Tag Archives: financial crisis

“The Big Lie” and the tragedy of Europe –Yanis Varoufakis blows the lid on Europe’s hidden agenda

Posted on July 2, 2017 | 4 comments

In this interview, former Greek finance minister, Yanis Varoufakis, outlines the nature of the 2008 financial crisis, the reasons for the program of “quantitative easing” and the irrational actions of the western European leaders. The fundamental point he seems to miss is the debt growth imperative that is inherent in today’s global money system, the underlying fact that keeps everyone trapped in a system that is driving the whole of civilization toward disaster.

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Posted in Geo-politics, The Debt Imperative, The Political Money System, The state of democracy

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Lie more about LIBOR—Giethner’s claims “not credible”

Posted on July 27, 2012 | 2 comments

Here’s a video from Yahoo! Screen featuring an interview with Neil Barofsky, former Special Inspector General in charge of the TARP bailout and author of a new book, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street.

In this interview, Barofsky says that Treasury Secretary Tim Geithner’s claims about his LIBOR whistle-blowing are “not credible,” and that the entire regulatory process has become “captured to the interests of the banks.”

Barofsky says that LIBOR was built into the bailout plan, so the fraud means the taxpayers are being repaid less than they should be, and added “I hope we see people in handcuffs.”

Watch it here.

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Posted in Banking, Geo-politics, The Political Money System

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An Update on the Iceland Financial Crisis

Posted on October 6, 2011 | 3 comments

Because of the way in which its people have responded to the financial crisis, tiny Iceland has drawn a lot of attention lately. Some pertinent information about this was provided in a previous post. Prof. Margrit Kennedy, author of Interest and Inflation Free Money, traveled to Iceland recently on a fact-finding tour. Her report below provides some additional insights. –t.h.g.

A Visit in Iceland

Margrit Kennedy. 23 September 2011

[English translation by Prof. Philip Beard, Ph.D.]

When I read an article two months ago about the state bankruptcy in Iceland and the public’s refusal to accept the government’s debt retirement plan, as a result of which the three largest banks became insolvent, I decided to travel to Iceland.  I wanted to find out whether the new, popularly-elected 25-member  Council, whose job was to formulate proposals for a new constitution, had made any statements regarding the monetary or financial system.  No such news had shown up in the several reports and English translations I’d gathered.

So a week ago, off I flew, after having received a few contact addresses from friends and having made three appointments with “Constitutional Council” members via email.  I stayed in Reykjavik from 9/13 till 9/19 and then went for a day to Solheimar, Iceland’s only eco-village, whose director had supplied me with these council members’ addresses.

Hardly had I arrived at my Reykjavik hotel when the first of my interlocutors showed up: Salvör Nordal.  A professor of ethics at Reykjavik University, she answered my questions patiently, and in about the first half hour filled me in on what all my later conversations would confirm: No, no one had said anything about the systemic monetary roots of the crash.  The Council’s discussions revolved around laying new groundwork for their democracy, environmental protection and protection of the commons, more transparency in governmental affairs and thereby better regulatory capacities.  She was glad to hear and watch my short presentation on the topic “Money rules the world!  — But who rules the money?”, and immediately said, “You must meet my friend in the finance ministry.  For sure, she’ll be fascinated by what you’ve got to say.”  Then she departed.  It was Tuesday evening.

The next day I met the man who had been elected to the Council with the most votes, the economist Prof. Sylfarson.  We had a short, congenial conversation of about an hour in which I learned that from where he stood, the situation in Iceland had returned to “normal”.  Before the crash everything had been more or less exaggerated: salaries, the value of the Icelandic crown, housing prices, the standard of living.  In his opinion his countryfolk were still doing well (which corresponded to my own first impressions), and Iceland was now catching up to the rules that every other European democracy had been practicing for decades, e.g. universal suffrage, transparency of public budgets, environmental laws, etc.

And no, the monetary system had not come under discussion.  Monetary matters remained pretty much as they had been, except that an index was now being applied to loans in order to reduce excessive credit demands.

He had never heard of complementary currencies, though he was very interested in the couple of examples I described to him and asked me to send him more information.

My third conversation partner was the young singer Svarvar, a friend of friends who had witnessed the so-called “revolution” but hadn’t taken part in it.  His opinion was that people had just been venting their fury at having all gotten poorer again, but he hadn’t seen much in the way of new values being adopted.

I could see, though, that the money theme fascinated him.  He brought a few of his friends to my talk at Reykjavik University that I had been invited to give by the dean of the engineering and natural sciences faculty, Kristin Vala Ragnarsdottir, and some of her colleagues.  They were all astonished that the room they’d chosen for the lecture turned out much too small.  But the concierge had already figured from the many phone calls he’d received that we would need a larger room, and had arranged for it.

It took a little time to get the crowd moved to the new room, but an atmosphere of high spirits and goodwill prevailed.  Obviously the 150-200 guests, many overflowing into the hallways, expected I’d be talking to them about something important.  And I later learned that two translators had already published parts of my first book in Icelandic; they proudly showed me their published articles, replete with graphs.  They didn’t know each other, but had each motivated a sizeable number of people to come to the talk.  I could tell from their questions how deeply concerned they were about this topic, and I agreed to meet with the “hard core” of a few grassroots groups on Sunday evening at one of their gathering places to discuss action strategies.

That evening at dinner I had the pleasure of a conversation with the personal adviser of the Economics Minister about the drama that had led up to the near-total collapse of Iceland’s financial and economic system.  This evening was the preparation for my discussion with the minister and the government’s chief economic adviser on Monday, shortly before leaving Reykjavik.

It was an important meeting for me, and for these two leading specialists as well.  As it turned out, they had never before so clearly perceived the role of interest and compound interest in the lead-up to the collapse, even though they’d been confronted with it practically every day since 2006.  And their serious countenances showed that they were taking it to heart.  Their comments indicated however that it would take considerable time before these new insights could be applied to political practice.  Germany, they said with mild regret, had no doubt been among the hardest hit by the whole matter.  [Translator’s note: It’s unclear how this last sentence relates to the preceding line of thought.]

But I did have the feeling that they were open to new solutions.  Most impressive for me was the evening I spent with representatives of perhaps seven grassroots initiatives, of whom at least three had been trying for years to get the money topic on people’s radar screens, with little prior but now greater success, to judge by their growing membership figures and the fact that they’re now “being heard” in the media.

The main topic was action strategies.  Lots of concrete questions: How can we change this and that?  What’s the best way to introduce complementary currencies?  How can we reduce the debt burden that’s been forced upon our poorer citizens?

I told of our experiences with barter circles, regional currencies, and the WIR system, and described our successes in the Chiemgau and Vorarlberg regions.  And I promised to send them written summaries of the key ingredients.

In any event we shall stay in contact, exchanging news of problems and successes.  As I left I had the feeling of having sown some seeds – having nourished the hope and the knowledge that new pathways lie before us, and what they might look like.

Overall a newcomer to this country notices little of its bout with bankruptcy.  You do see several unfinished skyscraper projects, especially near the seacoast and on the way to the airport.  But very few people or neighborhoods look genuinely poor.

With the help of the 2.1-billion euro credit from the IMF, the country has once again just barely avoided total breakdown.  Now people are rolling up their sleeves and saying, “We’ll make it back.”  I certainly hope they will, because I have become very fond of the Icelanders in the week I spent with them.

The best, most concrete outcome of this trip would be for the grassroots groups to enjoy a new level of attention, understanding, and perhaps even active support for their efforts at introducing new systems – systems that prove that we can run our monetary affairs without interest.

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Here is a link to a tv interview of Prof. Kennedy by Egill Helgason, which was aired on Icelandic television on Sunday the 25th of September 2011: http://silfuregils.eyjan.is/2011/09/26/fjarmalakerfi-sem-leidir-til-glotunar/

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Posted in Global Economy, The Political Money System

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Iceland, a case that deserves careful study

Posted on July 19, 2011 | 4 comments

Iceland was one of the first countries to experience the financial crisis that plagues the world. It seems to be the canary in the coal mine, and as such, it may be showing us not only what is in store for the rest of us, but also a way out of our dilemma.

In this series of 5 videos, Prof. Michael Hudson explains very clearly what happened to Iceland and shows it to be an example of the pattern that is being played out in the rest of the world.

In the time since that interview was recorded, the people of Iceland have taken action that may get to the root of the problem. Instead of bailing out the banks and rewarding those who caused the problem in the first place, Iceland has, according to one of my correspondents:
– Totally recalled its government.
– Nationalized its main banks.
– Decided not to honor the claims from the UK and Holland due to their speculative policies.
– Created a popular assembly to rewrite its constitution.

Strangely, there has been very little about that in the media.

I would very much like to see reports that detail these actions, so I invite any of my readers who find them to pass them on by making comments to this post–t.h.g.

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Posted in Geo-politics, Global Economy, The Political Money System

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The World’s Ominous Reckoning

Posted on January 25, 2011 | 3 comments

My latest article, The World’s Ominous Reckoning, is featured on Reality Sandwich. It was also excerpted and posted on the P2P Foundation blog.

For your convenience, I also post it here.

The World’s Ominous Reckoning

By Thomas H. Greco

In a recent Washington Post article titled Europe’s ominous reckoning [1], economist Robert Samuelson correctly argued that “Ireland’s economic crisis is … not about Ireland.” What he seems to not recognize is that “Europe’s ominous reckoning” is not about Europe.

The reckoning will be global because the money and banking regime is global — and deeply flawed.

Discussions about possible solutions to the debt crisis tend to degenerate into ideological bickering because ideologies provides an inadequate framework in which to understand the nature of the problem and discover real effective solutions. Fiscal conservatives want to cut social spending so as to avoid raising taxes on the rich and privileged class. Political liberals have largely caved in to the same interests because they think that supporting the privileged class’s agenda is their only hope of gaining power. They will pay lip service to a social agenda and throw a few crumbs to the masses in an attempt to get elected, but they will ultimately advance the same elitist agenda, as have Presidents Clinton and Obama. Progressives argue that budgets can be balanced by cutting the military budget and raising taxes on the rich, but they remain impotent because political power has been so thoroughly centralized that popular progressive agendas have not a prayer of being implemented. Even if they were, they would simply make matters worse because under the present money and banking regime, a balanced government budget is not possible. How can the debate move beyond ideologies, and common ground be found?

Samuelson, like almost all conventionally trained economists, blames the woes of Ireland, and every other country, on failures in policy. He says, “Most European economies suffer from the ill effects of some combination of easy money, unsustainable social spending and big budget deficits,” but he fails to address the deeper questions of why? Why has money been easy? Why is social spending unsustainable? Why have budget deficits been too big?

It is not only a problem of European economies, it is a problem for virtually all national economies. As Samuelson points out, even the most prosperous countries have accumulated enormous debts. The governments of Germany and France, for example, have, respectively, gross debts of 76 percent and 86 percent of GDP (GDP is a measure of total economic output). The debt of the United States government is projected to exceed 100% of GDP within the next couple of years. And this picture does not even include the debts of lower levels of government — states, counties, and municipalities — or all of the private sector debt that burdens companies and individuals.

If the world has become so prosperous and productive, why all this debt, and why does it continue to grow ever more rapidly?

It is not a matter of policy, i.e., how we operate a flawed system. The problem is structural and systemic. The system is designed to create debt, and ever more of it. Like a pernicious cancer, debt is a parasite that is killing us, and in the end a parasite will die along with its host. How much of our well-being shall we sacrifice to keep feeding this cancer? Are we willing to starve ourselves and our children, to endure cuts in spending for education and public services, to sacrifice our hard-won freedoms, in order to sustain a system that despoils the earth, destroys the social fabric,  and creates ever greater economic inequities?

A few have been calling for “debt forgiveness,” a remedy analogous to cancer surgery. That may be a good start, but even that does no go far enough. We can excise the cancer, but if we do not recognize and eliminate its fundamental cause it will simply grow back. We can restart the game of Monopoly, but the outcome of the next round will be very much like that of the previous round unless we change the rules — or choose to play a different game.

The fact is, there is a debt imperative that is built into the global system of money and banking, and debt is eating us alive. As I wrote in my first book more than 20 years ago, our money system, based as it is on banks’ lending money into circulation at compound interest, requires debt to grow with the passage of time. Virtually all of the money today is created when banks make “loans.” The compounding of interest on these loans means that debt must grow as time goes on, not slowly, but at an accelerating rate. Ever greater amounts of money must be borrowed into circulation for this system to continue. When the private sector debt can no longer be expanded, government assumes the role of “borrower of last resort.” That is why government budget deficits have become chronic and continue to grow. In the latest cycle of Bubble and Bust, governments are rescuing the banks by taking “toxic” debt off their hands and giving them government bonds in return. In this way, the system can be sustained a little bit longer, but at costs that have yet to be tallied.

The current global predicament is the late-stage symptom of this fundamental flaw. Every political currency collectivizes credit. It is our credit that supports each national currency. We have allowed the banks to control our credit and we pay them interest for the “privilege” of accessing some of it as bank “loans.”

What must be done? The answer is simple, but few have been willing to hear it: interest must be eliminated from the money system to put an end to the growth imperative. To modern economists, such a proposition is heresy, foolish even, unthinkable! Interest to them is an essential inducement to save and invest and a necessary means of regulating credit and the economy. Nonsense, I say, a gross error and delusion fostered by incessant propaganda, media hype, and financial mumbo-jumbo. In an economy that is free from inflation, preservation of one’s capital is sufficient motivation for saving, and return on productive investments can be had in the form of ownership shares (so-called equity investment) instead of interest on debt. Such equity investments share both the rewards and the risks inherent in a productive enterprise, making the relationship between the user of funds and the provider of funds more harmonious and fair. As for regulating credit, we don’t need interest to do that; we can merely decide to withhold or offer credit, to whom, for what purpose, and in what amounts.

We need to learn to play a different game. We need to organize an entirely new structure of money, banking, and finance, one that is interest-free, decentralized, and controlled, not by banks or central governments, but by businesses and individuals that associate and organize themselves into cashless trading networks. This is a way to reclaim “the credit commons” from monopoly control and create healthy community economies.

In brief, any group of traders can organize to allocate their own collective credit amongst themselves, interest-free. This is merely an extension of the common business practice of selling on open account — “I’ll ship you the goods now and you can pay me later,” except it is organized, not on a bilateral basis, but within a community of many buyers and sellers. Done on a large enough scale that includes a sufficiently broad range of goods and services spanning all levels of the supply chain from retail, to wholesale, to manufacturing, to basic commodities, such systems can avoid the dysfunctions inherent in conventional money and banking and open the way to more harmonious and mutually beneficial trading relationships that enable the emergence of sustainable economies and promote the common good.

This approach is no pie-in-the-sky pipe dream, it is proven and well established. Known as mutual credit clearing, it is a process that is used by scores of commercial “barter” companies around the world to provide cashless trading for their business members. In this process, the things you sell pay for the things you buy without using money as an intermediate exchange medium. It’s as simple as that. According to the International Reciprocal Trade Association (IRTA), a major trade association for the industry, “IRTA Member companies using the “Modern Trade and Barter” process, made it possible for over 400,000 companies World Wide to utilize their excess business capacities and underperforming assets, to earn an estimated $12 billion dollars in previously lost and wasted revenues.”

Perhaps the best example of a credit clearing exchange that has been successful over a long period of time is the WIR Economic Circle Cooperative. Founded in Switzerland as a self-help organization in 1934 in the midst of the Great Depression, WIR provided a means for its business members to trade with one another despite the shortage of official money in circulation. Over three-quarters of a century, in good time and bad, WIR has continued to thrive. Its more than 60,000 members throughout Switzerland trade about $2 billion worth of goods and services annually.

Yes, it is possible to transcend the dysfunctional money and banking system and to take back our power from bankers and politicians who use it to abuse and exploit us. We do it, not by petitioning politicians who are already bought and paid for by an ever more powerful elite group, but by using the power that is already ours to use the resources we have to support each other’s productivity and to give credit where credit is due.

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Posted in Global Economy, Prescriptions, The Political Money System

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“Inside Job,” the story of the looting of America

Posted on December 28, 2010 | Leave a comment

Inside Job is a recently released documentary film about the causes of the present financial crisis. I’ve not yet seen it, but from all indications it’s a blockbuster that exposes massive criminal fraud and malfeasance by both Wall Street and Washington. Watch this video as Dylan Ratigan on  MSNBC speaks with the film’s director and Professor William Black.

http://www.youtube.com/v/ffHFjlqIzKE?fs=1&hl=en_US

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Financial terrorism by bankers put Greece in the noose. Who is next?

Posted on December 10, 2010 | 2 comments

Max Keiser interviews a Greek economist who explains how an artificial crisis was created  by banks and institutions to force Greece to accept IMF conditions. It is a pattern that is being repeated over and over.

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Posted in Global Economy, The Debt Imperative, The Political Money System

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The Time of the Chrysalis?

Posted on February 14, 2010 | 2 comments

As I sit sweltering here in Malaysia (and before this, in Thailand) observing the busyness, the massive amounts of construction, the noisy moving to and fro, the widening extremes of opulence and degradation, the scramble of people to earn or save a few pennies to buy a piece of the good life, I often feel despair about the human condition. But, as I’ve said in my books and presentations, it is clear that civilization is experiencing a multi-dimensional mega-crisis which must lead to a thorough social, economic, and political restructuring. I liken it to the process of metamorphosis from the caterpillar to the butterfly. My soul yearns for peace and quiet, fellowship, and positive engagement in the metamorphic process.

Where to find it? How to proceed? These are the vexing questions of the moment.

Over the past three years my nomadic lifestyle has provided numerous adventures of discovery in many parts of Asia. I think my time in Asia has given me a pretty good sense of the developmental trends and the conditions that ordinary people here must contend with. The apparent lull in the breakdown process over the past few months should not cause us to become complacent but should be taken as an opportunity to prepare ourselves and to intensify our efforts to build a better world.

The global economy, like the caterpillar must at some point stop growing. That point seems now to have been reached. If you have not seen it, the post by Darryl Schoon, Davos: The Bomb Shelter, clearly expresses my own views that the current financial crisis is unprecedented and “the crisis will end in a complete breakdown of the banker’s system of credit and debt…”

The next phase, the chrysalis phase, requires that we take the accumulated resources that are at our disposal and use them to create the new butterfly economy. It is not easy to ascertain how that process will proceed, what the specific challenges will be, or how we might best negotiate what Robert Theobald called, The Rapids of Change. Carolyn Baker’s book, Sacred Demise: Walking the Spiritual Path of Industrial Civilzation’s Collapse, may help us in that regard. Major portions of the book can be read for free at books.google.com.

Each of us now needs to ask, “Where shall I spin my personal cocoon, where is my cohort community, and how can I help the emergence of a new, sustainable, more harmonious world.

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Posted in Global Economy, The Political Money System

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The Other Plot to Wreck America-An informative article from the New York Times

Posted on January 11, 2010 | Leave a comment

Even though it does not quite get to the root of the matter, this article is worth reading.

The Other Plot to Wreck America

By FRANK RICH

THERE may not be a person in America without a strong opinion about what coulda, shoulda been done to prevent the underwear bomber from boarding that Christmas flight to Detroit. In the years since 9/11, we’ve all become counterterrorists. But in the 16 months since that other calamity in downtown New York — the crash precipitated by the 9/15 failure of Lehman Brothers — most of us are still ignorant about what Warren Buffett called the “financial weapons of mass destruction” that wrecked our economy. Fluent as we are in Al Qaeda and body scanners, when it comes to synthetic C.D.O.’s and credit-default swaps, not so much.

What we don’t know will hurt us, and quite possibly on a more devastating scale than any Qaeda attack. Americans must be told the full story of how Wall Street gamed and inflated the housing bubble, made out like bandits, and then left millions of households in ruin. Without that reckoning, there will be no public clamor for serious reform of a financial system that was as cunningly breached as airline security at the Amsterdam airport. And without reform, another massive attack on our economic security is guaranteed. Now that it can count on government bailouts, Wall Street has more incentive than ever to pump up its risks — secure that it can keep the bonanzas while we get stuck with the losses.

The window for change is rapidly closing. Health care, Afghanistan and the terrorism panic may have exhausted Washington’s already limited capacity for heavy lifting, especially in an election year. The White House’s chief economic hand, Lawrence Summers, has repeatedly announced that “everybody agrees that the recession is over” — which is technically true from an economist’s perspective and certainly true on Wall Street, where bailed-out banks are reporting record profits and bonuses. The contrary voices of Americans who have lost pay, jobs, homes and savings are either patronized or drowned out entirely by a political system where the banking lobby rules in both parties and the revolving door between finance and government never stops spinning.

It’s against this backdrop that this week’s long-awaited initial public hearings of the Financial Crisis Inquiry Commission are so critical. This is the bipartisan panel that Congress mandated last spring to investigate the still murky story of what happened in the meltdown. Phil Angelides, the former California treasurer who is the inquiry’s chairman, told me in interviews late last year that he has been busy deploying a tough investigative staff and will not allow the proceedings to devolve into a typical blue-ribbon Beltway exercise in toothless bloviation.

He wants to examine the financial sector’s “greed, stupidity, hubris and outright corruption” — from traders on the ground to the board room. “It’s important that we deliver new information,” he said. “We can’t just rehash what we’ve known to date.” He understands that if he fails to make news or to tell the story in a way that is comprehensible and compelling enough to arouse Americans to demand action, Wall Street and Washington will both keep moving on, unchallenged and unchastened.

Angelides gets it. But he has a tough act to follow: Ferdinand Pecora, the legendary prosecutor who served as chief counsel to the Senate committee that investigated the 1929 crash as F.D.R. took office. Pecora was a master of detail and drama. He riveted America even without the aid of television. His investigation led to indictments, jail sentences and, ultimately, key New Deal reforms — the creation of the Securities and Exchange Commission and the Glass-Steagall Act, designed to prevent the formation of banks too big to fail.

As it happened, a major Pecora target was the chief executive of National City Bank, the institution that would grow up to be Citigroup. Among other transgressions, National City had repackaged bad Latin American debt as new securities that it then sold to easily suckered investors during the frenzied 1920s boom. Once disaster struck, the bank’s executives helped themselves to millions of dollars in interest-free loans. Yet their own employees had to keep ponying up salary deductions for decimated National City stock purchased at a heady precrash price.

Trade bad Latin American debt for bad mortgage debt, and you have a partial portrait of Citigroup at the height of the housing bubble. The reckless Citi executives of our day may not have given themselves interest-free loans, but they often walked away with the short-term, illusionary profits while their employees were left with shredded jobs and 401(k)’s. Among those Citi executives was Robert Rubin, who, as the Clinton Treasury secretary, helped repeal the last vestiges of Glass-Steagall after years of Wall Street assault. Somewhere Pecora is turning in his grave

Rubin has never apologized, let alone been held accountable. But he’s hardly alone. Even after all the country has gone through, the titans who fueled the bubble are heedless. In last Sunday’s Times, Sandy Weill, the former chief executive who built Citigroup (and recruited Rubin to its ranks), gave a remarkable interview to Katrina Brooker blaming his own hand-picked successor, Charles Prince, for his bank’s implosion. Weill said he preferred to be remembered for his philanthropy. Good luck with that.

Among his causes is Carnegie Hall, where he is chairman of the board. To see how far American capitalism has fallen, contrast Weill with the giant who built Carnegie Hall. Not only is Andrew Carnegie remembered for far more epic and generous philanthropy than Weill’s — some 1,600 public libraries, just for starters — but also for creating a steel empire that actually helped build America’s industrial infrastructure in the late 19th century. At Citi, Weill built little more than a bloated gambling casino. As Paul Volcker, the regrettably powerless chairman of Obama’s Economic Recovery Advisory Board, said recently, there is not “one shred of neutral evidence” that any financial innovation of the past 20 years has led to economic growth. Citi, that “innovative” banking supermarket, destroyed far more wealth than Weill can or will ever give away.

Even now — despite its near-death experience, despite the departures of Weill, Prince and Rubin — Citi remains as imperious as it was before 9/15. Its current chairman, Richard Parsons, was one of three executives (along with Lloyd Blankfein of Goldman Sachs and John Mack of Morgan Stanley) who failed to show up at the mid-December White House meeting where President Obama implored bankers to increase lending. (The trio blamed fog for forcing them to participate by speakerphone, but the weather hadn’t grounded their peers or Amtrak.) Last week, ABC World News was also stiffed by Citi, which refused to answer questions about its latest round of outrageous credit card rate increases and instead e-mailed a statement blaming its customers for “not paying back their loans.” This from a bank that still owes taxpayers $25 billion of its $45 billion handout!

If Citi, among the most egregious of Wall Street reprobates, feels it can get away with business as usual, it’s because it fears no retribution. And it got more good news last week. Now that Chris Dodd is vacating the Senate, his chairmanship of the Banking Committee may fall next year to Tim Johnson of South Dakota, home to Citi’s credit card operation. Johnson was the only Senate Democrat to vote against Congress’s recent bill policing credit card abuses.

Though bad history shows every sign of repeating itself on Wall Street, it will take a near-miracle for Angelides to repeat Pecora’s triumph. Our zoo of financial skullduggery is far more complex, with many more moving pieces, than that of the 1920s. The new inquiry does have subpoena power, but its entire budget, a mere $8 million, doesn’t even match the lobbying expenditures for just three banks (Citi, Morgan Stanley, Bank of America) in the first nine months of 2009. The firms under scrutiny can pay for as many lawyers as they need to stall between now and Dec. 15, deadline day for the commission’s report.

More daunting still is the inquiry’s duty to reach into high places in the public sector as well as the private. The mystery of exactly what happened as TARP fell into place in the fateful fall of 2008 thickens by the day — especially the behind-closed-door machinations surrounding the government rescue of A.I.G. and its counterparties. Last week, a Republican congressman, Darrell Issa of California, released e-mail showing that officials at the New York Fed, then led by Timothy Geithner, pressured A.I.G. to delay disclosing to the S.E.C. and the public the details on the billions of bailout dollars it was funneling to its trading partners. In this backdoor rescue, taxpayers unknowingly awarded banks like Goldman 100 cents on the dollar for their bets on mortgage-backed securities.

Why was our money used to make these high-flying gamblers whole while ordinary Americans received no such beneficence? Nothing less than complete transparency will connect the dots. Among the big-name witnesses that the Angelides commission has called for next week is Goldman’s Blankfein. Geithner, Henry Paulson and Ben Bernanke should be next.

If they all skate away yet again by deflecting blame or mouthing pro forma mea culpas, it will be a sign that this inquiry, like so many other promises of reform since 9/15, is likely to leave Wall Street’s status quo largely intact. That’s the ticking-bomb scenario that truly imperils us all.

Frank Rich is an Op-Ed columnist for The New York Times.

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The Inevitable End of the Central Banking and Political Money Regime

Posted on September 22, 2008 | 3 comments

The present disorder in the financial markets and the cascading failures of financial institutions come as no surprise. Those who recognize the impossibility of perpetual exponential growth and who understand how compound interest is built into the global system of money and banking expect the continuation of periodic “bubbles” and “busts,” each of increasing amplitude until the systems shakes itself apart.

Engineers call this phenomenon, “positive feedback.” Such a system cannot find equilibrium. Imagine a heating system in which the thermostat, sensing a rise in temperature, calls for more heat instead of less. Such is the nature of the debt-money system. The imposition of interest on the debt by which money is created, demands that more debt be created. Such is the debt imperative which gives rise to a growth imperative. Among other things, it prevents the emergence of a steady state economy.

Is this the final round? Who can say? Can the system be saved yet one more time? Maybe.

Under the central banking regime which has become all but universal in countries around the world, money has been politicized. The collusion between politicians and international bankers enables governments to extract wealth from the economy by deficit spending and banks to extract wealth by charging interest on money as they create it by making loans. These two parasitic elements take wealth away from productive members of society and lavish it on military adventures, international intrigues, wasteful boondoggles, and financial finaglers.

When the system spins out of control what will come out of the chaos? It is impossible to predict but here are two strong possibilities. When the dollar collapses the financial and political elite class will certainly try to orchestrate a new global monetary regime based on the same old mechanisms for centralizing power and concentrating wealth in their own hands, seeking to complete the New (feudal) World Order which has been abuilding for the past three hundred years. Another possibility is the emergence of the kind of decentralized, democratic, and sustainable system we have been advocating for a long time.

We had better get ready to seize the opportunity that accompanies this impending crisis.

How? By organizing ourselves in our local communities and affinity groups to reclaim the credit commons, to create interest-free, non-dollar, non-bank exchange mechanisms and payment media. This is not as hard as it seems We already know how to do it. All it takes is organization and will.

Back to the current crisis, we should consider the possible actions of America’s creditors. According to Paul Joseph Watson & Yihan Dai, in and article in Prison Planet (http://prisonplanet.com/) dated Friday, September 19, 2008, “China Finance, China News and Chaobao Financial News, all state owned media outlets, slammed the Fed for taking action that will only make long term economic conditions worse and devalue the dollar by “creating money that does not exist which leads to the inflation of liquidity,” a policy contrary to China’s position as a holder of vast reserves of US dollars.”

Central banks have one true function, that is to manage the effects of the parasitic drain, to decide who will pay the price, who will feel the pain. They can either (1) restrict credit, thus causing recessions, bankruptcies and unemployment; or (2) they can expand credit and inflate the money supply by monetizing debts (either public or private) that are uncollectible.

Given China’s position as one of the United States’ biggest creditors, it is in a powerful position to determine the outcome of the current and future financial crises. If they don’t like the restructuring plan that the financial elite wants to put in place, they can kick over the table by dumping their dollar holdings and causing the value of the dollar to crash through the floor. Organized others acting in cooperation might do the same.

“The king is dead, long live the king.”

My upcoming book, “The End of Money,” due to be published early next year by Chelsea Green, will elaborate these points.

t.h.g.

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