Tuesday, December 02, 2008

State Sanctioned Theft - When Immorality is Law and Resistance is Crime

By Simon Davies and Donald Hunt
SOTT.net

World stock indexes rebounded strongly last week. The Dow and the Hang Seng were up nearly 10%, the FTSE and DAX were up 13% and the Brazilian Bovespa was up a whopping 17%. Gold pushed passed $800.

In the U.S. retailers reported a better than feared "Black Friday," with sales rising 3% compared to the previous year, although discounts were deep and profit margins low. Black Friday refers to the Friday after the Thanksgiving holiday. It is both the traditional start of the Christmas shopping season and the day that retailers start to make their profits for the year. In recent years it has become a bigger and bigger thing, with families waiting in line outside big box stores and malls the night before waiting to get let in at five in the morning, lured by steep discounts on a few big ticket items. This year with the bad economy it got completely out of hand as a Walmart employee was trampled to death in Long Island when the crowds were let in.

These reports contrast with the predicament of one in ten Americans in nearly half the states who are now relying on food stamps.

The people of Iceland are also in dire straits. The entire banking system has collapsed, Britain has used anti-terror laws to freeze assets and force restitution; the currency has devalued by half, the economy shrunk by 15% causing companies to go bust everyday with thousands of job losses. Naturally the people are calling for a revolution.

In a notionally "free market" system, banks that find themselves in trouble should not be bailed out but allowed to fail - that is what happens to ordinary people, we are never bailed out we become bankrupt with all the attendant horrors of that status. So why is there so much government hand wringing when banks hits the wall? There is a simple solution to this, that there are banks and other corporations that are deemed "too big to fail" which in fact should be allowed to fail and then be broken up and never allowed to rise again. If there were no banks or companies "too big to fail" then bankers would be forced to retain the risk they accumulate as well as the profits. In the current situation that would mean that banks would fail or at least be taken into managed liquidation or administration. This could be achieved and the citizen protected at costs certainly no greater than the current bailouts. But don't expect to see anything so radical on the agenda anytime soon.

Yet, as we discussed last week, it seems that exactly the contrary is likely to arise from the New Bretton Woods system of mega-banks. Many commentators and certainly many US voters have high hopes that Barack Obama is a man who can bring change, who perhaps might even be a "New Dealer" treading in the footsteps of FDR. If Obama really was to implement changes then, like FDR, he will have to break up the 'Great Trusts" starting with the banks.

According to Michael Hudson, all the bailouts to date have been designed to protect claims by the super-wealthy on the surpluses generated by the rest of us. Bad debts are being kept on the books, but they are being transferred in the U.S. to the Treasury and the Fed. Meanwhile, the government's pension fund that insures what private pensions are left, is not being bailed out; and the auto industry is being pushed into bankruptcy precisely so that it can renege on its pension commitments to its workers. Someone is clearly out to get us.

Reality had to raise its ugly head. Barack Obama was elected with overwhelming approval to inaugurate an era of change. And at his November 25th press conference, he said that his decisive victory gave him a mandate to change the direction in which America is moving. But his recent economic and foreign policy appointments make it clear that when he chose "change" as his campaign slogan, he was NOT referring to the financial, insurance and real estate (FIRE) sectors, nor to foreign policy. These are where the vested interests concentrate their wealth and power. And change already has been accelerating here. Unfortunately, its direction has been for the top 1% of America's population to raise their share of the returns to wealth from 37% ten years ago to 57% five years ago and an estimated nearly 70% today.

The change that Mr. Obama is talking about is largely marginal to this wealth, not touching its economic substance - or its direction. No doubt he will bring about a welcome change in race relations, environmental regulations, and a more civil rule of law. And he probably will give wage earners an income-tax break (thereby enabling them to keep on paying their bank debts, incidentally). As for the rich, they prefer not to earn income in the first place. Taxes need to be paid on income, so they take their returns in the form of capital gains. And simply avoiding losses is the order of the day in the present meltdown.

Where losses cannot be avoided, the government will bail out the rich on their financial investments, but not wage earners on their debts...

If you are a billionaire, your first concern is simply to preserve your wealth, to avoid having to take a loss in the value of your financial claims on the economy - claims for repayment of loans and investment, as well as interest and dividends, and enough capital gains to compensate for the price inflation that erodes the spending power of more lowly income-earners.

This year has changed the typical fate of financial wealth in the face of bursting financial bubbles. Traditionally, business booms culminate in a wave of bankruptcies that wipe out bad debts - and the savings that have been invested on the "asset" side of the balance sheet. This year has changed all that. The bad debts are being kept on the books - but transferred from the banks to the federal government, mainly the Federal Reserve and Treasury. The bank bailouts have aimed not so much to protect the banks themselves, but to enable them to pay off on the bad bets they made vis-à-vis the nation's hedge funds and other institutional investors in the derivatives market.

To participate in a hedge fund, one needs to prove that one can afford to lose their money and not be much the worse off for it in terms of actual living conditions. So the $306 billion in federal guarantees of the junk mortgage packages sold by Citibank, and the $135 billion bailout of the insurance contracts written by A.I.G. to protect swap contracts from loss, could have been avoided without much impact on the "real" economy.

In fact, writing down these financial claims ON the economy would have paved the way for writing down its debt burden. If the subprime and other mortgage debts had been permitted to decline to the neighborhood of 22 cents on a dollar they were trading for, this would have made it possible to write down debts to match the price at which mortgage holders had bought these loans for. But the financial overhead of American wealth "saved" in the form of creditor claims on indebted homeowners, industrial companies and junk-insurance companies such as A.I.G. has been protected against erosion by this year's federal bailout program.

Bloomberg has added up these programs and finds that they $7.7 trillion dollars - nearly half an entire year's GDP. By acting to support the market for bad-mortgage loans (but not for real estate itself), the seemingly endless series of Paulson bailouts seeks to keep today's debt overhead intact rather than writing it down. Service charges on this indebtedness will divert peoples' income from consumption to paying creditors. It will help financial investors, not labor or industry. It will keep the cost of living and doing business high, preventing the U.S. economy from working its way out of debt by becoming competitive once again.

With all these trillions of dollars of bailing out the wealthy, one might easily forget to ask what is being left out. For one thing, the government's Pension Benefit Guarantee Corp, whose $25 billion deficit is not bailed out. This year, underfunded corporate pension plans are supposed to "catch up" to full funding so as to protect the PBGC, in accordance with a law passed by Congress two years ago. If underfunded plans don't meet the scheduled 92% coverage for this year, they have to bring their set-asides fully up to the 100% funding level. The stock market plunge has dashed their hopes to do this. The result will be to force many industrial companies into a financial bind.

On the auto front, the Bush Administration has brought pressure to force the big three Detroit companies into bankruptcy as a way to annul their defined-benefit pension plans - with no plans at all bail out money owed to labor by restoring the PBGC to solvency. State and local pension plans are almost entirely unfunded, and are at even more risk as their tax revenues plunge and property tax payments are stopped on housing and commercial buildings that have foreclosed.
All this bailing out of the owners of the FIRE (Finance, Insurance, and Real Estate) sector will most likely effectively bankrupt governments under the current system. Indeed, this is probably one of the main reasons it is being done. Governments will be bankrupt and the biggest financial institutions, those "too big to fail", will have even more control; currencies will collapse from accelerating inflation all conveniently paving the way for the introduction of a new monetary system and a new form of money. As Rob Lee writes,
By the end of next year the US may have near zero interest rates, a fiscal deficit of 8% of GDP or more, and a chronically weak currency. This is a classic recipe for inflation. It is a myth that a weak economy necessarily means low inflation, especially if the size and role of government are expanding. Company failures and low investment weaken the supply side of the economy but improve pricing power for the survivors. Once the credibility of the currency and policy has gone people and businesses seek to protect themselves in real assets. Inflation can rise then very rapidly even in a weak economy.
It may be no coincidence that the only major country not preparing a massive bailout is the one most scarred by memories of hyperinflation, Germany. With banking economists calling for dramatic fiscal stimuli throughout the OECD, "China has announced a stimulus package worth 4 trillion yuan, or roughly $586 billion; Tokyo plans a stimulus worth 5 trillion yen ($53 billion), though it plans only to submit the extra budget to parliament in the new year; Washington has spent or committed trillions of dollars and is expected to come up with another big package -- some economists believe it may be worth upwards of $400 billion -- as soon as President-elect Barack Obama takes over in January and the European Commission has proposed that the 27-country European Union come up with an EU-wide package worth 200 billion euros, or 1.5 percent of EU gross domestic product.

German resistance

German resistance is of course being portrayed by the media as Chancellor Angela Merkel making a big mistake. Merkel says she does not want to get into a "race for billions", but is being accused of not "pulling its weight", a "lack of vision, lack of leadership, and a temptation to free-ride that, if widely mimicked, would truly condemn the world economy to a new great depression"

What is fascinating is to see the economists trying to drive Germany into a corner; Jim O'Neill, chief economist at Goldman Sachs, notes that domestic consumption in export-dependent Germany has barely budged in what will soon be 20 years since the fall of the Berlin Wall. And that is something that should change. "Europe's largest economy should do itself and the rest of the world a favor by raising wages, reducing sales tax, and thereby supporting higher levels of consumption", O'Neill argued in an article in the London Financial Times. O'Neill is of course pressing the Wall Street line that wishes to see every country fall within the trap of a rescue and stimulus package of the type slowly closing around other nations. Maybe Germany has learned from its experiences, not the least of which was the Weimar Republic, and is trying to chart an independent course.

In the United States, much of the bailout activity has been out of the news lately. Remember early in the process where the U.S. Federal Reserve announced that it would lend to institutions besides the banks it usually lent to? We haven't heard much about that lately. But Bill Buckler in his Privateer newsletter reminds us of what has been happening:

We live in astonishing financial times. In its latest reports, the US Fed has let it be known that total Fed lending has climbed above $2 trillion for the first time. That is a rise of 140 percent - or $1.172 trillion - in seven weeks!! The total includes a $788 Billion increase in loans to banks through the Fed and another $474 Billion in other lending, mostly through the central bank's purchase of Fannie and Freddie bonds. Here comes the problem. The Fed has refused to identify the recipients of almost $2 trillion of emergency loans and what the Fed has accepted as collateral!

Bloomberg has sued the Fed under the US Freedom of Information Act, trying to get this information, but the issue is stuck in Federal Court. Somebody out there got this $2 trillion from the Fed but they are not talking. The Fed, in turn, got some financial paper as collateral, but it won't say what it is.
Amid all the money flying around the near collapse of the settlement system for US Treasuries has hardly merited a comment, yet it does not auger well for the future. It is certainly an interesting development when we consider that Timothy Geithner, the next US Treasury Secretary, is chairman of the Bank for International Settlements Committee on Payment and Settlement systems.

The Markets

The markets this week
Previous week's close This week's close Change% change
Gold ($) 791.80819.0027.203.44%
Gold (€)628.96645.5916.632.64%
Oil ($) 49.9354.434.509.01%
Oil (€)39.6642.913.248.18%
Gold:Oil15.8615.050.815.12%
$ / €0.7943 / 1.25890.7883 / 1.2686 0.006 / 0.00970.76% / 0.77%
$ / ₤0.6700 / 1.49250.6507 / 1.5368 0.0193 / 0.0443 2.88% / 2.97%
$ / ¥95.938 / 0.0104 95.400 / 0.0105 0.538 / 0.00010.56% / 0.56%
DOW8,0468,8297839.73%
FTSE3,7814,28850713.41%
DAX4,1274,66954213.13%
NIKKEI7,9118,5126017.60%
BOVESPA31,25136,5965,34517.10%
HANG SENG 12,65913,8881,2299.71%
US Fed Funds 0.50%0.50%0.000.00%
$ 3month 0.01%0.04%0.03300%
$ 10 year 3.20%2.92%0.288.75%


Equality and Freedom

We've been harping on about Capitalism or rather Free Market Capitalism for a while now yet there is more ground to cover. We have all known nothing but two dominant creeds our entire lives, Capitalism and the other charade Soviet 'Communism'. Both are hollow lies, both concentrate wealth and power in the hands of a small minority, both are fundamentally based on theft.

Let us now go back to some roots, to some basic ideas and to some history. Unless you are an adherent of an elitist or racist creed you will agree that we are all born equal, at least in terms of our civil rights. You will also agree that all people should be free. Quite what we mean by "equal" and "free" has been a matter of debate since before Plato. We have broad conceptions that arise within us of "equality" and "freedom" yet when we seek to define how this "equality" or "freedom" might manifest in the material world we encounter disagreement in understanding and precious little implementation. We regard ourselves as being born equal while we are also born with differing attributes which lead us to wish for different 'things' in life, we are born with differing skills that determine what we can put into life. We are born with differences that will determine what we can do with life but these differences do not detract from the fundamental principle that we are all equally entitled to civil and human rights.

When we look around us however, we find precious little evidence to suggest any true equality. We don't mean the fallacious 'equality' that so many organisations campaign for today for what is the benefit of gaining the rights to be a wage slave, to be taxed or to have a meaningless vote. "Freedom" has become a sick joke for we are all prisoners while our jailers laugh all the way to the bank, literally.

We have fine phrases such as "equal before the law" yet we have ample evidence that we are certainly not equal before the law, for otherwise George Bush, Dick Cheney, Tony Blair and thousands of others would be on trial for crimes against humanity. The reality is that we are subject to innumerable laws that restrict us, fine us and otherwise impose upon us for simply trying to live.

In the UK there are fines for leaving the lid of a trash can open, for putting that trash can in the wrong place or leaving it too early for collection, there are speed cameras everywhere, parking fines abound, whatever a resident of that island seeks to do they will find themselves bound by laws at every turn. Yet the people of Britain believe themselves to be free.

Douglas Reed was a noted British journalist and author who became the subject of a vicious smear campaign because he had the temerity to point out the obvious; that there are dark forces at work in the affairs of man who have as their avowed aims the destruction of all that people of conscience hold dear, the enslavement of the planet and all who dwell upon it and the imposition of their godless and faceless rule. He wrote extensively of what he saw taking place around him in the 1930s, 40s and 50s and told it as he saw it in his books, Insanity Fair, From Smoke to Smother, Lest We Regret and Controversy of Zion to name but four. In 1943 in Lest We Regret he described freedom:-
Freedom is a thing of innumerable facets, but split it, and it has but two halves. The first , ...though not the greatest of all, is a man's freedom to roam and know his own country, to enjoy and use a part of [his] native land. The second half is the greater half, because the first half rests on it. It is, freedom from wrongful arrest and wrongful imprisonment.
So it is to Britain, or rather England the "mother of parliaments", that we would like to turn because the roots of much of what we see around the world originated in that small country.

A brief history of resistance

In 1215 England was subject to an uprising among the nobles in a direct challenge to the absolute authority of the king. The upshot was the Magna Carta. The original document was significantly watered down in the years following its signing by King John with the notable exception of the writ of Habeas Corpus ("the fundamental instrument for safeguarding individual freedom against arbitrary and lawless state action."[1] ) which provided in due time the bedrock for that second half of freedom spoken of by Douglas Reed, "freedom from wrongful arrest and wrongful imprisonment". In the decades following Magna Carta the church and the nobility cemented certain freedoms for themselves while leaving the peasantry unrepresented and repressed; most often by the church and nobility themselves. Across Europe, on numerous occasions the peasantry, the common people, sought to wrest elements of freedom from their monarchs, the church and the nobility. The uprisings of the 14th, 15th and early 16th centuries arose from the unremitting pressure upon the poor who were excluded from any share in society or its wealth.

The reasons for these uprisings were those that have driven men to desperation throughout history for they speak of a desire for equality and freedom while labouring under conditions of great economic and social inequality. They are remarkably familiar:-

- The increasing gap between the wealthy and the poor due in great part to the wealth retained by the landed class, the nobility, and the new class of proto-capitalist, the merchant.

- Inflation driven by wars and currency devaluation [2] put pressure on the nobility who resorted to rent rises, theft and thuggery to steal more money from the poor.

- The monarchs and nobility raised taxes and tithes to finance both war and their own expenses.

- Amid this abuse of power there also arose the idea that inequality in property and wealth was against god, that there should be greater equality in society.
One of the most famous of the numerous revolts was the Peasants Revolt or Great Rising in England in 1381. Following the plagues of 1348/49 that ravaged England the shortage of labour gave the peasants some bargaining power which they endeavoured to use to improve their very poor lot. The response of the ruling elite of the time was to enact a law (Statute of Labourers, 1351) fixing wages at the pre-plague level and restricting the ability of peasants to travel. These laws were enforced with widespread severity which, combined with the wealth gap, inflation, taxation and the awakening of ideas of equality, led to the uprising in 1381.

The uprising was ended by the murder of its leaders who were meeting the King and his advisors for negotiations and were therefore subject to the ancient protections afforded to men in such situations and the tricking of the peasants through the outright lies of the King. The surviving leaders were executed.

The structure of land use and holding in England was based on ancient systems that neither the Romans nor the Normans had changed. The idea of title as we know it today did not exist; instead each person has rights and responsibilities relating to the land and those upon it whether they were the lord, the freeholder, the cottager, tenant farmer or squatter. The system gave men the ability to house and feed themselves and their family.

Despite all the inequality within England and the history of the separation of the ruling and ruled, there remained some elements of life based upon the concept of equality for all people had access to common land where they were free to gather wood, forage for food for their animals, and game for their own bellies. Think about that, a man born into poverty had an absolute right to live on common land, to gather fuel from that land and to gather food for himself and his animals and by extension for his family. He had no need to labour for somebody else nor for money for everything that he needed to survive could be found on the common land.

The taking of land through Enclosure prior to the English Civil War was open theft, the primary impediment to which was, strangely, the Star Chamber Court of the King. As the land was steadily stolen the ordinary people often resisted. History records their resistance as rebellion. In all cases the people failed in protection of their rights. The laws of England were used as the means by which theft was enforced, for resistance was grounds for violence against the resisters who were routinely killed while their leaders were hanged and quartered[3].

The merchant class were the first to accumulate capital in England until the Civil War (1642 - 1651) through trade, both domestic and foreign. A key commodity in this wealth creating trade was wool, the price of which rose steeply until the middle of the 17th century. It was this rise in wool prices that drove much of the theft of land so that the land could be used for raising sheep. Thus began an unholy alliance of greed between the ruling elite of the countryside and the merchants. During the war many rural communities took advantage of the weakening of the established order, particularly the fall of the estates of royalists, catholics and the church to recover what was rightfully theirs, namely access to and use of land and its resources of timber, grazing and food[4].

Following the Civil War, despite the illusion that men had fought for greater freedoms, the form of the modern repressive state, particularly the creation of a standing army, took shape and the repression of the ordinary people recommenced as land was steadily expropriated from the ordinary people to the ruling elite.

Two ideas

Two groups of ideas that shape our world today were coalescing during The Enlightenment. One set saw a grand vision of humanity while the other, in two parts, has proven to be absolute evil The former held that, "human beings are perfectible; the right structures of society, at the heart of which is representational government whose power derives from the consent of the governed, facilitate this continual evolution; reason is the means by which ordinary people can successfully rule themselves and attain liberty; the right to liberty is universal, God given, and part of a natural cosmic order, or "natural law"; as more and more people around the world claim their God-given right to liberty, tyranny and oppression will be pushed aside."[5]

The other group of ideas had two parts which were and remain bedfellows, Political Zionism and Communism, together better described by Douglas Reed as the Destructive Principle. The Destructive Prinicpal became publicly manifest in Adam Weishaupt, a German who founded the secret society the Order of the Illuminati in 1776; its avowed aim was the destruction of all nations, monarchs, religions, private property and marriage to bring a New World Order into existence. The creed of the Illuminati is pure psychopathology, a pure, unadulterated pathological evil promoted by a man who was undoubtedly a psychopath. We will be discussing this aspect further next week.

Enclosure - Grand Theft

At the very moment in history when some men's minds were turning to the potential for a better world, and others were turning to evil domination, the expropriation of land, through Enclosure, accelerated in England with arguments of this kind advanced to support the theft of land, "The use of common land by labourers operates upon the mind as a sort of independence ... when the commons are enclosed, the labourers will work every day in the year, their children will be put out to work early, and that subordination of the lower ranks, of society which in the present times is so much wanted, would be thereby considerably secured." More than half the cultivated land of England, before Enclosure, was farmed on the common-field system, and the landless farm labourer was hardly known in the villages of England.[6]

"About a fifth of the total acreage of England was enclosed between 1760 and 1840, and the old village community ... was broken up. Until that time, any man might hope, by his own labour, to acquire property and rise in his village. From that time, we inherit the most unhappy of beings, the landless farm labourer".[7] It is this landless labourer and his family, often then evicted as a further consequence of Enclosure, who became the factory workers of the Industrial Revolution, the men, women and children on whose immense suffering industrial capitalism was built.

Enclosure was justified as a means to improvement. The English countryside and the agriculture practiced on it was said to be in need of reform. The truth was that the expropriation of land from the ordinary people enabled a new form of industrialized agriculture to be practiced which greatly increased the profitability of farming and therefore the wealth of the ruling elite. The ordinary people were reduced to slaves on the land to which they held rights dating from the time of the Druids.

Not only was the theft justified but it was also legal. The process was simple, Douglas Reed again:-

...a petition to Parliament was made bearing the signature of one big landowner for authority to put a fence round some piece of land until then shared by all. The smallholder's only hope of succour was to reach and move the heart of a Parliament packed with great landowners and as distant from and daunting to himself as the Court of the Last Judgment.

In Parliament these petitions were laid before Committees of Members from the districts where Enclosure was proposed - the cronies of the petitioner! Often, petitions affecting the enclosure of thousands of acres, and the fate of hundreds of freemen, were rushed through in a week or two.

The manner in which a large part of England was taken from the many and enclosed by the few was simple and is staggering to look back on. Recent history contains nothing to compare with it. A petition was 'accepted'; that is, the petitioner's friends in Parliament passed it for him. Then, Commissioners, who were appointed by the Enclosers even before they presented their petition to Parliament and were often the lord of the manor's own bailiffs, arrived to put a fence round that 'certain proportion of the land which has been assigned to the lord of the manor in virtue of his rights and the owner of the tithes'. The power of the Commissioners was absolute. This happened in the England in which Pitt was Prime Minister, who declared 'it is the boast of the law of England that it affords equal security and protection to the high and low, the rich and poor'.
That last sentence quoting an English Prime Minister of 200 years ago might just as well have been made today for the same mendacity walks the corridors of power today as walked it then.

The Parliament of the day was a parliament of landlords elected in a corrupt system, many of them being 'elected' through the rotten and pocket boroughs under which, at one point, half (about 200) the members of the House of Commons were elected by just 153 voters (yes, some voters could elect more than one member). Under such a system it is no wonder that the petitions of the ordinary people against the theft of their land rights were buried. Those that resisted were treated as common criminals. Many emigrated while those that stayed became subject to increasingly severe laws against trespass and poaching. At the time when Englishmen, told that they would be enslaved if Napoleon landed in England, fought at Waterloo, "Parliament fixed the penalties for poaching at hard labour, flogging, or transportation. In the year following Waterloo ... a Bill went through Parliament, without debate, which imposed the maximum penalty of transportation for seven years on any person found unarmed but with a net for poaching in enclosed land; and in some of the subsequent years one in seven of all criminal convictions in England were convictions under these Game Laws!"[8]

Not only were the elected members of the House of Commons the landlords and merchants benefiting from the system of legalised robbery but the second house of parliament, the House of Lords, was the shrine of entrenched rights of nobility while the civil administration officials pocketed about £120,000 in fees in fourteen years for assisting the Enclosure Bills through the "legal process". What hope did the ordinary people have?

William Cobbett

There was spirited resistance. William Cobbett was a political activist and journalist who campaigned for political reform in England. Way before his time, he was man who understood the terrible condition of "dense dependent populations incapable of finding their own food, the toppling triumph of machines over men, the sprawling omnipotence of financiers over patriots, the herding of humanity in nomadic masses whose very homes are homeless, the terrible necessity of peace and the terrible probability of war, all the loading up of our little island like a sinking ship; the wealth that may mean famine, and the culture that may mean despair; the bread of Midas and the sword of Damocles. In a word, he saw what we see, but he saw it before it had arrived. Many today cannot see it - even when it is all around them."[9]

The life of William Cobbett is instructive for it exemplifies many aspects of oppression which we seek to shine a light upon today. Cobbett was a moral man who gave his whole life to the battle for those two vital objectives: the freedom of the land, and freedom from wrongful imprisonment. It may not mean much to a modern city dweller, or even perhaps to those who live in the countryside but do not work the land, what an immense loss the loss of ones land is. It is the removal of everything in one go; home, possession, security, income, inheritance and culture. For these English men, women and children dispossessed of everything they knew there was no choice other than to become a member of the new proletariat, depending for subsistence on selling their labour for wages, whether in the city or on the land.

Douglas Reed said this about William Cobbett, "He fought for [freedom] in England, in France during the French Revolution, in America just after the American Revolution, and again in England. ..... he was wooed by a Tory government and offered the editorship of a government newspaper so that he might, for a comfortable salary, laud all that was done by authority and lampoon all who protested."

"He refused, and began to publish the weekly Political Register [in 1802], the most famous independent journal of the next thirty-five years. Sometimes the politicians, sometimes the mob, attacked him. He was fined for criticizing the Government's treatment of Ireland. His windows were smashed."

By 1806 he was a Radical, a vocal proponent of political reform. In 1810 he "angrily protested against the public flogging of British soldiers under a guard of German mercenaries."[10] He was found guilty of treasonous libel, fined a thousand pounds and imprisoned for two years in the infamous Newgate Gaol. In prison, and after he came out, he continued to write, for another seven years, as a fierce and independent critic who could neither be corrupted nor cowed. Notably, he wrote the pamphlet, Paper against Gold warning of the dangers of paper money.

The government, seeking to limit the access of people to news and radical opinion and to generally suppress independent newspapers, heavily taxed all newspapers. This limited circulation of the Political Register so Cobbett changed it from a newspaper to a pamphlet to avoid these taxes. Circulation jumped from just over a thousand to about forty thousand copies a week thus becoming the main journal of the educated working class.

The government, frightened of this voice for change, schemed to charge him with sedition[11] by passing the Power of Imprisonment Act 1817. This act suspended the Habeas Corpus Act of 1679, itself based upon rights enshrined in the Magna Carta. Cobbett fled to America.

England's fight for supremacy against Napoleon in the years leading up to the Battle of Waterloo (1815) had left its finances in a parlous state; Enclosure was proceeding apace, cities and the attendant factories were expanding, the condition of the ordinary people, those people that had "fought for freedom" against Napoleon, was abysmal. The Corn Laws, a tax on imported food, kept food prices high with the inevitable consequences on the ordinary people. In this climate grew an increasing clamour for change, known then as the Radical Movement. The Radicals sought electoral reform and universal sufferage. This made them the enemies of the entrenched order, of the ruling elite, who reacted with ever increasing repression.

The Peterloo Massacre

In August 1819, between sixty thousand and eighty thousand workers, well dressed, highly disciplined and orderly gathered for a meeting in St Peter's Field in Manchester. The authorities arrayed against these peaceful workers 600 elite cavalry, 800 infantrymen, 2 six-pounder artillery guns, 400 militiamen, 400 special police and 120 militia cavalry.

In an attempt to stop the speech of Henry Hunt a famous radical speaker, the militia cavalry rode into the crowd. The ensuing confusion has been used to excuse what happened next but the simple truth is that the crowd was attacked from two sides simultaneously. On one side they were charged by the 600 elite cavalry with sabers drawn while on another by the infantry militia, their only escape route was blocked by the 800 infantrymen.

It is remarkable that only 11 to 15 people died with up to 700 injured. Not content with the slaughter many factory owners fired anybody associated with the meeting while stories abound of the wounded being refused treatment. Women were not spared despite often being dressed in white; of the official 658 casulaties, 168 were women of whom 4 died. The rioting that followed the massacre was used to justify the carnage.

However, unlike other confrontations in this era, there were professional reporters present who faithfully recorded what they saw, they called the event the Peterloo Massacre. This meant that the government was unable to effect a cover up. Despite this, in familiar fashion, the government reaction was even more repression. The speakers and organizers were tried for sedition and jailed. None of the professional soldiers were tried with just four of the militia men tried all of whom were acquitted.

Within one month of reconvening after the massacre parliament passed the Six Acts which treated any political meeting not approved of by the established order as an overt act of treasonable conspiracy. These Acts made meetings of 50 or more subject to license if the meeting was to discuss matters of "church or state" and limited attendees to locals only, thus preventing radical speakers from touring; seditious writing became punishable by fourteen years transportation, essentially a life sentence in Australia; newspaper taxes were increased and broadened to include pamphlets expressing opinions, publishers were required to post a bond; ownership of weapons by the working classes was banned, powers of search, seizure and arrest were granted to magistrates.

As we discussed with regard to the modern Circles of Power, Tony Bunyan summarised with respect to similar circles then, "the ruling class was not monolithic, but comprised several competing and complementary factions. These factions were the merchants, the agricultural capitalists, the small manufacturers and the new industrial [capitalists]. In this period of competitive capitalism it was the merchants and the landed aristocracy who effectively controlled parliament and the state."

"Only later, in the 1830s, when industrial capital became dominant in the economic field, did the [industrial capitalists] begin to challenge the other factions for state power. It was during this struggle between the competing [capitalists] in the 18th and 19th centuries that the foundations of liberal democracy emerged (well prior to an equal voice being accorded to labour). The ideas of neutrality of the state and its institutions were fashioned in this period, less for reasons of democracy than as a means of arbitrating between the warring capitalist factions and combating working class demands."

"In the latter part of the [19th century] capitalism began to move from competitive to the monopoly stage and the twin pillars of its current foundation emerged. One was monopolistic industrial capital and the other centralized bank capital." [12]

Lessons from History

The dreadful history of the ordinary Englishman up until today stands as a testament to the true condition of ordinary people on this planet. The story, which we must leave for the moment, continues with a slow rise in the relative power of ordinary people in England. But it was a rise that was quickly ponerised and misdirected by the same forces that Adam Weishaupt gathered together in his Order of the Illuminati. The ordinary people realised in due course that they held real power but by the time they came to exercise it they themselves had become subject to the thrall and dominance of that great evil, the psychopath, and its attended destruction of good and propagation of evil.

As ordinary people approached the time when they might gain real power under the existing systems the systems changed to move the seats of power always away from them. The outward appearance has remained in the form of parliaments, of Congress, of the judiciary, the police, the military and the other institutions but these have been steadily corrupted and the real seats of power moved ever deeper into the shadows. The role of the intelligence agencies in this move is not to be underestimated.

One aspect of the modern story that we should mention now is the continuation of the great theft that we have described above, Privatisation. Exactly the same argument was put forward for privatisation as for Enclosure, efficiency and improvement. We were told that it was impossible for state enterprises to make the changes necessary to 'modernise'. The fact that within a few short years private ownership achieved many great improvements is held out as proof of the original claim. But nothing could be further from the truth.

Either through their direct labour or indirectly through taxation, generations of our forebears had built the infrastructure, the assets and the systems that made the companies and corporations that provided transport, telephones, water, electricity and numerous other services and resources, many essential to life. With the arrival of Margaret Thatcher in the UK and Ronald Reagan in the US a wave of theft swept the economy. State owned enterprises, many natural monopolies providing essential public services, were packaged up and sold off.

The public were limited to acquiring a small percentage of each company while "professional investors" took the bulk. These professionals were of course the financial powerhouses of the world's financial centers who acquired these essential service companies for their own and their clients gain. Many companies have changed hands, some a number of times, since the original sale, often at many multiples of the original privatization price.

The services that are delivered have in some cases shown a marked improvement while in others they have steadily worsened. The simple truth is that governments could successfully have restructured the companies and made the much needed investments while retaining public ownership. It doesn't matter where you look, whether it is the sale of state housing or of state telecommunications, the tale is the same; the workers and public are far worse off in social as well as monetary terms as a result of privatization while the capitalist elite have made out like the bandits they are.

So you see, dear reader, that there is nothing new under the sun. The theft of our national heritage, our future and the future of our children through 25 years of the privatisation of the infrastructure that was built by our forebears and today through the pillaging of our governments in the form of bank and other corporate bailouts is just another page in the sad annals of history that record, for those prepared to look, the gradual theft of our property, our equality and our liberty. Our rulers have always justified their actions as "improvements" or for our own good while the moral crimes they have committed have been sanctified by the laws that they themselves enact all the while criminalizing resistance to them.

The economic situation we see around us today is no different from the theft of land under the Enclosures. We are bound by laws written by people whose principle motives have been and remain the continuation of the current order from which they and their masters profit; these laws therefore stand not as the bedrock of a just society but as the walls of our prison. Modern law seeks to protect the ruling elites as much today as the laws of historical England, many of which remain in place, protected the thieves of Enclosure. These laws protect our modern thieves and abusers because they have been written by them.

The myriad laws passed under the modern banner of terrorism are not aimed at real terrorists but at us, the ordinary people, while being written by those very forces that we know control and direct the terrorism that they claim to be protecting us from. Just as at 'Peterloo' when we take our displeasure on to the streets we are attacked by armed police for the simple act of holding and expressing views contrary to the established order. In fact we can easily be attacked by the thugs of state in simply going about our daily lives; a fact especially true the poorer a person is.

Today we find ourselves surrounded by the institutions of states built upon principles of theft standing on pillars of law enacted for our repression. We are surrounded by intelligence agencies that track us, watch us and listen to us. We are ensnared in a web of laws that encroach upon our communications and our thoughts. Resistance to the established order, just as in the time of transportation for protecting ones land rights, is punishable with the full weight of the law; a law that is as despotic today as the law of transportation was in the 18th and 19th centuries.

Since 1969 just three clauses of the Magna Carta remain in force in Britain.

Habeas Corpus has been suspended in the US for those that resist the empire, under the Military Commissions Act of 2006. The Habeas Corpus Restoration Act of 2007 which aimed to overturn the Military Commissions Act 2006 was filibustered by Republicans in the Senate and therefore never became law.

Habeas Corpus has been suspended in the UK, as in the US, under the guise of protecting us from terrorism. There is unrelenting pressure in Britain to allow the government to detain anyone it chooses for increasingly long periods without trial and without representation. It should not be forgotten that Britain and the US both have ignominious histories of detaining people without trial for long periods; in the US, the Japanese, in the UK, the Irish.

Whenever Habeas Corpus is suspended we should see it for what it is - the tolling of the bell for freedom. We find ourselves today much as those hapless English found themselves centuries ago; we have been disenfranchised; we are having our "land" in the form of homes, jobs, security, income and inheritance taken from us even as you read this; and we have lost our rights to privacy and to protection from wrongful arrest and imprisonment. We face forces arrayed against us as formidable as any known in history; forces that are preparing, just as those who have come before, to use every tool of repression available to keep us subservient, to keep us ignorant, divided and confused, thereby ensuring our political and economic impotence.

To be continued....

*******

1. Harris v. Nelson, 394 U.S. 286, 290-91 (1969).
2. eg. The Great Debasement of English coin by Henry VIII coupled with inflows of bullion from the New World.
3. Newton Rebellion, June 8th 1608
4. One aspect of the war that has remained cloaked form public attention is the horror visited upon Ireland where Cromwell's New Model Army, the first professional army of modern European history, and those friends of all wars, disease and starvation, were responsible for the death of forty percent of the population.
5. Naomi Wolf, Give me Liberty, 2008
6. Douglas Reed, Lest We Regret, 1943
7. Douglas Reed, op cit
8. Douglas Reed, op cit
9. G.K. Chesterton, William Cobbett, 1925
10. Douglas Reed, Lest We Regret
11. Conduct or language inciting rebellion against the authority of a state (American Heritage Dictionary)
12. Tony Bunyan, The Political Police in Britain, 1976

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Monday, November 17, 2008

Money Supply, Debt Slavery and other Manipulations

By Simon Davies and Donald Hunt

From SOTT.net:

"The few who can understand the System (Cheque Money and Credits) will either be so interested in its profits, or so dependent on its favours, that there will be no opposition from that class. While on the other hand, the great body of people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint and perhaps without even suspecting that the system is inimical* to their interests." - Extract from a letter written by Rothschild Bros of London to a New York firm of bankers on 25 June 1863
* (hostile, hurtful)

********

Retail sales dropped 2.8% in the U.S. in October (compared to October of 2007), the worst monthly drop on record. That sent stocks tumbling again, with the Dow falling 5% for the week. Since the whole global economy depends on U.S. consumer spending, the other major national stock exchanges also fell for the week.

The U.K. seems to be entering the "capital flight" stage that used to happen only to developing nations. The pound dropped 6% against the dollar last week.

With the world economy officially in what economists call "crash and burn" mode (no, we made that up, they actually euphemistically call it a "serious recession"), governments, finance ministers, and central bankers are scrambling for more actions to take. Trillions of dollars have been pumped in to the financial system, interest rates have been lowered to almost zero, and checks have been mailed to U.S. citizens (and already spent).

The only thing left to do is invest in infrastructure improvements and reinvigorate heavy industry. In the United States, the auto industry is in dire need of a bailout, but they are an easy industry to hate, so politically, there is some selling to do. The Democrats in Congress are pushing for an auto industry bailout but Bush is trying to sneak a free-trade agreement with the narco-terrorist regime of Colombia into the bill - nothing like a last favour for your friends. One estimate claims that if General Motors is allowed to fail, the cost to the government could be as high as $200 billion, while the bailout would cost only $25 billion. GM may be the Lehman Brothers of the industrial sector and letting the market run its course could prove disastrous. Josh Marshall challenges those who would let the industry die arguing that the priority of keeping jobs means the industry should be taken into federal receivership. Once in receivership the need for new technology and especially cleaner technology can be imposed; a much shrewder move then letting this giant industry collapse. Everyone seems to have advice, because everyone drives and buys cars. Even aging rock stars such as Neil Young have creative advice for the auto industry.

That fact that "everyone drives cars" (which isn't true of course) should be a major wake up call. What staggers Europeans is the lack of quality public transport infrastructure and services in the US. Perhaps what is needed for the US is a greatly improved rail, subway, tramway and bus system not more cars.

All this at a time when the United States is in a strange interregnum, with Obama already elected president but not scheduled to take office until January 20th. Having such a long time between the election and the inauguration is dangerous in a time of economic crisis. Josh Marshall examines the notoriously perilous interlude between the election and inauguration:-

The normal calculus of power and responsibility is upended. In recent decades there was seldom enough occurring for it to matter all that much. But that's not the case now...

First, the management of the almost trillion dollars of bailout money. [ ].... there's a lot of hundreds of billions of dollars being assigned by people who will be able to wash their hands of the whole matter in about two months. And that's a problem.

Next, the auto industry. Could GM really go under in the next couple months because the Democrats who'd bail the company out are currently at the mercy of the electorally discredited Republicans who want to use the crisis to crush one of the last major manufacturing unions? [ ]

Moments of national crisis require experimentation and open minds. But more than anything they demand energy and direction, a plan -- one where the different moving parts interlock together in some rational way. But this feels like drift.

The situation is eerily similar to the 1932-33 transition, when banks were failing before Franklin Roosevelt was inaugurated. Herbert Hoover disagreed strongly with Roosevelt's approach, but wanted Roosevelt to cooperate in joint action. Roosevelt refused, not wanting to be tied to Hoover's policies and also feeling that the worse things got the more power he would have to act once inaugurated.

But what will Obama's policies be? The conventional way to get an idea is to look at his advisors . As a commentor on Postman Patel's blog wrote,
What happens when you replace a sociopathic lunatic with an eloquent, sane man who espouses the exact same policies? I think it will become even more apparent to the world that America is helplessly in the grip of corrupt corporations and a hopelessly corrupt Congress...
While Jonathan Weil calls it as it is; in relation to Obama's advisors he says, "It's hard to believe that Barack Obama would even think of calling this change."

It may be, however, that events may push things far beyond the control of the putative leaders. As things get worse, public anger may push more radical solutions that would normally be considered (the 1930s again offer a parallel). Here is a warning to U.S. corporate leaders from Shoshana Zuboff, a Harvard Business School professor. Zubhoff identifies the almost total lack of trust in business that holds sway across the US (and the UK and Europe if she did but know it) as having its roots in the time when businesses ceased to have any humanity and became solely money making machines; the process of ponerization pushed through by free-market economics that we discussed last week. The problem is that she makes the process seem way more accidental than it is. Naomi Klein in Shock Doctrine argues that the process was deliberate and well thought-out.

The Markets

The markets this week
Previous week's close This week's close Change% change
Gold ($) 736.10742.506.400.87%
Gold (€)578.79589.0110.221.76%
Oil ($) 61.0457.044.006.55%
Oil (€)47.8847.882.635.50%
Gold:Oil12.0613.020.967.94%
$ / €0.7863 / 1.27180.7933 / 1.2606 0.007 / 0.01120.89% / 0.88%
$ / ₤0.6393 / 1.56420.6784 / 1.4741 0.0391 / 0.0901 6.12% / 5.76%
$ / ¥98.235 / 0.0102 97.038 / 0.0103 1.197 / 0.00011.22% / 0.98%
DOW8,9448,4974474.99%
FTSE4,3654,2331323.02%
DAX4,9384,7102284.62%
NIKKEI8,5838,4621211.41%
BOVESPA36,66535,7898762.39%
HANG SENG 14,24313,5437014.92%
US Fed Funds 0.25%0.25%0.000.00%
$ 3month 0.28%0.13%0.1553.57%
$ 10 year 3.79%3.73%0.061.58%

A Solution looking for a Problem

As we sit to write, the leaders of the G20 nations are due to meet in a few hours somewhere near Washington. From the rhetoric leading up to this meeting they are seeking to build a "New Bretton Woods", a new system for the management of the global economy. The meeting, as we all know, has been brought on by the 'financial crisis' gripping the entire globe; a crisis that no nation is immune from and therefore one which every nation is seeking a 'solution'.

Solutions are sought when there are problems so we would be safe to assume that there is a problem, wouldn't we? So what is the problem for which a solution is sought? Perhaps some of the G20 leaders see the problem encapsulating a lack of liquidity in the banking system which has led to banks refusing to make new loans or refresh old loans to businesses, but that one has already been addressed; there is now unlimited central bank liquidity available. Perhaps they see it as a lack of banking capital causing banks to cease to lend; but this too has been addressed for the largest banks which now have so much capital that they are holding it in reserve so as to be able to buy up other banks when the opportunity arises; as they surely know it will.

With their financial paymasters always at hand they might also see part of the problem as excess debt for individuals, businesses, regions and nations which they are now unable to refinance or indeed even pay all the interest. Maybe it's extreme volatility in the financial markets - some politicians will see the loss in value to peoples savings due to stock market collapse, others will see the drop in commodity prices causing losses of real revenue, others see food prices rocketing beyond the reach of ordinary people or recession in manufacturing causing loss of jobs. Certainly for the ordinary people the latter are very real problems for which solutions are desperately needed.

However, these are not problems for the puppet masters of the world economic system; they are not facing disaster, ruin or starvation. They are sitting pretty pulling the levers of the global economy and thereby directing the show exactly as planned.

What we have in fact for the puppet masters is a solution, a global central bank, looking for a problem.

Does it have to be this way?

Last week we said that there are alternatives, summarizing the ideas of Herman Daly among which was, "Abolish fractional reserve banking. Give the control of money back to governments and away from banks". Two very simple statements but ones that certainly won't be on the agenda in Washington this weekend, for these two simple ideas go to the root of the issue and to the root of global power.

We are all agreed that the current banking bailout is larceny on a grand scale but does everybody know quite how unbelievable we have all been screwed all of our lives?

We were all born into this system, it didn't come upon us; we have nothing to compare it to. For the most part we are unaware that there might be alternatives and if so what those alternative might look like. We take certain attributes of the system to be fixed, immutable, but are they?

We assume that money has to be the way it is because it just does. We assume the same for the way we use money, where it comes from, for the fact that money has a time value associated with it which necessitates interest being charged. Fear grips our minds and constrains our actions but what is it that we have to be afraid of? Is this system so perfect so irreproachable that we cannot face to change it?

We are all slaves so why are we so afraid of the alternatives to our slavery that we are not actively seeking new ways of doing things.

The basic answer seems to us that we are afraid of the unknown, we are simply afraid of the dark; which isn't very impressive when you think about it, is it? Fear originates in the most primitive and deepest part of our brain. This should give us pause for thought about the nature of the beings - psychopaths - that control us and keep that fear always there, always pressing in upon us, always stalking us. They have been playing our fear for all it's worth for generation after generation. Back when religion truly was the opium of the masses, when widespread ignorance and superstition and limited travel and communication were the standard, it is understandable that human's seemingly innate fears were used against them. But in today's world of high speed internet, lightning fast communication, and global travel we would have thought that the ignorance would have been dispelled and along with it the fear. But that is not the case.

The reason is that as a species we remain woefully ignorant of our real predicament and sinfully lacking in resolve to remedy that ignorance; generally preferring convenient fairy tales to truth.

One of the greatest fairy tales has to be the illusion that is our economic system. As we quoted above from a Rothschild letter in 1863, "The few who can understand the system (check money and credits) will either be so interested in its profits, or so dependent on its favor, that there will be no opposition from that class, while on the other hand, the great body of the people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests."

It simply doesn't have to be this way. Money does not need to be borrowed by government from privately controlled central banks, interest does not need to be charged and banks do not need to be run as they are. The 'laws' that govern the economic system are not natural 'laws', they are mechanical laws and can change if we change the mechanism.

Our Money system

Imagine a community based on agriculture. There are farmers, laborers, merchants, storehouse owners and the various people who supply goods and services to the community built around these people. The farmers need seed to plant in spring so they borrow it from the merchants who have some stored from the previous year. It is planted and grows. Harvest arrives, the farmers hire laborers, the crop is gathered in and a large volume of seeds are sent by the farmers to the storehouses. The laborers are all paid in seeds, the merchants are repaid their seed plus some extra ('interest') and the storehouse fees are paid in seed. The remaining seed is then available for purchase as food for the community. For each crop there is a value agreed in terms of the other crops and services that all the community needs, the seeds being physically exchanged in each transaction.

Many societies have existed that used just such a system. Many soon developed the idea that rather than exchange the physical seeds for every transaction, a token that represented a certain amount of seeds (in the storehouse) could be used. So the storehouse owners issued the tokens and the people used them to effect day to day transactions. Eventually somebody in the chain would want some seeds to either eat or plant and would go to the storehouse to exchange the token for the seeds; a simple and effective system.

Money in the such forms is referred to as "Representative Money". The token could be presented to the issuer at any time and 'demand' for the underlying commodity made. The system relied upon the issuer being able to deliver the specified commodity upon such 'demand'.

Aristotle remarks in relation to the ancient world, "as the benefits of commerce were more widely extended the use of a currency was an indispensable device. As the [products] of nature were not all easily portable, people agreed for purposes of barter mutually to give and receive some article, which, while it was itself a commodity, was practically easy to handle in the business of life, some such article as iron or silver, which was at first defined simply by size and weight; although finally they went further and set a stamp upon every coin to relieve them from the trouble of weighing it...". Money therefore is a convenient and acceptable expression for the exchange ratio between various goods.

The problems began when the principles of repaying loans with "interest" of the same material as the loan, seeds or animals, was transferred to non-reproductive commodities such as metals; for while seeds and animals can reproduce and yield a greater amount than at commencement of a loan, metals cannot. So loans in metal, with interest and principal payable in metal, are inherently flawed as they require the conversion of things that can reproduce into metals.

This then leaves the borrower at the mercy of the fluctuating value of the thing they produce. A value that can be easily manipulated by increasing or decreasing the supply of money.

We were discussing this at the kitchen table the other day. Imagine you are at the table with a friend, you each have a coffee mug, these are the only two tradeable items in your economic system. Your system has $1 in it. By definition therefore, each mug must be worth 50 cents - the mugs being the only things that can be exchanged in your system and money, the $1, being the only medium of exchange. Now let us imagine that another $1 is introduced into the system, nothing else has changed other than this addition yet the worth of each mug has increased to $1 (2 mugs/$2 = $1). For every dollar introduced into the system the value of each mug will increase by 50 cents. Inflation, the rise in price or value of things within the system, is directly linked to the supply of money - this is the Quantity Theory of Money.

Let's look next at how the dollars got into your simple 2 mug $2 economic system. There are just the two of you so you have 2 choices; you can take 2 pieces of paper, write "$1" on each and agree that you will both respect that piece of paper as being a dollar or one of you could do the writing and give one dollar to the other, it really doesn't matter because the dollars are being given. They have no value in themselves, they just represent value by agreement. Now imagine that 8 friends come round and you need 8 more mugs. One of your friends makes mugs so agrees to make 8 more for $1 each; but you only have $2 in your system. So you agree among you that you will get 8 more pieces of paper, write "$1" on each, and give them to the mug maker with the assurance that you will all accept the paper as being a dollar. Now you have 10 mugs and $10 in the system. Should you wish to sell your mug you know it is worth $1 and you will accept a piece of paper with "$1" written on it in exchange for it. The supply of money grows along with the supply of goods. As long as there are new goods in the system matching the increase in the supply of money then the price or value of each item (in our case, mugs) remains the same.

If however more money is added to the system than goods then the price or value of those goods goes up, there is inflation. Conversely, if the supply of money is reduced then the price or value of the mugs goes down. This is one of the games that bankers play; they increase and then decrease the supply of money in the system.

As James Garfield, 20th President of the United States said, ""Whosoever controls the volume of money in any country is absolute master of all industry and commerce.... And when you realize the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate."

Money Supply

Most of us think of money as being the coins and notes that we traditionally use to pay for things and receive as payment for our labor and items we sell. But this is only the smallest part of what constitutes money today. By far the largest part of today's money is created by banks, literally, out of thin air.

Under the fractional reserve banking system, banks can lend ten times the amount of cash or its equivalent that they have available, their reserves. This means that if you go into your bank today with $100 dollars which you put into your account your bank can immediately legally lend $1,000. It does this by crediting a borrower's account with $1,000. The borrower takes their cheque (check in the US) book and, Hey Presto another increase in the money supply goes off to shop; or if you prefer, the bank by creating credit has added to the money supply. It is as simple as that. If you are interested in the numbers a good summary is here.

Money Supply is generally considered to have four components, M0, M1, M2 and M3 although the UK now uses just M0 and M4. Broadly, M0 is physical currency plus accounts held at the central bank that can become currency very quickly. The remaining measures are various forms of bank accounts and other debt instruments. This graph shows M1, M2 and M3 for the US since 1959. The green sector at the bottom is currency, the remainder are the aggregates of various forms of money account and debt instrument. The graph graphically illustrates the explosion in US money supply from $1 trillion dollars in 1974 to $10 trillion in March 2006.

It is important to be aware here that the reason the graph runs out in 2006 is that the Bush administration ceased to publish the M3 number after March that year. At the time Congressman Ron Paul stated that, "M3 is the best description of how quickly the Fed is creating new money and credit". Given where we are today one might be forgiven for thinking that that change in US government policy seems a mite convenient to say the least.

The Federal Reserve can increase bank reserves and reduce them at will. Because of the multiplier effect of the fractional reserve system the Fed therefore has a powerful tool for a $1,000 increase in reserves will result in additional money supply of $10,000.

Back to Mortgaged Backed Securities

Not only do bankers control the supply of money but they can also direct where that supply goes - a recent example being that bankers wished to direct money to mortgages to inflate the property market. Under the current banking system banks would generally be constrained by their capital to be able to lend 12 ½ times their capital or in the case of home mortgages 25 times their capital. [Note that this is a different restriction from the requirement for banks to hold, typically 10% of the value of made with them in reserve.] But banks came up with a far better idea than that, they packaged up the mortgages and 'sold' them to newly created companies (Structured Investment Vehicles or SIVs) which the banks controlled but were able to treat as if they didn't own them.

The next innovation was the rise of the Credit Rating Agencies; companies that are legally independent from the banks and which assess the risks involved in lending to a bank or corporation. These Credit Rating Agencies issue a Credit Rating based on their assessment of the risk of default - the highest rating AAA suggests that there will be a default by the borrower once in 10,000 years.

Bank risk and mortgage default models were built on historical performance over a time when mortgage defaults were extremely low and mortgage lending was relatively conservative. These models therefore showed there being very low risks inherent in home mortgages. The Ratings Agencies used the same models and statistics.

The SIVs had to raise money to be able to pay the banks for the mortgages so they issued Mortgage Backed Securities (MBS). Now the neat thing about these MBS was that unlike the individual mortgages themselves, the Ratings Agencies would provide Credit Ratings for them. Typically, an SIV would issue 2 groups of MBS; one group for about 95% of the money needed would be rated AAA and the remaining group for 5% of the money needed, which carried the greatest risk, would be BBB or similar.

Numerous investment funds, whether hedge funds, mutual funds or pension funds are only allowed to invest in debt, for this is what MBS is, that is both rated and has a rating of BBB or above. Thus armed with a rating for the MBS banks could sell them to the funds, funds not constrained by limits on bank capital or in many cases by regulation. Not only that but the banks would lend money to hedge funds to allow them to buy the MBS! This meant that in moving the mortgages out of the banks an almost limitless ability to provide mortgages was created.
However, the funds were not stupid so they often insisted that banks hold some of the MBS as well. This led to the next trick.

The Bank for International Settlements's Basel Committee on Banking Supervision that we mentioned in a previous article established the system which dictates what multiple of its capital a bank can lend. Under the old system introduced in 1988 the credit rating of a debt was irrelevant. Lending on a mortgage required a bank to hold a certain amount of capital such that it could lend, in theory, up to 25 times that capital in the form of domestic mortgages. However, a new system came into operation in the last few years for the biggest banks based on ratings, and guess what, it requires banks to have even less capital especially for AAA rated debt.

The upshot of this was that banks were more than happy to hold MBS as the amount they could invest in MBS was far greater than the amount they could lend directly in domestic mortgages.
Finally, the risk models used by the Rating Agencies and the banks were never properly adjusted to reflect changes in the mortgages that were being busily packed up and stuffed into SIVs; in effect hiding the fact that increasingly large volumes of these mortgages were 'sub-prime' and were completely inappropriate to be packaged into MBS in the first place, let alone into MBS that carried a AAA rating.

The upshot was that banks got to direct far more money into domestic mortgages than would otherwise have been possible by using these various tricks; every one of which was marketed as being a new innovation and every one of which went unopposed by the regulators.

Forgive the rather long tangent but we wanted to illustrate just how easy it was for the banks to increase the money supply and direct a large part of that increase towards housing. Hopefully this will have dispelled any doubts you had as to the manipulated nature of the situation.

The effects of the manipulation go back to the Quantity Theory of Money. There was an increase in the general money supply within which was an even greater increase in the money supply going towards housing. As a result the cost of goods generally rose and the cost of housing rose even more.

Debt Slavery

The trap has now been sprung, the massive rise in the cost of housing has left millions with debts that they have almost no hope of ever paying off while the homes they bought are now worth a fraction of what they were. This is the asset price deflation side of the Quantity Theory of Money; there is now less money available in the housing system so the value of housing is falling.
What is not falling though is the value of the debt that was used to buy the homes that are now worth much less than a couple of years ago. You might consider that in a just society the people that caused the rise in prices through their control of the money supply, and therefore essentially forced you to borrow so much money, might be required to share in the pain. But we do not live in just societies we live in societies where the usurer is given the protection of the law while the victim is criminalised.

The last law that protected the victims of usury in the US was repealed in 1981 under Reagan. The raft of laws that deal with the enforcement of debt, with the seizing of assets, with bankruptcy and all the other aspects of being unable to pay your debts is too long to list here and keeps growing. The Bush administration even made it harder to seek protection in bankruptcy in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005; yet another piece of remarkably prescient legislation. When signing this new law Bush commented, "The act of Congress I sign today will protect those who legitimately need help, stop those who try to commit fraud and bring greater stability and fairness to our financial system,".

How Machiavellian can you get? Debt Slavery has been achieved and Bush calls it fair!
The Power of Compound Interest

Interest is evil because it enslaves people. It also enslaves entire nations for the power of compounded interest is extraordinary and usually not appreciated, especially by borrowers.
As a very brief illustration, $10 borrowed at 5% annual interest, if the interest is never paid will have grown to a total debt of $16 in ten years, $1,315 dollars in one hundred years and $15,000,000,000,000,000,000,000 in one thousand years. On a more personal basis, a typical credit card debt of $1,000, if you pay the minimum payments every months will have risen to $12,700 in ten years.

Aristotle, in Politics, had this to say about wealth and the accumulation of money, ""There are two sorts of wealth-getting, as I have said; one is a part of household management, the other is retail trade: the former necessary and honorable, while that which consists in exchange is justly censured; for it is unnatural, and a mode by which men gain from one another. The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of all modes of getting wealth this is the most unnatural."

Interest is not a necessity, the entire Islamic banking system is proof of that. The absence of interest does not mean that a lender should not have a return for the use of their money; rather that return should be linked directly to the use. If a business does well then it is reasonable to share the benefits with the lender of the money that facilitated that success in part. Similarly, if a business does badly or a crop fails then the lender should share in that risk.

The destitution and suicides amongst Indian farmers would not be happening if the lenders were at risk for the success of the crop. If they were at risk then they would not be so keen to force the farmers to use genetically modified crops which are designed to fail. Aligning the interests of the borrower and lender would change many of the world's most dreadful practices.

National Debt

There need be no national debt. That's a radical statement but it's also true. So why is it that all our nations labor under such large debt burdens? The answer was provided by Mayer Amschel Rothschild (1744 - 1812), "Permit me to issue and control the money of the nation and I care not who makes its laws."

The Bank of England was established in 1694 as a private bank in exchange for an initial loan to the government of William III (William of Orange) of ₤1,200,000. Needless to say, the events surrounding the granting of the Royal Charter do not speak of straight dealing. Similarly, the events surrounding the establishment of the Federal Reserve have a highly conspiratorial nature to them. Not surprising when the entire venture is in breach of the Constitution and against the interests of the American people.

Article 1, Section 8 of the US Constitution reads, "Congress shall coin money and regulate the value thereof and of foreign coin" while the Tenth Amendment clearly states, "The Powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people". To be clear, only Congress has the power to issue money and that power is not able to be delegated.

The grant by Congress, under the Federal Reserve Act 1913, of the power to issue money to the Federal Reserve is a breach of the US Constitution. Similarly the powers exercised by the Federal Reserve in regulating the supply of money through the operation of the fractional reserve banking system is a breach of the US Constitution.

In delegating these two crucial powers of issue and regulation to the Federal Reserve, Congress handed over the keys of America to the private shareholders of the Federal Reserve banks and their powerful friends behind the scenes. Remarkably, the Fed persuaded Congress that rather than issue money itself the US government would have the Fed issue money and the US government would incur a debt to the Fed for that amount. That debt would then carry interest of course.

Had Congress not enacted the Federal Reserve Act of 1913 and instead learned the lessons from its own national history, it could have done what Guernsey did from 1817 onwards. Rather than borrow to finance much needed public expenditure on infrastructure, Guernsey printed its own money and put the bulk of it into circulation in paying for the works that needed doing. Some Guernsey money was sold in exchange for existing English money also. The resulting infrastructure development transformed much of the island. Additionally, and no less importantly, there was no interest to pay. So successful was the issue of the initial money that more was issued in due course so that in the end Guernsey was able to repay all its previous debt and use its tax revenues to help the people of the island rather than pay interest. Guernsey is still a very prosperous island with very low taxes.

Abraham Lincoln: "The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. The privilege of creating and issuing money is not only the supreme prerogative of government, but it is the government's greatest creative opportunity."

The Money Power

It is worthy of note that James Garfield, Abraham Lincoln and John Kennedy all held views that opposed the interests of bankers and that all three men were assassinated while President of the US.

Woodrow Wilson in 1913 spoke thus, "Since I entered politics, I have chiefly had men's views confided to me privately. Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they better not speak above their breath when they speak in condemnation of it."

Just three years later, with the Federal Reserve Act not even three years old he stated: A great industrial Nation is controlled by its system of credit. Our system of credit is concentrated (in the Federal Reserve System). The growth of the Nation and an our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the world -- no longer a Government of free opinion, no longer a Government by conviction and vote of the majority, but a Government by the opinion and duress of small groups of dominant men."

Congressman Oscar Callaway speaking in 1917 as to the manipulation of the media explained: "In March, 1915, the J.P. Morgan interests, the steel, shipbuilding, and powder interest, and their subsidiary organizations, got together 12 men high up in the newspaper world and employed them to select the most influential newspapers in the United States and sufficient number of them to control generally the policy of the daily press... They found it was only necessary to purchase the control of 25 of the greatest papers... An agreement was reached; the policy of the papers was bought, to be paid for by the month; an editor was furnished for each paper to properly supervise and edit information regarding the questions of preparedness, militarism, financial policies, and other things of national and international nature considered vital to the interests of the purchasers".

All these men either opposed or spoke up against the Money Power, a term coined by L.B. Woolfolk in his book The Great Red Dragon. Woolfolk laid the entire blame upon the people amongst whose number were found the bankers who held the Money Power. It is very tempting to lay the blame for all financial matters today at the feet of that same group of people but it is not truthful to do so. The blame lies with the psychopaths and sociopaths. That the most successful of these psychopaths in the financial sphere come in large proportion from one group of people is primarily a matter for that group; for, in hiding under the skirts of Judaism, the evils of the Money Power, Zionism and Bolshevism have harmed Jews as much if not more than non-Jews. The issue for all of us is psychopathy and its pathology. How to identify it, isolate it and neutralize it is a matter for all normal people and not one of race, creed or colour.

The modern preeminence of Jews in the money business may have its roots in the ban imposed upon Christians until the early 16th century on usury and the extant ban on the same practice for all Muslims. In the western world that pretty much just left the Jews. It wouldn't have mattered who was left with such a monopoly for it is in the very nature of modern money that it provides a means to predate upon people like no other instrument in history. It's very structure is the product of an evil genius for it is so incredibly simple yet incredibly powerful and plays on man's weaknesses of greed, avarice and jealousy.

Three steps have to be taken to break the Money Power:-

The Federal Reserve, and all similar central banks that are not owned by the nation, should be taken into public ownership and become part of the national treasury. The power to issue money must vest in the national treasury only.

Abolish fractional reserve banking.

The government of the US should stop the bailout theft and instead direct new money, created not through debt but using the power vested in Congress by the Constitution, towards rebuilding America's crumbling physical and social infrastructure.

These are incidentally the proposals advanced by the American Monetary Institute - a group that on the face of it has some very interesting ideas on how to move forward for the US.
Imagine what could be achieved in the US and Europe with $4 trillion (about the current banking bailout number) in new environmentally responsible infrastructure; new and improved schools, colleges and universities with will paid teachers in the classrooms and lecture theaters; new and improved medical facilities with access for all, and the real worthwhile jobs for people that would flow from such programmes.

Jim Rogers addressed this issue in a CNBC interview in October when he decried the inevitable inflationary effect of the governments of the world bailing out the banks. The effect is inevitably inflationary because pumping money into banks, money that isn't reaching the real economy, will not produce one iota of additional goods in the economy. Even if some of that money if forced into the real economy, coming via banks as debt with the inevitable interest burden, it will be detrimental to the overall health of the system. In fact it can only harm the economy in the current system through both the inflationary effect and the expansion in government debt.

The same money spent in the real economy would produce an increase in real goods, benefiting ordinary people through job creation, while being broadly non-inflationary if not created as government debt.

The effect across the globe if all governments took the same steps would literally change the world.

Once again, when they tell you they have to save the banks THIS way - they are lying. When they tell you there is no alternative way to run the economy, to issue money and to run banks - that it just has to be THIS way - they are lying.

Stef Zucconi summed it up marvellously:-

Sure, the majority of mid-level contributors to this mess were daft fools driven by greed and fear; with no comprehension of where they were headed. But to believe that only Nassim Taleb [who developed the Black Swan concept, "large-impact, hard-to-predict, random, unplanned and rare events beyond the realm of normal expectations."], and some net based Loons, were the only people who could see a crash coming is nonsense - and more than a little arrogant.

It's also worth remembering that, at the same time the seeds for the current crash were being sown, the key components of a fully-blown surveillance and detention state were being rushed into place in the same countries that were inflating the bubble.

It's also worth asking yourself just how much, or little, wealth the people responsible for inflating the bubble have lost personally.

The fact that history is littered with, admittedly simpler, smaller scale, occurrences of the same kind of kleptocratic economic terrorism is also a bit of a give away.
No doubt any non Loons passing through this blog would, if they could be bothered, dismiss my outpourings as being those of a deranged paranoid lunatic. But then there's the small matter of my blog, and countless others out there, detailing quite specifically what lay ahead.

So, sorry, claims that what is happening was inherently unpredictable don't impress me much at all. And shame on all those [people] out there in cyberspace and the mainstream media who devoted their time to sticking the knife into us 'tinfoil hatters' when the infrastructure for chaos-driven rape and pillage was being laid down piece by piece.

Taleb's almost certainly correct when he argues that the specific outcomes of this crash can't be predicted with any degree of certainty

But, there again, if you control all the guns, money and food would you need to?

(Something which dawned on me whilst pondering the Conspiraloon vs the Non Conspiraloon mental models for comprehending how the world of high finance works is that the Loon looks upon the financial markets as being a means of waging war on ordinary people. And, in war, any successful general makes provision for the unexpected, engages in contingency planning, retains reserves, and makes cold-blooded calculations about what proportion of his own forces he is willing to expend. In warfare, chaos and Black Swan events are pretty much a given and positively encouraged. Your objective is to comprehensively f*** up your enemy's ability to comprehend and respond to what you are doing, and then kill him. Non Loons who simply take the markets at face value will probably lose me totally at this point...)

Zucconi argues that Black Swan events, such as 9/11, Katrina, or the financial crisis, far from being random unforeseen event were in fact planned and very well foreseen by the planners.
Taleb quotes events like the 9/11 attacks and stock market crashes as being examples of unpredictable, Black Swan events, when there's copious evidence that they were anything but. One person's Black Swan; be it due to deceit, dissonance, indoctrination, or plain incompetence, is very often another person's Bleeding Obvious.
According to Zucconi, the problem with most economic commentary is that it is not "loony" enough.

A lot of people have heard the famous Jefferson quote...

"If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered."

...but don't seem to have understood its implications.

The process Jefferson was talking about 200 years ago is deliberate and managed. Switches between inflation and deflation are only nurtured when it suits the people doing the managing and they are not in the business of telegraphing when that would be.

Years of inflation have already ensnared the bulk of people in debt. All that remains is to mop up the minority of people, mostly Baby Boomers who until a few months ago were expecting a nice, cushy retirement, who actually put money aside over that time.

And those who placed their money in the markets have just lost 40-50% of their savings.

Those who've kept away from the markets and are holding cash instead can look forward to a 0% interest rate, whilst prices are rising 10%+, as their reward
Once the savers have been screwed over good and proper, that's everyone in the bottom 99.99% of society accounted for, then all the money our governments have released to the shadow banking system can be unleashed to buy everything that's worth buying unopposed.

A massive transfer of real wealth will then take place and a glittering future of supercharged debt-serfdom secured.

And even if some ordinary people manage to avoid mortgaging their lives away and actually retain some savings, there will still be plenty of tricks left in the toy box to deal with them.

None of this is too far off now but we won't be picking any dates just yet.

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