Funny Money

When an institution of government decides that it is alright to privatize profits on the way up but nationalize subsequent losses on the way down, you know that something deeply undemocratic is playing out. The ideas that have been ventilated this week by Hank Paulson, supported incidentally by the major presidential candidates, are nothing short of a reverse "Robin Hood" scenario where the poor are being robbed to pay for the rich, so that the rich need not pay for their own mistakes.

Many of us non-Americans, looking at this carry on from Europe, are amazed at how few American commentators are questioning the idea of a massive bailout for the housing -- and by extension -- banking sector. But then again, maybe we don't quite appreciate that in a services society, there isn't much more going on than a banking sector financing and extending cheap loans, and a population happy to use their houses as large ATM machines.

Now that this scam has been exposed as little more than a giant Ponzi scheme, how long before the rest of the world refuses to buy U.S. government stock, because holding dollars is one of the quickest way to loose money? Because the Fed continues to print dollars, the dollar, and thus the wealth of the average American, is being embezzled away by the state. This constant erosion of American's wealth went into overdrive in recent days as the Fed accelerated the debasement of the dollar by throwing money at the banking system.

Pretty soon, foreigners are going to reach the end of their patience with this game. They/we will rightly conclude that it might be okay for the U.S. government to rob its own people, it is after all a democracy, but they are not going to rob us anymore. (Those who doubt that countries in long-term decline do not debase their currency to mask their financial feebleness just have to consider the descent of Sterling as Britain ceded global power to the U.S. after WWII).

The same process is happening to America. This week the pension fund of South Korea, the fifth largest pension fund in the world, announced that it would be reducing its exposure to the U.S. dollar and dollar denominated assets. This is part of an on-going trend. As economic power shifts from the U.S. to China, the American government through the Fed will try to mask this by increasing the money supply of dollars. This will simply have the effect of making Americans poorer by stealth.

As the world cottons on to this, the ultimate sanction will be that the U.S. is forced to borrow in a currency that is not the dollar and the exchange rate risk for delinquency is not borne by foreign investors but by American voters. Only then will the average American wake up to the gradual hollowing out of the marrow of the U.S. economy which has been orchestrated by an unholy alliance of the Fed, the White House and Wall Street.

David McWilliams is author of The Pope's Children (John Wiley and Sons), available now.

www.davidmcwilliams.ie

Comments

[iratior]

The thing I find most frustrating about the economy is how long it takes the government to recognize abuses and correct them. For example, in the 1990's, I used to have to dispose of literally boxfuls of junk mail telling me in big print that I'd won this or that contest. The clause "if you have the winning number" would always be buried somewhere deep in the fine print. It was a waste of postal services, a waste of paper, a waste of ink, and a waste of time. As far as I'm concerned, businesses that engaged in it should have had the hell taxed promptly out of them. And after contest promotions, it was credit card offers. Boxloads of credit card offers. Considering all the hassle banks have put people through by cluttering up the mail with credit card offers, it would serve them right to find themselves stuck with a lot of bad loans.

[Wiarton]

George Orwell saw this coming when he penned Animal Farm. The pigs rule - for now.

[elbzee]

THAT'S IT! I've had the oddest sense of Déjà vu for ages now... You hit it right on! It IS Animal House!
Thank you so much!

[PADDYWHACK]

The Dollar was a monopoly until a similar sized economic entity with a strong central bank emerged.With 15 different countries having to observe the rules of Euro membership they are unlikely to stray off the path at the same time.Devaluing this coin is not likely to suit all the parties involved,no matter how many members wish it,the ECB is less susceptible to pressure.The benefits of a stable currency are worth the cost of compliance.The mandate is to control inflation.Cheney & Co.have flogged the Dollar to death for the Neocons,no country can spend recklessly and maintain their currency's value.The real imponderable is what would happen if to cover up the disaster in Iraq the Neocons decide to bomb Iran.Mountains of gold would be needed and oil will be dispensed wih an eye dropper.Petraeus will start the dog and pony show next week to accomplish the attack by summer.

[PublicAdvisor]

The Bear/Stearns $30,000,000,000.00 bail out is corporate socialism at taxpayer expense. Not only is it hypocritical from the vantage point of a self styled "Capitalist Investment Bank", but it means that other worthy projects, goals and priorities for the American Public will be delayed, reduced, or cancelled. Furthermore it incentivizes and rewards crime, theft and mismanagement of investor assetts creating future moral hazards for investors and taxpayers.
http://www.economyincrisis.org

Why should Savior Socialism come to the aid and rescue of Criminal Capitalism? Capitalism is neither grateful nor worthy of rescue. Why should We the taxpayers be raped by our own government to prop of a bank run by thieves, governed by mismanagement, and irresponsible to the very shareholders who are also being fleeced?

For years titans of industry have wailed about the evils of socialism being "soft" and "corrupt" and encourages people to be lazy, careless and uncreative. We've heard how Capitalism is tough, fair minded and competitive and how the cream rises to the top.

Really? Look at the fallen dollar and look at the Euro. http://xe.com/ucc

These are often the same l'aissez capitalists that want to privatize social security, cut pensions, school funding, reduce police, eliminate the arts, yet be awarded sweet heart tax deals, loan forgiveness, obsceve CEO salaries, and deregulation.

Michael Greenberger has a superb and straightforward analysis/explanation of the current financial meltdown and how it got that way.
http://www.npr.org/templates/story/story.php?storyId=89338743

[mamacat]

The reverse Robin Hood principal (rrhp)?
I love it. Explains what is going on in America pretty well.
Seems to me that a good first step away from the rrhp would be to limit the power of lobbyists and big corporations. I think that if the founding fathers had known about lobbyists, they would have outlawed them. Anyone found trying to corrupt government should be run out of town on a rail, after tar and feathering them first. Of course, with all of their money, the fat cats can hire their own army of goons to protect them, so they will never see justice.

[joelaf]

For the last 15 years i have worked in sales (was a broadcaster before that) 3 years ago I took a job with a small company with spectacular sales. Over the course of the first year, I became their highest producing salesperson. I was very popular with their customers, and out of 7 salespeople, I fielded 75% of their calls. All the while, I had to work unpaid overtime. I was assured I would get it back as "comp time". At the end of my first year, I put in for vacation. I was told "oh , yeah , didn't we tell you?
You don't start accruing vacation till after the first year. Check back with us in another year." I asked for some of my comp time off and was told "our attorney says we don't have to pay that unless someone sues us". I gave a month's notice, trained my replacement and moved on. Situation over , right? My former employer called all their clients and other companies in the field and had me blackballed. Now I work 4 days a week and earn under $ 15,000 per year. I have a modest mortgage ( in my 18th year on a 30 year loan) and I'm doing okay. I know how to live within my means. As sh*tty as the end of the stick that I'm holding looks, I bet there will be people who would gladly hold it alongside me soon. THANKS to our economy.

[GodisHateSpeech]

Sounds to me like you were employed by criminals masquerading as businessmen.

Get a business license, retain some lawyers, wear a suit with a lapel flag pin and you too can rip off anyone with impunity.

Thanks for your story, I'm sure you have everyone's deepest sympathy.

[Rule Of Law]

Yeah, **it happens, just be careful not to let it happen again.

[Rule Of Law]

In a system that's called "Capitalism," but isn't!, maybe we could just for once, actually help the American working person on whose back all those fortunes are built. And that would be no more "Socialism" than the so-called "Free Market" we are enslaved by is really Free!

These outdated Labels only serve to polarize us all. It's time to get beyond the false meanings ascribed to humane ways of living--FDR was a Socialist eg--and decide where our priorities really lay. Are they with the People, and if they are, how do we free ourselves from a system that robs everything from us, and then blames us for where we find ourselves?

The Plains Indians had a form of socialism where everyone shared and no one went without. The Amish, Patriot mentioned, very similar while still maintaining the private ownership ideals we all value. There are ways we can take care of each other, rather than being set at each others throats and then fleeced by the Elites that would still allow for personal initiative! It's just that we've been trained to let the words get in the way.

I'm not religious, but I'm tired of the Elites using the Bible to send us off to war, but reading from a whole different book when it comes to charity, compassion, and brotherhood.

[Henry]

A "social good" (economic definition) is a good whose consumption cannot be limited by the consumers inability to pay. The U.S. military provided "security" for all of us, even the homeless and the disabled. It is a social good, nonpayment does not limit its consumption. (In that respect, the U.S. military exactly the same in procurement, pay, and benefit as that of the USSR!)
A "private good" is like an ice cream cone at the drug store (dates me I know)... you don'g pay, you don't get.
Some goods are more efficiently provided "socially" than privately (and some the other way around). The interstate hiway, for example is better as a social good, than a private good. (but just wait , it allures Investment Banks (like Bear) to get in privatize and "create" private wealth)

Jesus by the way was a socialist (you are your brothers keeper)

[Rule Of Law]

Henry, thanks for your contributions today. I'd prefer, in my effort to desensitize these words, to refer to Jesus as a Humanist :) In this country we have been conditioned to believe so many lies.

The Free Market. (Never Capitalism,never Free).

Personal Initiative (the whole bootstrap idea that the Elites and banks laugh at).

Our independence from one another (rather than support and reliance upon one another).

The Western myth of the Loner (this country was built by communities, not loners).

The Lust For More (keeps us slaves, destroys happiness, distracts us from what's really going on).

That We MUST be afraid! (manipulation as an art form--and we're always afraid of exactly the wrong people).

And one Greed Old Psychopaths and I were tossing about yesterday that I call:

Hurray for me and Fuck everybody else! And that one's self explanatory.

If I'm going to pay taxes of any kind, then I would like to see them used for those social goods that elevate everyone, not for wars that enrich our masters. Better roads, better schools, better working conditions, in short, a better country that values people over money, and humanity over things.

[Rule Of Law]

2nd attempt--

Henry, thanks for your contributions today. I'd prefer, in my effort to desensitize these words, to refer to Jesus as a Humanist :) In this country we have been conditioned to believe so many lies.

The Free Market. (Never Capitalism,never Free).

Personal Initiative (the whole bootstrap idea that the Elites and banks laugh at).

Our independence from one another (rather than support and reliance upon one another).

The Western myth of the Loner (this country was built by communities, not loners).

The Lust For More (keeps us slaves, destroys happiness, distracts us from what's really going on).

That We MUST be afraid! (manipulation as an art form--and we're always afraid of exactly the wrong people).

And one Greed Old Psychopaths and I were tossing about yesterday that I call:

Hurray for me and F*** everybody else! And that one's self explanatory.

If I'm going to pay taxes of any kind, then I would like to see them used for those social goods that elevate everyone, not for wars that enrich our masters. Better roads, better schools, better working conditions, in short, a better country that values people over money, and humanity over things.

[joebhed]

Cooperation.
Cooperate.
Cooperative.
Cooperativism, if you like.

In this century, after we get control of our money-issuing powers, we will see an incredible growth in the number of cooperative business enterprises.
Yes. Business enterprises.
It's the real alternative to capitalistic competition.

There aren't many courses in the business schools right now.
But there will be.
How many credit-unions are going bankrupt for anything they did?
Cooperation - it's a way of life.
How many readers know the Seven Cooperative Principles?
Most countries this side of the big pond have a Cabinet level Minister of Cooperatives.
Some think its because they are banana republics.
After the chaos, the further behind we go, the more ahead we are.
Cooperate.
The International Currency Exchange Cooperative - we respect the sovereignty of all nations.
A Cooperative.
It's definition is: what's best for everybody.
Forget socialism.
Cooperate.

[Rule Of Law]

I like the word, Joe. Sounds like people working together; everything they don't want us to do.

[WMG]

From the founder of the Democratic Party, on his occasion of dissolving the first FEDeral Reserve bank in the U.S in 1833¦

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the [public] bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves." -Andrew Jackson


In 1913 after 2 decades of efforts, the money interests who control this nation won the gift that keeps giving to them: our present FEDeral Reserve Bank.

From the man who granted the Feds charter:

"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men..." -Woodrow Wilson

Democrats should be leading the cry for the Fed's dissolve.

[Halsey]

Thank you for these worthy quotes!..how can we NOT be getting all those millions back from the Wharton MBA's who "invented" CDO's etc...packing "nothing" from "nothing"...paying themselves HUGE bonuses... I know we had to bail out Bear...(as much as I hate it..the ramifications of its failure too big)..BUT I WANT THAT MONEY BACK!!!>.and I WAnt prison time for the scoundrels..that is the ONLY way this will not happen again in our life times...

Damn..wish Elliot Spitzer was still head of the SEC!...I couldn't give a shit about his using call girls..IF he sent every last Bear Stearn asshole (not the secretaries!)..to friggin jail!!!

[WMG]

Halsey, you"re welcome, really.

I want to strongly suggest people concerned about the FED and its policies do everything they can to learn more about what is going on. I"ve really only started paying attention in the last few years. There are a couple short articles I strongly recommend that touch on important issues¦ both of these guys are worth reading regularly, and if u plug into their work, you will have many interesting things to read up on, and be ahead of the game.

http://www.minyanville.com/articles/Bernanke-Greenspan-jpm-Fed-arms-LTCM/index/a/16556

http://www.minyanville.com/articles/MER-Bernanke-jpm-Fed-LEH-BSC/index/a/16572

The battle over control of issuance of money is central to the history of all human civilization. It impacts everything. It should be a requirement of citizenship to master an understanding of money, but the elites would burn the country before they permitted it.

[joebhed]

I agree wholeheartedly.
I am also one who says you MUST have the replacement for the FED.
Please read:

http://www.neweconomics.org/gen/uploads/CreatingNewMoney.pdf

"For the first time, this report offers a practical and clear step-by-step
agenda on the essential first step of restoring the right of issuing new
money in a modern economy to be of benefit for the common good."

Also, just for fun, read former Chairman of the Banking and Currency Committee (remember that?) Congressman McFadden's treatise charging the FED with "CONSPIRACY, FRAUD, UNLAWFUL CONVERSION, AND TREASON."

http://home.hiwaay.net/~becraft/mcfadden.html

At some point, people are going to start paying attention to this dialogue, and when they do, they deserve an answer to the question, If not the FED, then what?
Viva La Follette !

[WMG]

Joebhed, thanks for the refs, I"ll check them out.

[Henry]

Think of it this way: The U.S. Dollar has acted, post WWII, as the world currency and also the world reserve currency (central bank reserve account to protect the value of their own currency). The world was "floated" with U.S. Notes (money) circulating around the world never to be "presented" for payment. (think of writing checks from you deposit account that are "monetized" and never presented to your account for payment).
Now... when Europe (the 12) had competing currencies Lira, Franc, Mark, they presented no consolidated scale of "unit" to compete with the dominance of the $U.S. Dollar. However, the Euro, which appears to have performed well to a "bloated" dollar from years of decadent flatulence (on the part of the dollar) now emerges to Latin America, the middle East, and Asia as equally or more attractive. So... like starting from -zero- the gains for these countries and the Euro have been staggering and the dollar diminishes.. The point is simple: The dollar used to be a monopoly. It now has competition, and that part of our flatulent decadent past is behind us. It's academic in that sense. Globalization liberates the masses from the prior tyrannies, even the ones we enjoyed.

[Rule Of Law]

So it take it one step further--Since the Fed was originally financed by a consortium of European and American banks, and, post WW2 America was the new center of financial power in the world, could it be, now that our economy has been inflated and looted and served its purpose, that the creation of the Euro comes at a time when our European cousins would like to see a restructuring of the centers of world finance?

[Henry]

I have studied this a bit and it will harken you to know that the Deutche Bank (central bank) and the Bank of Japan (central bank) are carbon copies of the FED put into concrete after WWII. The G-6 meetings are like meetings of the mob Godfathers where "agreements" are reached.
Globalization brings "factor price equilibrium". And the beneficiaries of this are the Investment Banking Class of society. (for example: if wages in America are $40 per hour, and the rest of the world are $1 per hour, the end result after the enduring competition will be world wages of $5 per hour... everyone gains, except America).
Without doubt the Europeans want their own sense of central finance. It grates at them to have to purchase dollars in order to buy oil from OPEC (what an insult they think)

[WIpatriot]

Henry, your last sentence made me chuckle, how true.

[kingcityguru]

And you wonder why smart money is buying GOLD and gold stocks.

[GodisHateSpeech]

It looks like the smart money is going to Euros.

[ChibiOne]

Take into account the American national deficit, and the petrodollar world reserve currency situation, and it starts to become quite scary. If the dollar falls too far, and loses its status as reserve currency, it will make the great depression look like the mid-90's.

[ErnestineBass]

That's assuming the rest of the world can't get along without big, bad America's guidance.

I think we're about to be disabused of that notion, tout suite.

[PhantomAviator]

Calvin Coolidge (noted Whore-monger):

"The Business of America IS Business."

that was in 1927.

[WIpatriot]

Now it's "Your business IS our business."

[Rule Of Law]

Hey, I thought that was Cheney's new FBI/CIA?

[Rumplestiltskin]

The US reaction to the South Korean Pension funds action should be to indicate we are pulling our troops out of South Korea, and that the South Koreans should begin to adopt responsibility for their own defense. We can save billons of dollars a year by limiting our troop presence around the world to a very few specific places where our direct interests are served.

[ErnestineBass]

Lovely. One foreign base down, 721 to go.

[JacobSinger]

Chalmers Johnson puts the number of US foreign military bases at 737, as he counts bases that exist but are not included in official tallies. By his own admission, there are probably more that the US public are unaware of....

[WorkingClass]

The actions of the FED and the Bush administration are those of a parasite in a dying host. Most Americans are blissful in their slumber. Those that are awake are having a nightmare.

[maryyooch]

WHY CAN THE FEDS BAIL OUT THE BIG CORPORETIONS {WITH UNTOLD MONEY HIDEN IN OFFSHORE ACCOUNTS} WHEN THEY CAN'T HELP THE WORKING MAN? tHIS JUST MAKES ME SICK. THERE ARE TOO MANY HOMELESS FAMILIES, PEOPLE WITHOUT HOUSES THAT ARE STRUGGLING TO PAY RENT, DOCTOR BILLS, BUY FOOD, ETC. SO, WHERE IS THAT COMPASIONATE CONSERVATISM NOW? IF YOU HAPPEN TO COME ACROSS ANY, PLEASE LET ME KNOW. WE CAN'T EVEN GO BACK TO LIVING OFF THE LAND, AS THE RICH HAVE BOUGHT IT ALL UP. WE NEED A PRESIDENT WHO HAS EXPERIENCED A ROUGH LIFE. LIKE EATING PBJ EVERY DAY FOR YEARS, WORRING ABOUT BILLS SO THEY GET NO SLEEP, AND HOW TO COME UP WITH MONEY TO DRESS YOUR KIDS IN THE MANDATORY SCHOOL UNIFORMS. EVERY THING THIS GOVERMENT DOES POINTS TO FASCISM.

[WIpatriot]

Sorry, that's not the president I'd want.

[joebaggadonuts]

Parasite in dying host. I like the analogy. Too bad most Americans won't get it. Maybe they will from watching enough CSI, but probably not. Let's see..... keep it warm enuf to lay eggs or create spores as quickly as possible, then get the little ones the heck out fast and far and try to find a new host.... Like umm, keep all the tax money you can and put it off shore, buy ranch land in Paragauy, visit other nations to spread the seeds of destruction and make connections so you can stick there.

Great analogy.

[Purple Girl]

It all Boils down to a Private Banking Scam from 1934- the 'Sting' perpetrated by the Charade called the 'Federal Reserve'. They took OUR nations gold As HOSTAGE , without the pesky duty of Accounting for it , then Prints our money like Counterfeiters Gone Wild, Then while they have their Goons beat the Hell out of th eMom & Pop Store Owners, let al theri Buddies in the Back to Clean the Place Out. Under that Logic & ethics- Capone was A 'Federal man'
WE MUST FIRE THIS GRAND DADDY INDEPENDENT CONTRACTOR.Indict all its co Conspirators and Make the US TREASURY The Institution it was Supposed to BE.
WE must use the same tactics we have endured- FREEZE & SEIZE all Corp & PERSONNAL ASSETs.Some will need to be extradicted to their Creditor nations with a Note Pinned to theri Shirts - WE DO NOT PAY GAMBLING DEBTS. And Let the Creditors do as they wish with them, extract their money or Payback anyway THEY see Fit.

[WIpatriot]

Fight the Fed...Buy Gold.

[ErnestineBass]

Nice idea, WIpatriot, but...HOW THE @#%$ ARE WE SUPPOSED TO PAY FOR IT?

You know I luv yah, darlin', but $1,000 an oz. is simply out of most folk's range.

[GodisHateSpeech]

Tired Old School paranoid rhetoric.

Wise Up, Buy Euros.

Gold has TOPPED OUT.

Patriot, you don't happen to sell gold do you?