The Plutocratic Deceit …
If the economy is being controlled, then the question becomes, “Who” will control it? Will it be plutocrats serving themselves at the expense of the nation? Or democratic governments representing and serving the interests of the population? It is quite clear that self-enriching plutocrats exclude the interests of most people in operating their private economies. And it is not clear that governments in fact serve their people rather than themselves. But corporatist plutocrats seek to prevent this question from even being asked, by pretending to be powerless “free market participants” suffering the predations of “big bad government”.
But individuals or small groups of men controlling economic resources the size of entire nations are not mere economic competitors. They are alternate forms of government. And they should be recognized, scrutinized and treated as such. America’s government is structured along the lines of Montesquieu’s tripartite system presented in his 1748 “The Spirit of the Laws”, where the legislative, executive and judicial branches of government each act as a jealous check on each other to prevent any group from gaining a monopoly of power and tyrannizing the nation.
… A 600-Year Legacy
But in our current post-moral environment of kleptocracy (rule by thieves), extreme personal wealth is rampant and ALL branches of government are corrupted by the same opportunities to receive extravagant personal wealth by serving the plutocratic (rule by the rich) interests of wealthy individuals and corporations rather than serving the democratic interests of the nation’s economy and the people of the nation. America’s founders, most notably Thomas Jefferson and Andrew Jackson, were highly aware of and mightily resisted the corrupting and monopolizing influence of big private money. In an 1802 letter to Secretary of the Treasury Albert Gallatin, Jefferson wrote,
“If the American People ever allow the 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 property until their children wake up homeless on the continent their fathers occupied. The issuing power of money should be taken from the bankers and restored to Congress and the people to whom it belongs. I sincerely believe the banking institutions having the issuing power of money are more dangerous to liberty than standing armies.”
Jefferson fought Hamilton et al in the latter’s effort to establish a central bank in America, owned and operated by “European banking interests”, which meant “Rothschild” banking interests. This organization already dominated The City in London and essentially ruled Europe’s financial life; and now wanted to rule America’s destiny too. Bankers “create” the financial credit that they lend to governments and to the public. Bankers do not lend out money that already exists. They create new money. A bank loan is the creation of new financial credit. Financial credit functions as “money”. Repayment of the loan extinguishes that credit, extinguishes that money. That is the function of “banking” as it has been practiced these past 600 years.
Consolidation of Banking Power
The mega-trillions of money that flood the world today did not exist in 1776, or even in 1976. This is new money created as financial credit every time a bank makes a loan or purchases a government bond. Banking is where our money “comes from”. This awesome private power to create and allocate money, and thereby to guide or rule the economic life of nations, and to allocate wealth wherever it choses and to deny wealth wherever it chooses, was correctly seen by America’s founders as a direct alternative and competitor to democratic government.
The battle between the private money power and democratic government is the central theme of virtually all of America’s history, though the bankers won a decisive victory with passage of the 1913 Federal Reserve Act and associated commercial banking legislation that formalized the banks’ privilege to create the nation’s financial credit, the nation’s “money”. Not coincidentally, this formal (some argue, “unconstitutional”) transfer of the money creating authority from Congress to private bankers took place just before the largest financial undertaking the world had ever known to that date: World War I.
The 1920-21 depression, Roaring Twenties, Great Crash, Great Depression, World War II, and subsequent financial history of the US is well known and need not be repeated here. But needless to say, because all new US money is created as loans of financial credit by bankers, as America’s economy grew and her money needs grew, America’s “debt” grew in lockstep. In this system, in order for one person to have “savings” of money, some other person must still owe that money as “debt” to their banker.
Bank lending creates the money, borrowers spend it into the economy where it is earned by other people, then the borrowers earn it back out of the economy to repay their loan, at which time both the debt and the money are destroyed on the bank’s balance sheet. The “money” existed as a bank balance sheet equation, with a monetary “credit” in one column offset by a monetary “debt” in the opposite column. When the money meets the debt in a loan repayment, the positive and negative numbers cancel each other out, leaving no debt and no money. Insane as it may sound, that is our monetary system in a nutshell.
Unpayable Debts
So the flip side of today’s mega-trillions of government and private “debt” is that other people presently hold that money as their “savings”. But if the savers are hunkered down and won’t spend, then the debtors have no way to earn that money back out of the economy to repay their debts, and their debts become literally “impossible” to pay. Some argue that now is the time for the government to borrow even more money from the bankers by issuing even more bond debt. But I think we have come to the time where we must recognize that our bank-debt money system is fundamentally flawed, and some kind of monetary reform is going to be necessary to unlock the current impasse between savers and debtors.
Crossing the Rubicon
Today millions of foreclosed Americans are finding themselves “homeless on the continent their fathers occupied”, and mega corporations “bestride the narrow world like a colossus”, as Shakespeare wrote of Julius Caesar after he defied the Roman Senate by bringing his army across the Rubicon River in 63 BC and effectively became “emperor” of what had been for centuries the Roman “republic”. The Republican democratic balance of power had broken down and devolved to rule by a man, an emperor, and Rome’s system of democratic government was forever altered.
America’s Republican balance of power has likewise broken down, but rather than devolving to autocracy (rule by one man with unlimited power) like Rome’s emperors, or oligarchy (rule by a few) like earlier Rome’s aristocratic Senate, America is devolving into plutocracy, rule by the rich. And they became rich and dominant, as Jefferson warned, because of the democratically corrosive influence of bankers’ power to create and allocate virtually unlimited quantities of money in the form of financial credit.
Usurpation of Constitutional Power
“The money power” is just that: human power of command. Money “commands” people in the economy to do the bidding of the lender or spender of money. Bankers didn’t “acquire” all that money they lend because they or some depositor previously “earned” it. Bank lending “creates” a bank deposit, and that bank deposit functions as “money”. So the moral argument that bankers and rich people “should” be able to do whatever they want with “their” money breaks down on the fact that bankers have usurped the government’s constitutional authority and responsibility to create the nation’s money in ways that serve the interests of the nation; and that rich corporatists are simply beneficiaries of private bank allocation of money that allows those corporations to buy out all their competitors and gain anti-competitive, anti-market monopoly or oligopoly power in their industries.
Ten competitors line up in the starting blocks. One of them is given a financial rocket boost and dominates the field and wins all the prize money, repeatedly, until he is the only runner left on the field, richer than Midas, and the game of “competitive economy” is over and won. This was never a “fair” race, because one player was given an insurmountable advantage by another player who happens to enjoy the privilege of creating money and providing it to whomever he chooses.
The Prodigal Monopoly
A monopolist is in a position to extract as much earnings as he likes from his captive market, so he is ideally suited to pay interest to bankers. A national government is likewise in a position to extract enough taxes from its people to pay interest, so bond debt is another old favorite of bankers. It is in the interest of the institution of banking, as it is currently structured, to create monopolies and public debt. Free market “competitors” lose more often than they win, so they are highly unreliable lending targets.
Unless, as has been the case since the 1982 Latin debt default rendered almost all of the Canadian (4 of 5) and American (7 of 8) big banks technically insolvent after their recycling of post-1973 Arab petrobillions into Latin resource plays went sour, the bankers know the government will bail them out of their failures (I don’t know the history of European banks in this regard, but they may have been involved as well). An implicit bailout guarantee to banking institutions who possess literally a license to print money, turned out to be a license for bank executives and bonused-up employees to “steal” money via accounting control fraud, as the indefatigable Bill Black never tires of warning all who will hear him.
So we got the S&L bubble followed by the tech bubble followed by the orders of magnitude larger real estate bubble, where bankers took all the money as upfront fees, and the government or central bank took all the failed loans off their balance sheets and propped them up to steal, steal again. And now JP Morgan is “earning” record profits again after its near death experience in 2008? (Cough, cough.)