Commentary
An Argentinean voice from the economic wilderness
By Jerry Mazza
Online Journal Associate Editor


Nov 5, 2008, 00:26

Perhaps it was linking the DVD, The International Bankers Orchestration of Argentina’s 2001 Collapse, in my last article, The Halloween Economy: trick or treat, that brought me an email copy of Adrian Salbuchi’s brilliant article, Go Get Your Dollars Out Now! FAST! There was a sense of urgency to that statement, an offer I found hard to refuse or at least to read.

B. McDonald described the “Collapse” DVD this way: “This film documents the events that led to the economic collapse of Argentina in 2001 which wiped out the middle class and raised the level of poverty to 57.5%. Central to the collapse was the implementation of neo-liberal policies which enabled the swindle of billions of dollars by foreign banks and corporations. Many of Argentina’s assets and resources were shamefully plundered. Its financial system was even used for money laundering by Citibank, Credit Suisse, and JP Morgan. The net result was massive wealth transfers and the impoverishment of society which culminated in many deaths due to oppression and malnutrition.”

Sound familiar, including some stateside banking brand names? It is.

In his article, Salbuchi had this to add and then some, “As Argentine citizens, we have a huge advantage over other peoples, including US citizens, when it comes to understanding and coping with this kind of crisis. I say this because in our own lifetimes we have suffered in Argentina all of what is now happening globally -- albeit on a much smaller scale in our case. We’ve seen this movie . . . We’ve been there, and done that . . .

“We’ve been pushed and dragged through the entire hysterical hocus-pocus of inflation, hyperinflation, systemic banking collapses, currency changes, Debt Bond Swaps, Mega-Debt Bond Swaps, financial ‘armoring,’ banking holidays, freezing of bank accounts, etc., etc . . . And we have also suffered the end-results: bank bailouts paid for by taxpayers (or through inflation, or through the confiscation of savings), disappearance of pension funds, destruction of job posts and overall impoverishment of the population.

“So, take a clue from our thirty years’ experience in ‘financial meltdowns’: GO GET YOUR DOLLARS OUT FROM YOUR BANK NOW, AND DO IT FAST!” [Caps, the author’s].

Thus, in the eternal words of Yogi Berra, “It’s déjà vu all over again,” or at least about to happen here all over again. And Salbuchi gives us four basic flaws for this monetary model, which he later explains in significantly greater detail. But the basic flaws are easily applicable to the US.

“1. Programmed Monetary Insufficiency - Artificially generated by an ‘independent’ central bank, controlled by the local and global private banking institutions superstructure . . .”

I would also add that the banks were aided and enabled by a worldwide network of computers, which can add and subtract, amortize and compound interest and flash the results, incredible sums, across visible and invisible borders, from public institutions to private offices in seconds, with the stroke of a key or two.

“2. Private banking based on Fractional Reserves - As a system, this allows banks to create money out of thin air, charging interest for it - often at usury rates -, and generating huge profits for ‘investors’ and creditors . . .”

These reserves can fluctuate incredibly, Salbuchi points out, with say JP Morgan and Citigroup generating 8 to 10 dollars for every real buck, to Goldman Sachs or Morgan Stanley generating about $30 to one buck, to Merrill before its collapse generating more than $60 to one buck, to Bear Stearns and Lehman Brothers generating more than $100 to one buck before they collapsed. Those figures speak for themselves.

“3. Debt - This is the key concept that ‘fuels’ private and public economies replacing the far more economically sound concept of reinvesting company profits and promoting a savings culture. Those who benefit from the unnecessary creation of debt need to promote and instigate among the public at large in all countries, ferociously undisciplined consumerism and greed, which goes hand in hand with total rejection of the very concept of saving and preparing for a rainy day.”

That is really not hard to see, from the subprime lending criminality to the multi-billion dollar credit card collapses, Reserve Fund failures, given the decades of rotating consumer debt, averaging some $12,000 per American family. “The saving for the rainy day” notion, which my parents, survivors of the 1929 Great Depression, would constantly refer to got lost. Somehow post-WW II prosperity from the spoils of victory and production of armaments, aided and abetted by modern advertising, blew all those cautions away. It gave birth to “conspicuous consumption” as well as “planned obsolescence,” so one could be in a perpetual state of purchase and seeming self-renewal and self-improvement.

“4. Privatize Profits/Socialize Losses - As a channeling and transference scheme for the various stages of the recurrent ‘cycles,’ so that when they reach the inexorable stage where collapse is unavoidable, there is always a way of making the population at large pay the bill. . . .”

Again, we’ve had a more than painful example of “socializing the losses” with the latest $700 billion bailout, primarily for banks, with the reason nominally being “toxic” subprime loans, given originally with the blessing of investment banks to mortgage companies and lending banks. Then collateralized into mortgage pools and bundled into debt securities, generating additional revenues.

Or course, the profits, the fees, charges, compounded interest for buyers not bewaring were privatized and went to the financial institutions. Yet the tab is being socialized, i.e., picked up by the American taxpayer, and/or any nation or individuals holding American dollars, given their devaluation, along with the threat of a total ice age freeze-up of capital if not fed by the endless warmth of more cash.

The 4 pillars of the Extreme Capitalist Model

Salbuchi’ describes his full 4 pillars Model as follows: “In short the key factors described above in the long-term all function together in a coordinated, consistent and synchronized manner, which means that, even if in the short-and-medium-terms there are spates of high profits where money is sloshed around big time, in the long-term the whole system just doesn’t add up.

“That’s when you have periodic meltdowns like today’s. Usually, they are explained away by well-paid economic gurus writing brainy explanations in The Wall Street Journal, Financial Times or New York Times, who tell us that this is all just part of ‘the economic cycle.’ For the most part, they can isolate sections of those downturns and localize them, so that they only affect a couple of emerging markets . . . Like Argentina in 2001, or Brazil in 1999, or Mexico in 1997.”

Well Salbuchi is brainy enough himself, as much as any of the major media pundits. The difference is he’s telling you the truth quite simply. And giving you his bottom line equally as simply. Get your money out of the bank. Of course, I’m not trying to start a run here, simply reporting what the “voice of experience” has said with great erudition. In his summary, he gives you a virtuoso review from beginning to end of our present “terminal crisis of the global financial system.” He finds it, as I do, “very enlightening and revealing.” He also conceives of . . .

Three plans which could develop from the disaster

Salbuchi provides a Plan A, which addresses a relatively low intensity crisis through basically financial measures. A Plan B, which addresses a medium intensity crisis through financial and monetary measures. And a Plan C, which addresses a high intensity crisis through geopolitical and military measures, which includes the possibility of an all-out world war. This may not be for the feint of economic heart, but it certainly is food for healthy thought when considering the unbridled outcome of our government’s present policies.

In my humble opinion, this 10-page piece deserves your close attention and a highlighter pen. Salbuchi’s last and shortest section is a definition of the Argentine Second Republic Movement. Yet, let me close this commentary with Salbuchi’s opening paragraph, which echoes my own thoughts on the subject . . .

“The events of the last two weeks, perhaps months [author itals], have clearly revealed that the global financial, monetary and banking system imposed on the world by the power structures promoting ‘globalization’ is fundamentally flawed, unviable and immoral in its effects upon the most all of Mankind. After allowing a small cabal of shady characters to illegitimately accumulate vast amounts of wealth and power over markets, corporations, industries, media, armed forces and entire nations, like the World Trade Center towers on 9/11, this entire System is now in free-fall, collapsing into itself in one massive implosion.” Amen. And let us all aim, if not hope, for its demise.