By now, everyone is talking about the economic crisis. From the workplace water cooler to bathroom chatter, everyone is mentioning it. And the situation is affecting everyone, or is it? Gas and food prices have been going up long before recent bank collapses and the problem in the housing market may have caused many home owners to lose their houses, but there are still plenty of apartments for rent. Is the government’s $700 billion bailout truly necessary, or is it simply placing more money into the hands of unscrupulous bankers whose poor decisions may not have the snowballing effect everyone is predicting?
Earlier this week, Bush made an address to the nation concerning the economy.
“…We are in the midst of a serious financial crisis and the federal government is responding with decisive action…our entire economy is in danger. So I propose that the Federal Government reduce the risk posed by these troubled assets and supply urgency needed money so that banks and other financial institutions can avoid collapse and resume lending…” -President Bush’s national address concerning the economic bailout1
The speech was straight forward, well rehearsed and ensured the American people about the realities of a crisis that must be avoided and the steps that Bush was taking to correct it. It was not entirely unlike the direct voice of absolute certainty Bush used when informing the American people that Saddam Hussein had weapons of mass destruction and going to war with Iraq.
“My fellow citizens. At this hour, American and Coalition forces are in the early stages of military operations to disarm Iraq, to free its people and to defend the world from great danger…” —President Bush Address to the Nation2 (March 19, 2003)
And also, not too different than Clinton’s speech to the nation about Iraq:
“..Saddam Hussein must not be allowed to threaten his neighbors or the world with nuclear arms, poisonous gas or biological weapons…” -President Clinton’s Address to the Nation3 (December 16, 1998)
JPMorganChase is credited as saving both Bear Stearns and the more recent Washington Mutual, both firms which it recent bought out. And although many credit JPMorganChase for taking these companies at a possible loss to itself, in reality it has grown its own company with two predominant and well known brands as well as accumulating all their accounts both good and bad.
During the 1920s, J.P. Morgan himself was a ruthless businessman whose stake in the banking industry was so large that mere rumors of the insolvency of competing banks in New York sent the market into a tumble. Morgan knew this would cause panic and lead the people to withdraw funds causing other banks to call in their loans, which in turn caused people to sell their stocks and property, sending the market into a downward spiral4.
“Oakly Thorne, the president of that particular trust company, testified later before a congressional committee that his bank had been subjected to only moderate withdrawals…that he had not applied for help and that it was the (Morgan) ‘sore point’ statement alone that had caused the run on his bank. From this evidence, plus other fragments of other supposedly pertinent evidence, certain chroniclers have come to the ingenious conclusion that the Morgan interests took advantage of the unsettled conditions during the autumn of 1907 to preciitate the panic, guiding it slowly as it progressed so that it would kill off rival banks and consolidate the pre-eminence of the banks within the Morgan orbit5.” -Frederick Lewis Allen. Life Magazine. 1949.
Today J.P. Morgan is no more the savior of the banking industry than it was in the 1920s. It has essentially used its influence to buy up massive competitors and earn a place as a massive megabank. The two remaining large investment banks Goldman Sachs and Morgan Stanley have sought to make the transition to becoming holding companies restricting them from riskier ventures and placing them under more congressional oversight6.
“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” -Thomas Jefferson
Turning to the campaign trail, McCain decided to suspend his campaign in order to deal with the economic crisis and called on Obama to do the same. This is of course only days before the first presidential debate with an election looming just over a month away. Not only was the notion of suspending his campaign ridiculous, as if McCain’s full attention could defuse the economic situation, but the suggestion also seemed to indicate that McCain also wanted to avoid the upcoming debate; possibly out of fear.
“…This is exactly the time when the American people need to hear from the person who in approximately 40 days will be responsible for dealing with this mess…” -Barack Obama
I look forward to the debates, and all though I’m sure a focus will be on the current economic conditions, I do not think they will address the real issues with our current financial system. The economic problems are not due to the failure of individual banking CEOs and board members to anticipate future economic conditions and to temper their risks. It is a deeper problem with the Federal Reserve system itself that is responsible for the predatory lending to banking entities that pushed the market into housing credit that was over saturated and unsustainable.
It is important to note that these bad debts are not being bought directly by the Federal Government but the Federal Reserve Bank. The Federal Reserve is not a public entity but a private one with officials appointed by the President. It is about as Federal as Federal Express. The total federal tax revenue from 2006 including both corporate and individual tax was $2.4 trillion8. By giving the Federal Reserve authority over $700 billion, we are giving nearly 30% of US tax revenue to a fully private yet government appointed entity; a decision that will put the Federal Reserve in oversight over several trillions of dollars in assets it has bought from Freddy Mac, Fannie May and AIG and assets it will buy from other failing banks.
“Permit me to issue and control the money of a nation, and I care not who makes its laws…” -Mayer Anselm Rothschild
It is important to note that the future of the economy will not be built on whether or not the industries the American people are familiar with will survive or the easy and difficulty in acquiring credit, but it will be in the value of the dollar in the context of a global economy. The dollar is a currency like so many others around the world that is not backed by anything except the trust in the senate and the believe that the dollar has worth. It is not back by gold or silver and in essence it has no real value.
If the world ever fails its trust in the US dollar, if the western world abandons faith in their individual countries’ currencies and if the Federal Reserve holds the financial assets of major corporate entities which are paid for by the debt of the American taxpayer, we will essentially be on the path to communism. And with that communism comes a slavery to debt and to fascism.
“Fascism should more properly be called corporatism because it is the merger of state and corporate power.” — Benito Mussolini
1 Bush: US in Crisis CNN. September 24, 2008
2 President Bush Address to the Nation March 19, 2003
3 President Clinton’s Address to the Nation December 16, 1998
4 Zeitgeist (Film 2007)
5 None Dare Call it Conspiracy Allen. Concord Press. 1971
6 Goldman, Morgan to become holding companies Schroeder. Marker Watch. September 21, 2008.
7 Obama rejects McCain call to delay debate MSNBC. September 24, 2008.
8 Memo to the Congressional Budget Office Orszag. May 18, 2007.