"Too Bad About the Public"
Banks got rich. Congress got rich.
Lobbyists got rich. What about you?
by Bill Bonner
"Glory in war exceeds all other forms of success."
~ Cicero
Youghal, Ireland - "Birds in the trees…lovers in one another’s arms…and the crows are flying across the morning sky carrying twigs to build their nests. It’s springtime. And all of nature is looking ahead. Fruit trees in bloom, anticipating the apples, pears, and plums that will follow. And birds coo-ing to one another…laying eggs and hatching the next generation.
And, what is an old man to do? Can he think happy thoughts of the future? Of his family…his house…his golf handicap…his muscles…his next battle…his next achievement…his wealth – all growing, getting bigger and better? Or is it too late for that? Should he turn gloomily to the past and remember the mistakes, vanities and traps…and then, wagging his finger in a knowing way, should he say: ‘I don’t think that will work’?
The two things we don’t think will work are the very two things America’s ruling elites most want to do – fight wars they don’t need to fight…and spend money they don’t have. They are, traditionally, the two most dangerous and addictive drugs in the political dispensary…and the two that are hardest to resist. They are also the things that hasten the decline of a great empire.
Where Your Money’s Going: Today, our politics are dominated by scoundrels and scalawags. Previous generations of the political caste may not have been any better. But they were subject to more constraints. The US Constitution, for example, forbade wars without the explicit consent of Congress. The wisdom of the founding fathers further advised against ‘foreign entanglements.’ And if they went to war, they had to figure out a way to pay for it; the reality of federal finances prevented expenses from getting too far ahead of income. Congress was expected to present a balanced budget, and did so…more or less…for 183 years.
But what happens in any society is that ambitious people move into government. They aim to do good. And they do very well. For themselves. Gradually, they take over the institutions that are meant to protect citizens from their government…and use them to rip off the public.
Today, we see more evidence. Congress is racing to pass yet another 1,000-page stopgap spending bill. And the bill includes – would you guess it – more spending where it is least needed, CNN: "…the bill also increases Department of Defense funding, providing $824.3 billion, an increase of $26.8 billion above fiscal year 2023."
We explored the subject recently and concluded that the US is already a form of soft military dictatorship, where Congress has been bought and paid for…and the key decisions of war and peace…surplus or deficit…are made by the military-industrial complex for its own benefit. Steadfast soldiers…well-trained armies…valiant generals – as Cicero explained, they are always popular.
Taxes, Inflation and Financial Chaos: Less popular but similarly self-serving is the Wall Street-Fed complex. By 1913, big bankers had figured out how to get control of the financial system. There was no question of marching off to a glorious war. Bankers don’t get medals for all the deals they put together. And when they suborned the US money system, they did so in secret.
In a very private meeting that took place on Jekyll Island, off the coast of Georgia, the financiers – pretending to be on a hunting trip – set up a cartel, the Federal Reserve system. The idea was simple. When times were good, the bankers would earn substantial profits. When times were bad, usually because of their own over-reaching, the Fed would bail them out and shift the losses onto the public.
This is just what it did in the Crisis of ’08-’09. The Bernanke Fed extended trillions of dollars’ worth of new credits to banks that – in an honest system – wouldn’t have gotten a dime. These new credits – lent at zero, or negative, real rates of interest – saved the biggest banks in the country. But the negative rates fouled the entire economy. The US government, for example, added $25 trillion in new debt since 2008. And the entire economy – including corporations, businesses, and households – now has total debt edging up to nearly $100 trillion.
The national debt alone now costs the public more than $1 trillion per year in interest. As the debt grows – so does the cost of carrying it…which is ultimately paid in taxes, inflation and financial chaos.
Phony Fiat: One important innovation made both of these debauches – the huge growth of the war machine…and the Wall Street takeover of the financial system – possible. It was the switch to a pure paper money system in 1971. Real money is what normally keeps the war makers and the moneymakers on the leash. Inflation of the money supply – being able to ‘print’ up new money at will – lets them run wild.
Even today, 110 years after the creation of the Fed, most people still believe it is part of the government – which they mistakenly believe voters control. Not so; it is a private cartel, designed to serve the interests of member banks, not the interests of the American public.
And even now, 53 years after the new ‘phony’ money was introduced, most people think a little inflation is either inevitable…or even a good thing. The Fed and many economists put forward the fantasy that price increases and lower interest rates help the economy. There is no reason this should be so, theoretically…and no evidence, empirically, that it is. Growth rates have come down, decade after decade, since the new money was put in place.
The One-Two Punchbowl: And here’s the latest. Banks hold US Treasury bonds in their vaults. According to Moody’s, those bonds have lost $650 billion of real value as interest rates went up. Naturally, the banks would like to see lower rates again. So would Wall Street. Lower rates, generally, provoke higher stock prices; Wall Street is fundamentally a stock sales outlet. So, what does the Fed do? Here’s CNN:
"US stocks soared to new highs in Wednesday afternoon trading as investors cheered the Federal Reserve's policy rate decision, economic projections and Fed Chair Jerome Powell's press conference. The central bank kept interest rates unchanged but indicated that there would still be three rate cuts this year. Before the meeting, some investors had worried that the Fed would lower that projection."
Meanwhile, since 1971 the “Inflation Calculator” tells us prices have risen 633%. That is another way of saying that, if you have a dollar from 1970, it is now worth 13 cents. Compared to real money – gold – the dollar fell from $38 per ounce of gold to $2,200 yesterday – a 98% loss. And the rate of loss is speeding up; over the last 4 years, the dollar has lost 20% of its purchasing power.
Banks got rich. Wall Street got rich. The firepower industry got rich. Lobbyists got rich. Members of Congress got rich. Too bad about the public. "Stay tuned.
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