The Ultimate Struggle: Big Banking Vs Gov’t of the People

The Ultimate Struggle:  Big Banking & Business, Vs Gov’t of the People.

Ready or not, its coming.

The ultimate human struggle on the material level of this planet will be between the people and the banks.  Put another way, it will be between a bottom-up democracy and some form of top-down despotic control, financial or otherwise.

Throughout mankind’s history some form of force or power has been used for the strong, violent and ruthless to dominate or control the meek, peaceful or virtuous.  Control of land, resources and forced labor have been common methods down through time.  Direct force or military power as a primary means of controlling the populace has now been largely replaced by the rule of law.  However, the laws themselves can be instruments of domination and control when written in ways that serve those who hold and wield power, even subtle forms of power.  Media power is one key to control public opinion.  Educational power is another key means of control.  Religious power is one of the subtlest forms of control over the masses.  Economic power is another.  The power of money in a capitalist society cannot be disputed.  One generally needs it for shelter, food and the other most basic necessities of life.

It is the power of money that has escaped from democratic control.  And it is the power of money that is growing exponentially stronger every day.  It may already be too late to contain or control it, without triggering an apocalypse.  That remains to be seen.  Many conventional scenarios are still possible, and although most of them are ugly, there remain a few innovative civilized and peaceful resolutions.

The scenario I’d most like to see is the peaceful grassroots populous clamor for money and banking legislation.  If we had fair and unbiased mainstream news and information media it might be possible.  However we don’t.  The banks, or the corporations they own or control own nearly all the media.  So they speak with a similar corporate voice and purpose, and it is not usually the voice of the people.  The end result is that what we hear from the MSM is spin and propaganda all slanted toward the corporate bankers profit perspective.

To make matters worse, the power of the financial institutions is such that they can stop the flow of money in most nations almost at the snap of their fingers, and can restart it just as quickly.  They control the flow of credit as well, even credit our US government needs in order to conduct its business or pay its bills.  “How can this be?” you might well ask.  Isn’t our government sovereign?  Can’t sovereign governments just issue their own money sufficient to meet their economic needs?  Well, yes and no is the clear answer – yes they should be, but in fact are not.  So maybe the answer isn’t so clear.  Maybe the situation has been deliberately confused  and hidden from our plain sight.  Unless you already know this strange story, (and very few do) let me just say there are a few videos and books that will explain the whole sordid story to anyone who will take the time to watch or read them. [i]

This current worldwide economic meltdown is just the first visible tip of the coming battle between the people and the banks.  We are going to have to either accept a future of economic servitude for our people, or our people are going to take back our government, and our financial sovereignty.  Financial and monetary sovereignty ultimate resides with the voting citizen in a democracy.

So, can we the people win this struggle for economic and financial independence?  Can we establish a real political democracy that is based on economic democracy?  It’s going to be tough. Here is a brief explanation why.  [Continue reading by using link]

Continue reading

Is There No Way Out?

Is There No Way Out?

Who would have thought it possible?   How did we come to this place? Can our republic be saved without destroying capitalism?  Are we going bankrupt?  Is our financial system sound?  Why are trillions in assets evaporating?  Do our leaders know what they are doing?  What is happening?  Who can you believe?  Who can you trust?  How bad are things going to get?

I surf blogs and forums quite a bit, and everywhere I go people are angry and confused over the economy. Now, after the Obama Democratic administration has been in office for 6 weeks it is getting much worse. It is as if President Obama’s critics feel as if 6 weeks is enough time for him to have totally fixed every imaginable problem, not only in America, but in the entire world. In many quarters it is much worse. We hear Obama being blamed for everything that is wrong with the world economy. Seriously. It’s all his fault, according to the right wing media blitz. I hear talk of rebellions and revolutions from both the extremes on the right and the left. He’s not unwinding the wars in Afghanistan and Iraq fast enough. He’s not vetoing earmarks on legislation. He’s not closing Gitmo fast enough. He hasn’t done this or that and yada-yada, blah-blah, ad infinitum.

I’m having trouble believing what I’m reading, and when I read it again, it hasn’t changed. It’s still crazy. It’s nuts. It’s Alice in Wonderland. It’s The Matrix. Sadly, I realize that this is precisely why our civilization is falling apart, and our economy is collapsing like the house of cards it really is. Maybe what we are holding on to is just one big insane asylum! No one seems to have a clue about reality anymore. Well, perhaps “no one” is a bit hyperbolic, but “darned few” is a very realistic assessment. Few very are willing to take the “red pill”, step out of the Matrix, and see “how deep the rabbit hole goes”.

The Democrats have no answers, with the possible exception of Kucinich. The Republicans have no answers, although Ron Paul has a few clues about the problems. In other words we are in serious, if not apocalyptic, trouble.

Here are some questions I picked out of a few minutes surfing one forum today, along with my comments. But these questions are all over the place, everywhere, and the kinds of answers to them I’m seeing offers little hope of a good solution, to put it mildly.

Is there no way out?

Well, YES, there is, but NOT until a critical mass of people see it. and understand it. Until then, the way will be closed. I will show you the way out. I will explain it very carefully. But will you listen? Will you hear it? I doubt it. You have too many cherished myths and urban legends in the way. You have bought into a system of pleasing fables that you would rather keep than see the truth. You see, knowing the truth means you must act on it, and that means making changes you are uncomfortable with, and its scary, and your myths and legends are safer, and the truth makes your head hurt, and you get dizzy thinking about it… and … and … and …. and …

Who would have thought it possible?

I would, for one, and have been writing and saying so for many decades. So have many others. The ancient prophets foretold of these days. John the Revelator warned us about them, as did Jesus. If you really want answers, go to those who have seen this coming and are not selling something.

How did we come to this place?

Ignorance, in a word. Poor information and education. Deception. Trickery. Misdirection. Smoke and mirrors. Selfishness. Greed. Lust for power and privilege. Failing to place controls and limits on power, especially financial power. The last is really the key. Our founding fathers knew a lot, but they were fuzzy on money and economic issues, and did not provide ways to limit financial power as they did with the other checks and balances. Jefferson predicted it. So did Madison, Franklin, Adams, Paine, Monroe, Jackson, Van Buren, Lincoln, Garfield, Wilson, FDR, and countless others of note. We have not been listening, or heeding their strong warnings.

We came here through ignorance of the power of money, and its potentials for abuse and corruption when not properly handled, controlled and regulated for the benefit of the people as a whole. This is not what you have been taught, but it is the truth.

Can our republic be saved without destroying capitalism?

The “wrongness” of this question illuminates the problem, and even shows us “how we got here”.

What is your conception of “our republic”? Are “we” only interested in saving “our” republic? What about the rest of the world? Don’t others and “their republics” count?

Maybe we first have to think about how to save others before we can see how to save ourselves. But then, that is silly, isn’t it? We all have to look out for number one, and let others take care of themselves as best they can, right? Like Cain, we are still avoiding the answer to the question, “Where is your brother?”, with, “Am I my brother’s keeper?” We still need to figure that one out.

Another revealing issue is the question: What is in “our republic” that is worth saving? And why the concern with preserving “capitalism” from destruction? Is “capitalism”, as it is practiced now, so precious? Is our current form of “capitalism” sacred? If so, why is it collapsing? Why have trillions of taxpayer dollars had to go to keep banks that are “too big to fail” from failing? Is it smart to wish to preserve such a rotten and corrupt financial system? Forget “smart”; is it even sane?

What do you really mean by these terms? Do you know what “capitalism” is, or how many variations of it exists, or has existed? Have you considered that the particular version of it we now have could be the cause of problem, and that it probably should be altered or destroyed and replaced with something better? Do you know the difference between financial capitalism and monopoly capitalism? Or between these and laissez-faire capitalism? Do you even know what “capital” really means? The point is that these terms have changed in meaning, and sometimes in very “Orwellian” ways.

You see unless and until each of us can honestly and accurately answer those questions there really is “no way out”. We will not find the exit and the fire will consume the theater audience, stage, and actors. Many of the producers will also be killed or injured.

On the other hand, once you do answer them that way the “way out” becomes clear. Even better, the fire hoses are revealed. Safety can be had for all. The theater and all that are left in it can be saved.

You see, you can’t fix something unless you know what it is that is broken. And right now few people are even asking the right questions, let alone finding the true answers.

Philosophers and historians have written more volumes on these words, and what they mean, than one could read in a lifetime, or even several. I’ve read many of them, and my all writings try to condense and simplify the essential knowledge that must be gained by both individuals and civilizations, and then “lived into wisdom”. Like a parent watching a beloved child headed into the seduction of drugs, easy money, and fast women (or men) and knowing it will end badly, with much loss, pain and suffering, those of us who have survived our mistakes and learned our lessons must see our warnings ignored, and our experience disdained.

While I am writing longer books on these issues that may or may not ever see publication, I post blurbs like this around the Internet, hoping to touch a few souls who may then reach a few others. So the remaining message will be brief, and those who wish to learn more will have some direction to other resources.

All our major world problems, from poverty to wars, including our current economic crisis, is at its base a spiritual crisis. Unless the spiritual confusion and darkness are resolved to a sufficient degree, the material aspects of its manifestation cannot be fully addressed or long resolved. By “spiritual” I am in not way referring to church or temple membership or attendance, wearing crosses, crescents or stars, or subscribing to creeds and dogmas that some men or women have substituted for the real thing. That “real thing” is an inner sense of being spiritually connected to the universe – to our common Creator from whence all creatures and worlds originate, and to Whom we will all someday return – IF that is our choice. This is an inner, unseen but very real sense of connectedness that can eventually be experienced by the individual. Once that happens no further proof or demonstration is needed.

That is not the answer you were looking for, perhaps, but it is nevertheless true. You are seeking the more immediate and secular answer. And so you will have it.

Would you like a one-word answer? Power. Two words? Monopoly Power. Three words? Unchecked Monopoly Power. Four? Unlimited, Unchecked Monopoly Power. Another good word is Totalitarianism, as in the economic variety.

Here are some sign posts to point “the way out.  But can you really handle the truth they contain?

http://www.webofdebt.com

http://webofdebt.wordpress.com

http://www.monetary.org

http://www.informationclearinghouse.info/article18205.htm

as well as this site.

From much past experience, I doubt that many people will look at the information presented in those links. However, they do show us “the way out” that was the subject of this post.

I am not suggesting that people stop preparing for worst-case scenarios. On the contrary, without a change in course, we are headed straight over the cliffs and into the abyss, just as so many people are beginning to fear. But without knowing what caused the problem it is impossible to know what to fix, or rebuild something better when the status quo self-destructs.

First, ask the right questions:

Who has the real power over others? Who really controls things? Who really calls the shots? What really constitutes power? What role does wealth and money play in the distribution of power? What is wealth? What is money? How has the ownership of wealth and money evolved down through time? What is different today? What kind of government do we really have? Who controls our government? Are the checks and balances between branches of government working? Are the checks and balances between individuals, families, neighborhoods, communities, towns, cities, states, and nations working as they should? How should nations align themselves continentally or internationally? What is “sovereignty”? Who has “sovereignty”? How is sovereignty distributed now? How should it be distributed? Does it flow from the top down, as in the “divine rights of kings”? Or does it flow from the bottom up, as in a democracy? What role do laws play? Are laws created or changed from the bottom up or the top down? Is everyone subject to the law, or are some entities or corporations above the law? What role do agreements, contracts, charters, and constitutions play?

A daunting list of questions and issues to be sure, but some understanding all of them is necessary to understanding today’s economic crisis, and why it will only grow progressively worse until the system itself it changed. The body of mankind has a life-threatening cancer, and unless it is surgically removed or otherwise treated, it will consume and kill the host. As is a real individual cancer, early detection and treatment is essential to the patient’s survival. It is not at all clear now that the host, our global economic body, can be saved at this point. Nor is it clear to what degree our national economic bodies can be saved. Iceland’s has already collapsed, as did Argentina’s, Russia’s, Spain’s, and a growing list of other nations and states.
What of the USA?

Ask the above question about our nation, and then get honest answers to them. My website will help, as might the other resources I’ve listed.

The bottom line is that we have a thoroughly corrupt private (NOT government or public) monetary system, and money (currency, electronic credits and debits, etc.) is the cancer we must root out and cure or replace with a more democratic form of currency that benefits the public rather than private bankers, as is now the case. Ben Franklin and Abraham Lincoln showed us the way out.

Our wisest forefathers foresaw this day.

Jefferson, Madison, Franklin, Adams, Paine, Monroe, Jackson, Van Buren, Lincoln, Thomas Edison, Henry Ford, and untold others warned us about the money monopoly, the money power, the money trust, the eventual usurping of government of, by and for the people with that of, by and for the monopoly corporations.

There was a reason President James Madison said:

“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.”

Or Andrew Jackson’s address to Congress 1829:

“You [central bankers] are a den of vipers and thieves and I intend to rout you out, and by the eternal God, I will rout you out. If Congress has the right to issue paper money, it was given them to be used by themselves, and not to be delegated to individuals or corporations…”

Or Jefferson:

“I believe that banking institutions are more dangerous to our liberties than standing armies.” – Thomas Jefferson.

Or Lincoln:

“The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers….. The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power. “ – Lincoln Abraham Senate document 23, Page 91. 1865

These are but a few of hundreds of such statements that are on record warning us about the unlimited power of private money and the money-changers.  We must address and correct certain fundamental flaws in ways we conduct our financial and economic affairs.  Power corrupts, and power must be kept in some system of checks and balances so that it cannot become “absolutely corrupted”.  We must rethink our systems of checks and balances on financial power, because that can be more damaging to our world than runaway nuclear power.  We really are facing a financial Chernobyl on a scale geometrically larger than that disaster.

I especially recommend two books that tell the truth about money, and how its abuse has gained control over our lives and governments. They are The lost Science of Money, by Stephen Zarlenga, and Web of Debt, by Ellen H Brown. Other links and sources can be found throughout this my blogsite, http://WealthMoney.wordpress.com

Let me leave you with one thought.  There has been an onslaught of criticism of the Obama Administration, from not only the extreme right, but from fiscal conservatives and from the left.  I am mindful and sympathetic to many of those criticisms, especially those that he is appointing the wrong people, and is allowing too many of the former (Bush) administration policies in place.

What so many people fail to recognize is the degree to which ANY president, or even any congressperson, is locked in the grip of those money-masters and power-masters who are actiually running our nation (USA) and all but the most remote reaches of our world.

He can only make so many changes.  He is one lone mortal man who must have allies around him.  He must cooperate with the powers that be, even while he might be working to change them.  Remember that the mainstream media and money powers are all against reforms and changes that may limit their profits and power.

Make your criticisms positive ones, helpful and constructive ones. Don’t just blame.  Suggest workable alternatives.  The operative word here is “workable”, as opposed to fanciful.

Never before in our history can unthinking, hastily spoken words do more harm to the status of mankind.  We are on the brink of either terrible disasters or unimaginable progress.  The forces of light and darkness are demanking that we choose sides.  Selfishness and greed are always aligned with darkness.  Cooperation and kindness are always aligned with the light.

We must either wake up and grow up very quickly, or perish as a people and a civilization.  The time is now.  The choice is ours.  Choose wisely and well.

WHAT MUST WE DO TO FIX OUR ECONOMIC CRISIS?

WHAT MUST WE DO TO FIX OUR ECONOMIC CRISIS?

Jere L Hough
2008-01-18

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

Open Letter to President-Elect Barrack Obama

Open Letter to President-Elect Barrack Obama
by Jere L Hough
2009-01-06

Dear Barack Obama:

Congratulations. Your election brings the “audacity of hope” for real and meaningful change in these dark economic times. I have always wondered if you fully comprehend the nature and gravity of the economic problems facing our nation, and the world, and if, indeed, whether any human being is capable of offering the leadership and inspiration to effect the depth and breadth of the needed changes in our critically ill economy and financial system. There are a few people – very few indeed – who really understand what is wrong with our banking and financial system, and how to actually fix the problems at the level of causation.

I have agonized over how to best get this message out to those who can influence policy and bring about needed fundamental and substantive, rather than cosmetic, change.

Let me digress for a moment. After growing up in the last “Great Depression”and WW II, I became aware during my military service and my college years that the great sounding slogans of the Post-WW I era, the League of Nations, the FDR New Deal, the wars “to make the world safe for democracy” and the post WW II promise of world peace brought by the United Nations, were all just so much empty rhetoric, canned for public consumption.

Nothing of any real consequence changed. All of the human problems of poverty, hunger, disease, warfare, genocides, and man’s brutality and exploitation of his fellow human brothers and sisters has continued to grow, even as some enjoyed unprecedented wealth, technology, and luxury. Surface levels of prosperity for the privileged few hid most of these problems from public view in America.

The gap between the “haves” and “have-nots” of the world is increasing exponentially, but why? This is the eternal question for which there are thousands of answers, all of which make little sense and will not work to actually address the problems at the fundamental levels. About 50 years ago I resolved to figure out the answers to that great and seemingly unsolvable question. The answers are not to be easily found in the halls of formal education, although a broad understanding of the Liberal Arts, Humanities, Social and Behavioral Sciences, and most especially, History are indispensable in laying the foundations for working though the “maze of deception” and misinformation that obscure the most important truths of our current social economic and cultural era, and how it is really controlled.

My journey of discovery resulted in a long string of “epiphanies”, each built upon the former. What I finally discovered, or came to realize, was shocking, disturbing, unnerving, and yet strangely hopeful. I found that there is one root problem and a key solution for it that has not yet been tried, or even seriously considered, much less widely discussed or debated. “The Powers That Be” want it that way, and so the real root problems and their solutions are inimical to the interests of TPTB.

I want to emphasize the “hopeful” aspect, because the solution to our greatest problem, the root cause of most other large-scale human problems, is unbelievably simple, easily achievable, and can be accomplished almost overnight, IF, and this is the big IF, the political and economic will to do so can be mustered, and the special interests that reap enormous unearned wealth from the current system can be overcome. And this will take massive education, informed leadership, elimination of centuries of conceptual error, and the adoption of an entirely new paradigm in our ways of thinking about one of the most basic institutions that shape our modern world: money.

The failure to understand the truest and highest concepts and definitions of money, and what is is, or should be, is leading to the series of unprecedented economic upheavals that have begun, and will continue to escalate in a downward economic spiral that can only end in total despotism or economic slavery for most of the world for untold generations to come.

This statement is not an exaggeration or hyperbole. It simply is a recognition of the universal laws that govern such things, and was a part of my learning process. I hope I can make it a part of yours, and with enough awakening, real change just might be possible in time to avert the worst of the cause-effect consequences that are now manifesting.

Money, or the love of it, is the root of all evil. As true as that proverb is, there is more to the story that that. The greater evil is the misunderstanding of money, what it is, where it comes from, and who controls it, or should control it. How is should be controlled is also crucial, as to volume and regulation of value. How money enters into circulation, or is withdrawn from circulation is also a major issue.

Continue reading

What Caused our Economic Meltdown?

What Caused our Economic Meltdown?
Jere L Hough
2008-11-22

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.

Endnotes:

(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.