In this diary, I hope to provide some background and context to the incredible turn of events that have taken hold here in the US and in Europe. In the following piece, I present a lot of information and then tie it together in what I feel is a clear account of what has happened to our government and our people and where we may find ourselves heading. I offer no conspiracy theories but I do assess blame to specific organizations where the culpability has been demonstrated. We have been under a very insidious attack by financial insiders and in many ways these same perpetrators have co-opted various safeguards in our system of laws and government of the people to bring about the terribly unsettled time we find ourselves living in.
Now thirteen years ago, the Banking Act of 1933, commonly know as Glass-Steagall, was repealed in a near party line vote in the Senate and a strong bipartisan majority in the House. Providing limits on banking activities and insurance, this law protected consumers for over six decades from being the victims of the financial crimes and malfeasance that brought our nation to its knees in the lead up to the Great Depression.
In 2000, the only effective regulation that provided politically balanced media on public airwaves when the FCC, under pressure from the courts, repealed the Fairness Doctrine. Seeing the looming threat to an informed citizenry, lawmakers made two separate attempts to codify the doctrine into legislation only to be met with a veto by President Reagan and later the threat of a veto by George H.W. Bush. These were sufficient to have the FCC officially remove the rules in August, 2011.
These reforms provided the legal and regulatory environment that brought about some of the most significant changes to the basic social contract between the people and their government in many decades. The government, according to the preamble of the Constitution, is intended to provide for the general welfare of its citizens. This entails providing regulation of health and food, public education and consumer protection. Today, it is this aspect of the American social contract that is changing most profoundly.
These regulatory changes converged to precipitate the financial meltdown we saw in 2008 and the lack of clear response in terms of legal recourse. Financial deregulation allowed banks to play several key roles that were once separated to protect from having unfair control of the marketplace. The new found power of being permitted to create new securities, the ability to affirm their worth and the ability to provide insurance instruments on the same securities had the effect of letting the large investment banks set the rules for the investment game to their liking. Not surprisingly, they used this power to make a lot of money for themselves. They also used this opportunity to redefine many of the basic roles our government plays in our lives.
The convergence of these three fundamental changes in our democracy have placed us in a precarious place. The money and power that came together to change these laws appears to be motivated towards making an even more profound change to our system, that democracy itself is too inexpedient and messy to be worth the trouble and should be dismantled to allow the powerful and their superior moral stature dictate the new American contract. Surely the world of their own making would be a better place not only for themselves, but for all of the “little people” too. Underlying the immediate profit motive was a longer term ambition to redefine the wages paid to the workers who actually produce in our society.
The common element in the Euro debacle and the weak US economy can be traced back to the excessive power and influence bestowed upon a single Wall Street corporation, Goldman-Sachs. The maker of markets, Goldman-Sachs has occupied a place in our economic system that no other corporation has the privilege to occupy. They are the single source an emerging company goes to when they wish to make an initial offering of stock to take the company public. They are also a proprietary trader. This means that unlike other investment banks who invest their clients money to make profits, Goldman is allowed to invest the firms money to make a profit as well. Goldman is also the primary dealer of US Treasury securities. The entirety of what Goldman-Sachs encompasses provides them with unmatched power in the form of information about the markets and the economies of the worlds governments.
In the shock doctrine, Naomi Klein lays out the case that starting from the Chicago School of Economics in the early 1960s, Milton Friedman, Alan Greenspan and a number of other “conservative” thinkers applied research on human response to shocking events to attempt an experiment in controlling the masses through systematic shocks followed by a rush to implement new systems of government and finance. The first of these experiments occurred in Chile. The outcomes were trans-formative to Chile in ways that brought great benefit to the “investing class” and perilous results for the working class. The coup to remove the democratically elected Allende brought about the Pinochet regime. This was enabled by a massive propaganda campaign by the CIA. The Pinochet regime persisted for some time with tacit top level support by the US government even though they had known of human rights abuses.
This has much to do with what is happening in Europe and the US. The precedent set informed a certain few that by using systematic propaganda and tactical fear, the people can be controlled to act against their own economic and sovereign best interests and assist the implementation of highly wealth concentrating policies.
In the United States, for the last decade, the infrastructure of disaster capitalism has been staged. When Hurricane Katrina hit New Orleans, the disaster and shock were administered by natural means. The opportunity to rebuild New Orleans, not for the people but for the betterment of the financial elite, availed itself. Being the opportunists they were, the Bush Administration and conservative lawmakers in Louisiana began to rebuild the Crescent City as a laboratory of conservative ideals such as charter schools in place of public schools and housing for well-to-do business people. The minority population of the city plummeted and a new city emerged in the years since.
Now the stage has been set for the next chapter. Goldman-Sachs and its best and brightest financial engineers set out to exploit the recently deregulated environment of Wall Street, of course to their own benefit. New possibilities emerged from the removal of restrictions for one firm to engage in commercial banking, investment banking and risk underwriting. The bright financial masters of the universe left without a basic set of rules of conduct were set free to create new financial instruments on the investment bank side of house while creating derivatives on the other side of house and you had the makings for a highly destructive marketplace. As we now know, the first target was the US housing market. Through broad marketing of the new Collateralized Debt Obligations (CDOs) and mortgage obligations (CMOs), the groundwork was laid to extract trillions of dollars from the economy.
Under normal conditions, creating the destruction of the marketplace you count on to make money is not a good strategy. When you understand in advance that you occupy that special place in the financial markets that you are indispensable to the continuity of the financial system, you know you will receive a bailout from the treasury in order to quiet markets and avoid a rapid unraveling of the broader economy. This knowledge is especially reliable when you know the Secretary of the Treasury is a notable Goldman alumni. The bailout was clearly structured so that it was without accountability. The proceeds did reinforce the banking sector, preventing a complete collapse. The money also permitted handsome bonus packages for partners industry wide.
The important point to take from these events is that they did not happen accidentally. The system was altered in such a way as to ensure its failure when viewed through the lens of the public. This failure was capitalized upon and served as the shock that allowed the otherwise unacceptable raid of the treasury to take place without the people taking to the streets in anger for having been robbed. The shock itself does not propagate itself without help. That brings us to the next part of this story; the infrastructure of the disaster capitalist.
The events of 9/11 obviously impacted the nation in profound ways. On our own soil, we were attacked and one of the most iconic images of western financial power was taken down for the world to see. I am not inclined to subscribe to conspiracy theories that suggest these attacks were in any way orchestrated by any of our citizens. That said, it would be hard to imagine a more effective shock to the nation that we saw on that fateful day. While it is not apparent that any American citizens played a role in this attack, there was in place a group of powerful people who saw this as a once in a lifetime opportunity to build an self-reinforcing infrastructure to perpetuate the fear and shock we had experienced.
Underlying the rationale for the wars that followed 9/11 were the think tank creations of pre-emptive war and development of a surveillance society. Clearly, the Constitution was an impediment to such radical change under normal circumstances. To the disaster capitalist, the lack of normalcy of the moment was a grand opportunity to implement a new set of rules for how our nation would conduct its affairs domestically and around the world. With the passage of the Patriot Act and the creation of a Department of Homeland Security came a new day for America. We willingly gave up essential liberty for the illusion of temporary safety. In the name of defending the homeland, the new government agency was able to receive very high levels of funding without clear opposition. Over time, this paved the way for the implementation of highly militarized police departments who were now trained in counter-terrorism and outfitted more like para-military operatives than policemen. There was little about the nature of the attacks on 9/11 that suggested the need to retrain and outfit police as tactical fighters of international terror threats. These functions had always been relegated upon the CIA and the FBI.
Fear would not self-perpetuate, however, without a helpful push every once in a while. That need was gladly met by the conservative media that has long ago recognized that instilling fear and anger in their viewers improved ratings and permitted the free dissemination of propaganda. The deregulated media ownership environment permitted a handful of “news” agencies to capitalize on decreasing journalistic standards and purvey a message that all media is corrupt and it is up to you, not us, to determine what is happening in the world. We report, you decide. The use of this corporate friendly media complex to deflect actual concerns from the people and to instead train viewers to distrust their government created the necessary divide between the facts unfolding on the ground and the attitudes of the people.
By 2008, the toxicity of the intentionally deceptive financial instruments finally came to a head. After a strong push by President Bush in 2003 to promote the “ownership society”, bankers from the private lending institutions began to push irresponsibly placed mortgages on the public. The deregulation of media and banking reached a pivotal confluence with this engineered crisis. The media spun the failures of the bank as being the result of over-leveraged individuals in aggregate creating a systemic imbalance that needed to be remedied, not by revaluation of the assets transacted, but through a further rapid de-leveraging of personal and institutional debt. This was accented with a message that government was responsible for the failures and that the best medicine would be to cut government down to size.
In 2009, newly elected President Obama successfully carried out an economic stimulus of under one trillion dollars. It was not evident at that time that the effect of the mortgage market bubble bursting was in fact many trillions of dollars of lost wealth. Several years into the economic malaise, no further effort was made to employ the Keynesian medicine of intervention to spur growth. The media complex has already rewritten historical understanding of Keynes to suggest that the stimulus was not effective and that we are in a new age with different fundamental laws of nature regarding how markets work. Instead of the government spending money and intervening to be the spender of last resort, the new paradigm suggested that government needed to be reigned in to prevent further deterioration. We are still living in this paradigm today, in spite of years of evidence to the contrary.
With globalization of markets and trade comes a more seamless transfer of social systems. The doctrines of deregulation as a cure for all economic ails spread around the globe. The success of the conservative media complex here in the US was a template for Europe as well. Consolidation of media ownership happened extraordinarily quickly across the pond. Europe’s robust media underwent a transformation much like what occurred here. The revelation of phone hacking, essentially espionage against ones own people, created a loud outcry from come of the established media but went largely unpunished as News Corp’s bid to take over BSkyB was not, in the end, derailed by the scandal. Such is the extent of sympathy to their cause in parliament.
All of this history converges on the events unfolding upon Europe right now. The push for austerity has its roots in the same disaster capitalist approach for how to exploit fear and wield power. In the last several weeks, two democratic governments have been dismantled and replaced by so-called technocratic regimes. These academic experts have been put in place to correct the mistakes the popularly elected could not be trusted to correct. In Greece, the mere mention of a public referendum to decide on austerity for itself was met with a rapid removal of Papandreou. In Italy, scandal ridden Berlusconi was quick to step aside for another technocrat prime-minister. How could the people who have lived under imposed regimes within the last hundred years be convinced to accept a new, non-democratic leader? They are still reeling from the shock of the decline and the immanent threat to stability and posterity.
There are a few things that are apparent about this usurpation of democracy. First, the people have been pitted against their neighbors by a media complex that thrives on purveying divisive messaging. Those in Greece are made to feel that the public servants have taken their future from them. Those in Germany believe the profligate “others” in several countries have overspent and placed their responsible achievement in jeopardy. Here in the US we are told that lazy Americans and overpaid public workers are the reason for reduced growth and diminished prospects for the future. This is the same message with different situational attributes. The result is precisely the same. The people are pre-occupied with in-fighting and are not taking account of who might actually be benefiting from the circumstances they find themselves in.
That beneficiary is apparent if you look at who has stepped to the helm of Italy and Greece. In Greece, you have Lucas Papademos, an MIT educated economist and banker who served as chief economist for the Federal reserve Bank of Boston in the 1980s. He later went to Greece to serve as the senior Economist for the Bank of Greece and later went to the European Central Bank. He left that capacity to become an advisor to Papandreou. In short, Papademos was a well-heeled banker with significant connections to the power elite on both sides of the Atlantic. Also joining the technocratic regime of Papademos is the new Minister of Infrastructure, Transport and Networks. Mikis "The Hammer" Voridis was a former member of a fascist organization and political party in Greece. He was removed from law school where he earned his nickname “The Hammer” for beating socialists on campus with a hammer he constructed of a large stick with several rocks tied to the end. This fascist being in charge of infrastructure and “networks” is cause for alarm. If the new regime that has been appointed for Greece is indeed sympathetic to fascism, Europe is facing a threat that defies comprehension in the post WWII era.
In Italy, the obviousness of the selection of prime-minister is even more astounding. A notable former Goldman-Sachs international affairs advisor, Monti has been a major player in developing the EU system after being placed on the European Commission by Silvio Berlusconi and serving as the Commisioner. Mr. Monti has been dubbed “Super Mario” for his highly visible participation in developing the EU system. It is little surprise with his connections to the international banking elite, that Mr. Monti would elevate quickly once the inconveniences of democracy were done away with.
At the center of the Euro crisis is the ECB. The new president of the European Central Bank is Mario Draghi. Draghi was Vice Chairman and Managing Director of Goldman Sachs International and a member of Goldman Sachs' Management Committee. It should come as no surprise that his interests will align with the bankers in forging a direction in the current situation.
With two democracies seized and Europe perilously close to catastrophic depression, the popular TV news media in the US have scarcely given airtime to this incredibly important development. Similarly, the same media has done little reporting on the now known causes of the mortgage crisis and its relationship to the greater economic challenges in the US since 2008. In order for the same powerful bankers who have complicity in each of these financial crises not to garner attention in the media requires further complicity by those media outlets themselves. Clearly, the bankers involved have sufficient influence over congress and the major broadcast media to deflect the attention they warrant and to have that directed towards the victims of the debacle. Instead of hearing that bankers designed the failed system for their own enrichment, we are told that irresponsible private citizens bit off more than they could chew and they are the ones at fault. Further, government should not help those who have lost their jobs through this disaster as they too are lazy and being coddled by the government.
The similarities on both sides of the Atlantic are intriguing and depressing. The degree of sameness in not only the causes and players but in the messaging and reaction are unsettling to put it mildly. It is clear that ultra-powerful bankers, especially those associated with Goldman-Sachs have not only been directly involved in the malfeasance that brought the worlds economies to the precipice of global depression, but that they have been directly rewarded for doing so by having the keys to the kingdom handed to them.
It is clear we are seeing the end game for the strategic assault on our economic system. The concentration of the worlds wealth has been well documented. During much of this economic catastrophe I have wondered what is on the other side of the destruction of our institutions. The developments in the last few days have made it clear that there appears to be a new and identifiable nucleus of power emerging on both sides of the Atlantic. The most elite of all in the world of banking and finance have positioned themselves to take the helm and show us the world as they would like it. The corruption of congress to act only in the best interests of these same few is coming into the light now. The connections within the White House and several before this one are also apparent. There is no clear opposing force that appears to equal the power these banking elite have amassed, except one.
In these last two months a single change has manifest within the US that may offer hope for constructive opposition to the disaster capitalists. The Occupy Wall Street movement has brought to the masses a new way of talking about and relating to the problems we had come to accept as our own fault. People are finally talking about income inequality even though it has been a problem that has been developing for more than 30 years. People are finally recognizing that the recession we have all felt every day for the last several years has actually passed by a few who have not only weathered it, but prospered. It does present a bit of hopefulness that these protesters can change the narrative and bring about an awakening of awareness in so short a time. If we are to learn lessons on what created this global economic realignment, we would be smart to employ many of the people and approaches Occupy has utilized in honing their message. Valuing consensus, letting all voices be heard, enduring well financed retaliation with unwavering conviction are take-aways that may serve us well going forward.
I am hopeful that we will emerge from this wiser and more astute to threats to our well-being from within our own land, instead of focusing on the need to demonize the “others” who cause many to be afraid.
We still may see the consolidated power of these amoral bankers result in deployment of a fascist control over the military resources and police in some or all of the affected countries. The Greek placement of “The Hammer” in charge of a major ministry is cause for concern. The trend of militarizing police forces is also worrisome. The creation of new militia laws in North Carolina and Arizona are potentially problematic. What we have seen with the response of the police to Occupy protests where no threats were apparent is also sobering. Media being refused access to report on the protests may be indicative of how the police have been co-opted to act as protection for the perpetuation of the bankers power grab. This leaves many wondering where our Constitution is in all of this.
The Arab Spring resulted from the people no longer relying on the state controlled media to communicate but instead using social networking to communicate and organize has presented a challenge to despotic and repressive rule. The rapid development of the Occupy movement is rooted in the same technological advances. The answer to what forces will prevail may be answered simply by watching what if any restrictions are placed in these modern communication tools. Surely, with the power to reach millions in seconds with a message that is not produced by a think tank or corporate sponsored broadcast is revolutionary. An attempt to restrict these technologies will certainly signal the next stage in the battle over our economic system and the continuity of our democracy.
We certainly do live in interesting times. It is my hope that humanity itself is strengthened out of this unfortunate turn of events so that we might get back to the realization of human potential instead of the systematic exploitation of it.