Dark Skinny

I’ve read a few articles concerning comparisons of the present day Financial Crisis in the US with The Great Depression Years. In this comparison among many, Ambrose Evans-Pritchard, writing in the UK Telegraph, walks us through a history, painting a small economic and political picture of what it was like in 1931 America, the similarities as well as differences to the present day crisis - the economic effects, wide civilian suffering with minor regional uprisings, Hoover’s bumbling policies, the Fed’s inadequacy and Roosevelt’s election, intervention and key change of policies. Much of this troubled economic period - in many ways - eerily resembles the Bush-Obama changeover.

In this extract - taken from his article  “Bad news: we’re back in 1931. Good news: it’s not 1933 yet.” - Mr. Evans-Pritchard takes us back to those times in a general historic  and economic assessment between then and now:

“President Obama faces a happier world. The liberal economic order is still in tact, if fraying at the edges. Capital and ships move freely. North America and Europe talk the same political language. China has so far proved a dependable pillar of the international system.

But then the world seemed benign enough in early 1931. It is the second phase of depression that does terrible things.

Roosevelt took over a country where the economic machinery had completely broken down. The New York Stock Exchange and the Chicago Board of Trade had closed. Thirty-two states had shut their banks. Texas had restricted withdrawals to $10 a day.

Few states could borrow on the bond markets. Illinois and much of the South had stopped paying teachers. Schools closed for months. An army of 25,000 famished war veterans squatting in view of Congress had been charged by troopers of the 3rd US cavalry with naked sabres – led by a Major George Patton.

Armed farmers threatening revolution had laid siege to a string or Prairie cities. A mob had stormed the Nebraska Capitol. Minnesota’s governor was recruiting Communists only for the state militia. Lawyers attempting to enforce foreclosures were shot. More than 100,000 New Yorkers applied to go to the Soviet Union when Moscow advertised for 6,000 skilled workers.

We forget how close America came to open revolt. Eleanor Roosevelt feared the country was beyond saving. Her husband kept the faith. He channelled the anger against Wall Street, diffusing it. “The practices of the unscrupulous money-changers stand indicted in the court of public opinion,” he began his presidency.

The Fed was an ideological deadweight. Bowing to pressure from Congress it began to purchase bonds in mid-1932 to boost the money supply, but then recoiled, before retreating into pitiful self-justification. A third of the rescue funds in Hoover’s Reconstruction Finance Corporation had been embezzled.

Today there has been no such failure of US institutional imagination, even if, as George Soros argues, the Treasury’s policies have been “haphazard and capricious”.

The twin blasts of fiscal and monetary stimulus have been massive. In short order the Fed has slashed rates to zero. It is now conjuring money out of thin air on an industrial scale, buying $600bn of mortgage bonds to force down the cost of home loans, and propping up the commercial paper market to avoid mass corporate default. Ben Bernanke, a Depression junkie, is proceeding with a messianic sense of certainty. The wash of money should ensure that the next 18 months will not mimic the cascade of disasters from late 1931 to early 1933.

It buys time. But it does not solve the deeper problem, which is that a West addicted to Ponzi credit has put off the day of reckoning with ever more extreme monetary policy with each downturn, stealing prosperity from the future.

It will be an extremely delicate task to right the ship again. Central banks will have to extricate themselves from their venture into the bond markets without setting off a bond debacle in 2010 or 2011. Governments will have to map out of a path of Puritan discipline for year after year.

This will be Barack Obama’s grim test of statesmanship.”

In 1910, in a quiet backwater in Georgia at The Jekyl Island Hunt Club, there was a meeting whose simple purpose was the formation of US The Federal Reserve. Those who attended were: Senator Nelson Aldrich (Nelson Rockefeller’s maternal grandfather); A. Piatt Andrew, Economist and Assistant Secretary of the Treasury; Frank Vanderlip, President of the National City Bank of New York; Henry P. Norton, President of Morgan’s First National Bank of New York; Paul Moritz Warburg, a German who was partner in the New York banking house of Kuhn, Loeb Co.; Benjamin Strong, an aid to J. P. Morgan.

The Federal Reserve was incorporated in 1913 and has been creating a completely unnecessary National Debt ever since. In simple terms, the Fed creates money as debt. They create money  and credit out of thin air by nothing more than the ruse of “fractional lending” and a book entry. Whenever the members of the Fed make any loans, that debt money is the US money supply.

THE TEN ORIGINAL MEMBER BANKS OF THE FEDERAL RESERVE

All owned by the Rothschilds

Rothschild Bank of London
Warburg Bank of Hamburg
Rothschild Bank of Berlin
Lehman Brothers of New York
Lazard Brothers of Paris
Kuhn Loeb Bank of New York
Israel Moses Seif Banks of Italy
Goldman, Sachs of New York
Warburg Bank of Amsterdam
Chase Manhattan Bank of New York

Please note that The Rothschild family owns and runs all the above so-called “American Banks”. Therefore you could safely assume that the Rothschild family both runs and controls the whole of the American Banking System. Indeed, Rothschilds is an old European family which has dominated the European banking system for centuries. So not even an American runs the US banking system - a European family cartel manipulates it completely with impunity.

By 1850, the House of Rothschild represented more wealth than all the families of Europe. Shortly after William Patterson formed the Bank of England(est. 1695),  its control passed to Nathan Rothschild and here is how he did it:

Nathan Rothschild was an observer on the day the Duke of Wellington defeated Napoleon at Waterloo, Belgium. He knew that with this information he could make a fortune. He later paid a sailor a big fee to take him across the English Channel in bad weather. The news of Napoleon’s defeat would take a while to hit England. When Nathan arrived in London, he began selling securities and bonds in a panic. The other investors were deceived into believing that Napoleon won the war and was eyeing England so they began to sell their securities too. What they were unaware of is that Rothschild’s agents were buying all the securities that were being sold in panic. In one day, the Rothschild fortune grew by one million pounds. They literally bought control of England for a few cents on the dollar. The same way the Rockefeller’s went into Japan after World War 2 and bought everything 10 cents on the dollar. SONY=Standard Oil New York, a Rockefeller Company.

Nathan Mayer von Rothschild(1840-1915), 1st Baron Rothschild, once boasted:

“I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man that controls Britain’s money supply controls the British Empire, and I control the British money supply.”

Frederick Morton wrote in his book, The Rothschilds:

“…the wealth of the Rothschilds consists of the bankruptcy of nations.”

But the Fed staunchly maintains that they are a private institution who’s only function is to serve the US government and its citizens. Well of course they do !! So, purely out of interest, lets look at those Financial Institutions that Hank Paulson (ex-CEO of Goldman Sachs) and Ben Bernanke have “saved” in the recent TARP bail-out:

• Morgan Stanley
• Citibank
• Wells Fargo
  
• Goldman Sachs
• Bank of America
• Merrill Lynch
• State Street
• Bank of New York

Every single one of these institutions is either related or has interests and connections to the original Fed forming cartel of 1910, ultimately run by the Rothschilds family. These financial institutions have all been saved as a priority by their cartel buddies within the Fed brotherhood. How many Mainstreet banks (that’s ordinary non-Investment Banks) have been saved or helped by the Fed? I would suggest that the Fed brotherhood’s Wall Street tentacles and influence spreads long, dirty and deep into the very heart of the US political infrastructure - which is the only possible explanation that could adequately explain their inexplicable untouchableness and apparent freedom of agenda.

Now some other facts about the the Fed:

• The Fed, as a private US institution, pays no corporate or any other income tax at all to the US government.
• The Fed is allowed to look after US prices and the money supply - “at their own discretion”.
• The Fed charges interest to the US government for every single Federal Note it produces. This charge, in the form of seignorage, is then passed on to the US citizens as an invisible “inflation tax”.
• The Fed has NEVER been properly audited.
• At their top-level meetings, the Fed keeps no written records or memoranda.
• The Fed, as a private institution, is headed by an American banking cartel which, in turn, is under the complete influence of the European-based Rothschild banking family.

As a result of The Fed’s unstoppable financial activity and due to all the rash debt they have caused within America so consistently over the years, 22 cents in every single US dollar is now foreign owned through all their self-serving and mutifarious debt instruments. If these debt instruments were being used properly, then surely the US National Debt would be coming down wouldn’t it ?  But instead, it becomes painfully evident that the Fed uses these foreign loans, multiplied hugely by the practice of “Fractional Reserve Lending” to further create  credit, leading to unstable and untenable mountains of corporate, personal and financial debt. The US Fiscal Debt is currently running at about $60 trillion now, which is 6 X the reported National Debt and about 15 X GDP. These comparisons become even more ridiculous when compared against the dollar notes in circulation - which is approximately $600 billion. The Fiscal Debt is therefore 100 X more than the dollar notes in circulation !! Is this the measure of a strong economy ? Remember that  the total production of the world economy amounts to $60 trillion alone. David Walker, ex-Comptroller General of the government GAO has said that in order to pay back this US Fiscal Debt, every citizen in America would have to pay its government $480,000 just to break even.

In these current hard economic times, it seems that the forefathers of the  American Constitution had some real vision. In 1826, the second bank’s charter was soon to expire and presidential candidate Andrew Jackson - an avid and honest constitutionalist - campaigned fiercely against a central bank which was owned and operated by the international banking element. Here is Jackson’s opinion of those bankers:

“You are a den of vipers. I intend to wipe you out, and by the Eternal God I will rout you out…If people only understood the rank injustice of the money and banking system, there would be a revolution by morning.”

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References:

The Federal Reserve History and Conspiracy

The Federal Reserve: History of Lies, Thievery, and Deceit

David Walker Interview on CBS(Youtube)

Nobody I know really understands the vastness or the complexity of the Derivatives Market. But the evidence appears to be that the dollar, amidst much reverse spin from the US government corridors, is squirming and hurting bad. But how is this possible with the dollar so strong now ? Read the following explanation from the financialsense.com website, and watch the clock carefully - something nasty is coming.

In the cited article, Kirby wrote: “What folks need to understand is that the global OTC derivatives market, measured in tens or hundreds of Trillions, is virtually all US Dollar denominated. Its SYSTEMIC failure, which is now occurring, requires US Dollar balances to clear (settle) the trades (bets). This has created the paradoxical global demand for US Dollars, the currency of a country that is fundamentally bankrupt. By rationing credit to hedge funds that were naturally levered and ‘long commodities’ (institutions like JP Morgan routinely took the other sides of their customers commodities bets, ruining institutions like natural gas player Amaranth), and propping up the balance sheets of those who were short commodities [such as] the Banks. The Federal Reserve led cabal of Central Bankers have ENGINEERED the collapse in commodities prices while creating the illusion (of a perverse USDollar rally). The engineered collapse of the commodities complex became necessary in the eyes of monetary elites because the rush for tangibles and corresponding repudiation of fiat money was becoming manic, as so CLEARLY evidenced by the emerging shortages of precious metals, gold and silver bullion.” My rejoinder is that the crude oil price, and many commodity prices, have come down right before the election, just like in autumn 2006, a perception we share.

Kirby went on to conclude that “We are CLEARLY going to HYPERINFLATE!!!!” He steadfastly contradicts shallow assertions that deflation will dominate the scene. Anyone observing the money supply acceleration in recent weeks can easily see this, yet deflationists seem unable to observe the human response in desperation. We two have frequent debates between ourselves, whether USTreasury Bond default will occur or else a big Reflation Episode. It is possible both will occur. These exchanges will contribute toward a key section in the upcoming November Hat Trick Letter on the weekend of November 9. A topic raging lately between us has been the failures to deliver USTreasurys. This extraordinary phenomenon highlights the extreme mountain of toxic bond (in)securities spewed worldwide by the corrupted US financial sector, but it also highlights the questionable legitimacy of USTreasury Bonds. One should remember that over $2000 billion in counterfeit USTreasury Bonds was probably buried under the World Trade Tower rubble one dark September day in 2001. The traded volume of USTBonds was recorded to be over $2 trillion above official issuance in USTBonds. So maybe we are seeing a redux of counterfeit issuance of USTBonds in order to satisfy unprecedented demand. By the way, USTreasury management is done, and accounting is done, almost like a money laundering operation, handled by JPMorgan. The rise, burial, and revival of supply are all conducted under the convenient accounting rules permitted by national security agencies.

Could the failures to deliver USTreasurys, as shown in the alarming graphic below, be a precursor to actual default? We will see. Kirby maintains a period of tremendous hyper-inflation is coming. My forecast is for a possible USTreasury default, as conditions grow out of control, and economic disintegration catches the nation by surprise. The collapse of General Motors could trigger a profound change in perception concerning the effective implementation of USGovt and Wall Street bailouts and rescues. Either way, disruptions like never seen before are on the horizon. The settlement failures bring into question the integrity of the USTreasurys as a legitimate market. Their counterfeit from more supply than issuance is well documented, and rings like a loud echo to the naked stock shorting chapter of US financial markets.

So, as we breath a small sigh of relief and trust,  the bail-out remedy has been dissolved into the financial institutions — still fizzing –  and we wait for its effect. My blind and shaky faith in both Paulson’s and Bernanke’s economic capabilities reminds me of the Marx Brother’s film Monkey Business, wherein  Groucho quips, “Sure I’m a doctor, where’s the horse ?”.

The secretive, adhoc and shadow-agenda-tilted remedies of these two “government employees” does not stir any faith from my bowels whatsoever. Their continued verbal flatulence - telling us nothing really - makes me wonder whether the coming Depression is, indeed, stoppable - or is it like those multitude of assured and very expensive allopathic cancer “cures”, where it is so difficult to determine whether the poor and trusting cancer patient was - in the end - killed by the cancer or the vicious “cure”. Meanwhile, the advising doctors and drugs companies get fatter and richer. I’m sure even Hippocrates himself would shudder with disgust and horror at this sick ruse…

First Paulson. His background and pure essence is Wall Street. He was an Ivy Leaguer, East coast, and was a star wrestler and footballer at college.  He has a B. A. in English from Dartmouth College. Disappointingly, I can’t find any learned references to Economics within his education at all. Paulson began his work in government, moving up to work as assistant secretary to Jon Ehrlichman in the Nixon administration from 1972 - 73. From here he joined Goldman Sachs, eventually succeeding Jon Corzine to become CEO in 1998. In Wikipedia his achievements may be further summed up:

“His net worth has been estimated at over US$700 million.^[9] Paulson has personally built close relations with China during his career. In July 2008 it was reported by The Daily Telegraph that: “Treasury Secretary Hank Paulson has intimate relations with the Chinese elite, dating from his days at Goldman Sachs when he visited the country more than 70 times.”"

Just before the bailout vote in the senate, Goldman Sachs (together with other major financial institutions) contributed significant funds to both McCain and Obama as well as to other major players including Senator Dodd, Head of the Senate Banking Committee. Perhaps they did this to assure safe passage of the Bailout Bill through the Senate ? See it here :

Here is evidence of who Paulson really works for :

[youtube:http://www.youtube.com/v/BEumrdHOq0w]

Evidence of Political Manipulation by Goldman Sachs:

“Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve System. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

Herewith is an economic paper written by two professors of Economics at the University of Boston. This paper describes the fiscal debt situation as it was back in 2003 while the country was under the leadership of Bush Jnr. It is an enlightening read. Bye the way, all quoted fiscal debt - everytime you see $44 trillion dollars, please now read $59 trillion dollars, since this little noticed paper was written in 2003 (The situation is, of course, much worse now). What follows is a critique of those fiscal measures necessary to pay back the fiscal debt, herein referred to as the Menu of Pain.

By Laurence J. Kotlikoff and Jeffrey Sachs, 5/19/2003

“OUR GOVERNMENT is going broke. The feds face bills that are far beyond our capacity to pay — by $44 trillion to be precise. The longer we ignore them, the bigger they get. Yet President Bush is working overtime to deepen our fiscal trap. This $44 trillion figure is not ours. Nor is it some other academics’ calculation. It was produced last fall by economists and budget analysts at the US Treasury, the Federal Reserve, the Office of Management and Budget, and the Congressional Budget Office. The study was ordered by then Treasury Secretary Paul O’Neil and was slated to appear in the president’s budget, released in February.

O’Neil instructed his team, led by Jagadeesh Gokhale, Federal Reserve senior economist, and Kent Smetters, then deputy assistant secretary for economic policy at the Treasury, to answer the following question: Suppose the government could, today, get its hands on all the revenue it can expect to collect in the future, but had to use it, today, to pay off all its future expenditure commitments, including debt service net of any asset income. Would the present value (the value today) of the future revenues cover the present value of the future expenditures?

The answer is no, and the fiscal gap is the $44 trillion. Now, that is big bucks by anyone’s definition. It’s four times current GNP and 12 times official debt. Imagine everyone in the country working for four years and handing over every penny earned to pay this bill, and you’ll grasp its size.

Unfortunately, we can’t ascribe the $44 trillion calculation to overly pessimistic assumptions. On the contrary, the assumptions are optimistic with respect to future longevity as well as growth in federal health expenditures, discretionary spending, and labor productivity.

Gokhale and Smetters asked a follow-up question: By how much would taxes have to be raised or expenditures cut on an immediate and permanent basis to generate, in present value, the $44 trillion? Their ”menu of pain” is mind-boggling. Entree A is raising federal income tax collections (individual and corporate) by 69 percent. Entree B is raising payroll tax collections by 95 percent. Entree C is cutting Social Security and Medicare benefits by 56 percent. Entree D is cutting federal discretionary spending by more than 100 percent, which, of course, is not feasible. Combination platters are also available. For example, we might select quarter portions of entrees A through D. But no matter what combination we order, digesting this medicine is going to be plenty painful.

Why are the nation’s fiscal affairs in such a mess? The reason is straightforward. Baby boomers are just five years from starting to collect Social Security retirement benefits and eight years from starting to collect Medicare benefits. When all 76 million boomers are retired, we’ll have twice the number of elderly beneficiaries, but only 15 percent more workers to pay their benefits.

If the fiscal gap and its associated menu of pain are unfamiliar, there’s a reason. You can scour the thousands of pages of the president’s FY 04 budget, and you won’t find the analysis. It never made it in. When Secretary O’Neill was replaced last December, the analysis was yanked from the budget.

To be clear, limiting our need to know is not just a Republican responsibility. When it came to publishing a generational accounting analysis in the FY 92 budget, President Clinton’s political watchdogs overruled OMB and pulled the same trick. And bankrupting has been a collective effort of all postwar administrations, each of which has cared more about the next election than the next generation.

Our current team leader, President Bush, is doing his part. Taken together, his first tax cut and his proposed second tax cut, which is about to be passed by Congress, account for roughly a sixth of the fiscal gap. The president, an ardent believer in voodoo economics, is convinced his tax cuts will stimulate growth and dramatically raise revenues. Neither economic theory nor economic facts supports this view. In fact, the president is not only burying us in explicit and implicit debt, he’s undermining the economy’s future performance.

The stakes are now too high for more political games and flaky economic theories. Democrats and Republicans alike need to send our leaders a firm message: Deal responsibly with the coming generational obligations! If we don’t, we can look forward to massive cuts in future Social Security and Medicare benefits, tax hikes, high inflation, and bitter political strife. Putting aside the president’s latest tax cut would be an excellent start on the road to responsibility.”

Laurence J. Kotlikoff is chairman of the Department of Economics at Boston University. Jeffrey Sachs is professor of economics at Columbia University.”