Category Archives: Banks

A Global People’s Bailout for the Coming Crash

When the global financial crisis resurfaces, we the people will have to fill the vacuum in political leadership. It will call for a monumental mobilisation of citizens from below, focused on a single and unifying demand for a people’s bailout across the world.

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A full decade since the great crash of 2008, many progressive thinkers have recently reflected on the consequences of that fateful day when the investment bank Lehman Brothers collapsed, foreshadowing the worst international financial crisis of the post-war period. What seems obvious to everyone is that lessons have not been learnt, the financial sector is now larger and more dominant than ever, and an even greater crisis is set to happen anytime soon. But the real question is when it strikes, what are the chances of achieving a bailout for ordinary people and the planet this time?

In the aftermath of the last global financial meltdown, there was a constant stream of analysis about its proximate causes. This centred on the bursting of the US housing bubble, fuelled in large part by reckless sub-prime lending and an under-regulated shadow banking system. Media commentaries fixated on the implosion of collateralised debt obligations, credit default swaps and other financial innovations—all evidence of the speculative greed and lax government oversight which led to the housing and credit booms.

The term ‘financialisation’ has become a buzzword to explain the factors which precipitated these events, referring to the vastly expanded role of financial markets in the operation of domestic and global economies. It is not only about the growth of big banks and hedge funds, but the radical transformation of our entire society that has taken place as a result of the increasing dominance of the financial sector with its short-termist, profitmaking logic.

The origins of the problem are rooted in the early 1970s, when the US government decided to end the fixed convertibility of dollars into gold, formally ending the Bretton Woods monetary system. It marked the beginning of a new regime of floating exchange rates, free trade in goods and the free movement of capital across borders. The sweeping reforms brought in under the Thatcher and Reagan governments accelerated a wave of deregulation and privatisation, with minimum protective barriers against the ‘self-regulating market’.

The agenda was pushed aggressively by most national governments in the Global North, while being imposed on many Southern countries through the International Monetary Fund and World Bank’s infamous ‘structural adjustment programmes’. A legion of books have examined the disastrous consequences of this market-led approach to monetary and fiscal policy, derisorily labelled the neoliberal Washington Consensus. As governments increasingly focused on maintaining low inflation and removing regulations on capital and corporations, the world of finance boomed—and the foundations were laid for a dramatic dénouement in 2008.

Missed opportunities

What’s extraordinary to recall about the immediate aftermath of the great crash is the temporary reversal of those policies that had dominated the previous two decades. At the G20 summit in April 2009 hosted by British Prime Minister Gordon Brown, heads of state envisaged a return to Keynesian macroeconomic prescriptions, including a large-scale fiscal stimulus in both developed and developing countries. It appeared that the Washington Consensus had suddenly lost all legitimacy. The liberalised global financial system had clearly failed to provide for a net transfer of resources to the developing world, or prevent instability and recurrent crisis without effective state regulation and democratic public oversight.

Many civil society organisations saw the moment to call for fundamental reform of the Bretton Woods institutions, as well as a complete rethink of the role of the state in the economy. There was even talk of negotiating a new Bretton Woods agreement that re-regulates international capital flows, and supports policy diversity and multilateralism as a core principle (in direct contrast to the IMF’s discredited approach).

The United Nations played a staunch role in upholding such demands, particularly through a commission set up by the then-President of the UN General Assembly, Miguel d’Escoto Brockmann. Led by Nobel laureate Joseph Stiglitz, the ‘UN Conference on the World Financial and Economic Crisis and its Impact on Development’ proposed a number of sensible measures to protect the least privileged citizens from the effects of the crisis, while giving developing countries greater influence in reforming the global economy.

Around the same time, the UN Secretary-General endorsed a Global Green New Deal that could stimulate an economic recovery, combat poverty and avert dangerous climate change simultaneously. It envisioned a massive programme of direct public investments and other internationally-coordinated interventions, arguing that the time had come to transform the global economy for the greater benefit of people everywhere, including the millions living in poverty in developing and emerging industrial economies.

This wasn’t the first time that nations were called upon to enact a full-scale reordering of global priorities in response to financial turmoil. At the onset of the ‘third world’ debt crisis in 1980, an Independent Commission on International Development Issues convened by the former West German Chancellor, Willy Brandt, also proposed far-reaching emergency measures to reform the global economic system and effectively bail out the world’s poor.

Yet the Brandt Commission proposals were widely ignored by Western governments at the time, which marked the rise of the neoliberal counterrevolution in macroeconomic policy—and all the conditions that led to financial breakdown three decades later. Then once again, governments responded in precisely the opposite direction for bringing about a sustainable economic recovery based on principles of equity, justice, sharing and human rights.

A world falling apart

We are all familiar with the course of action taken from 2008-9: colossal bank bailouts enacted (without public consultation) that favoured creditors, not debtors, despite using taxpayer money. Quantitative easing (QE) programmes that have pumped trillions of dollars into the global financial system, unleashing a fresh wave of speculative investment and further widening income and wealth gaps. And the perceived blame for the crisis deflected towards excessive public spending, leading to fiscal austerity measures being rolled out across most countries—a ‘decade of adjustment’ that is projected to affect nearly 80 percent of the global population by 2020.

To be sure, the ensuing policy responses across Europe were often compared to structural adjustment programmes imposed on developing countries in the 1980s and 1990s, when repayments to creditors of commercial banks similarly took precedence over measures to ensure social and economic recovery. The same pattern has repeated in every crisis-hit region, where the poorest in society pay the price through extreme austerity and the privatisation of public assets and services, despite being the least to blame for causing the crisis in the first place.

After ten years of these policies a new billionaire is created every second day, banks are still paying out billions of dollars in bonuses each year, and the top 1% of the world population are far wealthier than before the crisis happened. At the same time, global income inequality has returned to 1820 levels, and indicators suggest progress is now reversing on the prevention of extreme poverty and multiple forms of malnutrition.

Indeed the United Nations continues to face the worst humanitarian situation since the second world war, in large part due to conflict-driven crises that are rooted in the economic fallout of the 2008 crash—most dramatically in Syria, Libya, and Yemen. Countries of both the Global North and South remain in the grip of a record upsurge of forced human displacement, to which governments are predictably failing to respond to in the direction of cooperative burden sharing through agreements and institutions at the international level.

Not to mention the rise of fascism and divisive populism that is escalating in almost every society, often as a misguided response to pervasive inequality and a widespread sense of unfairness among ordinary workers. It is surely reasonable to suggest that all these trends would not be deteriorating if the community of nations had seized the opportunity a decade ago, and acted in accordance with calls for a just transition to a more equitable world order.

The worst is yet to come

We now live in a strange era of political limbo. Neoclassical economics may have failed to predict the great crash or provide answers for a sustained recovery, yet it still retains its hold on conventional academic thought. Neoliberalism may also be discredited as the dominant political and economic paradigm, yet mainstream institutions like the IMF and OECD still embrace the fundamentals of free market orthodoxy and countenance no meaningful alternative. Consequently, the new regulatory initiatives agreed at the global level are largely voluntary and inadequate, and governments have done little to counter the power of oligopolistic banks or prevent reckless speculative behaviour.

Banks may be relatively safer and possess a bigger crisis toolkit, but the risk has moved to the largely unregulated shadow banking system which has massively increased in size, growing from $28 trillion in 2010 to $45 trillion in 2018. Even major banks like JP Morgan are forewarning an imminent crisis, which may be caused by a digital ‘flash crash’ in which high frequency investments (measuring trades in millionths of a second) lead to a sudden downfall of global stock markets.

Another probable cause is the precipitous rise in global debt, which has soared from $142 to $250 trillion since 2008, three times the combined income of every nation. Global markets are running on easy money and credit, leading to a debt build-up which economists from across the political spectrum agree cannot last indefinitely without catastrophic results. The problem is most acute in emerging and developing economies, where short-term capital flowed in response to low interest rates and QE policies in the West. As the US and other rich countries begin to steadily raise interest rates again, there is a risk of a mass exodus of capital from emerging markets that could trigger a renewed debt crisis in the world’s poorest countries.

Of most concern is China, however, whose credit-fuelled expansion in the post-crash years has led to massive over-investment and national debt. With an overheating real-estate sector, volatile stock market and uncontrolled shadow banking system, it is a prime candidate to be the site for the next financial implosion.

However it originates, all the evidence suggests that an economic collapse could be far worse this time around. The ‘too-big-to-fail’ problem remains critical, with the biggest US banks owning more deposits, assets and cash than ever before. And with interest rates at historic lows for many G-10 central banks while the QE taps are still turned on, both developed and developing countries have less policy and fiscal space to respond to another shock.

Above all, China and the US are not in a position to take the same decisive central bank action that helped avert a world depression in 2008. And then there are all the contemporary political factors that mitigate against a coordinated international response—the retreat from multilateralism, the disintegration of established geopolitical structures and relationships, the fragmentation and polarisation of political systems throughout the world.

After two years of a US presidency that recklessly scraps global agreements and instigates trade wars, it is hard to imagine a repeat of the G20 gathering in 2009 when assembled leaders pledged never to go down the road of protectionist tariff policies again, fearing a return to the dire economic conditions that led to a world war in the 1930s. The domestic policies of the Trump administration are also especially perturbing, considering its current push for greater deregulation of the financial sector—rolling back the Dodd-Frank and consumer protection acts, increasing the speed of the revolving door between Wall Street and Washington, D.C., and more.

Mobilising from below

None of this is a reason to despair or lose hope. The great crash has opened up a new awareness and energy for a better society that brings finance under popular control, as a servant to the public and no longer its master. Many different movements and campaigns have sprung up in the post-crash years that focus on addressing the problems wrought by financialisation, which more and more people realise is the underlying source of most of the world’s interlinking crises. All of these developments are hugely important, although the true test of this rising political consciousness will come when the next crash happens.

After the worldwide bank bailouts of 2008-9—estimated in excess of $29 trillion by the US Federal Reserve alone—it is no longer possible to argue that governments cannot afford to provide for the basic necessities of everyone. Just a fraction of that sum would be enough to end income poverty for the 10% of the global population who live on less than $1.90 a day. Not to mention the trillions of dollars, euros, pounds and yen that have been directly pumped into financial markets by central banks of the major developed economies, constituting a regressive form of distribution in favour of the already wealthy that could have been converted into some form of ‘quantitative easing for the people’.

A reversal of government priorities on this scale is clearly not going to be led by the political class. They have already missed the opportunity, and are largely beholden to vested interests that are unduly concerned with short-term profit maximisation, not the rebuilding of the public realm or the universal provision of essential goods and services. The great crash and its aftermath was a global phenomenon that called for a cooperative global response, yet the necessary vision from within the ranks of our governments was woefully lacking. If the financial crisis resurfaces in a different and severer manifestation, we the people will have to fill the vacuum in political leadership. It will call for a monumental mobilisation of citizens from below, focused on a single and unifying demand for a people’s bailout across the world.

Much inspiration can be drawn from the popular uprisings throughout 2011 and 2012, although the Arab Spring and Occupy movements were unable to sustain the momentum for change without a clear agenda that is truly international in scope, and attentive to the needs of the world’s majority poor. That is why we should coalesce our voices around Article 25 of the Universal Declaration of Human Rights, which proclaims the right of everyone to the minimal requirements for a dignified life—adequate food, housing, medical care, access to social services and financial security.

Through ceaseless demonstrations in all countries that continue day and night, a united call for implementing Article 25 worldwide may finally impel governments to cooperate at the highest level, and rewrite the rules of the international economic system on the basis of shared mutual interests. In the wake of a breakdown of the entire international financial and economic order, such a grassroots mobilisation of numberless people may be the last chance we have of resurrecting long-forgotten proposals in the UN archives, as notably embodied in the aforementioned Brandt Report or Stiglitz Commission.

The case of Iceland is widely remembered as an example of how a people’s bailout can be achieved, following the ‘Pots and Pans Revolution’ that swept the country in 2009—the largest protests in the country’s history to date. As a result of the public’s demands, a new coalition government was able to buck all trends by avoiding austerity measures, actively intervening in capital markets and strengthening social programs for the less privileged. The results were remarkable for Iceland’s economic recovery, which was achieved without forcing society as a whole to pay for the blunders of corrupt banks. But it still wasn’t enough to prevent the old establishment political parties from eventually returning to power, and resuming their support for the same neoliberal policies that generated the crisis.

So what must happen if another systemic banking collapse occurs of even greater magnitude, not only in Iceland but in every country of the world? That is the moment when we’ll need a global Pots and Pans Revolution that is replicated by citizens of all nationalities and political persuasions, on and on until the entire planet is engulfed in a wave of peaceful demonstrations with a common cause. It will require a huge resurgence of the goodwill and staying power that once animated Occupy encampments, although this time focused on a more inclusive and universal demand for implementing Article 25 and sharing the world’s resources.

It may seem far-fetched to presume such an unprecedented awakening of a disillusioned populace, as if we can expect a visionary leader of Christ-like stature to point out the path towards resurrecting the UN’s founding ideals of “better standards of life for everyone in the world”. Unfortunately, nothing less may suffice in this age of economic chaos and confusion, so let us all be prepared for the climactic events about to take place.

The Aftershocks Of The Economic Collapse Are Still Being Felt

Photo by Oli Scarff for Getty Images

There has been a spate of articles recently on the ten year anniversary of the financial collapse. We wrote about this anniversary two weeks ago, describing the cause of the collapse and the reasons why we are still at risk for another one. Now, we look at how the aftermath of the collapse is shaping current politics, people’s views on the economic system and the conflict that lies ahead to create an economy for the 21st Century.

Economic Violence Is Being Waged Worldwide (Source Twitter)

The Aftershocks Of The Collapse Are Still Being Felt

Jerome Roos of ROAR Magazine writes that the response to the 2008 crash – bailing out the banks but not the people – led to unrest across the globe, beginning with the Arab Spring, and a growing anti-capitalist sentiment. He goes on to say:

It has recently begun to consolidate itself in the form of vibrant grassroots movements, progressive political formations and explicitly socialist candidacies that collectively seek to challenge the untrammeled power and privileges of the ‘1 percent’ from below.

The stagnant economy, austerity measures and resulting increased debt have opened a space for people to search for and try out alternative economic structures that are more democratic. They have also created conditions for a rise of nationalism on the right. Roos concludes that the “real confrontation is yet to come.”

In the United States, the economic conditions have revived populist movements on both the right and the left. Gareth Porter explains the Democratic and Republican parties are aware of the great dissatisfaction with their failed policies and know they need to try to appease the public by trying new policies, but they don’t know how.

He points to recent joint papers put out by the Center for American Progress, a Democratic Party think tank, and the American Enterprise Institute, a Republican Party think tank. One from May is called, “Drivers of Authoritarian Populism in the United States,” and the other from July is called, “Partnership in Peril: The Populist Assault on the TransAtlantic Community.” In the papers, rather than present alternative solutions, they attack Jill Stein of the Green Party and Bernie Sanders, a Democratic Socialist.

There is a battle inside the Democratic Party between progressives, some who call themselves socialists, and the dominant business-friendly corporatists. As Miles Kampf-Lessin writes:

An August poll shows that, for the first time since Gallup started asking the question 10 years ago, Democrats now view socialism more favorably than capitalism.

But the Democratic Party has been deaf to the interests of its constituents for decades. At meetings organized by centrist Democratic Party groups this summer, lacking populist solutions, the best they could come up with was “the center is sexier than you think.” And while a few “progressives” in the Democratic Party won their primaries, they are not receiving support from the party. Instead, the party leaders are throwing their weight behind security state Democrats, who could make up half of newly-elected Democrats this November.

In the Republican Party, Donald Trump’s faux populism has shown itself to be a sham. The Republican Party is unable to handle Trump, who defeated a series of elitist candidates starting with the next heir of the royal Bush family, Jeb. A record number of Republicans have given up and decided not to run for re-election. Speaker of the House Paul Ryan saw the writing on the wall and said he wanted to spend time with his family.

The 2018 election will bring change as Republican control of both Chambers of Congress is at risk, especially the House, but this is unlikely to resolve the crises the country is facing. Democrats are more focused on going after Trump. We can expect a flood of subpoenas investigating all aspects of his administration and business, rather than solutions to the economic and social crises.

From Catholic News USA

What The People Are Demanding

There is a growing anti-capitalist revolt, especially against the form it has taken in the United States; i.e., neoliberalism that privatizes everything for the profit of a few while cutting essential services for the many.  Anti-capitalism is so widespread that even corporate media outlets like Politico are taking notice, as they did in an article describing what socialism would look like in the United States. And President Obama this week discovered “a great new idea,” Medicare for all.

Of course, there has been a movement for National Improved Medicare for All for decades, and it is now gaining momentum. A new poll found even a majority of Republicans support Medicare for all, as do 85% of Democrats. Out of all of the ‘wealthy’ nations, the United States is ranked at the bottom, only above Greece, when it comes to the percentage of the population that has healthcare coverage. The third poorest country in our hemisphere, Bolivia, announced this week it will provide healthcare for all.

While polls indicate increased support for socialism, in the United States there is a lack of clarity on what that means exactly. Rather than a state socialism, most people are advocating for policy changes that socialize the basic necessities of the people. National Improved Medicare for All is one example.  There is also increased pressure for community-controlled or municipal Internet, taking this critical public service out of the hands of the much-hated for-profit providers.

Other demands include a living wage, free college education and affordable housing. There is also increased advocacy for a universal basic income and for public banks. All of these socialized programs can and do exist in capitalist countries.

From Prout.org

Creating Economic Democracy For The 21st Century

The new economy is still taking shape and will likely result from a process of trying new practices out and gradually replacing current economic institutions with the new ones that gain support. The new institutions will need to be radically different than the current ones, meaning they are rooted in different values, if they are to change the current system.

In Policy Options, Tracy Smith Carrier urges using a human rights framework for the new economy. The human rights principles are universality, equity, transparency, accountability and participation. Rather than charity, which doesn’t solve the problems that brought people into a situation of need, her research team advocates for putting in place a poverty-reduction strategy that targets “the building blocks of society that reproduce poverty.”

This past week, we interviewed economist Emily Kawano of the US Solidarity Economy Network for our podcast, Clearing the FOG. The episode is called “So You Want To End Capitalism, Here’s How.” Like the human rights framework, the solidarity economy is built on a set of principles: democracy, cooperation, equity, anti-oppression, sustainability and pluralism. Kawano describes the formation of the solidarity economy using the analogy of a caterpillar’s metamorphosis into a butterfly – the various pieces of the economy are forming and finding each other and may eventually coalesce into a new system composed of old and new elements.

This week on Clearing the FOG, we will publish an interview with Nathan Schneider, author of Everything for Everyone: The Radical Tradition that is Shaping the New Economy. Schneider acknowledges that his generation is the first one that will fare worse than its predecessors. Out of necessity, people are creating more democratic economic structures. The Internet is a helpful tool in the process, particularly in creating ‘platform cooperatives.’

The economy needs to move from concentrated wealth to shared economic prosperity. In addition to requiring specific changes in policy that lead to greater socialization of the economy, systemic changes will be needed to establish a cooperative and egalitarian economy. Without far-reaching changes to the structure of the state, they are highly unlikely to succeed.

There will be another economic crisis in the near future which will present opportunities for rapid transformational change, if the movement is organized to demand it. JP Morgan issued a report on the tenth anniversary of the collapse warning of another collapse and mass social unrest like the US has not seen in 50 years. It is up to us now to prepare for that moment by developing our vision for the future and working out the types of institutions that will bring it about. The other option, if we are not prepared, could bring fascism and greater repression.

As Jerome Roos concludes, “…the political fallout of the global financial crisis is only just getting started. The real confrontation, it seems, is yet to come.”

Central Banks Have Gone Rogue, Putting Us All at Risk

Central bankers are now aggressively playing the stock market. To say they are buying up the planet may be an exaggeration, but they could. They can create money at will, and they have declared their “independence” from government. They have become rogue players in a game of their own.

Excluding institutions such as Blackrock and Vanguard, which are composed of multiple investors, the largest single players in global equity markets are now thought to be central banks themselves. An estimated 30 to 40 central banks are invested in the stock market, either directly or through their investment vehicles (sovereign wealth funds). According to David Haggith on Zero Hedge:

Central banks buying stocks are effectively nationalizing US corporations just to maintain the illusion that their “recovery” plan is working . . . . At first, their novel entry into the stock market was only intended to rescue imperiled corporations, such as General Motors during the first plunge into the Great Recession, but recently their efforts have shifted to propping up the entire stock market via major purchases of the most healthy companies on the market.

The US Federal Reserve, which bailed out General Motors in a rescue operation in 2009, was prohibited from lending to individual companies under the Dodd-Frank Act of 2010; and it is legally barred from owning equities. It parks its reserves instead in bonds and other government-backed securities. But other countries have different rules, and today central banks are buying individual stocks as investments, with a preference for big tech stocks like Amazon, Apple, Facebook and Microsoft. Those are the stocks that dominate the market, and central banks are bidding them up aggressively. Markets, including the US stock market, are thus literally being rigged by foreign central banks.

The result, as noted in a January 2017 article on Zero Hedge, is that central bankers, “who create fiat money out of thin air and for whom ‘acquisition cost’ is a meaningless term, are increasingly nationalizing the equity capital markets.” At least they would be nationalizing equities, if they were actually “national” central banks. But the Swiss National Bank, the biggest single player in this game, is 48% privately owned; and most central banks have declared their independence from their governments. They march to the drums not of government but of big international banks.

Marking the 10th anniversary of the 2008 collapse, former Fed chairman Ben Bernanke and former Treasury secretaries Timothy Geithner and Henry Paulson wrote in a September 7 New York Times op-ed that the Fed’s tools needed to be broadened to allow it to fight the next anticipated economic crisis, including allowing it to prop up the stock market by buying individual stocks. To investors, propping up the stock market may seem like a good thing; but what happens when the central banks decide to sell?  The Fed’s massive $4 trillion economic support is now being taken away, and other central banks are expected to follow. Their US and global holdings are so large that their withdrawal from the market could trigger another global recession. That means when and how the economy will collapse is now in the hands of central bankers.

Moving Goal Posts

The two most aggressive central bank players in the equity markets are the Swiss National Bank and the Bank of Japan.  The goal of the Bank of Japan, which now owns 75% of Japanese exchange-traded funds, is evidently to stimulate growth and defy longstanding expectations of deflation. But the Swiss National Bank is acting more like a hedge fund, snatching up individual stocks because “that is where the money is.” About 20% of the SNB’s reserves are in equities, and more than half of that is in US equities. The SNB’s goal is said to be to counteract the global demand for Swiss francs, which has been driving up the value of the national currency, making it hard for Swiss companies to compete in international trade. The SNB does this by buying up other currencies, and it needs to put them somewhere, so it is putting the money in stocks.

That is a reasonable explanation for the SNB’s actions, but some critics suspect other motives. Switzerland is home to the Bank for International Settlements, the “central bankers’ bank” in Basel, where central bankers meet regularly behind closed doors. Dr. Carroll Quigley, a Georgetown history professor who claimed to be the historian of the international bankers, wrote of this institution in Tragedy and Hope in 1966:

[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.  This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences.  The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.

The key to their success, said Quigley, was that they would control and manipulate the money system of a nation while letting it appear to be controlled by the government. The economic and political systems of nations would be controlled not by citizens but by bankers, for the benefit of bankers. The goal was to establish an independent (privately owned or controlled) central bank in every country. Today, that goal has largely been achieved.

In a paper presented at the 14th Rhodes Forum in Greece in October 2016, Dr. Richard Werner, Director of International Development at the University of Southampton in the UK, argued that central banks have managed to achieve total independence from government and total lack of accountability to the people, and that they are now in the process of consolidating their powers. They control markets by creating bubbles, busts, and economic chaos. He pointed to the European Central Bank, which was modeled on the disastrous earlier German central bank, the Reichsbank. The Reichsbank created deflation, hyperinflation, and the chaos that helped bring Adolf Hitler to power. The problem with the Reichsbank, says Werner, was its excessive independence and its lack of accountability to German institutions and Parliament. The founders of post-war Germany changed the new central bank’s status by significantly curtailing its independence. Werner writes, “The Bundesbank was made accountable and subordinated to Parliament, as one would expect in a democracy. It became probably the world’s most successful central bank.”

But today’s central banks, he says, are following the disastrous Reichsbank model, involving an unprecedented concentration of power without accountability. Central banks are not held responsible for their massive policy mistakes and reckless creation of boom-bust cycles, banking crises and large-scale unemployment. Youth unemployment now exceeds 50 percent in Spain and Greece. Many central banks remain in private hands, including not only the Swiss National Bank but the Federal Reserve Bank of New York and the Italian, Greek and South African central banks.

Banks and Central Banks Should Be Made Public Utilities

Werner’s proposed solution to this dangerous situation is to bypass both the central banks and the big international banks and decentralize power by creating and supporting local not-for-profit public banks. Ultimately, he envisions a system of local public money issued by local authorities as receipts for services rendered to the local community. Legally, he notes, 97 percent of the money supply is already just private company credit, which can be created by any company, with or without a banking license. Governments should stop issuing government bonds, he says, and instead fund their public sector credit needs through domestic banks that create money on their books (as all banks have the power to do). These banks could offer more competitive rates than the bond markets and could stimulate the local economy with injections of new money. They could also put the big bond underwriting firms that feed on the national debt out of business.

Abolishing the central banks is one possibility, but if they were recaptured as public utilities, they could serve some useful purposes. A central bank dedicated to the service of the public could act as an unlimited source of liquidity for a system of public banks, eliminating bank runs since the central bank cannot go bankrupt. It could also fix the looming problem of an    unrepayable federal debt, and it could generate “quantitative easing for the people,” which could be used to fund infrastructure, low-interest loans to cities and states, and other public services.

The ability to nationalize companies by buying them with money created on the central bank’s books could also be a useful public tool. The next time the megabanks collapse, rather than bailing them out they could be nationalized and their debts paid off with central bank-generated money. There are other possibilities. Former Assistant Treasury Secretary Paul Craig Roberts argues that we should also nationalize the media and the armaments industry. Researchers at the Democracy Collaborative have suggested nationalizing the large fossil fuel companies by simply purchasing them with Fed-generated funds. In a September 2018 policy paper titled “Taking Climate Action to the Next Level,” the researchers wrote, “This action might represent our best chance to gain time and unlock a rapid but orderly energy transition, where wealth and benefits are no longer centralized in growth-oriented, undemocratic, and ethically dubious corporations, such as ExxonMobil and Chevron.”

Critics will say this would result in hyperinflation, but an argument can be made that it wouldn’t. That argument will have to wait for another article, but the point here is that massive central bank interventions that were thought to be impossible in the 20th century are now being implemented in the 21st, and they are being done by independent central banks controlled by an international banking cartel. It is time to curb central bank independence. If their powerful tools are going to be put to work, it should be in the service of the public and the economy.

• First published on Truthdig.com.

Canada: An International Banking Powerhouse

Strange how some people think Canada is a colony, a victim of U.S. power, when so much evidence points to the Great White North being an imperial power.

For example, Canada is an international banking powerhouse.

The Globe and Mail report on TD’s third-quarter results noted that its “international operations  – mostly in the United States and Latin America – produced outsized returns” while another recent story in that paper’s business pages pointed out that the Bank of Nova Scotia and Bank of Montreal “are doing brisk business lending in international markets, helping drive third-quarter profits higher.” For Canada’s biggest bank, reported the Financial Post, “U.S. wealth management unit helps propel RBC to $3.1 billion profit.”

Canada’s international banking prowess is not new. Dating to the 1830s, Canadian banks had become major players in the English Caribbean colonies and US-dominated Cuba by the early 1900s.

The Royal Bank of Canada began operating in Britain’s Caribbean colonies in the late 1800s and had branches there before Western Canada. During the 1898-1902 occupation of Cuba RBC was the preferred banker of US officials. (National US banks were forbidden from establishing foreign branches until 1914.) By the mid-1920s the “Banco de Canada”, as it was popularly known, had 65 branches in Cuba. In 1919 RBC established an association with the Westminster Bank, which had operations in British Africa. In 1925 RBC published an ad in Canadian magazines with a map of the Western Hemisphere with dots denoting the Royal’s presence throughout the Caribbean and South America. The headline read, “A bank with 900 branches: at home and abroad.”

The Bank of Montreal has operated in the Caribbean since the late 1800s. It was tied to British rule there and in Africa. According to James L. Darroch in Canadian Banks and Global Competitiveness:

In 1920, a substantial interest in the Colonial Bank was purchased [by the Bank of Montreal] to fill out the branch network and to provide representation in the West Indies and West Africa.

The Canadian Imperial Bank of Commerce (CIBC) entered the Caribbean just after World War One and Mexico a bit earlier. According to Darroch, “the CIBC acted for the U.S. government after the U.S. came into possession of the Philippines following the Spanish-American war” of 1898.

Scotiabank has “full-service  banking operations in 37 countries”. It set up shop in British controlled Jamaica in 1889, US-dominated Philippines a few years later and the Dominican Republic during the US occupation of 1916-1924.

With operations spanning the globe, Canadian banks are major international players. The five major Canadian banks are among the world’s 59 biggest banks. At 0.5% of the world’s population, Canada should have 1 of the world’s top 200 banks. To put it differently, this country’s proportion of the world’s 59 biggest banks is more than 15 times the share of Canada’s global population.

Canada’s outsized banking power is not new. In 1960 three of the world’s twelve biggest banks were Canadian and Canadian banks oversaw 15% of the international foreign currency market.

Similarly, Canada’s big five banks have long generated a significant share of their sizable profits from their international operations. In 1981 a Bank of Nova Scotia executive said, according to Walter Stewart in Towers of Gold, Feet of Clay: The Canadian Banks, “I don’t know why Canadians are upset about bank profits. We’ve stopped screwing Canadians. Now we’re screwing foreigners.”

Foreigners have protested Canadian banks for at least a century. CIBC and the Bank of Montreal were targeted during the 1910–17 Mexican Revolution and there’s been publicly recorded criticism of Canadian banking practices in the Caribbean since at least 1925. In the early 1970s Canadian banks were fire bombed in nationalist protests in Trinidad and Tobago and Scotiabank was targeted by demonstrators and the courts in Argentina at the start of the 2000s.

Amazingly, the Canadian left has generally ignored Canada’s international banking prowess (even as their foreign operations receive direct government assistance). The dominant left nationalist political economy perspective frames Canada as a victim of international capitalism. Looking at the world through a left nationalist lens generally leads individuals to ignore, or downplay, the destruction wrought by Canadian corporations abroad and “Canada’s hugely privileged place in the world economy”, as Paul Kellogg puts it in Escape from the Staple Trap: Canadian Political Economy after Left Nationalism.

Canadian banks have amassed significant wealth through their domestic operations and relationship to the profits generated from Tim Hortons’ workers, Inuit resources, oil extraction, etc. But, they’ve also made huge sums internationally and by skimming some of the wealth produced in US oil fields, Peruvian mines and Port-au-Prince sweatshops.

People on the left should tell it like it is: Canada is an imperial power, our ruling class profits greatly from the exploitation of poorer countries.

Tenth Anniversary Of Financial Collapse, Preparing For The Next Crash

Jail Bankers Not Protesters, Occupy Wall Street, 2011 (Photo by Stan Honda for AFP-Getty Images)

Ten years ago, there was panic in Washington, DC, New York City and financial centers around the world as the United States was in the midst of an economic collapse. The crash became the focus of the presidential campaign between Barack Obama and John McCain and was followed by protests that created a popular movement, which continues to this day.

Banks: Bailed Out; The People: Sold Out

On the campaign trail, in March 2008, Obama blamed mismanagement of the economy on both Democrats and Republicans for rewarding financial manipulation rather than economic productivity. He called for funds to protect homeowners from foreclosure and to stabilize local governments and urged a 21st Century regulation of the financial system. John McCain opposed federal intervention, saying the country should not bail out banks or homeowners who knowingly took financial risks.

By September 2008, McCain and Obama met with President George W. Bush and together they called for a $700 billion bailout of the banks, not the people. Obama and McCain issued a joint statement that called the bank bailout plan “flawed,” but said, “the effort to protect the American economy must not fail.” Obama expressed “outrage” at the “crisis,” which was “a direct result of the greed and irresponsibility that has dominated Washington and Wall Street for years.”

By October 2008, the Troubled Asset Relief Program (TARP), or bank bailout, had recapitalized the banks, the Treasury had stabilized money market mutual funds and the FDIC had guaranteed the bank debts. The Federal Reserve began flowing money to banks, which would ultimately total almost twice the $16 trillion claimed in a federal audit. Researchers at the University of Missouri found that the Federal Reserve gave over $29 trillion to the banks.

This did not stop the loss of nine million jobs, more than four million foreclosures and the deep reduction in wealth among the poor, working and middle classes. A complete banking collapse was averted, but a deep recession for most people was not.

The New Yorker described the 2008 crash as years in the making, writing:

…the crisis took years to emerge. It was caused by reckless lending practices, Wall Street greed, outright fraud, lax government oversight in the George W. Bush years, and deregulation of the financial sector in the Bill Clinton years. The deepest source, going back decades, was rising inequality. In good times and bad, no matter which party held power, the squeezed middle class sank ever further into debt.

Before his inauguration, Obama proposed an economic stimulus plan, but, as Paul Krugman wrote:

Obama’s prescription doesn’t live up to his diagnosis. The economic plan he’s offering isn’t as strong as his language about the economic threat.

In the end, the stimulus was even smaller than what Obama proposed. Economist Dean Baker explained that it may have created 2 million jobs, but we needed 12 million. It was $300 billion in 2009, about the same in 2010, and the remaining $100 billion followed over several years — too small to offset the $1.4 trillion in annual lost spending.

New York Magazine reports the stimulus was “a spending stimulus bigger, by some measures than the entire New Deal.” But unlike the New Deal, which benefited people at the bottom and built a foundation for a long-term economy, the bi-partisan post-2008 stimulus bailed out Wall Street and left Main Street behind.

Wall Street executives were not prosecuted even though the financial crisis was in large part caused by their fraud. Bankers were given fines costing dimes on the dollar without being required to admit guilt or having their cases referred for prosecution. The fines were paid by shareholders, not the perpetrators.

Protest near Union Square in New York, April, 2010. Popular Resistance.

Still at Risk

Many of the root causes of the crisis remain today, making another economic downturn or collapse possible. The New Yorker reports that little has changed since 2008, with Wall Street banks returning to risky behavior and the inadequate regulation of Dodd-Frank being weakened. Big finance is more concentrated and dominant than it was before the crash. Inequality and debt have expanded, and despite the capital class getting wealthier in a record stock market with corporate profits soaring, real wages are stuck at pre-crisis levels.

People are economically insecure in the US and live with growing despair, as measured by reports on well-being. The Federal Reserve reported in 2017 that “two in five Americans don’t have enough savings to cover a $400 emergency expense.” Further, “more than one in five said they weren’t able to pay the current month’s bills in full, and more than one in four said they skipped necessary medical care last year because they couldn’t afford it.”

Positive Money writes:

Ten years on, big banks are still behaving in reckless, unfair and neglectful ways. The structural problems with our money and banking system still haven’t been fixed. And many experts fear that if we don’t change things soon, we’re going to sleepwalk into another crash.

William Cohen, a former mergers and acquisitions banker on Wall Street, writes that the fundamentals of US economy are still flawed. The Economist describes the current situation: “The patient is in remission, not cured.”

From Occupy Washington DC at Freedom Plaza

The Response Of the Popular Movement

Larry Eliott wrote in the Guardian: “Capitalism’s near-death experience with the banking crisis was a golden opportunity for progressives.” But the movement in the United States was not yet in a position to take advantage of it.

There were immediate protests. Democratic Party-aligned groups such as USAction, True Majority and others organized nationwide actions. Over 1,000 people demonstrated on Wall Street and phones in Congress were ringing wildly. While there was opposition to the bailout, there was a lack of national consensus over what to do.

Protests continued to grow. In late 2009, a “Move Your Money” campaign was started that urged people to take their money out of the big banks and put it in community banks and credit unions. The most visible anti-establishment rage in response to the bailout arose later in the Tea Party and Occupy movements. Both groups shared a consensus that we live in a rigged economy created by a corrupt political establishment. It was evident that the US is an oligarchy, which serves the interests of the wealthy while ignoring the necessities of the people.

The anti-establishment consensus continues to grow and showed itself in the 2016 presidential campaigns of Senator Bernie Sanders and Donald Trump. They were two sides of the same coin of populist anger that defeated Jeb Bush and Hillary Clinton. Across the political spectrum, there is a political crisis with both mainstream, Wall Street-funded political parties being unpopular but staying in power due to a calcified political system that protects the duopoly of Democrats and Republicans.

Occupy Wall Street 2011

Preparing for the Next Collapse

When the next financial crisis arrives, the movement is in a much stronger position to take advantage of the opportunity for significant changes that benefit people over Wall Street. The Occupy movement and other efforts since then have changed the national dialogue so that more people are aware of wealth inequality, the corruption of big banks and the failure of the political elites to represent the people’s interests.

There is also greater awareness of alternatives to the current economy. The Public Banking movement has grown significantly since 2008. Banks that need to be bailed out could be transformed into public banks that serve the people and are democratically controlled. And there are multiple platforms, including our People’s Agenda, that outline alternative solutions.

We also know the government can afford almost $30 trillion to bail out the banks. One sixth of this could provide a $12,000 annual basic income, which would cost $3.8 trillion annually, doubling Social Security payments to $22,000 annually, which would cost $662 billion, a $10,000 bonus for all US public school teachers, which would cost $11 billion, free college for all high school graduates, which would cost $318 billion, and universal preschool, which would cost $38 billion. National improved Medicare for all would actually save the nation trillions of dollars over a decade. We can afford to provide for the necessities of the people.

We can look to Iceland for an example of how to handle the next crisis. In 2008, they jailed the bankers, let the banks fail without taking on their debt and put controls in place to protect the economy. They recovered more quickly than other countries and with less pain.

How did they do it? In part, through protest. They held sustained and noisy protests, banging pots and pans outside their parliament building for five months. The number of people participating in the protests grew over time. They created democratized platforms for gathering public input and sharing information widely. And they created new political parties, the Pirate Party and the Best Party, which offered agendas informed by that popular input.

So, when the next crash comes. Let’s put forward a People’s Agenda. Let’s be like Iceland and mobilize for policies that put people first. Collectively, we have the power to overcome the political elites and their donor class.

How China’s Mobile Ecosystems Are Making Banks Obsolete

Giant Chinese tech companies have bypassed credit cards and banks to create their own low-cost digital payment systems.

The US credit card system siphons off excessive amounts of money from merchants, who must raise their prices to cover this charge. In a typical $100 credit card purchase, only $97.25 goes to the seller. The rest goes to banks and processors. But who can compete with Visa and MasterCard?

It seems China’s new mobile payment ecosystems can. According to a May 2018 article in Bloomberg titled “Why China’s Payment Apps Give U.S. Bankers Nightmares”:

The future of consumer payments may not be designed in New York or London but in China. There, money flows mainly through a pair of digital ecosystems that blend social media, commerce and banking—all run by two of the world’s most valuable companies. That contrasts with the U.S., where numerous firms feast on fees from handling and processing payments. Western bankers and credit-card executives who travel to China keep returning with the same anxiety: Payments can happen cheaply and easily without them.

The nightmare for the US financial industry is that a major technology company – whether one from China or a US giant such as Amazon or Facebook – might replicate the success of the Chinese mobile payment systems, cutting banks out.

According to John Engen, writing in American Banker in May 2018, China processed a whopping $12.8 trillion in mobile payments in the first ten months of 2017. Today even China’s street merchants don’t want cash. Payment for everything is with a phone and a QR code (a type of barcode). More than 90 percent of Chinese mobile payments are run through Alipay and WeChat Pay, rival platforms backed by the country’s two largest internet conglomerates, Alibaba and Tencent Holdings. Alibaba is the Amazon of China, while Tencent Holdings is the owner of WeChat, a messaging and social-media app with more than a billion users.

Alibaba created Alipay in 2004 to let millions of potential customers who lacked credit and debit cards shop on its giant online marketplace. Alipay is free for smaller users of its platform. As total monthly transactions rise, so does the charge; but even at its maximum, it’s less than half what PayPal charges — around 1.2 percent. Tencent Holdings similarly introduced its payments function in 2005 in order to keep users inside its messaging system longer. The American equivalent would be Amazon and Facebook serving as the major conduits for US payments.

WeChat and Alibaba have grown into full-blown digital ecosystems – around-the-clock hubs for managing the details of daily life. WeChat users can schedule doctor appointments, order food, hail rides and much more through “mini-apps” on the core app. Alipay calls itself a “global lifestyle super-app” and has similar functions. Both have flourished by making mobile payments cheap and easy to use. Consumers can pay for everything with their mobile apps and can make person-to-person payments. Everyone has a unique QR code, and transfers are free. Users don’t need to sign into a bank or payments app when transacting. They simply press the “pay” button on the ecosystem’s main app and their unique QR code appears for the merchant to scan. Engen writes:

A growing number of retailers, including McDonald’s and Starbucks, have self-scanning devices near the cash register to read QR codes. The process takes seconds, moving customers along so quickly that anyone using cash gets eye-rolls for slowing things down.

Merchants that lack a point-of-sale device can simply post a piece of paper with their QR code near the register for customers to point their phones’ cameras at and execute payments in reverse.

A system built on QR codes might not be as secure as the near-field communication technology used by ApplePay and other apps in the U.S. market. But it’s cheaper for merchants, who don’t have to buy a piece of technology to accept a payment.

The mobile payment systems are a boon to merchants and their customers, but local bankers complain that they are slowly being driven out of business. Alipay and WeChat have become a duopoly that is impossible to fight. Engen writes that banks are often reduced to “dumb pipes” – silent funders whose accounts are used to top up customers’ digital wallets. The bank bears the compliance and other account-related expenses, and it does not get the fees and branding opportunities typical of cards and other bank-run options. The bank is seen as a place to deposit money and link it to WeChat or Alipay. Bankers are being “disintermediated” – cut out of the loop as middlemen.

If Amazon, Facebook or one of their Chinese counterparts duplicated the success of China’s mobile ecosystems in the US, they could take $43 billion in merchant fees from credit card companies, processors and banks, along with about $3 billion in bank fees for checking accounts. In addition, there is the potential loss of money market deposits, which are also migrating to the mobile ecosystem duopoly in China. In 2017, Alipay’s affiliate Yu’e Bao surpassed JPMorgan Chase’s government market fund as the world’s largest money market fund, with more than $200 billion in assets. Engen quotes one financial services leader who observes, “The speed of migration to their wealth-management and money-market funds has been tremendous. That’s bad news for traditional banks, where deposits are the foundation of the business.”

An Amazon-style mobile ecosystem could challenge not only the payments system but the lending business of banks. Amazon is already making small-business loans, finding ways to cut into banks’ swipe-fee revenue and competing against prepaid card issuers; and it evidently has broader ambitions. Checking accounts, small business credit cards and even mortgages appear to be in the company’s sites.

In an October 2017 article titled “The Future of Banks Is Probably Not Banks,” tech innovator Andy O’Sullivan observed that Amazon has a relatively new service called “Amazon Cash,” where consumers can use a barcode to load cash into their Amazon accounts through physical retailers. The service is intended for consumers who don’t have bankcards, but O’Sullivan notes that it raises some interesting possibilities. Amazon could do a deal with retailers to allow consumers to use their Amazon accounts in stores, or it could offer credit to buy particular items. No bank would be involved, just a tech giant that already has a relationship with the consumer offering him additional services. Phone payment systems are already training customers not to need bankcards, which means not to need banks.

Taking those concepts even further, Amazon (or eBay or Craigslist) could set up a digital credit system that bypassed bank-created money altogether. Users could sell goods and services online for credits, which they could then spend online for other goods and services. The credits of this online ecosystem would constitute its own user-generated currency. Credits could trade in a digital credit clearing system similar to the digital community currencies used worldwide, systems in which “money” is effectively generated by users themselves.

Like community currencies, an Amazon-style credit clearing system would be independent of both banks and government; but Amazon itself is a private for-profit megalithic system. Like its Wall Street counterparts, it has a shady reputation, having been variously charged with worker exploitation, unfair trade practices, environmental degradation, and extracting outsized profits from trades. However, both President Trump on the right and Senator Elizabeth Warren on the left are now threatening to turn Amazon, Facebook and other tech giants into public utilities. This opens some interesting theoretical possibilities. We could one day have a national non-profit digital ecosystem operated as a cooperative, a public utility in which profits are returned to the users in the form of reduced prices. Users could create their own money by “monetizing” their own credit, in a community currency system in which the “community” is the nation or even the world.

First posted on TruthDig.com.

Breaking the Illusion of Power: There Is No Spoon

Do not be misled by what you see around you, or be influenced by what you see. You live in a world which is a playground of illusion, full of false paths, false values and false ideals. But you are not part of that world.

— Sai Baba

The greatest obstacle to discovery is not ignorance – it is the illusion of knowledge.

— Daniel Boorstin

You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.

— Buckminster Fuller

Do not try to bend the spoon, that is impossible. Instead try to understand the truth…There is no spoon. Then you’ll see it’s not the spoon that bends, only yourself.

— Spoon Boy, The Matrix

At the height of empire a boundless stream of lies are told through euphemistic abstractions.  These abstractions are but illusion, they obscure perceptions by never directly dealing with the actual physical reality. Instead an interface is placed over the existing reality for purposes of control.

How often does one hear from corporate news sources about trying to build more homes or grow more food so there are no more homeless or hungry? Almost never, because there is already enough of both food and housing for all in the US, but what there is not enough of is the abstraction of money and that is what corporate news speaks of the most. The one thing we can create an infinite amount of is somehow the one thing we don’t have enough of so the people can have access to housing and food that already exist.

These abstractions are designed with the intent to flummox the people and hold them in place with abstract coercions that intend to create dependence and learned helplessness. We are told the automobiles that kill the environment and weapons designed to kill people are abstractions for freedom. We’re told a government that leads the world in mass incarceration is also an abstraction of preventing tyranny and providing security, democracy, and justice. Organized religion in the US is worth around $1.2 trillion a year, more money than Google and Apple combined, and is an abstraction of spirituality, community, and giving while never making a dent in any social problem.

Science has become an abstraction of wisdom, progress, and reason while evidently receiving their spiritual center from the aforementioned shoddy organized religion, as they continue to ignore harm they cause in favor of ostensible discovery, but what they are really discovering is how a corporation can concoct something that makes more money. Social media and likes become an abstraction for relationships, validation, and human connection. And most insidious of all money is an abstraction of self worth, material possessions, privilege, power, success, and labor.  Our virtual reality is complete sans the clunky head gear.

The illusion is created via layers of interfaces stacked on top of each other, similar to the creation of art which is made by adding layers of meaning through a chosen medium until the aggregate of the layers become a gestalt, or something more than its individual pieces. Such is the way the illusion is created for the people, which is intended to hold them in place.  They see only the gestalt and cannot understand the underlying truth around the world of false narratives elites have weaved over thousands of years of ownership and domination culture in western society.

The abstractions are man-made interfaces created by those in power to drive people towards predetermined outcomes. Abstractions are the propaganda by which we live our lives. They are not real, but the imposition of these abstractions forces us down the same illusory paths as they gaslight our waking reality.

Notice again, how nothing in American society is done directly, like when one needs medical care instead of going directly to a doctor they typically first get insurance so one can afford a doctor and are given doctors on a pre-approved list, along with only being approved for select treatments by said insurance. A certain crowd of people talk all day about the horrors of government getting in between them and their doctor, yet in America, predatory capitalism is a perfectly acceptable guest in their doctor’s office, as they assume that no one in the history of time has ever tried to sell people things they didn’t need or price gouge them for things they absolutely do need.

Or in the food situation, we don’t typically grow food directly. We instead go to miserable jobs to get the money to buy the food. Or when we don’t have a place to live, we don’t typically build a house ourselves, not that most people have time to build a house since, you know, we’re stuck at those miserable capitalist jobs so we can afford to eat. And we can’t afford to buy a home either because the miserable capitalist job doesn’t pay enough, and so it goes down the line of needs. A list of expenses that the capitalist jobs are supposed to be able to cover but they don’t. Just about everyone in the lower classes finds themselves in debt and working more hours to end up owing someone else money to live.

The system is as maddeningly irrational as it is cruel. A Sisyphean system that is seemingly inescapable where significantly more debt exists than money to pay off the debt. Now I say irrational only in relation to 99.99% of people on the planet, as it’s a perfectly rational position for lost souls at the top of the hierarchy who are ensconced in the throes of capitalist egomania.

Everyday in modernity people say things like “Well, you need money to live.” – Such utterances are said with an absolute certainty like the money could be consumed for nourishment with a nice chianti and some fava beans. To believe in money to such a degree is a delusionary psychopathy; a diseased state of being, which accepts artificial precepts as a primary necessity for survival. The reality is the money is only a tool for control by power. It’s the neo-whip.

Anyone that has a child knows they can control quite a bit of behavior by limiting their child’s access to funds and controlling what they can spend their funds on, or by altering what the child desires by what they are exposed to. Parents routinely reward certain behaviors to get the outcomes they seek, and you often see parents using their kids like indentured servants forcing them to do work for an allowance or just to be able to socialize with other kids.

Similarly the people are treated like children by a wealthy elite parent class. Most people have little interest in capitalist machinations, evidenced by the fact a whopping 80% of Americans are unhappy with their role as servant, that would be a hundred percent if they understood what kind of world is possible compared to what we are settling for. Very few have an interest in continuing to use oil, but if you can make people desperate enough to pay rent then they’ll go out on an oil rig and drill baby drill, just as they have little interest in war but through desperation they’ll kill baby kill.

The illusion is this system, the man behind the curtain; elites are playing a game and then pretending like their capitalist system is a natural order, like it was ever something democratically chosen. But Arthur Young long ago laid down the basic premise for the necessity of the illusions in capitalism when he said, “Every one but an idiot knows that the lower classes must be kept poor, or they will never be industrious.”  Or in other words, the illusion of scarcity must be thrust upon them or they’ll never show up at the bullshit jobs.

The wars give the illusion like America cares for the safety of the people to the degree the government will aggressively pursue signing up desperate naive teenagers with much life to live and put them in harm’s way to keep us “safe.” It’s not clear what kind of safety is offered to people by a society that throws its youth into traumatic situations so a bunch of old rich codgers can make more money. This form of safety seems like a good recipe to provoke hatred against us and is the antithesis of fostering a peaceful cooperative world.

The edifices of our society are colored and detailed with nebulous misapprehensions, most nebulous of all is universal fiat currency, and everywhere it traverses empire is created without the need for firing a shot. It forces action via coercion and puts people into roles they wouldn’t do otherwise.

The ruling class likes to shame those they lord over for not working hard while ironically they do little else other than signing documents. They like to claim it’s then a profitable skill they should be rewarded for greatly to manage the complex rigged system they created for their benefit with their lawyers, contracts, corporations, loans, government institutions, courts, weapons, threats, and coercions. A capitalist’s claim to money usually rests on how they learned how to exploit you better and with less compassion. It truly takes someone that cares very little for anything but themselves to hoard power in such a tyrannical manner and then consistently try and rationalize their system as a benefit to all.

If there was real symbiosis in our society no one would have to be forced to do anything because the benefit of the actions would have equal benefit for all. But the creation of most things in capitalism is for the financial benefit of a small oligarchy and hence the people often have little interest in contributing to helping elites since most of the benefit goes to those who are already rich and powerful.

The money is such a perfect tool because it’s so easy to manipulate and it’s more surreptitious in disguising its intents than ordering someone around with a gun. If the masses became wealthy enough where they have better options, and thus refuse to work down in a mine shaft, then this is when the money is tightened by the ruling class. And all you have to do to restrict money flow is give out less loans at banks, or raise rents by increasing interest rates and suddenly you put a pinch on the common man. Add in property taxes so their home, typically their primary investment, can be taken from them at any time if they can’t cough up those taxes, and thus they’ll scramble to take those jobs.

If a ruler is going to adequately hold brutal reign over people, as all leaders do in some form, they must coerce, divide, and manipulate people to get them to do the things they want. And when those things are directly opposed to the held values of a person you then have to frame the action under an acceptable premise. Blinders must be placed on the human animal so that it continues to drag the emperor’s plow and carriage.

There is a sticky social glue that holds the fabric of reality together and it is based on nothing more than a perception and what we collectively believe. The contemporary state of our self-abusing beliefs says we have to wait for a president’s term to end before we can think about making desperately needed changes to this society and change the way we are living. Our held beliefs that capitalism offers some kind of fundamental liberty is an impediment to the freedom of the entire global population, because capitalism has always been a tool of control formulated by elites to rig the game in their favor. The people will not be free under any system where there is a centralized power, and continuing to pretend capitalism is anything but exploitation is to never realize the nature of the trap. But this is not to assume a centralized state run communism structure is any better. It is the opposite side of the authoritarian coin, a double bind coercion. They give you bad cop/worse cop options, China or America, blech and blech.

This way of being was never decided on by a vote of the people, there was never an alternative option. We were simply forced into this state, often violently so. We seem to have no recollection that indigenous Native American people lived prosperously for hundreds of years without much of a mercantile system, no stock markets, no lawyers, no mass incarceration system, no weapons of mass destruction, no corporations – And yet somehow, somehow, the majority of them managed to find meaning, community, and purpose in life.

In truth we cannot be free of illusions manifested in the material until we free our minds of what lies exist in the realm of thought and the false values we live our lives by; the shame, punishment, domination, and ownership installed in dogmatic systems of control have to go. There’s a lyric from Florence and the Machine that goes “It’s hard to dance with the devil on your back, so shake him off.” We cannot be free, we cannot dance in the sun, we cannot do anything until enough of us see past these illusions to create a new reality.

And to create this new reality, we must get right in our minds. Take care of our bodies, take care of each other, take care of our state of consciousness. Get strong in the mind. Do no harm to others, be humble and learn from all. Tried and true paths of reaching greater enlightenment often include meditation, walks in nature, learning how to breathe, doing an internet search for Terence McKenna, and a little help from psychedelics if you have the means. Know that your courage will be tested at every moment, and awareness will frustratingly leave you when you feel like you need it the most.

Breathe through that shit.

Face what you are afraid to face in your mind and your mind will be set ablaze, your spirit will flow, your body will beat with new rhythms, and just like that you’ll get it. And all that depression, all that violent negative shit you masochistically torture yourself with upstairs will fall away like magic. Alakazam!

If you should choose then to let go of desire, to let the world come to you, to accept, to forgive, to turn the other cheek, to have gratitude in the moment, well, then you might find yourself feeling like a god amongst common people. But then you come to learn you are equal to all, even to the smallest and most fragile, and you are just in a different place than them, different positions on a path. One may learn to the benefit of all, to always error towards humility, to work to help those who face the same struggles you have in ways that actually help them and are not colored with the shadow of selfish intent. These are truths beyond illusion.

The gaslighting must be unraveled before the shame and punishment systems truly come crumbling to the ground. To break the illusion we must at every moment hold in the forefront of our minds that this is but a chosen system elites have put us in and it does not have to be this way. Things can change quickly if we can find a new spell to cast, one we choose together instead of one chosen for us by a select few who hold illegitimate power.

Always remember, the centralized economic systems, the politicians, the corporations, the banks, and the organized religions are all tools of control in a social hierarchy. These tools of control are put there intentionally to curve your decision making to do what they want you to do, which is make them more powerful. These elites have quite the arrogance to suggest they know better than you, than philosophers, shamans, ecologists, biologists, climatologists, artists, artisans, the lovers, the dreamers, and me; to put it in amphibian terms.

They believe they know better out of convenience to them because if they know better that means ever so coincidentally they grow more powerful, with more money, more stuff, and better looking people to use sexually. Their success is not symbiotic, though, as their success means the exploitation of everything else in existence so they can just take more for themselves.

Never forget, even when we are forced to operate within this system and they put that saddle on you, do not be broken. To quote Margaret Attwood’s words from The Handmaid’s Tale, “Don’t let the bastards grind you down.”

Know the illusion is a game being played with an malevolent intent, and work to bring the underlying truth into the forefront of the conscious mind and the illusion will break. Refuse to be led around by coercions of money or any other control system that attempts to cage humanity or your consciousness while simultaneously wrecking the natural world. The entire earth is now speaking to us in very direct terms, showing us that the way we are living is wrong. Every feedback mechanism screams this way of living is not healthy for body, mind, spirit, flora or fauna. We can change it, but it takes belief in better.

Free your minds. Free the Earth. May it be so.

How Fascist Loot Funded US Anti-Communism

In Gold Warriors, by Sterling and Peggy Seagrave, the authors reveal one of the most shocking secrets of the 20th century. It is the story of the vast treasure Japan managed to loot across Asia, today worth billions or even trillions of dollars, the concealment of it in hundreds of sites, and the secret recovery of much of it by what would become America’s Central intelligence Agency. America helped Japan cover up this vast fortune, fooling the world into believing Japan was bankrupt after the war and was unable to pay reparations for their mass murder and material damage.

Most of Japan’s vast stolen fortune would remain in the hands of imperialist war criminals, and would for decades be used to prop up Japan’s corrupt one party democracy ruled by the Liberal Democratic Party, with the CIA and the Yakuza pulling the strings behind the scenes. It would be controlled by men like Allen Dulles and John J. McCloy through their Black Eagle Trust, which managed both Japanese and Nazi War loot. The Gold would be deposited in the Federal Reserve, the Bank of England, Union Banque Suisse (UBS) in Switzerland, Citibank, HSBC and other major banks who often stole it for themselves.  The gold was also used to manipulate the global economy, finance assassinations and covert ops, bribe politicians, and finance right wing political movements like the John Birch Society domestically.

Gold Warriors tells a compelling tale of secrecy, greed, treachery, murder and lies. The book offers a window into the vast and mysterious world of offshore banking and the Gold Cartel. The authors estimate that today, the ultra-rich are hoarding over 23 trillion dollars, mostly in offshore bank accounts. Meanwhile around the world, health and education are being cut, poverty and homelessness are on the rise, and the rest of us are constantly told to tighten our belts.

The Seagraves destroy the myth that America reformed Japan after the war, revealing the shocking story of the MacArthur occupation and its alliance with fascists along with Japan’s ruthless imperial family and their huge corporate backers like Mitsui, Mitsubishi, Kawasaki and Sumitomo. They used this loot to finance Japan’s postwar recovery and meteoric rise. Companies that have since become household names made their fortunes through looting Asia and employing slave labor, including that of American POWS. When the survivors tried to sue for reparations, State Department officials like Tom Foley with corrupt ties to these Japanese corporations compared these victims to terrorists.

The Seagraves begin their book with the brutal assassination of the Korean Queen Min on October 7 1895 by the imperialist Japanese. In Japan, like in America, big business, organized crime, and intelligence were strongly interrelated. The Japanese Empire, like all empires, were cynical liars and claimed that Queen Min had been murdered by Koreans. With the strong-willed Queen Min out of the way, her weak husband King Kojong quickly became a Japanese puppet and soon Korea was a Japanese colony, while China suffered a humiliating defeat at Japan’s hands when it tried to intervene.

Japan seized Taiwan and parts of Manchuria from China. Korea became Japanese property, and they began to loot the accumulated wealth of centuries, including gold silver and prized celadon porcelains. Japan employed an army of antiquarians to seize and catalog hundreds of ancient Korean manuscripts, sending them to Japan or burning them to destroy Korea’s cultural heritage.  The Japanese even resorted to grave robbery on a massive scale, targeting Korean Imperial tombs.

Japan targeted Taiwan, colonizing the island and setting up massive heroin laboratories. Taiwan would for decades become a center of the global drug trade. Japan launched a sneak attack on the Russian Empire in 1904 and Russia was forced to sign a humiliating peace deal giving Japan control of its possessions in Manchuria like the South Manchurian Railway it had built. To turn a quick profit, Japan set up a massive opium growing operation. They bribed warlords and began buying up Chinese industries and land. Manchuria became what the authors call the center of “carpetbaggers, spies, secret policemen, financial conspirators, fanatical gangsters, drug dealers and eccentric army officers.” The Mitsui and Mitsubishi Corporations ran everything, making a fortune from their cut of the illegal drug trade. Through a series of provocations involving the patriotic societies and Japanese intelligence, Japan was whipped into a war frenzy and more Chinese land was stolen. Japan unleashed an army of experts to steal as much art and priceless manuscripts as they could.

Around the same time Japan had been conquering Korea, America had conquered the Philippines while claiming they wanted to liberate it from Spain. With its usual cynical hypocrisy, once Spain surrendered, America crushed the Filipino independence movement with the brutal tactics it would later employ in Greece, Korea, Vietnam, Afghanistan, Iraq and a long list of other countries. Of course, it had been America itself which had forced Japan to end its long isolation setting into motion the chain of events that had led to Japan’s rapid modernization and imperialist adventures in the first place. When the Second World War began to go very badly by 1943, Japan was no longer able to ship its loot back to Japan, and so began to hide it all over the Philippines and Indonesia. Prisoners of war and the local Filipinos were forced to dig massive tunnels. These slave laborers were often massacred or buried alive to keep the tunnels secret. The Japanese often buried their loot near historical landmarks and hospitals because they were less likely to be bombed. They smuggled gold into the Philippines on phony hospital ships, since they would be less likely to be sunk by American submarines. They hid some of the gold by loading ships full of treasure and sinking them for later recovery, and huge underground chambers were filled with thousands of tons of gold.

The Americans managed to discover gold was being hidden during the war, thanks to one of their spies. There were at least 176 treasure sites in the Philippines. By the time the war ended, the Americans had found so much gold that if it became publicly known it would have destroyed the Bretton woods system which relied on gold being valued at 35 dollars an ounce. The Bretton Woods system was itself backed with the huge sums in Nazi gold the US had managed to seize and hide, the authors of Gold Warriors suggest.

Back in Washington, there was already a group dedicated to stealing and hiding Nazi gold: the Black Eagle Trust. With their massive off-the-books money, they would bribe politicians and finance coups, covert operations and psychological warfare. Soon, the Golden Lily loot was being managed by the same people. It was being moved across the world, being used to prop up banks around the world. UBS in Switzerland, HSBC in Hong Kong, the Bank of England, Chase Manhattan. Hidden in 42 countries between 1945-47, the gold was used to make huge loans to Britain, Egypt, and the Kuomintang in China. Politicians around the world were bribed with gold certificates. The intersection between Wall Street and intelligence involved vast sums completely unknown to the public. The notion that the CIA could ever be held in check once it had control of this vast fortune was a joke, and it perhaps led to events like the Kennedy assassination. A nearly 60-year cover-up after that event would not be surprising when one remembers that the entire mainstream American media was controlled by former Office of Strategic Services men, as discussed in Science of Coercion by Christopher Simpson. The CIA and Office of Policy Coordination controlled much of the media worldwide as part of Frank Wisner’s infamous Operation Mockingbird, putting out nonstop Cold War propaganda.

In Japan, criminal Yoshio Kodama made a deal to turn over $100 million to the CIA for his immunity (worth 1 billion dollars today). During the war, Kodama had managed to save 13 billion in gold, platinum, diamonds and other loot. America had not bombed Japanese industries, instead targeting workers’ homes. This was likely because American corporations were heavily invested in Japan, just as they were in Nazi Germany, where American-owned factories supplying the German war machine were spared during the war. In occupied West Germany, Denazification was a scam, and so too was the removal of imperialism in Japan. Trials targeting Japanese war criminals were fixed to prevent the Emperor’s role being known. The US set up a special fund to bribe witnesses. Kodama was put on the CIA payroll, and behind the scenes he created the misnamed Liberal Democratic Party headed by corrupt politicians. The Yatsuya fund was used to  control the Japanese underworld. The Keenan fund named after Joseph Keenan, the chief war crimes prosecutor, was used to bribe witnesses to protect the Emperor and his cronies.

The M-Fund was named after General William Frederic Marquat, who was in charge of restructuring the Japanese economy. Marquat was also entrusted to disband Japan’s infamous Unit 731 that ran bio-warfare research using prisoners as guinea pigs during the war, but instead of disbanding, they were recruited by the Pentagon and used to develop germ warfare against China and North Korea. The M-Fund was used to bribe politicians, and evolved into one of the most scandalous financial scams in history. Soon, it would corrupt American politicians as well. Nixon turned the M-Fund, which had been run by MacArthur’s cronies like General Marquat along with the CIA and the corrupt Liberal Democratic Party, over to the full control of Japan in exchange for illegal kickbacks funneled into the 1960 presidential Campaign he lost to Kennedy. Part of the deal was for Nixon to return Okinawa to Japan, which he later did once he finally got elected.

Golden Lily loot was funneled back to far right movements in the US, and would help finance Joseph McCarthy’s witch hunts. Another source of such wealth was the global drug trade, as the CIA would manage it in cooperation with the Chinese Kuomintang and Japanese and Korean organized crime. Together, these sources of wealth would be used to fund the World Anti-Communist League or WACL the global network of fascist drug dealers and terrorists loved by Ronald Reagan. In the final chapter of their book, the authors provide a brilliant summary of the politics of heroin, relying heavily on Doug Valentine’s classic The Strength of the Wolf. In Japan, McCarthyism took a much bloodier course with a massive assassination program combined with a COINTELPRO-style war on anyone who dared to dissent. Even American and British officials could be targeted for assassination if they threatened to expose MacArthur’s alliance with war criminals and gangsters. For assassinations that were even more sensitive, KOTOH was employed – an acronym formed from the names of five Japanese army officers who performed assassinations.

Much of Gold Warriors describes the hunt for treasure in the Philippines. The Japanese were the masters of this, quietly returning for decades to recover their loot. Future Philippines president Ferdinand Marcos learned of the gold by befriending Santa Romana and making deals with the Japanese to recover gold, becoming one of the richest men in the world through his discoveries. It was Marcos gold that paved the way for Nixon’s visit to China, with Marcos agreeing to deposit 72 billion in Gold in China’s Bank accounts. Marcos had long been used by the CIA to bribe Asian governments into supporting American policy, and in return they allowed him to get rich by selling his gold to Saudi princes or trading it for drugs from Asian or Latin American cartels. The golden Lily loot that led to his rise also led to his downfall, when he bargained too forcefully with the Reagan White House and the CIA who wanted him to use his fortune to back Reagan’s scheme to create Rainbow dollars. Marcos then became one of the first victims of a CIA color revolution. As CIA-backed NGOs flooded the streets with angry protestors, his American sponsors kidnapped him and airlifted his fortune out of the country.

Gold Warriors reveals that from the underworld to the military and intelligence agencies, to the corrupt politicians to the titans of finance we are ruled at every level by gangsters. After reading it, one may even wonder how much of the CIA’s gold is involved today in financing charlatans like Alex Jones and the rest of the US “patriot” movement, since their radio stations are heavily involved in selling gold and silver. It is a fantastic book that anyone with an interest in the CIA, drugs, or fascism should read, because it offers a window into the shadowy world of offshore banking, where around a trillion dollars is transferred around the world every day. It names some of the most powerful families in the world: the Krupps, the Rothschilds, the Oppenheimers, the Warburgs and the Rockefellers. All are tied to banking and the gold cartel, where fortunes are incalculable. In fact, the gold and diamond cartels are still looting the world today with the same greed and brutality as imperial Japan. In the Democratic Republic of the Congo alone, ten million people have been killed in a brutal war to loot the country of gold, diamonds, uranium, and rare earth elements. Furthermore, most of the world’s gold is hoarded today in the Swiss Alps, in secret bunkers and underground tunnels designed to survive a nuclear war. The hunt for the gold stolen by imperial Japan even resumed as recently as 2001, when George W. Bush sent navy seals on a secret mission to recover it.

Blackstone, BlackRock or a Public Bank? Putting California’s Funds to Work

California has over $700 billion parked in private banks earning minimal interest, private equity funds that contributed to the affordable housing crisis, or shadow banks of the sort that caused the banking collapse of 2008. These funds, or some of them, could be transferred to an infrastructure bank that generated credit for the state – while the funds remained safely on deposit in the bank.

California needs over $700 billion in infrastructure during the next decade. Where will this money come from? The $1.5 trillion infrastructure initiative unveiled by President Trump in February 2018 includes only $200 billion in federal funding, and less than that after factoring in the billions in tax cuts in infrastructure-related projects. The rest is to come from cities, states, private investors and public-private partnerships (PPPs) one. And since city and state coffers are depleted, that chiefly means private investors and PPPs, which have a shady history at best.

A 2011 report by the Brookings Institution found that “in practice [PPPs] have been dogged by contract design problems, waste, and unrealistic expectations.” In their 2015 report “Why Public-Private Partnerships Don’t Work,” Public Services International stated that “experience over the last 15 years shows that PPPs are an expensive and inefficient way of financing infrastructure and divert government spending away from other public services. They conceal public borrowing, while providing long-term state guarantees for profits to private companies.” They also divert public money away from the neediest infrastructure projects, which may not deliver sizable returns, in favor of those big-ticket items that will deliver hefty profits to investors. A March 2017 report by the Economic Policy Institute titled “No Free Bridge” also highlighted the substantial costs and risks involved in public-private partnerships and other “innovative” financing of infrastructure.

Meanwhile, California is far from broke. It has over well over $700 billion in funds of various sorts tucked around the state, including $500 billion in CalPERS and CalSTRS, the state’s massive public pension funds. These pools of money are restricted in how they can be spent and are either sitting in banks drawing a modest interest or invested with Wall Street asset managers and private equity funds that are not obligated to invest the money in California and are not safe. For fiscal year 2009, CalPERS and CalSTRS reported almost $100 billion in losses from investments gone awry.

In 2017, CalSTRS allocated $6.1 billion to private equity funds, real estate managers, and co-investments, including $400 million to a real estate fund managed by Blackstone Group, the world’s largest private equity firm, and $200 million to BlackRock, the world’s largest “shadow bank.” CalPERS is now in talks with BlackRock over management of its $26 billion private equity fund, with discretion to invest that money as it sees fit.

“Private equity” is a rebranding of the term “leveraged buyout,” the purchase of companies with loans which then must be paid back by the company, typically at the expense of jobs and pensions. Private equity investments may include real estate, energy, and investment in public infrastructure projects as part of a privatization initiative. Blackstone is notorious for buying up distressed properties after the housing market collapsed. It is now the largest owner of single-family rental homes in the US. Its rental practices have drawn fire from tenant advocates in San Francisco and elsewhere, who have called it a Wall Street absentee slumlord that charges excessive rents, contributing to the affordable housing crisis; and pension funds largely contributed the money for Blackstone’s purchases.

BlackRock, an offshoot of Blackstone, now has $6 trillion in assets under management, making it larger than the world’s largest bank (which is in China). Die Zeit journalist Heike Buchter, who has written a book in German on it, calls BlackRock the “most powerful institution in the financial system” and “the most powerful company in the world” – the “secret power.” Yet despite its size and global power, BlackRock, along with Blackstone and other shadow banking institutions, managed to escape regulation under the Dodd-Frank Act. Blackstone CEO Larry Fink, who has cozy relationships with government officials according to journalist David Dayen, pushed hard to successfully resist the designation of asset managers as systemically important financial institutions, which would have subjected them to additional regulation such as larger capital requirements.

The proposed move to hand CalPERS’ private equity fund to BlackRock is highly controversial, since it would cost the state substantial sums in fees (management fees took 14% of private equity profits in 2016), and BlackRock gives no guarantees. In 2009, it defaulted on a New York real estate project that left CalPERS $500 million in the hole. There are also potential conflicts of interest, since BlackRock or its managers have controlling interests in companies that could be steered into deals with the state. In 2015, the company was fined $12 million by the SEC for that sort of conflict; and in 2015, it was fined $3.5 million for providing flawed data to German regulators. BlackRock also puts clients’ money into equities, investing it in companies like oil company Exxon and food and beverage company Nestle, companies which have been criticized for not serving California’s interests and exploiting state resources.

California public entities also have $2.8 billion in CalTRUST, a fund managed by BlackRock. The CalTRUST government fund is a money market fund, of the sort that triggered the 2008 market collapse when the Reserve Primary Fund “broke the buck” on September 15, 2008. The CalTRUST website states:

You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.

CalTRUST is billed as providing local agencies with “a safe, convenient means of maintaining liquidity,” but billionaire investor Carl Icahn says this liquidity is a myth. In a July 2015 debate with Larry Fink on FOX Business Network, Icahn called BlackRock “an extremely dangerous company” because of the prevalence of its exchange-traded fund (ETF) products, which Icahn deemed illiquid. “They sell liquidity,” he said. “There is no liquidity. . . . And that’s what’s going to blow this up.” His concern was the amount of money BlackRock had invested in high-yield ETFs, which he called overpriced. When the Federal Reserve hikes interest rates, investors are likely to rush to sell these ETFs; but there will be no market for them, he said. The result could be a run like that triggering the 2008 market collapse.

The Infrastructure Bank Option

There is another alternative. California’s pools of idle funds cannot be spent on infrastructure, but they could be deposited or invested in a publicly-owned bank, where they could form the deposit base for infrastructure loans. California is now the fifth largest economy in the world, trailing only Germany, Japan, China and the United States. Germany, China and other Asian countries are addressing their infrastructure challenges through public infrastructure banks that leverage pools of funds into loans for needed construction.

Besides the China Infrastructure Bank, China has established the Asian Infrastructure Investment Bank (AIIB), whose members include many Asian and Middle Eastern countries, including Australia, New Zealand, and Saudi Arabia. Both banks are helping to fund China’s trillion dollar “One Belt One Road” infrastructure initiative.

Germany has an infrastructure bank called KfW which is larger than the World Bank, with assets of $600 billion in 2016. Along with the public Sparkassen banks, KfW has funded Germany’s green energy revolution. Renewables generated 41% of the country’s electricity in 2017, up from 6% in 2000, earning the country the title “the world’s first major green energy economy.” Public banks provided over 72% of the financing for this transition.

As for California, it already has an infrastructure bank – the California Infrastructure and Development Bank (IBank), established in 1994. But the IBank is a “bank” in name only. It cannot take deposits or leverage capital into loans. It is also seriously underfunded, since the California Department of Finance returned over half of its allotted funds to the General Fund to repair the state’s budget after the dot.com market collapse. However, the IBank has 20 years’ experience in making prudent infrastructure loans at below municipal bond rates, and its clients are limited to municipal governments and other public entities, making them safe bets underwritten by their local tax bases. The IBank could be expanded to address California’s infrastructure needs, drawing deposits and capital from its many pools of idle funds across the state.

A Better Use for Pension Money

In an illuminating 2017 paper for UC Berkeley’s Haas Institute titled “Funding Public Pensions,” policy consultant Tom Sgouros showed that the push to put pension fund money into risky high-yield investments comes from a misguided application of the accounting rules. The error results from treating governments like private companies that can be liquidated out of existence. He argues that public pension funds can be safely operated on a pay-as-you-go basis, just as they were for 50 years before the 1980s. That accounting change would take the pressure off the pension boards and free up hundreds of billions of dollars in taxpayer funds. Some portion of that money could then be deposited in publicly-owned banks, which in turn could generate the low-cost credit needed to fund the infrastructure and services that taxpayers expect from their governments.

Note that these deposits would not be spent. Pension funds, rainy day funds and other pools of government money can provide the liquidity for loans while remaining on deposit in the bank, available for withdrawal on demand by the government depositor. Even mainstream economists now acknowledge that banks do not lend their deposits but actually create deposits when they make loans. The bank borrows as needed to cover withdrawals, but not all funds are withdrawn at once; and a government bank can borrow its own deposits much more cheaply than local governments can borrow on the bond market. Through their own public banks, government entities can thus effectively borrow at bankers’ rates plus operating costs, cutting out middlemen. And unlike borrowing through bonds, which merely recirculate existing funds, borrowing from banks creates new money, which will stimulate economic growth and come back to the state in the form of new taxes and pension premiums. A working paper published by the San Francisco Federal Reserve in 2012 found that one dollar invested in infrastructure generates at least two dollars in GSP (state GDP), and roughly four times more than average during economic downturns.

This article was originally published on Truthdig.com.

Fringe Economy

Fringe, adj. not part of the mainstream; unconventional, peripheral. When this definition is applied to the economy it becomes the title of a book, Short Changed: Life and Debt in the Fringe Economy, written by Howard Karger, who at the time was a professor of social policy.1 Part 4 is a review of that book.

Do you have any idea what the “historical neighborhood banker” is? I didn’t until I read his book. It’s the pawnshop says Karger. Most likely not in your neighborhood, though. Indebted people have been pawning their belongings as long ago as 1000 BC. If your image of today’s American pawnshop is of a storefront operation owned and operated by a shady character, you’ll be as surprised as I was to learn that many of those storefronts have been gobbled up by five publicly traded corporations (e.g., EZ Pawn) raking in 100’s of millions of dollars yearly from pawnshop loans and with boards of directors lavishly paying their CEOs. Even the shrinking population of go-it-alone pawn shop brokers gets loans to set up their operations from big banks. Well, why not? No banksters worthy of the name will miss out on grabbing other people’s money.

Karger defines the fringe economy as “corporations and business practices [that pray on the poor] by charging excessive interest rates or fees, or exorbitant prices for goods and services.” He divides this economy into seven sectors and gives a chapter to each. Besides a storefront loan sector that includes pawnshop businesses, the other sectors are the credit card industry, alternative financial services such as check cashing and rent-to-own, fringe housing, real estate speculation and foreclosure, the fringe auto industry, and the “getting-out-of-debt” industry such as the multibillion dollar debt management business. Large corporations operate in each of these sectors, and some, like EZ Pawn, may not be household names, while other large corporations that operate in both the fringe and mainstream economies surely are, such as the really big banksters, Bank of America, Wells Fargo, Verizon, and then the telecommunications giant, AT & T, that depended on the banksters at the outset.

Karger fills his book with a lot of facts about his subject, so much so that he warns early on that reading them “may be tedious” yet necessary because the “devil is in the details.” He compensates nicely for them, though, by fleshing out the facts with many anecdotes. I couldn’t help but think how Charles Dickens might have novelized them into a modern classic, absent the debtor’s prison (see the next paragraph) in “David Copperfield.

Karger’s name for the last sector, the “getting-out-of debt” industry surely has to be tongue-in-cheek, for as he describes and explains it, this industry can only be a multi-billion dollar business because its customers never get out of debt. Businesses in the other sectors, as he amply shows, are no different in that they all seek to sink already indebted people further into debt by escalating the interest fees levied on them, amounting in some cases to nearly a 500% APR! It would not be profitable to put these people in debtors’ prisons. Indeed, the entire sub-prime and predatory lending businesses of the fringe economy are built on the backs of persistently indebted customers.

Obviously, it would it not be profitable either to drive indebted people into bankruptcy, an escape hatch of last resort so to speak. This explains why corporations, especially in the credit card industry lobbied heavily to get the draconian Bankruptcy Abuse Prevention and Consumer Protection Act passed by a captive Congress. Known pejoratively but aptly as the “loan shark law,” Karger notes that it “intensifies the economic war on the poor and credit-challenged.”

If you are thinking loan sharks might starve if people stopped spending beyond their means you would be giving, in Karger’s opinion, too much credence to what he calls the “over consumption” argument. While he agrees that such “affluenza” (see De Graaf et al., 2002) is a contributing factor, he maintains that the argument fails to address a major cause of indebtedness, “the high cost of living in a privatized society.”2 He notes that the rising cost of necessities amounted then to 75% of a family’s two-person income, leaving little left for luxuries for the “functionally poor.” Moreover, consumer spending is less than it was a decade ago then. The argument, he believes, lets lawmakers fault debtors “for an economic reality they can’t control.”

Besides its loan shark law, the government has boosted the fringe economy in various other ways. For example, what Karger means by a “privatized society” is that stricter federal and state public assistance policies more quickly than before throw former recipients into jobs with no benefits and with pay suppressed by the miserly minimum wage law that has been frozen at that time by conservative politicians since 1997. Another example is public policy on homeownership along with sub-prime mortgage lenders and their low teaser rates that lure unqualified customers to buy homes eventually foreclosed. And not to leave out the judiciary’s role, Karger cites a U.S. Supreme Court ruling that allows national banks to charge the highest rate allowable in their home states to borrowers living elsewhere.

What, you might ask, is the difference between the two types of lending, sub-prime and predatory? Is the first legal and the second not? No. Illegalities exist in both. Moreover, state usury laws vary, so what may be illegal loans in one state are legal in another. Ethical considerations certainly don’t differentiate the two types of lending. Unscrupulous but legal practices abound in both types. The difference between them Karger says is blurry, offering his own blurry view that the first is generally “beneficial” and the second is “destructive.” In my opinion the only difference may be in how excessively customers are gouged. It seems to me, moreover, that sub-prime loans can’t be beneficial because the effects of being gouged benefit only the gouger.

The profitability of the fringe market has been too tempting for mainstream financial institutions not to enter it. Some observers, Karger says, believe this development will help to counteract unscrupulous lending practices. Not a chance! Anyone who tracks big financial institutions and corporations in general should know that the profit to be made and the pressure to make it every quarter will compromise the means to make it. Karger is not “optimistic” either and offers some corroborating evidence by citing some very prominent corporations that entered the fringe market. Customers of this market represent what I would call our own undeveloped “sub-country,” so why should we expect it to be any less exploited than are undeveloped countries by multi-national corporations?

The solution, Karger thinks, is not to eliminate the fringe market, as if that were even a remote possibility! He also thinks it would not be desirable because compared to fringe services the mainstream ones are not as accessible physically or as culturally compatible to poor neighborhoods.

At the end of each sector’s chapter and in the concluding chapter, therefore, he suggests numerous solutions, some more plausible than others, that would accommodate the realities of these neighborhoods while also eliminating some of the abusive and fraudulent practices of doing business with the people who live in those neighborhoods. Many of the solutions, like lending “only to borrowers who have the income or liquid assets to repay the debt” (how plausible, though, is that for some borrowers?) could be voluntarily adopted by lenders. But business being what it is, whether in the fringe or mainstream economy, socially and genuinely responsible behavior is rarely volunteered. So Karger adds some legislative recommendations. In this sense his book is very timely. As I wrote the review, for instance, Congress was considering legislation to curb the excesses of the sub-prime mortgage business. But whatever Congress passes is academic. Anything Congress does is not done without the heavy hand of large corporations in the mix.

In Closing

Were it only true that the corpocracy and its capitalism were relegated to the fringe economy and then made to vanish to never-never land!

  1. Brumback, GB. “Review of the book Short Changed: Life and Debt in the Fringe Economy by Howard Karger in the book review section of Personnel Psychology 60″, 2007, pp. 787-790.
  2. John De Graaf, J. et al. Affluenza: The All-Consuming Epidemic, 2002.