaque, and greed infested waters in which they trade as a financial disaster waiting to happen for many years.

What cemented our current disaster was the repeal of the Glass-Steagall Act in 1999, passed in 1933 to prevent the cronyism, corruption, and greed of the 20s, brought to you by the same cast of characters as today, from ever happening again. Glass-Sreagall for over 65 years had stood as an effective bulwark against the baser instincts of bankers, brokers, and politicians, essentially preventing banks from buying brokerages, and both of those from buying insurance companies. It strictly forbade co mingling of funds, clients, and personnel between banks, brokerages, and insurance companies because this is what had led to the meltdown in the 20s, and the Great Depression. With the passage of Graham-Leach-Blyly in 1999, the sponsor of whom recently called us all “a nation of whiners”, and said the recession was “imaginary, and all in our heads”, the last remaining semblance of any economic restraint in financial services disappeared with a flourish of the pen. Investment banks could now own consumer banks, insurance companies, mortgage companies, appraisal companies etc. Imagine the possibilities! For cronyism, conflicts of interest, rampant speculation, and unbridled malfeasance! We got it all, not necessarily in that order, and in less than ten years, the same bankers, brokers, and politicians had us dangling from a knife edge, staring into the financial abyss, staring down the barrel of another Great Depression. Amazing isn’t it? How people, and history never change?

Credit default swaps, originating from insurance companies like AIG in the late 90s, and investment banks on Wall Street like Lehman Brothers, were the real icing on the cake however. These instruments were issued to insure against bond defaults. Sounds simple right? Pay us a premium of X, and we’ll insure your bond issue for Y. If the issue went bad, the originators had recourse against AIG to collect on the losses from the issue. These CDSs (Credit Default Swaps) were used extensively at the height of the housing bubble by nervous mortgage originators worried about the solvency of the underlying mortgage pools they were creating (I wonder why), packaging, and reselling to pension funds, insurance companies, bond funds and individual investors worldwide. The collateralized mortgage obligations (CMOs), GNMAs, FNMAs all represented securitized mortgages. Many of these mortgages were of the sub prime variety.

Problem was, the people insuring these mortgage pools were not using realistic pricing models to evaluate the real intrinsic risk in the new asset (mortgage pool). Surprise, surprise. Their models were using totally unrealistic default rates of 3-4% (marked to myth) because it was more profitable (required fewer reserves) when in actuality, nearly anyone with a cerebral cortex knew the default rates on these CDSs would be much, much, higher. More like 25-30%. And of course, it turns out that the rating agencies were in bed with the purveyors of this trash, giving these bonds highly inflated, and undeserved ratings.

When the housing bubble burst and the asset underlying these derivatives and credit default swaps went south, all hell broke loose of course. The inevitable happened as it always does. The leverage of 30-60:1 started working against the hedge funds, brokers, and banks that had been buying these derivatives. Leverage of 60:1 (possible with the eradication of Gas-Steagall and a complicit Fed) against you is not pretty, as we’ve seen in the last 3 months. The value of these instruments plummeted, forcing these players to raise cash. This required selling all other asset classes from gold to stocks, creating a cascade in the financial markets, an “unwinding” of leverage the likes of which no one has ever seen.

Owners of mortgage backed securities, likewise, demanded restitution from those that had “insured” them against default, AIG and Lehman in this example. AIG was on the hook for anywhere from 40-unknown billions due to their massive issuance of CDSs in the last ten years. It had been a massive revenue generator, but was now about to bury the company. In addition, if AIG did not honor its commitments to pay, many of which were to our major creditors, Japan, China, Korea, and the EU, they would not only never lend us another dime, but a “domino effect” could ensue in which AIGs counter parties went belly up, causing their counter parties to go belly up, creating a symbiotic implosion heard around the world. Oh, and by the way, ending capitalism as we know it. Maybe not such a bad thing. So here we were.

Deregulation=S&L debacle (80s) + Securitization (90s)= financial bubbles in bonds/stocks=bust/tech wreck of 2000 = Derivatives + Credit Default Swaps (2000s)= Housing Bubble Extraordinaire= Bust + Depression. Clear?

Or, if you prefer:

Deregulation – Securitization – Glas-Steagal Repeal–Derivatives – Credit Default Swaps–Financial Armageddon

This is the daisy chain that leads us to today. This financial “unwinding” as CNBC likes to put it, prompted Paulson, who ran Goldman Sachs for years, and is now head of our Treasury unbelievably, to ironically, run red faced, and panting, to that “Big Government” the right loves to demonize so much for a 750 billion “bailout” just a few short weeks ago. Talk about Socialism! A government owned banking and insurance sector??? Why the rush to pump the taxpayer you rightly ask? Kind of reminiscent of Bushes’ “war resolution” just before midterm elections, or ramming the Patriot Act through Congress, isn’t it?

Paulson has intimate ties to AIG through his days at Goldman, which would also be bailed out by the by, and AIG begged him (or paid him) to get them off the hook. Without a handout, they’d go under and the western world as we know it would cease to exist they pleaded. I’m sure this was the scenario. Their dutiful errand boy then runs to Congress and using extortion and threats (falling financial markets and possible martial law) to force Congress to pony up. A little more sophisticated than a protection racket run by the mob, but not by much. So the thugs get their money, select investment banks (Goldman) and banks (Bank of America and 7 others) get bailouts, while others like Lehman Brothers are allowed to go under. Why Lehman you ask?

Because Lehman was a major competitor to Goldman of course, and this was the perfect opportunity to let them be swallowed up by the cess pit of banking history, and free up more business for Goldman and Morgan, the two go to boys for the Federal Reserve. That is, Morgan and Goldman are the two major purveyors of government bonds, and it is they whom “open market operations” of the Fed are choreographed. Couldn’t have the major purveyors of the bankrupt governments worthless paper going out of business, could we? That wouldn’t instill much “con”fidence in what has come to the biggest con game of all, selling government paper.

So friends, as McCain would say, there you have it. PLEASE get your facts straight before showing off your ignorance. It was unbridled, unregulated, and fraudulent use of derivatives and credit default swaps, by Wall Street, and a corrupt Federal Reserve, which led to this fiasco. Not “big government”, not mortgages made to poor people (they never could have been made if the Fed had been doing its job), not Fannie and Freddie, and certainly not the Community Reinvestment Act. This tripe, drivel and vacuous nonsense peddled by the likes of Hannity would be laughable, if our economy were not at stake. These are the same charlatans calling anyone who disagrees with the bald faced lying, corruption, irresponsibility, and disgraceful and unlawful shenanigans of the last eight years, Marxists and Communists. It would be laughable if it weren’t so tiresome, ugly, and untrue. Some people just have no self respect, or shame, it seems.

Good night friends.

Dr. James Glenn

October 31, 2008

End Glenn Article – Begin The Rest of the Story” by Jere L Hough.

I applaud this article, especially the point that this is not a left/right, liberal/conservative or Democrat/Republican issue. Nor is it an exercise in placing the blame just to make the “other guy” look bad. The only valid reason for fixing blame is in order to come up with the right solution. It also does little good and much possible harm to blame persons for systemic problems, unless the systemic flaws are also addressed.

Dr. Glenn is accurate on every point he covers. He just doesn’t cover nearly enough.

He sums it up in a very helpful way:

“Deregulation=S&L debacle (80s) + Securitization (90s)= financial bubbles in bonds/stocks=bust/tech wreck of 2000 = Derivatives + Credit Default Swaps (2000s)= Housing Bubble Extraordinaire= Bust + Depression. Clear?

Or, if you prefer:

Deregulation – Securitization – Glas-Steagal Repeal–Derivatives – Credit Default Swaps–Financial Armageddon”

To his list of causation I could add another dozen or two of antecedents, going back to the wars, panics, booms and busts, and The Great Depression of the 20th Century, and all the way back to the US Constitution itself, and the Supreme Court decisions from that time to today.

I will leave out the details and get to the last layer of the onion.

MONEY – The Founding Fathers of our nation did not understand or properly define the nature of money, where it should come from, how it should come into being, how its value should be regulated, and by whom it should be created and regulated. At least they could reach no consensus on money. Jefferson, Franklin, Madison, and Paine had some advanced ideas on the subject, especially Franklin. This inability to reach a consensus that was written into our constitution has led to an imbalance of political and economic power that was not foreseen by the FFs, or they would have provided checks and balances to issues of economic and monetary power and policy, as they tried doing with other powers and functions of federal government.

The largest and most essential of these neglected constitutional issues are whether or not money should be publicly or privately created and controlled and how “money” is defined.

Definition: Money is a medium of exchange. It can be any medium, as long as it is nearly universally accepted within a given economy, and it accepted in payment of government taxes and fees. Money can be metal coins, paper, commodities, checks, accounting entries (debits & credits) on paper or electronically, debit or credit card transactions, and so on. The purpose of money is to enable transactions of land, resources, products, labor and services (real wealth).

The US Constitution does give clear authority to congress to coin (create) money and set its value. (Article 1, Section 8)

The creation of money in any and all its forms should be a sovereign right and responsibility. In a democracy or republic the “citizen” is the ultimate sovereign, and only cedes certain sovereign rights to government in a “social contract” – matters of maintaining civil order, defense, safety of person, home, business, trade and commerce, education, public health, sanitation, water, utilities and infrastructure such as roads, bridges, schools and media centers. All other sovereign rights not “ceded” to governments are to be retained by “the people”. This includes the right to use one’s labor and creativity to work as he chooses and to profit from his labors or their fruits, the end products.

In order to profit from the fruits of one’s labors one must sell or market them. So trade, commerce and markets are essential rights, as is the right to barter, exchange, or use a common medium of exchange to assist in realizing the fruits of one’s labor. That means having access to money to use to grease the wheels of trade. So the creation of money should be a sovereign right that can be delegated upward to be useful to more people and wider markets. Money should be under public supervision. Money should not be privately created and loaned into circulation as it is today, under our unconstitutional Federal Reserve System.

Money creation should be a public enterprise, according to formula including population and trade per capita, and other considerations.

The point is that the usurious system of money-creation and regulation we have today is broken, and banker and corporate elites with heavily vested interests want to keep us from fixing it, or even discovering the true causes of its failure. Banking and money creation as it is structured today is nothing but a grand Ponzi Scheme – the granddaddy of them all – huge enough to funnel the world’s wealth up the pyramid to those at the very top – while giving those in the middle the illusion of prosperity until the growth at the bottom stops, as it always must.

Unless the power to create interest-free money is reclaimed by the public (our government) there is no hope of avoiding an escalating and widening Apocalypse. The derivates and credit default swaps are just the looters and plunderer’s “new game strategies” for grabbing all they can before it all unwinds, or collapses – same thing.

Collapse will mean world financial and political reorganization, with new global money and new economic systems. ( [i] ) In many or most places it will mean martial (military) law, curfews, banning of private or public discussions and meetings, gasoline or food rationing, and possibly the economically or militarily forced enslavement of populations – for their own protection, of course. Their lands and resources may be “appropriated” in a number of ways, lease, purchase, or outright theft – annexation. It won’t be a pretty scenario.

The solution is to create viable alternative public money systems. On the US National level the window has probably closed for the ideal solution – placing the Fed and FRS under public control – even with the election of “pro-change” Barack Obama as US President and a more liberal democratic congressional majority. But there are other levels of government that could implement their own currencies, credits, or bookkeeping systems that could allow local commerce to continue.

It is my view that the US Constitution preserves the rights of people to a fair and just medium of exchange (money) with which to advance commerce and trade in private and public transactions. Furthermore, the background discussions, papers and letters of the framers show they would have been in agreement with this just principle of fair, debt-free money.

In today’s world and with our current technology, only the cost of maintaining an office with a half-dozen staff, fail-safe accounting system and printing press should suffice to keep track of most commerce of a decent-sized town. Merchants and customers could pay a small transaction fee far less than today’s ATM charges to keep the system going.

It remains to be seen how such local, county or state money or debit systems will be viewed by national and global government and monetary authorities. However, it is probably a survival paradigm to experiment with alternative systems of monetary exchange. It will certainly be better than barter.


(i) This will probably mean returning to some kind of money at least partially backed by gold, silver or other precious metals, gems or commodities. Or it could be pure fiat, backed by nothing but the “full faith and credit” of that issuing government or corporate authority. It really matters little to a society what the so-called “backing” is. What matters is who issues it, public or private – and whether or not those who “create it” charge interest, and use a “fractional reserve” basis for loaning (creating) money. The best and most stable money is debt-free money that can be spent into circulation by communities, towns, cities, states or nations for the public welfare. Private money creation by making fractional reserve loans is immoral, unethical and should be illegal. It is a “Ponzi Scheme”, pure and simple, only on a scale for too large for most people to ever comprehend or imagine possible.