by Richard C. Cook
Our economy is on an artificial life-support system, a barely-breathing hostage in a lunatic asylum. That asylum is the U.S. and world financial systems which are on the verge of collapse.
The inmates are the world's central bankers, along with most of the financial magnates big and small. The fact is that the economy of much of the world is in a decisive downward slide which the financiers cannot stop because the systems they operate are the primary cause. As often happens, the inmates rule the asylum.
In such an environment, crime, warfare, terrorism, and other forms of violence are endemic. Only the most naïve, self-centered, and deluded jingoist could describe such a scenario in terms of the freedom-loving Western democracies being besieged by the "bad guys."
Rather what is happening highlights the growing failures of Western globalist finance whose impact on political stability has been so corrosive. As many responsible commentators are warning, we are likely to see major financial shocks within the next few months. The warnings are even coming from high-flying institutional players like the Bank of International Settlements and the International Monetary Fund.
How did today's looming tragedy come to pass? Looking for causes is like peeling an onion. What we are really seeing are the terminal throes of a failed financial system almost a century old. It's happening because, since the creation of the Federal Reserve System in 1913 — even during the period of the New Deal with its Keynesian economics aimed at full employment — our economy has been based almost entirely on fractional reserve banking.
This means that under the regime of the world's all-powerful central banking systems, money is brought into existence only as debt-bearing loans. Interest on this lending tends to grow exponentially unless overtaken by real economic growth.
The banks, along with the bank-leveraged equity and hedge funds, are preparing for the biggest fire sale in at least a generation. Insiders are going liquid to get ready. If you think Enron was "the bomb," you won't want to miss this one.
There are so many flaws in the system that it's time for real change.
As I have been pointing out in articles over the last several months, the key to a rational solution would be immediate monetary reform leading to a fundamental shift in how the world conducts its financial business. It would mean taking control of the world's economy out of the hands of the private bankers and giving it back to democratically elected governments.
I spent twenty-one years working for the U.S. Treasury Department and studying U.S. monetary history. For much of our history we were a laboratory for diverse monetary systems.
During and after the Civil War (1861-5) we had five different sources of money that fueled our economy. One was the Greenbacks, an extremely successful currency which the government spent directly into circulation. Contrary to financiers'propaganda, the Greenbacks were not inflationary. (…)
The banking system which rules the economy through the Federal Reserve System has produced the crushing debt pyramid of today. The system is a travesty. Banks, which can be useful in facilitating commerce, should never have this much power. Many intelligent people have called for the Federal Reserve to be abolished, including former chairmen of the House banking committee Wright Patman and Henry Gonzales and current Republican presidential candidate Ron Paul.
Some might call such a program a revolution. I prefer to call it a restoration — of national sovereignty. Central to the program would be the elimination of the Federal Reserve as a bank of issue and restoration of money-creation to the people's representatives in Congress. This is what our Constitution says too. It's the system we had before 1913.
The fundamental objectives of monetary policy should be to secure a healthy producing economy and provide for sufficient individual income. The objectives should not be to produce massive profits for the banks, fodder for Wall Street swindles, and a blank check for out-of-control government expenditures.
Note I referred to income. I did not say "create jobs." That is the Keynesian answer, because Keynes was a collectivist, and the main thing collectivists like to come up with is to give everyone more work to do, even if it's just grabbing a shovel and digging ditches like they did with the WPA during the Depression.
The idea of "income," as opposed to "jobs," is a civilized and humane idea. When are we going to realize that everyone doesn't need a paying job in order for an industrial economy to provide all with a decent living? When are we going to realize that the productivity of the modern economy is part of the heritage of all of us, part of the social commons?
Why can't mothers have the choice of staying home with the kids like they could a generation ago? Why can't some people choose to do eldercare? Why can't others comfortably go into lower-paying occupations like teaching or the arts? Why can't some just opt to study or travel for a while or learn new skills or start a business without facing financial ruin as they often must today? Why can't retirees enjoy their retirement instead of having to stay in the job market or worrying about Social Security going broke?
The U.S. and world economies are on the brink of collapse due to the lunacy of the financial system, not because we can't produce enough.
Contrary to so many doomsayers, the mature world economy is capable of providing a decent living for everyone on the planet. It cannot because the monetary equivalent of its bounty is skimmed by interest-bearing debt.
Fundamental monetary reform implemented to restore economic democracy is what America's real task should be for the twenty-first century. One thing is for certain. The out-of-control financial system that has wrecked the U.S. and world economies over the last generation cannot be allowed to continue.