Banker-Controlled System is Fraudulent and the Cause of the Crisis

By LUIS MIRANDA | THE REAL AGENDA | JUNE 1, 2012

It took almost 100 years for the globalists in control of the financial and banking systems to realize that their fraudulent debt-based scheme can no longer be utilized to exploit the people and the resources of the planet. Back in 1913, rubber barons and the global novelty decided that they were going to control the issuance and flow of money with a system that would perpetually maintain all nations of the world in debt with the supranational financial institutions founded by international private banking entities. These entities would create the money out of thin air, lend it to their slave, dependent nations for a juicy profit while ensuring that future generations would have to work all of their lives to pay them interests on the never ending debt.

Today, most main stream media omitted the annual Bilderberg meeting in Virginia, United States, but did make time to promote the fact that the same banking organizations that brought the global economy to a halt, are finally convinced that their model does not work anymore. It is important to understand that when they say it does not work, it implicitly means that they can’t keep on defrauding the world with it. What the main stream dinosaur media is not telling the people is that the current global mafia intends to implement a new system under which they will remain in control, but with more power and more enslavement. Both the heads of the International Monetary Fund and European Central Bank have said that it is time to end the remaining nation-states and give way for a world financial organization that will dictate economic, environmental and financial policies, which will be indeed under the control of the same monopoly men.

Mario Draghi, president of the European Central Bank, labeled the current system imposed by central bankers themselves as “unsustainable” and once again blamed the governments of the nations that did not accept the bankers’ directives as responsible for the dire global economic and financial crisis. He said leaders have been slow to respond to the sovereign debt crisis, which was also manufactured by international banking institutions. “The configuration we had for 10 years, which was considered sustainable, has been shown now to be unsustainable unless further steps are undertaken,” said Draghi. He forgets to mention the fact that it was the bankers that created and sold derivatives and credit default swaps as the newest and trendiest forms of investment to later run away with the people’s money in the form of pension funds, retirement accounts, social security savings and so on. Another important detail left out by Draghi is that the globalization of the economy has served as a perfect platform to gain even more control.

After creating the problem, the bankers presented their rescue and austerity programs as a “solution” to kick start the economy, but as it turns out, it was all about the consolidation of indebted nations such as Iceland, Greece, and the new ones to come soon such as Spain, Portugal, France, the United States and Germany. Austerity came in the form of cuts to the entitlement programs upon which millions of people depend in those countries, and the rescues of international banks in the form of financial bailouts. As things stand today, the bankers were helped and the people were dumped. But trillions of dollars in financial rescue packages were not enough for the bankers. They wanted more. They wanted total control. Since their rescue programs did not render total control now they bankers are shifting to plan B, which includes the complete acquisition of other nation-states through a perpetual state of war that justifies their theft of natural resources and the centralization of all human activity.

After creating and selling the problem through continuous threats that warned about the complete collapse of the global financial system — a situation they sought and provoked — should governments choose not to bail the banks out, globalists like Herman Van Rompuy, Jean Claude Trichet and José Manuel Barroso tried to create panic so politicians would adopt the so-called austerity measures and illegally carried out the rescue of banks that were too large to go bankrupt. After bankers bet on toxic financial products which they knew would not stand a simple smell test, they ran away with 97 percent of investors’ money by risking people’s money in transactions that involved as little as 2 or 3 percent of their own cash.

Suddenly, the banks and their institutions are no longer capable of supporting the sand castles built over pillars of overconfidence, greed, hubris and financial degeneration. “Can the E.C.B. fill the vacuum left by lack of euro area governance?” he asked. “The answer is no.” Of course not. A new system is needed that allows the banks to operate with even less accountability and more liberty to continue taking risks by mortgaging the future of the working classes all around the world. Just as in the recent past, the bankers are warning that inaction, debt liquidation or more effective regulations would mean a generalized contagion of banks and economies which would happen more easily and rapidly due to the interconnectedness of the global economy. Banks are seeking complete deregulation and self governance, as supposed to accountability to governments. But it was precisely lack of regulation, malinvestment and self governance what allowed the bankers to do what they did, submit the world into a deep black hole of debt from which there is no way out.

The elimination of the Glass-Steagall Act of 1933, which had successfully curbed the bankers’ hunger for risky business, triggered a chain of events that is still ongoing. Banks in need of rescues because supposedly are too big to fail, governments without cash to meet their obligations, pension funds whose coffers are empty, run-away financial corruption, toxic and artificial investment products, insane leveraging, you name it. “It was the largest transfer of money from the working classes to the richest people in human history,” says Russ Roberts, the host of Econtalk. “It was bad for Democracy and for Capitalism.” The solution, according to the bankers however, is to create an insurance fund, which will be paid for by taxpayers from around the world, to assure banks there will always be a rescue plan ready to pull them out of their risky investments. That will not only effectively create the financial incentive to further centralized economic power, but will also eliminate the natural free-market accountability process, the barrier not to bet more than you can possibly pay. A global financial fund will prompt bankers to risk even more, because they can count on a working class that will provide the fruit of their labor to bail them out whenever they need.

Allan Greenspan, the head of the Federal Reserve Bank in 2008 said in Congressional hearings that he did not know what had happened, that he thought the bankers were able to regulate themselves. He said he believed the banks had the ability to assess their own risk. And they did. That is why for every 100 dollars that banks malinvested, only three dollars or so were from their own money. The rest was money from governments, pension funds, savings accounts and so on. Greenspan was the man sitting on the golden chair of the Federal Reserve when the largest banking deregulation process took place under previous administrations, and he knew exactly the potential that such deregulation would create for financial institutions to run unchecked with zero need for accountability. Now that their system has been uncovered as fraudulent, the bankers are using more colorful analogies to describe the supposed threats that would emerge should governments decide not to surrender their sovereignty completely. The latest of those is that the debt crisis is a ‘time bomb’. Bankers do not want to buy government debt back and so they are labeling that proposal as the trigger that will detonate the ‘time bomb’.

The initiative to make banks buy the debt back, would not be a solution to the sovereign debt crisis, though. In fact, it would actually perpetuate the debt-based system, because governments would be able to create more debt, which will result in a deeper crisis, as they will be unable to make bond payments. The banks will then be left holding the bag, an outcome usually reserved for the working classes. The ideal scenario would be that banks were forced to buy back the current debt, which they created in the first place, and governments adopted sane fiscal and monetary policies without creating more money out of thin air. Of course, the banks will not allow that to happen, because it will reduce their control over the financial system. Independent, debt-free governments that adopt responsible fiscal and monetary policies would eliminate the need for the current debt-based system, and therefore erase the control the bankers have amassed up until now. The liquidation of debt by letting banks and other institutions fail and go bankrupt would allow the world economic system to begin fresh and operate on a clean, disinfected environment, where artificially created economies would not exist anymore and countries would run their businesses based on existence of resources, production capacity, real gross domestic product, the balance of sales and purchases, bilateral and multilateral commercial negotiations and so on.

“The crisis we’re now in was caused by people taking excessively risky bets with other people’s money,” says Roberts. He adds that a good question to ask is why did people allow the banks to take such high leveraged bets with their money. It was like a poker game where the banks only risked about 3 percent of their own money, while investors took the fall with 96 or 97 percent of their money. But instead of being punished for taking those risks, the banks were rewarded by receiving bailouts. Although the mathematical calculations used by banks to assess market risk and asset value are considered to be fraudulent, they are still used to evaluate investment opportunities. But when those opportunities were shown to be just risky bets, based on fraudulent calculations, the banks were told it was fine, because governments had come to their rescue. They were allowed to sell liabilities as assets making people take very high risks in exchange for a promise to get a miniscule return, if any at all. “I think they believed the government would bail them out in the case of a downturn,” asserts Roberts. As he sees it, the markets are now governed by crony capitalists, and the crony part must be taken out before things can go back to real Capitalism.

Capitalism is a profit and loss system. The prospect of good returns is an incentive to take risk, and the losses are calls for prudence. When the incentive to be prudent is eliminated because there is a government, entity or Fund that will bail out a bank or a whole system, it destroys the financial system, and that is what happened in 2008. Governments, at the behest of the powerful banking cartel covered the risks taken by banking institutions and by doing so eliminated the need for prudence and responsibility.

“Unregulated Greed has Destroyed the Capitalist System”

Paul Craig Roberts

I write about major problems: the collapsing US economy, wars based on lies and deception, the police state based on “the war on terror” and other fabrications such as those orchestrated by corrupt police and prosecutors, who boost their performance reports by convicting the innocent, and so on. America is a very distressing place. The fact that so many Americans are taken in by the lies told by “their” government makes America all the more depressing.

Often, however, it is small annoyances that waste Americans’ time and drive up blood pressures. One of the worst things that ever happened to Americans was the breakup of the AT&T telephone monopoly. As Assistant Secretary of the US Treasury in 1981, if 150 percent of my time and energy had not been required to cure stagflation in the face of opposition from Wall Street and Fed Chairman Paul Volcker, I might have been able to prevent the destruction of the best communications service in the world, and one that was very inexpensive to customers.

The assistant attorney general in charge of the “anti-trust case” against AT&T called me to ask if Treasury had an interest in how the case was resolved. I went to Treasury Secretary Don Regan and told him that although my conservative and libertarian friends thought that the breakup of At&T was a great idea, their opinion was based entirely in ideology and that the practical effect would not be good for widows and orphans who had a blue chip stock to see them through life or for communications customers as deregulated communications would give the multiple communications corporations different interests than those of the customers. Under the regulated regime, AT&T was allowed a reasonable rate of return on its investment, and to stay out of trouble with regulators AT&T provided excellent and inexpensive service.

Secretary Regan reminded me of my memo to him detailing that Treasury was going to have a hard time getting President Reagan’s economic program, directed at curing the stagflation that had wrecked President Carter’s presidency, out of the Reagan administration. The budget director, David Stockman, and his chief economist, Larry Kudlow, had lined up against it following the wishes of Wall Street, and the White House Chief of Staff James Baker and his deputy Richard Darman were representatives of VP George H.W. Bush and did not want s substantial Reagan success that would again threaten the Republican Establishment’s hold over the party. Baker and Darman wanted to be sure that George H. W. Bush, and not Jack Kemp, succeeded Ronald Reagan, and that required a muted Reagan success that they could claim as theirs for moderating an “extremist” program.

I told Secretary Regan that if I had another deputy assistant secretary, I could reach a reasonable conclusion whether the breakup of AT&T was sensible. He replied that he was sure that was the case, but that once I had three deputies the headlines in the Washington Post and New York Times, Business Week, Newsweek, and so on, would be: “Supply-sider builds empire at Treasury.” He said it would sink me and that without me he could not get the President’s economic program out of the President’s administration. “Which do you want to do,” he asked, “save AT&T or cure stagflation?”

Curing stagflation gave America twenty more years. Ironically, the good times started to erode when Reagan’s other goal was accomplished and the Soviet Union dissolved in 1990. “The end of history” resulted in India and China opening their labor markets to American capitalists, who began producing offshore with foreign labor the products that they sold to Americans. The labor costs savings pushed up corporate profits, shareholders’ returns, and managerial bonuses. But it deprived Americans of middle class incomes and wrecked the balance of trade. The US income distribution and the trade deficit worsened.

Many progressives blame the worsening income distribution on the Reagan tax rate reductions, but the real cause is the offshoring of manufacturing, industrial, and professional service jobs, such as software engineering.

None of us in the Reagan administration foresaw jobs offshoring as the consequence of Soviet collapse. We had no idea that by bringing down the Soviet Union we would be bringing down America. During the Reagan years India was socialist and would not allow foreign corporations, had they been interested, to touch their labor force. China was communist and no foreign capital could enter the country.

However, once the Soviet Union was gone from the earth, the remaining socialist and communist regimes decided to go with the winners. They opened to Western corporations and sucked jobs out of the developed West.

But this is a different story. To get back to deregulation, nothing has worked for the consumer since deregulation. Deregulation permitted corporations to impose their costs of operation on customers without having to send them a bill. For example, corporations use voice recognition technology to keep customers from salaried customer representatives. I remember when a customer with a problem could call a utility company or bank and have the problem immediately corrected.

No more. There was an error in my phone bill today, which I had corrected without result on two previous occasions. As everyone knows by now, it takes 10-15 minutes, usually, to get a live person who can actually fix the problem. After listening to sales pitches for 12 minutes, I got a live person. Once the problem was understood, it was pronounced to be an upper level problem out of his hands. I waited another 10 minutes while he tried to reach a superior who had the code to fix the problem that the phone company had produced in my account. The entire time I listened to product advertisements.

How many times has this happened to you?

Whoever invented these artificial voice capabilities is the enemy of mankind. Whomever a customer calls–utilities, credit card companies, banks, whatever, the customer gets a voice machine. Some voice machines never tell the customer how to get a live person who can, on occasion, actually fix the problem.

In my opinion, the strategy behind the endless delays is to cause the customers to give up, slam the telephone down and play the higher incorrect bill as it is cheaper in time and frustration to correcting the problem and being billed in the correct amount. These ripoffs of the customer are produced by Wall Street pressures for higher earnings.

The frustrations, of course, multiply when one reaches an offshored service somewhere in the Third World. The incentive is to hang up and to pay the excessive bill so that phone, internet, or credit card services are not cut off

Had Don Regan and I known that the high speed Internet was in our future and that American corporations would use it to destroy the jobs traditionally filled by US university graduates, possibly we would have decided to save the regulated telephone monopoly and to deliver the economy over to stagflation.

The reason is that sooner or later something would have been done about stagflation, but nothing whatsoever has been done about offshoring. Saving the economy from offshoring would have been a greater achievement than saving the economy from stagflation. However, in my time stagflation, not offshoring, was the problem.

I regret that I did not have a crystal ball.

Deregulation proponents will say that the breakup of AT&T gave us cell phones and broadband, as if foreign regulated communication companies and state monopolies do not provide cell phone service or high speed Internet connections. I can remember attending corporate board meetings years ago at which the European members had digital cell phones with which they could call most anywhere on earth, while we Americans with our analogue cell phones could hardly connect down the street.

What deregulation did was to permit Wall Street to push the deregulated industries– phone service, airlines, trucking, and later Wall Street itself– to focus on profits and not on service. Profits were increased by curtailing service, by pushing up prices and by Wall Street creating fraudulent financial instruments, which the banksters used America’s reputation to market to the gullible at home and abroad.

Consider air travel. Admit it, if you are my age you hate it. The deterioration in service over my lifetime is phenomenal. Studies in favor of airline deregulation focused on short flights between A and B and concluded that small airlines serving high density areas were more efficient because they were not regulated. What was left out of the analysis is that regulated airlines served low density areas and permitted free stopovers. For example, if one was flying from the US to Athens, Greece, the traveler could stopover in London, Paris, and Rome without additional charges. Moreover, passengers were fed hot meals even in tourist class. In those halcyon days, it was even possible to travel more comfortably in tourist class than in first class, because flights were not scheduled in keeping with full capacity. Several rows of seats might be unoccupied. It was possible to push up the arm rests on three or four center aisle seats, lay down and go to sleep.

Perhaps the best benefit of regulated air travel for passengers was that airlines had spare airliners. If one airplane had mechanical problems that could not be fixed within a reasonable time, a standby airliner was rolled out to enable passengers to meet their connections and designations. With deregulation, customer service is not important. The bottom line has eliminated spare airliners.

With deregulated airlines, Wall Street calls the tune. If your flight has a mechanical problem, you are stuck where you are unless you have some sort of privileged status that can bump passengers from later fully booked flights. “Studies” that focus only on discounted ticket price omit major costs of deregulation and thereby wrongly conclude that deregulation has benefited the consumer.

When trucking was regulated, truckers would stop to provide roadside assistant to stranded travelers. Today, with deregulated trucking, every minute counts toward the bottom line. Not only do truckers no longer stop to aid stranded travelers, they travel at excessive speeds that endanger automobile drivers. Trucks have expanded in size, weight and speed. Trucks raise the stress level on interstate highway drivers and destroy, at taxpayers expense, the roads on which they travel.

Conservatives and especially libertarians romanticize “free market unregulated capitalism.” They regard it as the best of all economic orders. However, with deregulated capitalism, every decision is a bottom-line decision that screws everyone except the shareholders and management.

In America today there is no longer a connection between profits and the welfare of the people. Unregulated greed has destroyed the capitalist system, which now distributes excessive rewards to the few at the expense of the many.

If Marx and Lenin were alive today, the extraordinary greed with which Wall Street has infected capitalism would provide Marx and Lenin with a better case than they had in the 19th and early 20th centuries.

UK demise: Deficit ‘to surpass Greece’s as worst in EU’

The use of non-original content in this site is protected by the Fair Use Clause created in 1976, which allows for the reproduction of copyrighted materials for the purposes of commentary, criticism and education.

UK Guardian

Whoever wins the election must make sorting out the public finances the top priority, the European commission warned on the eve ofUk debt the poll, as it predicted the British budget deficit would swell this year to become the biggest in the European Union, overtaking even Greece.

The commission’s spring economic forecasts put the UK deficit for this calendar year at 12% of GDP, the highest of all 27 EU nations and worse than the Treasury’s own forecasts.

The country’s budget shortfall was the third largest in the EU last year but will overtake both Greece and Ireland this year, according to the forecasts. Greece’s measures to tackle its public finances problems are projected to cut its deficit to 9.3% of GDP.

Worries about Britain’s public finances – in their worst state since the end of the second world war – continue to unnerve financial markets and analysts are divided over whether a hung parliament will have the clout to rapidly reduce the deficit.

“The first thing for the new government to do is to agree on a convincing, ambitious programme of fiscal consolidation in order to start to reduce the very high deficit and stabilise the high debt level of the UK,” said European economic and monetary affairs commissioner Olli Rehn.

“That’s by far the first and foremost challenge of the new government. I trust whatever the colour of the government, I hope it will take this measure.”

The deficit forecasts are an improvement on the commission’s last outlook for Britain but they still paint a gloomier picture than the government itself.

In financial year terms, the commission’s forecasts are for a worse deficit than predicted by Alistair Darling at his March budget. In 2010/11 the commission puts the deficit at 11.5% of GDP, compared with Darling’s forecast for an 11.1% ratio of public sector net borrowing – the gap between tax and spending – to GDP.

The EU’s executive did double its forecast for British growth this year to 1.2% from 0.6%, in line with a March budget forecast for 1-1.5%. But in 2011 it warns growth will only pick up to 2.1%, significantly below a Treasury forecast of 3-3.5%.

It described “a slow start to a protracted recovery”, highlighting pressures on private consumption, a key growth driver, from employment worries and stagnant wages.

Darling pointed out that the commission expected the UK to grow more quickly than other major European countries next year – including Germany, France, Italy, and the Netherlands. “The European commission’s report shows again that our judgment call to support the economy was right. Yet again George Osborne’s flaky judgment is exposed. The Tories cannot be allowed to derail the recovery,” he said.

But opposition politicians seized upon the outlook as evidence that a new government was needed to get the economy back on track. “The day before the election the European commission has issued a damning indictment of Gordon Brown’s economic record,” said shadow chancellor George Osborne, claiming only the Conservatives would start dealing with Britain’s debts on Friday.

“He has left this country with the largest budget deficit in Europe – larger even than Greece – and projections for future growth well below his own forecasts.”

Liberal Democrat Treasury spokesman Lord Oakeshott said the EU report laid bare government overconfidence. “This shows the government has been far too optimistic,” he said.

“What matters now is a credible deficit reduction plan backed by the nation. If the Conservatives scrape home with barely a third of the vote and indulge in butchery behind closed doors, that just won’t work. That’s why the Liberal Democrats call for a council of fiscal stability with all three economic spokesmen, whoever they are, and the governor of the Bank of England to agree a credible deficit reduction plan.”

More…