President Obama: Nationalize the Fed and Create Our Own Money
by Doug Page / February 7th, 2009
We are all full of anxiety these days. How bad will the depression be? Will the bailout work? How will we (and our children and grandchildren) be able to pay for the massive bailout of the Banks and our massive public debt?
The new book, The Web of Debt, by Ellen Hodgson Brown, Stephen J. Zerlanga’s proposed American Monetary Act, and Paul Grignon’s 47 minute video Money and Debt present a persuasive case for the United States to exercise its sovereignty by creating its own currency, and for the nationalization of the Federal Reserve System. The fact that Wall Street banks are “too big to fail,” is a compelling reason, among many others, why they should be nationalized. These authors present interesting solutions for our current anxiety. They propose a way to abolish our Ponzi-like private banking system and to curb banker fraud.
Here are some shocking little-known facts from the sources here reviewed:
* The Federal Reserve Bank is a private institution owned and controlled by private banks. It is a private bank that enriches its private owners.
* The US Mint does not create our money. It creates about 3% of it in the form of dollar bills and coins. The rest is generated through computerized bookkeeping entries by the private banks.
* Banks do not make loans only from money they have on deposit… Through what is called “fractional reserve banking,” They loan well over ten times the amount they have on deposit. This is how our money is created. It is created out of thin air.
* All debt of the US, all corporate debt, and all individual debt are owed to private banks.
* All money is debt.
* Over 20% of our taxes are used just to pay the interest on our government debt
* Banks are no longer limited to loaning money to make their profit. The 1999 abolition of the Glass-Steagall Act allows them to gamble in the stock market, the commodity exchanges, the foreign currency exchanges, collateralized debt obligations, and to buy and sell other banks and businesses.
AN ILLUSTRATION OF THE WAY THE PRIVATE BANKING SYSTEM MAKES HUGE PROFITS OUT OF THIN AIR
Let’s use $10,000 as an example to understand the process.
The Federal Reserve Bank buys $10,000 of US debts called Treasury Bills from the US. Where does the Fed get the money? The Fed creates it out of thin air. This is the first bit of magic. This is authorized by the Federal Reserve Act of 1913, and is a questionable delegation by Congress of its own power to “coin money and regulate the value thereof. It is the ultimate in privatization. It is an authorization for the Fed and the banks to counterfeit actual hard money. Other federal laws make this counterfeit money legal tender for the payment of all debts and taxes.
The Fed then loans this $10,000 to a bank and requires the bank to pay the current federal funds rate as interest. This $10,000 becomes a “liability” of the bank, but the bank immediately loans this money to a borrower, but in double entry bookkeeping, this $10,000 loan becomes an “asset” of the bank from which the bank can make further loans. Here is where the second bit of magic occurs called “fractional reserve banking.” The reserve is not gold or any other hard asset. The “reserve” is debt.
The bank is permitted by the Fed to loan 90% (or more) of that $10,000 loan to make a second loan of $9,000 which also becomes an “asset” of the bank from which the bank can make a third loan of 90% or $8100 and continuing to a maximum of 10 times the first $10,000 or $100,000.
The bank “earns” interest on this magic $100,000 created out of thin air which is the source of the bank’s immense Ponzi-like profit. A bank can earn more profit by borrowing more from the Fed and loaning it. This explains why the banks are so eager to give us credit cards.
By federal law, this money created out of thin air is “legal tender” and must be accepted in the payment of debts and taxes. The backup security is not gold, but “the full faith and credit” of the United States.
All of this is made clear and understandable by the video “Money and Debt.”
WHAT IS WRONG WITH THIS PRIVATE PONZI-LIKE SYSTEM OF CREATING OUR MONEY?
* The power to create money is immense private power that exists parallel to our governmental power. This private power generates tremendous private wealth that is then used to control, dominate, and thwart our government and our right to govern ourselves.
* The power to create money gives the private banking system the power to control our money supply. By curtailing the money supply, the banks can cause a deflation. By increasing the money supply the banks can cause inflation. As we now see, they can also cause a depression.
* This private power is used solely to make a profit for the owners of the private banks. There is no public control. There is no enforceable obligation of the banks to serve the public interest or to meet public needs. We have allowed our entire existence to be dominated and controlled by those few individuals who control the banks that create our money.
* It makes short term profit making the dominant influence on all of us and negates 2200 years of the moral wisdom of our civilization: “When gold argues the cause, eloquence is impotent;” “One cannot love both God and Mammon;” “Money is the mother’s milk of politics;” “Follow the money.”
* More than 20% of our taxes is used to pay the interest owed to private bankers on the U.S. debt.
OUR GOVERNMENT SHOULD CREATE OUR MONEY
Professor Michael Hudson on January 30 in Counterpunch gave us a hint of what we could do:
“Bank credit is created freely. Governments could do the same. Indeed, this is what the U.S. Treasury did during America’s Civil War, when it issued greenback credit.”
There are many successful historical and current instances where sovereign governments have created their own currency.
King Henry I in England in 1100 A.D. created England’s money by simply dictating that England’s currency was to be solely wooden sticks called “tallies” with varying notches to indicate the denomination. The sticks were then split in half and one half was held by the King to prevent counterfeiting. The other half was used by his subjects to buy and sell goods. The King required all taxes to be paid with these sticks. This tally system financed the British Empire successfully for 700 years.
Prior to our Revolutionary War, Pennsylvania issued money for 50 years because England limited the supply of its money in the colonies. The King’s edict prohibiting the colonies from issuing their own money was a cause of that War.
The American colonies financed the Revolutionary War by issuing paper money.
During the Civil War the Northern Banks would loan President Lincoln money to finance the Civil War only at interest rates of 24-36%, so Lincoln caused the Congress to authorize the Secretary of the Treasury to issue Greenbacks, paper dollars that were U.S .legal tender. These Greenbacks successfully financed the Civil War and remained in circulation for decades thereafter.
Stephen J. Zerlenga has drafted a proposed American Monetary Act.
This proposed Act is very useful concrete example of how the U.S. would create its own money, how it would work, and the surprising array of public benefits that could be obtained.
The proposed Act begins with a finding:
(1) The Federal Reserve Act of 1913 effectively ceded the sovereign power to create Money delegated to Congress by the Constitution to the private financial industry.
(2) This cession of Constitutional power has resulted in a multitude of monetary and financial afflictions, including an uncontrollable national debt, excessive taxation of citizens, inflation of the currency, drastic increases in the cost of public infrastructure investments, excessive un- and under-employment, and erosion of the ability of Congress to exercise its Constitutional responsibilities to provide for the common defense and general welfare.
The Secretary of the Treasury, following targets established by a 9 member Monetary Authority appointed by the President with the advice and consent of the Senate, shall directly issue all money, called United States Money, the nominal unit being the U.S. Dollar. This money shall be legal tender, backed by the full faith and credit of the United States.
The Act stops the creation of money by private banks. Fractionalized Reserve Banking is prohibited and banks can loan only the United States Money they actually have on deposit.
The Federal Reserve System (but not the local banks) is nationalized as a Bureau within the U.S. Treasury.
The United States would no longer borrow money. The Secretary of the Treasury shall issue United States Money as needed in lieu of public borrowing.
All existing money shall be exchanged for United States Money.
U.S. Money can be loaned to local banks which can continue to loan United States Money but with maximum charges not to exceed 8%. Banks can loan only U.S. Money.
The U.S. shall pay off the principal and interest of the national debt as they came due with directly issued United States Money.
The U.S. would use directly issued United States Money to rebuild the nation’s infrastructure.
The United States could loan United States Money interest free to states and local governments.
It is contemplated that in the future United States Money would be issued to finance Universal Health Care and an Education Funding Program that would at least put the United States on par with other developed nations.
CONCLUSION
President Obama and his economic advisors can be encouraged by the fact that famous and influential economist Milton Friedman supports the idea of abolishing the Fed. For at least 300 years, the private banks have used their wealth and power to persuade governments to allow them exclusive control over money. They have relentlessly and vigorously battled every single effort of governments to create currency. The author Ellen Brown does not expressly claim that banks have resorted to actual assassination, but she does note the strange sudden deaths of many of the reformers such as President James Garfield who urged public creation of currency. The political power of Wall Street banks is currently illustrated by their ability promptly to get billions of dollars of bailout money with no serious debate. The banks due to their own greed and ineptitude are now near bankruptcy and collapse. They are more vulnerable now to nationalization than they ever have been. They have brought all of us to the brink of economic disaster. This is a strategic political time for the U.S. to create our money. The awesome political power of private banks driven by the quest for huge profits would be curbed. Public control of the money supply would unleash the government to meet our legitimate human needs as it has done in the past in our own history. If the private banks can create money out of thin air, there is no reason why the government could not do it. We would all escape our excessive debt and tax burdens due to the interest owed to private banks. If interest must be charged, let it go into the public treasury.
Tuesday, May 05, 2009
Sunday, April 26, 2009
THE FALL OF THE AMERICAN EMPIRE
THE FALL OF THE AMERICAN EMPIRE
The Connection between Torture, Wall Street Bank Profits and Our Descent into Poverty
We who are watching President Obama carefully observe that he has betrayed us. For unknown, hopefully innocent and unknowing reasons, he has chosen an economic policy based on a massive falsehood, and advisors who have enabled Wall Street Banks to earn rich profits in the short run based on that falsehood. Obama has committed $12.8 Trillion to bailing out crooked Wall Street Banks, fraudulent by the public admissions of their own CEOs, and attempting to make them whole, a ratio of 14 for Wall Street Bank crooks to 1 for our Main Street economy. Obama continues the idiotic policy through massive bailouts of Wall Street crooks by trying to restart the unregulated real estate bubble, specifically including unregulated derivatives, credit default swaps, and hedge funds.
Instead of hope and change from the policies of the Bush Administration that some of us expected, every single policy regarding the maintenance of an aggressive economic empire abroad has been retained or expanded. We are all concerned about the depression that now confronts us, our loss of jobs and our loss of our homes in foreclosure, and the loss of our old age security. We had somehow assumed that Obama would deal with that directly and effectively by taking steps to restore purchasing power. An obvious first thing we expected was that he would enlarge and lengthen unemployment benefits. This has not happened. President Obama has not clearly explained how his present bail out priorities will help us. He has announced no alternate strategy if the present strategy does not work. Our disillusion was capped off by an article in the Wall Street Journal on April 18, 2009 reporting that Obama was considering secret retention of the right of the CIA to torture. We get no explanation of this from the mainstream media, nothing from the Democratic Party and nothing from the Republican Party. Even Marxists seem unconcerned about Wall Street Banks. It is left to us citizens and voters to try to find answers to these perplexing questions from non-mainstream sources and from economists and analysts who are not beholden to Wall Street’s status quo. We thus have a massive job of self-education and education of friends and neighbors. As Professor Michael Hudson suggests, we might copy a small European nation where labor unions called a one day general strike for the purposes of educating citizens. In the United States, we may need a one week general strike, probably more than one.
Since so large a proportion of public money is devoted to crooked Wall Street Banks, and to the ;maintenance of the aggressive spread of American investment opportunities in foreign lands, it seems appropriate to examine the dynamics of the Wall Street Banking system.
THREE PRELIMINARY DEFINITIONS
By “Wall Street Banks,” we mean about 10 dominant leading international banks of the United States, Europe and Japan, the main ones being based in the United States, and the major firms that they lend money to in defense industries, manufacturing and industrial businesses, agri-business and transportation. The term includes the Federal Reserve System, the WTO and the IMF. We do not mean the local independent banks that serve us in our local communities.
By “capitalism” we mean the political-economic system in which the Wall Street Banks and the firms they finance including their control over the governments where they operate. Capitalists are thus those within the operating complex of Wall Street Banks who have access to the means of producing goods and services, and access to the Wall Street Bank loans to do so. We citizens and voters whether employed or self-employed are not “capitalists.” because we have control of and access to nothing but our own labor or brain power which we sell or rent to employers or clients, patients and customers. The car dealers, professionals and independent businesses in our local communities are not capitalists in the sense here used. We non-Wall Street citizens and voters have very different moral values, ethics and interests than Wall Street Banks.
By “the massive falsehood,” we mean the culture wide dominating falsehood promoted by Wall Street Banks and its politicians and advisors and, so far, accepted by President Obama. It is this lie:
“The economy can flourish indefinitely by increasing the supply of goods and services and loaning people money with which to buy them. It is never necessary to increase the wages and purchasing power of employees. Wages and salaries can be cut, jobs eliminated, and production transferred to low wage countries without harming our stable economy."
Current events now graphically demonstrate the falseness of this proposition as does simple logic. Imagine an economic system where all of the work is done by unpaid slaves. The slaves could buy nothing, having no earned income. So who is left to buy? Banks might loan slaves money with which to buy, but how would slaves repay the loans? That is now our plight. Wall Street Banks hate unions and hate high wages and salaries for employees. Wall Street Banks hate giving citizens more money and security. Our jobs were transferred overseas where workers earn too few pennies to buy much of anything. Too many of us are unemployed or employed only part time at a wage where we can not even buy enough food, much less support our huge, but very fragile economy.
THE PRIVATE FORTUNE BUILDING MACHINE: HOW THE FED AND PRIVATE BANKS CREATE MONEY OUT OF THIN AIR AND THEN PROFIT BY LENDING IT TO US
The Wall Street Banking System is private. It exists to make a profit for its investors and owners. Congress in the 1913 Federal Reserve Act granted a franchise to private banks to create money and to regulate interest rates. This franchise today is exclusive for all practical purposes since most money is “check book” money and not coins and dollar bills.
The Federal Reserve Board is not a public institution. Although the President selects the 12 board members for staggered terms, by law, they must be selected from a pool of private bankers. The Federal Reserve Bank and its 12 member branches are also private banks, owned by the member private banks. We have no accurate way of knowing the profits of this system because, by law, it may not be subjected to public audit.
The Federal Reserve Board creates money out of thin air, simply by writing a check, with no back up reserves or deposits and then allows a member bank to “create” 10 times more of that initial check book money. Our government backs this magic money as “legal tender” for the payment of all debts and taxes. For example, if a member bank has applications for loans, say $1000, the Fed simply writes a check for this money out of nothing and lends it to the member bank. Then a second bit of magic money making occurs: Each such loan by a member bank becomes an “asset” or a reserve so that the member bank can loan 90% of the first “asset” to a second borrower, and 90% of the second borrower to a third borrower and so on, to a maximum of $10,000 based on the initial $1000. This is called fractional reserve banking” It is a fabulous way to create a permanent and growing “critical mass” fortune due to the compounding of money loaned at interest over time. It is the hidden secret of private banking that has existed at least since Rothschild in the early 1800s. The banks charge us interest on money they create out of thin air. The private fortunes that this system generates over the decades are beyond belief. These private banking fortunes must have multiplied many times. The total private banking fortunes of Bank investors and heirs of investors must now be as large as the entire planet’s GNP. We have no way of knowing how much. This then is the operational underpinning of the private banking system. If we had known in time, we all should have started banks. Foreign banks and individuals, probably including Rothschild heirs, own stock in our private Wall Street Banks, but again we have no way of knowing how much. Because it generates so much money, it generates dominant power over our government. In fact it was this already existing private bank lobby money and power that “persuaded” congress to delegate its power to coin money and regulate the value thereof to private banks in 1913. Keep this secret, magic, profit generating system in mind as we examine how the private banks have used this power since 1913. Think also of the statement attributed to the legendary European banker Amschel Mayer Rothschild who allegedly said in 1838: "Permit me to issue and control the money of a nation, and I care not who makes its laws."
HOW THE WALL STREET BANKS HAVE COMPOUNDED THEIR POLITICAL POWER AND PROFITS FROM 1913 TO DATE.
Wall Street Banks have persistently striven to place themselves at the center of every human transaction so as to make money, and to expand their profit making opportunities and their power.
In 1944 the Wall Street Banks met at a ski resort in Bretton Woods, New Hampshire.Voters and citizens in the US were fighting WWII in the armed services, riveting airplanes, welding tanks and ships, and buying Victory Stamps arranged as corsages for their dates. Millions of ordinary citizens were putting out this massive effort to secure the Four Freedoms, Freedom from Fear, Freedom from Want, Freedom of Speech, and Freedom of Religion. The Wall Street Banks had a very different objective. They were meeting in Bretton Woods to plan how to maximize their profit and power following WWII. England, France, Germany and Japan were physically and financially devastated by WWII. The United States escaped WWII relatively unharmed. Wall Street Banks seized the opportunity to dominate. Wall Street Bankers hatched a plan to make the dollar backed by gold the dominant currency for the planet and to breach national barriers so as to foster dominant lending and investment opportunities throughout the world for Wall Street Banks. The dollar dominance created by Bretton Woods was backed by the US guarantee that it was “legal tender,” and the promise to pay in gold if demanded, the “gold standard.”
By 1971, The US debt and inflation due to the Viet Nam War caused Europeans to demand payment of debts in gold. This was exhausting our gold supply so President Nixon unilaterally abandoned the gold standard and adopted a “floating dollar standard” relative to other currencies. The US dollar dominance was strong enough by that time that the dollar remained the dominant currency of the planet, aided by a Treaty with Saudi Arabia that all oil it sold would be paid for with dollars.
After a time a domestic crisis occurred in the operation of this Wall Street Bank capitalism. There would be overproduction: more goods produced than earned wages could purchase, and still yield a profit. Wages stagnated. Wall Street Banks found insufficient profitable places to loan money. The Wall Street Banks quickly adapted using the IMF and the WTO which the private banks controlled. They exported their Wall Street Bank crisis to poor countries. They made large loans to foreign governments often to their Dictators, to “help them develop.” Wall Street Banks were not being charitable or benevolent. They imposed harsh conditions on these loans:
1. The borrowing country had to open its borders so that Wall Street Banks could invest in that country.
2. The country had to privatize many of its public works such as water works, abandon “socialism,” and adopt a market economy so that Wall Street Banks could purchase or invest in that country without restriction.
3. The country had to cut its social welfare programs (which had the intended effect of compelling workers to accept lower wages, or starve.)
4. Taxes had to be raised on the workers so that the IMF loans could be repaid.
This was the Wall Street Bank salvation formula that was imposed on the Soviet Union, Mexico, Brazil, Argentina, Chile, and Indonesia, among others.
By 1980, poor nations became unable to pay and Wall Street Banks were desperate to find still other ways to make profit. Wall Street Banks adopted the policy of “Financialization.” This meant that instead of trying to loan money for the production of goods and services that human beings needed, and could pay for, Wall Street Banks would buy and sell each other’s companies, invest in hedge funds or bets that a company or commodity would go up or down. The profits for Wall Street Banks were immense, much more than Wall Street Banks had ever made before. Wall Street Banks used its new money to persuade Congress to abolish the Glass-Steagall Act and to pass a law prohibiting regulation of these “securities.”
This new absence of regulation enabled Wall Street Banks to become crooks, to engage in fraud. Wall Street Banks made “liar loans,” risky loans that Wall Street Banks knew from decades of banking experience, the borrowers were unlikely to repay. Wall Street Banks begged local mortgage brokers to sell such liar loans to unqualified buyers of houses, urging them to falsify their income. These liar loans were made sometimes to unlearned first time home buyers and sometimes to speculative individuals who thought they saw a way to make money without working from the appreciation in house values.
Wall Street Banks then bundled these loans, and issued layer upon layer of bonds “secured” by these “liar loans.” Wall Street Banks then pressured the rating agencies like Moody’s to give these very risky bonds an AAA rating. Wall Street Banks then sold these bonds to state pension funds, wealthy foreign individuals, to foreign governments, and even to a tiny town in Northern Norway, all of whom justifiably relied on the AAA rating. The profits for Wall Street Banks created many new billionaires and millionaires. These Financial Assets grew to about 425% of U.S. Gross National Product The total fortunes now accumulated by the families invested in Wall Street Banks are probably enough to control the entire developed world.
It is these crooked fraudulent Wall Street Banks, stock holders and CEOs that Obama is now bailing out with a commitment of $12.8 Trillion of public money. Further than that, President Obama has retained as his main advisors the same persons and the same crooked fraudulent practices that created our current depression and difficulties.
THE WARS AGAINST TERROR, AIDED WHERE NECESSARY BY TORTURE AND ASSASSINATION, ARE CRITICALLY NECESSARY TO THE MAINTENANCE OF THE POWER OF THE WALL STREET BANKS.
Any person or group within a foreign country who actively opposes imperialistic Wall Street Bank looting or dollar domination is labeled a radical, a communist, a socialist, or more recently a terrorist. Terrorists are often loyal to their cause and to each other and will not talk when captured, so Wall Street Banks find it necessary to torture them so as to identify and capture other terrorists. This will not seem so strange or unusual to those who know that US employers, to protect their profits, have historically resorted to hired thugs, beatings, and murder of those employees who engaged in a work stoppage and union organizing. Employers did not see this as immoral or uncivilized. Such striking employees were “terrorists,” outlaws, hooligans, and radicals, so far as employers were concerned. Wall Street Banks apparently see those who oppose their policies abroad in the same way. According to Professor Michael Hudson, Wall Street Banks say in effect: If you oppose our dollar domination, we will kill you.” William Blum in his 1995 book, Killing Hope gave us the details of 55 foreign countries in which our military or CIA had been involved in killing operations after WWII up to 1995! (The “hope” that Wall Street Banks killed was the hope of the citizens of these countries for a better life.) Since 1995, we have the additional examples of Yugoslavia-Bosnia, Afghanistan, Iraq, and now Pakistan.
CRIMINALS HAVE CAPTURED OUR GOVERNMENT
We can make sense out of what is happening only by seeing Wall Street Banks for what they are: Criminals with far more power and capacity for evil than the mob or the mafia. These criminal Wall Street Banks, unlike the mafia, have control of our national government, with its larger military capacity than all of the other nations put together. These criminals have at their disposal, 800 military bases in 70 countries, the Army, Navy, Air Force and Marines, the CIA, most academic persons, the main stream press, and the support of the major religious faiths. They have the tools of modern advertising and PR to create diversionary fears, to create “false flag disasters,” and to manipulate our thoughts and our votes.
Wall Street Banks are now exercising their power over our government to restart the crooked bubble without regulation. Michael Hirsch in an April 10, 2009 Newsweek article entitled “Wall Street Digs In” writes:
“At issue is whether trading in credit default swaps and other derivatives - and the giant, too-big-to-fail firms that traded them - will be allowed to dominate the financial landscape again once the crisis passes. As things look now, that is likely to happen. And the firms may soon be recapitalized and have a lot more sway in Washington - all of it courtesy of their supporters in the Obama administration. With its Public-Private Investment Program set to bid up and buy toxic assets, the administration is handing these companies another giant federal subsidy. But this time the money will come through the back door, bypassing Congress, mainly via FDIC loans. No one is quite sure how the program will work yet, but it's very likely going to make a lot of the same Wall Street houses much richer at taxpayer expense. Meanwhile, the big banks that still need help will almost certainly get another large infusion once the stress tests are completed by the end of the month.
The financial industry isn't leaving anything to chance, however. One sign of a newly assertive Wall Street emerged recently when a bevy of bailed-out firms, including Citigroup, JPMorgan and Goldman Sachs, formed a new lobby calling itself the Coalition for Business Finance Reform. Its goal: to stand against heavy regulation of "over-the-counter" derivatives, in other words customized contracts that are traded off an exchange. Companies like these kinds of contracts, which are agreed to privately between firms, because they allow them to tailor a hedge perfectly against a firm-specific risk for a certain time period. But in order to preserve its right to negotiate these cheaper private contracts, Wall Street is apparently willing to argue for the same lack of public transparency and to permit the systemic risk that led to the crash.”
EVEN THOUGH THE CONGRESSIONAL OVERSIGHT COMMITTEE CANNOT FIND OUT WHAT IS GOING ON, WHAT CAN WE CITIZENS DEDUCE CONCERNING OUR OWN WELL-BEING?
Elizabeth Warren, the head of the Congressional Oversight Committee, tells us that she cannot get answers from Wall Street Banks about their strategy or what they have done with the bail out money they have already received. However it is clear from the evidence that Wall Street Banks are attempting to subject us ordinary citizens to the policies that they imposed on the poor nations of the world. We ordinary US citizens are destined to become like the citizens of “underdeveloped” nations. Wall Street Banks are trying to “kill our hope.”
• We have to accept “free trade” meaning the exporting of our jobs to foreign nations where labor is cheaper, unregulated capitalism, and police wiretap power over our thoughts and records.
• We have to endure privatization of our public works such as water works, freeways and prisons, abandon “socialism,” and avoid joining unions
• We have to accept cuts in our social welfare programs (which have the intended effect of compelling us to accept lower wages, or starve.)
• We have to pay higher taxes to repay the bail out debts, while the wealthy get tax cuts.
Wall Street Banks well know of the culture wide lie that they have propagated. They know that the jig is up, that our wages and salaries have been so depleted, and our borrowing so maxed out, that the system is about to fall. Lending us more money, will no longer work.
Professor Michael Hudson says that the crooked Wall Street Banks know that the debts now being incurred by us taxpaying citizens can never be repaid. They know that this will cause China and Saudi Arabia to stop buying our Bonds, Bonds that finance our wars and bases that encircle and threaten those countries like China, Japan, and Saudi Arabia who now buy our bonds. Wall Street Banks know that their own acts and policies will inevitably bring our political economy crashing down. As bankers, they well know that creating a lot of “check book” money (fiat currency) will cause massive inflation so that each of our dollars will buy less and less.
So the only conclusion that can be drawn is that the human owners of the Wall Street Banks are grabbing all of the Trillions of dollars that they possibly can, while they can. They will quickly convert their dollars to a stable foreign currency if there is one, to land, oil, gold, diamonds, plutonium, and commodities, and live in residential castles behind guarded gates. They will buy or obtain by foreclosure all available food producing land. Those of us that survive will be reduced to feudal serfs allowed to work a parcel of land for the economic nobles who own it, and to retain a small share of food, wool and cotton for ourselves. We will become share-croppers at best, and dead at worst.
SO HOW DOES OBAMA FIT INTO ALL OF THIS?
Is Obama the hypnotized, drugged, programmed puppet of Wall Street Banks?
Is Obama afflicted with the psychological disorder of two or more personalities, one magnificently promising us hope and change, and the other delivering starvation, serfdom, and death?
Is he simply innocently ignorant of the real dynamics of our political economy and respectful of his Harvard academic advisor like Lawrence Summers, University of California advisor Christina Romer and Wall Street Banker, Secretary Geithner who themselves have built their careers on the lie?
Does he have the ambition of the top law school graduates of rising to the top of the “legal pecking order” by serving the legal “needs” of the very largest private institutions?
Is he a very bright man who does know of the lie, but also knows the political limits, within which he can operate, and, somewhat like Lincoln, is waiting for Wall Street Banks to fall even further, become even more weak and bankrupt, before he can act on our behalf? If so there are neither plans on the shelf, nor knowledgeable persons to implement it.
We have no way of knowing what motivates Obama. How do you see him? What is your strategy given the circumstances? I am “beating pots and pans” as loudly as I can, and writing articles like this in my effort to arouse others to participate in massive protest marches whose objective is to make the politicians meet our needs. I invite you to do the same. As a fall back position, I am buying a small parcel of land with my remaining retirement dollars where I can grow food and keep a goat.
Dated: April 22, 2009
Doug Page
The Connection between Torture, Wall Street Bank Profits and Our Descent into Poverty
We who are watching President Obama carefully observe that he has betrayed us. For unknown, hopefully innocent and unknowing reasons, he has chosen an economic policy based on a massive falsehood, and advisors who have enabled Wall Street Banks to earn rich profits in the short run based on that falsehood. Obama has committed $12.8 Trillion to bailing out crooked Wall Street Banks, fraudulent by the public admissions of their own CEOs, and attempting to make them whole, a ratio of 14 for Wall Street Bank crooks to 1 for our Main Street economy. Obama continues the idiotic policy through massive bailouts of Wall Street crooks by trying to restart the unregulated real estate bubble, specifically including unregulated derivatives, credit default swaps, and hedge funds.
Instead of hope and change from the policies of the Bush Administration that some of us expected, every single policy regarding the maintenance of an aggressive economic empire abroad has been retained or expanded. We are all concerned about the depression that now confronts us, our loss of jobs and our loss of our homes in foreclosure, and the loss of our old age security. We had somehow assumed that Obama would deal with that directly and effectively by taking steps to restore purchasing power. An obvious first thing we expected was that he would enlarge and lengthen unemployment benefits. This has not happened. President Obama has not clearly explained how his present bail out priorities will help us. He has announced no alternate strategy if the present strategy does not work. Our disillusion was capped off by an article in the Wall Street Journal on April 18, 2009 reporting that Obama was considering secret retention of the right of the CIA to torture. We get no explanation of this from the mainstream media, nothing from the Democratic Party and nothing from the Republican Party. Even Marxists seem unconcerned about Wall Street Banks. It is left to us citizens and voters to try to find answers to these perplexing questions from non-mainstream sources and from economists and analysts who are not beholden to Wall Street’s status quo. We thus have a massive job of self-education and education of friends and neighbors. As Professor Michael Hudson suggests, we might copy a small European nation where labor unions called a one day general strike for the purposes of educating citizens. In the United States, we may need a one week general strike, probably more than one.
Since so large a proportion of public money is devoted to crooked Wall Street Banks, and to the ;maintenance of the aggressive spread of American investment opportunities in foreign lands, it seems appropriate to examine the dynamics of the Wall Street Banking system.
THREE PRELIMINARY DEFINITIONS
By “Wall Street Banks,” we mean about 10 dominant leading international banks of the United States, Europe and Japan, the main ones being based in the United States, and the major firms that they lend money to in defense industries, manufacturing and industrial businesses, agri-business and transportation. The term includes the Federal Reserve System, the WTO and the IMF. We do not mean the local independent banks that serve us in our local communities.
By “capitalism” we mean the political-economic system in which the Wall Street Banks and the firms they finance including their control over the governments where they operate. Capitalists are thus those within the operating complex of Wall Street Banks who have access to the means of producing goods and services, and access to the Wall Street Bank loans to do so. We citizens and voters whether employed or self-employed are not “capitalists.” because we have control of and access to nothing but our own labor or brain power which we sell or rent to employers or clients, patients and customers. The car dealers, professionals and independent businesses in our local communities are not capitalists in the sense here used. We non-Wall Street citizens and voters have very different moral values, ethics and interests than Wall Street Banks.
By “the massive falsehood,” we mean the culture wide dominating falsehood promoted by Wall Street Banks and its politicians and advisors and, so far, accepted by President Obama. It is this lie:
“The economy can flourish indefinitely by increasing the supply of goods and services and loaning people money with which to buy them. It is never necessary to increase the wages and purchasing power of employees. Wages and salaries can be cut, jobs eliminated, and production transferred to low wage countries without harming our stable economy."
Current events now graphically demonstrate the falseness of this proposition as does simple logic. Imagine an economic system where all of the work is done by unpaid slaves. The slaves could buy nothing, having no earned income. So who is left to buy? Banks might loan slaves money with which to buy, but how would slaves repay the loans? That is now our plight. Wall Street Banks hate unions and hate high wages and salaries for employees. Wall Street Banks hate giving citizens more money and security. Our jobs were transferred overseas where workers earn too few pennies to buy much of anything. Too many of us are unemployed or employed only part time at a wage where we can not even buy enough food, much less support our huge, but very fragile economy.
THE PRIVATE FORTUNE BUILDING MACHINE: HOW THE FED AND PRIVATE BANKS CREATE MONEY OUT OF THIN AIR AND THEN PROFIT BY LENDING IT TO US
The Wall Street Banking System is private. It exists to make a profit for its investors and owners. Congress in the 1913 Federal Reserve Act granted a franchise to private banks to create money and to regulate interest rates. This franchise today is exclusive for all practical purposes since most money is “check book” money and not coins and dollar bills.
The Federal Reserve Board is not a public institution. Although the President selects the 12 board members for staggered terms, by law, they must be selected from a pool of private bankers. The Federal Reserve Bank and its 12 member branches are also private banks, owned by the member private banks. We have no accurate way of knowing the profits of this system because, by law, it may not be subjected to public audit.
The Federal Reserve Board creates money out of thin air, simply by writing a check, with no back up reserves or deposits and then allows a member bank to “create” 10 times more of that initial check book money. Our government backs this magic money as “legal tender” for the payment of all debts and taxes. For example, if a member bank has applications for loans, say $1000, the Fed simply writes a check for this money out of nothing and lends it to the member bank. Then a second bit of magic money making occurs: Each such loan by a member bank becomes an “asset” or a reserve so that the member bank can loan 90% of the first “asset” to a second borrower, and 90% of the second borrower to a third borrower and so on, to a maximum of $10,000 based on the initial $1000. This is called fractional reserve banking” It is a fabulous way to create a permanent and growing “critical mass” fortune due to the compounding of money loaned at interest over time. It is the hidden secret of private banking that has existed at least since Rothschild in the early 1800s. The banks charge us interest on money they create out of thin air. The private fortunes that this system generates over the decades are beyond belief. These private banking fortunes must have multiplied many times. The total private banking fortunes of Bank investors and heirs of investors must now be as large as the entire planet’s GNP. We have no way of knowing how much. This then is the operational underpinning of the private banking system. If we had known in time, we all should have started banks. Foreign banks and individuals, probably including Rothschild heirs, own stock in our private Wall Street Banks, but again we have no way of knowing how much. Because it generates so much money, it generates dominant power over our government. In fact it was this already existing private bank lobby money and power that “persuaded” congress to delegate its power to coin money and regulate the value thereof to private banks in 1913. Keep this secret, magic, profit generating system in mind as we examine how the private banks have used this power since 1913. Think also of the statement attributed to the legendary European banker Amschel Mayer Rothschild who allegedly said in 1838: "Permit me to issue and control the money of a nation, and I care not who makes its laws."
HOW THE WALL STREET BANKS HAVE COMPOUNDED THEIR POLITICAL POWER AND PROFITS FROM 1913 TO DATE.
Wall Street Banks have persistently striven to place themselves at the center of every human transaction so as to make money, and to expand their profit making opportunities and their power.
In 1944 the Wall Street Banks met at a ski resort in Bretton Woods, New Hampshire.Voters and citizens in the US were fighting WWII in the armed services, riveting airplanes, welding tanks and ships, and buying Victory Stamps arranged as corsages for their dates. Millions of ordinary citizens were putting out this massive effort to secure the Four Freedoms, Freedom from Fear, Freedom from Want, Freedom of Speech, and Freedom of Religion. The Wall Street Banks had a very different objective. They were meeting in Bretton Woods to plan how to maximize their profit and power following WWII. England, France, Germany and Japan were physically and financially devastated by WWII. The United States escaped WWII relatively unharmed. Wall Street Banks seized the opportunity to dominate. Wall Street Bankers hatched a plan to make the dollar backed by gold the dominant currency for the planet and to breach national barriers so as to foster dominant lending and investment opportunities throughout the world for Wall Street Banks. The dollar dominance created by Bretton Woods was backed by the US guarantee that it was “legal tender,” and the promise to pay in gold if demanded, the “gold standard.”
By 1971, The US debt and inflation due to the Viet Nam War caused Europeans to demand payment of debts in gold. This was exhausting our gold supply so President Nixon unilaterally abandoned the gold standard and adopted a “floating dollar standard” relative to other currencies. The US dollar dominance was strong enough by that time that the dollar remained the dominant currency of the planet, aided by a Treaty with Saudi Arabia that all oil it sold would be paid for with dollars.
After a time a domestic crisis occurred in the operation of this Wall Street Bank capitalism. There would be overproduction: more goods produced than earned wages could purchase, and still yield a profit. Wages stagnated. Wall Street Banks found insufficient profitable places to loan money. The Wall Street Banks quickly adapted using the IMF and the WTO which the private banks controlled. They exported their Wall Street Bank crisis to poor countries. They made large loans to foreign governments often to their Dictators, to “help them develop.” Wall Street Banks were not being charitable or benevolent. They imposed harsh conditions on these loans:
1. The borrowing country had to open its borders so that Wall Street Banks could invest in that country.
2. The country had to privatize many of its public works such as water works, abandon “socialism,” and adopt a market economy so that Wall Street Banks could purchase or invest in that country without restriction.
3. The country had to cut its social welfare programs (which had the intended effect of compelling workers to accept lower wages, or starve.)
4. Taxes had to be raised on the workers so that the IMF loans could be repaid.
This was the Wall Street Bank salvation formula that was imposed on the Soviet Union, Mexico, Brazil, Argentina, Chile, and Indonesia, among others.
By 1980, poor nations became unable to pay and Wall Street Banks were desperate to find still other ways to make profit. Wall Street Banks adopted the policy of “Financialization.” This meant that instead of trying to loan money for the production of goods and services that human beings needed, and could pay for, Wall Street Banks would buy and sell each other’s companies, invest in hedge funds or bets that a company or commodity would go up or down. The profits for Wall Street Banks were immense, much more than Wall Street Banks had ever made before. Wall Street Banks used its new money to persuade Congress to abolish the Glass-Steagall Act and to pass a law prohibiting regulation of these “securities.”
This new absence of regulation enabled Wall Street Banks to become crooks, to engage in fraud. Wall Street Banks made “liar loans,” risky loans that Wall Street Banks knew from decades of banking experience, the borrowers were unlikely to repay. Wall Street Banks begged local mortgage brokers to sell such liar loans to unqualified buyers of houses, urging them to falsify their income. These liar loans were made sometimes to unlearned first time home buyers and sometimes to speculative individuals who thought they saw a way to make money without working from the appreciation in house values.
Wall Street Banks then bundled these loans, and issued layer upon layer of bonds “secured” by these “liar loans.” Wall Street Banks then pressured the rating agencies like Moody’s to give these very risky bonds an AAA rating. Wall Street Banks then sold these bonds to state pension funds, wealthy foreign individuals, to foreign governments, and even to a tiny town in Northern Norway, all of whom justifiably relied on the AAA rating. The profits for Wall Street Banks created many new billionaires and millionaires. These Financial Assets grew to about 425% of U.S. Gross National Product The total fortunes now accumulated by the families invested in Wall Street Banks are probably enough to control the entire developed world.
It is these crooked fraudulent Wall Street Banks, stock holders and CEOs that Obama is now bailing out with a commitment of $12.8 Trillion of public money. Further than that, President Obama has retained as his main advisors the same persons and the same crooked fraudulent practices that created our current depression and difficulties.
THE WARS AGAINST TERROR, AIDED WHERE NECESSARY BY TORTURE AND ASSASSINATION, ARE CRITICALLY NECESSARY TO THE MAINTENANCE OF THE POWER OF THE WALL STREET BANKS.
Any person or group within a foreign country who actively opposes imperialistic Wall Street Bank looting or dollar domination is labeled a radical, a communist, a socialist, or more recently a terrorist. Terrorists are often loyal to their cause and to each other and will not talk when captured, so Wall Street Banks find it necessary to torture them so as to identify and capture other terrorists. This will not seem so strange or unusual to those who know that US employers, to protect their profits, have historically resorted to hired thugs, beatings, and murder of those employees who engaged in a work stoppage and union organizing. Employers did not see this as immoral or uncivilized. Such striking employees were “terrorists,” outlaws, hooligans, and radicals, so far as employers were concerned. Wall Street Banks apparently see those who oppose their policies abroad in the same way. According to Professor Michael Hudson, Wall Street Banks say in effect: If you oppose our dollar domination, we will kill you.” William Blum in his 1995 book, Killing Hope gave us the details of 55 foreign countries in which our military or CIA had been involved in killing operations after WWII up to 1995! (The “hope” that Wall Street Banks killed was the hope of the citizens of these countries for a better life.) Since 1995, we have the additional examples of Yugoslavia-Bosnia, Afghanistan, Iraq, and now Pakistan.
CRIMINALS HAVE CAPTURED OUR GOVERNMENT
We can make sense out of what is happening only by seeing Wall Street Banks for what they are: Criminals with far more power and capacity for evil than the mob or the mafia. These criminal Wall Street Banks, unlike the mafia, have control of our national government, with its larger military capacity than all of the other nations put together. These criminals have at their disposal, 800 military bases in 70 countries, the Army, Navy, Air Force and Marines, the CIA, most academic persons, the main stream press, and the support of the major religious faiths. They have the tools of modern advertising and PR to create diversionary fears, to create “false flag disasters,” and to manipulate our thoughts and our votes.
Wall Street Banks are now exercising their power over our government to restart the crooked bubble without regulation. Michael Hirsch in an April 10, 2009 Newsweek article entitled “Wall Street Digs In” writes:
“At issue is whether trading in credit default swaps and other derivatives - and the giant, too-big-to-fail firms that traded them - will be allowed to dominate the financial landscape again once the crisis passes. As things look now, that is likely to happen. And the firms may soon be recapitalized and have a lot more sway in Washington - all of it courtesy of their supporters in the Obama administration. With its Public-Private Investment Program set to bid up and buy toxic assets, the administration is handing these companies another giant federal subsidy. But this time the money will come through the back door, bypassing Congress, mainly via FDIC loans. No one is quite sure how the program will work yet, but it's very likely going to make a lot of the same Wall Street houses much richer at taxpayer expense. Meanwhile, the big banks that still need help will almost certainly get another large infusion once the stress tests are completed by the end of the month.
The financial industry isn't leaving anything to chance, however. One sign of a newly assertive Wall Street emerged recently when a bevy of bailed-out firms, including Citigroup, JPMorgan and Goldman Sachs, formed a new lobby calling itself the Coalition for Business Finance Reform. Its goal: to stand against heavy regulation of "over-the-counter" derivatives, in other words customized contracts that are traded off an exchange. Companies like these kinds of contracts, which are agreed to privately between firms, because they allow them to tailor a hedge perfectly against a firm-specific risk for a certain time period. But in order to preserve its right to negotiate these cheaper private contracts, Wall Street is apparently willing to argue for the same lack of public transparency and to permit the systemic risk that led to the crash.”
EVEN THOUGH THE CONGRESSIONAL OVERSIGHT COMMITTEE CANNOT FIND OUT WHAT IS GOING ON, WHAT CAN WE CITIZENS DEDUCE CONCERNING OUR OWN WELL-BEING?
Elizabeth Warren, the head of the Congressional Oversight Committee, tells us that she cannot get answers from Wall Street Banks about their strategy or what they have done with the bail out money they have already received. However it is clear from the evidence that Wall Street Banks are attempting to subject us ordinary citizens to the policies that they imposed on the poor nations of the world. We ordinary US citizens are destined to become like the citizens of “underdeveloped” nations. Wall Street Banks are trying to “kill our hope.”
• We have to accept “free trade” meaning the exporting of our jobs to foreign nations where labor is cheaper, unregulated capitalism, and police wiretap power over our thoughts and records.
• We have to endure privatization of our public works such as water works, freeways and prisons, abandon “socialism,” and avoid joining unions
• We have to accept cuts in our social welfare programs (which have the intended effect of compelling us to accept lower wages, or starve.)
• We have to pay higher taxes to repay the bail out debts, while the wealthy get tax cuts.
Wall Street Banks well know of the culture wide lie that they have propagated. They know that the jig is up, that our wages and salaries have been so depleted, and our borrowing so maxed out, that the system is about to fall. Lending us more money, will no longer work.
Professor Michael Hudson says that the crooked Wall Street Banks know that the debts now being incurred by us taxpaying citizens can never be repaid. They know that this will cause China and Saudi Arabia to stop buying our Bonds, Bonds that finance our wars and bases that encircle and threaten those countries like China, Japan, and Saudi Arabia who now buy our bonds. Wall Street Banks know that their own acts and policies will inevitably bring our political economy crashing down. As bankers, they well know that creating a lot of “check book” money (fiat currency) will cause massive inflation so that each of our dollars will buy less and less.
So the only conclusion that can be drawn is that the human owners of the Wall Street Banks are grabbing all of the Trillions of dollars that they possibly can, while they can. They will quickly convert their dollars to a stable foreign currency if there is one, to land, oil, gold, diamonds, plutonium, and commodities, and live in residential castles behind guarded gates. They will buy or obtain by foreclosure all available food producing land. Those of us that survive will be reduced to feudal serfs allowed to work a parcel of land for the economic nobles who own it, and to retain a small share of food, wool and cotton for ourselves. We will become share-croppers at best, and dead at worst.
SO HOW DOES OBAMA FIT INTO ALL OF THIS?
Is Obama the hypnotized, drugged, programmed puppet of Wall Street Banks?
Is Obama afflicted with the psychological disorder of two or more personalities, one magnificently promising us hope and change, and the other delivering starvation, serfdom, and death?
Is he simply innocently ignorant of the real dynamics of our political economy and respectful of his Harvard academic advisor like Lawrence Summers, University of California advisor Christina Romer and Wall Street Banker, Secretary Geithner who themselves have built their careers on the lie?
Does he have the ambition of the top law school graduates of rising to the top of the “legal pecking order” by serving the legal “needs” of the very largest private institutions?
Is he a very bright man who does know of the lie, but also knows the political limits, within which he can operate, and, somewhat like Lincoln, is waiting for Wall Street Banks to fall even further, become even more weak and bankrupt, before he can act on our behalf? If so there are neither plans on the shelf, nor knowledgeable persons to implement it.
We have no way of knowing what motivates Obama. How do you see him? What is your strategy given the circumstances? I am “beating pots and pans” as loudly as I can, and writing articles like this in my effort to arouse others to participate in massive protest marches whose objective is to make the politicians meet our needs. I invite you to do the same. As a fall back position, I am buying a small parcel of land with my remaining retirement dollars where I can grow food and keep a goat.
Dated: April 22, 2009
Doug Page
Saturday, April 25, 2009
IS OBAMA MORE DANGEROUS THAN BUSH?
IS OBAMA EVEN MORE DANGEROUS THAN BUSH?
INTRODUCTION
69 Million of us voted for President Obama because he promised hope and change from the disasters of the Bush Administration. Countless millions of human beings around the planet joined us in our relief and our elation when he was elected. An unthinking uncritical “Obamamania” among most of his supporters continues to prevail so far. This is dangerous for them, for President Obama and for all of us. Without critical analysis and pressure from his millions of fans, Obama will stumble into disaster.
We have carefully watched the new President’s first 100 days and we are appalled. We find that Obama has continued Bush policies affecting the abuses of Wall Street banks, and allowing Wall Street wrongdoers to manage our economy and the “recovery.”
Forget the impeachment of Bush and Cheney, the prosecution of Eliot Spitzer for his sexual indiscretion, and Bernard Madoff’s little Ponzi-scheme. What about prosecuting those bankers who profited from the most massive fraudulent swindle in human history?
Reputable commentators such as Michael Whitney, John Paul Roberts, Professor Michael Hudson, and now Professor William K. Black have spelled out the details. The CNBC TV Documentary “House of Cards” explained in detail with surprisingly candid on camera, guilt free admissions by the wrong-doers how this swindle worked from the borrowers and mortgage salesmen in Los Angeles to the top CEOs of Wall Street and to the Fed. These sources of our information have been relatively diplomatic in tone. It is time to name names and cite the fraudulent acts of those responsible, and the specific violations of law.
As we evaluate all of this, keep in mind what William K. Black said on Bill Moyer’s April 3 program about making risky loans where the ability of the borrower to repay a loan is not vetted: “We know that will produce enormous fraud under economic theory, criminology theory, and two thousand years of life experience.” Both Democrats and Republicans, hand in hand with Wall Street Bankers, by repealing the Glass-Steagall Act, and by enacting The Commodity Futures Modernization Act of 2000 specifically to preclude regulation, caused the current extraordinary depression and crisis by ignoring and acting contrary to this accumulated human wisdom. Think of this when you evaluate whether their acts were knowing and intentional and whether they are guilty or innocent.
THE INTENTIONAL FRAUD OF THE WALL STREET BANKERS AND RATING COMPANIES AND THEIR CONGESSIONAL ENABLERS
The legal elements or requirements of the crime or wrong of fraud known to every first year law student are:
1. An intentional misrepresentation of facts or a false promise
2. Knowledge of falsity
3. Intent to deceive
4. Justifiable and actual reliance on the truth of what was represented or promised
5. Resulting Damage
President Obama is a brilliant lawyer, top of his class at Harvard Law, and a ten year professor of Constitutional Law. His roots are in Chicago politics. President Obama clearly knows the elements of fraud.
We know the factual details of the wrongdoing from CNBC’s video “House of Cards” where those involved in the fraud at each level made surprisingly candid admissions of what they had done. At each level, the CEOs involved felt no guilt or responsibility. They would not have changed their conduct in retrospect. Each said he had to do what he did to stay in business and to compete with others who were doing the same thing. This was the “justification” at every level from LA mortgage salesperson, to the bankers, the creators of layers of derivatives and credit default swaps to the raters who gave the derivatives that they knew or should have known were not worth their stated values, AAA ratings. All of this was happening in the context of congressionally granted exemptions from regulation, and NY Fed President Timothy Geithner’s failure to supervise and to regulate.
The Wall Street bankers deliberately made and palmed off to others loans that they knew were really bad. They made them because they were so profitable. Among themselves, they called them “liar’s loans” because they did not care if borrowers were unqualified and they encouraged them to lie about their incomes. They created the layers of derivatives based on these pools of liar loans, knowing that they were extremely risky. They pressured the rating companies to give them AAA ratings, and the rating companies complied “because the competition was doing it” when they knew or should have known that the “securities” were really not of AAA quality.
Foreign investors, domestic pension fund managers, and foreign governments and banks justifiably relied on the Wall Street banker’s sales pitch and the AAA ratings. The AAA rating satisfies the obligation of “due diligence” in checking the risk of an investment. These innocent but sophisticated investors had a right to assume that NY Fed President Timothy Geithner was doing his duty of supervising and regulating.
All of these investors were damaged when the house of cards collapsed. The investors have been damaged. We the citizens and voters and generations of our offspring have suffered almost incalculable damage…damage totaling many trillions of dollars that will plague us for generations.
This is the massive Wall Street fraud that President Obama inherited, and is now covering up, and possibly attempting to restart.
PRESIDENT OBAMA IS NOT FAITHFULLY EXECUTING THE LAW REGARDING UNDERCAPITALIZED BANKS IN VIOLATION OF HIS OATH
President Obama now has the sworn Presidential duty to “take care that the laws be faithfully executed.” Thus he must “faithfully” prosecute financial wrongdoing, avoid conflicts of interest, and specifically, take certain prompt action against wrongdoing Wall Street banks as mandated by the Prompt Corrective Action Law that was enacted just following the savings and loan crisis of the 1980s. This law is found in Title 12 United States Code beginning at Section 1831. There is no exception in the law for “banks that are too big to fail,” and no exception for criminal enterprises even if they are large.
Instead of bailing out wrongdoing banks with Trillions of dollars of our money, President Obama is required by federal law to appoint a receiver for the bank within 90 days after it becomes critically undercapitalized. He must prosecute those bankers who were paid salaries or bonuses while their banks were undercapitalized. There is no question that they are undercapitalized because they require Trillions just to make them function, without complying with legal standards. If “they are too large to fail,” they have seized way too much private “mafia-like” power over all of us. President Obama can and must follow the law.
OBAMA’S CHOSEN FINANCIAL AND ECONOMIC ADVISORS KNOWINGLY DEREGULATED SO AS TO ENABLE THE FRAUD, AND THEN PARTICIPATED IN THE FRAUD AND PROFITED FROM IT
Obama’ Chief Economic Advisor, Larry Summers one of Clinton’s Secretaries of the Treasury, and Robert Rubin along with Republican Senator Phil Gramm lead the lobbying effort to repeal the Glass Steagall Act thereby enabling Wall Street Banks to invest in derivatives, hedge funds, and credit default swaps, and permitting Wall Street insurance companies to engage in banking.
Then the same three men, Summers, Rubin, and Gramm together with Alan Greenspan lead the effort to persuade Congress to pass a law in 2000 without debate in either the House or the Senate prohibiting the regulation of these newly enabled Wall Street financial giants. It is known as The Commodity Futures Modernization Act of 2000, and is found in Title 7 USC Section 2. The exemptions from regulation are found in Sections 2 (g) and 2(h). President Clinton signed the new law on December 21, 2000.
Obama’s Chief Economic Advisor Larry Summers and his Secretary of Treasury Timothy Geithner both pushed for the enactment of this law which enabled the ensuing fraud involving mortgages and the layers of derivatives that were known to be risky and worthless.
Secretary of Treasury Timothy Geithner, President of the New York division of the Fed where all of the major Wall Street banks are located had the following duties according to its own mission statement found at http://www.newyorkfed.org/aboutthefed/introtothefed.html:
“It is responsible for
• formulating and executing monetary policy,
• supervising and regulating depository institutions,
• providing an elastic currency,
• assisting the federal government's financing operations, and
• serving as the banker for the U.S. government.”
In addition to paying his own taxes, Timothy Geithner had a public responsibility and duty to all of us. Timothy Geithner, the man chiefly responsible for avoiding what has happened, instead facilitated the fraud. He did not supervise and he did not regulate. As Professor Black said to Bill Moyers, he, along with every one else involved in the fraud, ignored the FBI’s public 2004 warning that there was “an epidemic of mortgage fraud, that if it was allowed to continue it would produce a crisis at least as large as the Savings and Loan debacle.”
PRESIDENT OBAMA IS KNOWINGLY AND INTENTIONALLY REWARDING CRIMINALS AND IS COVERING UP WALL STREET BANK CRIMES AND FRAUD
It is a felony for any person including the President of the United States to cover up a crime. 18 USC Section 4 states:
“Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined under this title or imprisoned not more than three years, or both.”
Such a cover up is also criminal fraud as defined in 47USC 1001.
Such a cover up when done by a President, Vice President or a Secretary of Treasury is also a “high crime and misdemeanor” warranting impeachment under Article II, Section 4 of our Constitution:
“The president, vice president and all other civil officers of the United States shall be removed from office on impeachment for, and conviction of…high crimes and misdemeanors.”
President Obama has also taken the Presidential Oath that he will faithfully execute this cover up avoidance law as well, and not to violate it himself.
80% of the American people, according to a recent poll believe that Wall Street is crooked and is responsible for our current Depression.
Obama, in a recent speech to Wall Street CEOs telling them to “cool it” about justifying their contract rights to bonuses, said
“My administration is the only thing between you and the pitchforks.”
So what is he saying to the 80% of us potentially holding pitchforks who voted for him?
In effect, he is saying in his vague, charming, persuasive and hypnotic way: “I know of no crimes. I want to look to the future I will not prosecute the bankers. I will hire them as advisors. We have nothing to learn from their mistakes. We together will try to restore lending, and restart the economy as it was.”
What are President Obama’s own lawyers, Dawn Johnson Chief of the Office of Legal Counsel and Attorney General Eric Holder advising him? Are they, like John Yoo and Michael Mukasey who advised Bush that he could torture, advising Obama that he has the power to ignore the law created exactly for the purpose of dealing with failing banks because of an economic emergency? What is brilliant lawyer Obama advising himself? Where is there indication of Obama’s own integrity and inner moral compass?
WHAT ARE THE CONSEQUENCES FOR US IF OBAMA’S MUTI-TRILLION BAIL OUT OF WALL STREET “SUCCEEDS?”
The most immediate, pressing danger is that it will not work at all. Obama may not discover this until it is too late to try another solution. The reason is Obama seeks mainly to restore the lending ability of the Wall Street banks. That will work only if we are willing to fund our purchases by more borrowing. We are not. We will not borrow. We are too frightened. The great danger is of a total breakdown of civilized democratic society.
Even if it “works,” Obama’s plan will never succeed for us. The reasons are:
• Obama and his advisors see capitalism as a stable system that only got a little off track due to unfortunate lack of regulation. It is in fact in deep trouble even aside from the banking problem due to an overproduction of goods and services that can be produced at a profit. This is the underlying “systemic defect.” Failing to recognize this defect, Obama does nothing to solve it.
• Obama aims mainly toward providing more credit, restoring the Wall Street banks’ ability to lend money.
Obama fails to deal adequately with restoring the purchasing power of consumers from our earned labor. Taken together, Obama and Bernanke are committing $12.8 Trillion to bailing out Wall Street compared to only $900 Billion to stimulating the real economy, a ratio of 14 to 1.
The inevitable result for us will be a vast inflation of our dollars, so that each dollar buys less and less. We will be like frogs placed in slowly heating water. We will notice nothing at first. The “water” will heat slowly until it kills us. It may ultimately “succeed” for the wealthiest 1% in that they will own all of the land, gold, platinum, silver, and commodities and live in guarded gated castles. Those of us who survive will do so as feudal serfs who are permitted to share-crop their land. The result for Obama is that he will lose his bid for re-election in 2012 due to the massive despair and disillusionment of voters.
WHAT COULD OBAMA DO THAT WOULD WORK?
Although his window of opportunity is very short, if Obama changed course promptly before he has put us many trillions further in debt, there are sound, historically tested things he could do. They are bold. They involve a profound change in his analysis of our problem. He could:
• Cause our government to be the sole creator of our money supply, our silver coins, our dollar bills, and our “check book” money. Lincoln did this in 1860 to finance the Civil War. The state of Pennsylvania did this successfully for 50 years prior to 1789.
• Instead of borrowing from private banks and other governments, our government could create and issue money to meet government, business and individual needs, including rebuilding our infrastructure, education through college, and universal health coverage, and to pay our government’s obligations on existing bonds as they fell due.
• Prohibit “fractionalized reserve banking,” the practice of private bankers lending from 10 to 90 times the asset-reserves they hold. Allow banks only to loan on a 1 to 1 basis, from the dollars they have on deposit.
• Impose a top limit on interest that could be charged say 8%.
• Allow the Wall Street banks to go into bankruptcy, but retain enough of the needed staff employees to implement the new way of supplying money where needed.
• Repeal the Federal Reserve Act and install the needed functions of the Fed as a division of the Treasury Department.
• Enable local banks and businesses to continue to function as they now do.
Dated: April 7, 2009
Doug Page
INTRODUCTION
69 Million of us voted for President Obama because he promised hope and change from the disasters of the Bush Administration. Countless millions of human beings around the planet joined us in our relief and our elation when he was elected. An unthinking uncritical “Obamamania” among most of his supporters continues to prevail so far. This is dangerous for them, for President Obama and for all of us. Without critical analysis and pressure from his millions of fans, Obama will stumble into disaster.
We have carefully watched the new President’s first 100 days and we are appalled. We find that Obama has continued Bush policies affecting the abuses of Wall Street banks, and allowing Wall Street wrongdoers to manage our economy and the “recovery.”
Forget the impeachment of Bush and Cheney, the prosecution of Eliot Spitzer for his sexual indiscretion, and Bernard Madoff’s little Ponzi-scheme. What about prosecuting those bankers who profited from the most massive fraudulent swindle in human history?
Reputable commentators such as Michael Whitney, John Paul Roberts, Professor Michael Hudson, and now Professor William K. Black have spelled out the details. The CNBC TV Documentary “House of Cards” explained in detail with surprisingly candid on camera, guilt free admissions by the wrong-doers how this swindle worked from the borrowers and mortgage salesmen in Los Angeles to the top CEOs of Wall Street and to the Fed. These sources of our information have been relatively diplomatic in tone. It is time to name names and cite the fraudulent acts of those responsible, and the specific violations of law.
As we evaluate all of this, keep in mind what William K. Black said on Bill Moyer’s April 3 program about making risky loans where the ability of the borrower to repay a loan is not vetted: “We know that will produce enormous fraud under economic theory, criminology theory, and two thousand years of life experience.” Both Democrats and Republicans, hand in hand with Wall Street Bankers, by repealing the Glass-Steagall Act, and by enacting The Commodity Futures Modernization Act of 2000 specifically to preclude regulation, caused the current extraordinary depression and crisis by ignoring and acting contrary to this accumulated human wisdom. Think of this when you evaluate whether their acts were knowing and intentional and whether they are guilty or innocent.
THE INTENTIONAL FRAUD OF THE WALL STREET BANKERS AND RATING COMPANIES AND THEIR CONGESSIONAL ENABLERS
The legal elements or requirements of the crime or wrong of fraud known to every first year law student are:
1. An intentional misrepresentation of facts or a false promise
2. Knowledge of falsity
3. Intent to deceive
4. Justifiable and actual reliance on the truth of what was represented or promised
5. Resulting Damage
President Obama is a brilliant lawyer, top of his class at Harvard Law, and a ten year professor of Constitutional Law. His roots are in Chicago politics. President Obama clearly knows the elements of fraud.
We know the factual details of the wrongdoing from CNBC’s video “House of Cards” where those involved in the fraud at each level made surprisingly candid admissions of what they had done. At each level, the CEOs involved felt no guilt or responsibility. They would not have changed their conduct in retrospect. Each said he had to do what he did to stay in business and to compete with others who were doing the same thing. This was the “justification” at every level from LA mortgage salesperson, to the bankers, the creators of layers of derivatives and credit default swaps to the raters who gave the derivatives that they knew or should have known were not worth their stated values, AAA ratings. All of this was happening in the context of congressionally granted exemptions from regulation, and NY Fed President Timothy Geithner’s failure to supervise and to regulate.
The Wall Street bankers deliberately made and palmed off to others loans that they knew were really bad. They made them because they were so profitable. Among themselves, they called them “liar’s loans” because they did not care if borrowers were unqualified and they encouraged them to lie about their incomes. They created the layers of derivatives based on these pools of liar loans, knowing that they were extremely risky. They pressured the rating companies to give them AAA ratings, and the rating companies complied “because the competition was doing it” when they knew or should have known that the “securities” were really not of AAA quality.
Foreign investors, domestic pension fund managers, and foreign governments and banks justifiably relied on the Wall Street banker’s sales pitch and the AAA ratings. The AAA rating satisfies the obligation of “due diligence” in checking the risk of an investment. These innocent but sophisticated investors had a right to assume that NY Fed President Timothy Geithner was doing his duty of supervising and regulating.
All of these investors were damaged when the house of cards collapsed. The investors have been damaged. We the citizens and voters and generations of our offspring have suffered almost incalculable damage…damage totaling many trillions of dollars that will plague us for generations.
This is the massive Wall Street fraud that President Obama inherited, and is now covering up, and possibly attempting to restart.
PRESIDENT OBAMA IS NOT FAITHFULLY EXECUTING THE LAW REGARDING UNDERCAPITALIZED BANKS IN VIOLATION OF HIS OATH
President Obama now has the sworn Presidential duty to “take care that the laws be faithfully executed.” Thus he must “faithfully” prosecute financial wrongdoing, avoid conflicts of interest, and specifically, take certain prompt action against wrongdoing Wall Street banks as mandated by the Prompt Corrective Action Law that was enacted just following the savings and loan crisis of the 1980s. This law is found in Title 12 United States Code beginning at Section 1831. There is no exception in the law for “banks that are too big to fail,” and no exception for criminal enterprises even if they are large.
Instead of bailing out wrongdoing banks with Trillions of dollars of our money, President Obama is required by federal law to appoint a receiver for the bank within 90 days after it becomes critically undercapitalized. He must prosecute those bankers who were paid salaries or bonuses while their banks were undercapitalized. There is no question that they are undercapitalized because they require Trillions just to make them function, without complying with legal standards. If “they are too large to fail,” they have seized way too much private “mafia-like” power over all of us. President Obama can and must follow the law.
OBAMA’S CHOSEN FINANCIAL AND ECONOMIC ADVISORS KNOWINGLY DEREGULATED SO AS TO ENABLE THE FRAUD, AND THEN PARTICIPATED IN THE FRAUD AND PROFITED FROM IT
Obama’ Chief Economic Advisor, Larry Summers one of Clinton’s Secretaries of the Treasury, and Robert Rubin along with Republican Senator Phil Gramm lead the lobbying effort to repeal the Glass Steagall Act thereby enabling Wall Street Banks to invest in derivatives, hedge funds, and credit default swaps, and permitting Wall Street insurance companies to engage in banking.
Then the same three men, Summers, Rubin, and Gramm together with Alan Greenspan lead the effort to persuade Congress to pass a law in 2000 without debate in either the House or the Senate prohibiting the regulation of these newly enabled Wall Street financial giants. It is known as The Commodity Futures Modernization Act of 2000, and is found in Title 7 USC Section 2. The exemptions from regulation are found in Sections 2 (g) and 2(h). President Clinton signed the new law on December 21, 2000.
Obama’s Chief Economic Advisor Larry Summers and his Secretary of Treasury Timothy Geithner both pushed for the enactment of this law which enabled the ensuing fraud involving mortgages and the layers of derivatives that were known to be risky and worthless.
Secretary of Treasury Timothy Geithner, President of the New York division of the Fed where all of the major Wall Street banks are located had the following duties according to its own mission statement found at http://www.newyorkfed.org/aboutthefed/introtothefed.html:
“It is responsible for
• formulating and executing monetary policy,
• supervising and regulating depository institutions,
• providing an elastic currency,
• assisting the federal government's financing operations, and
• serving as the banker for the U.S. government.”
In addition to paying his own taxes, Timothy Geithner had a public responsibility and duty to all of us. Timothy Geithner, the man chiefly responsible for avoiding what has happened, instead facilitated the fraud. He did not supervise and he did not regulate. As Professor Black said to Bill Moyers, he, along with every one else involved in the fraud, ignored the FBI’s public 2004 warning that there was “an epidemic of mortgage fraud, that if it was allowed to continue it would produce a crisis at least as large as the Savings and Loan debacle.”
PRESIDENT OBAMA IS KNOWINGLY AND INTENTIONALLY REWARDING CRIMINALS AND IS COVERING UP WALL STREET BANK CRIMES AND FRAUD
It is a felony for any person including the President of the United States to cover up a crime. 18 USC Section 4 states:
“Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined under this title or imprisoned not more than three years, or both.”
Such a cover up is also criminal fraud as defined in 47USC 1001.
Such a cover up when done by a President, Vice President or a Secretary of Treasury is also a “high crime and misdemeanor” warranting impeachment under Article II, Section 4 of our Constitution:
“The president, vice president and all other civil officers of the United States shall be removed from office on impeachment for, and conviction of…high crimes and misdemeanors.”
President Obama has also taken the Presidential Oath that he will faithfully execute this cover up avoidance law as well, and not to violate it himself.
80% of the American people, according to a recent poll believe that Wall Street is crooked and is responsible for our current Depression.
Obama, in a recent speech to Wall Street CEOs telling them to “cool it” about justifying their contract rights to bonuses, said
“My administration is the only thing between you and the pitchforks.”
So what is he saying to the 80% of us potentially holding pitchforks who voted for him?
In effect, he is saying in his vague, charming, persuasive and hypnotic way: “I know of no crimes. I want to look to the future I will not prosecute the bankers. I will hire them as advisors. We have nothing to learn from their mistakes. We together will try to restore lending, and restart the economy as it was.”
What are President Obama’s own lawyers, Dawn Johnson Chief of the Office of Legal Counsel and Attorney General Eric Holder advising him? Are they, like John Yoo and Michael Mukasey who advised Bush that he could torture, advising Obama that he has the power to ignore the law created exactly for the purpose of dealing with failing banks because of an economic emergency? What is brilliant lawyer Obama advising himself? Where is there indication of Obama’s own integrity and inner moral compass?
WHAT ARE THE CONSEQUENCES FOR US IF OBAMA’S MUTI-TRILLION BAIL OUT OF WALL STREET “SUCCEEDS?”
The most immediate, pressing danger is that it will not work at all. Obama may not discover this until it is too late to try another solution. The reason is Obama seeks mainly to restore the lending ability of the Wall Street banks. That will work only if we are willing to fund our purchases by more borrowing. We are not. We will not borrow. We are too frightened. The great danger is of a total breakdown of civilized democratic society.
Even if it “works,” Obama’s plan will never succeed for us. The reasons are:
• Obama and his advisors see capitalism as a stable system that only got a little off track due to unfortunate lack of regulation. It is in fact in deep trouble even aside from the banking problem due to an overproduction of goods and services that can be produced at a profit. This is the underlying “systemic defect.” Failing to recognize this defect, Obama does nothing to solve it.
• Obama aims mainly toward providing more credit, restoring the Wall Street banks’ ability to lend money.
Obama fails to deal adequately with restoring the purchasing power of consumers from our earned labor. Taken together, Obama and Bernanke are committing $12.8 Trillion to bailing out Wall Street compared to only $900 Billion to stimulating the real economy, a ratio of 14 to 1.
The inevitable result for us will be a vast inflation of our dollars, so that each dollar buys less and less. We will be like frogs placed in slowly heating water. We will notice nothing at first. The “water” will heat slowly until it kills us. It may ultimately “succeed” for the wealthiest 1% in that they will own all of the land, gold, platinum, silver, and commodities and live in guarded gated castles. Those of us who survive will do so as feudal serfs who are permitted to share-crop their land. The result for Obama is that he will lose his bid for re-election in 2012 due to the massive despair and disillusionment of voters.
WHAT COULD OBAMA DO THAT WOULD WORK?
Although his window of opportunity is very short, if Obama changed course promptly before he has put us many trillions further in debt, there are sound, historically tested things he could do. They are bold. They involve a profound change in his analysis of our problem. He could:
• Cause our government to be the sole creator of our money supply, our silver coins, our dollar bills, and our “check book” money. Lincoln did this in 1860 to finance the Civil War. The state of Pennsylvania did this successfully for 50 years prior to 1789.
• Instead of borrowing from private banks and other governments, our government could create and issue money to meet government, business and individual needs, including rebuilding our infrastructure, education through college, and universal health coverage, and to pay our government’s obligations on existing bonds as they fell due.
• Prohibit “fractionalized reserve banking,” the practice of private bankers lending from 10 to 90 times the asset-reserves they hold. Allow banks only to loan on a 1 to 1 basis, from the dollars they have on deposit.
• Impose a top limit on interest that could be charged say 8%.
• Allow the Wall Street banks to go into bankruptcy, but retain enough of the needed staff employees to implement the new way of supplying money where needed.
• Repeal the Federal Reserve Act and install the needed functions of the Fed as a division of the Treasury Department.
• Enable local banks and businesses to continue to function as they now do.
Dated: April 7, 2009
Doug Page
WRIGHT PATMAN'S SOLUTION FOR OUR CANCEROUS BANKING SYSTEM
WRIGHT PATMAN’S PRESCRIPTION FOR HEALING THE CANCEROUS
I am scared. We all are scared. Our Wall Street obedient leaders who claim they are struggling valiantly to “solve” the banking crisis seem to meander uncertainly and ideologically, while they spend unimaginable Trillions of Dollars of our public money. All of this is using public money that we have borrowed, and we worry how we and our children will ever repay it. We worry that the Bail Out will do nothing for us.
Forty five years ago in 1964, Wright Patman had answers and solutions for our banking problems which he left for us in his Congressional Reports, in transcripts of Congressional Hearings, and in his speeches in the Congressional Record.
Wright Patman was an extremely well qualified expert on our side. He was a lawyer, a former District Attorney, a former Representative in the Texas Legislature, and a long time Congressman. Wright Patman served as a Congressman from the North East corner of
Patman from his long experience with our banks provides evidence that Thomas Jefferson’s 1802 view of private banks was accurate:
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered."
Luckily for us, Patman summarized his long experience with Wall Street Banking in his 50 page report, “A Primer on Banking” published by the U.S. Government Printing Office in 1964. It was his gift for us, his warnings, and his suggested reforms that are very relevant today even though our banking problem has gotten many times worse.
WHO CREATES MONEY IN THE UNITED STATES?
Patman approvingly quoted Lincoln who said:
“Money is the creature of law, and the creation of the original issue of money should be maintained as the exclusive monopoly of the National Government. The privilege of creating and issuing money is not only the supreme prerogative of Government, it is the Government’s greatest opportunity.”
Our Constitution provides that Congress shall have the power “To coin money and regulate the value thereof.”
Unfortunately, under heavy lobbying by private bankers, Congress delegated the power to create money to a private group of bankers with the 1913 Federal Reserve Act and its 1934-35 Amendments. About this, Patman said:
“In the
We still have two such governments today in 2009. We have
1. Our “We the People” Constitutional government of by and for the people. Our governmental powers are exercised for us by our elected representatives.
2. A government by a private oligarchy of 12 bankers which creates our money, regulates the amount in circulation, regulates the interest rate at which money shall be loaned to us, to businesses and to our government, whose sole legal obligation is to make as much profit for bankers as possible.
What is wrong with this?
It gives this tiny private bankers’ oligarchy dominant control over our government, our economy, our level of well being. The oligarchy can refuse to finance reforms and programs enacted by our constitutional government. The oligarchy can and does lobby congress extensively; it finances the re-election of those who favor it, and finances opponents of those who vote against its wishes.
Patman quotes a once famous British Chancellor of the Exchequer who said of private banks:
“They control the credit of the nation, direct the policy of the governments, and hold in their hands the destiny of the people.”
This mirrors the statement attributed to the legendary European banker Amschel Mayer Rothschild who allegedly said in 1838: "Permit me to issue and control the money of a nation, and I care not who makes its laws."
This oligarchy in effect plans our economy, not to benefit us or our general welfare, but to earn the maximum private profit for them. Thus, for example, we can get health coverage for everyone only if it we pay 31 cents of every health care dollar for interest on loans, HMO profits and CEO salaries and bonuses. We cannot have Single Payer health coverage financed by the government by progressive income taxes.
It is undemocratic. These 12 bankers are responsible to no one. They are appointed every 12 years by the then sitting President on staggered terms. The law compels that the appointees be selected from a pool of bankers, and thus no appointees representing labor, the consumer, the voter or academic experts can be selected. The Accounting and Auditing Act of 1950 section, 31 USC 714(b), dictated that congressional audits of the Federal Reserve may not include "deliberations, decisions and actions on monetary policy matters.”[1] According to the law, in other words, the Fed simply cannot be audited by Congress. We apparently can not find out the actual profits of the Fed.
The oligarchy by increasing the amount of money in circulation can cause inflation. By decreasing the amount it can cause a recession and leave millions jobless. It can cause “bubbles,” and it can also cause depressions, whichever will earn the maximum profit for them.
Patman summarizes it this way:
“What may appear, then, to be a simple decision to rein in the money supply and raise interest rates is, in fact, a simultaneous decision about the whole range of economic life—the prices people pay, the incomes they earn, the level of prosperity and the dynamic thrust of the economy is permitted to develop. The fallout extends even further. As interest rates rise, a transfer of income also takes place—to the large holders of liquid assets and the large financial institutions. It is no accident that rising interest rates are accompanied by a boom in the market for the stocks of banks and life insurance companies. The major owners of these institutions—certainly concentrated among a tiny minority of families in the
WHAT IS MONEY?
Patman has a very clear and accurate concept of money. Money is not real wealth; it is only a claim to wealth. While barter can be useful, it is far more convenient to have a medium of exchange that people agree has value. This need not be gold and it need not be any substance of real value. It can be shells, beads, notched sticks or printed paper greenbacks. The selected medium of exchange must be backed by the law and the courts in that it must be legally acceptable in full payment of debts and taxes. It adds to its stature to have it backed by a government guarantee and to have a tax system in place so that the government can make good on its guarantee if necessary. There are many advantages if the government is the sole creator of money. Letting private bankers create money creates a lot of problems, particularly if banks are not regulated.
HOW IS MONEY CREATED?
A government, whether a royal monarchy or a democracy, can simply print and issue greenbacks, or give recipients a government check. The government would incur no debt to anybody if this method were used, and if interest was to be charged, the government would get the interest. Our Constitution authorizes this method for us.
Under the exclusive franchise to manufacture money that we have delegated to the 12 bankers, these private bankers can simply “write a check” with absolutely nothing to back it up. They can create money out of thin air, loan it to us, to businesses, and to our government, and make a private profit from the interest charged. This private money manufacturing process is backed by our law that makes this money legal tender, and it is guaranteed by our government and hence by us taxpayers. It is magic money making scheme that makes private bankers wealthy beyond imagination. It is far better than all the casinos on the planet for making money. Patman did not use this description, but it is in fact a massive fraud on the public in that banks are loaning money that they do not have.
Bankers and their controlled mainstream media do not like to reveal their lucrative secret. As Patman says:
“…some of those who do understand the workings of our monetary system seem to feel they are in possession of secrets which cannot be safely revealed to the public…..For this reason, it has been traditional for bankers and other private managers of money to cloak the working of the money system with a mantle of secrecy…..These officials seem very partial to the turns of phrase that imply that the supply of money—and interest rates—are subject to powerful economic laws over which men have no control.”
Patman lays out the workings of this private money making franchise in a way that we all can understand.
It all began with the gold smiths of the late middle ages who held gold for wealthy persons who did not wish burden or the risk of carrying it around. The gold smiths issued receipts for the gold. People found it convenient to use these receipts as a medium of exchange rather than withdrawing gold, paying it to the creditor, with the creditor then depositing the gold with the gold smith. The gold smiths made loans based on their deposits. Then, since depositors rarely came at one time to withdraw the gold, they began to make loans of up to 10 times the amount of the actual gold on deposit. Nobody was any the wiser and the gold smiths got very rich. The gold smiths were creating money, ten times the amount of money they had on deposit. Banks now do the same thing. It is called “fractionalized reserve banking.” They loan a lot more than they have on deposit. What they have on “deposit” and call an “asset” for the purposes of the ratio will surprise you.
In 1964, there were at least 2 components of our money supply in circulation:
20 % was Coins and dollar bills minted and created by the U.S. Mint
80% was “Check book money” being money created by private commercial banks and by the private Fed simply by writing a check
"In 2005, the check book money, now generated by computer entries and not actual checks, was calculated to be 97.6% of our money supply. ("Money as Debt," Helen Hodgson Brown, 2008, Third Millenium Press,
Supposing a local bank had loan applications, but had no money. Where would it get it to loan? The local bank would borrow money from the Fed. Patman used $1,000 as a ridiculously low example simply for purposes of explanation. So the local bank borrows $1000 from the Fed. Where does the Fed get the money? It simply writes a check for it, although the Fed has no reserve deposit. “It creates money purely and simply by writing a check.”
In addition to the magic power to write a check out of thin air, there is a magic multiplier:
Each loan that a bank makes is considered a new addition to its “reserve” for the purpose of calculating the fractional reserve ratio. Thus it can loan 90% of the first $1000 loan or $900 to a second borrower, and 90% of that or $810 to a third borrower and continuing until it has loans outstanding of 10 times the $1000 created out of thin air or $10,000 drawing interest to profit the bank and its shareholders.
When we consider the Trillions of Dollars of debt now owed to private bankers, it becomes clear that Wall Street and its banks are collecting huge sums in interest. This magic process creates unimaginable hidden wealth for banks and their shareholders.
There is always a danger that frightened cash depositors will gang up on a bank and demand the withdrawal of their cash deposits. The Fed stands ready as the “banker’s bank” to make loans to the besieged bank to meet the threat. So long as the threat is local and confined, the whole magic system continues to function and to earn profit for the bankers.
WHAT CAN WE LEARN FROM PATMAN THAT WOULD HELP TODAY?
Since Patman wrote his Primer in 1964, the powers and activities of banks have compounded the wealth generated for the bankers and their shareholders. This is due to de-regulation, relaxed regulation, and the repeal of the Glass Steagall Act so as to permit banks to venture outside mere money lending. Banks could now invest in new ventures, invest in the stock and futures markets, in hedge funds, in various collateralized debt obligations, all with the sole legal imperative that they make profit for their shareholders. They still had no legal obligation to serve the public interest. While it lasted, this bubble made bank shareholders very wealthy. This tiny group of wealthy individuals uses its wealth to enhance its political power over elected officials. As we see from recent Bail Out events, this power over our government has become dominant. The powers of our government have been captured and used solely to benefit this tiny group, the top 1% of the wealthiest people in our nation.
Despite this vast mushrooming, Patman’s analysis of the underlying banking dynamics remains accurate and his remedies even more effective. Patman would recommend:
- That the Federal Reserve Act be repealed and the legitimate functions of the Fed be made a division of the Treasury Department.
- That the U.S. Government be the sole “coiner” of money and that it simply issue Greenbacks as needed to make the economy flourish, and to pay for public projects.
- That fractionalized reserve banking be abolished. Local banks would be permitted to loan only on a 1 to 1 ratio of what they had on deposit and then only for a low rate of interest.
- That local Banks be regulated again.
These reforms would halt the cancerous existing practice where all money rests on somebody’s debt. This would stop the endless
We could finance our recovery from this depression. We could avoid going into an even deeper depression. Our local banks and businesses would function as they now do, but in a stable sustainable way. If the money supply of the
President Reagan’s Assistant Secretary of the Treasury, Republican Paul Craig Roberts seems to agree with Democrat Wright Patman. In Counterpunch on 3-26-09 in an article entitled, “Is the Bail Out Breeding a Bigger Crisis,” Roberts wrote:
“Could this huge debt issue be avoided if the government took over the banks and netted out the losses between the constituent parts? A staid socialized financial sector run by civil servants is preferable to the gambling casino of greed-driven, innovative, unregulated capitalism operated by banksters who have caused crisis throughout the world.
Perhaps the Federal Reserve should be socialized as well. The notion of an independent, privately-owned Federal Reserve system was never more than a ruse to get a national bank into place. Once the central bank is part of the state-owned banking system, the government can create money without having to accumulate a public debt that saddles taxpayers and future budgets with hundreds of billions of dollars in annual interest payments.”
There is one startling difference between what Wall Street banks wanted in Patman’s day and what they want now. Wall Street banks used to be overly concerned about inflation of their dollars. Our market economy was then fairly stable and the wealthy wanted the purchasing power of their dollars preserved. They restricted the creation of money and raised interest rates, a “tight money” policy. Now, strangely enough, Wall Street is going all out to inflate dollars beyond measure. This must mean that Wall Street has secretly given up on our market economy, and now seeks to siphon off as many dollars as it can as quickly as it can. The wealthy can then invest their dollars in land, gold, silver, platinum, oil reserves, and in gated castles for themselves. They can thus reduce those of us who survive to the level of feudal serfdom where we eke out an existence by working their land.
Wall Street’s plan to rescue itself is a covert class war by the top 1% against the rest of us. Wall Street seeks to solve the problem of the huge public debt to
Dated: March 27, 2009
Doug Page,
[1] (b) Under regulations of the Comptroller General, the Comptroller
General shall audit an agency, but may carry out an onsite examination of an open insured bank or bank holding company only if the appropriate agency has consented in writing. Audits of the Federal Reserve Board and Federal reserve banks may not include-- (1) transactions for or with a foreign central bank, government of a foreign country, or nonprivate international financing organization; (2) deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations; (3) transactions made under the direction of the Federal Open Market Committee; or (4) a part of a discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to clauses (1)-(3) of this subsection. Saturday, December 27, 2008
PRESIDENT OBAMA; TAKE ADVANTAGE OF THE WALL STREET DISASTER
PRESIDENT OBAMA: TAKE ADVANTAGE OF THE WALL STREET DISASTER TO BRING US STABLE SECURE LIVES
We Will Do Everything in Our Power to Help
President Bush in an interview just this last week said that on September 28, 2008 his own Secretary of the Treasury came to him in great alarm and said: “the credit markets are frozen! If we do not give them a massive bailout of cash, we may face a depression, a greater depression than the Great Depression.” This was the Phi Beta Kappa, Republican, former head of Wall Street’s Goldman Sachs talking, not some radical Marxist, and it was our first main stream signal that something was drastically wrong with our capitalism. With full support of our entire political and economic leadership, Congress quickly voted $700 Billion and gave $350 Billion to Secretary Paulson to spend immediately. What he did with it, he refuses to say, but the fact that we can all observe is that it did nothing to help us or to help the economy. The additional Billions that were given before and since have not helped either. Millions and millions of us are facing the pain of economic downturn and nothing has helped us. All of us are scared. We wait breathlessly for January 20 when President Obama can do something to help. Today he promises to spend $400 Billion to create 4 million jobs although many more than that have already been laid off.
The entire main stream political and economic establishment including the departing President and the incoming President and his main stream advisors are desperately seeking to get things going as they were before September 2 8, to restore the fragile bubble economy that then existed. Although Obama promises some direct aid to the unemployed, poor and hungry, Obama’s main strategy as suggested by his choice of advisors is to restore our trickle down economic system
Even Paul Krugman wrote in the NYT on December 22:
“The prosperity of a few years ago, such as it was — profits were terrific, wages not so much — depended on a huge bubble in housing, which replaced an earlier huge bubble in stocks. And since the housing bubble isn’t coming back, the spending that sustained the economy in the pre-crisis years isn’t coming back either.”
Even some in the labor movement do not want a new bubble:
NYT columnist Bob Herbert wrote on December 20:
“As Andy Stern, president of the huge Service Employees International Union, told me on Friday: ‘We’ve had a 25-year experience with market-worshipping, deregulating, privatizing, trickle-down policies, and it has ended us up with the greatest economy on earth staggering, and with the greatest amount of inequality since the Great Depression.’”
Our capitalism is not just “staggering.” It has crashed and nobody can rebuild or restore it. It has mutated into its final terminal stage as capitalism. It can further mutate into an authoritarian government joined with a system to benefit the powerful, but not as capitalism.
MONETARISM WILL NO LONGER KEEP CAPITALISM GOING
So far as we can tell, all of the current mainstream advisors, including those that Obama has chosen, are monetarists, being intellectual disciples of Milton Friedman. Monetarism has produced fabulous profits for the very wealthy, but it has served the rest of us poorly even before September 28. Since the crash of capitalism, it will not even serve the very wealthy in terms of keeping capitalism going.
Monetarism has at least 4 basic express ideas:
1. Capitalism is basically a stable economic system that serves all of us rich and poor.
2. The occasional ups and downs of capitalism can be handled by adjusting the interest rate and the money supply.
3. A really serious down turn can be controlled by a massive injection of public money into this stable capitalism, supplied by us taxpayers.
4. There are no structural or systemic defects in capitalism.
There are also some implied assumptions that do not fit the real world:
1. A rising tide lifts all boats with substantial fairness
2. There are no irreconcilable conflicts of interest between the rich and the poor, between capitalism and democracy or between the interest of employers and the interests of employees.
Now that a major crash is upon us, one that threatens to drop us into a “depression worse than the Great Depression,” the Wall Street strategy to avoid this disaster is, guided by the monetarists, to give more an more money to the major banks with the idea that these banks and their subsidiaries will then extend more credit to employers who will create more jobs, paying existing or lower wages, so that after all of this trickle down, employees will have enough purchasing power, augmented by their own new loans and credit cards, to start another bubble. Wall Street loves bubbles. Bubbles make Wall Streeters very rich so long as the bubble works. The main product of Wall Street banks is credit…to fuel the economy with loans bearing interest paid back for the enrichment of Wall Street banks. Hence, Wall Street seeks to restart capitalism with some sort of a new bubble. Due to Wall Street’s massive contribution of dollars to our elected officials, no other strategy is being considered. The trouble is there are no new bubbles on the horizon. We do not want a new housing bubble, a Silicon Valley stock bubble, or a bubble that would have Detroit turning out more massive SUVs. We do not want to increase the already massive disparity of income between the very rich and the rest of us. Another trouble is that the amount of actual purchasing power that trickles down is too little, and too late.
The mainstream monetarists are very bright. The problem is neither lack of intelligence nor stupidity by mainstream advisors. Robert Rubin, Ben Bernanke, and Henry Paulson are each members of Phi Beta Kappa. The mainstream economic advisors have chosen to use their intelligence to keep existing capitalism going and to make themselves rich by devoting their lives to serving the interests of the very rich. They have chosen to deny the existence of structural defects in capitalism.
CAPITALISM HAS ALWAYS HAD A STRUCTURAL OR SYSTEMIC FLAW, THE CAPACITY TO SELF-DESTRUCT IN ITS MATURE STAGE.
Capitalism has always had this fatal flaw that some are now calling a “systemic defect.” This is the defect noted by capitalist Henry Ford in the 1920’s and first enunciated 150 years ago by Karl Marx. Capitalists do not pay their employees enough salaries and wages so that employees can buy the products that they produce. Capitalism is thus inherently unstable. The necessary purchasing power can be maintained temporarily by foreign investment, government purchases for defense, wars, and Homeland Security, by borrowing and credit card financing, but we have reached the limit. Neither we, nor corporate businesses can borrow more. We cannot pay higher taxes so as to further fund a fragile capitalism that has died for want of purchasing power.
The main stream has applied every possible “band-aid” to capitalism, and it is still trying find other props. Most of us have supported those efforts. Most of us knew of no alternative. The difficult truth is that the inner dynamic of capitalism in its mature mutation, has caused its terminal illness, its final crash. Neither All the King’s men in “Humpty Dumpty,” nor President Obama will be able to put it together again. The reason is that nobody in the political and economic main stream has yet publicly acknowledged this systemic defect. Nobody is publicly dealing with it, or even hinting at its existence. Everybody recognizes that our capitalism depends for its survival on consumer purchasing power, but few want to face up to the systemic defect that causes the absence of purchasing power. Painful and disagreeable though it may be we must face up to and deal with this systemic defect.
Capitalism, our “mother” also has much influence on us now. It feeds all of us. Every one of us is dependent on capitalism for our survival. We think we have no other choice. Whether we are employees of business, non-profits, the media or universities, we are fed by this “mother.” Even if we are self-employed, we are dependent on the income of employees for our income. We are not and can never again be hunter-gatherers, or self-sufficient farmers. We are as dependent on the current mutation of capitalism as a new born baby is on its mother. When our “mother” no longer nurtures us, we become very scared. We become so scared that some of us deny that anything is wrong; some of us assume that it is our own fault, and some of us emphasize other causes like crooked businessmen, crooked politicians, or false advertising; and some assign blame to inner psychology, even to a Jungian collective unconscious. We turn to anything and everything to avoid facing the real problem. Just as we desperately need and want the love of our real mothers, we similarly cling to our capitalism, and we find it very difficult to analyze or criticize either one. Those who hugely profit from capitalism naturally encourage us not to blame capitalism. Their media treats discussion of capitalism’s defects as a taboo subject. They reinforce our own dependent reluctance.
There is more and it is related to the vast disparity of incomes between the capitalist class, employers and those who invest with employers, and the rest of us. By its dynamic of paying employees as little as possible, and seizing as much as possible of the increase in wealth our work produces, the capitalist class has accumulated a staggering almost unimaginable stash of wealth. The capitalists have used this wealth to purchase a controlling share of our political power. Wall Street Banks have so far bought off the Democrats, who then lie and tell us that they are trying to enact reforms for our benefit. They just never get around to doing it. As Lou Dobbs reported on December 20 on CNN, Democrat Senator Chris Dodd, Chairman of the Senate Banking Committee has his own reform bill and another competing reform bill pending in his Committee. This powerful Democratic Chairman simply cannot find the necessary support to bring either bill up to the full Senate. Senator Dodd received $4 million dollars in his last election from the Wall Street banks he says he would like to regulate. Similarly, VP Biden representing the credit card issuers fostered a draconian Bankruptcy Bill that haunts us now. Ironically, President Obama on Saturday before departing for Hawaii appointed this same VP Biden to head a task force to try to meet the needs of the middle class. Do you suppose that Biden will recommend the cancellation of his recently sponsored awful Bankruptcy Bill? We must enlighten Senator Dodd, Vice President Biden and the other Democratic elected officials who receive money from Wall Street.
Our strategy is founded on this: Our widespread recognition that capitalism has died and cannot be revived will necessarily cause President Obama, Senators, Blue Dog Democrats, academic advisors, Wall Streeters of honest good will, and everyone except those who seek to survive by theft, to deal with our real human needs and stop using our money in a vain attempt to restart a dead capitalism. Therefore our most important task is to understand that multinational capitalism has died, why it has died, why it cannot be restarted, and to communicate that truth to everyone we know.
This is not to say that our way forward will be easy or pain free. We have to deal with capitalism’s terminal gasps that may lead some frightened persons turn to fascism. We have to face the ferocious, possibly violent reaction of those who have immensely profited from bubble capitalism as they seek to defend and preserve their wealth. The truth is that a great depression, greater than the Great Depression, may come upon us very soon. A bright European observer, Franck Biancheri speaking on the archived KPFA program “Guns and Butter” that aired on December 10 predicted this disastrous and painful crash at the multinational level by July 2009.
Reflect for a moment on what we could face as early as next summer:
• The nation’s food delivery truck fleet shut down for want of profit making opportunity.
• Empty food stores
• Wal Mart and other big box stores shut down because China stopped shipping stuff to the US and decided instead to improve conditions for the Chinese
• 30 million people out of work and hungry
• Hospital emergency rooms flooded with sick and injured people
• Charitable soup kitchens and charitable food suppliers overwhelmed and non-functional
• No food to buy with the dollars that we have..
So maybe, just maybe Franck Biancheri is wrong. This may not happen by next summer. It may not come until 2010. The point is that this greater than the Great Depression will soon happen unless we all face up to and correct the systemic defect in our political economy. It is inevitable. The advent of fascism will not stop the pain that is coming.
To survive the immediate pain, we would all be well advised to put in a store of emergency food. We should also persuade the new Secretary of Agriculture Tom Vilsack to stop making ethanol from corn and accumulate an emergency supply of corn and wheat.
We can each resolve to avoid panic, selfish choices, and false solutions.
We humans working together in our human community can solve this systemic defect and meet our reasonable needs. Multinational capitalism, the Federal Reserve Bank, Wall Street and their investment banks, money and credit schemes will not survive, and should not. We have the following advantages to meet the crisis and to create a new political economy:
We have needs, we each have skills and abilities to meet needs of others, and we are all willing to work.
The business capitalism in our local communities, our banks, car dealers, hardware stores, and food stores and clothing stores need not be much affected. Our local lives will go on, but much better than before when Wall Street siphoned off the lions share of our productive wealth for the very rich.
We now realize that all of us humans are interdependent and interconnected in our common needs for affordable housing, public health, clean water, adequate food, and medical care.
We each have the capacity to care for others and the capacity to receive the caring of others.
We have vast national resources.
We have a fallen global market economy with formerly arrogant, aggressive, defiant gung ho capitalists now on their knees, dispirited and begging for our help.
We have a new President with a towering intellect, oratorical skills, leadership skills, a strong will and a compassionate heart, who promises to act pragmatically.
• We can use the experience from WWII and set up something like the War Production Board, staffed by bright pragmatic people, to guide us in what should be produced to meet our needs and what should not be produced.
• We can set up a new Federal Loan Bank and create a new currency using the Constitutional power given to Congress “To coin money, regulate the value thereof, and of foreign coin.” We may choose to support the American Monetary Act now being introduced by Congressman Dennis Kucinich and supported by Professor Michael Hudson. http://www.monetary.org/amacolorpamphlet.pdf
• We can demand that our government be our employer of last resort, supplying as many jobs as may be necessary. We can demand that public expenditures be made for our direct and immediate public benefit and not for Wall Street or its investment banks.
• We can demand that Congress make “all laws which shall be necessary and proper…in order to from a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty for ourselves and our posterity…”
• We may not be able to afford wars in Iraq and Afghanistan, and we may have to bring our troops home.
We are in the most exciting times since 1776 when the fall of multinational capitalism compels and allows us to organize new ways of working together to meet our needs founded on caring for each instead of fearfully exploiting and competing with each other.
Dated: December 27, 2008
Doug Page
.
We Will Do Everything in Our Power to Help
President Bush in an interview just this last week said that on September 28, 2008 his own Secretary of the Treasury came to him in great alarm and said: “the credit markets are frozen! If we do not give them a massive bailout of cash, we may face a depression, a greater depression than the Great Depression.” This was the Phi Beta Kappa, Republican, former head of Wall Street’s Goldman Sachs talking, not some radical Marxist, and it was our first main stream signal that something was drastically wrong with our capitalism. With full support of our entire political and economic leadership, Congress quickly voted $700 Billion and gave $350 Billion to Secretary Paulson to spend immediately. What he did with it, he refuses to say, but the fact that we can all observe is that it did nothing to help us or to help the economy. The additional Billions that were given before and since have not helped either. Millions and millions of us are facing the pain of economic downturn and nothing has helped us. All of us are scared. We wait breathlessly for January 20 when President Obama can do something to help. Today he promises to spend $400 Billion to create 4 million jobs although many more than that have already been laid off.
The entire main stream political and economic establishment including the departing President and the incoming President and his main stream advisors are desperately seeking to get things going as they were before September 2 8, to restore the fragile bubble economy that then existed. Although Obama promises some direct aid to the unemployed, poor and hungry, Obama’s main strategy as suggested by his choice of advisors is to restore our trickle down economic system
Even Paul Krugman wrote in the NYT on December 22:
“The prosperity of a few years ago, such as it was — profits were terrific, wages not so much — depended on a huge bubble in housing, which replaced an earlier huge bubble in stocks. And since the housing bubble isn’t coming back, the spending that sustained the economy in the pre-crisis years isn’t coming back either.”
Even some in the labor movement do not want a new bubble:
NYT columnist Bob Herbert wrote on December 20:
“As Andy Stern, president of the huge Service Employees International Union, told me on Friday: ‘We’ve had a 25-year experience with market-worshipping, deregulating, privatizing, trickle-down policies, and it has ended us up with the greatest economy on earth staggering, and with the greatest amount of inequality since the Great Depression.’”
Our capitalism is not just “staggering.” It has crashed and nobody can rebuild or restore it. It has mutated into its final terminal stage as capitalism. It can further mutate into an authoritarian government joined with a system to benefit the powerful, but not as capitalism.
MONETARISM WILL NO LONGER KEEP CAPITALISM GOING
So far as we can tell, all of the current mainstream advisors, including those that Obama has chosen, are monetarists, being intellectual disciples of Milton Friedman. Monetarism has produced fabulous profits for the very wealthy, but it has served the rest of us poorly even before September 28. Since the crash of capitalism, it will not even serve the very wealthy in terms of keeping capitalism going.
Monetarism has at least 4 basic express ideas:
1. Capitalism is basically a stable economic system that serves all of us rich and poor.
2. The occasional ups and downs of capitalism can be handled by adjusting the interest rate and the money supply.
3. A really serious down turn can be controlled by a massive injection of public money into this stable capitalism, supplied by us taxpayers.
4. There are no structural or systemic defects in capitalism.
There are also some implied assumptions that do not fit the real world:
1. A rising tide lifts all boats with substantial fairness
2. There are no irreconcilable conflicts of interest between the rich and the poor, between capitalism and democracy or between the interest of employers and the interests of employees.
Now that a major crash is upon us, one that threatens to drop us into a “depression worse than the Great Depression,” the Wall Street strategy to avoid this disaster is, guided by the monetarists, to give more an more money to the major banks with the idea that these banks and their subsidiaries will then extend more credit to employers who will create more jobs, paying existing or lower wages, so that after all of this trickle down, employees will have enough purchasing power, augmented by their own new loans and credit cards, to start another bubble. Wall Street loves bubbles. Bubbles make Wall Streeters very rich so long as the bubble works. The main product of Wall Street banks is credit…to fuel the economy with loans bearing interest paid back for the enrichment of Wall Street banks. Hence, Wall Street seeks to restart capitalism with some sort of a new bubble. Due to Wall Street’s massive contribution of dollars to our elected officials, no other strategy is being considered. The trouble is there are no new bubbles on the horizon. We do not want a new housing bubble, a Silicon Valley stock bubble, or a bubble that would have Detroit turning out more massive SUVs. We do not want to increase the already massive disparity of income between the very rich and the rest of us. Another trouble is that the amount of actual purchasing power that trickles down is too little, and too late.
The mainstream monetarists are very bright. The problem is neither lack of intelligence nor stupidity by mainstream advisors. Robert Rubin, Ben Bernanke, and Henry Paulson are each members of Phi Beta Kappa. The mainstream economic advisors have chosen to use their intelligence to keep existing capitalism going and to make themselves rich by devoting their lives to serving the interests of the very rich. They have chosen to deny the existence of structural defects in capitalism.
CAPITALISM HAS ALWAYS HAD A STRUCTURAL OR SYSTEMIC FLAW, THE CAPACITY TO SELF-DESTRUCT IN ITS MATURE STAGE.
Capitalism has always had this fatal flaw that some are now calling a “systemic defect.” This is the defect noted by capitalist Henry Ford in the 1920’s and first enunciated 150 years ago by Karl Marx. Capitalists do not pay their employees enough salaries and wages so that employees can buy the products that they produce. Capitalism is thus inherently unstable. The necessary purchasing power can be maintained temporarily by foreign investment, government purchases for defense, wars, and Homeland Security, by borrowing and credit card financing, but we have reached the limit. Neither we, nor corporate businesses can borrow more. We cannot pay higher taxes so as to further fund a fragile capitalism that has died for want of purchasing power.
The main stream has applied every possible “band-aid” to capitalism, and it is still trying find other props. Most of us have supported those efforts. Most of us knew of no alternative. The difficult truth is that the inner dynamic of capitalism in its mature mutation, has caused its terminal illness, its final crash. Neither All the King’s men in “Humpty Dumpty,” nor President Obama will be able to put it together again. The reason is that nobody in the political and economic main stream has yet publicly acknowledged this systemic defect. Nobody is publicly dealing with it, or even hinting at its existence. Everybody recognizes that our capitalism depends for its survival on consumer purchasing power, but few want to face up to the systemic defect that causes the absence of purchasing power. Painful and disagreeable though it may be we must face up to and deal with this systemic defect.
Capitalism, our “mother” also has much influence on us now. It feeds all of us. Every one of us is dependent on capitalism for our survival. We think we have no other choice. Whether we are employees of business, non-profits, the media or universities, we are fed by this “mother.” Even if we are self-employed, we are dependent on the income of employees for our income. We are not and can never again be hunter-gatherers, or self-sufficient farmers. We are as dependent on the current mutation of capitalism as a new born baby is on its mother. When our “mother” no longer nurtures us, we become very scared. We become so scared that some of us deny that anything is wrong; some of us assume that it is our own fault, and some of us emphasize other causes like crooked businessmen, crooked politicians, or false advertising; and some assign blame to inner psychology, even to a Jungian collective unconscious. We turn to anything and everything to avoid facing the real problem. Just as we desperately need and want the love of our real mothers, we similarly cling to our capitalism, and we find it very difficult to analyze or criticize either one. Those who hugely profit from capitalism naturally encourage us not to blame capitalism. Their media treats discussion of capitalism’s defects as a taboo subject. They reinforce our own dependent reluctance.
There is more and it is related to the vast disparity of incomes between the capitalist class, employers and those who invest with employers, and the rest of us. By its dynamic of paying employees as little as possible, and seizing as much as possible of the increase in wealth our work produces, the capitalist class has accumulated a staggering almost unimaginable stash of wealth. The capitalists have used this wealth to purchase a controlling share of our political power. Wall Street Banks have so far bought off the Democrats, who then lie and tell us that they are trying to enact reforms for our benefit. They just never get around to doing it. As Lou Dobbs reported on December 20 on CNN, Democrat Senator Chris Dodd, Chairman of the Senate Banking Committee has his own reform bill and another competing reform bill pending in his Committee. This powerful Democratic Chairman simply cannot find the necessary support to bring either bill up to the full Senate. Senator Dodd received $4 million dollars in his last election from the Wall Street banks he says he would like to regulate. Similarly, VP Biden representing the credit card issuers fostered a draconian Bankruptcy Bill that haunts us now. Ironically, President Obama on Saturday before departing for Hawaii appointed this same VP Biden to head a task force to try to meet the needs of the middle class. Do you suppose that Biden will recommend the cancellation of his recently sponsored awful Bankruptcy Bill? We must enlighten Senator Dodd, Vice President Biden and the other Democratic elected officials who receive money from Wall Street.
Our strategy is founded on this: Our widespread recognition that capitalism has died and cannot be revived will necessarily cause President Obama, Senators, Blue Dog Democrats, academic advisors, Wall Streeters of honest good will, and everyone except those who seek to survive by theft, to deal with our real human needs and stop using our money in a vain attempt to restart a dead capitalism. Therefore our most important task is to understand that multinational capitalism has died, why it has died, why it cannot be restarted, and to communicate that truth to everyone we know.
This is not to say that our way forward will be easy or pain free. We have to deal with capitalism’s terminal gasps that may lead some frightened persons turn to fascism. We have to face the ferocious, possibly violent reaction of those who have immensely profited from bubble capitalism as they seek to defend and preserve their wealth. The truth is that a great depression, greater than the Great Depression, may come upon us very soon. A bright European observer, Franck Biancheri speaking on the archived KPFA program “Guns and Butter” that aired on December 10 predicted this disastrous and painful crash at the multinational level by July 2009.
Reflect for a moment on what we could face as early as next summer:
• The nation’s food delivery truck fleet shut down for want of profit making opportunity.
• Empty food stores
• Wal Mart and other big box stores shut down because China stopped shipping stuff to the US and decided instead to improve conditions for the Chinese
• 30 million people out of work and hungry
• Hospital emergency rooms flooded with sick and injured people
• Charitable soup kitchens and charitable food suppliers overwhelmed and non-functional
• No food to buy with the dollars that we have..
So maybe, just maybe Franck Biancheri is wrong. This may not happen by next summer. It may not come until 2010. The point is that this greater than the Great Depression will soon happen unless we all face up to and correct the systemic defect in our political economy. It is inevitable. The advent of fascism will not stop the pain that is coming.
To survive the immediate pain, we would all be well advised to put in a store of emergency food. We should also persuade the new Secretary of Agriculture Tom Vilsack to stop making ethanol from corn and accumulate an emergency supply of corn and wheat.
We can each resolve to avoid panic, selfish choices, and false solutions.
We humans working together in our human community can solve this systemic defect and meet our reasonable needs. Multinational capitalism, the Federal Reserve Bank, Wall Street and their investment banks, money and credit schemes will not survive, and should not. We have the following advantages to meet the crisis and to create a new political economy:
We have needs, we each have skills and abilities to meet needs of others, and we are all willing to work.
The business capitalism in our local communities, our banks, car dealers, hardware stores, and food stores and clothing stores need not be much affected. Our local lives will go on, but much better than before when Wall Street siphoned off the lions share of our productive wealth for the very rich.
We now realize that all of us humans are interdependent and interconnected in our common needs for affordable housing, public health, clean water, adequate food, and medical care.
We each have the capacity to care for others and the capacity to receive the caring of others.
We have vast national resources.
We have a fallen global market economy with formerly arrogant, aggressive, defiant gung ho capitalists now on their knees, dispirited and begging for our help.
We have a new President with a towering intellect, oratorical skills, leadership skills, a strong will and a compassionate heart, who promises to act pragmatically.
• We can use the experience from WWII and set up something like the War Production Board, staffed by bright pragmatic people, to guide us in what should be produced to meet our needs and what should not be produced.
• We can set up a new Federal Loan Bank and create a new currency using the Constitutional power given to Congress “To coin money, regulate the value thereof, and of foreign coin.” We may choose to support the American Monetary Act now being introduced by Congressman Dennis Kucinich and supported by Professor Michael Hudson. http://www.monetary.org/amacolorpamphlet.pdf
• We can demand that our government be our employer of last resort, supplying as many jobs as may be necessary. We can demand that public expenditures be made for our direct and immediate public benefit and not for Wall Street or its investment banks.
• We can demand that Congress make “all laws which shall be necessary and proper…in order to from a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty for ourselves and our posterity…”
• We may not be able to afford wars in Iraq and Afghanistan, and we may have to bring our troops home.
We are in the most exciting times since 1776 when the fall of multinational capitalism compels and allows us to organize new ways of working together to meet our needs founded on caring for each instead of fearfully exploiting and competing with each other.
Dated: December 27, 2008
Doug Page
.
Saturday, December 13, 2008
VP BIDEN: TAME THE SENATE FILIBUSTER
DOUGLAS R. PAGE
6063 E. Rosewood
Tucson AZ 85711
Phone 520 514 7836 Fax 520 514-7088
Cell 520-400-5905 dougpage2@earthlink.net
December 13, 2008
Edward Kaufman, Chief of Staff
Office of Senator Joseph R. Biden
201 Russell Senate Office Building
Washington, DC 20510-0801
Regarding: Senate Rule XXII and President Obama’s and Vice President Biden’s promise of hope and change
Dear Mr. Kaufman:
Congratulations!!! You are soon to be a Senator yourself. That is why I, a resident of Arizona, and I claim a Sovereign Citizen, am writing to you. You are also very close to Senator Biden and that is another reason. I will soon be a constituent of VP Biden, and I have always considered that I am a constituent of all Senators. I trust that you also will recognize a duty to all of us and not just the voters of Delaware.
I am the outraged voter-citizen who filed the suits challenging the constitutionality of Senate Rule XXII in the 1990s when the filibuster was used to thwart our majority will and Bill Clinton’s proposed stimulus package. We are again confronted with the same problem: Certain Senators are sure to use the filibuster to thwart political and economic solutions to our imminent second Great Depression. The filibuster can and will be used to thwart control of global warming, regulation of Wall Street, and a sustainable energy policy. Just as the filibuster was used for 100 years after the Civil War to prevent enactment of a law against lynching, the filibuster now can and will be used to drive many of us into the economic law of the jungle and possibly starvation. It will surely be used to impede pragmatic legislative solutions and experiments in a wise way to see what really works to deal with our problems.
It makes good sense to require 60 votes or even 67 votes to confirm Judicial appointments when such nominations require the advice and consent of the
Senate, and when these Judges serve for life and can only be impeached or removed by a 2/3 vote.
It is simply a “bloodless coup” for the Senate to require more than a simple majority of those Senators present to enact political and economic reforms or anything else that can always be done away with by the next Congress.
I ask, I beg that you and Vice President Biden face the many crises that we all face and implement our majority will as voters by using the “constitutional option” aka the “nuclear option” to implement our majority will.
I am writing to you now so that you and Vice President Biden can carefully plot your strategy, enlist the support of a majority of Senators, and draft Vice President Biden’s ruling now that would end unconstitutional use of the filibuster.
You could move and VP Biden could rule, when the necessary “option” motions are made to avoid the filibuster, something like the following:
“The Chair rules that when legislation or appointments are proposed that can be cancelled or reversed by the next Congress, the Constitution compels Senate Rule XXII with its 60 vote requirement to close debate to be unconstitutional. For such legislation, the Chair rules that the Constitution compels action by vote of a simple majority of a quorum of those Senators present and voting. The Chair rules that Senate Rule XXII with its 60 vote requirement insofar as it applies to judicial appointments for the life of the nominee which can be undone only by a 2/3 vote of impeachment, is constitutional.”
I hope that you and Vice President Biden will exercise the leadership necessary to do this successfully.
Sincerely,
DOUGLAS R. PAGE
6063 E. Rosewood
Tucson AZ 85711
Phone 520 514 7836 Fax 520 514-7088
Cell 520-400-5905 dougpage2@earthlink.net
December 13, 2008
Edward Kaufman, Chief of Staff
Office of Senator Joseph R. Biden
201 Russell Senate Office Building
Washington, DC 20510-0801
Regarding: Senate Rule XXII and President Obama’s and Vice President Biden’s promise of hope and change
Dear Mr. Kaufman:
Congratulations!!! You are soon to be a Senator yourself. That is why I, a resident of Arizona, and I claim a Sovereign Citizen, am writing to you. You are also very close to Senator Biden and that is another reason. I will soon be a constituent of VP Biden, and I have always considered that I am a constituent of all Senators. I trust that you also will recognize a duty to all of us and not just the voters of Delaware.
I am the outraged voter-citizen who filed the suits challenging the constitutionality of Senate Rule XXII in the 1990s when the filibuster was used to thwart our majority will and Bill Clinton’s proposed stimulus package. We are again confronted with the same problem: Certain Senators are sure to use the filibuster to thwart political and economic solutions to our imminent second Great Depression. The filibuster can and will be used to thwart control of global warming, regulation of Wall Street, and a sustainable energy policy. Just as the filibuster was used for 100 years after the Civil War to prevent enactment of a law against lynching, the filibuster now can and will be used to drive many of us into the economic law of the jungle and possibly starvation. It will surely be used to impede pragmatic legislative solutions and experiments in a wise way to see what really works to deal with our problems.
It makes good sense to require 60 votes or even 67 votes to confirm Judicial appointments when such nominations require the advice and consent of the
Senate, and when these Judges serve for life and can only be impeached or removed by a 2/3 vote.
It is simply a “bloodless coup” for the Senate to require more than a simple majority of those Senators present to enact political and economic reforms or anything else that can always be done away with by the next Congress.
I ask, I beg that you and Vice President Biden face the many crises that we all face and implement our majority will as voters by using the “constitutional option” aka the “nuclear option” to implement our majority will.
I am writing to you now so that you and Vice President Biden can carefully plot your strategy, enlist the support of a majority of Senators, and draft Vice President Biden’s ruling now that would end unconstitutional use of the filibuster.
You could move and VP Biden could rule, when the necessary “option” motions are made to avoid the filibuster, something like the following:
“The Chair rules that when legislation or appointments are proposed that can be cancelled or reversed by the next Congress, the Constitution compels Senate Rule XXII with its 60 vote requirement to close debate to be unconstitutional. For such legislation, the Chair rules that the Constitution compels action by vote of a simple majority of a quorum of those Senators present and voting. The Chair rules that Senate Rule XXII with its 60 vote requirement insofar as it applies to judicial appointments for the life of the nominee which can be undone only by a 2/3 vote of impeachment, is constitutional.”
I hope that you and Vice President Biden will exercise the leadership necessary to do this successfully.
Sincerely,
DOUGLAS R. PAGE
PRESIDENT OBAMA!! WALL STREET IS ROBBING US
PRESIDENT OBAMA!! WALL STREET BANKS ARE ROBBING US BLIND
President Obama: You have set up a web site and invite comment from your supporters. Here is something we are profoundly concerned about. We your loyal sovereign supporters and voters are being robbed blind by Wall Street. Professor Michael Hudson tells us that Two Trillion Dollars have been given to 15% or so of the wealthiest banks on Wall Street, investment banks like those that Robert Rubin, Senator Charles Schumer, Senator Chris Dodd and Vice President Biden and many other Senators have long supported. Our money is still being poured out to Wall Street. There is no end in sight. The phony rationale has been that we all will fall into a deep economic depression unless we make it possible for these banks again to extend credit, to make loans. First off, they are not doing this. These banks are, according to Professor Hudson, hoarding the money so that they can deal with their huge, but as yet unaudited, liabilities on collateralized debt obligations, credit default stops and the like. The Bank of America even used bailout money to buy a bank in China. Moreover, the stated objective makes no sense. No sane person wants to jump start the real estate bubble, the Silicon Valley bubble or any other bubble. Yet, that is the stated objective. These few banks seek to “solve” the real problem of our insufficient purchasing power in an awkward indirect tickle down way by transferring public money to the top 1% in the hope that the top 1% will find profit making opportunities and lend, invest, create employment, pay existing or lower wages, and thus finally “restore” our purchasing power. If these Wall Street banks mean what they say, this “solution” was not working before the crisis, has not worked since 1980, and especially will not work now. If these Wall Street bankers are spinning the facts to cover an outright theft of our money as appears to be the case, they should be prosecuted. These banks should be allowed to fall into bankruptcy, and a more direct, creative and effective use should be made with our bailouts.
President Obama, we, being some of your sovereign voters who gave you campaign money and who elected you want you to know that we have come to a startling realization: Our national market economy, our capitalism has “blown its engine.” No new inputs of oil or fuel or cash will jump start this blown engine. We must meet the immediate need of getting survival cash in our hands, then analyze why the engine failed, and then fix the defect. There are many among us who because of habit, obliviousness or temporary advantage have not yet accepted the fact that our national capitalism has permanently stalled beyond anybody’s capacity to restore it. We all soon will.
Have you noticed the spin on the real cause of the depression we now face? The main stream media incessantly label it as a “credit crisis,” and a “liquidity crisis” of Wall Street. Ben Bernanke and Henry Paulson were the first users of these words when the investment banks stopped lending because of their vast liability exposure in collateralized debt obligations. The use of these words as obfuscating spin continues inaccurately and inappropriately now that we are in a full blown depression. Their analysis is faulty. They either have not examined the dynamics of capitalism or they find it advantageous not to deal with the dynamics in public. Our diminishing or non-existent paychecks are the cause of Wall Street’s crisis and of our own crisis. Millions of us cannot afford to buy what multinational capitalism produces and attempts to sell at a profit. Naturally, high unemployment does not help. Stephen Lendman reported in http://www.dissidentvoice.org/2008/12/the-global-economic-crisis-bad-and-worsening/
“Economist John Williams corrects it (official statistics) by including what BLS leaves out, and through November reports unemployment at 16.5% or more than double the manipulated government data.”
There is suddenly an “overproduction” of houses that can be sold at a profit although millions are homeless. We do not need more credit in order to buy. We need much more adequate salaries and wages and we need full employment. In capitalism’s gigantic siphoning of money from the production process in the form of CEO salaries and perks, dividends, and interest, capitalism has created a small wealthy group of about 33,000 of us who have as much income and wealth as the bottom 300,000,000 of us. It has left the rest of us with insufficient wages and salaries to buy the houses and cars that capitalism produces. There is a limit to the number of houses the members of the top 33,000 very wealthy want, so their purchases do not keep capitalism going.. Five or more mansions spread around the planet for each of them is enough. The Wall Street spin, if honestly presented seeks to preserve the profit making opportunities, salaries, perks, dividends, interest, and power of the top 1%, and for the wealthiest investment banks of Wall Street. We emphasize: This strategy will not work even for Wall Street capitalists because it does nothing directly to restore our employee purchasing power upon which capitalism is so desperately dependent.
Our tax money is thus contributing to the continuation of the very dynamic that caused the crisis and blew up the economic engine we call capitalism. The bailout is not made on condition that employees be paid more so that they can buy what is produced. There is no condition imposed that the profit CEO salaries, perks, dividends, or interest of those who receive this public bailout be curtailed or eliminated. It is analogous to pouring more and more oil into a blown engine of an Indy race car. Pouring more and more oil will not start this blown engine and put it back in the race.
It is significant that the Wall Street spin studiously avoids suggesting an immediate direct solution to our real crisis: the quick transfer of public money to those who will quickly spend it, such as generously enhanced unemployment pay and a negative income tax. It is sad that even the UAW is part of the spin and is marching to Washington offering benefit concessions while forgetting Henry Ford’s dceision that he had to pay his employees more generously so that they could buy the Model Ts that their labor produced on the assembly line. With UAW concessions and support of the “credit crisis,” Ford employees will not be buying many Fords.
These observations are neither left nor right. They are simply observations of Wall Street acts and Wall Street’s stated purposes as communicated to us by the Wall Street owned media.
What underlying truth is this obfuscating spin hiding? In the case of the bailout of Wall Street investment banks and insurance companies, it may be a case of the top 1% getting all of our money they can “while the getting is good,” and hiding it away in their personal accounts overseas before we wise up. The Wall Street spin may conceal the largest theft of public funds we humans have ever experienced.
The rationalizations and justifications for national capitalism have been totally discredited. National capitalism is neither meeting human needs nor its own needs. It is not efficiently managed. It is not innovating. Any economic system whose normal dynamics can take us into the dark ages must be abolished. It is the height of stupidity to support an economic system that creates a few persons with the power to destroy our well-being.
Is capitalism providing society with good efficient management in its search for profit? Robert Rubin, Secretary Paulson and other top bankers of Wall Street were not very efficient in getting us into the subprime and collateralized debt obligation mess, and in their failure to deal with the core defect of inadequate purchasing power that has been with us since 1980. The management of capitalism’s best and brightest in the auto industry has brought the auto industry to bankruptcy.
Is American capitalism providing society with innovation in its relentless search for profit? Certainly not in the auto industry or in the housing industry. What about new products like hydrogen fuel cells? So far as I have been able to find, the main source of innovation is the University of California at Irvine where a public employee, Professor Scott Samuelsen is a world wide leader of hydrogen cell research and applications. Unfortunately for us, Wall Street capitalism has innovated and ineptly managed a large number of ways to make a short term profit without producing anything we need. This management has brought capitalism to its knees and begging for public bailout. Innovation and good management? What about Bear Stearns and Citibank? What about AIG? Lehman Brothers? The coal industry is spending millions in false advertising and PR to sell “clean coal” when no such thing now exists and is not predicted to exist for at least 2 decades. We are experiencing unthinking greed by our brightest national capitalists and not good management and innovation.
The point of all this is not to pick on human beings, misled and oblivious as they may be. Ben Bernanke is a brilliant human being with an IQ far above most of us mortals. He is moral and civilized. Capitalism did not self destruct for the want of human intelligence. The point here is to analyze and recognize the inevitably self destructive dynamic of capitalism itself. Former capitalists and present defenders and revivers of capitalism, Ben Bernanke, liberals like Paul Krugman and Robert Reich, and most importantly our elected Senators must face the facts. Capitalism has now destroyed itself at least at the national and global levels. National capitalists have successfully demanded that we turn over the management of our economy to them. “Privatize” and “let the market handle it” they said. They asked for freedom to invest abroad. We met their demands, loosened regulation, and provided billions and billions of public money to stimulate capitalism. We gave them unfettered freedom to invest and take their production facilities anywhere on the planet Despite this capitalism and capitalists have totally failed us. There is no point in trying to revive this blown economic engine at the national level.
We, through our democratic government, led by our new President Obama must take over the overall management of our national economy and our currency away from the market, away from Wall Street and away from the Federal Reserve Bank. We must use our public money much more directly and efficiently to solve real problems. For example, to meet the tragedy of those whose pensions are now vastly diminished in value, we must use public money to meet legitimate expectations. We must tax the wealth of those who “made out” during the bubbles and bailouts to fund what needs to be done
Our local capitalism in our local communities should not be much affected. A Federal Loan Bank can supply local auto dealers, hardware stores, and grocery stores with routine business loans for innovation. This Federal Bank could supply us with affordable housing loans. We are apparently not ready as citizens and voters to manage our local economies. Local capitalism should continue in our local communities. The civic impulse in us Americans seems to be in relatively short supply. We can barely manifest enough civic energy to vote periodically. Most union members do not attend union meetings. We so far do not have enough civic energy or interest to manage our local businesses through employee ownership and management. If bursts of civic energy should emerge to challenge capitalism on the local level, employees and voters can form Mondragon co-operatives so that they can be owner-managers of local business.
We challenge any and all remaining defenders of capitalism to show precisely how this analysis is wrong. If President Obama’s official advisors, or any one thinks that it is, put forth what you believe to be a more accurate analysis of the inner dynamics of capitalism.
December 13, 2008
Doug Page
President Obama: You have set up a web site and invite comment from your supporters. Here is something we are profoundly concerned about. We your loyal sovereign supporters and voters are being robbed blind by Wall Street. Professor Michael Hudson tells us that Two Trillion Dollars have been given to 15% or so of the wealthiest banks on Wall Street, investment banks like those that Robert Rubin, Senator Charles Schumer, Senator Chris Dodd and Vice President Biden and many other Senators have long supported. Our money is still being poured out to Wall Street. There is no end in sight. The phony rationale has been that we all will fall into a deep economic depression unless we make it possible for these banks again to extend credit, to make loans. First off, they are not doing this. These banks are, according to Professor Hudson, hoarding the money so that they can deal with their huge, but as yet unaudited, liabilities on collateralized debt obligations, credit default stops and the like. The Bank of America even used bailout money to buy a bank in China. Moreover, the stated objective makes no sense. No sane person wants to jump start the real estate bubble, the Silicon Valley bubble or any other bubble. Yet, that is the stated objective. These few banks seek to “solve” the real problem of our insufficient purchasing power in an awkward indirect tickle down way by transferring public money to the top 1% in the hope that the top 1% will find profit making opportunities and lend, invest, create employment, pay existing or lower wages, and thus finally “restore” our purchasing power. If these Wall Street banks mean what they say, this “solution” was not working before the crisis, has not worked since 1980, and especially will not work now. If these Wall Street bankers are spinning the facts to cover an outright theft of our money as appears to be the case, they should be prosecuted. These banks should be allowed to fall into bankruptcy, and a more direct, creative and effective use should be made with our bailouts.
President Obama, we, being some of your sovereign voters who gave you campaign money and who elected you want you to know that we have come to a startling realization: Our national market economy, our capitalism has “blown its engine.” No new inputs of oil or fuel or cash will jump start this blown engine. We must meet the immediate need of getting survival cash in our hands, then analyze why the engine failed, and then fix the defect. There are many among us who because of habit, obliviousness or temporary advantage have not yet accepted the fact that our national capitalism has permanently stalled beyond anybody’s capacity to restore it. We all soon will.
Have you noticed the spin on the real cause of the depression we now face? The main stream media incessantly label it as a “credit crisis,” and a “liquidity crisis” of Wall Street. Ben Bernanke and Henry Paulson were the first users of these words when the investment banks stopped lending because of their vast liability exposure in collateralized debt obligations. The use of these words as obfuscating spin continues inaccurately and inappropriately now that we are in a full blown depression. Their analysis is faulty. They either have not examined the dynamics of capitalism or they find it advantageous not to deal with the dynamics in public. Our diminishing or non-existent paychecks are the cause of Wall Street’s crisis and of our own crisis. Millions of us cannot afford to buy what multinational capitalism produces and attempts to sell at a profit. Naturally, high unemployment does not help. Stephen Lendman reported in http://www.dissidentvoice.org/2008/12/the-global-economic-crisis-bad-and-worsening/
“Economist John Williams corrects it (official statistics) by including what BLS leaves out, and through November reports unemployment at 16.5% or more than double the manipulated government data.”
There is suddenly an “overproduction” of houses that can be sold at a profit although millions are homeless. We do not need more credit in order to buy. We need much more adequate salaries and wages and we need full employment. In capitalism’s gigantic siphoning of money from the production process in the form of CEO salaries and perks, dividends, and interest, capitalism has created a small wealthy group of about 33,000 of us who have as much income and wealth as the bottom 300,000,000 of us. It has left the rest of us with insufficient wages and salaries to buy the houses and cars that capitalism produces. There is a limit to the number of houses the members of the top 33,000 very wealthy want, so their purchases do not keep capitalism going.. Five or more mansions spread around the planet for each of them is enough. The Wall Street spin, if honestly presented seeks to preserve the profit making opportunities, salaries, perks, dividends, interest, and power of the top 1%, and for the wealthiest investment banks of Wall Street. We emphasize: This strategy will not work even for Wall Street capitalists because it does nothing directly to restore our employee purchasing power upon which capitalism is so desperately dependent.
Our tax money is thus contributing to the continuation of the very dynamic that caused the crisis and blew up the economic engine we call capitalism. The bailout is not made on condition that employees be paid more so that they can buy what is produced. There is no condition imposed that the profit CEO salaries, perks, dividends, or interest of those who receive this public bailout be curtailed or eliminated. It is analogous to pouring more and more oil into a blown engine of an Indy race car. Pouring more and more oil will not start this blown engine and put it back in the race.
It is significant that the Wall Street spin studiously avoids suggesting an immediate direct solution to our real crisis: the quick transfer of public money to those who will quickly spend it, such as generously enhanced unemployment pay and a negative income tax. It is sad that even the UAW is part of the spin and is marching to Washington offering benefit concessions while forgetting Henry Ford’s dceision that he had to pay his employees more generously so that they could buy the Model Ts that their labor produced on the assembly line. With UAW concessions and support of the “credit crisis,” Ford employees will not be buying many Fords.
These observations are neither left nor right. They are simply observations of Wall Street acts and Wall Street’s stated purposes as communicated to us by the Wall Street owned media.
What underlying truth is this obfuscating spin hiding? In the case of the bailout of Wall Street investment banks and insurance companies, it may be a case of the top 1% getting all of our money they can “while the getting is good,” and hiding it away in their personal accounts overseas before we wise up. The Wall Street spin may conceal the largest theft of public funds we humans have ever experienced.
The rationalizations and justifications for national capitalism have been totally discredited. National capitalism is neither meeting human needs nor its own needs. It is not efficiently managed. It is not innovating. Any economic system whose normal dynamics can take us into the dark ages must be abolished. It is the height of stupidity to support an economic system that creates a few persons with the power to destroy our well-being.
Is capitalism providing society with good efficient management in its search for profit? Robert Rubin, Secretary Paulson and other top bankers of Wall Street were not very efficient in getting us into the subprime and collateralized debt obligation mess, and in their failure to deal with the core defect of inadequate purchasing power that has been with us since 1980. The management of capitalism’s best and brightest in the auto industry has brought the auto industry to bankruptcy.
Is American capitalism providing society with innovation in its relentless search for profit? Certainly not in the auto industry or in the housing industry. What about new products like hydrogen fuel cells? So far as I have been able to find, the main source of innovation is the University of California at Irvine where a public employee, Professor Scott Samuelsen is a world wide leader of hydrogen cell research and applications. Unfortunately for us, Wall Street capitalism has innovated and ineptly managed a large number of ways to make a short term profit without producing anything we need. This management has brought capitalism to its knees and begging for public bailout. Innovation and good management? What about Bear Stearns and Citibank? What about AIG? Lehman Brothers? The coal industry is spending millions in false advertising and PR to sell “clean coal” when no such thing now exists and is not predicted to exist for at least 2 decades. We are experiencing unthinking greed by our brightest national capitalists and not good management and innovation.
The point of all this is not to pick on human beings, misled and oblivious as they may be. Ben Bernanke is a brilliant human being with an IQ far above most of us mortals. He is moral and civilized. Capitalism did not self destruct for the want of human intelligence. The point here is to analyze and recognize the inevitably self destructive dynamic of capitalism itself. Former capitalists and present defenders and revivers of capitalism, Ben Bernanke, liberals like Paul Krugman and Robert Reich, and most importantly our elected Senators must face the facts. Capitalism has now destroyed itself at least at the national and global levels. National capitalists have successfully demanded that we turn over the management of our economy to them. “Privatize” and “let the market handle it” they said. They asked for freedom to invest abroad. We met their demands, loosened regulation, and provided billions and billions of public money to stimulate capitalism. We gave them unfettered freedom to invest and take their production facilities anywhere on the planet Despite this capitalism and capitalists have totally failed us. There is no point in trying to revive this blown economic engine at the national level.
We, through our democratic government, led by our new President Obama must take over the overall management of our national economy and our currency away from the market, away from Wall Street and away from the Federal Reserve Bank. We must use our public money much more directly and efficiently to solve real problems. For example, to meet the tragedy of those whose pensions are now vastly diminished in value, we must use public money to meet legitimate expectations. We must tax the wealth of those who “made out” during the bubbles and bailouts to fund what needs to be done
Our local capitalism in our local communities should not be much affected. A Federal Loan Bank can supply local auto dealers, hardware stores, and grocery stores with routine business loans for innovation. This Federal Bank could supply us with affordable housing loans. We are apparently not ready as citizens and voters to manage our local economies. Local capitalism should continue in our local communities. The civic impulse in us Americans seems to be in relatively short supply. We can barely manifest enough civic energy to vote periodically. Most union members do not attend union meetings. We so far do not have enough civic energy or interest to manage our local businesses through employee ownership and management. If bursts of civic energy should emerge to challenge capitalism on the local level, employees and voters can form Mondragon co-operatives so that they can be owner-managers of local business.
We challenge any and all remaining defenders of capitalism to show precisely how this analysis is wrong. If President Obama’s official advisors, or any one thinks that it is, put forth what you believe to be a more accurate analysis of the inner dynamics of capitalism.
December 13, 2008
Doug Page
Sunday, November 30, 2008
WALL STREET BAILOUT WILL NOT JUMPSTART CAPITALISM
THE WALL STREET BAILOUT WILL NOT JUMP-START OUR CAPITALISM
A PLAN B
Despite all of the talk and promise of hope and change, it is now apparent that President Obama plans to try to restart capitalism as it was prior to August 2007. He proposes to try to restore the status quo just prior to the present crisis. He also plans to use public funds, our tax money, “as much as is necessary” for this purpose. The total already promised is $7.3 Trillion for Wall Street. This is $28,000 of debt for each one of us, our children and grandchildren. If Obama goes ahead with his proposed stimulus package for Main Street, it is estimated that will cost at least $7 Trillion more. That will be a debt of $56,000 for each of us. Obama promises to help both Wall Street and Main Street, both the wealthiest 1% and the “middle class,” a classification that contains ever diminishing numbers. Those of us who are not a part of the wealthiest 1% are typically economically insecure, worried, poor, and getting poorer in terms of medical care, housing, and even adequate nutritious food, and the new taxes necessary to pay off this tremendous debt. There is an irreconcilable conflict of interest between the top 1%, Wall Street and the very rich, and the bottom 95% consisting of Main Street, the Middle Class, the poor, the homeless and the destitute. Obama now seems to be a servant of Wall Street. We hope that he is a wise prophet with secret future plans, when he promises that we are all united Americans with a common need and a common goal.
President Obama does not now acknowledge how very sick and fragile our capitalism was in August 2007. We were overburdened with credit debt. The economy was kept going by tempting us into more debt by issuing multiple credit cards, and by selling us overpriced subdivision houses with mortgages that we could not afford. As we shall show below, the subprime mess was a natural mutation of the dynamics of our capitalism.
However, most of us continue to give Obama the benefit of the doubt. We have no other choice. We hope and we pray that he, like Lincoln, is making every possible effort to harmonize profoundly conflicting ideologies and levels of wealth, and that he will ultimately do what is right and possible for mankind and fulfill our yearning for hope and healing change. We hope that he will do this without another Civil War, and without the loss of our liberty.
All we can do right now is to raise questions: Will Obama’s present plan to give Wall Street $7.3 Trillion without effective conditions really stimulate the whole economy? Will Obama’s efforts, priorities, and huge bailouts rescue Wall Street and the top 1% so that capitalism will be jump started for them and for all of us?
President Obama’s selection of University of California Professor Christina Romer as his head economics advisor gives us a hint of what he plans. She, so far as we can tell from her writings, has never studied nor even acknowledged the existence of capitalism’s inner dynamics. She seems to assume that capitalism if left to itself, will work smoothly and permanently with full employment. The insight that we now have as to her interests and beliefs comes from her entry on “Business Cycles” in the Library of Economics and Liberty at http://www.econlib.org/library/Enc/BusinessCycles.htm
As to the causes of business cycles, recessions and depressions, she writes: “…there is no reason why business cycles have to occur at all. The prevailing view among economists is that there is a level of economic activity, often referred to as full employment, at which the economy could stay forever….If nothing disturbs the economy, the full employment level of output, which naturally tends to grow as the population increases, and newer technologies are discovered, can be maintained forever.” She seems to believe that our capitalism can be controlled simply by tweaking the money supply and the interest rates. If these cycles cause pain among us, she writes: “The advent of unemployment insurance and other social welfare programs means that recessions no longer wreak the havoc on individuals’ standard of living that they once did.”In her view of our capitalism, “Everything is grand in Kansas City. Everything is good as it can be.”
Although she is said to be a specialist in the causes of the Great Depression, Her academic work and writings seem to reflect her interest in simply uncritically and non-judgmentally observing capitalism, and measuring its external movements and tendencies. She assumes capitalism is at least potentially a stable, socially useful system for all of us. She seems to assume that only minor tweaking is needed to keep it going. She does not show interest in the inner workings of capitalism, its tendency toward monopoly, overproduction, and imperialism, in its creation of a tremendous disparity between the rich and the poor and the resulting political power, and its longstanding need for ever increasing public expenditure to avoid economic depression.
She thus assumes a capitalism that has never existed anywhere, at any time. No manipulations of money supply and interest rates have ever made capitalism work with full employment. Born in 1958 and coming of age in 1978, she has never personally experienced or witnessed the pain of the Great Depression. She has apparently not been much influenced by John Steinbeck’s book, Grapes of Wrath whose main character Tom Joad says regarding our capitalism: “There is food to eat and people to eat it, but them two cannot get together. There is work to do and people to do it, but them two cannot get together either.” Professor Romer thus deprives herself of much relevant data, insights, and actual experience of the real workings of capitalism during strikes, on the picket line, in the legislative halls, among the victims of industrial pollution, with the sick whose only source of care is the hospital emergency room, and among the homeless, unemployed and underemployed. She apparently has not read Barbara Ehrenreich’s recent book, “Nickel and Dimed” about a woman’s unsuccessful effort to survive in our real economy. She also deprives herself of those who have studied the real inner workings and dynamics of capitalism, or she finds it professionally advantageous to ignore them. (No capitalist business or corporation has ever provided grants to professors or graduate students to study the defects of capitalism.)
The point of all of this is that neither Professor Romer nor President Obama can devise remedies and solutions for the great crisis of our capitalism unless they know the real causes of the crisis.
Feeding more hay to a sick elephant will only make it sicker if the elephant has cancer in its digestive tract. The evidence shows that our capitalism has “cancer of its metabolism.” The evidence shows that ever since 1980, capitalists could not make a profit producing things that people really need. The fact that capitalist employers draw out tremendous salaries and dividends from the production our labor creates and the fact that investment banks draw out more in interest, leaves us employee-consumers with insufficient wages and salaries to buy the goods our labor has produced. So the employers have “overproduction.” We still have needs, but there is no profit for capitalists in meeting our needs. They fire us and move on to some other activity where they can make a profit, first overseas in economic imperialism by hiring employees to produce there, at even lower wages. When even imperialism produced more goods that could be sold, capitalists turned in 1980 to what has been named Financialization. Desperate for new sources of profit, capitalists began to buy and sell each other’s companies using the easy credit from investment banks to do so rather than their own accumulated profits or issuing stock. (Interest is tax deductible, while dividends are not.) They also began to invest in subprime mortgages, and then in the many levels of collateralized debt obligations based on these new mortgages. These three or more levels of collateralized debt obligations provided quick Ponzi scheme type profit for Robert Rubin and his investment banks, but produced absolutely nothing that human beings needed. This is how capitalism actually has worked during recent history. This illustrates the inner dynamics of capitalism. As we see, capitalism was very sick even in 1980 in that there was insufficient profit making opportunities in producing what people needed. Every year from 1933 to date, capitalism has needed tremendous contributions of public money to stay out of depression. Capitalism has never been robust on its own without public money. It has always been fragile. Our capitalism’s mutation from one level to the next is set forth in detail in my previous article, “Why is Our Capitalism Failing Us?” published in Dissident Voice at http://www.dissidentvoice.org/2008/06/why=is=capitalism-failing-us/
There simply is no credit crisis. There is a demand crisis, a crisis among us voter consumers consisting of our inability to buy what we need. We need more credit like we need a hole in the head. We are already maxed out on credit. The real problem is that people do not earn enough from their labor to buy what capitalism cam produce. There is an “overproduction” of things that can be sold at a profit, but there simply is not an overproduction of things we really need. So it is a pure criminal theft of our money to give $7.3 Trillion to investment banks, their CEOs and shareholders in the hope that they will again make credit available. This scandalous gift of public funds is aimed at a problem that does not exist and will do absolutely nothing to solve the problem that does exist. A policy that is aimed at providing profit making opportunities for investment banks on Wall Street will not even produce profit for them. It does absolutely nothing to increase our purchasing power or our earnings or our well being. If we were eagerly ready to pay for more cars and houses, you may be sure that Wall Street banks would find a way to finance them. We are not. We cannot. We have no earned money with which to buy. THAT is the problem. The current strategy involves spending $7.3 Trillion in an outright gift to bankrupt ineptly managed investment banks and insurance companies to relieve them of the liability of now worthless collateralized debt obligations. It is then hoped that they will again extend credit. This is not working, it could work for us if at all only by trickle down, and it cannot work even for Wall Street. Even if the banks are forced to lend money to businesses and credit card holders, there is no way to force anybody or any company to borrow. There is no way this trickle down will create adequate purchasing power among those with needs. It does nothing to solve the inner sickness of capitalism. There is absolutely no reason why we the public should bear the cost of Robert Rubin’s stupidity and take over the massive liabilities of the investment banks in these worthless collateralized debt obligations. In order to qualify to invest in those, one had to be a sophisticated wealthy investor. Let Robert Rubin and other investors like him bear the loss of their stupid investments. It is idiotic to let Robert Rubin and his protégés now influence the policy of bailing them out when they are responsible for the problem.
With an accurate and realistic analysis of the dynamics of capitalism, one can then fashion pragmatic reforms or substitutes as circumstances demand, a Plan B.
We have plenty of humans willing and anxious to work. We have immense human needs, many of them unmet. We have thousands of businesses ready and willing to meet those needs, although some needs like medical care cannot and should not yield a profit. What is missing is a source of earned purchasing power. Instead, to get things going why not set up a Federal Loan Bank and provide the necessary credit at low interest rates directly to local healthy banks so that they can function normally? These local banks can then meet the routine needs of business for flooring loans, seasonal loans, and other normal long and short term loans. Spend the $7.3 Trillion on extending and increasing Unemployment benefits, in retraining, building new sources of energy, and rebuilding our bridges and levees. Let’s spend it for Universal Health Care. If necessary let our government be the employer and the lender of last resort. Let Robert Rubin’s investment banks go bankrupt. With any luck, Wall Street’s corrupt political power over our elected officials will then be weakened. Once things are going, we can then consider further steps to solve capitalism’s inner sickness. For those human needs that capitalists cannot meet adequately and still make a profit like universal health care, our government can become the employer of last resort. For example, our government can hire doctors, nurses and physician’s assistants. It can place a physician’s assistant in a drop in clinic in the corner of drug stores to provide immediate health care. We can then relieve our employers of the expense of providing health care and Worker’s Compensation Insured medical care for job injuries.
Since our government is not choosing direct solutions, it is apparent that this is a class issue. Wall Street, Robert Rubin and the top 1% naturally prefer that the $7.3 Trillion be given to them to compensate them for their stupid investments. We do not need to yield to these outrageous demands. Our President and our government are so far demonstrating that they are subject to the control of Wall Street. Our alternative is to let the investment banks go bankrupt and not us. They created their own problem. There is no sense in letting them take us down with them.
It is also obvious that President Obama, at least for the present, is adopting as his very own, and trying to refuel, the already existing class war of Wall Street and the very rich against the rest of us to convert every minute of our existence into a profit making opportunity. This is obvious from his priority of helping Wall Street first, asking absolutely nothing substantive in return and the promptness with which he gave his support. It is obvious from his support of the Wall Street policy of helping investment banks and insurance companies, but not Ford Chrysler or GM. The Wall Street policy is to let the auto companies go through bankruptcy to escape their union contracts and health insurance commitments. Wall Street will then help these companies after bankruptcy. The current policy will not work. A Great Depression will soon be upon us. We hope that brilliant, pragmatic, compassionate, non-ideological President Obama and his economic advisor Professor Christina Romer will then stop listening to Robert Rubin’s and Wall Street’s “solutions.” We hope that President Obama will then use our public money to solve the inner sickness of capitalism, and to meet our needs. We will then be truly united Americans with common needs, dreams, and more equal political power. We will then have more fully achieved a government of, by, and for the people.
Dated: November 29, 2008
Doug Page dougpage2@earthlink.net
A PLAN B
Despite all of the talk and promise of hope and change, it is now apparent that President Obama plans to try to restart capitalism as it was prior to August 2007. He proposes to try to restore the status quo just prior to the present crisis. He also plans to use public funds, our tax money, “as much as is necessary” for this purpose. The total already promised is $7.3 Trillion for Wall Street. This is $28,000 of debt for each one of us, our children and grandchildren. If Obama goes ahead with his proposed stimulus package for Main Street, it is estimated that will cost at least $7 Trillion more. That will be a debt of $56,000 for each of us. Obama promises to help both Wall Street and Main Street, both the wealthiest 1% and the “middle class,” a classification that contains ever diminishing numbers. Those of us who are not a part of the wealthiest 1% are typically economically insecure, worried, poor, and getting poorer in terms of medical care, housing, and even adequate nutritious food, and the new taxes necessary to pay off this tremendous debt. There is an irreconcilable conflict of interest between the top 1%, Wall Street and the very rich, and the bottom 95% consisting of Main Street, the Middle Class, the poor, the homeless and the destitute. Obama now seems to be a servant of Wall Street. We hope that he is a wise prophet with secret future plans, when he promises that we are all united Americans with a common need and a common goal.
President Obama does not now acknowledge how very sick and fragile our capitalism was in August 2007. We were overburdened with credit debt. The economy was kept going by tempting us into more debt by issuing multiple credit cards, and by selling us overpriced subdivision houses with mortgages that we could not afford. As we shall show below, the subprime mess was a natural mutation of the dynamics of our capitalism.
However, most of us continue to give Obama the benefit of the doubt. We have no other choice. We hope and we pray that he, like Lincoln, is making every possible effort to harmonize profoundly conflicting ideologies and levels of wealth, and that he will ultimately do what is right and possible for mankind and fulfill our yearning for hope and healing change. We hope that he will do this without another Civil War, and without the loss of our liberty.
All we can do right now is to raise questions: Will Obama’s present plan to give Wall Street $7.3 Trillion without effective conditions really stimulate the whole economy? Will Obama’s efforts, priorities, and huge bailouts rescue Wall Street and the top 1% so that capitalism will be jump started for them and for all of us?
President Obama’s selection of University of California Professor Christina Romer as his head economics advisor gives us a hint of what he plans. She, so far as we can tell from her writings, has never studied nor even acknowledged the existence of capitalism’s inner dynamics. She seems to assume that capitalism if left to itself, will work smoothly and permanently with full employment. The insight that we now have as to her interests and beliefs comes from her entry on “Business Cycles” in the Library of Economics and Liberty at http://www.econlib.org/library/Enc/BusinessCycles.htm
As to the causes of business cycles, recessions and depressions, she writes: “…there is no reason why business cycles have to occur at all. The prevailing view among economists is that there is a level of economic activity, often referred to as full employment, at which the economy could stay forever….If nothing disturbs the economy, the full employment level of output, which naturally tends to grow as the population increases, and newer technologies are discovered, can be maintained forever.” She seems to believe that our capitalism can be controlled simply by tweaking the money supply and the interest rates. If these cycles cause pain among us, she writes: “The advent of unemployment insurance and other social welfare programs means that recessions no longer wreak the havoc on individuals’ standard of living that they once did.”In her view of our capitalism, “Everything is grand in Kansas City. Everything is good as it can be.”
Although she is said to be a specialist in the causes of the Great Depression, Her academic work and writings seem to reflect her interest in simply uncritically and non-judgmentally observing capitalism, and measuring its external movements and tendencies. She assumes capitalism is at least potentially a stable, socially useful system for all of us. She seems to assume that only minor tweaking is needed to keep it going. She does not show interest in the inner workings of capitalism, its tendency toward monopoly, overproduction, and imperialism, in its creation of a tremendous disparity between the rich and the poor and the resulting political power, and its longstanding need for ever increasing public expenditure to avoid economic depression.
She thus assumes a capitalism that has never existed anywhere, at any time. No manipulations of money supply and interest rates have ever made capitalism work with full employment. Born in 1958 and coming of age in 1978, she has never personally experienced or witnessed the pain of the Great Depression. She has apparently not been much influenced by John Steinbeck’s book, Grapes of Wrath whose main character Tom Joad says regarding our capitalism: “There is food to eat and people to eat it, but them two cannot get together. There is work to do and people to do it, but them two cannot get together either.” Professor Romer thus deprives herself of much relevant data, insights, and actual experience of the real workings of capitalism during strikes, on the picket line, in the legislative halls, among the victims of industrial pollution, with the sick whose only source of care is the hospital emergency room, and among the homeless, unemployed and underemployed. She apparently has not read Barbara Ehrenreich’s recent book, “Nickel and Dimed” about a woman’s unsuccessful effort to survive in our real economy. She also deprives herself of those who have studied the real inner workings and dynamics of capitalism, or she finds it professionally advantageous to ignore them. (No capitalist business or corporation has ever provided grants to professors or graduate students to study the defects of capitalism.)
The point of all of this is that neither Professor Romer nor President Obama can devise remedies and solutions for the great crisis of our capitalism unless they know the real causes of the crisis.
Feeding more hay to a sick elephant will only make it sicker if the elephant has cancer in its digestive tract. The evidence shows that our capitalism has “cancer of its metabolism.” The evidence shows that ever since 1980, capitalists could not make a profit producing things that people really need. The fact that capitalist employers draw out tremendous salaries and dividends from the production our labor creates and the fact that investment banks draw out more in interest, leaves us employee-consumers with insufficient wages and salaries to buy the goods our labor has produced. So the employers have “overproduction.” We still have needs, but there is no profit for capitalists in meeting our needs. They fire us and move on to some other activity where they can make a profit, first overseas in economic imperialism by hiring employees to produce there, at even lower wages. When even imperialism produced more goods that could be sold, capitalists turned in 1980 to what has been named Financialization. Desperate for new sources of profit, capitalists began to buy and sell each other’s companies using the easy credit from investment banks to do so rather than their own accumulated profits or issuing stock. (Interest is tax deductible, while dividends are not.) They also began to invest in subprime mortgages, and then in the many levels of collateralized debt obligations based on these new mortgages. These three or more levels of collateralized debt obligations provided quick Ponzi scheme type profit for Robert Rubin and his investment banks, but produced absolutely nothing that human beings needed. This is how capitalism actually has worked during recent history. This illustrates the inner dynamics of capitalism. As we see, capitalism was very sick even in 1980 in that there was insufficient profit making opportunities in producing what people needed. Every year from 1933 to date, capitalism has needed tremendous contributions of public money to stay out of depression. Capitalism has never been robust on its own without public money. It has always been fragile. Our capitalism’s mutation from one level to the next is set forth in detail in my previous article, “Why is Our Capitalism Failing Us?” published in Dissident Voice at http://www.dissidentvoice.org/2008/06/why=is=capitalism-failing-us/
There simply is no credit crisis. There is a demand crisis, a crisis among us voter consumers consisting of our inability to buy what we need. We need more credit like we need a hole in the head. We are already maxed out on credit. The real problem is that people do not earn enough from their labor to buy what capitalism cam produce. There is an “overproduction” of things that can be sold at a profit, but there simply is not an overproduction of things we really need. So it is a pure criminal theft of our money to give $7.3 Trillion to investment banks, their CEOs and shareholders in the hope that they will again make credit available. This scandalous gift of public funds is aimed at a problem that does not exist and will do absolutely nothing to solve the problem that does exist. A policy that is aimed at providing profit making opportunities for investment banks on Wall Street will not even produce profit for them. It does absolutely nothing to increase our purchasing power or our earnings or our well being. If we were eagerly ready to pay for more cars and houses, you may be sure that Wall Street banks would find a way to finance them. We are not. We cannot. We have no earned money with which to buy. THAT is the problem. The current strategy involves spending $7.3 Trillion in an outright gift to bankrupt ineptly managed investment banks and insurance companies to relieve them of the liability of now worthless collateralized debt obligations. It is then hoped that they will again extend credit. This is not working, it could work for us if at all only by trickle down, and it cannot work even for Wall Street. Even if the banks are forced to lend money to businesses and credit card holders, there is no way to force anybody or any company to borrow. There is no way this trickle down will create adequate purchasing power among those with needs. It does nothing to solve the inner sickness of capitalism. There is absolutely no reason why we the public should bear the cost of Robert Rubin’s stupidity and take over the massive liabilities of the investment banks in these worthless collateralized debt obligations. In order to qualify to invest in those, one had to be a sophisticated wealthy investor. Let Robert Rubin and other investors like him bear the loss of their stupid investments. It is idiotic to let Robert Rubin and his protégés now influence the policy of bailing them out when they are responsible for the problem.
With an accurate and realistic analysis of the dynamics of capitalism, one can then fashion pragmatic reforms or substitutes as circumstances demand, a Plan B.
We have plenty of humans willing and anxious to work. We have immense human needs, many of them unmet. We have thousands of businesses ready and willing to meet those needs, although some needs like medical care cannot and should not yield a profit. What is missing is a source of earned purchasing power. Instead, to get things going why not set up a Federal Loan Bank and provide the necessary credit at low interest rates directly to local healthy banks so that they can function normally? These local banks can then meet the routine needs of business for flooring loans, seasonal loans, and other normal long and short term loans. Spend the $7.3 Trillion on extending and increasing Unemployment benefits, in retraining, building new sources of energy, and rebuilding our bridges and levees. Let’s spend it for Universal Health Care. If necessary let our government be the employer and the lender of last resort. Let Robert Rubin’s investment banks go bankrupt. With any luck, Wall Street’s corrupt political power over our elected officials will then be weakened. Once things are going, we can then consider further steps to solve capitalism’s inner sickness. For those human needs that capitalists cannot meet adequately and still make a profit like universal health care, our government can become the employer of last resort. For example, our government can hire doctors, nurses and physician’s assistants. It can place a physician’s assistant in a drop in clinic in the corner of drug stores to provide immediate health care. We can then relieve our employers of the expense of providing health care and Worker’s Compensation Insured medical care for job injuries.
Since our government is not choosing direct solutions, it is apparent that this is a class issue. Wall Street, Robert Rubin and the top 1% naturally prefer that the $7.3 Trillion be given to them to compensate them for their stupid investments. We do not need to yield to these outrageous demands. Our President and our government are so far demonstrating that they are subject to the control of Wall Street. Our alternative is to let the investment banks go bankrupt and not us. They created their own problem. There is no sense in letting them take us down with them.
It is also obvious that President Obama, at least for the present, is adopting as his very own, and trying to refuel, the already existing class war of Wall Street and the very rich against the rest of us to convert every minute of our existence into a profit making opportunity. This is obvious from his priority of helping Wall Street first, asking absolutely nothing substantive in return and the promptness with which he gave his support. It is obvious from his support of the Wall Street policy of helping investment banks and insurance companies, but not Ford Chrysler or GM. The Wall Street policy is to let the auto companies go through bankruptcy to escape their union contracts and health insurance commitments. Wall Street will then help these companies after bankruptcy. The current policy will not work. A Great Depression will soon be upon us. We hope that brilliant, pragmatic, compassionate, non-ideological President Obama and his economic advisor Professor Christina Romer will then stop listening to Robert Rubin’s and Wall Street’s “solutions.” We hope that President Obama will then use our public money to solve the inner sickness of capitalism, and to meet our needs. We will then be truly united Americans with common needs, dreams, and more equal political power. We will then have more fully achieved a government of, by, and for the people.
Dated: November 29, 2008
Doug Page dougpage2@earthlink.net
Saturday, November 22, 2008
THE UNDIAGNOSED CANCER THAT HAS KILLED CAPITALISM
In the 1920s, Henry Ford perceived a fundamental flaw in capitalism and when he suddenly started paying his auto workers the then extremely generous sum of $5 per day. A unilateral raise of this magnitude was shocking at that time. Ford did this so that his employees would have enough money to buy his Fords. Ford had recognized a fundamental fatal defect of capitalism: It inevitably produces more than can be sold.
Since we have an economic system, capitalism, where almost all humans are employees, who, if not employees, will purchase capitalism’s products? Hunters and gatherers? Self employed farmers? What group in society has cash to purchase what capitalism produces? Are there enough money lenders and capitalist employers with enough profit and earned interest to purchase all of the production? Experience now clearly demonstrates that there are not. We now have tremendous unused capacity to produce. Capitalism is destroying itself. This is not a left-right problem, nor a conservative- liberal ideological problem. It is simply a fact. It is an inevitable, unavoidable result of the core dynamic of capitalism. That core dynamic is:
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QUACKING ON THE EVE OF DISASTER
Lame duck President Bush speaking recently about the economic depression we now face said: “We must save capitalism,” “Government is not the total solution,” “Capitalism is the only way,” and “The key is sustained economic growth with free trade within the
Free of the propaganda coming from the top 1%, we can evaluate the power and numbers of “terrorists,” and make a determination as to whether there are less expensive and more effective ways such as effective police work and negotiation, to deal with them rather than a permanent planet-wide war.
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