Analysis
Populism now! The mother of all DIY projects
By Joseph Danison
Online Journal Contributing Writer


Oct 2, 2008, 00:19

�You got to be very careful if you don�t know where you�re going, because you might not get there.� --Yogi Berra.

Henry Paulson waves his crooked pinkie in the air with his mouth twitching spastically, and explains to the gathered senators why they should fork over 700 billion dollars, and fast. Ben Bernanke sits quietly composed at his side, Paulson�s cool and rational counterparty, and follows up the comrade�s harried pitch with a measured invocation of the terror of financial Armageddon if the senators refuse to approve the Troubled Asset Relief Program.

Paulson takes most of the flack because he�s a Bush political appointee, whereas Bernanke, also a Bush appointee, plays the High Priest of the Temple role, the guardian of mysteries and dispassionate possessor of financial wisdom and incontrovertible facts. The Fed is purportedly above mere politics. These two are driving the stuttering financial machine as it coughs and backfires on down the road. They are the nation�s chauffeurs on this historic trip, and also the mechanics who claim to know how to fix what no one else seems to understand. They are the front men for the private corporate owners of the vehicle, so, naturally, we expect them to keep it running. That�s the deal we made with the legal entity called The Federal Reserve back in 1913.

This Troubled Asset Relief Program is a magic TARP. The Congress, out of spite, will probably change the name when they cave in to Wall Street, but TARP says it all. It�s big enough tarp to cover all the corpses on Wall Street and Main Street we�re told. Paulson cannot go into detail how it actually works because it is so complicated, but, apparently, you just throw this TARP, which is stitched together from 7,000,000,000 one hundred dollar bills, over the nation�s dead and zombified financial institutions and they will be made whole again. Through mysterious alchemical processes this will unclog arteries and create liquidity in the national circulatory system.

Look at it this way: you take your car to the garage because the �check engine� light is on. You don�t know what�s wrong with the effing thing and if Mr. Goodwrench tries to explain some intricacies of the internal combustion engine, your eyes glaze over and you suspect a snow job. You just want it fixed, fast, and you don�t want to get ripped off. You�ve got more important things on your mind than becoming a mechanic.

Well, I hate to be the one to break it to you, but like billionaire third party candidate, Ross Perot, used to say in �92 it�s time to pop the hood and have a look yourself. This financial vehicle has no warranty. God wouldn�t underwrite it. This 700 billion dollar repair estimate smells like a colossal rip-off. And you�ve got to hand it to Bernanke and Paulson. These guys never crack a smile.

�Their plan now is for icing on the cake -- to take Mr. Paulson�s $700 billion and run,� economist Michael Hudson says. �It�s not a �bailout of the financial system.� It�s a giveaway -- to insiders, to sell out all their bad bets. Companies across the board will get rid of their bad mortgages, and also their bad car loans, furniture time payments, credit-card loans, student loans -- all the debts that any competent actuary could have told them never could have been paid in the first place.�

The people are being asked to declare a jubilee year for that group of financial aristocrats who live by �the miracle of compound interest,� the speculators and gamblers in red suspenders and tasseled loafers who feast on the nation�s wealth like ticks suck a dog�s blood. �Sworn to fun, loyal to none!� is the motto of this class of elite globalists. When they suspect the dog is about to die, they�re gone, like Jim Rogers, the �commodity king,� who relocated to Singapore, where his kid is learning Cantonese.

Here�s the big question that no one is asking, not even progressive economists like Michael Hudson: why do we give these people so much power? Why do we have a private monetary system they use for their benefit to the detriment of the great body of the American people? When their bets go sour, why do the people end up homeless? Most people work productively for wages and salaries and do not take risks, so why must they pay the bills for an elite group of gamblers? This question has to be answered and there is no one currently engaged in what is cynically called �public service� who is even asking it. Some, like Ralph Nader, are asking why this �bail out� is necessary, but no one asks why the rich are running the show to begin with.

So now you know there�s a giant rip-off in progress as you�re wondering how to make your next mortgage payment and the president is on TV trying to browbeat you into submission. Earnest senators and congressmen are proclaiming that they have to do it, but they swear to protect the taxpayer�s interests and maybe even make a profit buying up Wall Street�s garbage. Everybody is talking shit. Nobody is asking the right questions! You find yourself staring at the mother of all DIY projects.

The sense of your own ignorance is painful and disheartening. But there it is. Deal with it somehow! Washington, DC, will be no help; it is the occupied territory of the neo-aristocracy. It�s up to you to dream up a better operating system. That�s a hard fact of life in a democracy. It�s an old republican virtue called �self-reliance,� or �thinking for yourself.� It�s the last refuge of citizens betrayed by their elected representatives.

We don�t have a democracy when you think about it because the people are not directly involved in making policy. The people want universal health care, they want good paying jobs to stay in this country; they don�t want wars. This is a republic where thinking and policy making is delegated to elected representatives, who call themselves �public servants� but don�t actually represent the will of the people. They are for sale to the highest bidders from the financial class. Even Henry Paulson is nominally a �public servant� and some senators on the banking committee wax effusive about his meritorious �service� to the people. This is like a homeowner in an insurance scam leaving out milk and cookies for his pals the burglars. It is also called �sucking up� and, in the Senate hearing room, it means that the suck-up senator will give Paulson and Bernanke what they want even though his public comments may sound harsh and critical of the magic TARP.

The private financial system called the Federal Reserve is the source of the power of the elite class of financial predators. Paulson, Bernanke, and many in the House and Senate are card-carrying members of this class. Forty percent of senators and almost 30 percent of House reps are millionaires. It is not reasonable to expect them to change the system that treats them so well. �Populist millionaire� is usually an oxymoron, which is not to say that there will be no millionaires under a populist monetary system. It is more true to say that in a system of populist economics, millionaires will not be made at the expense of everyone else.

The Fed was established in 1913 when the representatives of the people gave the keys of the public Treasury to a private banking consortium in the name of fiscal stability. The same bankers responsible for financial mayhem from the Civil War to that point were given monopoly access to the goose that lays the golden egg. It�s a script that could have been written by Kurt Vonnegut. Apparently, the people were suffering from battered wife syndrome since the financial shock of 1907 and may have thought that if they gave the robber barons what they wanted, they�d finally behave and treat them well, a common mistake among trauma victims.

Needless to say, fiscal stability has remained an elusive goal, but the Federal Reserve Act has helped to create a super class of Nietzschean Ubermenschen contemptuous of American republican values. They have lately begun to dismantle the Constitution. They�re growing quite arrogant and intolerant of traditional concepts such as �the general welfare� which contradicts their free market fundamentalism. The Federal Reserve Act is unconstitutional by any reasonable interpretation of that document. It may be difficult to imagine George W. Bush as an Ubermensch, but that is what he seems to believe when he anoints himself �The Decider.�

The creation of the Federal Reserve System was a craven abdication of constitutional responsibility on the part of the Congress and the most profound act of privatization in the 20th Century. President Woodrow Wilson and his phony populist secretary of state, William Jennings Bryant, grievously betrayed their populist constituency. Wilson later admitted as much. (�The Web of Debt, Ellen Brown, 2007). But the clever aristocrats got their bill through Congress. According to William Greider (Secrets of the Temple, 1987) � . . . the new institution defined the permanent limits of American democracy.�

These �permanent limits� are defined by two factors, credit and its evil twin, debt. Credit availability is what the dynamic duo of Bernanke and Paulson are so concerned about. The private financial machine is overwhelmed by self-generated toxic debt, as Michael Hudson explains in the link referenced above. Paulson wants to create more credit availability (�liquidity�) by making the debt disappear with the magic TARP provided by Congress.

Who will get credit, and at what price, is the primary lever of financial control. The Fed has lost control. It could be argued that the Fed has never exercised real control, but has merely exploited the economy in the interest of its elite constituency.

The Federal Reserve System carves up the nation into 12 districts; each presided over by the local regional Federal Reserve Bank, somewhat as predators stake out their territories. All the nationally chartered banks in each district by law become part of the system while other state chartered banks have the option of joining if they meet requirements. There are 12 financial fiefdoms within the national Federal Reserve System, with the New York Federal Reserve Bank exercising the greatest influence over all the others. This does not imply there are 12 financial lords exercising autocratic control in each district, or that the NY Federal Reserve Bank dictates to all the others. The financial class is corporate. Each district bank has its own board of directors and operates with a degree of autonomy within the system, and a Federal Reserve Board oversees the system itself. In the words of the primordial robber baron, John D. Rockefeller, Sr., in the 1880s: �The day of combination is here to stay. Individualism has gone, never to return.�

The private financial system is as well organized as a group of rapacious predators can be, and most importantly, it is free of significant oversight by the government. The perfunctory appearance of the Federal Reserve chairman before the Congress is essentially meaningless. The Federal Reserve System and its secretive operations have never been subjected to an audit; therefore, there is no genuine oversight. (Lewis v. United States, 680 F.2d 1239 (1982) The Fed acts with impunity in its management of the financial affairs of the American people.

The system is in the business of creating credit, i.e., loaning money to worthy borrowers. When you, John or Jane Q. Public, go in to your bank and ask for a loan, the amount of credit you get and on what terms are determined by your credit score, a numerical rating assigned to you by the Economic Integrity Machine known as a �credit rating bureau.� Personal data of all kinds, which may include what hand you use to wipe your butt, is gathered from disparate sources, collated, and interpreted to determine your degree of worthiness.

What score would you assign to Henry Paulson or Ben Bernanke, based on their track record of fiscal management? (Hint: Paulson left the criminal Nixon Administration in 1974 and went to work at Goldman Sachs where he oversaw the accumulation of debt, from $20 billion in 1999 to $100 billion by 2005)

There are different strokes for different folks, the key principle of crony capitalism. If you are one of the Ubermenschen, a member of the privileged network with an ownership stake in the private financial system, you need not visit the bank to apply for credit. You have your CFO handle the transaction, or your executive assistant, or if you enjoy the bowing and scraping of menials, you might call from a reclining position in your limo as you head on over to Sotheby�s. If you are a hedge fund manager and you need a few million on margin to purchase a few hundred million worth of options in the commodities market, no problem! If you�re a private equity group and you want to buy Chrysler back from the Germans, here, have all the billions you need! If you live at the top of the pyramid, your name is your credit score and your credit is cheap and plentiful. This is your financial system. You�re in with the In Crowd. .

If you�re John or Jane Q. Public, one of the great lumpen mass of the people, you are not necessarily denied credit based on your modest station in life, your tiny bungalow in your insignificant ZIP code, your occasional late car payments, but you will be subjected to intense scrutiny, raised eyebrows, moral admonitions, and HIGH INTEREST RATES. Your lack of education and financial sophistication may cause you to be victimized by fine print and incoherent legal babble as you seek to better your station in life or gratify your consumer lust with borrowed money. Your ignorance of the law is no excuse, however, and no matter where you go, you cannot run or hide from the System. If you fail in your moral obligation to meet the terms of a contract you don�t really understand, the Integrity Machine will hound you into homelessness.

But be consoled! You will receive daily credit card solicitations so long as you have a mailing address. You are very important to the System! You are the essential resource the System needs in order to survive, just as the wildebeest is necessary for the survival of the lion. If you, the average American, did not pay high interest rates, no one would, and the financial class could not reap huge profits from the �spreads� and the complex games of interest rate arbitrage in the obscene modern environment of rediscounted paper. Further elaboration of these concepts poses great moral hazard to readers. The shadowy world of usury, like that of child pornography, need not be examined too closely in order to be understood. The rule of the System is: you pay more; insiders pay less and make a killing on the differentials.

But back to the question: why do we give them the power to control our money? Is it because we are so dumb? Not really. The reason we submit to a privatized financial system that exploits the many through the manipulation of interest rates to benefit the few is because, like representatives in the Congress, too many Americans are complicit in it. It is the American Dream of today to retire young and live on Easy Street through investment income. This daydream of money making money through the miracle of compound interest is about to smash into an impervious wall called reality whether Congress bails out Wall Street or not.

Bernanke and Paulson are hounding you to sacrifice your American dream in order that they can have theirs. Wal-Mart workers are denied a living wage so that the Walton family may all become billionaires. As Paulson says, the American people are �already on the hook,� so this 700 billion extortion attempt is just to prevent the problem from getting even worse. The full court press by these representatives of the financial class is a demand that they be allowed to refinance their bankrupt system. The urgency arises from their fear that the American people will have too much time to think about it and realize they do not need this failed private monetary system called the Federal Reserve.

Why are we on the hook in the first place? Because we gave monopoly control over the magical process of creating money to a financial elite. The US government thinks it needs credit, too, just like everyone else, and the System provides it. The Fed loans money to the US government and receives IOUs in the form of Treasury securities in exchange. The Fed then brokers these securities to all buyers in the open market so that governments, institutions, and individuals at home and all over the world own a piece of US government debt. Most of the money the government spends is borrowed in this way and the taxpayers are on the hook to pay it back. At the moment, each of the 304 million US citizens owes about $32,333 on a national debt totaling nearly 10 trillion dollars. Paulson and Bernanke are currently asking the people to add an additional $6,000 to their debt load.

If the US government borrows money to fund its operations through the Federal Reserve System, where does the Fed get the money to lend to the government?

The sovereign power of the US government, or any government, includes the magical ability to create money by fiat, by law, out of nothing, and to �regulate the value thereof.� (US Constitution, Article 1, Section 8, Clause 5) The US government does not need credit like everyone else; it can create its own, free. Through the Federal Reserve Act, the government outsourced its sovereign prerogative and responsibility to a private contractor.

The government did such a stupid thing in 1913 because of a precedent set by the first secretary of the Treasury, Alexander Hamilton, who funded the operation of the new government in 1790 through borrowing from existing private financial networks. Hamilton was a bastard with low self-esteem and a fatal attraction to arrogant people with money. This precedent of deficit financing was not broken for 71 years, until 1861 when Lincoln used the sovereign power of money creation to issue the greenback, debt-free fiat money. The value of the greenback was based on the productive capacity of the American people and the full faith and credit of their government. Lincoln did not have to borrow money from private bankers at outrageous interest rates to finance the war; he simply had it printed up. It worked very well and won the Civil War for the Union.

But private banking interests could not allow this breach of Hamiltonian orthodoxy to stand. The financing of governments is their most lucrative business. Through influence in Congress, i.e., bribery, and �sound money� propaganda, private banking interests were able to get the National Banking Act of 1863 signed into law. The �gold standard� was established. Ancient popular prejudice founded in ignorance, fears of financial instability, and effective propaganda gave the private bankers financial control once again, until 1913 and their greatest coup, The Federal Reserve Act that consolidated and institutionalized their power as never before. 1913 is also the year the 16th Amendment was ratified which resulted in the income tax and the creation of the IRS to coerce popular compliance.

�In time,� says William Greider, in his study of the Federal Reserve, �ordinary citizens would no longer grasp the political meaning of money or even know that it existed. The burden was entrusted to a new technology that was as mystifying as the ancient temples.�

The American people can plainly see the political meaning of money today as the most privileged group in society lobbies for a hand out and gets it.

Today a grand opportunity exists for the people to demand a �greenback solution� to the present crisis and the return of the sovereign power to create money to their government. The big TARP Paulson and Bernanke are lobbying for is an admission of the failure of the Federal Reserve System itself, not merely a few banks and brokerages. Fed policies are the root cause of the rampant speculation and the insanity and perversity of �structured finance� that has infected the crony networks of the financial elite like a toxic batch of cocaine.

If the Paulson/Bernanke performance does not demonstrate to the people the corruption and complicity of the monetary system itself with an elite political interest group, nothing will. We�re doomed as a republic. No fix, no TARP or rescue plan by any other name can prevent the ultimate collapse of this dysfunctional system and a declaration of economic emergency. The legislation for martial law is in place and the apparatus for civil control is being put together. US Northern Command is preparing its Brigade Combat Teams for such an emergency. Fusion operations like the suppression of dissent at the RNC display the efforts of Homeland Security to develop methods of population control. It is likely that when Paulson and Bernanke apprised members of the Senate and House about the situation behind closed doors, they raised the specter of a national economic emergency as their strongest selling point.

A populist economics founded on constitutional money could emerge from this crisis, as it did briefly during the great national cataclysm of Civil War, but only if John and Jane Q Public start thinking for themselves.

There are excellent resources available for the understanding of populist economics. One of the best is The Web of Debt by Ellen Hodgson Brown. There is a legislative proposal offered by the American Monetary Institute, titled �The American Monetary Act,� that would resolve the present crisis overnight if enacted by the Congress. It is a clearly written piece of legislation and makes good reading. The Lost Science of Money, by former denizen of the financial world and now head of the American Monetary Institute, Stephan Zarlenga, is a comprehensive overview of the concept of money. To understand populism as a vital political alternative for today, Fixing the System, by Adrian Kuzminski is essential reading.

Populism is the politics of a free people. There is no hope of democracy without populism. There is no �we the people.�