Is the game rigged?
- Banking history
- Economic bubbles and bank runs
- US economic strategy
- Economic warfare
- Market manipulations
- Peak Oil
- What future?
Banking historyWhen the power of the church and the middle age feudal system declined, more dukedoms, princedoms and kingdoms (read warlords) appeared. This new and fragmented organization competed, and often waged war. To afford these wars the people were taxed and their properties appropriated, especially those of conquered peoples. The wars resulted in empires, nation states and fat cats. Waging war became more expensive and could only happen if and when enough money was available. The solution was clear: raise taxes, again and again.
This can only be done so much. If you go too far, the people will revolt. So some entrepreneurs came up with a cunning plan. Lending money to warlords. Of course they would have to pay it back, with interest. And the people (and their future production) would be given as collateral for these loans.
This practice invented by William Patterson, founder of the Bank of England, quickly institutionalized in a simple yet devastating relationship: governments give a central bank the monopoly for printing a national currency, and central banks guarantee the finance of government plans. This is the beginning of permanent national debts.
Bankers and governments always want to devalue currencies, to spend more money than is really available. For example, the Roman empire increasingly used more zinc and less silver in their coins and the Spanish empire declined by increasing deficits and continued increasing imports to maintain a luxury lifestyle (only for the upper and middle classes of course).
Economic bubbles and bank runsBanks benefit from eliminating competition and decoupling money from gold. Even though banker business was a good “trade” to be in, because of the free market there was lots of competition. Local bank runs were commonplace when its customers believed a bank was mismanaging their money, and overall the market was transparent and efficient. Increasingly, big commercial banks were pushed into defensive positions by small banks in coops that were less commercial and more about serving the community.
US economic strategyA coop of big commercial banks, led by a central bank could not only eliminates the less commercial and more trusted banks, nationally paper “coins” could be introduced, and increase control over those smaller banks serving the community. When the US knew it was going to win WW II, some people decided to capitalize on that and impose their will on the rest of the world as much as they could. In a small group they agreed to sell a new system to the world, one that would give the US the advantage for decades to come.
In November 1910 Senator Nelson Aldrich and six other men came together in a meeting under conditions of great secrecy to create the Federal Reserve System on Jekyll Island, an island off the coast of Georgia.
In 1913 press, public and politics were told the banking system needed to be stabilized to prevent bank runs as those that had happened in 1873, 1884, 1893 and 1907. When people would collect their savings after losing trust in a bank, the bank would go bankrupt. In the 25 years before the FED around 1748 banks had gone bankrupt in the US. The plan was to combine all of the reserves to limit such bankrupcies, because the combined reserves could guarantee the financial balance of banks. Technically, a bank run would no longer be possible. The politicians liked that. And they could now lend money from the banks, unlimited, and with that play a bigger role in foreign affairs.
In the 60s more and more money needed to be printed to finance the Vietnam war. Charles de Gaulle and several other countries, who had had their misgivings about the US monetary system and its effects, started trading surplus dollars for gold. The gold reserve in Fort Knox was definitely shrinking. In august 1971, Richard Nixon called his advisers together and a regime of floating rates started.
This brought on the first dollar crisis (the value of the dollar halved in just a few years, and the value of gold went crazy, from 35 dollars per ounce (fixed until 1971) to 800 dollars). Inflation skyrocketed. Paul Volcker intervened and raised interest to 15%. It worked, but the world entered in a recession as a result. Since the interest rates of the 80s, the FED got control and interest went gradually down. A declining interest rate is like a jet engine. People invest in houses and stocks and shares and obligations. People borrow more. A credit bubble.
After Switzerland joined the IMF in 1992, no currency on earth is convertible to gold. Statutory the IMF forbids it. Articles of Agreement, Article IV, Section 2(b). For participating in the IMF, one has to adhere to the articles of agreement. IMF members are not allowed to couple their money (make it convertible) to gold.
TransparencySince 1930 central banks subscribe to the BIS, Bank for International Settlements (the central bank of central banks), located in Basel, Switzerland. In the course of the 20th century, most central banks came in the hands of governments, with a few exceptions. The Swiss central bank is still 100% privately owned, and the Belgian central bank for 50%. In the US this is not the case. It is impossible to buy shares in the FED. The shares are owned by predominantly commercial banks on Wall Street. It isn’t a system of central banks, it is a system of commercial banks pretending to be a national bank.
Until 2001, the BIS was still partly in private hands. Now the power in the BIS is in the hands of the G7 central banks. Shares of the BIS are in the hands of central banks. Oddly enough, its governance is not held accountable by governments. This mother of all central banks is a closed organisation. Neither politicians nor journalists nor the people have access to its meetings. On invitation only, other central banks can be present at particular meetings.
There are no meeting reports of the most important meetings, and BIS directors are not held accountable for any of the decisions they make, not to anyone, not even parliaments. Worse, its directors enjoy a status of diplomatic immunity, even after their active careers.
I can draw no other conclusion than that bankers consciously created a non-transparent system, away from democratic control.
Economic warfareThe IMF was originally designed to buffer exchange rate tensions between countries, but after the Bretton-Wood agreements were cancelled in 1971 a large part of this task no longer existed.
Since then the IMF has played a dubious role in the financial reorganization of many third world countries. If countries in financial trouble called on the IMF, draconian austerity measures were imposed to get things “back in shape”: Debts were restructured, taxes increased, and state-owned businesses sold, preferably to US companies.
John Perkins is a former respected member of the international banking community. In his book Confessions of an Economic Hit Man he describes how as a highly paid professional, he helped the US cheat poor countries around the globe out of trillions of dollars by lending them more money than they could possibly repay and then take over their economies.
Market manipulationsWithout a shred of doubt, the dollar is artificially supported. A number of central banks do so for self-interest. China does, to keep the value of its own currency cheap, and to maintain and increase export to the U.S. Japan does, to be able to pay its own debt. Countries in the Middle east do, for security reasons and high oil prices. And in the US, the Plunge Protection Team was instituted after the Wall Street crash of 1987.
PetrodollarsTwo years after president Nixon shocked the global economy when he officially ended the international convertibility from US dollars into gold, in an effort to maintain global demand for US dollars, another system was created called the petrodollar system.
A deal was struck between Saudi Arabia and the United States in which every barrel of oil purchased from the Saudis would be denominated in US dollars. Under this new arrangement, any country that sought to purchase oil from Saudi Arabia would be required to first exchange their own national currency for US dollars. In exchange for Saudi Arabia’s willingness to denominate their oil sales exclusively in U.S. dollars, the United States offered weapons and protection of their oil fields from neighboring nations, including Israel.
By 1975, all of the OPEC nations had agreed to price their own oil supplies exclusively in U.S. dollars in exchange for weapons and military protection. The royal house didn’t have that much support from the population of Saudi Arabia at the time. The US helped with building infrastructure and advanced military techniques. The billions that were earned with the oil, went partly to the US companies that could carry out those orders.
Peak OilIndustrialized countries consume around 25% of the world’s energy resources. More than half of the electricity generated for inductrialized countries still comes from coal, petroleum and natural gas.
Oil is important for all countries, and the more a “civilisation” is built on it, the more dependent a country is.
Some people claim there are “more than enough” fossil fuels, but the worldwide consumption is around 50,000 times faster than Earth’s forming of these resources, and our western system is based on it …
Until 1970 the U.S. had a large national oil production. It is a society based on and dependent on cheap oil. Oil and oil derived products are basically sold free of tax and the entire industry is subsidised. Using very inefficient cars and transportation, and living far away from work, is very common.
“Peak oil” in this context means that worldwide the production has reached its max and structural growth is not possible. So this is not about whether it’s all gone (yet). Western economies are based on growing profit and power. Tarsands, fracking, arctic oil and mineral seabed mining and heavy oil winning are not easily scalable as the refinement is not that easy and not a good idea for the environment.
This is a severe threat to the globalised economy because we have a debt based system that demands constant growth just to keep our heads above oil. If demand rises and production slows and the gap becomes too big, oil prices will rise. Only the richer countries will be able to buy oil, and the world economy will come to a grinding halt.
GlobalisationGlobalisation seems to indicate a “multitude of interconnected fatal consequences, social disintegration, a breakdown of democracy, more rapid and extensive deterioration of the environment, the spread of new diseases, and increasing poverty and alienation”. The fact that GDP may be a poor measure of well-being, or even of market activity, has, of course, long been recognized.
In many cases, GDP statistics seem to suggest that the economy is doing far better than most citizens’ own perceptions. The focus on GDP creates conflicts: political leaders are told to maximize it, but citizens also demand that attention be paid to enhancing security, reducing air, water, and noise pollution, and so forth – all of which might lower GDP growth.
What future?Got more links that are helpful for (our) research of the pillaging & plundering that’s going on? Post in the comments below please!