Coincidentally, when I turned on the computer today, I read an article by Simon Johnson that very closely parallels my theory of the American circumstance. His article can be found at end of blog.
I submit to you that our country is not a "free market, capitalist economy" that we were taught it to be in public school, but a corporate-fascist STATE. The STATE(federal government) is controlled by an elite group, that consists of the descendants of the original international bankers and American industrialists, in concert with opportunists from the elite academic institutions of the IVY league. The goal of this powerful group is centralized power and monetary policy control, through growth of the federal government machine. And boy has it grown! This country was founded as a republic(member states), and has evolved(devolved) into a centralized governing power of DC. It was never supposed to be this way. We have allowed this elite group of capitalists and opportunists of academia to hijack our country, and fundamentally change our way of life.
The greatest misconception by law-abiding, hard-working, honest middle-class citizens is that the multi-national corporations' leadership, and international banks' leadership, welcome COMPETITION. They most certainly do not. If we left it up to them 150 years ago we would have immediately had monopolies in banking, transportation, energy and all other vital segments of a productive society. The enforcement of the Constitution, and the policy of sound money(gold standard), ensured that the the elites had to play fair. Well, to get around that, these said elites came up with a brilliant plan, create a privately controlled central bank that has the complicit backing of the government of the USA.
This bank is known as The Federal Reserve Bank. Ironically, it is not Federal in any such manner. It was created on De. 23, 1913 with barely a quorum present in Congress, designed as an entity that would control pricing, and prevent economic collapses. Before its creation we had almost zero price inflation and very few collapses. Since then we have seen the purchasing power of the dollar fall by 95% and seen multiple recessions. "some job they have done, huh?"
It is vital for all American citizens to learn why The Fed must be abolished. I will forward pertinent info and recommend End The Fed, by Ron Paul. Enough for now.
Why, Exactly, Are Big Banks Bad?
By SIMON JOHNSONSimon Johnson is a professor at M.I.T.’s Sloan School of Management and a senior fellow at the Peterson Institute for International Economics.
Just over 100 years ago, as the 19th century drew to a close, big business in America was synonymous with productivity, quality and success.
“Economies of scale” meant that big railroads and big oil companies could move cargo and supply energy cheaper than their smaller competitors and, consequently, became even larger.
But there also proved to be a dark side to size, and in the first decade of the 20th century mainstream opinion turned sharply against big business for three reasons.
First, the economic advantages of bigness were not as great as claimed. In many cases big firms did well because they used unfair tactics to crush their competition. John D. Rockefeller became the poster child for these problems.
The original J.P. — that is, John Pierpont — Morgan. Second, even well-run businesses became immensely powerful politically as they grew.
J.P. Morgan was without doubt the greatest financier of his day. But when he put together Northern Securities — a vast railroad monopoly — he became a menace to public welfare, and more generally his grip on corporations throughout the land was, by 1910, widely considered excessive.
Third, there was a blatant attempt to use the political power of big banks to shape the financial playing field in ways that would help them (and their close allies) and hurt the remainder of the private sector — including farmers, small businesses and everyone else.
Senator Nelson Aldrich’s push to create a central bank after 1907 — to be underwritten by the government but controlled by big banks — ultimately backfired. The Federal Reserve, while far from perfect, was created with far greater public control and more safeguards than Wall Street had in mind.
The fact that Nelson Aldrich’s daughter was married to John D. Rockefeller’s son was not lost on anyone.
A hundred years later, we have come full circle, as the mainstream consensus again weighs what to do with today’s overly powerful banks.
There are differences, of course. We no longer fear individuals; it’s the organizations they run that can make us or break us.
And, strangely, it is not the power of big finance to control everything that has us worried — except maybe in some movies. Rather it’s the ability of major banks to generate the conditions that make major international financial crises possible — with the incentive to take risks that, when things go well, result in huge upside for bankers and, when things go badly, massive downside for the rest of us.
Even the supporters of our existing financial structure — men like former Treasury Secretary Henry M. Paulson Jr. (in his book “On The Brink“); the White House economic adviser, Lawrence H. Summers (in his 2000 Ely Lecture); and JPMorgan Chase’s chief executive, Jamie Dimon — concede that big crises occur every five years or so. What hit us in 2008-9 was not a “once per century” event. Rather it was the latest, and scariest, in a series of regular global crises going back at least to the 1970s.
At the heart of this pattern of behavior is a perception of invincibility among the folks who run our biggest banks — and following our most recent crisis they act more assured than ever that the government will provide a backstop.
At the same time, everyone agrees that such “too big to fail” arrangements cannot continue. Even the Federal Reserve, which has fallen on hard and embarrassing times since it was captured by Big Finance during the 1990s, now has its leading officials give speeches to this effect.
We like to think we live in a more professional and technocratic age than a century ago, so the central pretense of current reform efforts is that we can design a “resolution authority” of some kind that would allow the government to take big banks into a form of bankruptcy or liquidation.
But this notion of a resolution authority that can handle massive banks is a complete unicorn, a mythical beast with magical powers that does not really exist. A United States-run resolution authority does nothing to help handle the failure of international banks; there is no cross-border resolution authority, nor will there be one anytime soon. If a Citibank or a JPMorgan Chase or a Goldman Sachs were to fail, our government would be in exactly the same awkward position as it was in September and October 2008.
Big banks cannot be reined in through some clever tweaking of the rules. The issue before us is intensely political, just as it was in the first decade of the 20th century. There is again a confrontation between concentrated financial power and our democracy. One side will win and the other side will lose.
The banks start with a definite edge. The public relations machines of today’s bankers may be even more effective than those of Morgan and Rockefeller, although the campaign contributions and control of the Senate exercised by those titans was immense.
The Senate legislation expected this week or next will achieve nothing, except make the stakes clearer and the motivations more transparent. If the banks win this round, as seems likely, they will become even larger — and more dangerous. At current scale, our megabanks bring no social benefits and great social risks.
Just as it did 100 years ago, the consensus on big banks has to change. In this instance, either we break them up, or they will soon break us all.
Sorry, but for all of its flaws, we are much better off with the Fed than without it. The idea that prices were stable and busts were few during the gold standard years is way off base. Although prices were, by definition, stable over the long run, prices within boom and bust cycles fluctuated wildly. The gold standard, pre-fed economy produced numerous inflationary and deflationary episodes which most Americans today would not tolerate. The busts were especially hard-hitting and often times put 30-40 percent of the population out of work, not to mention the wiping out of individual savings as banks collapsed. The busts happened on the order of every 10 years or so and were WAY more severe than today's recessions and financial crises.
ReplyDeleteThe Fed was originally created to act as a lender of last resort to the banking system and to ameliorate the pervasive negative effects of financial panics. This worked for a while, but ultimately failed during the Great Depression because, although powerful, the Fed was still constrained by the gold standard. It could not furnish enough currency to cover the massive liquidation of private debts.
The story you present regarding the abandonment of the gold standard is highly suspect. The powerful Wall Street interests of the 19th and early 20th centuries were vigorous defenders of the gold standard. They benefited enormously from the vicious circle of falling wages and prices gold-standard economies inevitably produced. It was the progressive movement, led by Great Plains farmers and Northern industrial workers, who rallied against the "gold cross". They rightly argued that only a government freed from the arbitrary constraints of a gold standard could protect the economic interests of the population at large and thus serve its intended public purpose.
I'm sorry, but Ron Paul is WAY off base with his advocacy of the gold standard. Its logic is completely misguided and dangerous.
I understand the concerns you express regarding the economic arrangements of our day. Banks indeed have too much power, and the Federal Government is too captive to corporate interests in general. But the reduction of state power in general will not reduce the power of banks, corporations, and the like.
If anything, a strong central government is necessary to curb the excessive power banks and corporations would otherwise posses in a free market. The proper response, therefore, is not to attack governmental institutions themselves, but to vigorously defend an open, transparent, and democratic government that serves the people.