"Wherefore We must interrupt a silence which it would be criminal to prolong, that We may point out...as they really are, men who are badly disguised." Pope St. Pius X, September 8, 1907, Pascendi Dominici Gregis

Friday, August 24, 2012

Livin’ In A Bankster’s Paradise

Originally penned on October 3, 2008.
The state is the ultimate criminal enterprise.  Many of you may interpret my superimposing of gangster rap lyrics over the images of state officials as my own idiosyncratic form of humor, but there is more to this than meets the eye.  Take a listen to Coolio’s “Gangsta’s Paradise,” (http://www.youtube.com/watch?v=mVVmxFnn53o ) and you could just as easily be listening to a description of the trepidations of the state and its rulers, as the description of the life of a pettier gangster.  Some will disagree from the beginning with my description of the state as a criminal enterprise.  But how else can you refer to organizations, the Mafia and the state foremost among them, that believe it is legitimate to kill without provocation and steal?  Indeed, as a Father of the Catholic Church relates:

St. Augustine tells the story of a pirate captured by Alexander the Great, who asked him “how he dares molest the sea.” “How dare you molest the whole world?” the pirate replied: “Because I do it with a little ship only, I am called a thief; you, doing it with a great navy, are called an Emperor.” (http://www.ameu.org/page.asp?iid=162&aid=422&pg=1 )

Power and the Money, Money and the Power

Although the American Empire certainly does its share of naked molestation of the wider world, the domestic portion of this molestation, the theft that too often funds molestation elsewhere, is often more subtle to make it more palatable to the public.  The primary mechanism by which the American government hides its theft from the American people is the Federal Reserve System.  Listen again to the Augustinian parable altered only slightly:

We have the story of a counterfeiter captured by the Secret Service, who interrogate him.  “How dare you print thousands of new hundred dollar bills,” they ask.  “How dare you print millions of the same,” the counterfeiter replies, “because I do it with one printing press only, I am called a criminal; you, doing it with an entire Bureau of Engraving and Printing, are called a provider of liquidity.”

In prior articles I have mentioned the Federal Reserve’s manipulation of the interest rate; the mechanism by which the Fed is capable of manipulating the interest rate is the dumping of newly printed money on the loan markets.  The Fed uses this money primarily to buy U.S. Treasury bonds and thereby funds the expenditure of the U.S. government.  The U.S. government and those who benefit from government largesse use these newly printed dollars to bid away the savings of everyone else.  Notice, printing new money does not create new oil, tractors, shoes, or carrots, but new money can be used to bid these products away from savers, resulting in higher prices.  Although difficult to see and easily blamed on “greedy capitalists” in order to justify even greater expansions of state power, increasing prices are actually a direct result of this fraudulent system of government finance.

The banking system, for its complicity in this freely counterfeiting setup, gets its own kickback.  Banks are only required to keep on hand roughly 10% of their depositor’s funds; the rest, 90%, they can lend out for interest.  Your bank only has approximately 10% of your total balance on hand for immediate withdrawal.  If you went down to your local U-Store-It (http://www.ustoreit.com/ ) and deposited your old record collection, you’d expect all your records to be there when you returned.  If only 10% were there, you’d be rightly outraged.  Yet, many entrust something far more valuable, their life’s savings, to an inherently fraudulent fractional reserve banking system.  Just as a U-Store-It that consistently lent out 90% of its depositor’s possessions would quickly find itself without customers, so too would our current banking system fail a real market test.  The state as it exists, much dependent upon inflationary financing, and the current bankers, similarly dependent upon the intervention of the state (e.g., FDIC, liquidity injections, bank holidays, etc.), have merged into a state-banking nexus, aptly described by NYU Scholar Chris Matthew Sciabarra here:  http://www.nyu.edu/projects/sciabarra/notablog/archives/001540.html .  This system based on deceit may be justly described as a banker-gangster’s paradise.  

It’s goin’ on in the kitchen, but I don’t know what’s cookin’

In addition to the undermining of savings caused by inflation, the consistent dumping of newly printed money on the loan market has even more deleterious consequences.  On a free market, the market set interest rate helps to efficiently distribute savings to borrowers.  Entrepreneurs, using this rate as a guide, embark upon projects such as building houses and factories, which are dependent upon the loaned savings of other people.  An unhindered, free market set interest rate will, due to the very nature of voluntary transactions, always indicate the actual amount of savings; an unhindered rate will also help entrepreneurs decide which out of all the possible housing and factory projects to actually undertake.  Again, voluntary and non-fraudulent transactions on the marketplace, as manifested by an unhindered interest rate, will always accurately reflect the true preferences of the consumers, else consumers would not engage in these transactions in the first place.  

However, thanks to the state-baking nexus, the Fed has the power to set the interest rate.  Because the market interest rate occurs naturally outside of any action by the Federal Reserve, any newly printed money, which again does not represent any actual savings, lent under the auspices of the Fed will modify the interest rate in way that does not conform to consumer preferences.  This causes entrepreneurs not only to believe that more savings are available than actually are - this period is usually called the ‘boom’ - it also causes them to choose particular projects to the exclusion of other possible projects.  It is only later, when inflation picks up, since this is all newly printed money can result in, that entrepreneurs realize they have started on too many of the wrong projects.  A bust is the result.  The business cycle, then, is yet another feature of living in a banker-gangster’s paradise.

So, we see, the state knows where the action’s at in terms of acquiring the savings of other people, but it is clueless when it comes to setting the proper interest rate.

Too much television watchin’ got me chasin’ dreams

As I’ve pointed out previously, the media is only too happy to justify the Fed’s every move.  When a bust inevitably and rightly follows a boom, we hear a clarion call to re-inflate, provide liquidity, stabilize bad projects, etc.  Silent during the boom, or in CNBC’s case, complicit, the media does not
“address…the real problem, i.e., why houses became so overvalued in the first place, the media only addresses their made-up problem of the re-emergence of normality: how can we keep housing prices from falling? Thus, we repeat out mistakes. The Federal Reserve has once again excessively lowered the interest rate, which is what exactly caused housing prices to get too high in the first place, in order to prevent housing prices from returning to normal levels.” (http://www.new.facebook.com/home.php?ref=logo#/note.php?note_id=31130029179&id=7911319&index=8 )

The call for re-inflation plays right back into the hands of the banker-gangsters.  The Fed now has a pseudo-scientific justification for its continuing inflation, i.e., the stabilization of bad projects undertaken during the boom, and the banks that bankrolled these bad projects will be the first in line to receive some of the newly printed cash.  The consumers, on the other hand, are forced to wait longer and work harder in order to achieve the standard of living they would have achieved much sooner in an unhampered market place.  They must take a look at their savings and realize there’s nothing left, ‘cause Ben Bernanke’s been inflating and laughing so long that even Jim “Mad Money” Cramer thinks his mind is gone.  (http://blog.mises.org/archives/008680.asp

 I’m an educated fool, with money on my mind

Yet, state action is not without its veneer of pseudo-intellectual propaganda.  Go to a major university, and they will teach you “Economics,” although it will sound little like what I’ve outlined here.  Growing up, I do recall much contemplation of the apparent dichotomy between common sense and expertise.  The longer one went to school, it seemed, the less one seemed to know about the basic structure of reality.  Or as William F. Buckley, with whom I agree only on rare occasions, is said to have quipped, ‘I would rather be governed by the first four hundred people in the Boston phonebook, than the entire staff of Harvard.’  We see that “educated fool,” then, is a key oxymoron.  Much of modern economic theory is more about providing pseudo-scientific rationalizations for the Fed’s manipulation of the money supply and the current state of our banking system and less about uncovering the fundamental truths highlighted in this article.

Why are we not taught that the nature of the Federal Reserve and the banking system based upon it is inflationary, disruptive, and fraudulent?  So many are taught instead that the actions of the Fed are stabilizing and anti-inflationary (see http://homepage.smc.edu/brown_bruce/HLPPT/Ch14.ppt ).  How can this be? Hans Hermann Hoppe provides an explanation:

Yet how can one persuade the majority of the population to believe this? And the answer is: only with the help of the intellectuals. Now how do you get the intellectuals to work for you? To this the answer is easy. The market demand for intellectual services is not exactly high and stable. Intellectuals would be at the mercy of the fleeting values of the masses, and the masses are uninterested in intellectual, philosophical concerns. The state, on the other hand, can accommodate the intellectual's typically over-inflated egos, and offer them a warm, secure, and permanent berth in its apparatus.

…You must become a monopolist. And this is best achieved if all educational institutions, from kindergarten to universities, are brought under state control, and all teaching and researching personnel is state-certified.

But what if the people do not want to become educated? For this, education must be made compulsory. 

…Now, none of this guarantees correct statist thinking [on the part of intellectuals], of course. It certainly helps however, in reaching the correct statist conclusion, if one realizes that without the state one might be out of work, and may have to try one's hands at the mechanics of gas-pump operation, instead of concerning oneself with such pressing problems as alienation, equity, exploitation, the deconstruction of gender and sex roles, or the culture of the Eskimos, the Hopes, and the Zulus. ( http://mises.org/Community/blogs/ayrnieu/archive/2008/07/15/the-state-the-intellectuals-and-the-role-of-anti-intellectual-intellectuals.aspx )

Education as it stands, then, is not exactly synonymous with the pursuit of truth.  Our education system produces way too many educated fools, again to the delight of the banker-gangsters.

Got the tin in my hand, and the gleam in my eye

Something must be said as to how we arrived in this situation.  When the Federal Reserve was created in 1913, the money supply was still directly tied to gold.  A system wherein gold serves directly as money cannot suffer inflation wrought by the banker-gangsters, as it is impossible to print more gold; the supply of gold is greatly limited, unlike the supply of paper dollars.  Murray Rothbard explains what happened:

In the United States, the Federal Reserve Act compel[led]…banks to keep [a] minimum ratio of reserves to deposits and, since 1917, these reserves could only consist of deposits at the Federal Reserve Bank.  Gold could no longer be part of a bank's legal reserves; it had to be deposited in the Federal Reserve Bank.
The entire process took the public off the gold habit and placed the people's gold in the none-too-tender care of the State - where it could be confiscated almost painlessly. ( http://mises.org/money/3s8.asp )

It would be only a matter of time before all gold would be confiscated by the government and Federal Reserve notes would no longer be redeemable for and thus directly tied to a supply of gold:

On April 5, 1933, Franklin D. Roosevelt ordered the confiscation of gold from US citizens, in one of the most heinous acts of mass-robbery imaginable. ( http://blog.mises.org/archives/002627.asp )

As Murray Rothbard also points out, if, as popular nostrums suggest, gold is obsolete or worthless as money, why would the government feel the need to confiscate and horde the people’s gold?  Indeed, the purpose was not to replace a lesser form of money, gold, with a greater form of money, Federal Reserve Notes, but to replace a greater form of money, gold, with an easily counterfeited and thus lesser form of money, Federal Reserve Notes.  Thanks to this inaugural theft, the banker-gangsters began an era of counterfeiting that has yet to cease.

I’m 232 now, but will I live to see 233?  The way things is goin’, I don’t know…

America celebrated its 232nd birthday last July fourth.  Albeit the most powerful state in existence since the beginning of mankind, America, like all empires, faces greater and greater military obligations that will eventually way her down.  As I outlined in my justification for a Texan independence movement:

America will find itself increasingly in need of proving that its superpower status remains and increasingly having to resort to exercising military action in order to do so. This need will increase faster as goodwill continues to decline. This is the path all empires face, and they eventually pay for their military conquests with, among other things, a devaluation of their currency.  (http://www.new.facebook.com/profile.php?id=7911319&ref=name#/note.php?note_id=14848804179&id=7911319&index=12 )

An empire, in essence, lives life do or die.  Historically, empires have constantly expanded in order to bring a larger tax-base under its control in order to help it avoid excessive inflation from military spending and other government largesse, but in order to secure a larger and larger tax base, greater and greater military efforts must be undertaken.  History has shown that eventually the costs of empire outweigh an empire’s ability to generate more wealth.  

Things are more subtle for America, as it is the proprietor of the world’s reserve currency.  However, this economic scheme is also slowly coming unglued.  America pays for the defense of countries that can easily afford to defend their selves – i.e., South Korea, Germany, France, England, Japan, Saudi Arabia, Israel, Kuwait, Italy and so many others – and in return, we export part of our inflation. In other words, these countries keep U.S. dollars as reserves. This is an informal ‘agreement’ to be sure, but it has been the de facto international order since the collapse of Bretton Woods in the 1970s. The problem is, we are abusing our Imperial position like all empires are prone to do; we are printing too many dollars and the value of these holdings are decreasing markedly. Many countries will soon begin to bolt from the dollar for their own selfish reasons.

If America continues down its current path of empire, its inflationary actions will result in a more rapid destruction of the dollar, which in turn will likely lead us to lash out militarily against weaker countries that unpeg their currencies and exports from the dollar – like Iran and Iraq, for example. These vast and new military expenditures will only hasten this process, and the U.S. Empire will collapse messily with war, bankruptcy, and hyperinflation.  Undeserved power breeds arrogance; this is the Achilles’ heel of the banker-gangsters.  Unfortunately, they may take the rest of us down with them.

Under the current system, the American consumer will continue to suffer from avoidable increases in prices and the unemployment caused by unnecessary fluctuations in business activity, as the banker-gangsters continue to defraud us.  Until we, like President Andrew Jackson, “kill the Bank,” we will keep spending most our lives living in a bankster’s paradise.