In December of 2008 it was announced that the Bank of
New
York Mellon would continue participating in the FDIC Temporary
Liquidity Program. The Bank of New York Mellon? Who the
heck is
that? The Bank of New York
Mellon is the product of a 2007 merger between
Mellon Financial Corp and The Bank of New York, the
oldest bank in the country, founded in 1784. Alexander
Hamilton not only wrote the bank’s constitution, but was “the individual most actively
involved in the organization of The Bank of New York, guiding it
through its early stages”(2)
Alexander Hamilton is well known for his advocation of the
central bank, and this sentiment echoed in his “Report on Public
Credit“, where he proposed that the federal government assume
state debts incurred during the revolution, much to the dismay of
others like Thomas Jefferson and James Madison, who believed that
“taxpayers
should not be assessed again to bail
out the less provident.”
(3)
Sound familiar? An interesting twist of fate
here,
isn't it, given the
current
bailout milieu? What we are currently experiencing, as it
happens, is indeed a blast from the past. And the
bailouts our forefathers dealt with were controversial, just as
they are now. This is no surprise given the bailout mentality not
only tolerates improvidence - it encourages it. Indeed
it rewards it. This mentality revolves fundamentally
around a central bank and its authority to create money with the
stroke of a pen, money that we (the US Treasury) must issue debt
(T-bills) to lay a finger on. So when we run out of money, the
FED just prints us more (though folks forget that we then owe the FED
that money ...) This easy money (debt
financed) system has had some interesting effects, which all too
often get lumped into the catch-all category of
“globalization”. This is certainly convenient, because for many
this means that these changes are not only inevitable but are
also inherently good. Isn’t it more interesting to
look at the kind of “globalization” that is being pushed and who it
really benefits?
Globalization does not have to entail the
loss
of national sovereignty. The two are not mutually exclusive,
though the global elite would have us think they are.
Globalization need not entail the blurring of lines that we are seeing
today, the lines separating public from private and those
separating foreign from domestic. Today, big corporations
and government entities, both foreign and domestic, seem to have
interests everywhere. Thus the private Bank of New York Mellon
and other banks happily support the FDIC temporary liquidity
program, since taxpayers will almost certainly, ultimately bear the
cost. The government can orchestrate bailouts for many
private corporations using hundreds of billions of taxpayer
dollars. And the central bank can authorize GMAC’s bid for access to billions of
taxpayer bailout money though the majority of GMAC is
owned by GM and the giant private equity firm Cerberus.
Meanwhile,
some countries, like ours, are driven deeper into debt, while others
have surpluses - sovereign wealth funds - allowing them to buy up
stakes in both our national debt and our private corporations.
These sovereign wealth funds are a product of decades of the United
States importing more than it exports. Now China not only can
purchase our debt, but can infuse Blackstone or Morgan Stanley. Abu Dhabi can infuse Citibank. Korean
Investment Corp and Kuwait Investment Authority can pour funds into Merrill Lynch. And
this is a positive development?
Public
to private and vice-versa. What’s the difference anymore?
Across international borders … no problem. And how can the
average Joe ever keep track of it? We can’t. And yet some
things remain quite clear. This kind of “globalization”
smacks of power consolidation and of multinationals that are
bigger than countries and that destroy local commerce everywhere
they go and control governments. But worse, they are
governments! It has become relatively easy for most of us today
to name the corporate associations of many of our most important
leaders. Conflict of interest, anyone? But
this really comes as no surprise given that corporate
leadership and top government officials, including central bank
officials, have been meeting secretly (4) on a
regular basis for a very long time now. Wouldn’t it be nice to be
a fly on the wall inside the inner sanctum, at this year’s
Trilateral Commission, CFR, or Bilderberg meetings?
The
net result? The global elite are getting
richer. No surprises there. What should we
expect when we ”liberalize” the globe in the name of the free
market global economy (5), giving giant transnationals unfettered
access to the markets of their choice, regardless of how that might
affect the local economy there, or here? (What would we
expect if we took things like weight classes and age limits away
from the Olympic games? Wouldn’t we expect to ruin the
competition?) And what happens when you allow big financial
institutions to use complex derivative instruments like
collateralized debt obligations and credit default swaps and also allow
these instruments to be bought and sold without regulation (6), or when
you allow a central bank to print money out of thin
air (money we don’t have) at their whim?
Easy
money artificially inflates and encourages people to spend money they
don’t have. It not only creates the illusion of wealth but a
misunderstanding of what wealth actually is. The populace is
easily sold on the idea that they can
attain wealth without producing anything real, that it is normal to
make obscene profits in stocks and real estate, and that these profits
are deserved - that this wealth can just appear from nowhere
- due to prudent investment. But did we notice the
simultaneous ballooning our national debt and unfunded
entitlements? And do we understand why things are so cheap for us?
This
something for nothing mentality should have raised a few more
red flags, but we were in the midst of a big party, even
as the underlying economics had already begun shifting. The world reserve
currency - the US dollar - continues losing value, and central
banks
around the world increasingly hold fewer dollars as reserves. As
new centers of production, such as the BRIC
countries, emerge, (where
transnationals can enjoy slave labor and low taxes) the
US
dollar will continue to lose significance. Now that
our production has fallen way back, the only thing keeping the dollar afloat is the fact
that it is still the world reserve currency. The paradigm
hasn’t finished shifting yet, though it has begun. Thus
productive countries
like China are still sending us goods just
to offset the dollars they use for their central bank reserves, dollars
that our “FED” created out of thin air, and then charged to the US national debt.
Every time the FED turns on its printing press to print more dollars,
our government has to issue bonds to get those
dollars. These bonds
represent more government debt, for which we owe the FED not only full
face
dollar value (on dollars that cost a few cents for the Fed to
print) but interest to boot. Fair deal?
Still the mass media leaves the central
bank alone, and shines its bright lights on the naughty little banks
who are engaging in “poor lending practices”. It’s all their
fault. Isn't that a bit like blaming
the drug problem on the kids instead of the supply chains,
treating the problem symptomatically instead of systemically? But
we have an even bigger problem than that. Unfortunately, it’s not
just the kids who are intoxicated. Easy money makes cocaine look
like milk and cookies. Spending way more than you produce is
intoxicating. Great. But how great will it be when
your home is worth a fraction of what it once was? How
great is it that the domestic stocks and funds (or the
so-called “foreign” ones that trade locally and are denominated in
dollars) that you hold in your retirement account continue to
slide while real foreign stocks and funds continue to
outperform? (7) Even the very currency that all of your
so-called “assets” are denominated in loses more value every
year while others climb. Meanwhile, giant
transnationals move on to greener pastures . . . greener
pastures that are rolling out the red carpets as their sovereign
wealth funds swell and buy up US debt and US preferred corporate
stock.
But don’t
worry - it’s just “globalization”.
(3) http://en.wikipedia.org/wiki/Alexander_Hamilton -
under “Report on Public Credit”
(4) ie; they
are not beholden to you in any way, shape or form to divulge the
purpose or contents of their meetings. The meetings are
private. But when they need bailout taxpayer dollars, then it’s
all about public . . . all about teamwork - oneness - for
the good of all humanity - for the “global community”, etc . . .
(5) Transnational offshoring has nothing to do
with the free market, and everything to do with looting. It
has everything to do with domination and killing the
competition being more important than innovation. When
resources aren’t available at home, they just go “offshore” and
steal them, which they can do because they have friends in high
places. Abundant natural resources, dirt cheap labor, negligible
civil rights, low taxes . . . How could they resist?
(6) Collateralized debt obligations and credit
default swaps are often
compared to betting on a sporting event. Just imagine what a
wonderful development this was for those in the loop! For most,
however, these instruments are
ticking time bombs.
Maybe that’s why Warren Buffett calls them “
financial weapons of mass destruction.”
These instruments are highly complex, unregulated and difficult for
credit rating agencies to evaluate, allowing large financial
institutions to move debt off their books and avoid taxes by
pooling
their debt with other financial institutions. In a nutshell,
smoke and mirrors paint a pretty picture, and create money outside the
normal central bank liquidity rules.
(7) If you’re like most investors,
your so-called “foreign” stocks or funds trade on a domestic
exchange, ie; on the NASDAQ, AMEX or NYSE. Besides being
denominated in dollars, these equities are being outperformed badly by
others trading on foreign exchanges such as London, Tokyo,
Hong Kong, etc … Too bad many of these foreign equities,
with long track records of superior performance, are prohibited
by our SEC from advertising in the US.
*Bonus material:
If the FED really is "federal", then it's part of the
government, isn't it? But how can we owe money to ourselves?