“A Ponzi Scheme” The Economy is Only A Paper Moon

“A Ponzi Scheme” The Economy is Only A Paper Moon

“Some will rob you with a six-gun and some with a fountain pen.” — Woody Guthrie 

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, 3rd president of US (1743 – 1826), Letter to the Secretary of the Treasury Albert Gallatin (1802)

Treasury Secretary Paulson’s Proposal: Shoveling $700,000,000,000 to Today’s Robber Barons 

If one would paraphrase the lyrics in ‘Yip’ Harburg’s, song: It’s Only A Paper Moon, to the current economy, they would go like this:

The Economy is Only A Paper Moon — Say, it’s only a paper economy — Sailing over a bubbled cardboard sea,

But it wouldn’t be make-believe  if you believed in me.

Yes, it’s only a canvas sky — Hanging over a muslin tree — But it wouldn’t be make-believe — If you believed in me

Without your trust — It’s a honky-tonk parade — Without your trust

It’s a melody played in a penny arcade — It’s a Barnum and Bailey economic world

Just as phony as it can be — But it wouldn’t be make-believe, If you believed in me

 A Ponzi scheme offers a high return using the funds of newcomers to make payments to earlier subscribers, and collapses when the supply of suckers runs out. The New Economy was the greatest of Ponzi schemes. It has been different this time — John Kay. Financial Times, October 15 2008.

Michael Hudson in his September 21, 2008 counterpunch.com article, The Market and the Terminator Machines America’s Own Kleptocracy, states:

What a two weeks! On Sunday, September 7, the Treasury took on the $5.3 trillion mortgage exposure of Fannie Mae and Freddie Mac, whose heads already had been removed for accounting fraud. On Monday, September 15, Lehman Brothers went bankrupt, when prospective Wall Street buyers couldn’t gain any sense of reality from its financial books. On Wednesday the Federal Reserve agreed to make good for at least $85 billion in the just-pretend ‘insured’ winnings owed to financial gamblers who bet on computer-driven trades in junk mortgages and bought counter-party coverage from the A.I.G. (the American Insurance Group, whose head Maurice Greenberg already had been removed a few years back for accounting fraud). But it is Friday, September 19, that will go down as a turning point in American history. The White House committed at least half a trillion dollars more to re-inflate real estate prices in an attempt to support the market value junk mortgages – mortgages issued far beyond the ability of debtors to pay and far above the going market price of the collateral being pledged. These billions of dollars were devoted to keeping a dream alive – the accounting fictions written down by companies that had entered an unreal world based on false accounting that nearly everyone in the financial sector knew to be fake. But they played along with buying and selling packaged mortgage junk because that was where the money was. Even after markets collapse, fund managers who steered clear were blamed for not playing the game while it was going. I have friends on Wall Street who were fired for not matching the returns that their compatriots were making. And the biggest returns were to be made in trading in the economy’s largest financial asset – mortgage debt. The mortgages packaged, owned or guaranteed by Fannie and Freddie alone exceeded the entire U.S. national debt – the cumulative deficits run up by the American Government since the nation won the Revolutionary War!

In the past years there have been larger and larger taxpayer bailouts of capitalist institutions, starting with the savings and loan crisis and the current mortgage crisis is a result of the bursting of the “housing bubble”

Now the President George W. Bush administration is asking Congress to print another $700 and counting, billion so that the can government further subsidize finance capital and their toxic mortgages, brought about by the collapse of the housing bubble.

The government bails out the banks, but it does not bail out the pensions that have become insolvent during this crisis or the people who are having their houses foreclosed due to the crisis –  a clear demonstration of the class nature of the government.  Instead of the nationalization of the wealth of these bankrupt companies, the government has socialized the debt of these companies, making them ‘risk free’ and making us pay for their crisis.

Every since the US dollar was taken off the gold standard, the United States dollar has been backed by the total productive wealth in the country. Since the paper wealth is not really an increase in real wealth, there has been an ever-growing tendency of the dollar to inflate — there is no additional real wealth to back up the dollar.

In today’s world, the government is printing ‘paper money’ to pay for the ‘paper mortgages’ (bad paper), that have are now bankrupt due to the collapse of the housing bubble. In effect, the government is creating an even bigger bubble of governmental debt that will never be paid back, in order to protect finance capital.

But then again, it’s only a paper debt. And, since the income taxes are no longer progressive, but regressive, it is debt that we are now forced to pay, with our real earnings — while today’s modern day robber barons1 are allowed to play, since their investments are now guaranteed by the bipartisan government. To add insult to the injury, the capitalist class earns tax-free income from the interest income derive from the bonds to pay the unpayable and ever increasing governmental debt.

Whenever I envision the corporate Robber Barons of today’s capitalism, I am always reminded of  the Piggies, a Beatles song from The White Album.

It was written by George Harrison as a social commentary on class and corporate greed. In my minds eye, I can just see these capitalist piggies wiggling their cute curly tails, with their snouts in the public trough, “clutching forks and knives to eat our bacon!”


Have you seen the little piggies — Crawling in the dirt

And for all those little piggies — Life is getting worse Always having dirt to play around in. — Have you seen the bigger piggies

In their starched white shirts — You will find the bigger piggies — Stirring up the dirt And they always have clean shirts to play around in. — And in their styes with all their backing

They don’t care what goes on around — And in their eyes there’s something lacking  What they needs a damm good whacking.  — Yeah, everywhere there’s lots of piggies

Playing piggy pranks — And you can see them on their trotters Down at the piggy banks — Paying piggy thanks — To thee pig brother

– everybody: –

Everywhere there’s lots of piggies— Living piggy lives You can see them out for dinner — With their piggy wives Clutching forks and knives to eat their bacon!  — One more time!

Originally, a “Robber Baron” was a noble who robbed travelers who passed through their lands. In the latter part of the 19th century, this term was ascribed to  U.S. capitalists or industrialist considered to have become wealthy by exploiting  natural resources, corrupting legislators, or other unethical means.

History Repeats Itself Again! From the Robber Barons of the Middle Ages, to the Robber Barons of the 1870s to the Robber Barons of Today!RobberThe Constant Failure of the Policy of Supporting the Lesser Evil

Ever since Democratic President Kennedy’s tax reforms in the 60s and every tax reform since then, has resulted in a shift in the tax burden from the rich to the poor, regardless of who is in the White House. The government is acting like Robin Hood in reverse!

The whole process of the eroding of human rights, civil rights, and workers rights began in earnest after the inflation crisis brought about by the expenditures for the Vietnam War and the consequent wage/price freeze imposed by Richard Nixon, with the approval of the Democratic Party controlled Congress. From that point on the bipartisan legislation kept whittling at our hard gained rights and when Reagan broke the 1981 Professional Air Traffic Controllers Organization (PATCO) strike, without any real opposition from the trade union bureaucracy, the rulers to be in this country saw they had no organized opposition to their domestic polices, either from the labor movement, the civil rights movement, or the women’s movement.

They saw a chance to increase their profits and move ahead with the transfer of wealth to the rich at the expense of the poor, and to increase the process of reversing the past gains of the social movements, along with an ongoing and continuous cut of social services to increase profits and increase social services for the rich.

America In WonderlandPonzi4RepublicratPonzi5

The following is from the “PREFACE TO THE SIXTH EDITION” to the The Media Monopoly: With a New Preface on the Internet and Telecommunications Cartels, by Ben H. Bagdikian (Pulitzer Prize-winning journalist and former editor of the Washington Post), (2000) Beacon Press, 25 Beacon St., Boston Mass 02108-2892:

AS THE UNITED STATES ENTERS the twenty-first century, power over the American mass media is flowing to the top with such devouring speed that it exceeds even the accelerated consolidations of the last twenty years. For the first time in U.S. history, the country’s most widespread news, commentary, and daily entertainment are controlled by six firms that are among the world’s largest corporations, two of them foreign. Even with the dramatic entry of the Internet and the cyber world with their uncounted hundreds of new firms, the controlling handful  of American and foreign corporations now exceed in their size and communications power anything the world has seen before. Their intricate global interlocks create the force of an international cartel. There are pernicious consequences. While excessive bigness itself is cause for economic anxieties, the worst problems are political and social. The country’s largest media giants have achieved alarming success in writing the media laws and regulations in favor of their own corporations and against the interests of the general public. Their concentrated power permits them to become a larger factor than ever before in socializing each generation with entertainment models of behavior and personal values. The impact on the national political agenda has been devastating, For years, the mainstream news has over dramatized its reporting of congressional and White House debate on the national debt and deficit beyond their intrinsic importance. Politicians raised the issue, but it was seized upon and overblown by the major media–media that politicians use as a bellwether on what issues will get them the  most public attention and partisan advantage. During these crucial years, the American economy was undergoing an astonishing phenomenon that the mainstream news left largely unreported or actually glamorized in its infrequent references: the largest transfer of the national wealth in American history from a majority of the population to a small percentage of the country’s wealthiest families.

Today, we are once again presented with the same political farce of often-failed policy of ‘supporting the lesser evil’. This policy that was first used to support Prussian General Von Hindenburg as the ‘lesser evil to Hitler’, who, when he got elected, appointed Hitler as his Chancellor.

In this country, it was used over and over again as the Socialist Party and the Communist Party, in the labor movement, supported Roosevelt during World War II. A good example of the idiocy of such a solution was when the segregationist Dixiecrat or Republicrat, Lyndon Baines Johnson (LBJ), ran as the lesser evil to Barry Goldwater, who threatened to go to war in Vietnam in 1964. But once he was elected, guess what the lesser evil, LBJ, did — set up the Gulf of Tonkin incident (a ‘catalyzing event’) as pretense for the invasion of Vietnam in 1965.

With the collapse of the Soviet Union and the reinstitution of capitalism in the Soviet Block, the United States felt free to begin the process to dominate the entire world economically, politically and socially.

In 1991 they started the first war on Iraq to establish, as Bush the first, said a ‘new world order’. They retreated a bit to reevaluate, and at the same time to more firmly establish capitalism in the Soviet Block and to extend NATO. This process culminated in the US invasion of the former Yugoslavia by the US. At the same time, the United States government took steps to further strengthen the executive branch of government and further erode the Bill of Rights, so that they could prevent the establishment of resistance to their master plans both at home and abroad.

During the Clinton and Bush (The 2nd) Presidencies, ever year new legislation has been passed to further implement these policies.

As Gore Vidal’s stated in his book, Perpetual War for Perpetual Peace, about the transition from President Clinton to Bush (The 2nd).

. . .The damage caused by the September 11 plane bombings is] “nothing compared to the knockout blow to our vanishing liberties — the Anti-Terrorism Act of 1996 combined with the recent requests to Congress for additional special powers to wiretap without judicial order; to deport lawful permanent residents, visitors, and undocumented immigrants without due process. . . .

Vidal speaks of ìan undeclared war under the Clinton presidency which coincided with severe restrictions of our human rights supposedly protected by the Bill of Rights as the first ten amendments to the constitution”.

 The Bush administration, Vidal noted, though eerily inept in all but its principal task, which is to exempt the rich from taxes, has casually torn up most of the treaties to which civilized nations subscribe — like the Kyoto Accords or the nuclear missile agreement with Russia. The Bushites go about their relentless plundering of the Treasury and now, thanks to Osama, Social Security (a supposedly untouchable trust fund), which, like Lucky Strike Green, has gone to a war currently costing us $3 billion a month. They have also allowed the FBI and CIA either to run amok or not budge at all, rather like the Wizard of Oz doing his odd pretend-magic tricks while hoping not to be found out. Meanwhile, G.W. booms, ‘Either you are with us or you are with the terrorists’. That’s known as asking for it.

In the United States and Worldwide, the rich are getting richer and the poor are getting poorer and the capitalist economy is collapsing within itself. These is no longer any room for lesser evil capitalism.

Politically, the US ruling class has one problem. The complete political incompetence of the ex-reprobate — George Bush and his inability to articulate a sentence, in order to effectively sell the US quest for Pax Americana; has made the motives of the United States clear to the world.

With George W. Bush, as their leader, the United States capitalist has earned the hatred of the world as he personifies the arrogance of capitalism making a profit at the expense of the environment, and denying the scientific facts of global warming and environmental destruction — he does not even pretend to be doing something about the problem, like other world ‘leaders’.

At the present juncture, the US ruling class is betting their money on Obama as their ‘change’ candidate. As John Pilger wrote in his essay, From Kennedy To Obama; Liberalism’s Last Fling:

 What is Obama’s attraction to big business? Precisely the same as Robert Kennedy’s. By offering a ‘new’, young and apparently progressive face of the Democratic Party—with the bonus of being a member of the black elite—he can blunt and divert real opposition. That was Colin Powell’s role as Bush’s secretary of state. An Obama victory will bring intense pressure on the US anti-war and social justice movements to accept a Democratic administration for all its faults. If that happens, domestic resistance to rapacious America will fall silent.

And US imperialism will have a seeming honest and glib president, to carry out Pax Americana and the politics of the Iron Heel more effectively.

By making more and more bipartisan legislation that increase restrictions and the negation of rights that were supposed to be ours, according to the Bill of Rights, and increasing the power of the executives branch, the United States ruling class in now starting to lay the groundwork to establish the Iron Heel of outright political dictatorship, as foreseen by Jack London, in his 1908 book, The Iron Heel.

Mumia Abu-Jamal, on Prison Radio (Prisonradio.org), puts the current problems of both the economy and thoday’s political realities, which the working class and the majority of people are confronted with quite well in his September 4, 2008 Commentary Items Off the Table:

Chalmers Johnson, in his 2000 book, Blowback: The Costs and Consequences of Empire (N.Y.: Owl Books) puts forth precisely this thesis with clarity and conviction. He illustrates how much of this could be traced to former president Richard Nixon’s abolition of the post-World War Bretton Woods agreements, which pegged world currencies to the dollar, and the dollar to U.S. gold reserves. From that day on, economies became free floating, and whole new industry was born—finance capital, or the business of speculating in, and profiting from, the moneys of others. Such a system, especially when wedded with the protectionism that prevailed in East Asia for some 50 years, created havoc around the world, where foreign wealth destabilizes local markets, for the quick buck. A byproduct of this new globalized economy was the hollowing out of American industries, the loss of manufacturing jobs, and the failure of America’ s domestic economy. Johnson cites the work of City College of New York historian, Judith Stein, for examples of how U.S. industrial policy became a wrecking ball to Black communities both in the South and North, industries abroad was a keystone of U.S. strategic policy, and encouraging steel imports became a tool for maintaining vital alliances. The nation’s leaders by and large ignored the resulting conflict between Cold War and domestic goals. While presidential candidates argue over taxes on capital gains, millions of Americans struggle to make ends meet. Tens of thousands of people have lost their homes, due to lost jobs or foreclosures. It is a globalized economy for capital, high finance, and speculation, but it can hardly be considered one for working people. For them, a hundred barriers bloom, making it harder than ever to chase jobs. Both major candidates are deaf to their plight, and thus are ill disposed to address it, much less solve it.

    As the ruling rich fear the inevitability of resistance by the working class majority of population, they have laid the groundwork for dictatorial rule to protect their economic and political power which they know will be challenged by the next uprising of the United States working class.

Unlike the collapse of the Roman Empire putting European society into the Dark Ages, the collapse of capitalism, will mean the destruction of humanity through the destruction of the environment through warfare and capitalist production or nuclear annihilation.

In order to regain what has been lost and win equality rights for all, we must stop supporting those who are oppressing us — the US capitalist class and their Democratic and Republican political parties! And go back to what made all movements powerful — opposing all capitalist parties and relying upon ourselves to build our own economic and independent political power.

That means organizing in our own interests as the working class majority and their allies — the oppressed national minorities, the protectors of humanity’s habitat, anti-war fighters, all those oppose to the injustices of capitalism — to unite and stop the unending war on terrorism!

In the present world, the rights of the capitalists to make a profit are in direct conflict with our basic rights. In this sense, the capitalist system has become a threat to humanity.

As Martin Luther King said:

. . .There is nothing, except a tragic death wish, to prevent us from reordering our priorities.  “. . . The coalition of an energized section of labor, Negroes, unemployed, and welfare recipients may be the source of power that reshapes economic relationships and ushers in a breakthrough to a new level of social reform. . . .The total elimination of poverty, now a practical responsibility, the reality of equality in race relations and other profound structural changes in society may well begin here.”

Such a coalition, as King envisioned it thirty-three years ago, is needed today. In order to survive, we must ‘begin the begin’.

Jefferson’s words, in the Declaration of Independence, that human rights are unalienable, mean that these rights can never be superseded. At all points of conflict the rights of humanity to survive must supersede the right of the few to make a profit. The right to a safe environment, life, liberty, and the pursuit of happiness, are unalienable human rights!

Since environmental illness and destruction, poverty, war, and famine are a global concern, it requires all of humanity to act collectively, in our overall interests for our survival as a species, to correct the problem and to remove the obstacle of capitalism. It requires a society where humanity has social, economic, and political control over the entire environment. Such a society, a socialist society, is needed to ensure that all decisions affecting our lives are under the democratic control of humankind so that the production of goods will be done for the needs and survival of humanity instead of the production and the destruction of humanity by capitalism’s quest for profits.

With common ownership of the means of production, and common control and protection of all property and wealth, science and society will be in harmony with the ecosystem and humanity’s future.

With these goals we can begin to build a more effective environmental movement. As we continue to organize against capitalism and its destructive course, we can and will transform the world.

Martin Luther King stated these same goals in his Frogmore, S.C. November 14, 1966 speech, he said:

You can’t talk about solving the economic problem of the Negro without talking about billions of dollars. You can’t talk about ending the slums without first saying profit must be taken out of slums …. we are treading in difficult water, because it really means that we are saying that something is wrong …. with capitalism. …. There must be a better distribution of wealth and maybe America must move toward a democratic socialism.

 September 2008