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33 stats national debt is destroying US

The US national debt is 36 times larger than it was just 40 years ago. That is not a misprint. That is actually the...

33 Stats That Prove That SOMETHING Desperately Needs To Be Done About The National...

Michael Snyder
American Dream
October 18, 2013

The U.S. national debt is 36 times larger than it was just 40 years ago.  That is not a misprint.  That is actually the truth.  We are literally destroying the future of America, but most Americans don’t really seem to care.  In fact, the most hated politicians in America are the Tea Party politicians that recently tried to take a stand against the out of control borrowing that the federal government has been doing.  Pew Research has just released a new survey that shows that the popularity of the Tea Party is at an all-time low

Image: US Dollars.

So while many Americans may say that they theoretically want something to be done about the national debt, when push comes to shove they don’t actually mean that.  You see, the reality of the matter is that about 128 million Americans get money from the federal government every month.  That accounts for the majority of all government spending.  Anyone who tries to take those goodies away is going to be hated.  So we are going to continue down this crazy path until the system completely crashes someday.

The “deal” that was just made in Congress does nothing to reduce our spending or control the growth of our debt.  It just kicks the decisions about government spending and the debt ceiling down the road for a few months.

In fact, the agreement on the debt ceiling did not actually place any limits on how much the federal government can borrow over the next few months.  It just temporarily suspended enforcement of the debt ceiling.  So the federal government could technically go out and borrow trillions of dollars during the next few months and nobody could do anything about it.

Let’s hope that does not happen.

And of course the “debt deal” contained all kinds of pork that will benefit certain politicians that were instrumental in putting together the deal.

When are the American people finally going to get sick and tired of this kind of thing?

Meanwhile, our debt problem continues to get even worse.  The following are 33 stats that prove that SOMETHING desperately needs to be done about the national debt…

#1 The U.S. national debt is on pace to more than double during Obama’s eight years in the White House.  In other words, under Barack Obama the United States will accumulate more debt than it did under all of the other presidents in U.S. history combined.

#2 During fiscal year 2013, the U.S. Treasury paid off $7,546,726,000,000 in maturing U.S. government debt and issued $8,323,949,000,000 in new debt.  In fiscal year 2014 those numbers will be even larger.

#3 In September, the average rate of interest on the government’s marketable debt was 1.981 percent.  In January 2000, the average rate of interest on the government’s marketable debt was 6.620 percent.  If we got back to that level today, it would collapse our entire financial system.

#4 Between 2008 and 2012, the ratio of government debt to government income increased from 4.0 to 6.6.

#5 Between 2008 and 2012, U.S. government debt grew by 60.7 percent, but U.S. GDP only grew by a total of about 8.5 percent during that entire time period.

#6 Since 2007, the U.S. debt to GDP ratio has increased from 66.6 percent to 101.6 percent.

#7 A revised IMF policy paper entitled “An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?” projects that U.S. government debt will rise to about 400 percent of GDP by the year 2050.

#8 At this point, the federal government hands out money to approximately 128 million Americans every single month.  In case you were wondering, that is about 41.3 percent of the population of the entire country.

#9 Back in 1980, the U.S. national debt was less than one trillion dollars.  Today, it is rapidly approaching 17 trillion dollars.

#10 Since the year 2000, the size of the U.S. national debt has grown by more than 11 trillion dollars.

#11 During Barack Obama’s first four years in the White House, the amount of new debt accumulated by the federal government breaks down to approximately$50,521 for every single household in the United States.

#12 The United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.

#13 At this point, the United States government is responsible for about a third of all the government debt in the entire world.

#14 According to the U.S. Treasury, foreigners hold approximately 5.6 trillion dollars of our debt.

#15 The amount of U.S. government debt held by foreigners is about 5 times larger than it was just a decade ago.

#16 If the federal government used GAAP accounting standards like publicly traded corporations do, the real federal budget deficit for 2011 would have been 5 trillion dollars instead of 1.3 trillion dollars.

#17 As I noted recently, if the U.S. national debt was reduced to a stack of one dollar bills it would circle the earth at the equator 45 times.

#18 How much money is one trillion dollars?  If you were alive when Jesus Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now.

#19 If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

#20 If you started paying off just the new debt that the U.S. has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 189,000 years to pay it off.

#21 The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first established in 1913.

#22 If Bill Gates gave every single penny of his entire fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.

#23 The federal government is stealing close to 100 million dollars from our children and our grandchildren every single hour of every single day.

#24 Historically, the interest rate on 10 year U.S. Treasuries has averaged 6.68 percent.  If the average interest rate on U.S. government debt rose to that level today, the U.S. government would find itself spending more than a trillion dollars per year just on interest on the national debt.

#25 Federal spending on entitlement programs has been increasing six times faster than population growth has.

#26 Overall, the federal government runs nearly 80 different “means-tested welfare programs“, and almost all of them are experiencing explosive growth.

#27 According to a Government Accountability Office report that was released earlier this year, Obamacare is going to cause the federal debt to rise by $6.2 trillion.

#28 If you can believe it, today more than 70 million Americans are on Medicaid, and it is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.

#29 As I have written about previously, the number of Americans on Medicare is projected to grow from a little bit more than 50 million today to 73.2 million in 2025.

#30 Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years.  That comes to approximately $328,404 for each and every household in the United States.

#31 It is being projected that the number of Americans on Social Security will rise from about 62 million today to more than 100 million in 25 years.

#32 Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.

#33 Boston University economist Laurence Kotlikoff is warning that the U.S. government is facing a gigantic tsunami of unfunded liabilities in the coming years that we are counting on our children and our grandchildren to pay.  Kotlikoff speaks of a “fiscal gap” which he defines as “the present value difference between projected future spending and revenue”.  His calculations have led him to the conclusion that the federal government is facing a fiscal gap of 222 trillion dollars in the years ahead.

Our financial situation is clearly not even close to sustainable.  We are heading for an inevitable collapse, but in the aftermath of the “deal” in Congress, Barack Obama declared that all Americans “need to stop focusing on the lobbyists, and the bloggers, and the talking heads on radio”.  Apparently he does not want you reading articles like this or listening to radio programs that are warning about the dangers of our national debt.

At the same time, the U.S. government continues to waste money in some of the most bizarre ways imaginable.  It is almost as if they don’t even care that they are destroying the future of our children and our grandchildren with their incredibly reckless spending.

And of course the mainstream media is very much on the side of the big spenders.  In recent weeks, those that identify themselves with the Tea Party have been endlessly called names on the big mainstream news networks even though they are just about the only ones that are trying to pull us back from the path to self-destruction that we are on.

The big mainstream news networks have portrayed those that identify with the Tea Party as idiots and morons, but the truth is that studies have found that Tea Partiers are better educated, more scientifically literate and have higher incomes than the general population.

The real idiots and morons are the ones that want us to continue down this road to financial oblivion.  We have accumulated the largest mountain of debt in the history of the world, and unless something dramatic is done, America is not going to have any kind of a future.

This article was posted: Friday, October 18, 2013 at 5:35 am

Tags: , , , ,





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Tea Party SignThe U.S. national debt is 36 times larger than it was just 40 years ago.  That is not a misprint.  That is actually the truth.  We are literally destroying the future of America, but most Americans don’t really seem to care.  In fact, the most hated politicians in America are the Tea Party politicians that recently tried to take a stand against the out of control borrowing that the federal government has been doing.  Pew Research has just released a new survey that shows that the popularity of the Tea Party is at an all-time low.  So while many Americans may say that they theoretically want something to be done about the national debt, when push comes to shove they don’t actually mean that.  You see, the reality of the matter is that about 128 million Americans get money from the federal government every month.  That accounts for the majority of all government spending.  Anyone who tries to take those goodies away is going to be hated.  So we are going to continue down this crazy path until the system completely crashes someday.

The “deal” that was just made in Congress does nothing to reduce our spending or control the growth of our debt.  It just kicks the decisions about government spending and the debt ceiling down the road for a few months.

In fact, the agreement on the debt ceiling did not actually place any limits on how much the federal government can borrow over the next few months.  It just temporarily suspended enforcement of the debt ceiling.  So the federal government could technically go out and borrow trillions of dollars during the next few months and nobody could do anything about it.

Let’s hope that does not happen.

And of course the “debt deal” contained all kinds of pork that will benefit certain politicians that were instrumental in putting together the deal.

When are the American people finally going to get sick and tired of this kind of thing?

Meanwhile, our debt problem continues to get even worse.  The following are 33 stats that prove that SOMETHING desperately needs to be done about the national debt…

#1 The U.S. national debt is on pace to more than double during Obama’s eight years in the White House.  In other words, under Barack Obama the United States will accumulate more debt than it did under all of the other presidents in U.S. history combined.

#2 During fiscal year 2013, the U.S. Treasury paid off $7,546,726,000,000 in maturing U.S. government debt and issued $8,323,949,000,000 in new debt.  In fiscal year 2014 those numbers will be even larger.

#3 In September, the average rate of interest on the government’s marketable debt was 1.981 percent.  In January 2000, the average rate of interest on the government’s marketable debt was 6.620 percent.  If we got back to that level today, it would collapse our entire financial system.

#4 Between 2008 and 2012, the ratio of government debt to government income increased from 4.0 to 6.6.

#5 Between 2008 and 2012, U.S. government debt grew by 60.7 percent, but U.S. GDP only grew by a total of about 8.5 percent during that entire time period.

#6 Since 2007, the U.S. debt to GDP ratio has increased from 66.6 percent to 101.6 percent.

#7 A revised IMF policy paper entitled “An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?” projects that U.S. government debt will rise to about 400 percent of GDP by the year 2050.

#8 At this point, the federal government hands out money to approximately 128 million Americans every single month.  In case you were wondering, that is about 41.3 percent of the population of the entire country.

#9 Back in 1980, the U.S. national debt was less than one trillion dollars.  Today, it is rapidly approaching 17 trillion dollars.

#10 Since the year 2000, the size of the U.S. national debt has grown by more than 11 trillion dollars.

#11 During Barack Obama’s first four years in the White House, the amount of new debt accumulated by the federal government breaks down to approximately $50,521 for every single household in the United States.

#12 The United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.

#13 At this point, the United States government is responsible for about a third of all the government debt in the entire world.

#14 According to the U.S. Treasury, foreigners hold approximately 5.6 trillion dollars of our debt.

#15 The amount of U.S. government debt held by foreigners is about 5 times larger than it was just a decade ago.

#16 If the federal government used GAAP accounting standards like publicly traded corporations do, the real federal budget deficit for 2011 would have been 5 trillion dollars instead of 1.3 trillion dollars.

#17 As I noted recently, if the U.S. national debt was reduced to a stack of one dollar bills it would circle the earth at the equator 45 times.

#18 How much money is one trillion dollars?  If you were alive when Jesus Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now.

#19 If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

#20 If you started paying off just the new debt that the U.S. has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 189,000 years to pay it off.

#21 The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first established in 1913.

#22 If Bill Gates gave every single penny of his entire fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.

#23 The federal government is stealing close to 100 million dollars from our children and our grandchildren every single hour of every single day.

#24 Historically, the interest rate on 10 year U.S. Treasuries has averaged 6.68 percent.  If the average interest rate on U.S. government debt rose to that level today, the U.S. government would find itself spending more than a trillion dollars per year just on interest on the national debt.

#25 Federal spending on entitlement programs has been increasing six times faster than population growth has.

#26 Overall, the federal government runs nearly 80 different “means-tested welfare programs“, and almost all of them are experiencing explosive growth.

#27 According to a Government Accountability Office report that was released earlier this year, Obamacare is going to cause the federal debt to rise by $6.2 trillion.

#28 If you can believe it, today more than 70 million Americans are on Medicaid, and it is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.

#29 As I have written about previously, the number of Americans on Medicare is projected to grow from a little bit more than 50 million today to 73.2 million in 2025.

#30 Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years.  That comes to approximately $328,404 for each and every household in the United States.

#31 It is being projected that the number of Americans on Social Security will rise from about 62 million today to more than 100 million in 25 years.

#32 Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.

#33 Boston University economist Laurence Kotlikoff is warning that the U.S. government is facing a gigantic tsunami of unfunded liabilities in the coming years that we are counting on our children and our grandchildren to pay.  Kotlikoff speaks of a “fiscal gap” which he defines as “the present value difference between projected future spending and revenue”.  His calculations have led him to the conclusion that the federal government is facing a fiscal gap of 222 trillion dollars in the years ahead.

Our financial situation is clearly not even close to sustainable.  We are heading for an inevitable collapse, but in the aftermath of the “deal” in Congress, Barack Obama declared that all Americans “need to stop focusing on the lobbyists, and the bloggers, and the talking heads on radio”.  Apparently he does not want you reading articles like this or listening to radio programs that are warning about the dangers of our national debt.

At the same time, the U.S. government continues to waste money in some of the most bizarre ways imaginable.  It is almost as if they don’t even care that they are destroying the future of our children and our grandchildren with their incredibly reckless spending.

And of course the mainstream media is very much on the side of the big spenders.  In recent weeks, those that identify themselves with the Tea Party have been endlessly called names on the big mainstream news networks even though they are just about the only ones that are trying to pull us back from the path to self-destruction that we are on.

The big mainstream news networks have portrayed those that identify with the Tea Party as idiots and morons, but the truth is that studies have found that Tea Partiers are better educated, more scientifically literate and have higher incomes than the general population.

The real idiots and morons are the ones that want us to continue down this road to financial oblivion.  We have accumulated the largest mountain of debt in the history of the world, and unless something dramatic is done, America is not going to have any kind of a future.

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Comedian Beppe Grillo was surprised himself when his Five Star Movement got 8.7 million votes in the Italian general election of February 24-25th. His movement is now the biggest single party in the chamber of deputies, says The Guardian, which makes him “a kingmaker in a hung parliament.”

Grillo’s is the party of “no.” In a candidacy based on satire, he organized an annual “V Day Celebration,” the “V” standing for vaffanculo (“f—k off”). He rejects the status quo—all the existing parties and their monopoly control of politics, jobs, and financing—and seeks a referendum on all international treaties, including NATO membership, free trade agreements and the Euro.

“If we get into parliament,” says Grillo, “we would bring the old system down, not because we would enjoy doing so but because the system is rotten.” Critics fear, and supporters hope, that if his party succeeds, it could break the Euro system.

But being against everything, says Mike Whitney in Counterpunch, is not a platform:

To govern, one needs ideas and a strategy for implementing those ideas. Grillo’s team has neither. They are defined more in terms of the things they are against than things they are for. It’s fine to want to “throw the bums out”, but that won’t put people back to work or boost growth or end the slump. Without a coherent plan to govern, M5S could end up in the political trash heap, along with their right-wing predecessors, the Tea Party.

Steve Colatrella, who lives in Italy and also has an article in Counterpunch on the Grillo phenomenon, has a different take on the surprise win. He says Grillo does have a platform of positive proposals. Besides rejecting all the existing parties and treaties, Grillo’s program includes the following:

• unilateral default on the public debt;
• nationalization of the banks; and
• a guaranteed “citizenship” income of 1000 euros a month.

It is a platform that could actually work. Austerity has been tested for a decade in the Eurozone and has failed, while the proposals in Grillo’s plan have been tested in other countries and have succeeded.

Default: Lessons from Iceland and South America

Default on the public debt has been pulled off quite successfully in Iceland, Argentina, Ecuador, and Russia, among other countries. Whitney cites a clip from Grillo’s blog suggesting that this is also the way out for Italy:

The public debt has not been growing in recent years because of too much expenditure . . . Between 1980 and 2011, spending was lower than the tax revenue by 484 billion (thus we have been really virtuous) but the interest payments (on the debt of 2,141 billion) that we had to pay in that period have made us poor. In the last 20 years, GDP has been growing slowly, while the debt has exploded.

. . . [S]peculators . . . are contributing to price falls so as to bring about higher interest rates. It’s the usurer’s technique. Thus the debt becomes an opportunity to maximize earnings in the market at the expense of the nation. . . . If financial powerbrokers use speculation to increase their earnings and force governments to pay the highest possible interest rates, the result is recession for the State that’s in debt as well as their loss of sovereignty.

. . . There are alternatives. These are being put into effect by some countries in South America and by Iceland. . . . The risk is that we are going to reach default in any case with the devaluation of the debt, and the Nation impoverished and on its knees. [Beppe Grillo blog]

Bank Nationalization: China Shows What Can Be Done

Grillo’s second proposal, nationalizing the banks, has also been tested and proven elsewhere, most notably in China. In an April 2012 article in The American Conservative titled “China’s Rise, America’s Fall,” Ron Unz observes:

During the three decades to 2010, China achieved perhaps the most rapid sustained rate of economic development in the history of the human species, with its real economy growing almost 40-fold between 1978 and 2010. In 1978, America’s economy was 15 times larger, but according to most international estimates, China is now set to surpass America’s total economic output within just another few years.

According to Eamonn Fingleton in In The Jaws of the Dragon (2009), the fountain that feeds this tide is a strong public banking sector:

Capitalism’s triumph in China has been proclaimed in countless books in recent years. . . . But . . . the higher reaches of its economy remain comprehensively controlled in a way that is the antithesis of everything we associate with Western capitalism. The key to this control is the Chinese banking system . . . [which is] not only state-owned but, as in other East Asian miracle economies, functions overtly as a major tool of the central government’s industrial policy.

Guaranteed Basic Income—Not Just Welfare

Grillo’s third proposal, a guaranteed basic income, is not just an off-the-wall, utopian idea either. A national dividend has been urged by the “Social Credit” school of monetary reform for nearly a century, and the U.S. Basic Income Guarantee Network has held a dozen annual conferences. They feel that a guaranteed basic income is the key to keeping modern, highly productive economies humming.

A basic income guarantee paid for with central bank credit would not be “welfare” but would eliminate the need for welfare. It would be social security for all, replacing social security payments, unemployment insurance, and welfare taxes.

In Europe, the proposal is being pursued not just by Grillo’s southern European party but by the sober Swiss of the north. An initiative to establish a new federal law for an unconditional basic income was formally introduced in Switzerland in April 2012. The idea consists of giving to all citizens a monthly income that is neither means-tested nor work-related. Under the Swiss referendum system of direct democracy, if the initiative gathers more than 100,000 signatures before October 2013, the Federal Assembly is required to look into it.

Colatrella does not say where Grillo plans to get the money for Italy’s guaranteed basic income, but in Social Credit theory, it would simply be issued outright by the government; and Grillo, who has an accounting background, evidently agrees with that approach to funding. He said in a presentation available on YouTube:

The Bank of Italy a private join-stock company, ownership comprises 10 insurance companies, 10 foundations, and 10 banks, that are all joint-stock companies . . . They issue the money out of thin air and lend it to us. It’s the State who is supposed to issue it. We need money to work. The State should say: “There’s scarcity of money? I’ll issue some and put it into circulation. Money is plentiful? I’ll withdraw and burn some of it.” . . . Money is needed to keep prices stable and to let us work.

The Key to a Thriving Economy

Major C.H. Douglas, the thought leader of the Social Credit movement, argued that the economy routinely produces more goods and services than consumers have the money to purchase, because workers collectively do not get paid enough to cover the cost of the things they make. This is true because of external costs such as interest paid to banks, and because some portion of the national income is stashed in savings accounts, investment accounts, and under mattresses rather than spent on the GDP.

To fill what Social Crediters call “the gap,” so that “demand” rises to meet “supply,” additional money needs to be gotten into the circulating money supply. Douglas recommended doing it with a national dividend for everyone, an entitlement by “grace” rather than “works,” something that was necessary just to raise purchasing power enough to cover the products on the market.

In the 1930s and 1940s, critics of Social Credit called it “funny money” and said it would merely inflate the money supply. The critics prevailed, and the Social Credit solution has not had much chance to be tested. But the possibilities were demonstrated in New Zealand during the Great Depression, when a state housing project was funded with credit issued by the Reserve Bank of New Zealand, the nationalized central bank. According to New Zealand commentator Kerry Bolton, this one measure was sufficient to resolve 75% of unemployment in the midst of the Great Depression.

Bolton notes that this was achieved without causing inflation. When new money is used to create new goods and services, supply rises along with demand and prices remain stable; but the “demand” has to come first. No business owner will invest in more capacity or production without first seeing a demand. No demand, no new jobs and no economic expansion.

The Need to Restore Economic Sovereignty

The money for a guaranteed basic income could be created by a nationalized central bank in the same way that the Reserve Bank of New Zealand did it, and that central bank “quantitative easing” (QE) is created out of nothing on a computer screen today. The problem with today’s QE is that it has not gotten money into the pockets of consumers. The money has gotten—and can get—no further than the reserve accounts of banks, as explained here and here. A dividend paid directly to consumers would be “quantitative easing” for the people.

A basic income guarantee paid for with central bank credit would not be “welfare” but would eliminate the need for welfare. It would be social security for all, replacing social security payments, unemployment insurance, and welfare taxes. It could also replace much of the consumer debt that is choking the private economy, growing exponentially at usurious compound interest rates.

As Grillo points out, it is not the cost of government but the cost of money itself that has bankrupted Italy. If the country wishes to free itself from the shackles of debt and restore the prosperity it once had, it will need to take back its monetary sovereignty and issue its own money, either directly or through its own nationalized central bank. If Grillo’s party comes to power and follows through with his platform, those shackles on the Italian economy might actually be released.

Ellen Brown

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. She is president of the Public Banking Institute, http://PublicBankingInstitute. org , and has websites at http://WebofDebt.com and http://EllenBrown.com

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Henrik Ibsen

Timothy Alexander Guzman, Silent Crow News – According to Oxford Dictionary the term Slave is defined as a person who is the legal property of another and is forced to obey them” as in the case of the United States during the 18th and 19th centuries where slavery was a legalized institution.  Oxford dictionary also defines slavery as “a person who works very hard without proper remuneration or appreciation” as in today’s world of a person working for a company or corporation where their efforts are usually under appreciated.  It also describes a slave as “a person who is excessively dependent upon or controlled by something” or “a device, or part of one, directly controlled by another”.  Debt can be an instrument used to control an individual or a nation for that matter.  In this case, an individual is dependent upon “Credit” to buy products.  Then the credit becomes a debt that has to be repaid.  It becomes a “control mechanism” as the creditor becomes the “Slave Owner” and the debtor becomes the “Slave”.  What is the point?   In today’s world of unlimited credit, consumers become modern-day slaves to their creditors.  What is the difference between slavery in 18th century America with imported African slaves and the America of 2013?  There is no difference besides the physical abuse of the African slaves by their owners.  In America, consumers suffer psychological abuse by its creditors.  As long as an individual remains in debt bondage, that person will have to repay that debt until the day that person literally dies in most cases.

Black Friday is the day that starts the most important holiday for big name retailers and Wall Street speculators and that is Christmas.  It is the shopping season that investors, economists and corporations pay close attention to as they measure consumer confidence and the profits they reap from consumer spending.  Major retailers and corporations such as Wal-Mart expect to make profits.  Wall Street expects consumers to spend on Black Friday through the Christmas holidays following the Federal Reserve’s continued policies of Quantitative Easing (QE).  Economists across the spectrum predict that the new Federal Reserve chairwoman Janet Yellen will continue to buy US bonds indefinitely continuing Ben Bernanke’s current policies.  All the while consumers continue to accumulate debt.  Black Friday was marked with chaos followed by violence as mobs of consumers’ raided shopping centers and malls for discounts and sales on numerous products including flat screen televisions, toys, clothing and other goods they most likely don’t need.  Regardless of the economic situation, consumers will continue to buy.  Granted, Christmas is about giving your loved ones gifts in a traditional sense.  It is also about spending time with the family.  It is supposed to be a joyous holiday for families, but the American population is mired in debt ranging from credit cards, mortgages, student loans and auto loans.  Earlier this month Bloomberg reported that U.S. households increased their debt levels by continuing to borrow at unprecedented levels:

Consumer indebtedness rose $127 billion to $11.28 trillion, the biggest increase since the first quarter of 2008, according to a quarterly report on household debt and credit released today by the Fed district bank. Mortgage balances climbed $56 billion, student loans increased $33 billion, auto loans were up $31 billion and credit-card debt rose by $4 billion.

“We observed an increase of household balances across essentially all types of debt,” Donghoon Lee, senior research economist at the New York Fed, said in a statement. “With non-housing debt consistently increasing and the factors pushing down mortgage balances waning, it appears that households have crossed a turning point in the deleveraging cycle.”

Consumerism has taking hold in America.  The population continues to stampede at malls and in some cases injuring and even killing individuals.  In 2008, a Wal-Mart worker was trampled to death in Long Island, New York by a stampede of hungry consumers looking for bargains.  There were also several people injured during the incident.  This Black Friday proved to be more of the same as shoppers filled shopping malls.  Some malls experienced violent crowds pushing and fighting with each other over items that were on sale.  It is absolutely mind boggling to see average people become violent over products sold at major retail stores.  Morality is in decline in America.

Regardless of debt the American public faces, it seems that shopping is the only thing that matters.  As debt increases it becomes harder for them to repay.  Can the American people ever awaken from their dystopian nightmare of mass consumption of products they don’t need?  They are accumulating large amounts of debt thanks to the Federal Reserve Bank’s printing of unlimited cheap money with incredibly zero to low interest rates.  Although, many do buy their basic necessities such as food and clothing, buying the latest products that includes video games and other computer gadgets are turning consumers into life-long debt slaves that will continue to pay their credit card companies with “interest” until the debt is paid.  That can take a long period of time since interest rates are tied to credit cards and other revolving loan payments.  According to the Federal Reserve Bank (who continues endless money printing) and other government institutions, the average US household owes between $7,000 and $15,112 on credit cards.  The average mortgage debt is at $146,215 and student loans’ reaching the $1 trillion mark is at $31,240.  The total amount of debt the United States owes to its creditors namely China is at $17 Trillion and steadily increasing as the Federal Reserve Bank continues to buy its own US bonds.

Debt Slavery is the new modern-day slavery as millions continue to buy products on credit becoming perpetual servants of mega corporations and international banks.  How?  As you buy with credit cards or loans, the “interest rates” attached to the purchases made is the bond that ties you and the corporate interests or bankers for eternity.  The debt people get into is difficult to escape as interest rates accumulate over time it becomes extremely difficult to repay since it keeps adding up.  In the 2009 film called ‘The International’ with Clive Owen and Naomi Watts which was actually inspired by the BCCI (Bank of Credit and Commerce International) scandal in real life had an interesting scene involving an Italian politician named Umberto Calvini, who is a weapons manufacturer who explains to Eleanor Whitman (Watts) and Louis Salinger (Owens) that IBBC was interested in buying a missile guiding system that his factory produces then later assassinated.  He explained that the true value was not conflicts but the debt it produces:

Calvini: “No, this is not about making profit from weapon sales.  It’s about control.”

Eleanor: “Control the flow of weapons, control the conflict?”

Calvini: “No. No No. The IBBC is a bank. Their objective isn’t to control the conflict, it’s to control the debt that the conflict produces. You see, the real value of a conflict – the true value – is in the debt that it creates. You control the debt, you control everything.  You find this upsetting, yes?  But this is the very essence of the banking industry, to make us all, whether we be nations or individuals, slaves to debt.”

It was an interesting scene coming out of Hollywood, which by every standard is a propaganda machine.  Debt is serious business especially for banks and corporations.  .

With all of the problems the American public faces with the prospect of a future war on Iran will impact the world’s economy.  With 100 million people out of work in the United States and a reduction in food stamps and inflation hitting food prices, there is much concern.  Celebrities’ personal lives still dominate headlines in the main stream media.  The ‘War on Terror’ has taken away civil liberties and the ‘War on Drugs’ has increased the prison population.  High-crime rates in major cities remain problematic. With the rollout of 7000 drones in 2015, endless wars, a looming dollar collapse, and endless Pharmaceutical commercials that keep people heavily drugged are serious problems for the American public.  Yet, shopping on Black Friday resulting in violence and chaos among uneasy crowds seems to be the norm.

The media and corporate advertisements have turned the American population into a “Slave” state of mind. Many people in the United States are accumulating debt at levels never seen in its 237 years of its existence.  It is a lesson to the world in what NOT to do.  An economy that is consumer based with credit is a disaster in the making because that debt only becomes unmanageable in the long run, especially when the people have no means to repay its debt obligations.  An economy based on consumerism leads to moral decay.  When people become ingrained in consumption disregarding the debt they inherit, they become immune to the realities around them.  When the situation becomes intense with a coming dollar collapse and a possible war in the Middle East, reality will sink in.  Then when the necessities such as food and shelter become scarce the people will begin to panic and lose control over their own lives.  Who knows what people in America will be capable of, but then again as you saw what happened on Black Friday, it is a reminder of how people react when products they don’t really need are on sale.  Imagine how they will react in times of economic despair.

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In its announcement Friday that credit rating agency Standard and Poor's (S&P) was cutting its rating on France's debt for the second time in...

Economic Coup d’Etat: Debt and Deficit as Shock Therapy

When Naomi Klein published her ground-breaking book The Shock Doctrine (2007), which compellingly demonstrated how neoliberal policy makers take advantage of overwhelming crisis times...

Debt and Deficit as Shock Therapy

When Naomi Klein published her ground-breaking book The Shock Doctrine (2007), which compellingly demonstrated how neoliberal policy makers take advantage of overwhelming crisis times...

Five Ways Student Debt Resistance Is Taking Off

On September 9, Sallie Mae became the 50th corporation to cut ties with the American Legislative Exchange Council–and the first to do so under pressure...

Another One Trillion Dollars ($1,000,000,000,000) In Debt

Did you know that the U.S. national debt has increased by more than a trillion dollars in just over 12 months?  On September 30th, 2012 the U.S. national debt was sitting at $16,066,241,407,385.89.  Today, it is up to $17,075,590,107,963.57.  These numbers come directly from official U.S. government websites and can easily be verified.  For a long time the national debt was stuck at just less than 16.7 trillion dollars because of the debt ceiling fight, but now that the debt ceiling crisis has been delayed for a few months the national debt is soaring once again.  In fact, just one day after the deal in Congress was reached, the U.S. national debt rose by an astounding 328 billion dollars.  In the blink of an eye we shattered the 17 trillion dollar mark with no end in sight.  We are stealing about $100,000,000 from our children and our grandchildren every single hour of every single day.  This goes on 24 hours a day, month after month, year after year without any interruption.

Over the past five years, the U.S. government has been on the greatest debt binge in history.  Unfortunately, most Americans don't realize just how bad things have gotten because the true budget deficit numbers are not reported on the news.  The following is where the U.S. national debt has been on September 30th during the five years previous to this one...

09/30/2012: $16,066,241,407,385.89

09/30/2011: $14,790,340,328,557.15

09/30/2010: $13,561,623,030,891.79

09/30/2009: $ 11,909,829,003,511.75

09/30/2008: $10,024,724,896,912.49

The U.S. national debt is now 37 times larger than it was 40 years ago, and we are on pace to accumulate more new debt under the 8 years of the Obama administration than we did under all of the other presidents in U.S. history combined.

Of course all of the blame can't be placed at the feet of Obama.  During the last two elections the American people have given the Republicans a solid majority in the U.S. House of Representatives, and the government cannot spent a single penny without their approval.

Unfortunately, House Speaker John Boehner and the Republicans that are allied with him have repeatedly turned their backs on the people that gave the Republicans the majority and they have authorized trillions of dollars of new debt which will be passed on to future generations of Americans...

Since John Boehner became speaker of the U.S. House of Representatives on Jan. 5, 2011, the debt of the federal government has increased by $3,064,063,380,067.72. That is more than the total federal debt accumulated in the first 200 years of the U.S. Congress--during the terms of the first 48 speakers of the House.

In fact, if all of that debt had been given directly to the American people, every household in America would have been able to buy a new truck...

The $26,722 in new debt per household accumulated under Speaker Boehner would have been more than enough to buy every household in the United States a minivan or pickup truck--or to pay three years of in-state tuition (not counting room and board) at the typical state college.

Sometimes we forget just how much money a trillion dollars is.  In a previous article, I included some illustrations that I believe are helpful...

-If you were alive when Jesus Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now.

-If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

We are doing the exact same thing that Greece did, only on a much larger scale.  What we are doing is not even close to sustainable, and it will inevitably end very, very badly.  The following is what Michael Pento, the president of Pento Portfolio Strategies, told RT the other day...

"That $17 trillion everybody says its 107 percent of GDP, that’s true. But who really cares about the percentage of GDP? It’s the percentage of the debt as a percentage of the revenue – its 700 percent of our revenue. Deficits are growing at 30 percent of our revenue every year added to the deficits we have already. So it’s unsustainable. What is going to happen eventually – a currency and bond market collapse! And it’s not going out 20 years, as I also heard someone mention. In 2016 we’ll probably be spending 40 percent of all of our revenue just to service our debt. That is what the interest payments will equal."

The U.S. debt situation is so bad that even the Prime Minister of Cyprus is scolding us...

"The U.S. has been fortunate in the sense that it’s like a bank, it prints the money that other people accept. So you can live beyond your means over an extended period of time without being punished by the market."

Unfortunately, we will not be able to live way beyond our means forever.  Reality is going to catch up with us at some point.

Right now, the rest of the world is lending us giant mountains of money at interest rates that are far below the real rate of inflation.  This is extremely irrational behavior, and this state of affairs will probably not last too much longer.

But if interest rates go up, it will absolutely cripple the U.S. economy.  For much more on this, please see this article.

And what would make things much, much worse is if the rest of the globe starts moving away from using the U.S. dollar.  At the moment, the U.S. dollar is the de facto reserve currency of the planet and this creates a tremendous demand for U.S. dollars and U.S. debt.

If that changes, it will be absolutely catastrophic for the United States, and unfortunately there are already lots of signs that this is already starting to happen.  I wrote about this in my recent article entitled "9 Signs That China Is Making A Move Against The U.S. Dollar".

But don't just take my word for it.  Just a couple of days ago a major U.K. newspaper came to the same conclusions...

China has overtaken the US as the world’s largest oil importer and goods trading nation. Over the next five years, it will surpass the rest of the world combined in its consumption of base metals.

Given the scale of the country’s consumption of fossil fuels and raw materials, it is only a matter of time before the renminbi replaces the dollar as the primary currency for trading commodities and resources such as crude oil and iron ore.

The debt ceiling farce in Washington and China’s growing reluctance to continue underwriting the US economy by buying up its bonds and adding to America’s near $17 trillion (£10.5 trillion) debt mountain suggests that this tectonic shift in the global trade system could be just around the corner.

So what will happen when the rest of the world decides that they don't need to use our dollars or buy our debt any longer?

At that point the consequences of decades of incredibly foolish decisions will result in an avalanche of economic pain that the American people are not prepared for.

Earlier today, I came across a photograph that perfectly captures what America is heading for.  The following photo of Mt. Rushmore crying has not been photoshopped.  It was taken by Megan Ahrens and it was posted on the Tea Party Command Center.  If George Washington was alive today, this is probably exactly how he would feel about the nation that he helped establish...

Martin Wolf on the Debt Ceiling Circus

This week, Congress approved an 11th-hour deal to raise the debt ceiling, which threatened to push the global economy over the edge, but instead...

US debt surges $328 billion in single day, surpassing $17 trillion for first time

Published time: October 19, 2013 09:32 The national Debt Clock is seen in New York October 15, 2013 (Reuters / Andrew Kelly) Just one...

The Debt Party Is Back: “Somebody Has Clearly Turned the Lights Back On”

This morning we learned that just one day after Congress voted to raise the debt ceiling yet again and relinquish any control it had...

US debt tops $17 trillion for first time

The US Treasury Department has announced that the public debt of the United States reached to a record of $17.076 trillion for the first...

Empire Building, the Debt Ceiling, the Budget Deficit and the “Samson Solution”

Introduction

            US and world political and economic leaders are faced with what they describe as a ‘systemic catastrophe’:  the inability to pay global creditors, including domestic and foreign banks, investors and governments, who hold $16.7 trillion in US Treasury notes.  There is a related crisis: the government cannot secure passage of a budget to finance its military and civilian agencies and activities, including large-scale payments to military contractors, the financing of business, agriculture and banking operations and social programs.  The raising of the debt-ceiling is central to the functioning of the financial ruling class as it extracts hundreds of billions of tax dollars in interest payments from the US Treasury.  Raising the debt ceiling allows the State to keep borrowing and pay its billionaire creditors.  In turn, as long as the US Treasury has liquidity, it remains a ‘safe haven’ for investors thus providing guaranteed profits.  In addition, as long as the dollar remains the principle currency for global transactions, it allows the US Treasury to print money at will and to borrow at a lower cost – at the expense of its competitors and adversaries.

             Financing the budget deficit requires borrowing, which involves the sale hundreds of billions of dollars worth of US government bonds through Wall Street – but at a cost to the taxpayer.  The common denominator is that the entire edifice of finance capital and all of its support structures depend on debt financing by the State.  By borrowing and then taxing its citizens the Treasury extracts wealth from the vast majority of Americans.

            To understand the fight to raise the debt ceiling and to pass a deficit budget it is necessary to analyze the long-term, large-scale sources of State debt.

Imperial Wars, the Ascendancy of Finance Capital and the Debt Crisis

            The ever-increasing debt and the constant raising of the debt ceiling is a result of long-term, large-scale military spending to build the US Empire.  The imperial enterprise has generated a huge deficit:  the cost/benefit ratio has been overwhelmingly negative.  Contrary to militarist propaganda, the empire has not been ‘self-financing’:  Wars and occupation in Iraq , Afghanistan and elsewhere have cost the US taxpayers trillions of dollars, not off-set by incoming imperial plunder or domestic economic expansion.

            Parallel to the cost of wars and occupations, the rise of finance capital has largely resulted from the pillage of the US Treasury.  Huge bailouts, low interest loans, large-scale interest payments on bonds, subsidies and tax exemptions have created a financial ruling class based on maintaining a debt-laden, interest-paying State, which meets its obligations to the creditors while it privatizes (and eliminates) social programs.  The result is a ‘poor indebted State’ and a rich and prosperous Wall Street.  Wall Street stands to gain trillions with the privatization of the multi-billion dollar health (Medicare) and retirement plans (Social Security): this will form an integral component of the “Grand Bargain” to raise the debt ceiling.

Who are the Beneficiaries of Raising the Debt Ceiling?

            The principle and immediate beneficiaries of increasing the debt ceiling are the wealthy, bond-holders and the medium and long-term beneficiaries are the military-intelligence-empire-builders who can continue to secure over $700 billion in annual budget allocations.  The principle strategic losers from raising the debt ceiling will be the hundreds of millions of beneficiaries of social programs like Social Security, Medicare and Medicaid and their family members.  As part of the ‘Grand Bargain’ struck by the Democratic President and Republican Congress – between $1.3 trillion and $1.4 trillion in social cuts will take effect over the next ten years, according to the Congressional Budget Office.  The cuts in Social Security will occur by raising the age of eligibility for full benefits to 70 years, resulting in a loss of $120 billion, as many older retired workers would be expected to die before drawing a single payment while millions of Americans  will be forced to delay retirement and work an extra five years.

Secondly, the earliest age of eligibility for partial benefits will increase from 62 to 64 years – resulting in an additional loss of $144 billion dollars from workers.

Thirdly, the cost of living index would be reduced – a ten- year loss of $112 billion dollars.

Fourthly, the calculation for initial benefits would discard the wage-based method for a so-called “price-index”, resulting in American workers losing another $137 billion dollars over 10 years.  In sum, workers’ social security benefits would be reduced by more than half a trillion dollars – an enormous transfer of wealth to the billionaire creditors, investors and empire builders – all in the name of ‘debt reduction’.

The cuts in MEDICARE and MEDICAID would result in an even more retrograde class polarization.  The ‘Grand Bargain’ could lead to additional losses of over $419 billion dollars.

The biggest cost to the workers will come in the form of an increase in their  monthly premium  for physician services (MEDICARE Part B) from the current 25%  to 35%, resulting in a loss of $241 billion dollars.  The second biggest loss to workers will result from raising the age of eligibility for MEDICARE from 65 to 67 years costing workers an additional S125 billion dollars.  The third loss for workers will be a $53 billion hit  from restricting the use of MEDIGAP insurance – supplementary policies that cover MEDICARE cost sharing requirements.

Further cuts of $187 billion in MEDICAID– the medical plan for the poor and disabled– would result when the federal government shifts its direct funding to block grants to the states that would severely cut services for the poor – a plan first proposed during the Clinton Administration with regard to welfare funding.

Once these reactionary cuts in basic social programs are in place, the beneficiaries, who are able, will be forced to buy alternative supplementary private medical insurance and private retirement plans, while the poor will go without.  The running down of public social services by Wall Street has been a deliberate, cynical strategy to cause popular discontent paving the way for the gradual privatization of services: adding costs, eliminating options and limiting medical treatment, surgery and procedures, especially for the elderly.  The privatization of Social Security, MEDICARE and MEDICAID, will maximize insecurity while minimizing services and lead to untreated and under-treated illness, greater suffering and economic distress.  Bi-partisan Congressional –White House agreements via the “Great Bargain” to raise the debt ceiling will widen and deepen inequalities in the United States .

In sum, “the Grand Bargain” will cause American workers to lose over $1.119 trillion dollars over the next 10 years, leading to a sharp decline in life expectancy, access to health care, living standards and quality of life.

The Samson Solution

            Given the harsh terms, which accompany the “Grand Bargain” to raise the debt ceiling, it would be better if no agreement were reached.  The financial elite is counting on the ‘Grand Bargain’ to leverage their debt collection over the lives and welfare of hundreds of millions of Americans.  It would be better to shake the pillars and pull down this Temple of Mammon (the ‘Samson Solution’) making them pay a price!

            The ‘shock and awe’ induced by default would shake the very foundations of the financial pillage of the US Treasury and the taxpayers; default would seriously undermine the financial basis for imperial wars, spying, torture and death squads.  The entire empire building project would crumble.

            True, in the short-run, the workers and middle class would also suffer from a default.  But the discredit of the ruling political parties, the political elite and Wall Street, could lead to a new political alignment, which would fund social programs by, in David Stockman’s phrase, “soaking the rich” – raising corporate taxes by 50%, imposing a financial transaction tax of 5%, uncapping the social security tax and collecting taxes on overseas US multi-nationals’ profits.  Additional billions would be saved by ending imperial wars, closing bases and canceling military contracts.  Tax reform, imperial dismantlement and increased domestic investment in productive activity would generate domestic growth leading to a budget surplus, extending MEDICARE to all Americans, reducing the age of retirement to 62 and providing a living wage for all workers!

The International Monetary Fund Lays The Groundwork For Global Wealth Confiscation

Bill Frezza
Forbes
Oct. 17, 2013

The International Monetary Fund (IMF) quietly dropped a bomb in its October Fiscal Monitor Report. Titled “Taxing Times,” the report paints a dire picture for advanced economies with high debts that fail to aggressively “mobilize domestic revenue.” It goes on to build a case for drastic measures and recommends a series of escalating income and consumption tax increases culminating in the direct confiscation of assets.

Yes, you read that right. But don’t take it from me. The report itself says:

“The sharp deterioration of the public finances in many countries has revived interest in a “capital levy”— a one-off tax on private wealth—as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair). … The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away. … The tax rates needed to bring down public debt to precrisis levels, moreover, are sizable: reducing debt ratios to end-2007 levels would require (for a sample of 15 euro area countries) a tax rate of about 10 percent on households with positive net wealth. (page 49)”

Read more

This article was posted: Thursday, October 17, 2013 at 1:20 pm

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Gold Spikes 3% After Debt Ceiling Rises & U.S. Downgrade

Today’s AM fix was USD 1,308.50, EUR 959.87 and GBP 813.09 per ounce.
Yesterday’s AM fix was USD 1,278.25, EUR 944.75 and GBP 797.71 per ounce.

Gold fell $1.80 or 0.14% yesterday, closing at $1,279.50/oz. Silver slid $0.06 or 0.28% closing at $21.27. Platinum climbed $14.80 or 0% to $1,395.20/oz, while palladium rose $7.25 or 1% to $712.55/oz.

Gold prices jumped $36 in 15 minutes and it surged as high as $1,321 per ounce or as much as 3.6% at one stage. Silver jumped by an even greater margin, by 5.1%, and rose as high as $22.18/oz.

Gold rose for the first time in four days after U.S. lawmakers reached an agreement to increase the debt ceiling and increasingly important Chinese credit ratings agency, Dagong Global Credit Rating Co. cut its credit rating for the U.S.

This led to short covering and some safe haven demand for gold as the dollar fell against all major currencies.

Gold in USD and Debt Ceiling - Quarterly, 1933-2013 (Bloomberg)
Gold in USD and Debt Ceiling - Quarterly, 1933-2013 - (Bloomberg)

The smart money is scooping gold bullion up at these depressed levels. Gold is down 23% this year despite robust demand from central banks and especially from India and China.

Global sales of bullion bars and coins gained 78% in the second quarter, according to the World Gold Council, showing that demand actually accelerated.

The U.S. government has avoided default but remains essentially insolvent and its appalling fiscal state has deteriorated once again due to the debt ceiling being raised above $16.7 trillion. Although the U.S. national debt has already surged well above that and as of writing, the U.S. National Debt is actually nearly $16.97 trillion and rising at roughly $1 trillion every year.

It is worrying that the recent debate has again been superficial and revolves around the theatre and political chicanery of the Republicans versus the Democrats and the usual partisan support for opposing ‘teams’ rather than the substantive issue of America’s likely insolvency and the fact that the actual national debt is actually between $100 trillion and $200 trillion and there is little sign of political or economic will to tackle this fundamentally important issue.

The U.S. is engaged in fiscal and monetary policies that are akin to a Banana Republic.

In addition to electronically creating out of nothing $85 billion every month to buy its own debt in the form of bonds, the U.S. is also borrowing more money than it is authorized to borrow, from itself again.

The extra $264 billion or so in borrowing — the difference between the actual real time $16.964 trillion national debt and the $16.7 trillion debt limit — was lent to themselves - by one section of government to another - in recent weeks.  Treasury Secretary, Jack Lew, ex COO of Citigroup Bank, has been using “extraordinary measures” since the U.S. ran out of money a few months ago and has been using government retirement programmes to make up the difference.

This is a form of shell game or confidence trick used to perpetrate what is a dangerous accounting practice that tends to end in tears.


Gold and Silver in USD and Debt Ceiling - Quarterly, 2000-2013 - (Bloomberg)

These unusual, some would say fraudulent, accounting practices and the fact that the U.S. is borderline insolvent, contrary to copious amounts of denial globally, are extremely dollar bearish and gold and silver bullish.

The risks posed to the dollar, but also to the pound, euro, yen and other electronic and fiat currencies is why we remain confident that both precious metals will reach real (inflation adjusted) record highs in the coming months.

Silver will likely continue to outperform after its most recent period of under performance.

JP Morgan Chase has issued letters to its business account holders notifying them that as of November 17 the bank will limit all cash transactions, including deposits, withdrawals and ATM usage, to $50,000 per month, and will prohibit all outgoing international bank wires.

Chase Bank has moved to limit cash withdrawals while banning business customers from sending international wire transfers. This has caused speculation that the bank is preparing for a looming financial crisis in the United States by imposing capital controls.

Some have suggested the drastic measures were designed to push business clients into more costly premium business accounts. Bank officials confirmed yesterday that the new capital limits apply to all business account holders but could not say why the measures came about and whether they were bank driven, due to profit motives or government regulations.


Gold in USD and Debt Ceiling, 2011 - (Bloomberg)

The bank will stop processing any outgoing international bank wire, and that any monthly cash transactions in excess of the new $50,000 limit will be subject to penalties and fees.

JP Morgan is embattled after a series of scandals including allegations of manipulation in many markets including LIBOR, foreign exchange, oil and energy markets and of course in the gold and silver markets.

It has received some enormous ‘slap on the wrist’ fines as it attempts to clear up the mess created by the London Whale trading scandal. The bank will pay $100 million to the U.S. Commodity Futures Trading Commission (CFTC), conceding "reckless" behavior led to the trading debacle that generated about $6 billion in losses.

There remains the real risk of capital controls and it will be important to own gold bullion in the event of capital controls.

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Republican Sell-out: White House Wins on Budget, Debt

The Republican congressional leadership capitulated completely to White House demands for full funding of the federal budget at fiscal 2013 levels and a suspension of the debt limit through February 7. 

In the October 16 votes, the House of Representatives voted 285-144, with 144 Republicans voting nay, and the Senate voted 81-18, with 18 Republicans voting nay. President Obama signed the bill into law shortly after midnight after the evening votes.

“We fought the good fight,” House Speaker John Boehner (R-Ohio) said in a press conference after the House Republican leadership capitulated. “We just didn’t win.” Boehner and his leadership team, including Majority Leader Eric Cantor (R-Ohio), shown in blue tie, and Majority Whip Kevin McCarthy (R-Calif.) voted in favor of the bill that failed to make any cuts to federal spending and gave a blank check to the White House to rack up new debt. 

The New York Times accurately summarized the bill in “The Republican Surrender,” a house editorial: "The health care reform law will not be defunded or delayed. No taxes will be cut, and the deal calls for no new cuts to federal spending or limits to social welfare programs.”

The bill funds federal government appropriations at fiscal 2013 levels through January 15, confirms that many federal employees have just finished a two-week paid vacation and suspends the national debt limit until February 7 in a provision of the bill called the Default Prevention Act of 2013. It would also require — in a sop thrown to Republicans — that President Obama verify that those qualifying for subsidies under ObamaCare are indeed qualified to receive those subsidies. The White House panned the provision as symbolic only, and stressed that it would in no way interfere with the funding or implementation of ObamaCare. 

The bill also includes a variety of pork barrel projects, including a $174,000 gratuity to the widow of the recently deceased Democratic Senator Frank Lautenberg of New Jersey (who was one of the wealthiest members of Congress, with an estimated personal wealth of more than $50 million) and more than $2.1 billion in new money for work on a dam on the Ohio River, which borders Senate Republican Minority Leader Mitch McConnell's state of Kentucky. (McConnell voted for the capitulation and is running for reelection next year.)

Congressman Thomas Massie (R-Ky.), elected with Tea Party support in 2012, was among the majority of House Republicans opposing the bill, noting that the law “will increase our nation's debt limit by hundreds of billions of dollars while simultaneously refusing to make a single cut or reform to address our nation's spending problem.” He noted in a Facebook post, "The only sustainable way to avoid a debt crisis is to balance the federal budget." Massie was among the House Republicans who voted against the bill.

Only in America are the ones who want to balance the budget and make raising the national debt limit unnecessary labeled terrorists, and those who want to raise the national credit card limit to infinity deemed “reasonable.”

The debate over the budget and debt limit was symptomatic of the sickness that is infecting both American politicians and mainstream media:

• On the budget, the debate was largely about what was not in the spending bills (specifically, funding for ObamaCare), rather than what was in them.

• In the budget debate, the dysfunction in the system has now become the only function. It was once a sign of the failure of the appropriations process that an omnibus “continuing resolution” was needed to fund several of the regular 12 annual appropriations bills. President Obama and Senate Majority Leader Harry Reid (D-Nev.) insisted that the budget be funded in a single bill, rather than through 12 different appropriations bills, as the rules of both houses of Congress require.

• Most of the budget is on autopilot; Congress does not vote to spend most of the budget any more. As a result, the vast majority of entitlements such as most of ObamaCare are automatically funded annually without a vote from Congress.

• The media and most politicians trumpeted only one option as a metaphysical necessity throughout the debate: They must raise the debt ceiling. Only a few Tea Party-supported congressmen ever discussed the alternative — balancing the budget — which would have made raising the debt ceiling unnecessary.

• The deadline over the debt limit extension seemed phony. Consider that the government shutdown, which stopped funding of 16-18 percent of the federal government during the first two weeks of October, matches almost exactly the projected deficit level for the same fiscal year. Why, if government spending was cut at the same level of the deficit, would the U.S. continue to accumulate debt? Why didn't the spending reductions, even if temporary, move the deadline needle at all?

Photo of House Majority Leader Eric Cantor: AP Images

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The International Monetary Fund Lays The Groundwork For Global Wealth Confiscation

by Bill Frezza The International Monetary Fund (IMF) quietly dropped a bomb in its October Fiscal Monitor Report. Titled “Taxing Times,” the report paints a...

Public Banking Forum of Ireland Power Point – “The Irish Debt Crisis: Time to...

--2014--

695. July 29-Aug. 5. Moving Beyond Capitalism conference, San Miguel de Allende, Mexico

--2013--

694. Dec. 15, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST

693. Nov. 16, interview This is Hell! radio show, WNUR 89.3 fm, thisishell.com/live, 11.20 a.m. EST. Listen to archive here

692. Nov. 15, interview with George Berry, The Financial News Network Show, truthfrequencyradio.com, 1 pm PST

691. Nov. 14, interview with Stanley Montieth, The Doctor Stan Show, Radio Liberty, 4 pm PSTf

690. Nov. 14, interview with Neil Foster, Reality Bytes show, Awake Radio (UK), Shazziz Radio (US), 8 pm UK time.

689. Nov. 13, interview with Bonnie Faulkner, KPFA, Los Angeles. Listen to archive here.

688. Nov. 12, interview with Tom Kiely, INN World Report, 4:30 PST

687. Nov. 11, interview, Between the Lines News Magazine, WPKN radio, Bridgeport, CT, 9 p.m. ET. Listen to archive here

686. Nov. 10, skype participant, forum at the Putrajaya International Islamic Arts and Cultural Festival, "Global Economic and Monetary Crisis: What Needs to be Done?" Putrajaya, Malaysia, 11 a.m. MYT, 7 pm, Nov. 9 PST

685. Nov. 3, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST

684. Oct. 31, interview with Voice of Russia radio, American edition, 2:30 pm, CET (Central Europe Time.) Listen to archive here.

683. Oct. 23, interview with Daniel Estulin on RT tv

682. Oct. 16, interview with Per Fereng, KBOO radio, Portland, 11 am PST

681. Oct. 15, presentation, "The Public Banking Forum in Ireland," 7-9 PM, Hudson Bay Hotel, Athlone, Ireland.

680. Oct. 14, presentation, Cork, Ireland

679. Oct. 12, presentation, "The Public Banking Forum in Ireland," 2-4 PM, Springfield Hotel in Leixlip, County Kildare, Ireland. Information on these three events here.

678. October 4, interview with Bill Deller, 3CR radio, Melbourne, Australia, 2:30 pm, PST

677. Oct. 3, interview with Joyce Riley, the Power Hour. Listen to archive here.

676. Oct. 1, interview with Tom Kiely, INN World Report 7:30 EST

675. Sept. 29, interview with Stephen Lendman, The Progressive Newshour, 10 a.m. PST

674. Sept. 27, interviw with Kevin Barrett, AmericanFreedomRadio.com, NoLiesRadio.org:
http://TruthJihadRadio.blogspot.com, 2 pm PST

673. Sept. 19, interview, The Gary Null Show, 9:30 a.m. Pacific

672. Sept. 19, Interview on the Global Research News Hour with Michael Welch--check site for time and archive.

671. Sept. 18, interview with David Sierralupe, Occupy Radio, KWVA, 88.1 FM, Eugene

670. Sept. 15, interview with Niall Bradley, Sott Talk Radio, sott.net, 2 p.m. EST

669. Sept. 14, interview FDLBookSalon, firedoglake.com, 5pm EST

668. Sept. 10, "Turning Hard Times into Good Times" with Jay Taylor, VoiceAmerica, 12:30 pm PST. Listen to archive here.

667. Sept. 9, interview with Ken MacDermotRoe and Del LaPietro, In Context Report, 9 am PST. Listen to archive here.

666. Sept 7, interview with Valerie Kirkgaard, WakingUpInAmerica.com, 6 am, PST. Listen here.

665. Sept. 6, Interview with Al Korelin, The Korelin Economics Report, 12:30 pm PST

664. Sept. 5, discussion of how to bring public banking to Colorado on "It's the Economy, Stupid," KGNU, Boulder, 5 p.m. PST

663. Sept. 5, interview with Patrick Timpone, oneradionetwork.com, 8 a.m. PST

662. Sept. 3, interview (along with Elliott Spitzer?), "Turning Hard Times into Good Times" with Jay Taylor, VoiceAmerica, 1 pm PST Listen to archive here.

661. Sept. 3, interview with Jeanette LaFeve, The People Speak, 6 pm PST

660. Aug. 25, Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

659. Aug. 22, interview with Christopher Greene, AMTV Radio, simulcast in audio/video over GoogleHangouts and American Freedom Radio, 1 p.m. PST

658. Aug. 22, interview, TheAndyCaldwellShow.com,
CalChronicle.com, 3 pm PST

657. Aug. 21, interview with Merry and Burl Hall, blogtalkradio.com/envision-this, 5 pm PST

656. Aug. 21, interview with Lori Lundin, America's Radio News Network, 10:30 a.m. ET.

655. Aug. 16, interview with Sinclair Noe, Moneyradio.com, 4 pm PST

654. Aug. 15, interview with Justine Underhill, Prime Interest, Russia Today TV, 1:30 pm PST

653. Aug 14, interview with Jim Goddard, This Week in Money, 4 pm, PST. Listen to archive here, starting at minute 32.

652. Aug. 14, interview with Mary Glenney, WMNF 88.5, 10 a.m. PST

651. Aug. 14, interview with Chuck Morse, irnusaradio.com, 8 am, PST

650. Aug. 13, interview with Thomas Taplin, Dukascopy TV, Switzerland, 9 am PST

649. Aug 7-11, Madison Democracy conference, https://democracyconvention.org/

648. Aug. 6, radio interview, INN World Report with Tom Kiely, http://feeds.feedburner.com/INNWorldReportRadio 4:30 PST

647. Aug 5, interview with Arnie Arnesen, 94.7 fm, Concord, NH, 9 am PST

646. Aug 3, interview with Diane Horn, Mind Over Matter show, KEXP radio, 90.3 FM, Seattle, 7:00 a.m. PST

645. July 31, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST

644. July 28, Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

643. July 2, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.

642. July 2, interview with Arnie Arnesen, 94.7 fm, Concord, NH, 12:30 EST.

641. June 30, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT. Listen to archive here.

640. June 24, interview on RT tv re student debt, 10:30 am PST

639. June 17, interview on The Andy Caldwell Show, 3:30 pm PST

638. June 16, interview with Jason Erb, 5 pm Pacific

637. June 13, interview with Paul Sanford, "Time 4 Hemp-LIVE," http://www.AmericanFreedomRadio.com, 10 am, PST

636. June 6 presentation with Jamie Brown at the Mt. Diablo Peace and Justice Center in Walnut Creek. Info at Favors.org, 7 to 9 pm

635. June 1, interview with Kris Welch, KPFA Los Angeles, 10 am PST

634. May 28, interview with Malihe Razazan, "Your Call" radio, KALW, San Francisco, 10 am PST.

633. May 26, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

632. May 23 interview with Simit Patel, InformedTrades.com (youtube) 3:30 pm PST

631. May 22, Thousand Oaks, 3 expert panel, "A Parachute For the Fiscal Cliff," University Village 2-4 pm

630. May 22, interview with Jack Rasmus, 11 am PST. Enjoy the interview here.

629. May 22, Guns and Butter show, KPFA, http://www.kpfa.org/archive/id/91790

628. May 14, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.

627. May 13, live appearance on RTTV, 3 pm PST Watch it here.

626. May 8, interview with Valli Sharpe-Geisler, Silicon Valley Voice, KKUP, 3 pm PST

625. May 8, interview, the Meria Heller Show, 11 am PST

624. May 4, interview, Latin Waves with Sylvia Richardson, 10 am PST

623. April 30, Jay Taylor, VoiceAmerica, 1 pm PST

622. April 29, interview with Rob Kall, Bottom Up Radio, 9 am Pacific
Listen to archive here.

621. April 28, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT

620. April 25, interview, the the Dr. Katherine Albrecht Show, 5 pm EDT

619. April 17, interview with Mike Harris, rense.com, 1 pm PDT

618. April 16th, speaker, Valley Democrats United (Democratic Party of San Fernando Valley), Van Nuys, Ca. 7-9pm

617. April 13, interview with Darren Weeks, Govern America, noon Eastern, listen here

616. April 9, interview with Charlie McGrath, Wide Awake News, 6-7 pm PDT.

615. April 6, phone conference, Justice Party, http://www.justicepartyusa.org/public_banking_conference_call, 9 a.m.

614. April 5, interview, Butler on Business, 11 a.m. EDT

613. April 3, interview with Michael Welch, Global Research News Hour, 8:30 a.m. PDT

612. April 2, interview with Jay Taylor, VoiceAmerica, 12:30 PDT. Listen here.

611. April 1, interview with Brannon Howse, www.worldviewradio.com, 11 a.m. PDT

610. April 1, interview with Scott Harris, Counterpoint,
WPKN Radio, 8:30 pm, ET Listen to archive here.

609. April 1, interview with Margaret Flowers and Kevin Zeese. Watch and listen to archive here, starting at minute 50. Articles based on the interview are at Truthout.org.

608. March 31, interview with Jason Erb, Exposing Faux Capitalism, Oracle Broadcasting, 11 a.m. Pacific

607. March 31, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PDT Listen to the archive here.

606. March 29, interview, The Gary Null Show, 9:30 a.m. Pacific

605. March 28, interview with Stan Monteith, radioliberty.com, 9 pm PDT

604. March 28, radio interview, INN World Report with Tom Kiely, http://feeds.feedburner.com/INNWorldReportRadio 4:30 PDT

603. March 27, interview with Charlie McGrath, Wide Awake News, 6-7 pm PdT.

602. March 27, interview with Jack Rasmus on PRN, 11 a.m. PDT

601. March 25, interview on the Richard Kaffenberger show, KTOX, Needles, CA. 3:15 PDT

600. March 22, newly available archived radio interview, Mandelman Matters. Listen here.

599. March 22, interview with James Fetzer, The People Speak Radio, 5-7 pm PDT

598. March 22, interview , Our Times With Craig Barnes, KSFR radio, Santa Fe, 10 a.m. MST

597. March 12, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.

596. March 11, interview with Stephen Lendman, Progressive Radio News Hour, 10 am, PST

595. March 9, Interview with Sylvia Richardson, Latin Waves, CJSF 90.1FM, 9:30 am PST

594. March 6, interview with Charlie McGrath, wideawakenews.com, 6pm PST. Watch and listen here.

593. March 3, interview with Lateef Kareem Bey, Fix Your Mortgage Mess, 4 pm PST

592. March 2, Interview with Stuart Richardson, Latin Waves, CJSF 90.1FM, 11 am PST

591. Feb. 27, interview with Jim Banks, KGNU, Boulder, 12 pm PST

590. Feb 27, interview with Sinclair Noe, Financial Review, 10 am PST

589. Feb. 25, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.

588. Feb. 6, Interview with Phil Mackesy, This Week in Money, TalkDigitalNetwork.com, 11 am PST. Listen to the archive here: http://talkdigitalnetwork.com/2013/02/this-week-in-money-70/

587. Feb. 4, interview with Ken Rose, What Now radio show, KOWS RADIO OCCIDENTAL 107.3 FM, 11 am PST.

586. Jan. 31, interview with Tom Kiely, INN World Radio Report, 5:00 pm PST

585. Jan. 27, interview with Stephen Lendman, progressive radio
network, 10 am PST

584. Jan. 23, interview on KPFK, 8pm PST

583. Jan. 22, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST.

582. Jan. 3, interview with Mary Glenney, WMNF 88.5, Tampa, 3 pm EST

581. Jan. 2, interview, The Bev Smith Show, thebevsmithshow.net, 5 pm PST

--- 2012 ---

580. Dec. 27, video interview with Charlie McGrath, Wide Awake News, listen and watch here.

579. Dec. 24, October talk at First Unitarian Church in Portland aired on KBOO radio, http://kboo.fm/, 8:00 am PST

578. Dec. 24, interview with Ron Daniels, the WWRL Morning Show with Mark Riley, wwrl1600.com, 5:05 am PST

577. Dec. 21, interview with Andy Caldwell, TheAndyCaldwellShow.com, KZSB AM1290 Santa Barbara / Ventura and KUHL AM1440 Santa Maria / San Luis Obispo, 3:30 pm PST

576. Dec. 20, interview with Fred Smart, aunetwork.tv, 9 pm EST

575. Dec. 19, interview, Crisis of Reality with Doug Newberry, oraclebroadcasting.com, 1pm EST. Listen here.

574. Dec. 19, interview with Dr. Jack Rasmus, Alternative Visions, Progressive Radio Network, 2 pm EST

573. Dec. 17, The Bev Smith Show, thebevsmithshow.net, 4 pm PST

572. Dec. 15, interview with Stephen Lendman, progressive radio network, 10 am PST. Listen here.

571. Dec. 14, interview with Craig Barnes, Our Times With Craig Barnes, KSFR radio, 9 am PST Listen to the archive here.

570. December 9th, speaker, Mayo Arts Center (10 Mayo Street) in Portland, ME
http://mayostreetarts.org/about-us/where-we-are 7:30-9pm

569. Dec. 7, Vermont's New Economy conference, Vermont College of the Find Arts, Montpelier, VT, 9 am to 4 pm and reception at 4:30. $25
www.global-community.org/neweconomy to register

568. Dec. 5, speaker, Pennsylvania Public Bank Project's Forum on Public Banking, at the David Library of the American Revolution, Washington Crossing, PA, 7pm

567. Nov. 26-27, 3rd Annual World Conference on Riba, Kuala Lumpur, Malaysia

566. Nov. 22, presentation before Royal Scottish Academy -- "A Public Bank for Scotland" (here), Riddle's Court, 322 Lawnmarket, Edinburgh EH1 2PG Scotland, 6 pm

565. Nov 8, Healthy Money Summit, speaking with Hazel Henderson at 1-2 pm PST, information here.

564. Sunday, Oct. 28, Keynote Speaker; The Buck Starts Here, 2:00pm, sponsored by the Kairos Occasional Speakers Series & OFOR, Kairos Milwaukie UCC, Milwaukie, OR.

563. Saturday, Oct. 27, Keynote Speaker; OFOR Saturday Symposium: The Buck Starts Here, 10am - 3pm, Molalla, OR

562. Friday-Sunday, Oct. 26-28, Keynote Speaker; Oregon Fellowship of Reconciliation Fall Retreat - The Buck Starts Here, Camp Adams, Molalla, OR, Friday, 5pm- Sunday 12 noon

561. Friday, October 26, Invited Commentator; screening of “HEIST” (new documentary about the roots of the American economic crisis), sponsored by First Unitarian Church of Portland's Economic Justice Action Groups, Alliance for Democracy, KBOO, Move to Amend, 7:00pm, First Unitarian Church, Portland, OR

560. (Oct. 25-28, Bioneers Conference, Portland, OR)
Oct. 25, Keynote Speaker; sponsored by Portland Fellowship of Reconciliation (PFOR) and the First Unitarian Church of Portland's Economic Justice and Peace Action Groups, 7:00-8:30pm, First Unitarian Church, Portland, OR

559. Oct. 24, interview with Per Fagereng, KBOO radio, Portland, 9 am PST

558. Oct. 24, KPFA "Guns and Butter" interview. Listen to archived show here.

557. Oct. 21, speaker at BBQed Oysters and Beer Fundraiser Party for PBI, San Rafael, CA, 4 pm PST

556. Oct. 14, Live Gaiam tv interview appearance. Watch it here free at 7pm EST.

555. Oct. 12, interview with Matt Rothschild of The Progressive, 10 a.m. Central time

554. October 11-14, speaker, Economic Democracy Collaborative, Madison, Wisconsin

553. Oct. 11, radio interview with Norm Stockwell, WORT, 12 pm CST

552. Oct. 9, interview with Kevin Barrett, No Lies Radio, listen to archive here.

551. Oct. 8, interview, "Mountain Hours Revolution Radio" with Wayne Walton, on RBN, 12-1 pm PST

550. Oct. 7, interview with Lloyd D'Aguilar, "Looking Back Looking Forward", http://lookingbacklookingforward.com/, 2 pm EST

549. Sept. 26, interview with Douglas Newberry, markettoolbox.tv, 1pm EST. Listen here.

548. Sept. 25, interview with Dr. Stanley Montieth, radioliberty.com, 3pm PST

547. Sept. 24, interview with Charlie McGrath, Wide Awake News, 6-7 pm PST.

546. Sept. 22, interview with Stephen Lendman, progressive radio network, 10 am PST

545. Sept. 17 interview along with Hazel Henderson, National Teach In for Occupy Wall Street, http://www.livestream.com/owshdtv 5pm EST

544. Sept. 10, interview with Thomas Taplin, Dukascopy TV (Switzerland), 7 am PST Watch and listen here

543. Sept. 7, interview with Mike Harris, republicbroadcasting.org, 6 am PST

542. Sept. 6, interview with Douglas Newberry, markettoolbox.tv, 1pm EST. Listen here.

541. Aug 28, interview, the Meria Heller Show, 11 am PST. Listen to archive here. And listen to excellent Meria Heller show here.

540. Aug 26, interview with Stephen Lendman, progressive radio network, listen to archive here.

539. August 21, interview with Charlie McGrath, wideawakenews.com. Listen to archive here.

538. Aug 20, interview with Kim Greenhouse, It's Rainmaking Time, listen here.

537. Aug 16, interview with Mike Harris, republicbroadcasting.org, 6 am PST

536. Aug. 14, interview, TheAndyCaldwellshow.com, 4:30pm PST

535. August 13, interview with American Free Press, 1 pm PST

534. July 24, interview along with Victoria Grant, The People Speak, 6pm, PST

533. July 24, interview with Kevin Barrett, NoLiesRadio.org, 9 am PST

532. July 23, interview with Charlie McGrath, wideawakenews.com, 6 pm PST

531. July 22, interview with Dave Hodges, The Common Sense Show, 7 pm PST

530. July 22, interview with Stephen Lendman, progressive radio network, 10 am PST. Listen to archive here.

529. July 19, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST

528. July 10-12, Speaker, Conference on Social Transformation, Faculty of Economics, Split University, Split Croatia

527. July 10, video interview with Max Keiser, the Keiser Report, on the ESM. Watch it here.

526. July 7, Interview with Phil Mackesy, This Week in Money, TalkDigitalNetwork.com, 3 pm PST

525. July 6, video interview with Dr. Mercola, see it here.

524. June 23, Interview with Al Korelin, The Korelin Economics Report, 1 pm PST. Listen to archive here.

523. June 21, interview with Tom Kiely, INN World Radio Report, 4:30 pm PST

522. June 21, interview on the Gary Null Show, 9:20 am PST

521. June 18, interview with Ken Rose, What Now radio show, KOWS RADIO OCCIDENTAL 107.3 FM, 1 pm PST. Listen to archive here.

520. June 17, interview with Bill Resnick, KBOO radio, 9 am PST

519. June 16 interview with Stephen Lendman, progressive radio network, 10 am PST. Listen to archive here.

518. June 9, interview with Sylvia Richardson, Latin Waves, 9:45 am PST. Listen to archive here.

517. June 5, interview, Truth Quest With Melodee, KHEN radio, 7pm PST

516. June 2, interview about Web of Debt, Our Common Ground,http://www.blogtalkradio.com/OCG, 7pm PST

515. June 1, interview with Robert Stark, The Stark Truth listen here.

514. Newly available video of interview on "Moral Politics" -- see it here

513. May 30, interview, The Tim Dahaney Show, ll am PST

512. May 28, interview with Pedro Gatos, "Bringing Light into Darkness", KOOP.ORG, 6 pm CST

511. May 24, interview, Make It Plain With Mark Thompson, SiriusXM Satellite Radio, 2pm PST

510. May 20, interview, Women's View Radio, blogtalkradio.com, 10 am Central Time. Listen here.

509. May 13, interview, www.Blogtalkradio.com/fixyourmortgagemess, 4:15 pm PST

508. May 12, interview with Stephen Lendman, progressive radio network, 10 am PST Listen here.

507. May 9, seminar, Re-imagining Money and Credit, Art bldg. rm 103, El Camino college, Torrance, Ca. 5-7:30 pm

506. May 8, interview with Mike Harris, republicbroadcasting.org, 9 am EST

505. May 7, radio discussion on "The Myth of Austerity", Connect the Dots, KPFK Los Angeles, 7 am PST. Listen here.

504. May 4, interview The Unsolicited Opinion, republicbroadcasting.org, 8 am PST

503. April 27-28, speaker, Public Banking Institute Conference, Friends Center, Philadelphia. Listen here.

502. April 25, speaker Global Teach-In (globalteachin.com), 12 noon EST

501. April 17, Interview with Leo Steel, http://www.blogtalkradio.com/lasteelshoworg, 8:30 pm EST. Listen here.. 31 minutes in.

500. April 14, interview with Stephen Lendman, progressive radio network, 10 am PST

499. April 14, interview with Al Korelin, The Korelin Economics Report

498. April 10th-12th Speaker at Claremont Conference, “Creating Money in a Finite World” Claremont, CA . See video here.

497. April 5, interview , This Week In Money with Phil Mackesy (howestreet.com) 12:30 PST. Listen to the archive here.

496. April 3, speaker at COMER with Paul Hellyer, "Escape From the Web of Debt," Toronto, 7:30 pm

495. March 27, speaker on "Why are we so Broke? New ways to look at the Finances of our State and City," League of Women Voters luncheon, San Diego, 12 noon

494.5 March 24, radio interview, Mandelman Matters. Listen here.

494. March 17, speaker via skype, SCADS conference, London

493. March 15, interview with Per Fagereng, Fight the Empire, KBOO radio, 9:30 am PST

492. March 15, speaker, San Rafael City Hall 6 pm

491. March 13, speaker at Sergio Lub's house, Walnut Creek, info at Favors.org, 6pm

490. March 11, speaker, TedxNewWallStreet. See it here.

489. March 10, interview with Stephen Lendman, progressive radio network, 10 am PST

488. March 6, interview with Melinda Pillsbury-Foster, http://radio.rumormillnews.com/podcast/, 11 am PST

487. Feb. 25, interview with Martin Andelman, http://www.mandelman.ml-implode.com, 9:30 am PST

486. Feb. 25, interview, This Week In Money with Phil Mackesy (howestreet.com), 3 pm PST

485. Feb. 25, interview on CIVL Radio, Latin Waves, How Greece Could Take Down Wall Street, 11:30am PST

484. Feb 23, interview with Thomas Kiely, INN World Report Radio, 7:30 pm EST

483. Feb. 17, featured speaker, Public Banking in America weekly call, 9 am PST

482. Feb. 11, interview with Stephen Lendman, progressive radio network, 10 am PST

481. Feb. 8, interview with Mike Beevers, KFCF Fresno, 4:30 pm PST

480. Feb. 7, interview with Kevin Barrett, NoLiesRadio.org, 9 am PST; listen to archive here

479. Feb. 6, participant, Occupiers and Wells Fargo Executives Gather to Discuss the American Foreclosure Crisis, The Center of Nonprofit Management at California Endowment Building 1000 N. Alameda, Los Angeles, meeting 3 pm and press conference 5:30 pm

478. Feb. 2, interview with Tom Kiely, INN World Report Radio, 7:30 pm EST

477. Feb. 2, interview with Patrick Timpone, oneradionetwork.com, naturalnewsradio.com. Listen to archive here

476. Jan. 31, interview, Liberty Coins and Precious Metals, 9 am PST

475. Jan. 27, interview KPFA, Project Censored, 8:30 am PST

474. Jan. 27, FILMS4CHANGE-INSIDEJOB, panel speaker, Edye Second Space, Santa Monica Performing Arts Center, 7:30 pm

473. Jan 22, interview with Dave Hodges, The Common Sense Show, 7:30 pm PST. Listen live here.

472. Jan. 20, interview with Mike Harris, The Republic Broadcasting Network, 7 am PST

471. Jan. 16, interview with Rob Lorei, WMNF fm, Tampa, 2 pm PST

470. Jan. 14, interview with Stephen Lendman, progressive radio network, 10 am PST

469. Jan. 11, interview with Jeff Rense, rense.com, 8pm PST

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Strike Debt Kicks Off Second Debt Buy-Up With March for Universal Healthcare

A Strike Debt action regarding medical debt in Union Square, New York City, March 23, 2013.A Strike Debt action regarding medical debt in Union Square, New York City, March 23, 2013. (Photo: The Eyes Of New York)A coalition of groups associated with Occupy Wall Street took to the streets of midtown Manhattan on Thursday evening calling for the abolition of the for-profit health care system in the United States and the creation of a government-run single-payer system. Around 70 protesters marched to four major health insurance companies to list their grievances with each corporation, often by comparing what they see as the wildly disproportionate salaries of CEOs with health costs for regular patients or the company's average worker's salary.

The march was part of a larger project that Strike Debt (which formed from the creative churn of Occupy) is implementing over the week to draw attention to medical debt, which the group sees as a national emergency. Strike Debt also announced that its latest round of a project known as the Rolling Jubilee has bought and abolished over $1 million in medical debt.

Activists handed out fliers on the march with statistics on just how damaging medical debt can be to households: "62% of bankruptcies are linked to medical bills" was featured prominently on the flier, as well as on a banner at the front of the march. Also on the handout was perhaps an even more surprising number: "78% of those who declared medical bankruptcy had insurance at the time they became sick." 

Strike Debt's mission is to politicize and organize around personal debt, often by arguing that debt is not a moral failing but rather a societal problem that needs to be addressed and resisted collectively. One of the tactics, called Rolling Jubilee, involves buying "debt for pennies on the dollar, but instead of collecting it, abolish[ing] it." The group buys debt on the open market the same way a collection agency would, but cancels the debt instead of collecting it. Funding comes from donors who contribute to the group through its website.

The first Rolling Jubilee took place in November of last year and "abolished" more than $100,000 of medical debt. The People's Bailout, as it was called on Twitter, culminated in a telethon at a New York City music venue and garnered unusually positive press for an Occupy-related action.

The second and latest Rolling Jubilee resulted in an even larger amount of debt abolished: over $1 million, according to a post on the group's website, for patients in Kentucky and Indiana. "The average debtor owed around $900," the group wrote, "and we will be abolishing the debt of over 1,000 people." Strike Debt is in the process of sending out letters to patients whose debt has been bought and abolished, as it did following the first Rolling Jubilee.

One of the most common questions asked of Strike Debt is whether it can buy and cancel specific people's debt. The answer is no. There are no strings attached for the person whose debt has been bought, though many activists hope that someone on the receiving end of the Rolling Jubilee might throw a few bucks back in the pot – a way of paying it forward, as it were.

Thursday's action began at Bryant Park around 4 PM with activists opening a dozen shredded umbrellas bearing the insignias of insurance companies, such as Cigna and Aetna. The broken umbrellas represented the activists' beliefs that even those who have private insurance are often not fully protected by it. 

In contrast, the marchers also opened a dozen intact umbrellas with the words "Medicare for all" – another phrase for single-payer – painted on them.

A physician named David, part of Physicians for a National Health Program (PNHP), addressed the crowd before the march. He railed against the high costs of medical care, lambasting the idea that the solution to the problem is complicated or somehow unknowable. "The answer is single-payer," he said.

The protesters then marched to the offices of United Healthcare Group, Aetna, Blue Cross Blue Shield, and Cigna, chanting "Health care for people, not for profit" and "Bankrupt and broke, insurance is a joke." The flier that activists handed out on the march claims that "the combined annual compensation for the CEOs" of those four companies "could buy and abolish almost 2 billion dollars of medical debt using the rolling jubilee model."

Katie Robbins, also with PNHP, said the "flimsy insurance [that] people get in case they get sick is a contract that gets broken all the time," referring to the many people in the US who have insurance but nevertheless are forced to pay huge medical bills. She said that her deductible was so high that virtually any medical procedure would leave her thousands of dollars in debt. She also said that, by her calculations, having a baby could put her as much as $10,000 in debt, adding "that's not a great place to be."

Access to Health Care, Basic Necessities a Matter of Life or Debt

Examining the argument that “medical and other debt shouldn’t exist because debt is part of a rigged system of mafia capitalism that extracts wealth from people who are trying to meet their basic needs.”

This week the Strike Debt Rolling Jubilee, a project that arose from Occupy Wall Street, will announce its purchase of more than $1 million of medical debt as part of a weeklong national conversation about why people shouldn’t be put in debt meeting their basic needs.

Patient holding hands

(Image: Patient holding hands via Shutterstock)

The Rolling Jubilee raised funds to purchase bundles of debt for pennies on the dollar. Unlike the rapidly growing industry of collection agencies that purchase debt and then hound debtors until they repay, the Rolling Jubilee will erase their purchased debt, freeing debtors from their obligation. Rolling Jubilee members view debt as the intersection between Wall Street and people’s lives. They argue that medical and other debt shouldn’t exist because debt is part of a rigged system of mafia capitalism that extracts wealth from people who are trying to meet their basic needs.

We spoke with Thomas Gokey of Strike Debt and Dr. Steffie Woolhandler, co-founder of Physicians for a National Health Program and author of the leading studies on bankruptcy caused by medical debt, to learn more. We explored why medical debt exists in the United States, what its impacts are on health and what could be done to end medical debt completely. Woolhandler also described the impact of the 2006 Massachusetts’ health law, which was used as a blueprint for the national health law, on debt and health care costs. The solution, a national single-payer health system, described as “Expanded and Improved Medicare for All,” is already supported by the majority of Americans. Until this and other solutions to our crises are realized, Strike Debt provides a guide for organizing and resisting the culture of debt that binds us.

Living in the Land of Health Injustice

The US has used a market-based health system for so long that most people probably feel that it is normal, but in truth, the US health system is an aberration. Most industrialized nations have publicly-funded universal health care systems paid for through taxes that cover virtually 100 percent of necessary care. Their systems have been in existence for many decades, and while no system is perfect, other countries spend half what the United States  does per person on health care, cover everyone and have better health outcomes.

After World War II, the United States moved toward a system of health insurance primarily accessed through employment. Then, under President Reagan in the 1980s, there was an intentional effort to create investor-owned health-care services, turn health insurance into a profit-making sector and privatize the delivery of health care in for-profit hospitals. Creating a for-profit health care system is a thirty-year experiment with clear outcomes: uncontrolled costs, growing health disparities, falling life expectancy and other indicators of poor health status, including high numbers of preventable deaths. If such an experiment were to have been conducted by a research team, ethics would have demanded that the experiment be stopped a long time ago.

The basic flaws of the US system are obvious. When health insurance is tied to employment, the healthiest segment of the population (i.e. essentially those who are working) is covered. Those who cannot work, perhaps because of a serious accident or illness, lose their coverage or struggle to afford it on the individual market where the prices are higher and the coverage is skimpier. When the bottom line is profit, not health, health insurers compete to attract those who are healthy in the first place and then find ways to restrict and deny payment for care through provider networks, authorization processes and out-of-pocket costs.

Patients and providers spend so much time and energy trying to navigate the complicated health system in the United States that it is hard to see the forest for the trees. But each time that a patient delays or avoids necessary care, that a patient is asked what kind of insurance they have before they are asked what they need, or that a family has to choose between paying for treatment and paying for basics such as food and shelter, a health injustice has occurred. These scenarios do not happen in other wealthy nations.

In fact, medical debt and bankruptcy are uniquely American experiences among wealthy nations. Some enter into medical debt because they are uninsured and need medical services, but the majority of people who end up with medical bankruptcy have health insurance. Dr. Woolhandler and her colleagues interviewed over two thousand people in bankruptcy court. They found that more than 60 percent became bankrupt because of medical illness and medical bills, and nearly 80 percent had insurance when they first became ill. Despite being insured, the out-of-pocket costs for the premiums, copays, deductibles, co-insurance and uncovered services combined to create an unsustainable financial burden.

Woolhandler’s landmark bankruptcy study was based on data from 2007, before the financial crisis of 2008. At present, over one-third of working families have no savings, and nearly two-thirds do not have enough cash on hand to withstand a $1,000 emergency. When families are living paycheck to paycheck, one serious accident or illness is enough to push them over the edge.

In addition to the obvious risk of financial ruin, we asked Woolhandler about the impact of being uninsured or underinsured on health outcomes. The consequences are well-documented. People without insurance do not receive primary or preventive care, have worse outcomes when they do seek treatment and are more likely to die. The same goes for those who have skimpy health insurance. Copays and deductibles cause people to delay or avoid necessary care

ObamaCare Will Escalate Health Injustice

There is a lot of confusion about the Affordable Care Act (ACA). At its root the ACA was an insurance company takeover of health care in the United States which included lots of ways for health corporations to profit. There has been a marketing effort to sell people on the ACA by claiming more people will have health insurance, but what is not mentioned is that the type of insurance coverage people will have is going to be skimpier. While it is true that more people will have insurance, the ACA will still leave tens of millions without insurance when fully implemented, and there will be an increase in expensive under-insurance plans.

Prior to the passage of the Obama health reform, there were efforts by some state-level insurance regulators to require insurance companies to provide more extensive coverage by spending 80 to 85 percent of premiums on health services rather than on profit and administration. The Obama law stopped those efforts by putting in place a law for the first time which said that 60-40 plans are acceptable. In a 60-40 plan, the insurance company pays 60 percent of the covered costs, while the enrollee pays 40 percent plus the full amount of uncovered costs, those not included in their policies. Enrollee costs include premiums, deductibles, copays, co-insurance and other out-of-pocket expenses. It is these out-of-pocket costs that quickly lead to health-care debt and bankruptcy.

The ACA will push coverage in the direction of under-insurance in a number of ways. One is through taxing so-called “Cadillac Plans” which are merely insurance plans that provide the kind of coverage all Americans once viewed as standard – actual health insurance. Employers are planning to avoid the Cadillac tax by lowering benefits so that their plans do not meet the Cadillac Plan criteria. Employers are also planning to drop health benefits and pay a penalty instead, which saves money, or to drop health benefits and offer subsidies to employees to purchase health insurance on their own. Other employers are changing the status of their employees to be consultants or less than full time to avoid having to provide health benefits.

The ACA will result in more people purchasing inadequate insurance plans when the state insurance exchanges open later this year. There will be four tiers of coverage from 90-10 to 60-40 plans. Most people will be forced to choose the lower tiers because premiums will rise even higher when the requirement to offer policies to people with pre-existing conditions begins.

Those who qualify for subsidies by earning below 250 percent of the federal poverty level (the Federal Poverty Level income for a family of four is $23,550, the qualifying income, $58,875) will be allowed to purchase 70-30 plans only.

And the Obama administration narrowly interpreted the law so that qualification for subsidies based on the cost of premiums only applies to individual, not family, plans. This means that if the cost of an individual plan is less than 9.5 percent of a person’s income, even if that person actually needs a family plan which would cost more than 9.5 percent, they do not qualify for a subsidy to buy a family plan.

One way to know how the Obama law will fare is to look at the experience of the pilot project in Massachusetts. The 2006 Massachusetts health-care law cut the number of uninsured in half, which is similar to what the ACA is expected to accomplish. Those who are still without coverage are primarily the working poor. The health insurance exchange has not brought the cost of premiums down and is not used by the majority of the public. The exchange is mainly used by those who receive a subsidy from the government because subsidized plans must be purchased from the exchange. To pay for subsidies for insurance premiums, Massachusetts cut important safety net public health programs, especially programs like those for mental health services that are not covered by insurance. The cost of health care in Massachusetts, already the highest in the nation, continues to rise. And the cost of health care continues to be a barrier for people who need health services. Medical debt and bankruptcies continue at the same levels as before the law was passed.

Based on predictions by groups like the Congressional Budget Office and the experience in Massachusetts, we can predict the result of the ACA: continued lack of insurance for at least 30 million, more people in the costly individual insurance market, more people with under-insurance, continued increases in the cost of health care, continued financial barriers to necessary health care and continued high levels of medical debt and medical bankruptcy. In other words, health injustice will continue in the United States.

How to End Health Injustice

One of the first steps required for change is awareness of the problem. The Strike Debt Rolling Jubilee “Life or Debt” campaign will help some people directly, but it will do more to highlight the ongoing problems of medical debt and the debtor system. The Rolling Jubilee has joined with single-payer health care advocates for a week of national solidarity actions to educate about the single-payer solution and to shift the broader conversation to one that questions a system that profits from people’s attempts to meet their needs.

The dominant message in the United States is one that places the blame on individuals when they are unable to meet their basic needs for health care, housing, education and food. The individual is blamed for making a bad decision to borrow money or for not being able to put money aside in a savings account. This is meant to make people feel shame. It is a form of social control that disempowers people and silences them. But Strike Debt recognizes that 76 percent of Americans are in debt and asks, “How is it possible that three-quarters of us could all have just somehow failed to figure out how to properly manage our money, all at the same time?”

This is a fundamental question because real transformation becomes possible when people stop feeling isolated and ashamed and instead join together to tell their stories, to find connections between their stories and to question the root causes of their shared situation. For us, this was a key reason for the physical occupations in the fall of 2011. In the occupations, people met others who were struggling with the same problems of homelessness, unemployment and debt. The Strike Debt campaign says it well, “You are not a loan. You are not alone.” Working in solidarity is both empowering and powerful.

For too long in the United States, politicians and the corporate media have defined the narrative. We can use single payer as a prime example. A single-payer health-care system or “improved Medicare-for-All” would ensure access to health care from birth to death for everyone in the United States. This is eminently affordable, indeed the US already spends the most per person on health care in the world; we just get the least return for our spending. It is not a question of the cost; rather it is a question of the US political system being able to put in place real solutions despite the power of the insurance and for-profit health-care industries.

The arguments for single payer are widely supported and well-known. It is the only proven path to a national health system that will provide coverage to everyone in the United States, control costs and produce excellent health outcomes. There is a solid majority of the public, including a majority of health professionals, who supports a single-payer health system despite the intentional misinformation campaign that characterizes single payer as “socialism” and “rationing.” But single-payer supporters are disempowered by being told that they are asking for too much and that what they want is not politically feasible. They are urged to be pragmatic and to accept incremental solutions.

Tens of millions of dollars have been invested in front groups such as Health Care for America Now to channel popular energy away from single payer and into Wall Street solutions such as the ACA. And it has been very effective. During the health-reform process, the groups who supported health reform were effectively split. Single-payer supporters were divided into those who held firm for a single payer plan and those who supported what was called the public option. Single-payer supporters who held firm were chastised for not being pragmatic and supporting a public option, which was mislabeled as a step toward single payer even though the evidence showed that a public option was neither a practical step nor was it intended to be included in the health law.

As the health law neared the final steps in the process, and the provisions in the bill were increasingly unacceptable, two additional methods of social control were employed. One was straight up lying. Politicians and their front groups called the health law “universal, affordable and guaranteed,” when it was none of those. And the other was to tie the success of the law to the success of the Democratic Party and to frighten the public into believing that Republicans would be much worse. This line of thinking ignored the fact that the state model for the bill was passed under a Republican administration, Governor Romney, in Massachusetts, and that the blueprint for the bill was developed in the conservative Heritage Foundation.

There are important lessons to learn from the health-reform process. First, is that advocates must have a solid understanding of what constitutes a real solution so they are not led down a path toward a false solution. Second, is that advocates must work in solidarity for real solutions with confidence rather than accepting watered-down solutions. And third, is that advocates must not tether their work to the agenda of any political party but must be willing to hold whoever is in office accountable.

Commodifying Human Needs Violates Human Rights

The human rights framework is being used more and more as a way to understand problems and their solutions and to empower people to demand that basic needs are met. The concept of human rights runs counter to the incentive of the market, which is to make everything a commodity. When human needs are treated as commodities, those who control access to them have a captive population.

Like the company towns that arose during the Industrial Revolution, Wall Street controls the currency, the jobs, and goods and services, so that many people have nowhere to go. It is estimated by author John Curl that 92 percent of the working population in the US is trapped in indentured servitude, dependent on their job for their survival. As anthropologist David Graeber points out, the earliest wage contracts were slave rentals. Today, the reality for almost all Americans is living as indebted wage slaves.

One of the tools used by dictatorships to control their populations and prevent uprisings is to impose economic sanctions. Sanctions are easy to recognize when we look at other nations, but not so easy to see at home. The United States is the wealthiest nation in the world, and total wealth is growing. But this wealth, much of which is derived from the resources and labor of the population, is flowing to the top 1 percent or above, while the wealth of the bottom 99 percent is falling. There is enough wealth in the United States to provide free education and health care to all and to create a full employment program. The US could invest in a clean energy infrastructure and affordable housing. The failure to do so is equivalent to imposing sanctions on the majority of the people.

Although some do not know it yet, all people in the United States are united by their human rights to have basic needs met. Indeed, the United States has signed onto two international treaties that delineate these human rights. One is the Universal Declaration of Human Rights and the other is the International Covenant on Economic, Social, and Cultural Rights. These rights, including our right to health care, are being violated. It is up to the people to realize this and to join together in demanding that our rights be honored. Human rights are the glue that binds us to each other. Debt is the shackle that enslaves us to Wall Street.

Starting at the Roots

The commodification of health care is the root cause of medical debt and bankruptcy, but we see the same pattern when it comes to other essentials such as housing, education and more. The Strike Debt campaign on medical debt is part of a broader campaign against our debt-based economy. Debt has been part of human society for thousands of years and, as David Graeber notes, there are “potentially catastrophic social consequences of debt.” In order to avoid a debt crisis:

“It soon became traditional for each new ruler to wipe the slate clean, cancel all debts, and declare a general amnesty or ‘freedom’, so that all bonded labourers could return to their families. (It is significant here that the first word for ‘freedom’ known in any human language, the Sumerian amarga, literally means ‘return to mother’.) Biblical prophets instituted a similar custom, the Jubilee, whereby after seven years all debts were similarly cancelled. This is the direct ancestor of the New Testament notion of ‘redemption.’ ”

Strike Debt seeks to “build popular resistance to all forms of debt imposed on us by the banks. Debt keeps us isolated, ashamed and afraid. We are building a movement to challenge this system while creating alternatives and supporting each other. We want an economy where our debts are to our friends, families and communities – and not to the 1%.”

This type of thinking is fundamental to achieving a society based on equality, prosperity and human rights. A culture shift away from the dominant narrative of the marketplace to one of social solidarity is essential because a population that is empowered and works together is more difficult to oppress and control.

The Strike Debt campaign prepared a Debt Resisters Organizing Manual to provide people with tools to both resist debt and build the society we want to live in. The manual is an ongoing work that is available for free on the Strike Debt website. It explains debt and how it is created. It provides specific actions that people can take to decrease their individual debt. And it provides information so that communities can understand ways that debt controls their collective lives, for example when public debt is used to justify cuts to social services and basic public infrastructure.

Debt is a global problem. It is a tool that has been used for decades to advance a neoliberal agenda of privatization of goods and services. Secretary of State John Kerry’s first trip to Egypt was to push their new government to accept an International Monetary Fund (IMF) loan with the requirement that it end subsidies for fuel and food, among other structural adjustments. The United States, through the World Bank and IMF, routinely requires Structural Adjustment Programs as conditions of loans that demand decreased funding for public programs and increased foreign ownership of resources.

Indeed, rather than ending debt as wise rulers of the past have done, for the first time in the 5,000-year history of debt, Graeber writes, “we have begun to see the creation of the first effective planetary administrative system, operating through the IMF, World Bank, corporations and other financial institutions, largely in order to protect the interests of creditors.”

But more civil societies are taking a stand against debt that has been imposed upon them without their consent. In Spain, this is being done through the “No Pagamos” (We Won’t Pay) campaign. Likewise, it is happening in the UK and Greece. We have written previously about successes in Latin America such as Venezuela and Ecuador.

As neoliberal policies take root at home, more communities in the US are building Strike Debt chapters and fighting back. To find a chapter near you or to start one, visit Strike Debt. It is time for Americans to stand together, with the people of the world, and end the systemic problem of debt enslavement. For this, our solidarity is more important than ever.

You can listen to our interview with Thomas Gokey of Strike Debt and Dr. Steffie Woolhandler of PNHP.org on Medical Debt and Bankruptcy on Clearing the FOG.Margaret Flowers and Kevin Zeese

Kevin Zeese JD and Margaret Flowers MD co-host ClearingtheFOGRadio.org on We Act Radio 1480 AM Washington, DC and on Economic Democracy Media, co-direct It’s Our Economy and are organizers of the Occupation of Washington, DC. Their twitters are @KBZeese and @MFlowers8.

Watch: Fall of the Fourth Reich — Empire of Debt (Micro-Doc)

Mac Slavo
March 22nd, 2013
SHTFplan.com

Read by 14,705 people

A new documentary from Future Money Trends highlights the similarities between modern day America and the German Weimar Republic, one of the most infamous examples of out-of-control hyperinflation in history.

The chickens were coming home to roost. Life was hard for many people.

The national debt had risen to a point that it could not be realistically paid back.

The war had cost more than expected.

There was high unemployment.

Products and services increased in price.

Production had decreased significantly.

The government acted, providing liquidity to banks and inflating the currency.

Having left the gold standard, uncertainty loomed and the country’s economy began to spiral out of control.

Sound familiar?

This was Germany, 1920.

Watch the micro documentary: Fall of the Fourth Reich – Empire of Debt

Watch this micro documentary at the Vision Victory Youtube Channel

Visit Future Money Trends

Author: Mac Slavo
Views: Read by 14,705 people
Date: March 22nd, 2013
Website: www.SHTFplan.com

Copyright Information: Copyright SHTFplan and Mac Slavo. This content may be freely reproduced in full or in part in digital form with full attribution to the author and a link to www.shtfplan.com. Please contact us for permission to reproduce this content in other media formats.

Solution to Student Debt is to Get the Banks Out of the Education Business

Michael Hudson: Crippling student debt, which is also a drag on the whole ecnonomy, developed as governments pushed the burden of higher education costs onto students and pushed them into the arms of the banks. PAUL JAY, SENIOR EDITOR, TRNN: Welcome b...

Solution to Student Debt is to Get the Banks Out of the Education Business

TRNN has... made its mark with amazing original reporting on the Middle East and international protest movements. - Caroline Lewis Log in and tell us why you support TRNN Bio Michael Hudson is a Wall Street Financial Analyst, Disting...

‘Italy may abandon euro if debt not renegotiated’ – politics kingmaker Grillo

Published time: March 02, 2013 23:31

Beppe Grillo (Reuters / Giorgio Perottino)

The economic crisis may see Italy abandoning euro and returning to lira, says comedian-turned-politician, Beppe Grillo, who’s anti-establishment Five Star Movement became a major power in the country’s politics after the last week’s general election.

In his interview with German Focus magazine, Grillo urged for the renegotiation of Italy’s €2-trillion debt, which is the second highest in the euro zone after Greece, at 127 per cent of gross domestic product (GDP).

“Right now we are being crushed, not by the euro, but by our debt. When the interest payments reach €100 billion a year, we’re dead. There’s no alternative,” the 64-year-old said.

According to the Five Star Movement leader’s forecast, the Italian political system has "only six months" left before it collapses and the state will no longer be able "to pay pensions and public sector salaries".

If there’ll be no changes to the debt obligations, Grillo believes, the option for his country would be to leave the euro and return to it's former national currency, the lira.

"If I've bought shares in a company that goes bankrupt, then that's my bad luck. I took a risk, and lost,"
he explained, drawing a comparison with the private market. “If the conditions remain the same, Italy would leave the euro and return to the lira.”

The Five Star Movement has attracted the sympathy of nearly a quarter of the many austerity-weary voters to win 109 seats in the Chamber of Deputies and 54 seats in the Senate in the general election on February 24-25. This has created a political deadlock.

Neither Pier Luigi Bersani‘s center-Left Democratic Party nor the center-Right coalition led by Silvio Berlusconi currently have sufficient majority in in both chambers to form a government. The conditions of the parliament’s newcomers is unacceptable to the established parties preventing the formation of a coalition government.

"If Bersani's PD and Berlusconi's PDL suggest an immediate change in the electoral law, cancellation of election expenses reimbursement, and a maximum of two terms for any deputy – we would of course support such a government immediately," Grillo said. "But they won't do that. They are just bluffing to win time."

"If we get into parliament we would bring the old system down, not because we would enjoy doing so but because the system is rotten," he added.

The Five Star Movement has everything it takes to become a huge headache for the European leaders, who have urged Italy to stay on the economic course laid out by Mario Monti ‘s outgoing government.

"Italy, as a major European economy, has a great responsibility,”
Philipp Roesler, Germany's Economy Minister, was quoted in the same edition of Focus. “There is no alternative to the policy of structural reforms... I'm confident that those responsible in Italy recognize the importance of stability.”

Beppe Grillo was a popular comedian on Italian television in 80s, but he disappeared from the screen in the 90s, with many suggesting that his harsh satire was too much to handle for Italian politicians.

After that he mainly performed in theatres and staged a series of mass rallies, including the 2007 V-Day celebrations, which gathered around 2 million people, protesting against the criminal activities of the Italian political elite.   

The Five Star Movement was started by Grillo in 2010 and has made a splash at local elections, receiving the third highest number of votes overall and winning the mayoral election for Parma before the latest success in the general election.

For the Italian government to be able to pass legislation, it must have a majority both in the Chamber, and the Senate, and to achieve this majority coalitions are often formed.

Student Debt Tripled in Eight Years

A new report from the New York Fed shows the explosion of total student loan debt, which shows no sign of stopping

March 2, 2013  |  

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A new report from the New York Federal Reserve further confirms what many commentators have been long saying — student debt is the bubble that just keeps expanding. Total student debt has nearly tripled in the past three years.

Total student debt stands at $966 billion as of the end of 2012, with a 70 percent increase in both the number of borrowers and the average balance per person. The overall number of borrowers past due on their student loan payments has also grown, from under 10 percent in 2004 to 17 percent in 2012.

Noting the N.Y. Fed report, HuffPo  pointed out that the proliferation of indebted students and their families has knock on effects on other areas of the economy:

Fewer people with student loans are buying homes, according to data in the report. Of borrowers ages 25 to 30 who are taking out new mortgages, the percentage of those with student debt has fallen by half, from nearly 9 percent in 2005 to just above 4 percent in 2012.

The fed report sees a connection, stating, “The higher burden of student loans and higher delinquencies may affect borrowers’ access to other types of credit and the performance of other debt.”

Crucially, however, the student debt bubble can’t be construed in the same way, say, as the housing bubble. Student debt will (and already does) have crippling effects on millions of Americans, but it’s a bubble with no promise of burst. As  Malcolm Harris has long pointed out, since most student loan debt is government backed and can never be discharged, the type of meltdown the student loan explosion could precipitate will take a different shape than the mortgage crisis, with the victims (student borrowers) already in place and struggling:

All the hallmarks of a bubble are there, including massive securitization and seemingly risk-free financial products. But, as the financial analysts are quick to remind us, the vast majority of this debt is government-backed. What’s the worst that could happen?

As far as investors are concerned, this line of thinking works just fine, but it should look less rosy for the Treasury. If it turns out the subsequent work of student debtors isn’t worth as much as the markets figured, another trillion-dollar bailout may be required, and the taxpayers can hardly afford it.

Yet neither investors nor the Treasury seem particularly concerned…

There’s no escape from student debt, and the government and markets both know it. This is, then, the real plan for the education bubble: student debtors will be forced, in one way or another, to fill it in. Not only are student loans not a burden on the federal government, they’re a good investment.

So it’s a bubble set for unfettered expansion and it’s in neither the government’s nor investors’ interest to intervene. Strike Debt activist campaigns have proposed collective  debt resistance, but their efforts have not yet made a significant dent in the national or even New York City-wide picture. As Harris noted in the Boston Review last November, “short of suicide, expatriation, or revolt, there’s not much 37 million American student debtors and counting can do about it.”

Natasha Lennard is Brooklyn-based writer and a project officer for the International News Safety Institute – North America. Visit INSI-NA’s for more information.

Infantile Conservatism: America’s “Greatest National Security Threat is Iran.” Do Conservatives really Believe this?

iranflag

Regularly now, The Washington Post, as always concerned with fairness and balance, runs a blog called “Right Turn: Jennifer Rubin’s Take From a Conservative Perspective.”

The blog tells us what the Post regards as conservatism.

On Monday, Rubin declared that America’s “greatest national security threat is Iran.” Do conservatives really believe this?

How is America, with thousands of strategic and tactical nuclear weapons, scores of warships in the Med, Persian Gulf, Arabian Sea and Indian Ocean, bombers and nuclear subs and land-based missiles able to strike and incinerate Iran within half an hour, threatened by Iran?

Iran has no missile that can reach us, no air force or navy that would survive the first days of war, no nuclear weapons, no bomb-grade uranium from which to build one. All of her nuclear facilities are under constant United Nations surveillance and inspection.

And if this Iran is the “greatest national security threat” faced by the world’s last superpower, why do Iran’s nearest neighbors — Turkey, Iraq, Azerbaijan, Afghanistan, Pakistan — seem so unafraid of her?

Citing The Associated Press and Times of Israel, Rubin warns us that “Iran has picked 16 new locations for nuclear plants.”

How many nuclear plants does Iran have now? One, Bushehr.

Begun by the Germans under the shah, Bushehr was taken over by the Russians in 1995, but not completed for 16 years, until 2011. In their dreams, the Iranians, their economy sinking under U.S. and U.N. sanctions, are going to throw up 16 nuclear plants.

Twice Rubin describes our situation today as “scary.”

Remarkable. Our uncles and fathers turned the Empire of the Sun and Third Reich into cinders in four years, and this generation is all wee-weed up over Mahmoud Ahmadinejad.

“For all intents and purposes, (Bibi) Netanyahu is now the West’s protector,” says Rubin. How so? Because Obama and Chuck Hagel seem to lack the testosterone “to execute a military strike on Iran.”

Yet, according to the Christian Science Monitor, Bibi first warned in 1992 that Iran was on course to get the bomb — in three to five years! And still no bomb.

And Bibi has since been prime minister twice. Why has our Lord Protector not manned up and dealt with Iran himself?

Answer: He wants us to do it — and us to take the consequences.

“With regard to Afghanistan, the president is pulling up stakes prematurely,” says Rubin.

As we are now in the 12th year of war in Afghanistan, and about to leave thousands of troops behind when we depart in 2014, what is she talking about?

“In Iraq, the absence of U.S. forces on the ground has ushered in a new round of sectarian violence and opened the door for Iran’s growing violence.”

Where to begin. Shia Iran has influence in Iraq because we invaded Iraq, dethroned Sunni Saddam, disbanded his Sunni-led army that had defeated Iran in an eight-year war and presided over the rise to power of the Iraqi Shia majority that now tilts to Iran.

Today’s Iraq is a direct consequence of our war, our invasion, our occupation. That’s our crowd in Baghdad, cozying up to Iran.

And the cost of that war to strip Iraq of weapons it did not have? Four thousand five hundred American dead, 35,000 wounded, $1 trillion and 100,000 Iraqi dead. Half a million widows and orphans. A centuries-old Christian community ravaged. And, yes, an Iraq tilting to Iran and descending into sectarian, civil and ethnic war. A disaster of epochal proportions.

But that disaster was not the doing of Barack Obama, but of people of the same semi-hysterical mindset as Ms. Rubin.

She writes that for the rest of Obama’s term, we “are going to have to rely on France, Israel, our superb (albeit underfunded) military and plain old luck to prevent national security catastrophes.”

Is she serious?

Is French Prime Minister Francois Hollande really one of the four pillars of U.S national security now? Is Israel our security blanket, or is it maybe the other way around? And if America spends as much on defense as all other nations combined, and is sheltered behind the world’s largest oceans, why should we Americans be as frightened as Rubin appears to be?

Undeniably we face challenges. A debt-deficit crisis that could sink our economy. Al-Qaida in the Maghreb, Africa, Arabia, Iraq and Syria. North Korea’s nukes. A clash between China and Japan that drags us in. An unstable Pakistan’s nuclear arsenal.

But does Iran, a Shia island in a Sunni sea, a Persian-dominated land where half the population is non-Persian, a country whose major exports, once we get past fossil fuels, are pistachio nuts, carpets and caviar, really pose the greatest national security threat to the world’s greatest nation?

We outlasted the evil empire of Lenin and Stalin that held captive a billion people for 45 years of Cold War, and we are frightened by a rickety theocracy ruled by an old ayatollah?

Rubin’s blog may be the Post’s idea of conservatism. Ronald Reagan wouldn’t recognize it.

Patrick J. Buchanan is the author of “Suicide of a Superpower: Will America Survive to 2025?” To find out more about Patrick Buchanan and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate webpage at www.creators.com .

This article was originally posted at Creators Syndicate

Private Debt — Not Government Debt — Will Destroy America

Personal debt.(Photo: SeniroLiving.org)There are two kinds of debt. One that’s relatively harmless. And one that can destroy us all.  

There’s public sector debt – or government debt – which is over $16 trillion. This is the sort of debt that politicians scream and holler about when they demand austerity.

And then there’s private sector debt – the debt owned by you and me and millions of Americans across the nation in the form of credit cards, home and auto loans, along with America's corporate debt. This sort of debt doesn’t seem to bother politicians at all, even though total private sector debt is $38 trillion, more than double government debt.

Now here’s what you need to know. Public sector debt is not a problem at all. Our national debt, despite the big number, is not a threat to the nation.

Currently, our national debt is roughly 100% of GDP. After World War 2, it was much higher – over 120% of GDP.  But, rather than freaking out in the 1950’s and demanding austerity spending cuts, both Republican and Democratic Presidents and lawmakers grew our nation out of this so-called debt problem with government spending.

There were massive government investments to build the Interstate Highway System, send returning GIs to college, and to grow the social safety net.

And it worked. With more government investments, more Americans were put to work, which meant they had more money to spend, which meant more businesses hired more people to keep up with the higher demand, which meant Americans all around were earning more money and paying more revenue into the government through taxes. Our debt-to-GDP ratio plummeted from its peak of over 120% in the 1950’s to around 20% in the 1970’s.  

Then Reagan came in, gave billionaires a massive tax cut, increased defense spending, and our national debt exploded again. But, two Presidents later, Bill Clinton had the budget balanced and the nation on track to completely eliminate the national debt within ten years.

George W. Bush blew up that plan with his tax cuts, wars, corporate giveaways, and his economic crash, so now we have a pretty massive debt, although not as big as the one Truman and Eisenhower faced and beat.

Our nation has a long history, from the Revolutionary War to the Civil War to World War II of dealing with our national debt, and reducing debt levels that are much higher than we see today. That’s why government debt is not a problem right now. With just a small amount of political will, it can be solved pretty easily: more government investments to put people to work and more taxes on the rich so that they pay their fair share again have always solved it in the past.

On the other hand, private sector debt is a huge problem. Not only is it devastating the livelihoods of millions of Americans around the nation, but it’s also pushing our economy toward collapse.   

After World War 2, total private debt was below 50% of GDP. Today, it’s more than 250% of GDP, which is even higher than it was during the Great Depression.

There are several reasons for this.

The first is that when Reagan stopped enforcing the Sherman Anti-Trust Act, businesses started merging and acquiring each other like crazy. Because of changes in the rules on how that could be done, Private Equity or LBO firms came into existence, driving the monopolistic merger process with trillions in debt. Today virtually every corporate merger involves the company taking on huge debt, while the executives and the Pirate Equity boys take home billions. The result is that most of this private sector debt is corporate debt, and it's dangerously high, a teetering, towering house of cards. 

And then there's household debt.  

Since Reagan, Americans have not been paid more for their increased productivity, so wages have failed to keep up with the rising costs of housing, energy, education, and healthcare. To make ends meet, Americans had to extend their credit lines and home mortgages, thus sinking further into debt.

Also, there was the housing bubble, which was caused by banksters pushing mortgages – or debt – on millions of Americans, knowing that those same Americans were unlikely to be able to pay down those mortgages and debt.

But the banks made a ton of money selling off that bad debt to other investors before the market went bust, and skimming fees off the top of every single transaction.

And, of course, all of the losses that the banksters did incur during the crisis were promptly repaid by our government thanks to the bailout.

But nobody seemed to care about the debt that everyone else who wasn’t a bankster still had. Nobody except the banks, which are still trying to suck more and more money out of their indebted customers, and are now bringing back debtor’s prisons to help in this effort.

In Arkansas, a breast cancer survivor, Lisa Lindsay, was thrown in jail because she didn’t pay a $280 medical bill, which was charged to her by mistake.

Debtors’ prisons haven’t officially been used in America since before the Civil War. But today, a third of the states in the country allow debt collectors to use the public court system to go after people who owe them money. So, rather than being thrown in jail for specifically owing money, Americans are thrown in jail for not showing up to court hearings or not paying legal fines stemming from their debts.  

There’s even a law in Arkansas that allows landlords to throw tenants in jail if they're late on their rent. According to a recent report by Human Rights Watch, hundreds of tenants in Arkansas who’ve fallen on hard times and can’t pay their rent are taken to court and sometimes jailed.

So, in a roundabout way, the debtors prisons have returned to America.

This is a huge problem because economies depend on consumers – people like you and me – spending money. But, if we’re in debt up to our eye-balls, and being thrown in prison for that debt, then we can’t spend money to stimulate the economy.

As economist Steve Keen told me, “That’s why we’re in a crisis.”

He added that it wasn't the government deficit we have to worry about.  Instead, he said, “It’s the dynamics of private debt that have determined the crunch we’re in now.”

While debt can be useful and free up more spending in the economy, we’ve reached a point where businesses and individual Americans can no longer afford to go deeper into debt. 

And a major reason why the economy continues to stagnate after the collapse is because Americans are paying down their debt rather than spending money in the economy. And the more Americans continue to pay down their debt instead of spending, the worse the economy will get.

When this happens, Keen told me, “You plunge off the cliff.” 

Even government stimulus can’t help at this point. Whether it was Bush’s stimulus at the end of 2008 that gave everyone a couple hundred bucks, or Obama’s stimulus in 2009, any extra money Americans get from the government is diverted away from the economy and put instead toward paying down their huge individual debts, which has no stimulative effect on the economy at all.  

If private debt was 50% of GDP like in the 1950’s, then Americans could afford to both buy things and pay down their own debt.  And ditto for businesses. But at 250% of GDP, that private sector debt strangles the economy and sets the stage for a looming economic collapse.

So then, what’s to be done?

We should wipe the worst and most destructive of the private sector debt, the debt that prevents people from spending.

Keen calls for a debt jubilee. That means using the government to simply pay off much of the individual debt across America, from mortgages to student loans to credit cards.

This is also the approach Occupy Wall Street is taking with its “Strike Debt” campaign, though the organization is also relying on private donations to help buy people’s overdue debt at a cheap price and then completely wipe it out.   

A debt jubilee isn’t a radical idea. In fact, it’s promoted in the Bible in the Book of Leviticus, which calls for a debt jubilee every 49 years.  As Leviticus 25:10 reads, "This fiftieth year is sacred—it is a time of freedom and of celebration when everyone will receive back their original property, and slaves will return home to their families."

Debt cancellation is supported in the Koran, too. And it was used in Ancient Athens and many Native American societies.

Wiping out private debt would unleash enormous spending in our economy in ways we haven’t seen since the boom years of the 1950’s and 1960’s. The only reason it’s not seriously being considered by our lawmakers today is because a debt jubilee would diminish the profits of the banksters who thrive – and prey – on an indebted nation.

But, in the not-to-distant future, as our economy continues to collapse under the weight of tens of trillions of dollars in private sector debt, our nation will be faced with an ultimate choice: Strike Debt or watch our economy completely collapse in a way that will make 1929 look like a picnic.

Let’s make the right choice now!     

Veterans For Peace: Debt Ceiling Is No Excuse

WASHINGTON - February 13 - Veterans for Peace has released the following statement: U.S. interest payments on debt are at an historic low, not an historic high. The shortage of funds in the federal government is due to an unemployment crisis, outrageo...

Progressive Grassroots Coalition Takes on ‘Fix The Debt’ Fraud

(Photo: Flip the Debt via Facebook)On Monday, a grassroots, anti–corporate tax-dodging coalition called Flip the Debt crashed a "Fix the Debt" party at St. Anselm's College in New Hampshire hosted by Honeywell CEO David Cote to tell the gathered deficit hawk disciples that paying their "damn taxes" would be a better solution than crippling the nation with fiscal austerity measures.

The CEO-led Fix the Debt campaign promotes fear over the national debt as a guise for lowering the corporate income tax rate and cutting necessary social support programs like Social Security and Medicare.

Three minutes into Cote's keynote address, the first protestor stood up in the conference room and spoke out

Fix the Debt claims to seek bipartisan solutions to reduce the deficit, but Fix the Debt is nothing more than a CEO lobby whose real objective is huge corporate tax breaks and drastic cuts in Social Security, Medicare and Medicaid. David Cote and his CEO friends receive a lot from government: In 2011, Honeywell received $725 million in government deals, making it the 35th largest federal contractor. However, Honeywell and other companies pay next to nothing in taxes. Honeywell's tax rate from 2008-2011 was 2 percent. Does anyone in this room pay 2 percent?

"Fix the Debt is going to be met by opposition everywhere it goes, because everyone knows it's a fraud" another added, before leading the group in the chant: "Read our lips. Pay your taxes!"

The group kicked off two weeks ago with the launch of a 'debt clock' and rally in New York City. The clock has thus far calculated that at least $2.3 trillion has been stolen by corporations and the top 1% (heavily represented within Fix the Debt) who exploit "loopholes, tax havens and tax cuts." That figure, according to the group, grows by nearly $100 billion annually.

Laying out the goals of the group, Flip the Debt co-founder Gan Golan said, "We will disrupt Fix the Debt meetings across the country to elevate our message that the biggest corporations in the country aren't paying taxes, and now they want the rest of us to pay for it."

On their website, the group adds: “We wouldn’t have to make these cuts, and we could invest in putting America back to work, if only [corporations] pay their fair share. So we say, rather than ‘fix the debt,’ let’s ‘flip the debt’ and put responsibility where it belongs. Hey 1%! Pay your damn taxes.”

One of the protestors produced this video of Monday's demonstration.

Fix the Debt and a Wall Street Sales Tax

Peter G. Peterson, a Wall Street private equity mogul, in New York in a Jan. 29, 2008 file photo. (Photo: Fred R. Conrad / The New York Times) At this point everyone knows about Fix the Debt. It is a collection of corporate CEOs put together by Peter ...

The Real Debt Issue: It’s Not How Much We Will Owe, It’s Who Will...

There’s a dirty little secret lurking behind the Republican’s debt and deficit hysteria.

No, it’s not the fact that austerity during an economic downturn is a proven way to shrink the economy and create debt.  Although true, that’s hardly a secret. Economists are just about screaming it out to anyone who will listen. 

And no, it’s not the fact that every country that’s tried austerity in an economic downturn is either experiencing a double dip recession or approaching one.  That’s a matter of record that folks like Krugman, and Reich and Stiglitz have been pointing out on a near daily basis.

And no, it’s not the fact that countries like Iceland and China that ignored the austerity mongers have prospered.

It’s not even the fact that Republicans don’t really give a damn about deficits.

Nope.  The dirty little secret is that if we follow their advice, we the people will end up with more debt than if we don’t, and fat cats and corporations will be holding the note.

Here’s why.

First, the main drivers of debt – medical and retirement costs – are much cheaper when administered by government. Impossible you say?  Why, doesn’t everyone know that big ol’ gubmint’ is clumsy and inefficient, while the private sector is agile and efficient.

Well, let’s step outside the bubble for a moment and check some facts.  You know, the things that make up reality.

First, overhead on Medicare, Medicaid, Veteran’s health care and Social Security are far lower than private sector equivalents.  Overhead for Medicare comes in at around 2% while private health insurance averages close to 17% of revenue.  And Medicare gets higher satisfaction rates and better health outcomes than private insurance. 

We will need medical care and retirement, regardless of whether it is provided by government or the private sector.  And we will have to pay for them – either by taxes or out of pocket.

Countries like Chile that experimented with private sector versions of social security experienced overheads of 14% or more, while social security has an administrative overhead of about 4%. 

Or take student loans.  Until public pressure forced Congress to kill it, a heavily subsidized private sector loan program ran in parallel to the federal direct loan program.  Even with the subsidies, the banks couldn't compete with the more efficient government program.

The second reason you’ll owe more if we cut government is that government is far better at containing cost increases. 

The single biggest factor driving debt is health care. The share of the economy devoted to health care grew from about 7.2 percent in 1970 to 17.9 in 2010, and it is expected to reach 25% of the economy by 2025.  

If we cut the budget and privatize health care this dizzying increase will continue – in fact it will accelerate, because Medicare is far more effective at containing costs than private health insurance.

The third reason you’ll end up with more debt is that corporations have a fiduciary responsibility to put profits over people.

Overturning the Glass-Steagal Act was a critical part of the conservative playbook. Until Clinton’s adminstration, banks were prohibited from taking your money and playing beach blanket bingo with it.  Now they routinely take big risks with your money.  Why? Because we the people are underwriting those risks with our taxes. 

And once we gut the budget, the already lame enforcement of the financial sector will get even worse, as the SEC is targeted for deep cuts.

Because Republicans  -- and some Democrats – fought “too big to fail” we now have even fewer banks controlling more of our collective national wealth.  This not only concentrates economic power, it concentrates political power. 

Already income disparity in the US is worse than in Iran or Cambodia, and the US ranks lower on intergenerational income mobility than just about any developed country.  In short, you’re getting a smaller share of the economic pie, and your kids will get even less.   

The reason all this is occurring is because for 30 years we’ve been pushing policies that favor speculators and the uber rich over wage earners and the middle class, and because we’ve let the private market run amuck.  Not surprisingly, the market does what it does best – it concentrates wealth. Today, the top fifth of the population has 87% of the nation's wealth, while the bottom fifth now has no net wealth (PDF).  If we keep the same policies we’ll continue to concentrate wealth, and spread debt.

We will need medical care and retirement, regardless of whether it is provided by government or the private sector.  And we will have to pay for them – either by taxes or out of pocket. 

The only difference is, who will hold be holding the note.  A government that can contain costs and deliver services efficiently – a government that can borrow at low or no cost and print money. Most importantly, one that must answer to us.  Or a private sector that is unconstrained, motivated by maximizing profits, and uninterested in controlling costs. 

Our personal debt will be larger if we choose the conservative playbook.  And the disparity in wealth and income that has marked the last 30 years will accelerate.  Yeah, eventually the deficit might go down, but you are unlikely to care much as you drive your decrepit car past an opulent gated community on your way to a low paying job you can’t afford to leave because you’re mired in private debt.

John Atcheson

John Atcheson is author of the novel, A Being Darkly Wise, an eco-thriller and Book One of a Trilogy centered on global warming. His writing has appeared in The New York Times, the Washington Post, the Baltimore Sun, the San Jose Mercury News and other major newspapers. Atcheson’s book reviews are featured on Climateprogess.org.

Russia’s external debt added record 22% in 2012

The Auditing Chamber of the Russian Federation (RIA Novosti/Dmitry Korobeinikov)

The Auditing Chamber of the Russian Federation (RIA Novosti/Dmitry Korobeinikov)

Every Russian citizen owes the equivalent of $4,200 after the country’s external debt skyrocketed to $215 billion during the last year, according to official data.

­It appears that Russia is good at amassing not only its gold reserves, but also debts. The country’s external debt reached a new height of $215 billion in 2012, or 10.5% of country’s GDP, Russia’s Audits Chamber’s report says. Debt servicing in 2012 amounted to over $1 billion. 

This amount is equal to what Russia spends on housing and public utilities, culture and filmmaking combined, according to the Audits Chamber’s Chairman Sergey Stepashin.

The Audits Chamber is concerned about the country’s corporate debt, with also grew significantly. By the end of 2012 the joint external debt reached $624 billion. This is 16.1% more than the country’s gold and foreign currency reserves.

In 2013 eleven companies with state participation will be subjected to a check on the effectiveness of their debt policies, according to an auditor at the Audits Chamber Nikolay Beskhmelnitsyn, Novaya Gazeta daily reports.

However, some experts believe the new corporate debt figures are not something to be afraid of.

We could start to worry if the cumulative credit volume gets more than 80-100% of Russia’s GDP. But the current volume is 30%, it’s not much by international standards,” head of investment division at Solid company, Mikhail Korolyuk, told Novaya Gazeta.

The debt of $624 billion is insignificant for the scale of Russian economy, it’s less than 20% of GDP, believes analyst from Aforex Narek Avakyan.

To compare, government foreign debt of Germany is around 65% of its GDP. China, which has over $3.5 trillion in gold and foreign currency reserves, has the debt of 22% of its GDP. In France this figure is more than 100%, and this is without corporate debts,” Avakyan told Novaya Gazeta. 

The world’s leaders by external debt (the total public and private debt) are the European Union and the United States with over $16 trillion debt each. As of September 20, 2012, US Treasury said the debt reached $15.85 trillion. Russia currently occupies 20th place by the amount of debt.

On the News With Thom Hartmann: Arkansas Law Signals Revival of Debtors’ Prisons in...

In today's On the News segment: Vermont leads the fight to protect unions, and more.

Thom Hartmann here – on the news...

You need to know this. The man-hunt for cop-turned-killer Christopher Dorner continues in California. As of today, the Navy veteran and former LAPD officer has eluded police for over a week after the killing three people on February 3rd. The LAPD have even offered a $1 million reward for information leading to his arrest. Most of the discussion in the media has focused on a multi-page manifesto, which Mr. Dorner posted to his Facebook page, describing the alleged reason behind the killings. Mr. Dorner claims that the LAPD unjustly fired him for leveling allegations of police brutality. Despite an investigation at the time finding Dorner's brutality accusations false, the LAPD has agreed to reopen the investigation. The media, and the public, have taken a variety of views about the cop-turned-killer – with some labeling the man as a homicidal maniac and others supporting him for taking on a system he believes is tyrannical. Many questions surround the firing, and the on-going man-hunt. We'll have to see what answers materialize in the coming days, and hope that no additional lives are lost in the process.

In screwed news...There are less than 20 days until the March 1st Sequester deadline. And Washington is gearing up for a major fight. If politicians can't come to a compromise, the looming $85 billion of Republican austerity is set to make devastating cuts to programs many Americans depend on. Despite non-defense spending being 14% lower than it has been in a half-century, deficit hawks in the Republican party want more austerity imposed on the working poor in our nation. Democrats on the House Appropriations Committee estimate that additional cuts will have a devastating impact on food safety, aviation safety, early education, disaster relief, and law enforcement. And vital programs like WIC, which helps low-income women provide food for their infants and toddlers, may be forced to tell 600,000 women and children to go hungry. In his weekly YouTube address over the weekend, President Obama again called on Congress to act now in order to avoid "deep, indiscriminate" cuts. He called out the Republicans directly saying, "they would rather ask more from the vast majority of Americans and put our recovery at risk, than close even a single tax loophole that benefits the wealthy." Rather than working to avert the impending crisis, House Republicans like Speaker John Boehner are simply using it to attack our President...coining the ridiculous term "Obama-quester." No country, in the history of the world, has ever cut it's way to prosperity. We can only hope that Congress starts considering a smarter approach – like the Sanders-Schakowsky Corporate Tax Fairness Act – and prevent devastating austerity. Stay tuned.

In the best of the rest of the news.

Vermont is leading the fight to protect unions! "Right-to-work-FOR-LESS" legislation was recently rammed through in Michigan, and has even been purposed as national legislation by Sen. Rand Paul. But now, Vermont is setting the opposite example with the introduction of the "Fair Share Bill." The state's Senate Committee on Economic Development voted 5-0, to ensure that people who reap the benefits of union representation pay their share into the bargaining process. In an interview with Vermont Public Radio regarding the so-called "Anti-Right-to-Work" law, State Senator Philip Baruth said, "If you enjoy the benefits of your union and collective bargaining, you will have to pay a percentage of what a fully paid up member of the union would pay." From increased wages - to safer working conditions - to the 5 day workweek, unions are responsible for many aspects of employment that people today take for granted. And we've seen unions virtually destroyed in states where "Right-to-Work-FOR-LESS" has been enacted. Those states consistently have lower wages, more dangerous working conditions, and a lower likelihood of sharing in the economic growth created by employee production. Kudos to Vermont for standing up for the rights of unionized employees in their state. Let's follow their lead and push for a national "Fair Share Bill."

Don't be late on your rent in Arkansas! Because if you are, you could wind up behind bars. According to a new report by Human Rights Watch, landlords and corrupt public officials abused an Arkansas "failure-to-vacate" law to bring charges against more than 1,200 tenants in 2012 alone. And the number of people who've actually been effected by this law, which charges people as criminals simply on a landlord's say-so, could be much higher. While most states handle late rent payments and evictions as civil matters, Arkansas' new use of the "failure-to-vacate" law could put you in jail for being as little as 10 days behind on rent. One woman interviewed by Human Rights Watch said she was only three days behind when her landlord ordered her to move out, and threatened to have her arrested. This law is clearly a revival of debtors' prisons in America – something that we outlawed in this country in 1833! More Americans than ever are finding themselves behind on bills. If more states adopt this policy, who knows how many more of us will wind up in jail. Perhaps someone needs to start researching the private prison industry's role in all this.

And finally...It's always sunny in Germany. At least, that's what some on Fox so-called News would have you believe. Last week, a trio of want-to-be journalists on Fox & Friends used that ridiculous reasoning to explain why Germany's solar industry is so far ahead of our own. So, instead of considering the obvious reasons – like the fact that Germany's government has long supported the solar industry – Fox would rather ridicule Obama's "failed" solar subsidies. In fact, every single state in our nation except for Alaska gets more annual sunshine then Germany. In addition to that, Obama's solar subsidies have vastly improved solar output, and expanded the industry's reach throughout our nation. Perhaps it's time we shine a little more light on Fox news.... maybe it'll eventually stop them from trying to push us back into the dark ages.

And that's the way it is today – Monday, February 11, 2013. I'm Thom Hartmann – on the news.

Protesters Confront CEO and “Fix the Debt” Leader over Corporate Tax Breaks

Flip the Debt unveils corporate debt clock outside IRS building in New York City. (Sign by People's Puppets of Occupy Wall Street; Photo by Amber King) "Fix the Debt," the CEO-led campaign promoting fear and what some have called near-hysteria over th...

How A Previously Secret Collateral Transformation With The Bank Of Italy Prevented Monte Paschi’s...

The endless Italian bailout story that keeps on giving, has just given some more. It turns out Italy's insolvent Banca dei Monte Paschi, which has been in the headlines for the past month due to its role as political leverage against the frontrunning Bersani bloc, and which has been bailed out openly so many times in the past 4 years we have lost track, and whose cesspool of a balance sheet disclose one after another previously secret derivative deal on an almost daily basis, can now add a previously unannounced bailout by the Bank of Italy to its list of recent historical escapades.

WSJ reports that in the summer of 2011, when Europe was as it tends to do in recent years, imploding and head of the ECB was still Jean-Claude Trichet, and before Goldman was set to control the troika of key world central banks (via NY Fed's Dudley, ECB's Draghi and BOE's Carney), and more importantly when the ECB was being accused of not being a credible lender of last resort, it was the Bank of Italy that secretly bailed out Italy's third largest lender with a €2 billion loan. From WSJ:

The €2 billion ($2.7 billion) emergency liquidity loan the Bank of Italy extended to troubled lender Monte dei Paschi di Siena in 2011 was a "classic" central-bank move, although it didn't appear on the European Central Bank's balance sheet and no other Italian bank entered a similar deal, a senior Bank of Italy official said Saturday.

"The Bank of Italy acted on its own" said Fabrizio Saccomanni, the deputy governor of Italy's central bank, when asked about the at-the-time undisclosed securities lending transaction with MPS.

The Bank of Italy, having found itself in the middle of the BMPS derivatives scandal and particularly its lack of oversight and disclosure under former head Mario Draghi, is in full damage control scramble.

Italy's central bank arranged the loan in October 2011 because MPS was running short of liquidity and had largely exhausted its ability to keep borrowing from the ECB. The loan was aimed at staving off a liquidity crisis at a key Italian bank at a delicate moment in the country's economic history.

The loan wasn't disclosed at the time by either the Italian central bank of MPS. In a conference call shortly after receiving the emergency loan, MPS executives described the bank's liquidity position as sound.

Mr. Saccomanni said that, with its loan to MPS, the Bank of Italy—which was led at the time of the loan by current ECB President Mario Draghi—didn't violate any rules. The loan was "utterly normal central bank behavior," he said. He added, however, that no other Italian bank was party to such an arrangement.

Then again, the Bank of Italy said there would be no more secret derivative losses to emerge at BMPS a few weeks ago when the firs two of BMPS' previously unknown balance sheet Easter eggs were reported (while also lying at the time it had no idea of BMPS' balance sheet horrors). This was followed promptly by revelations of two more (for now) such arrangements, one of which with US Bank of New York which "allowed the Italian bank to mislead authorities and smoothed through its acquisition of rival Antonveneta, according to a report by the financial police in Italy."

Therefore one can be excused for believing absolutely nothing that any European banker, whether they have worked at Goldman previously or not, has said.

What is troubling about the Bank of Italy loan, which only took place because the ECB had in fact been a perfectly qualified lender of last resort, only Monte Paschi had no more eligible collateral against which to receive cash from Europe's central bank, is that it was forced to seek a domestic bailout from the BoI as a true lender of last resort against the most worthless collateral the Siena bank could find. "Under the deal, MPS swapped loans and mortgages for some €2 billion of mainly Italian government bonds."

BMP then proceeded to use the Italian bonds with the ECB and to get Euros in exchange, in effect engaging in precisely the kind of collateral transformation alchemy we described previously in painful detail in "Modern Market Alchemy Explained: Converting Junk Debt Into Supersafe Treasurys Out Of Thin Air", only instead of converting Junk into "money good" Treasurys, Monte Paschi used the Bank of Italy as an collateral transformation intermediary converting just as worthless impaired loans and mortgages in the first step, and then using the repo proceeds, Italian bonds, as collateral with the ECB, and thus once again evading nationalization.

What the above episode highlights is the fundamental distinction in collateral transformation processes between the US and Europe: while the US has the $35-40 trillion shadow banking system as a conduit for preliminary junk-to-hunk "alchemy", in Europe it is the regional central banks that serve the role of a decentralized shadow bank (which Europe does not have). The only problem is that while the US shadow banking system is largely a private sector construct, in Europe it is the taxpayers who will be fully impaired when the real value of the worthless rehypothecated collateral is exposed.

Yet one major similarity is that just like in the US, where as we explained collateral transformation takes place entirely off the books, in Europe this step too was completely secret.  "The loan wasn't disclosed at the time by either the Italian central bank of MPS." At least in the US whenever the Fed provides direct bailout funding via the Discount Window or through excess reserves, it keeps a track of how much (if not who the beneficiary is of course) and discloses this publicly every week. Not so in Europe, and where it gets even worse is that in a conference call shortly after receiving the emergency loan, "MPS executives described the bank's liquidity position as sound." What they didn't describe is why their liquidity position was sound: because the bank had just engaged in a collateral transformation with the Italian people, who were handed off risk that not even the ECB wanted to touch!

Of course, had the conference call participants known the truth, it is very likely that BMPS would have been long since nationalized.

Yet the worst part of this whole story, is the Bank of Italy's painfully sad attempt at justification of its actions: First - the bold faced lie that only BMPS was engaging in such "shadow" transformations, which will be true until some other bank is revealed to have engaged in an identical junks-for-hunks repo with the Bank of Italy. And second, the BoI's childish explanation that because others in Europe do it, it's fine:

"Anyone can do it," Mr. Saccomanni said, adding that similar transactions have been carried out by other national central banks in the euro area. Some central banks, such as those of Greece and Ireland, have used their own balance sheets for such lending to domestic banks, under the Emergency Liquidity Assistance, a special dispensation from ECB protocols.

Yes, of course others can do it: the point is that all of them disclose it. The weekly updated balance of Greek and Irish ELA loans has been widely used as an indicator of liquidity and funding pressures in Europe.

What Italy did is engage in an identical operation with an insolvent bank, but undisclosed. That the head of the Italian central bank is so naive, gullible or plain stupid, to not realize the difference, is precisely why, as we reported a few hours ago, the Fed has now injected a record amount of dollars into foreign, i.e., European, banks in the last month.

Because if "other national banks in the euro area" do it, the implication of course is that they do so undisclosed. Which also means that nobody has any clue just how insolvent Europe truly is, but one does know that the situation now is as dire as it has always been. Otherwise Monte Paschi would not be set to receive yet another bailout in the form of a €3.9 billion state bond to raise it capital for "regulatory requirement" purposes. And the Fed would not have to use all the reserve proceeds created from QEternity to fund European banks.

Our advice to all depositors, who we can only hope can be counted on one hand, in Monte Paschi - take your money to a safe bank, and since in Italy that is an oxymoron, it is probably wisest to just park what money one may have in the local Banca dei Materassi.

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ECB approves Anglo Irish Bank debt deal

An illuminated euro sign is seen in front of the headquarters of the European Central Bank (ECB) (Reuters / STR)

An illuminated euro sign is seen in front of the headquarters of the European Central Bank (ECB) (Reuters / STR)

Ireland has moved closer to ending a troubled chapter in its economic history as the European Central Bank has agreed a deal to ease Ireland`s debt burden, just after liquidation of the troubled bank Anglo Irish, was officially announced.

­On Thursday the Irish parliament passed legislation enacting the dissolution of Anglo Irish, now called IBRC. The bank’s collapse back in 2008 led the Irish government to seek a 67.5 billion euros international bailout and dragged the entire country’s economy into debts. 

The European Central Bank has agreed on a deal proposed by Ireland officials to ease the country’s public finances by paying off the debts over a longer period.  It’s hoped the move will boost the country’s chances of finding its way out of an international bailout agreed back in 2010.    

At the moment Ireland has to pay to the ECB a toxic 3.1 billion euros annually until 2023 to repay interest for promissory notes that were issued to underwrite the Anglo Irish Bank during its meltdown.

The liquidation of Anglo Irish Bank will give Ireland an opportunity to pay off its debts to ECB and IMF in a longer period, it should also lower the country’s financing needs.

Under the plan Ireland will swap the so-called promissory notes used to rescue Anglo Irish for long-term government bonds, Reuters reports.

Dublin`s KPMG will initially transfer Anglo Irish assets to a so-called Irish bad bank, the National Asset Management Agency said, according to Bloomberg. The bank`s net debt will be bought using government-backed bonds as payment.

It is expected that most of the bank`s personnel will be rehired to manage the assets' relocation.

Scandals surrounding the collapse of Anglo Irish Bank have been in regular circulation in the nations media in recent years.   First the Bank fuelled a housing boom by handing cheap loans to property developers without much scrutiny, secondly, when the real estate bubble finally collapsed in 2008 – the Bank dragged the entire banking system into the depths of the global economic recession. The meltdown of one of the biggest national banks forced Ireland to seek a 67.5 billion euros international bailout. Its collapse saw dozens of unfinished real estate projects and half-built houses left abandoned across the country. Anglo Irish was nationalized in January 2009.

Irish officials held an emergency debate early on Thursday to enable the liquidation, during which Ireland`s Prime Minister Enda Kenny stressed “This closes a sad and tragic chapter in our economic history.”

During the economic recession, the Bank was nationalized in 2009 and merged with another failed institution. In a bid to changed the image of the troubled lender it was rebranded Irish Bank Resolution Corporation. But failures continued to haunt the company. Last year criminal charges were filed against the former chief executive and chairman of the bank.

The case is yet to go to trial.

Guest Post: The United States of Debt Addiction

Originally posted at GoldSilver.com,

16 point 7 trillion dollars.  That is our current national debt.  12 point 8 trillion dollars.  That is the amount households carry in mortgage and consumer debt.  We are now addicted to debt to lubricate the wheels of our financial system.  There is nothing wrong with debt per se, but it is safe to say that too much debt relative to how much revenue is being produced is a sign of economic problems.  At the core of our current financial mess is how we use debt as a parachute for any problem.  We’ve been masking the shrinking of the middle class by allowing households to take on too much debt for a couple of decades.  The results were not positive.  Too this degree, we have now created a massive moral hazard economy where savings are punished into oblivion.  There is very little incentive to put your money in a bank account yielding zero percent interest when real inflation is eating away at your money like a hungry wolf.  So what do people do?  Well many simply cannot save and therefore choose to go into debt to finance cars, housing, and education with very little down.  Where does this debt addiction lead us?

A little bit of deleveraging

US households have deleveraged from the peak in the crisis.  However, much of this deleveraging has been forced via the 5 million foreclosures that have occurred:

I’m not sure if we can interpret that as some sign of a healthy and growing economy.  Households have had their access to debt limited in many sectors.  Yet one sector that never retreated was that in higher education.  There is little doubt that there is a major bubble in higher education.  Instead of addressing the problems head on we now have more access to debt as the solution.  In order to compete in our service driven economy, having a skill is very important.  Most will make the investment to pursue a college degree but the issue is that with easy access to debt, prices have soared.  It is no surprise that college prices are following the trajectory of what happened in housing.

If you look at the above chart, a big part of the contraction has come from deleveraging from mortgages and credit card debt.  Yet we are now once again loading up on auto debt and college debt.  The system is now setup to punish any type of savings.  Good luck trying to stash your money in a bank account and outrun even the steady pace of inflation.

Take a look at the current savings rate for Bank of America:

Of course the Fed has a hand in all of this.  The Fed realizing that our system for over a decade has been juiced by debt spending, had to step in and make it unattractive to save to the point that people are willing to dive into risky investments yet again.  Because of this however, you create moral hazard.  For example, with housing you have many government backed loans that are now accessible with very little down.  In fact, this has been the path of ownership for most Americans since many are without savings.  One out of three Americans has no savings and nearly half are one or two paychecks away from being out on the streets.

This is why we have seen such a dramatic rise in food stamp usage:

Why save to buy anything when you can simply go into debt for it?  That seems to be the course we are treading on.  We have reached a critical point where our national debt is now higher than our annual GDP.  This crossing of the Rubicon is seen as a major financial tipping point.  We have also mastered how to hide certain employment figures:  

If we look at the U7b measure, the unemployed + underemployed + discouraged workers are nearly up to 25 percent.  We were discussing how many younger Americans are simply riding out the weak economy by going to college.        

People think that this recovery has come from organic forces when in reality, it has come because of number games and also the Fed injecting trillions of dollars into the banking industry.  Ironically these banks are using this money to speculate in markets like stocks and housing where they are now crowding out working and middle class Americans.  When you have access to a printing press with no restraints, it becomes too tempting to spend into oblivion.  Instead of confronting the core problems of the crisis, we are simply repeating them yet again; easy access to low down payment mortgages, easy access to student debt, consumer credit slowly expanding, and major Wall Street speculation.  Addictions are never easily cured and we have yet to come to terms with our insatiable appetite for debt.

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The U.S. Congress: From One Crisis to Another, The Politics of Debt Default

washington

“The full consequences of a default — or even the serious prospect of default — by the United States are impossible to predict and awesome to contemplate… Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and on the value of the dollar in exchange markets.”

-Ronald Reagan (1911-2004), 40th President of the United States (1981–89), (1983)

“Decisions about the debt level [should] occur in conjunction with spending and revenue decisions as opposed to the after-the-fact approach now used… [doing so] would help avoid the uncertainty and disruptions that occur during debates on the debt limit today.”

-U.S. Government Accountability Office (G.A.O.)

“I will not have another debate with this Congress over whether they should pay the bills for what they’ve racked up… We can’t not pay bills that we’ve already incurred.”

-President Barack Obama, Tuesday January 1, 2013

That’s why the American people hate Congress.”

-Chris Christie, New Jersey Republican Governor, (January 2, 2013, after the Republican House majority refused to vote on a $60 billion aid package for victims of Superstorm Sandy)

One crisis averted, three to come! Indeed, that’s what can be said after the U.S. House of Representatives passed legislation on January 23, 2013, to suspend the government’s statutory borrowing limit for three months.

In fact, the cycle of artificially created crises will go on and on in Washington D.C. Now, the next crises are scheduled for March 1s, for March 27th and for May 19th. Stay tuned. On March 1st, automatic sequester cuts agreed by Congress in 2012 will take effect, causing an immediate cut of $69 billion in public discretionary spending. Then, on March 27, the U.S. government’s ability to fund itself (the “continuing resolution”) will run out. And, of course, come May 19, the melodrama of raising the debt ceiling will be back again in force.

Ever since Republicans took control of the 435-member U.S. House of Representatives in 2010, a fiscal drama with the White House and the U.S. Senate has been replayed time and again. One of the political gimmick is called the “raising of the country’s debt limit.

Why so many artificial crises in the current American political system? Extreme political polarization seems to be the answer.

Indeed, since the 2010 mid-term election, when the Republican Party took control of the House of Representatives with some 242 seats, this party has behaved as if it were in fact two parties in one. There is the traditional conservative Republican Party on one side, and the radical Republican Tea Party on the other side. With some 67 anarchist anti-tax and anti-establishment Tea Party House members voting as a block, the latter has been in a position to hold the balance of power in the House and to prevent compromised solutions to the country’s fiscal problems.

A good example was the 2011 showdown between the Democratic Obama administration and the Republican-controlled House of Representatives regarding raising the U.S. government’s debt ceiling.

In the spring of 2011, House Republicans, spurred by Tea Party members who practice no party discipline toward the Republican Party except to themselves, and reneging on a decades-long bipartisan tradition, refused to raise the nation’s debt ceiling, thus threatening to push the U.S. government toward debt default. They demanded that the Obama administration concede to freezing tax revenues and to enacting massive spending cuts. In the midst of a financial crisis and an economic slowdown, such huge public spending cuts could have pushed the U.S. economy toward an economic depression similar to the 1930’s Great Depression.

For the first time, therefore, House Tea Party members decided to use the perfunctory requirement to raise the debt limit to gain partisan political advantage. That move has introduced into the functioning of the U.S. Congress an element of radicalism and brinkmanship that could prevent the U.S. government from operating properly for years to come.

Mind you, the obligation for Congress to vote on raising the U.S. government’s debt ceiling has existed since a 1917 law to that effect was enacted. It allows the U.S. Treasury to proceed with borrowing to finance government operations as outlined in an already approved budget for a given fiscal year.

Economically speaking, indeed, there are three main ways to finance public expenditures: -through tax revenues; -through borrowing; -or, through the printing press, when a government borrows from its own central bank. The latter is in fact an inflation tax imposed on every user of the national currency.

Therefore, if the U.S. Congress has already approved a public budget of operations that does not raise taxes in a sufficient amount to cover outlays, and if an inflation tax is out of question, the only other avenue left is to borrow the required funds.

For years, the 1917 requirement to raise the debt limit was considered redundant since the budget had already been approved and it was seen as a simple bipartisan formality. Since 1940, for example, the U.S. debt ceiling has been raised 94 times, 54 times by a Republican administration and 40 times by a Democratic administration. Altogether the debt ceiling has been raised 102 times since 1917. It has been raised every year that the U.S. government has run a deficit.

If the Tea Party members of the House keep on routinely using the 1917 law to formally raise the debt limit as an obstructionist tool, Congress may be constantly gridlocked and the U.S. government will continue going from crisis to crisis. A small minority of House members could then hold the U.S. government hostage. As a consequence, it could become increasingly difficult for the U.S. Administration to implement sensible economic and fiscal policies along the principle of majority rule. The U.S. economy is bound to suffer severely from such a political paralysis.

In 2011, former president Bill Clinton expressed the view that the 1917 law is unconstitutional since it goes against Article I, sec. 8 of the U.S. Constitution that requires that Congress pay “the Debts and provide for the … general Welfare of the United States.” Besides, the Fourteenth Amendment (section 4) of the U.S. Constitution states that: “the validity of the public debt of the United States… shall not be questioned.

Therefore, if Congress does not fulfill its duties for one reason or another, the President in whom executive power is vested may have the right to act for the “general Welfare of the United States”.

In the coming weeks, if the House of Representatives refuses bipartisan cooperation and keeps stonewalling the Administration, President Obama may have no other choice but to call the Tea Party members’ bluff by unilaterally declaring the 1917 law unconstitutional and letting the courts sort it out later.

A constitutional crisis may seem to many to be a better alternative than a repetitive and protracted economic and financial crisis and an economy constantly teetering on the brink of a permanent fiscal cliff.

Dr. Rodrigue Tremblay, a Canadian-born economist, is the author of the book “The Code for Global Ethics, Ten Humanist Principles”, and of “The New American Empire”)

Breaking the Chains of Debt Peonage

Paying bills(Image: Paying Bills via Shutterstock)Chris Hedges gave this talk Saturday night in Brooklyn at the People’s Recovery Summit.

The corporate state has made it clear there will be no more Occupy encampments. The corporate state is seeking through the persistent harassment of activists and the passage of draconian laws such as Section 1021(b)(2) of the National Defense Authorization Act—and we will be in court next Wednesday to fight the Obama administration’s appeal of the Southern District Court of New York’s ruling declaring Section 1021 unconstitutional—to shut down all legitimate dissent. The corporate state is counting, most importantly, on its system of debt peonage to keep citizens—especially the 30 million people who make up the working poor—from joining our revolt.

Workers who are unable to meet their debts, who are victimized by constantly rising interest rates that can climb to as high as 30 percent on credit cards, are far more likely to remain submissive and compliant. Debt peonage is and always has been a form of political control. Native Americans, forced by the U.S. government onto tribal agencies, were required to buy their goods, usually on credit, at agency stores. Coal miners in southern West Virginia and Kentucky were paid in scrip by the coal companies and kept in perpetual debt servitude by the company store. African-Americans in the cotton fields in the South were forced to borrow during the agricultural season from their white landlords for their seed and farm equipment, creating a life of perpetual debt. It soon becomes impossible to escape the mounting interest rates that necessitate new borrowing.

Debt peonage is a familiar form of political control. And today it is used by banks and corporate financiers to enslave not only individuals but also cities, municipalities, states and the federal government. As the economist Michael Hudson points out, the steady rise in interest rates, coupled with declining public revenues, has become a way to extract the last bits of capital from citizens as well as government. Once individuals, or states or federal agencies, cannot pay their bills—and for many Americans this often means medical bills—assets are sold to corporations or seized. Public land, property and infrastructure, along with pension plans, are privatized. Individuals are pushed out of their homes and into financial and personal distress.

Debt peonage is a fundamental tool for control. This debt peonage must be broken if we are going to build a mass movement to paralyze systems of corporate power. And the most effective weapon we have to liberate ourselves as well as the 30 million Americans who make up the working poor is a sustained movement to raise the minimum wage nationally to at least $11 an hour. Most of these 30 million low-wage workers are women and people of color. They and their families struggle at a subsistence level and play one lender off another to survive. By raising their wages we raise not only the quality of their lives but we increase their capacity for personal and political power. We break one of the most important shackles used by the corporate state to prevent organized resistance.

Ralph Nader, whom I spoke with on Thursday, has been pushing activists to mobilize around raising the minimum wage. Nader, who knows more about corporate power and has been fighting it longer than any other American, has singled out, I believe, the key to building a broad-based national movement. There is among these underpaid 30 million workers—and some of them are with us tonight—a mounting despair at being unable to meet even the basic requirements to maintain a family. Nader points out that Walmart’s 1 million workers, like most of the 30 million low-wage workers, are making less per hour, adjusted for inflation, than workers made in 1968, although these Walmart workers do the work required of two Walmart workers 40 years ago.

If the federal minimum wage from 1968 were adjusted for inflation it would be $10.50. Instead, although costs and prices have risen sharply, the federal minimum wage remains stuck at $7.25 an hour. It is the lowest of the major industrial countries. Meanwhile, Mike Duke, the CEO of Walmart, makes $11,000 an hour. And he is not alone. These corporate chiefs make this much money because they have been able to keep in place a system by which workers are effectively disempowered, forced to work for substandard wages and denied the possibility through unions or the formal electoral systems of power to defend workers’ rights. This is why corporations lavish these CEOs with obscene salaries. These CEOs are the masters of plantations. And the moment workers rise up and demand justice is the moment the staggering inequality of wealth begins to be reversed.

Being a member of the working poor, as Barbara Ehrenreich chronicles in her important book “Nickel and Dimed,” is “a state of emergency.” It is “acute distress.” It is a daily and weekly lurching from crisis to crisis. The stress, the suffering, the humiliation and the job insecurity means that workers are reduced to doing little more than eating, sleeping—never enough—and working. And, most importantly, they are kept in a constant state of fear. Ehrenreich writes:

When someone works for less pay than she can live on—when, for example, she goes hungry so that you can eat more cheaply and conveniently—then she has made a great sacrifice for you, she has made you a gift of some part of her abilities, her health, and her life. The “working poor,” as they are approvingly termed, are in fact the major philanthropists of our society. They neglect their own children so that the children of others will be cared for; they live in substandard housing so that other homes will be shiny and perfect; they endure privation so that inflation will be low and stock prices high. To be a member of the working poor is to be an anonymous donor, a nameless benefactor, to everyone else.

It is time to halt the sacrifice of the working poor. It is time to empower the 30 million low-wage workers—two-thirds of which are employed by large corporations such as Walmart and McDonald’s—to fight back.

Joe Sacco and I spent the last two years in the poorest pockets of the United States, our nation’s sacrifice zones, for our book “Days of Destruction, Days of Revolt.” We saw in Pine Ridge, S.D., Camden, N.J.—the poorest and the most dangerous city in the nation—the coalfields of southern West Virginia and the produce fields of Immokalee, Fla., how this brutal system of corporate exploitation works. In these sacrifice zones no one has legal protection. All institutions, from the press to the political class to the judiciary, are wholly owned subsidiaries of the corporate state. And what has been done to those in these sacrifice zones, those places corporations devastated first, is now being done to all of us.

There are no impediments within the electoral process or the formal structures of power to prevent predatory capitalism. We are all being forced to kneel before the dictates of the marketplace. The human cost, the attendant problems of drug and alcohol abuse, the neglect of children, the early deaths—in Pine Ridge the average life expectancy of a male is 48, the lowest in the Western Hemisphere outside of Haiti—is justified by the need to make greater and greater profit. And these costs are now being felt across the nation. The phrase “the consent of the governed” has become a cruel joke. We use a language to describe our systems of governance that no longer correspond to reality. The disconnect between illusion and reality makes us one of the most self-deluded populations on the planet.

The Weimarization of the American working class, and increasingly the middle class, is by design. It is part of a corporate reconfiguration of the national and global economy into a form of neofeudalism. It is about creating a world of masters and serfs, of empowered oligarchic elites and broken disempowered masses. And it is not only our wealth that is taken from us. It is our liberty. The so-called self-regulating market, as the economist Karl Polanyi wrote in “The Great Transformation,” always ends with mafia capitalism and a mafia political system. This system of self-regulation, Polanyi wrote, always leads to “the demolition of society.”

And this is what is happening—the demolition of our society and the demolition of the ecosystem that sustains the human species. In theological terms these corporate forces, driven by the lust for ceaseless expansion and exploitation, are systems of death. They know no limits. They will not stop on their own. And unless we stop them we are as a nation and finally as a species doomed. Polanyi understood the destructive power of unregulated corporate capitalism unleashed upon human society and the ecosystem. He wrote: “In disposing of a man’s labor power the system would, incidentally, dispose of the physical, psychological, and moral entity ‘man’ attached to the tag.”

Polanyi wrote of a society that surrendered to the dictates of the market. “Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as victims of acute social dislocation through vice, perversion, crime, and starvation. Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed. Finally, the market administration of purchasing power would periodically liquidate business enterprise, for shortages and surfeits of money would prove as disastrous to business as floods and droughts in primitive society. Undoubtedly, labor, land, and money markets are essential to a market economy. But no society could stand the effects of such a system of crude fictions even for the shortest stretch of time unless its human and natural substance as well as its business organizations was protected against the ravages of this satanic mill.

The global and national economy because of this “satanic mill” continues to deteriorate, and yet, curiously, stock market levels are close to their highs in 2007 before the global financial meltdown. This is because these corporations have been able to suppress wages, slash social programs and bilk the government for staggering sums of money. The Federal Reserve purchases about $85 billion worth of mortgage-backed securities and Treasury bills every month. This means that the Fed is printing endless streams of money to buy up government debt and toxic assets from the banks.  The Federal Reserve now owns assets, much of them worthless, of $3.01 trillion. This is triple what it was in 2008.

And while corporations such as Citibank and General Electric loot the Treasury they exact more pounds of flesh in the name of austerity. General Electric, as Nader points out, is a net job exporter. Over the past decade, as Citizens for Tax Justice has documented, GE’s effective federal income tax rate on its $81.2 billion in pretax U.S. profits has been at most 1.8 percent. Because of the way General Electric’s accountants play with tax liabilities the company actually receives money from the Treasury. They have several billion dollars paid to them from the federal government into company bank accounts—and these are not tax refunds. The company, as Nader argues, is a net drain on the Treasury and a net drain on jobs. It violates a host of environmental and criminal laws. And yet Jeffery Immelt, the CEO of General Electric, was appointed to be the chairman of Obama’s Jobs Council. Immelt’s only major contribution to the jobs initiative was to get rid of 37,000 of his employees since 2001. Jim McNerney, president and CEO of Boeing, who also sat on the Jobs Council, has cut over 14,000 jobs since 2008, according to Public Campaign. The only jobs the CEOs on the Jobs Council were concerned with were the ones these CEOs eradicated. The Jobs Council, which Obama disbanded this week, is a microcosm of what is happening within the corridors of power. Corporations increasingly terminate jobs here to hire grossly underpaid workers in India or China while at the same time stealing as much as fast as they can on the way out the door.

As Michael Hudson has pointed out, financialization has created a new kind of class war. The old class warfare took place between workers and bosses. Workers organized to fight for fair wages, better work hours and safety conditions in the workplace as well as adequate pensions and medical benefits. But with a country of debtors and a government that must also borrow to continue operating, Hudson says, we have changed the way class warfare works. Finance, he points out, controls state and federal policy as well as the lives of ordinary workers. It is able to dictate working conditions. The financiers, who insist that cuts be made so governments can repay loans, impose draconian austerity and long-term unemployment to, as Hudson told a Greek newspaper, “drive down wages to a degree that could not occur in the company-by-company clash between industrial employers and their workers.”

The former Federal Reserve Chairman Alan Greenspan, testifying before Congress, was quite open about the role of debt peonage in keeping workers passive. Greenspan pointed out that since 1980 labor productivity has increased by about 83 percent. Yet real wages have stagnated. Greenspan said this was because workers were too burdened with mortgage debts, college loans, auto payments and credit-card debt to risk losing a job. Household debt in the United States is around $13 trillion. This is only $2 trillion less than the country’s total yearly economic output. Greenspan was right. Miss a payment on your credit card and your interest rates jumps to 30 percent. Fail to pay your mortgage and you lose your home. Miss your health insurance payments, which have been spiraling upwards, and if you are seriously ill you go into bankruptcy, as 1 million Americans who get sick do every year. Trash your credit rating and your fragile financial edifice, built on managing debt, collapses. Since most Americans feel, on some level, as Hudson points out, that they are a step or two away from being homeless, they are deeply averse to challenging corporate power. It is not worth the risk. And the corporate state knows it. Absolute power, the philosopher Thomas Hobbes wrote, depends on fear and passivity.

The only way to break this fear and passivity is to organize workers to break the cycle of mounting debt. And the first step to achieving independence from debt—the primary form of political control by the corporate state—is to raise the minimum wage. There are other solutions—forgiving mortgage and student debt, instituting universal health care, establishing a nationwide jobs program to rebuild the country’s Third World infrastructure, and green energy—but none of this will happen until we are able to mount a sustained mass movement that discredits the corporate state. This mass movement will arise, as Nader says, when we mobilize around the minimum wage.

The lowest-grade worker at the General Electric plant that makes high-tech health care devices outside Paterson in Totowa [New Jersey]—a pay grade known as the D 04—was just raised to $14,555 a year. That is under $8 an hour. The plant’s highest-paid hourly employee, known as D 16, earns $22,000. Immelt makes over $11 million a year. This vast disparity in income, and this wage abuse, is played out in every corporation in the country. No one in Washington intends to challenge it.

Only 11.3 percent of workers in this country belong to unions. This is the lowest percentage in 80 years. And nearly all these unions, and especially the AFL-CIO, have been emasculated by corporate power.

Nader is right when he warns that we are not going to be assisted in this effort by established unions. Union leaders are bought off. They are comfortable. They are pulling down at least five times what rank-and-file workers make. Nader says we have to mount protests not only outside the doors of Walmarts and General Electric plants, not only outside congressional offices, but outside the doors of the AFL-CIO. There is no established institution inside or outside government that will help us. They are all broken or complicit. But there are the 30 million working poor who, if we organize to break the system of debt peonage that holds them hostage, may be willing to rise up. We are bound with many chains and shackles. We will have to break them one at a time. But once we rise up, once we are able to threaten the corporate systems that keep us supine through fear, we will unleash a torrent of energy and passion that will confirm the worst nightmares of our corporate overlords.

Breaking the Chains of Debt Peonage

Chris Hedges gave this talk Saturday night in Brooklyn at the People’s Recovery Summit.

(Photo: watchingfrogsboil via flickr)The corporate state has made it clear there will be no more Occupy encampments. The corporate state is seeking through the persistent harassment of activists and the passage of draconian laws such as Section 1021(b)(2) of the National Defense Authorization Act—and we will be in court next Wednesday to fight the Obama administration’s appeal of the Southern District Court of New York’s ruling declaring Section 1021 unconstitutional—to shut down all legitimate dissent. The corporate state is counting, most importantly, on its system of debt peonage to keep citizens—especially the 30 million people who make up the working poor—from joining our revolt.

Workers who are unable to meet their debts, who are victimized by constantly rising interest rates that can climb to as high as 30 percent on credit cards, are far more likely to remain submissive and compliant. Debt peonage is and always has been a form of political control. Native Americans, forced by the U.S. government onto tribal agencies, were required to buy their goods, usually on credit, at agency stores. Coal miners in southern West Virginia and Kentucky were paid in scrip by the coal companies and kept in perpetual debt servitude by the company store. African-Americans in the cotton fields in the South were forced to borrow during the agricultural season from their white landlords for their seed and farm equipment, creating a life of perpetual debt. It soon becomes impossible to escape the mounting interest rates that necessitate new borrowing.

Debt peonage is a familiar form of political control. And today it is used by banks and corporate financiers to enslave not only individuals but also cities, municipalities, states and the federal government. As the economist Michael Hudson points out, the steady rise in interest rates, coupled with declining public revenues, has become a way to extract the last bits of capital from citizens as well as government. Once individuals, or states or federal agencies, cannot pay their bills—and for many Americans this often means medical bills—assets are sold to corporations or seized. Public land, property and infrastructure, along with pension plans, are privatized. Individuals are pushed out of their homes and into financial and personal distress.

Debt peonage is a fundamental tool for control. This debt peonage must be broken if we are going to build a mass movement to paralyze systems of corporate power. And the most effective weapon we have to liberate ourselves as well as the 30 million Americans who make up the working poor is a sustained movement to raise the minimum wage nationally to at least $11 an hour. Most of these 30 million low-wage workers are women and people of color. They and their families struggle at a subsistence level and play one lender off another to survive. By raising their wages we raise not only the quality of their lives but we increase their capacity for personal and political power. We break one of the most important shackles used by the corporate state to prevent organized resistance.Ralph Nader, whom I spoke with on Thursday, has been pushing activists to mobilize around raising the minimum wage. Nader, who knows more about corporate power and has been fighting it longer than any other American, has singled out, I believe, the key to building a broad-based national movement. There is among these underpaid 30 million workers—and some of them are with us tonight—a mounting despair at being unable to meet even the basic requirements to maintain a family. Nader points out that Walmart’s 1 million workers, like most of the 30 million low-wage workers, are making less per hour, adjusted for inflation, than workers made in 1968, although these Walmart workers do the work required of two Walmart workers 40 years ago.

If the federal minimum wage from 1968 were adjusted for inflation it would be $10.50. Instead, although costs and prices have risen sharply, the federal minimum wage remains stuck at $7.25 an hour. It is the lowest of the major industrial countries. Meanwhile, Mike Duke, the CEO of Walmart, makes $11,000 an hour. And he is not alone. These corporate chiefs make this much money because they have been able to keep in place a system by which workers are effectively disempowered, forced to work for substandard wages and denied the possibility through unions or the formal electoral systems of power to defend workers’ rights. This is why corporations lavish these CEOs with obscene salaries. These CEOs are the masters of plantations. And the moment workers rise up and demand justice is the moment the staggering inequality of wealth begins to be reversed.

Being a member of the working poor, as Barbara Ehrenreich chronicles in her important book “Nickel and Dimed,” is “a state of emergency.” It is “acute distress.” It is a daily and weekly lurching from crisis to crisis. The stress, the suffering, the humiliation and the job insecurity means that workers are reduced to doing little more than eating, sleeping—never enough—and working. And, most importantly, they are kept in a constant state of fear. Ehrenreich writes:

When someone works for less pay than she can live on—when, for example, she goes hungry so that you can eat more cheaply and conveniently—then she has made a great sacrifice for you, she has made you a gift of some part of her abilities, her health, and her life. The “working poor,” as they are approvingly termed, are in fact the major philanthropists of our society. They neglect their own children so that the children of others will be cared for; they live in substandard housing so that other homes will be shiny and perfect; they endure privation so that inflation will be low and stock prices high. To be a member of the working poor is to be an anonymous donor, a nameless benefactor, to everyone else.

It is time to halt the sacrifice of the working poor. It is time to empower the 30 million low-wage workers—two-thirds of which are employed by large corporations such as Walmart and McDonald’s—to fight back.

Joe Sacco and I spent the last two years in the poorest pockets of the United States, our nation’s sacrifice zones, for our book “Days of Destruction, Days of Revolt.” We saw in Pine Ridge, S.D., Camden, N.J.—the poorest and the most dangerous city in the nation—the coalfields of southern West Virginia and the produce fields of Immokalee, Fla., how this brutal system of corporate exploitation works. In these sacrifice zones no one has legal protection. All institutions, from the press to the political class to the judiciary, are wholly owned subsidiaries of the corporate state. And what has been done to those in these sacrifice zones, those places corporations devastated first, is now being done to all of us.

There are no impediments within the electoral process or the formal structures of power to prevent predatory capitalism. We are all being forced to kneel before the dictates of the marketplace. The human cost, the attendant problems of drug and alcohol abuse, the neglect of children, the early deaths—in Pine Ridge the average life expectancy of a male is 48, the lowest in the Western Hemisphere outside of Haiti—is justified by the need to make greater and greater profit. And these costs are now being felt across the nation. The phrase “the consent of the governed” has become a cruel joke. We use a language to describe our systems of governance that no longer correspond to reality. The disconnect between illusion and reality makes us one of the most self-deluded populations on the planet.

The Weimarization of the American working class, and increasingly the middle class, is by design. It is part of a corporate reconfiguration of the national and global economy into a form of neofeudalism. It is about creating a world of masters and serfs, of empowered oligarchic elites and broken disempowered masses. And it is not only our wealth that is taken from us. It is our liberty. The so-called self-regulating market, as the economist Karl Polanyi wrote in “The Great Transformation,” always ends with mafia capitalism and a mafia political system. This system of self-regulation, Polanyi wrote, always leads to “the demolition of society.”

And this is what is happening—the demolition of our society and the demolition of the ecosystem that sustains the human species. In theological terms these corporate forces, driven by the lust for ceaseless expansion and exploitation, are systems of death. They know no limits. They will not stop on their own. And unless we stop them we are as a nation and finally as a species doomed. Polanyi understood the destructive power of unregulated corporate capitalism unleashed upon human society and the ecosystem. He wrote: “In disposing of a man’s labor power the system would, incidentally, dispose of the physical, psychological, and moral entity ‘man’ attached to the tag.”

Polanyi wrote of a society that surrendered to the dictates of the market. “Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as victims of acute social dislocation through vice, perversion, crime, and starvation. Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed. Finally, the market administration of purchasing power would periodically liquidate business enterprise, for shortages and surfeits of money would prove as disastrous to business as floods and droughts in primitive society. Undoubtedly, labor, land, and money markets are essential to a market economy. But no society could stand the effects of such a system of crude fictions even for the shortest stretch of time unless its human and natural substance as well as its business organizations was protected against the ravages of this satanic mill.

The global and national economy because of this “satanic mill” continues to deteriorate, and yet, curiously, stock market levels are close to their highs in 2007 before the global financial meltdown. This is because these corporations have been able to suppress wages, slash social programs and bilk the government for staggering sums of money. The Federal Reserve purchases about $85 billion worth of mortgage-backed securities and Treasury bills every month. This means that the Fed is printing endless streams of money to buy up government debt and toxic assets from the banks.  The Federal Reserve now owns assets, much of them worthless, of $3.01 trillion. This is triple what it was in 2008.

And while corporations such as Citibank and General Electric loot the Treasury they exact more pounds of flesh in the name of austerity. General Electric, as Nader points out, is a net job exporter. Over the past decade, as Citizens for Tax Justice has documented, GE’s effective federal income tax rate on its $81.2 billion in pretax U.S. profits has been at most 1.8 percent. Because of the way General Electric’s accountants play with tax liabilities the company actually receives money from the Treasury. They have several billion dollars paid to them from the federal government into company bank accounts—and these are not tax refunds. The company, as Nader argues, is a net drain on the Treasury and a net drain on jobs. It violates a host of environmental and criminal laws. And yet Jeffery Immelt, the CEO of General Electric, was appointed to be the chairman of Obama’s Jobs Council. Immelt’s only major contribution to the jobs initiative was to get rid of 37,000 of his employees since 2001. Jim McNerney, president and CEO of Boeing, who also sat on the Jobs Council, has cut over 14,000 jobs since 2008, according to Public Campaign. The only jobs the CEOs on the Jobs Council were concerned with were the ones these CEOs eradicated. The Jobs Council, which Obama disbanded this week, is a microcosm of what is happening within the corridors of power. Corporations increasingly terminate jobs here to hire grossly underpaid workers in India or China while at the same time stealing as much as fast as they can on the way out the door.

As Michael Hudson has pointed out, financialization has created a new kind of class war. The old class warfare took place between workers and bosses. Workers organized to fight for fair wages, better work hours and safety conditions in the workplace as well as adequate pensions and medical benefits. But with a country of debtors and a government that must also borrow to continue operating, Hudson says, we have changed the way class warfare works. Finance, he points out, controls state and federal policy as well as the lives of ordinary workers. It is able to dictate working conditions. The financiers, who insist that cuts be made so governments can repay loans, impose draconian austerity and long-term unemployment to, as Hudson told a Greek newspaper, “drive down wages to a degree that could not occur in the company-by-company clash between industrial employers and their workers.”

The former Federal Reserve Chairman Alan Greenspan, testifying before Congress, was quite open about the role of debt peonage in keeping workers passive. Greenspan pointed out that since 1980 labor productivity has increased by about 83 percent. Yet real wages have stagnated. Greenspan said this was because workers were too burdened with mortgage debts, college loans, auto payments and credit-card debt to risk losing a job. Household debt in the United States is around $13 trillion. This is only $2 trillion less than the country’s total yearly economic output. Greenspan was right. Miss a payment on your credit card and your interest rates jumps to 30 percent. Fail to pay your mortgage and you lose your home. Miss your health insurance payments, which have been spiraling upwards, and if you are seriously ill you go into bankruptcy, as 1 million Americans who get sick do every year. Trash your credit rating and your fragile financial edifice, built on managing debt, collapses. Since most Americans feel, on some level, as Hudson points out, that they are a step or two away from being homeless, they are deeply averse to challenging corporate power. It is not worth the risk. And the corporate state knows it. Absolute power, the philosopher Thomas Hobbes wrote, depends on fear and passivity.

The only way to break this fear and passivity is to organize workers to break the cycle of mounting debt. And the first step to achieving independence from debt—the primary form of political control by the corporate state—is to raise the minimum wage. There are other solutions—forgiving mortgage and student debt, instituting universal health care, establishing a nationwide jobs program to rebuild the country’s Third World infrastructure, and green energy—but none of this will happen until we are able to mount a sustained mass movement that discredits the corporate state. This mass movement will arise, as Nader says, when we mobilize around the minimum wage.

The lowest-grade worker at the General Electric plant that makes high-tech health care devices outside Paterson in Totowa [New Jersey]—a pay grade known as the D 04—was just raised to $14,555 a year. That is under $8 an hour. The plant’s highest-paid hourly employee, known as D 16, earns $22,000. Immelt makes over $11 million a year. This vast disparity in income, and this wage abuse, is played out in every corporation in the country. No one in Washington intends to challenge it.

Only 11.3 percent of workers in this country belong to unions. This is the lowest percentage in 80 years. And nearly all these unions, and especially the AFL-CIO, have been emasculated by corporate power.

Nader is right when he warns that we are not going to be assisted in this effort by established unions. Union leaders are bought off. They are comfortable. They are pulling down at least five times what rank-and-file workers make. Nader says we have to mount protests not only outside the doors of Walmarts and General Electric plants, not only outside congressional offices, but outside the doors of the AFL-CIO. There is no established institution inside or outside government that will help us. They are all broken or complicit. But there are the 30 million working poor who, if we organize to break the system of debt peonage that holds them hostage, may be willing to rise up. We are bound with many chains and shackles. We will have to break them one at a time. But once we rise up, once we are able to threaten the corporate systems that keep us supine through fear, we will unleash a torrent of energy and passion that will confirm the worst nightmares of our corporate overlords.

© 2013 TruthDig

Chris Hedges

Chris Hedges writes a regular column for Truthdig.com. Hedges graduated from Harvard Divinity School and was for nearly two decades a foreign correspondent for The New York Times. He is the author of many books, including: War Is A Force That Gives Us Meaning, What Every Person Should Know About War, and American Fascists: The Christian Right and the War on America.  His most recent book is Empire of Illusion: The End of Literacy and the Triumph of Spectacle.

Breaking the Chains of Debt Peonage

Breaking the Chains of Debt Peonage

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Posted on Feb 3, 2013
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By Chris Hedges

Chris Hedges gave this talk Saturday night in Brooklyn at the People’s Recovery Summit.

The corporate state has made it clear there will be no more Occupy encampments. The corporate state is seeking through the persistent harassment of activists and the passage of draconian laws such as Section 1021(b)(2) of the National Defense Authorization Act—and we will be in court next Wednesday to fight the Obama administration’s appeal of the Southern District Court of New York’s ruling declaring Section 1021 unconstitutional—to shut down all legitimate dissent. The corporate state is counting, most importantly, on its system of debt peonage to keep citizens—especially the 30 million people who make up the working poor—from joining our revolt.

Workers who are unable to meet their debts, who are victimized by constantly rising interest rates that can climb to as high as 30 percent on credit cards, are far more likely to remain submissive and compliant. Debt peonage is and always has been a form of political control. Native Americans, forced by the U.S. government onto tribal agencies, were required to buy their goods, usually on credit, at agency stores. Coal miners in southern West Virginia and Kentucky were paid in scrip by the coal companies and kept in perpetual debt servitude by the company store. African-Americans in the cotton fields in the South were forced to borrow during the agricultural season from their white landlords for their seed and farm equipment, creating a life of perpetual debt. It soon becomes impossible to escape the mounting interest rates that necessitate new borrowing.

Debt peonage is a familiar form of political control. And today it is used by banks and corporate financiers to enslave not only individuals but also cities, municipalities, states and the federal government. As the economist Michael Hudson points out, the steady rise in interest rates, coupled with declining public revenues, has become a way to extract the last bits of capital from citizens as well as government. Once individuals, or states or federal agencies, cannot pay their bills—and for many Americans this often means medical bills—assets are sold to corporations or seized. Public land, property and infrastructure, along with pension plans, are privatized. Individuals are pushed out of their homes and into financial and personal distress.

Debt peonage is a fundamental tool for control. This debt peonage must be broken if we are going to build a mass movement to paralyze systems of corporate power. And the most effective weapon we have to liberate ourselves as well as the 30 million Americans who make up the working poor is a sustained movement to raise the minimum wage nationally to at least $11 an hour. Most of these 30 million low-wage workers are women and people of color. They and their families struggle at a subsistence level and play one lender off another to survive. By raising their wages we raise not only the quality of their lives but we increase their capacity for personal and political power. We break one of the most important shackles used by the corporate state to prevent organized resistance.

Ralph Nader, whom I spoke with on Thursday, has been pushing activists to mobilize around raising the minimum wage. Nader, who knows more about corporate power and has been fighting it longer than any other American, has singled out, I believe, the key to building a broad-based national movement. There is among these underpaid 30 million workers—and some of them are with us tonight—a mounting despair at being unable to meet even the basic requirements to maintain a family. Nader points out that Walmart’s 1 million workers, like most of the 30 million low-wage workers, are making less per hour, adjusted for inflation, than workers made in 1968, although these Walmart workers do the work required of two Walmart workers 40 years ago.

If the federal minimum wage from 1968 were adjusted for inflation it would be $10.50. Instead, although costs and prices have risen sharply, the federal minimum wage remains stuck at $7.25 an hour. It is the lowest of the major industrial countries. Meanwhile, Mike Duke, the CEO of Walmart, makes $11,000 an hour. And he is not alone. These corporate chiefs make this much money because they have been able to keep in place a system by which workers are effectively disempowered, forced to work for substandard wages and denied the possibility through unions or the formal electoral systems of power to defend workers’ rights. This is why corporations lavish these CEOs with obscene salaries. These CEOs are the masters of plantations. And the moment workers rise up and demand justice is the moment the staggering inequality of wealth begins to be reversed.

Being a member of the working poor, as Barbara Ehrenreich chronicles in her important book “Nickel and Dimed,” is “a state of emergency.” It is “acute distress.” It is a daily and weekly lurching from crisis to crisis. The stress, the suffering, the humiliation and the job insecurity means that workers are reduced to doing little more than eating, sleeping—never enough—and working. And, most importantly, they are kept in a constant state of fear. Ehrenreich writes:

When someone works for less pay than she can live on—when, for example, she goes hungry so that you can eat more cheaply and conveniently—then she has made a great sacrifice for you, she has made you a gift of some part of her abilities, her health, and her life. The “working poor,” as they are approvingly termed, are in fact the major philanthropists of our society. They neglect their own children so that the children of others will be cared for; they live in substandard housing so that other homes will be shiny and perfect; they endure privation so that inflation will be low and stock prices high. To be a member of the working poor is to be an anonymous donor, a nameless benefactor, to everyone else.

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Major Cuts Needed to $1.2 Trillion National Security Budget

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Lawrence Wilkerson: Pressure from arms manufactures and politicians protecting jobs make it difficult to have a rational approach to US military budget

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore. And welcome to this week's edition of The Wilkerson Report with Larry Wilkerson, who joins us now from William & Mary College, where he is the adjunct professor of government. He is also the former chief of staff for U.S. Secretary of State Colin Powell.

Thanks very much for joining us, Larry.

LAWRENCE WILKERSON, FMR. CHIEF OF STAFF TO COLIN POWELL: Thanks for having me, Paul.

JAY: So what have you been working on, thinking about this week?

WILKERSON: Reducing the Pentagon budget, which really boils down to reducing the national security budget.

JAY: And what conclusions did you come to? I once heard a speech you made at the Samuel Adams awards, and you said that what United States governing powers have to come to terms with is, one way or the other, the American empire is going to weaken and be less or wither away, and it can either be managed reasonably or it can be fought kicking and screaming. So what does that mean in terms of military budgets?

WILKERSON: This is a huge component of that, Paul. If you can't take money away from the security component, the national security component, and either use that money in more advantageous ways for the country, then you're trapped, I mean, you're really trapped into the national security state, and your discretionary spending is extremely little and growing less as your interest payments on your debt grow larger and larger.

So if you look at the national security budget across its entire [li], that is to say, holistically, you see a number of different accounts. You see, of course, the soft power account, which is the 150 account at the State Department, the international affairs account. You see the Homeland Security account. You see the Veterans Administration account. You see the nuclear weapons account buried in the Department of Energy. You also see the account that now is, I think, approaching if not over $100 billion for this massive intelligence structure we've set up since 9/11.

So if you look at all of those accounts, you're talking about spending not as the military people say all the time, including myself, 3, 4, 4.5 percent of GDP; you're spending 7 or 8 percent of GDP. You're spending, for example, in FY 2010 $1.2 trillion. At that really impacts your discretionary spending. You hardly have any spending for anything else.

So we've got to do something about this. And I think the time, very opportunistic time, convergence of Tea Party interests, Democratic interests, Republican interests, progressive interests, and real interests of this republic are to reduce this spending across the board. And I think we can do that.

JAY: What would it look like?

WILKERSON: It would like like, I think, a ten-year program, adjusted wisely—not the way sequestration's going to do it, like a hammer, but adjusted wisely for the different threats that we think we envision and the different capabilities we think we need over about the next decade. I do think you could reduce spending somewhere in the neighborhood of $50 to $100 billion each of the years of that decade. Now, in one year you might reduce it by only $45 billion; in another decade you might reduce by $80 billion. But it's got to be in consonance with the way we perceive the threats, developing and otherwise, and the way we perceive the capabilities we need to counter those threats.

JAY: Now, you're talking about actual cuts, not just slowing down growth, because some of the things that have—I know President Obama has said they've already made some cuts, but if I understand it correctly, a lot of that is really just slowing down growth.

WILKERSON: That's absolutely right, Paul. I mean, let's face it. We are last year still in a spending spree. We're spending more than we spent at the height of the Cold War. Our expenditures are phenomenal in that respect, particularly when you look out and see no existential threats, and the threats you do see are very different from the past. We need to reshape our capabilities to accommodate those threats, and at the same time to save enormous amounts of money by this reshaping.

For example, drones don't cost nearly as much as F-22 fighters. Submarines don't cost nearly as much as aircraft carriers. And, incidentally, submarines are the most invulnerable weapons platform in the world and need to be augmented and need to be retained and need to be made even more sophisticated than they are now. You want to bring a nation to its knees, a nation, for example, like China, then you impact its commerce with submarines.

So we need to think hard about how we reshape our capabilities, saving money in the process, working out inefficiencies—and waste and fraud and abuse, too, of course—and at the same time look at the management of our Armed Forces. For example, we have more general and flag officers, general officers, admirals and generals, on active duty today with a much less force than we had when we had 16 million men under arms in World War II. That's crazy. We need to get rid of some of these generals and admirals.

So there are all manner of ways you can do this, but it's basically reshaping your capabilities to meet the threats you think you're going to meet in the next 25 to 30 years.

JAY: But isn't it also about rethinking what you want to accomplish with the military? I mean, it's one thing about defending your own country. It's another thing to want, to quote you, bring a nation to its knees. I mean, why be in a position to have to or be capable of bringing a nation to its knees? Why not just be in a position to defend the country?

WILKERSON: Excellent point. And what I mean when I say you need to look at the national security budget holistically is just that. We need to rebalance that budget. For example, we need to put a lot more money into soft power. And the dominant element there is the 150 account at State, the international affairs account. We need to hire more foreign service officers. We need to empower them. We need to let them take risks. We need to use them for intelligence gatherers. And their intelligence, by the way, Paul, will be infinitely better than this billion-dollar complex we've created to gather intelligence, which has done nothing but fail catastrophically over the last 30 years.

So we need to shift the balance in that national security set of accounts to favor soft power. And what you do when you do that is you create situations in the world that are not going to require military force. So you reduce the need for the military. I'm not saying you reduce it to zero, but I am saying you can reduce it dramatically if you apply diplomacy, political and economic power, and so forth more adroitly, more smartly, more wisely over the next 25 to 30 years.

JAY: Now, I mean, there's lots of ways you could approach this rationally, either from the point—even if you want to maintain the American empire—I mean, I would argue it'd be a good thing not to, but either way there's a lot more rational approaches that could be taken than the current one, which begs the question, then, how much of military policy and expenditure, military budget, is really the result of lobbying by arms manufacturer, the military-industrial complex. I mean, is it possible to have change? And you've been in on the inside. How big a pressure is that, coming from those places?

WILKERSON: It's enormous. Take the NRA for example. The NRA's not in business to protect the Second Amendment or individual gun owners. It's in business to protect those who sell arms. It's that clear. It's that simple. Anybody who thinks differently is smoking something. By the same token, Lockheed Martin is in business to sell arms. So is Ratheon. So is [groUn]. So you've got enormous influences that will tend to want to keep the military-industrial complex as big as it is, even grow it, expand it, and want to keep the jobs and everything associated with it. So this is not going to be an easy task.

As I was talking at this recent conference, I talked about Norfolk, for example, Norfolk, Virginia, my home state. This is real jobs, this is real economic might to people in Virginia. So if you talk about cutting the complex over at Norfolk and the environs surrounding and you talk about cutting the jobs and so forth, you're going to have two Virginia senators and some representatives and a governor and everybody else in your face.

So this is not going to be easy, but it's time to do it. And it's time to do it not just for the satisfaction of reducing the security budget, but for the benefit of this country. And if you want to maintain an empire, make it a commercial empire, make it an empire of things we do best, arguably (used to be, at least) better than anybody else in the world. The Chinese are giving us some competition. The Japanese did previously. But it's healthy competition, though. Let's make it a commercial empire and let's maintain that empire in terms of commerce and not in terms of killing people, killing people for oil or killing people for human rights. I think both are just as bad as the other.

JAY: Alright. Thanks for joining us, Larry.

WILKERSON: Thanks for having me, Paul.

JAY: And thank you for joining us on The Real News Network.

The Politics of Debt in America: From Debtor’s Prison to Debtor Nation

Those who view debt with a smiley face as the royal road to wealth accumulation and tend to be forgiven if their default is large enough almost invariably come from the top rungs of the economic hierarchy.  Then there are the rest of us, who get scolded for our impecunious ways, foreclosed upon and dispossessed, leaving behind scars that never fade away and wounds that disable our futures.

Think of this upstairs-downstairs class calculus as the politics of debt.  British economist John Maynard Keynes put it like this: “If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”

After months of an impending “debtpocalypse,” the dreaded “debt ceiling,” and the “fiscal cliff,” Americans remain preoccupied with debt, public and private.  Austerity is what we’re promised for our sins. Millions are drowning, or have already drowned, in a sea of debt — mortgages gone badstudent loans that may never be paid off, spiraling credit card bills, car loans, payday loans, and a menagerie of new-fangled financial mechanisms cooked up by the country’s “financial engineers” to milk what’s left of the American standard of living.  

The world economy almost came apart in 2007-2008, and still may do so under the whale-sized carcass of debt left behind by financial plunderers who found in debt the leverage to get ever richer.  Most of them still live in their mansions and McMansions, while other debtors live outdoors, or in cars or shelters, or doubled-up with relatives and friends — or even in debtor’s prison. Believe it or not, a version of debtor’s prison, that relic of early American commercial barbarism, is back.

In 2013, you can’t actually be jailed for not paying your bills, but ingenious corporations, collection agencies, cops, courts, and lawyers have devised ways to insure that debt “delinquents” will end up in jail anyway.  With one-third of the states now allowing the jailing of debtors (without necessarily calling it that), it looks ever more like a trend in the making.

Will Americans tolerate this, or might there emerge a politics of resistance to debt, as has happened more than once in a past that shouldn’t be forgotten?

The World of Debtor’s Prisons

Imprisonment for debt was a commonplace in colonial America and the early republic, and wasn’t abolished in most states until the 1830s or 1840s, in some cases not until after the Civil War.  Today, we think of it as a peculiar and heartless way of punishing the poor — and it was.  But it was more than that.

Some of the richest, most esteemed members of society also ended up there, men like Robert Morris, who helped finance the American Revolution and ran the Treasury under the Articles of Confederation; John Pintard, a stock-broker, state legislator, and founder of the New York Historical Society; William Duer, graduate of Eton, powerful merchant and speculator, assistant secretary in the Treasury Department of the new federal government, and master of a Hudson River manse; a Pennsylvania Supreme Court judge; army generals; and other notables.

Whether rich or poor, you were there for a long stretch, even for life, unless you could figure out some way of discharging your debts.  That, however, is where the similarity between wealthy and impoverished debtors ended.

Whether in the famous Marshalsea in London where Charles Dickens had Little Dorritt’s father incarcerated (and where Dickens’s father had actually languished when the author was 12), or in the New Gaol in New York City, where men like Duer and Morris did their time, debtors prisons were segregated by class.  If your debts were large enough and your social connections weighty enough (the two tended to go together) you lived comfortably.  You were supplied with good food and well-appointed living quarters, as well as books and other pleasures, including on occasion manicurists and prostitutes.

Robert Morris entertained George Washington for dinner in his “cell.” Once released, he resumed his career as the new nation’s richest man.  Before John Pintard moved to New Gaol, he redecorated his cell, had it repainted and upholstered, and shipped in two mahogany writing desks.

Meanwhile, the mass of petty debtors housed in the same institution survived, if at all, amid squalor, filth, and disease.  They were often shackled, and lacked heat, clean water, adequate food, or often food of any kind.  (You usually had to have the money to buy your own food, clothing, and fuel.)  Debtors in these prisons frequently found themselves quite literally dying of debt.  And you could end up in such circumstances for trivial sums.  Of the 1,162 jailed debtors in New York City in 1787, 716 owed less than twenty shillings or one pound.  A third of Philadelphia’s inmates in 1817 were there for owing less than $5, and debtors in the city’s prisons outnumbered violent criminals by 5:1.  In Boston, 15% of them were women.  Shaming was more the point of punishment than anything else.

Scenes of public pathos were commonplace.  Inmates at the New Gaol, if housed on its upper floors, would lower shoes out the window on strings to collect alms for their release.  Other prisons installed “beggar gates” through which those jailed in cellar dungeons could stretch out their palms for the odd coins from passersby.

Poor and rich alike wanted out.  Pamphleteering against the institution of debtor’s prison began in the 1750s.  An Anglican minister in South Carolina denounced the jails, noting that “a person would be in a better situation in the French King’s Gallies, or the Prisons of Turkey or Barbary than in this dismal place.”  Discontent grew.  A mass escape from New Gaol of 40 prisoners armed with pistols and clubs was prompted by extreme hunger.

In the 1820s and 1830s, as artisans, journeymen, sailors, longshoremen, and other workers organized the early trade union movement as well as workingmen’s political parties, one principal demand was for the abolition of imprisonment for debt.  Inheritors of a radical political culture, their complaints echoed that Biblical tradition of Jubilee mentioned in Leviticus, which called for a cancellation of debts, the restoration of lost houses and land, and the freeing of slaves and bond servants every 50 years.

Falling into debt was a particularly ruinous affliction for those who aspired to modest independence as shopkeepers, handicraftsmen, or farmers.  As markets for their goods expanded but became ever less predictable, they found themselves taking out credit to survive and sometimes going into arrears, often followed by a stint in debtor’s prison that ended their dreams forever.

However much the poor organized and protested, it was the rich who got debt relief first.  Today, we assume that debts can be discharged through bankruptcy (although even now that option is either severely restricted or denied to certain classes of less favored debt delinquents like college students).  Although the newly adopted U.S. Constitution opened the door to a national bankruptcy law, Congress didn’t walk through it until 1800, even though many, including the well-off, had been lobbying for it.

Enough of the old moral faith that frowned on debt as sinful lingered.  The United States has always been an uncharitable place when it comes to debt, a curious attitude for a society largely settled by absconding debtors and indentured servants (a form of time-bound debt peonage).  Indeed, the state of Georgia was founded as a debtor’s haven at a time when England’s jails were overflowing with debtors.

When Congress finally passed the Bankruptcy Act, those in the privileged quarters at New Gaol threw a party.  Down below, however, life continued in its squalid way, since the new law only applied to people who had sizable debts.  If you owed too little, you stayed in jail.

Debt and the Birth of a Nation

Nowadays, the conservative media inundate us with warnings about debt from the Founding Fathers, and it’s true that some of them like Jefferson — himself an inveterate, often near-bankrupt debtor — did moralize on the subject.  However, Alexander Hamilton, an idol of the conservative movement, was the architect of the country’s first national debt, insisting that “if it is not excessive, [it] will be to us a national blessing.”

As the first Secretary of the Treasury, Hamilton’s goal was to transform the former 13 colonies, which today we would call an underdeveloped land, into a country that someday would rival Great Britain.  This, he knew, required liquid capital (resources not tied up in land or other less mobile forms of wealth), which could then be invested in sometimes highly speculative and risky enterprises.  Floating a national debt, he felt sure, would attract capital from well-positioned merchants at home and abroad, especially in England.

However, for most ordinary people living under the new government, debt aroused anger.  To begin with, there were all those veterans of the Revolutionary War and all the farmers who had supplied the revolutionary army with food and been paid in notoriously worthless “continentals” — the currency issued by the Continental Congress — or equally valueless state currencies.

As rumors of the formation of a new national government spread, speculators roamed the countryside buying up this paper money at a penny on the dollar, on the assumption that the debts they represented would be redeemed at face value.  In fact, that is just what Hamilton’s national debt would do, making these “sunshine patriots” quite rich, while leaving the yeomanry impoverished.

Outrage echoed across the country even before Hamilton’s plan got adopted.  Jefferson denounced the currency speculators as loathsome creatures and had this to say about debt in general: “The modern theory of the perpetuation of debt has drenched the earth with blood and crushed its inhabitants under burdens ever accumulating.”  He and others denounced the speculators as squadrons of counter-revolutionary “moneycrats” who would use their power and wealth to undo the democratic accomplishments of the revolution.

In contrast, Hamilton saw them as a disinterested monied elite upon whom the country’s economic well-being depended, while dismissing the criticisms of the Jeffersonians as the ravings of Jacobin levelers.  Soon enough, political warfare over the debt turned founding fathers into fratricidal brothers.

Hamilton’s plan worked — sometimes too well.  Wealthy speculators in land like Robert Morris, or in the building of docks, wharves, and other projects tied to trade, or in the national debt itself — something William Duer and grandees like him specialized in — seized the moment.  Often enough, however, they over-reached and found themselves, like the yeomen farmers and soldiers, in default to their creditors.

Duer’s attempts to corner the market in the bonds issued by the new federal government and in the stock of the country’s first National Bank represented one of the earliest instances of insider trading.  They also proved a lurid example of how speculation could go disastrously wrong.  When the scheme collapsed, it caused the country’s first Wall Street panic and a local depression that spread through New England, ruining “shopkeepers, widows, orphans, butchers… gardeners, market women, and even the noted Bawd Mrs. McCarty.”

A mob chased Duer through the streets of New York and might have hanged or disemboweled him had he not been rescued by the city sheriff, who sent him to the safety of debtor’s prison.  John Pintard, part of the same scheme, fled to Newark, New Jersey, before being caught and jailed as well.

Sending the Duers and Pintards of the new republic off to debtors’ prison was not, however, quite what Hamilton had in mind.  And leaving them rotting there was hardly going to foster the “enterprising spirit” that would, in the treasury secretary’s estimation, turn the country into the Great Britain of the next century.  Bankruptcy, on the other hand, ensured that the overextended could start again and keep the machinery of commercial transactions lubricated.  Hence, the Bankruptcy Act of 1800.

If, however, you were not a major player, debt functioned differently. Shouldered by the hoi polloi, it functioned as a mechanism for funneling wealth into the mercantile-financial hothouses where American capitalism was being incubated.

No wonder debt excited such violent political emotions.  Even before the Constitution was adopted, farmers in western Massachusetts, indebted to Boston bankers and merchants and in danger of losing their ancestral homes in the economic hard times of the 1780s, rose in armed rebellion.  In those years, the number of lawsuits for unpaid debt doubled and tripled, farms were seized, and their owners sent off to jail.  Incensed, farmers led by a former revolutionary soldier, Daniel Shays, closed local courts by force and liberated debtors from prisons.  Similar but smaller uprisings erupted in Maine, Connecticut, New York, and Pennsylvania, while in New Hampshire and Vermont irate farmers surrounded government offices.

Shays’ Rebellion of 1786 alarmed the country’s elites.  They depicted the unruly yeomen as “brutes” and their houses as “sties.”  They were frightened as well by state governments like Rhode Island’s that were more open to popular influence, declared debt moratoria, and issued paper currencies to help farmers and others pay off their debts.  These developments signaled the need for a stronger central government fully capable of suppressing future debtor insurgencies.

Federal authority established at the Constitutional Convention allowed for that, but the unrest continued.  Shays’ Rebellion was but part one of a trilogy of uprisings that continued into the 1790s.  The Whiskey Rebellion of 1794 was the most serious.  An excise tax (“whiskey tax”) meant to generate revenue to back up the national debt threatened the livelihoods of farmers in western Pennsylvania who used whiskey as a “currency” in a barter economy.  President Washington sent in troops, many of them Revolutionary War veterans, with Hamilton at their head to put down the rebels.

Debt Servitude and Primitive Accumulation

Debt would continue to play a vital role in national and local political affairs throughout the nineteenth century, functioning as a form of capital accumulation in the financial sector, and often sinking pre-capitalist forms of life in the process.

Before and during the time that capitalists were fully assuming the prerogatives of running the production process in field and factory, finance was building up its own resources from the outside.  Meanwhile, the mechanisms of public and private debt made the lives of farmers, craftsmen, shopkeepers, and others increasingly insupportable.

This parasitic economic metabolism helped account for the riotous nature of Gilded Age politics. Much of the high drama of late nineteenth-century political life circled around “greenbacks,” “free silver,” and “the gold standard.”  These issues may strike us as arcane today, but they were incendiary then, threatening what some called a “second Civil War.”  In one way or another, they were centrally about debt, especially a system of indebtedness that was driving the independent farmer to extinction.

All the highways of global capitalism found their way into the trackless vastness of rural America.  Farmers there were not in dire straits because of their backwoods isolation.  On the contrary, it was because they turned out to be living at Ground Zero, where the explosive energies of financial and commercial modernity detonated.  A toxic combination of railroads, grain-elevator operators, farm-machinery manufacturers, commodity-exchange speculators, local merchants, and above all the banking establishment had the farmer at their mercy.  His helplessness was only aggravated when the nineteenth-century version of globalization left his crops in desperate competition with those from the steppes of Canada and Russia, as well as the outbacks of Australia and South America.

To survive this mercantile onslaught, farmers hooked themselves up to long lines of credit that stretched back to the financial centers of the East.  These lifelines allowed them to buy the seed, fertilizer, and machines needed to farm, pay the storage and freight charges that went with selling their crops, and keep house and home together while the plants ripened and the hogs fattened.  When market day finally arrived, the farmer found out just what all his backbreaking work was really worth.  If the news was bad, then those credit lines were shut off and he found himself dispossessed.

The family farm and the network of small town life that went with it were being washed into the rivers of capital heading for metropolitan America.  On the “sod house” frontier, poverty was a “badge of honor which decorated all.”  In hisDevil’s Dictionary, the acid-tongued humorist Ambrose Bierce defined the dilemma this way: “Debt. n. An ingenious substitute for the chain and whip of the slave-driver.”

Across the Great Plains and the cotton South, discontented farmers spread the blame for their predicament far and wide.  Anger, however, tended to pool around the strangulating system of currency and credit run out of the banking centers of the northeast. Beginning in the 1870s with the emergence of the Greenback Party and Greenback-Labor Party and culminating in the 1890s with the People’s or Populist Party, independent farmers, tenant farmers, sharecroppers, small businessmen, and skilled workers directed ever more intense hostility at “the money power.”

That “power” might appear locally in the homeliest of disguises.  At coal mines and other industrial sites, among “coolies” working to build the railroads or imported immigrant gang laborers and convicts leased to private concerns, workers were typically compelled to buy what they needed in company scrip at company stores at prices that left them perpetually in debt.  Proletarians were so precariously positioned that going into debt — whether to pawnshops or employers, landlords or loan sharks — was unavoidable.  Often they were paid in kind: wood chips, thread, hemp, scraps of canvas, cordage: nothing, that is, that was of any use in paying off accumulated debts.  In effect, they were, as they called themselves, “debt slaves.”

In the South, hard-pressed growers found themselves embroiled in a crop-lien system, dependent on the local “furnishing agent” to supply everything needed, from seed to clothing to machinery, to get through the growing season.  In such situations, no money changed hands, just a note scribbled in the merchant’s ledger, with payment due at “settling up” time.  This granted the lender a lien, or title, to the crop, a lien that never went away.

In this fashion, the South became “a great pawn shop,” with farmers perpetually in debt at interest rates exceeding 100% per year.  In Alabama, Georgia, and Mississippi, 90% of farmers lived on credit.  The first lien you signed was essentially a life sentence.  Either that or you became a tenant farmer, or you simply left your land, something so commonplace that everyone knew what the letters “G.T.T.” on an abandoned farmhouse meant: “Gone to Texas.”  (One hundred thousand people a year were doing that in the 1870s.)

The merchant’s exaction was so steep that African-Americans and immigrants in particular were regularly reduced to peonage — forced, that is, to work to pay off their debt, an illegal but not uncommon practice.  And that neighborhood furnishing agent was often tied to the banks up north for his own lines of credit.  In this way, the sucking sound of money leaving for the great metropolises reverberated from region to region.

Facing dispossession, farmers formed alliances to set up cooperatives to extend credit to one another and market crops themselves.  As one Populist editorialist remarked, this was the way “mortgage-burdened farmers can assert their freedom from the tyranny of organized capital.”  But when they found that these groupings couldn’t survive the competitive pressure of the banking establishment, politics beckoned.

From one presidential election to the next and in state contests throughout the South and West, irate grain and cotton growers demanded that the government expand the paper currency supply, those “greenbacks,” also known as “the people’s money,” or that it monetize silver, again to enlarge the money supply, or that it set up public institutions to finance farmers during the growing season.  With a passion hard for us to imagine, they railed against the “gold standard” which, in Democratic Party presidential candidate William Jennings Bryan’s famous cry, should no longer be allowed to “crucify mankind on a cross of gold.”

Should that cross of gold stay fixed in place, one Alabama physician prophesied, it would “reduce the American yeomanry to menials and paupers, to be driven by monopolies like cattle and swine.”  As Election Day approached, populist editors and speakers warned of an approaching war with “the money power,” and they meant it.  “The fight will come and let it come!”

The idea was to force the government to deliberately inflate the currency and so raise farm prices.  And the reason for doing that?  To get out from under the sea of debt in which they were submerged.  It was a cry from the heart and it echoed and re-echoed across the heartland, coming nearer to upsetting the established order than any American political upheaval before or since.

The passion of those populist farmers and laborers was matched by that of their enemies, men at the top of the economy and government for whom debt had long been a road to riches rather than destitution.  They dismissed their foes as “cranks” and “calamity howlers.”  And in the election of 1896, they won.  Bryan went down to defeat, gold continued its pitiless process of crucifixion, and a whole human ecology was set on a path to extinction.

The Return of Debt Servitude

When populism died, debt — as a spark for national political confrontation — died, too.  The great reform eras that followed — Progessivism, the New Deal, and the Great Society — were preoccupied with inequality, economic collapse, exploitation in the workplace, and the outsized nature of corporate power in a consolidated industrial capitalist system.

Rumblings about debt servitude could certainly still be heard.  Foreclosed farmers during the Great Depression mobilized, held “penny auctions” to restore farms to families, hanged judges in effigy, and forced Prudential Insurance Company, the largest land creditor in Iowa, to suspend foreclosures on 37,000 farms (which persuaded Metropolitan Life Insurance Company to do likewise).  A Kansas City realtor was shot in the act of foreclosing on a family farm, a country sheriff kidnapped while trying to evict a farm widow and dumped 10 miles out of town, and so on.

Urban renters and homeowners facing eviction formed neighborhood groups to stop the local sheriff or police from throwing families out of their houses or apartments. Furniture tossed into the street in eviction proceedings would be restored by neighbors, who would also turn the gas and electricity back on.  New Deal farm and housing finance legislation bailed out banks and homeowners alike.  Right-wing populists like the Catholic priest Father Charles Coughlin carried on the war against the gold standard in tirades tinged with anti-Semitism.  Signs like one in Nebraska — “The Jew System of Banking” (illustrated with a giant rattlesnake) — showed up too often.

But the age of primitive accumulation in which debt and the financial sector had played such a strategic role was drawing to a close.

Today, we have entered a new phase.  What might be called capitalist underdevelopment and once again debt has emerged as both the central mode of capital accumulation and a principal mechanism of servitude.  Warren Buffett (of all people) has predicted that, in the coming decades, the United States is more likely to turn into a “sharecropper society” than an “ownership society.”

In our time, the financial sector has enriched itself by devouring the productive wherewithal of industrial America through debt, starving the public sector of resources, and saddling ordinary working people with every conceivable form of consumer debt.

Household debt, which in 1952 was at 36% of total personal income, had by 2006 hit 127%.  Even financing poverty became a lucrative enterprise.  Taking advantage of the low credit ratings of poor people and their need for cash to pay monthly bills or simply feed themselves, some check-cashing outlets, payday lenders, tax preparers, and others levy interest of 200% to 300% and more.  As recently as the 1970s, a good part of this would have been considered illegal under usury laws that no longer exist.  And these poverty creditors are often tied to the largest financiers, including Citibank, Bank of America, and American Express.

Credit has come to function as a “plastic safety net” in a world of job insecurity, declining state support, and slow-motion economic growth, especially among the elderly, young adults, and low-income families.  More than half the pre-tax income of these three groups goes to servicing debt.  Nowadays, however, the “company store” is headquartered on Wall Street.

Debt is driving this system of auto-cannibalism which, by every measure of social wellbeing, is relentlessly turning a developed country into an underdeveloped one.

Dr. Jekyll and Mr. Hyde are back.  Is a political resistance to debt servitude once again imaginable?

Steve Fraser is a historian, writer, and editor-at-large for New Labor Forum, co-founder of the American Empire Project, and TomDispatch regular. He is, most recently, the author of Wall Street: America’s Dream Palace. He teaches at Columbia University. This essay will appear in the next issue of Jacobinmagazine.

US Imperialism, International Law and the United Nations

liberty statue gun

The broad principles underlying the United Nations (UN) are noble and peaceful. They have unfortunately been perverted from the UN’s inception.

The UN is currently being used as an instrument of domination by several permanent member States of the UN Security Council.

According to the Charter’s Preamble the UN was established:

“to save succeeding generations from the scourge of war [...] to reaffirm faith in fundamental human rights, in the dignity and worth of the human person, in the equal rights of men and women and of nations large and small, and to establish conditions under which justice and respect for the obligations arising from treaties and other sources of international law can be maintained [...]” (Charter of the United Nations)

The UN General Assembly (GA) is democratic. One country, one vote. Unfortunately, even if it represents all 193 member states and passes very important resolutions, its members often follow the diktats of the powerful nations on which they depend financially.

The GA has no power. The latter lies in the self-given authority of the five permanent members of the Security Council (U.S.,UK, France, Russia, China), the only ones in possession of the very arbitrary and very powerful veto.

The astonishing number of resolutions passed by the GA regarding Israel have had no effect whatsoever and have invariably been blocked by the US at the Security Council (SC).

In his historic speech at the UN in 2009, which the New York Times unfairly qualified as “rambling”, the late Muammar Gaddafi rightfully and virulently criticized the unjust and contradictory nature of the UN:

The Preamble is very appealing, and no one objects to it, but all the provisions that follow it completely contradict the Preamble. We reject such provisions, and we will never uphold them; they ended with the Second World War. The Preamble says that all nations, small or large, are equal. Are we equal when it comes to the permanent seats? No, we are not equal.

[…] Do we have the right of veto? Are we equal? The Preamble says that we have equal rights, whether we are large or small.

That is what is stated and what we agreed in the Preamble. So the veto contradicts the Charter. The permanent seats contradict the Charter. We neither accept nor recognize the veto.

The Preamble of the Charter states that armed force shall not be used, save in the common interest. That is the Preamble that we agreed to and signed, and we joined the United Nations because we wanted the Charter to reflect that. It says that armed force shall only be used in the common interest of all nations, but what has happened since then? Sixty-five wars have broken out since the establishment of the United Nations and the Security Council — 65 since their creation, with millions more victims than in the Second World War. Are those wars, and the aggression and force that were used in those 65 wars, in the common interest of us all? No, they were in the interest of one or three or four countries, but not of all nations. (Muammar Gaddafi cited in Who is Muammar Al-Qadhafi: Read his Speech to the UN General Assembly, Global Research, March 23, 2011)

It is worth noting that the Libyan leader was killed during the 2012 NATO military invasion, which had been been approved by the Security Council. Three of the SC”s permanent members namely the U.S., the UK and France, participated in this NATO led invasion.

According to Mahmoud Jibril, Libya’s interim Prime Minister during the Western-backed armed insurrection in 2011, Gaddafi was killed by a French intelligence operative “acting under direct instructions of the French government”.

French President “Sarkozy was eager to prevent the possibility of Gaddafi standing trial, particularly after the Libyan leader had threatened to expose his alleged financial dealings with the French President”. (Joseph Fitsanakis, Did French intelligence agent kill Libyan leader Muammar Gaddafi?, intelNews.org, October 2, 2012.)

These allegations are not surprising since France played a leading role in the invasion of Libya.

Was the war on Libya, like the other wars Gaddafi mentioned, “in the common interest of us all” or “in the interest of one or three or four countries”?

Libya was invaded and its leader killed for many reasons, all of which were of financial and geostrategic nature. Mahdi Nazemroaya explains how only a few nations, most of all the U.S., control the UN:

The manipulation of the United Nations for imperialist interests, […] goes back a long way. From its inception, the United Nations was meant to facilitate the global influence of the US after the Second World War. [...]

The UN was used as a tool to control most these former Western European and American colonies of the Third World. At first the US and its post-war allies maintained their domination over the newly formed UN and the former colonies through their numbers and then through a Western Bloc monopoly over the structures of the United Nations. Hereto this monopoly includes control over the agencies and permanent veto-wielding chairs of the fifteen-member Security Council of the United Nations.

The Security Council above all has been used by the US as a means of protecting its interests. The purpose of the Security Council veto is to reject any international resolutions and consensuses against the national interests (or more precisely the interests of the ruling elites) of the US and the other major post-World War II powers [...]

As the Western Bloc began to lose its numerical advantage, control over the Secretariat would be maintained through the Security Council. The UN Security Council does this by filtering all the candidates for the top UN post in the Secretariat. Secretaries-general of the UN are appointed by the UN General Assembly based on the recommendation of the UN Security Council. Thus, the US and other permanent members of the Security Council have vetoes that can eliminate any candidates that would be hostile to their interests. (Mahdi Darius Nazemroaya, America’s Takeover of the United Nations, Press TV 3 September 2012.)

The selection process of the UN Secretary-General reveals why those in office espouse concepts such as the so-called “responsibility to protect” (R2P), which actually refers to “military invasion”, and why they fail to act as “spokesm[e]n for the interests of the world’s peoples, in particular the poor and vulnerable among them”, as their position requires. If R2P had been drafted with genuine intent, it would have been invoked to protect Palestinians against the permanent Israeli aggression. Under Ban Ki-Moon, the Secretariat has rather endorsed Israeli agressions and approved the illegal blockade of Gaza. Kofi Annan was “an enabler of ‘responsibility to protect’” and Ban Ki-moon its “executioner”, Nazemroaya argues.

In regards to both Libya and Syria, Ban Ki-moon has followed the US and NATO script for R2P and regime change. When a major propaganda effort was launched against Syria following the Houla Massacre, Ban Ki-moon and other UN officials quickly followed the US line and condemned Damascus at a special session of the UN General Assembly in New York City. (Ibid.)

Ronda Hauben details the “mysterious process” by which the Security Council was able to influence the way the UN investigation on the Houla massacre was conducted and how a one-sided version of the events supporting the Western propaganda prevailed:

By a rather mysterious process, the Security Council’s request that an investigation of the Houla massacre, which was to be carried out with the involvement of UNSMIS, was shifted to a significantly different process that was carried out by the Human Rights Council and the Commission of Inquiry it created, the Independent International Commission of Inquiry on the Syrian Arab Republic (hereafter CoI). How this shift happened and the significance of this change, merit serious consideration by those who are concerned about the role the UN is playing in the conflict in Syria [...]

Major-General Robert Mood, head of UNSMIS, [...] said that UNSMIS had been to Houla with an investigating team [...] They interviewed locals who told one story. They interviewed locals who told another story. But the circumstances leading up to Houla, the detailed circumstances, the facts related to the incident still remained unclear to the UNSMIS investigators. This led General Mood to say that if there was a decision to support a more extensive on the ground investigation, UNSMIS could help to facilitate it.

In his June 15 press briefing, General Mood said the UNSMIS Report on Houla included statements and interviews with locals with one story and statements and interviews with locals with another story. The August Report of the CoI tells only one story and claims that they either do not have other information or that any other information they know of is inconsistent, so that they have accepted that there is only one story. The Reports that the CoI produced had no on-site interviews or statements, but only telephone or Skype interviews with insurgents or those supporting the account of Houla presented by the armed insurgents. (Ronda Hauben, US-NATO Sponsored Crimes against Humanity in Syria. Coverup by UN Human Rights Council, taz.de,November 28, 2012)

Of all 297 UNSMIS international unarmed military observers on the groundto monitor a cessation of armed violence in all its forms by all parties“, none were from the US. The conditions of the UNSMIS mandate were set by the Security Council, which decided on July 20, 2012 it would allow the mission to be extended only if it confirmed “the cessation of the use of heavy weapons and a reduction in the level of violence sufficient by all sides”. The US must have known those conditions would be impossible to meet since it had itself been providing the rebels with heavy weaponry and contributing to the violence. Even The New York Times ran a story on the CIA arming Syrian rebels on June 21. The UNSMIS mandate was ended on August 19. If the US was not part of the UNSMIS, it was and still is, on the other hand, a member the UN Human Rights Council (HRC). The US possibly used its influent position at the Security Council to request that the HRC takes over the Houla massacre investigation, where it could play a part in its findings and align them with its war agenda.

[T]he US was elected to a second three-year term on the 47-member United Nations Human Rights Council (HRC). President Bush boycotted the HRC for criticizing Israel too much, but Obama joined in 2010 to ‘improve’ it. US Ambassador to the United Nations Susan Rice welcomed Washington’s re-election this week, saying that the HRC “has delivered real results”, citing its criticism of Syria, though she criticized the rights council’s continued “excessive and unbalanced focus on Israel”. (Eric Walberg, Human Rights: the People vs the UN, November 18, 2012.)

While it should be the guardian and promoter of international law, the UN has shown several times it acts on behalf of the powerful against the powerless. NATO has been manipulating the UN to legitimize its brutal neo-colonial designs and international law is being used in a very selective manner by imperial powers. James Petras explains:

Imperial law supersedes international law simply because imperial law is backed by brute force; it possesses imperial/colonial air, ground and naval armed forces to ensure the supremacy of imperial law.  In contrast, international law lacks an effective enforcement mechanism.

Moreover, international law, to the extent that it is effective, is applied only to the weaker powers and to regimes designated by the imperial powers as ‘violators’. [T]he application and jurisdiction of international law is selective and subject to constraints imposed by the configurations of imperial and national power [...]

To counter the claims and judgments pertaining to international law, especially in the area of theGenevaprotocols such as war crimes and crimes against humanity, imperial legal experts, scholars and judges have elaborated a legal framework to justify or exempt imperial-state activity [...]

This does not imply that imperial rulers totally discard international law: they just apply it selectively to their adversaries, especially against independent nations and rulers, in order to justify imperial intervention and aggression – Hence the ‘legal bases’ for dismantlingYugoslaviaor invadingIraqand assassinating its rulers [...]

Imperial legal doctrine has played a central role in justifying and providing a basis for the exercise of international terrorism.  Executives, such as US Presidents Bush and Obama, have been provided with the legal power to undertake cross-national ‘targeted’ assassinations of opponents using predator drones and ordering military intervention, in clear violation of international law and national sovereignty.  Imperial law, above all else, ‘legalizes’ aggression and economic pillage and undermines the laws of targeted countries, creating lawlessness and chaos among its victims. (James Petras“Legal Imperialism” and International Law: Legal Foundations for War Crimes, Debt Collection and Colonization,December 03, 2012)

On behalf of four men, Canadian and American lawyers recently filed a complaint against Canada with the United Nations Committee against Torture, because the Canadian authorities failed to prosecute George W. Bush during his visit to the country. Considering its strong economic, diplomatic and military ties to the U.S, such a move was not expected from Canada and its inaction demonstrates yet again how the U.S.’ imperial law overcomes international law.

As a signatory to the Convention against Torture, Canada has an obligation to investigate and prosecute a torture suspect on its soil. This is the first time a complaint concerning torture allegations against a high-level U.S. official has been filed with the U.N. Committee. The Canadian Centre for International Justice (CCIJ) and the U.S.-based Center for Constitutional Rights (CCR) filed the complaint on the men’s behalf.

“Canada has the jurisdiction and the obligation to prosecute a torture suspect present in Canada, including a former head of state, and even one from a powerful country,” said Matt Eisenbrandt, CCIJ’s Legal Director. “Canada’s failure to conduct a criminal investigation and prosecution against Mr. Bush when there was overwhelming evidence against him constitutes a clear violation of its international obligations and its own policy not to be a safe haven for torturers.” (Lawyers against the War, Survivors File U.N. Complaint Against Canada for Failing to Prosecute George W. Bush for Torture The Canadian Centre for International Justice, November 14, 2012.)

Global Research offers its readers a list of selected articles on this very important issue. For more in-depth analysis, visit our archives United Nations and Law and Justice.

Global Research has been committed to peace and justice and over the years has provided its readers with insightful analyses pertaining to the UN, international law and illegal wars. We need your help to continue to fight the brutal domination of a ruling elite willing to send young men and women fight unjust wars of aggression to remain in power through destruction and exploitation. You find our articles useful? Make a donation or become a Global Research member!

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SELECTED ARTICLES

Who is Muammar Al-Qadhafi: Read his Speech to the UN General Assembly, March 23, 2011

America’s Takeover of the United Nations, Mahdi Darius Nazemroaya,  September 3, 2012

US-NATO Sponsored Crimes against Humanity in Syria. Coverup by UN Human Rights Council, Ronda Hauben, November 28, 2012

Human Rights: the People vs the UN, Eric Walberg, November 18, 2012

“Legal Imperialism” and International Law: Legal Foundations for War Crimes, Debt Collection and Colonization, James Petras, December 03, 2012

Survivors File U.N. Complaint Against Canada for Failing to Prosecute George W. Bush for Torture, Lawyers against the War,  November 14, 2012

Hamas Shouldn’t Fire Rockets … But Israel Has Violated HUNDREDS of UN Resolutions, Washington’s Blog, November 20, 2012 

UN General Assembly Vote On Syria: World Gone Unipolar – And Mad, Rick Rozoff, August 06, 2012

Canada’s Vote Opposing UN Recognition of Palestine. Quebec’s Motion to Recognize Palestine Statehood, Canadians for Justice and Peace in the Middle East, December 05, 2012

UN Vote on Palestine, Stephen Lendman, December 01, 2012

UNESCO Human Rights Conference Honoring Israel’s President Shimon Peres. Four of Five Speakers Pull Out, Ali Abunimah, October 24, 2012

Boycott and Chaos at the United Nations in Geneva: Who Committed War Crimes in Iraq? Dirk Adriaensens, October 03, 2012

The UN and General Mood’s “Missing Report” on Conflicting Accounts of Houla Massacre, Ronda Hauben, September 11, 2012

UN Envoy Brahimi bears Poison Chalice to Syria, Finian Cunningham, September 10, 2012

NAM Summit: Ban Ki-Moon in disgraceful show of US puppetry, Finian Cunningham, August 30, 2012

Can the US and its Allies arbitrarily Violate International Law?, Rick Rozoff and John Robles, August 17, 2012

Terrorism as an Instrument of US Foreign Policy: UN-Backed Rogue States Plan Syria’s Slaughter, Felicity Arbuthnot, August 11, 2012

The Politics of Debt in America: From Debtor’s Prison to Debtor Nation

[This essay will appear in the next issue of Jacobin.  It is posted at TomDispatch.com with the kind permission of that magazine, and re-posted at Common Dreams with subsequent permission.]

Shakespeare’s Polonius offered this classic advice to his son: “neither a borrower nor a lender be.”  Many of our nation’s Founding Fathers emphatically saw it otherwise.  They often lived by the maxim: always a borrower, never a lender be.  As tobacco and rice planters, slave traders, and merchants, as well as land and currency speculators, they depended upon long lines of credit to finance their livelihoods and splendid ways of life.  So, too, in those days, did shopkeepers, tradesmen, artisans, and farmers, as well as casual laborers and sailors.  Without debt, the seedlings of a commercial economy could never have grown to maturity.

Ben Franklin, however, was wary on the subject. “Rather go to bed supperless than rise in debt” was his warning, and even now his cautionary words carry great moral weight.  We worry about debt, yet we can’t live without it.

Debt remains, as it long has been, the Dr. Jekyll and Mr. Hyde of capitalism.  For a small minority, it’s a blessing; for others a curse.  For some the moral burden of carrying debt is a heavy one, and no one lets them forget it.  For privileged others, debt bears no moral baggage at all, presents itself as an opportunity to prosper, and if things go wrong can be dumped without a qualm.

Those who view debt with a smiley face as the royal road to wealth accumulation and tend to be forgiven if their default is large enough almost invariably come from the top rungs of the economic hierarchy.  Then there are the rest of us, who get scolded for our impecunious ways, foreclosed upon and dispossessed, leaving behind scars that never fade away and wounds that disable our futures. 

Think of this upstairs-downstairs class calculus as the politics of debt.  British economist John Maynard Keynes put it like this: “If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”

After months of an impending “debtpocalypse,” the dreaded “debt ceiling,” and the “fiscal cliff,” Americans remain preoccupied with debt, public and private.  Austerity is what we’re promised for our sins. Millions are drowning, or have already drowned, in a sea of debt -- mortgages gone bad, student loans that may never be paid off, spiraling credit card bills, car loans, payday loans, and a menagerie of new-fangled financial mechanisms cooked up by the country’s “financial engineers” to milk what’s left of the American standard of living. 

The world economy almost came apart in 2007-2008, and still may do so under the whale-sized carcass of debt left behind by financial plunderers who found in debt the leverage to get ever richer.  Most of them still live in their mansions and McMansions, while other debtors live outdoors, or in cars or shelters, or doubled-up with relatives and friends -- or even in debtor’s prison. Believe it or not, a version of debtor’s prison, that relic of early American commercial barbarism, is back. 

In 2013, you can’t actually be jailed for not paying your bills, but ingenious corporations, collection agencies, cops, courts, and lawyers have devised ways to insure that debt “delinquents” will end up in jail anyway.  With one-third of the states now allowing the jailing of debtors (without necessarily calling it that), it looks ever more like a trend in the making.

Will Americans tolerate this, or might there emerge a politics of resistance to debt, as has happened more than once in a past that shouldn’t be forgotten?  

The World of Debtor’s Prisons

Imprisonment for debt was a commonplace in colonial America and the early republic, and wasn’t abolished in most states until the 1830s or 1840s, in some cases not until after the Civil War.  Today, we think of it as a peculiar and heartless way of punishing the poor -- and it was.  But it was more than that.

Some of the richest, most esteemed members of society also ended up there, men like Robert Morris, who helped finance the American Revolution and ran the Treasury under the Articles of Confederation; John Pintard, a stock-broker, state legislator, and founder of the New York Historical Society; William Duer, graduate of Eton, powerful merchant and speculator, assistant secretary in the Treasury Department of the new federal government, and master of a Hudson River manse; a Pennsylvania Supreme Court judge; army generals; and other notables.

Whether rich or poor, you were there for a long stretch, even for life, unless you could figure out some way of discharging your debts.  That, however, is where the similarity between wealthy and impoverished debtors ended.

Whether in the famous Marshalsea in London where Charles Dickens had Little Dorritt’s father incarcerated (and where Dickens’s father had actually languished when the author was 12), or in the New Gaol in New York City, where men like Duer and Morris did their time, debtors prisons were segregated by class.  If your debts were large enough and your social connections weighty enough (the two tended to go together) you lived comfortably.  You were supplied with good food and well-appointed living quarters, as well as books and other pleasures, including on occasion manicurists and prostitutes. 

Robert Morris entertained George Washington for dinner in his “cell.” Once released, he resumed his career as the new nation’s richest man.  Before John Pintard moved to New Gaol, he redecorated his cell, had it repainted and upholstered, and shipped in two mahogany writing desks.

Meanwhile, the mass of petty debtors housed in the same institution survived, if at all, amid squalor, filth, and disease.  They were often shackled, and lacked heat, clean water, adequate food, or often food of any kind.  (You usually had to have the money to buy your own food, clothing, and fuel.)  Debtors in these prisons frequently found themselves quite literally dying of debt.  And you could end up in such circumstances for trivial sums.  Of the 1,162 jailed debtors in New York City in 1787, 716 owed less than twenty shillings or one pound.  A third of Philadelphia’s inmates in 1817 were there for owing less than $5, and debtors in the city’s prisons outnumbered violent criminals by 5:1.  In Boston, 15% of them were women.  Shaming was more the point of punishment than anything else.

Scenes of public pathos were commonplace.  Inmates at the New Gaol, if housed on its upper floors, would lower shoes out the window on strings to collect alms for their release.  Other prisons installed “beggar gates” through which those jailed in cellar dungeons could stretch out their palms for the odd coins from passersby.

Poor and rich alike wanted out.  Pamphleteering against the institution of debtor’s prison began in the 1750s.  An Anglican minister in South Carolina denounced the jails, noting that “a person would be in a better situation in the French King’s Gallies, or the Prisons of Turkey or Barbary than in this dismal place.”  Discontent grew.  A mass escape from New Gaol of 40 prisoners armed with pistols and clubs was prompted by extreme hunger. 

In the 1820s and 1830s, as artisans, journeymen, sailors, longshoremen, and other workers organized the early trade union movement as well as workingmen’s political parties, one principal demand was for the abolition of imprisonment for debt.  Inheritors of a radical political culture, their complaints echoed that Biblical tradition of Jubilee mentioned in Leviticus, which called for a cancellation of debts, the restoration of lost houses and land, and the freeing of slaves and bond servants every 50 years.

Falling into debt was a particularly ruinous affliction for those who aspired to modest independence as shopkeepers, handicraftsmen, or farmers.  As markets for their goods expanded but became ever less predictable, they found themselves taking out credit to survive and sometimes going into arrears, often followed by a stint in debtor’s prison that ended their dreams forever. 

However much the poor organized and protested, it was the rich who got debt relief first.  Today, we assume that debts can be discharged through bankruptcy (although even now that option is either severely restricted or denied to certain classes of less favored debt delinquents like college students).  Although the newly adopted U.S. Constitution opened the door to a national bankruptcy law, Congress didn’t walk through it until 1800, even though many, including the well-off, had been lobbying for it.

Enough of the old moral faith that frowned on debt as sinful lingered.  The United States has always been an uncharitable place when it comes to debt, a curious attitude for a society largely settled by absconding debtors and indentured servants (a form of time-bound debt peonage).  Indeed, the state of Georgia was founded as a debtor’s haven at a time when England’s jails were overflowing with debtors.

When Congress finally passed the Bankruptcy Act, those in the privileged quarters at New Gaol threw a party.  Down below, however, life continued in its squalid way, since the new law only applied to people who had sizable debts.  If you owed too little, you stayed in jail. 

Debt and the Birth of a Nation

Nowadays, the conservative media inundate us with warnings about debt from the Founding Fathers, and it’s true that some of them like Jefferson -- himself an inveterate, often near-bankrupt debtor -- did moralize on the subject.  However, Alexander Hamilton, an idol of the conservative movement, was the architect of the country’s first national debt, insisting that “if it is not excessive, [it] will be to us a national blessing.”

As the first Secretary of the Treasury, Hamilton’s goal was to transform the former 13 colonies, which today we would call an underdeveloped land, into a country that someday would rival Great Britain.  This, he knew, required liquid capital (resources not tied up in land or other less mobile forms of wealth), which could then be invested in sometimes highly speculative and risky enterprises.  Floating a national debt, he felt sure, would attract capital from well-positioned merchants at home and abroad, especially in England.

However, for most ordinary people living under the new government, debt aroused anger.  To begin with, there were all those veterans of the Revolutionary War and all the farmers who had supplied the revolutionary army with food and been paid in notoriously worthless “continentals” -- the currency issued by the Continental Congress -- or equally valueless state currencies.

As rumors of the formation of a new national government spread, speculators roamed the countryside buying up this paper money at a penny on the dollar, on the assumption that the debts they represented would be redeemed at face value.  In fact, that is just what Hamilton’s national debt would do, making these “sunshine patriots” quite rich, while leaving the yeomanry impoverished.

Outrage echoed across the country even before Hamilton’s plan got adopted.  Jefferson denounced the currency speculators as loathsome creatures and had this to say about debt in general: “The modern theory of the perpetuation of debt has drenched the earth with blood and crushed its inhabitants under burdens ever accumulating.”  He and others denounced the speculators as squadrons of counter-revolutionary “moneycrats” who would use their power and wealth to undo the democratic accomplishments of the revolution.

In contrast, Hamilton saw them as a disinterested monied elite upon whom the country’s economic well-being depended, while dismissing the criticisms of the Jeffersonians as the ravings of Jacobin levelers.  Soon enough, political warfare over the debt turned founding fathers into fratricidal brothers.  

Hamilton’s plan worked -- sometimes too well.  Wealthy speculators in land like Robert Morris, or in the building of docks, wharves, and other projects tied to trade, or in the national debt itself -- something William Duer and grandees like him specialized in -- seized the moment.  Often enough, however, they over-reached and found themselves, like the yeomen farmers and soldiers, in default to their creditors. 

Duer’s attempts to corner the market in the bonds issued by the new federal government and in the stock of the country’s first National Bank represented one of the earliest instances of insider trading.  They also proved a lurid example of how speculation could go disastrously wrong.  When the scheme collapsed, it caused the country’s first Wall Street panic and a local depression that spread through New England, ruining “shopkeepers, widows, orphans, butchers... gardeners, market women, and even the noted Bawd Mrs. McCarty.”   

A mob chased Duer through the streets of New York and might have hanged or disemboweled him had he not been rescued by the city sheriff, who sent him to the safety of debtor’s prison.  John Pintard, part of the same scheme, fled to Newark, New Jersey, before being caught and jailed as well.

Sending the Duers and Pintards of the new republic off to debtors’ prison was not, however, quite what Hamilton had in mind.  And leaving them rotting there was hardly going to foster the “enterprising spirit” that would, in the treasury secretary’s estimation, turn the country into the Great Britain of the next century.  Bankruptcy, on the other hand, ensured that the overextended could start again and keep the machinery of commercial transactions lubricated.  Hence, the Bankruptcy Act of 1800.

If, however, you were not a major player, debt functioned differently. Shouldered by the hoi polloi, it functioned as a mechanism for funneling wealth into the mercantile-financial hothouses where American capitalism was being incubated.

No wonder debt excited such violent political emotions.  Even before the Constitution was adopted, farmers in western Massachusetts, indebted to Boston bankers and merchants and in danger of losing their ancestral homes in the economic hard times of the 1780s, rose in armed rebellion.  In those years, the number of lawsuits for unpaid debt doubled and tripled, farms were seized, and their owners sent off to jail.  Incensed, farmers led by a former revolutionary soldier, Daniel Shays, closed local courts by force and liberated debtors from prisons.  Similar but smaller uprisings erupted in Maine, Connecticut, New York, and Pennsylvania, while in New Hampshire and Vermont irate farmers surrounded government offices. 

Shays' Rebellion of 1786 alarmed the country’s elites.  They depicted the unruly yeomen as “brutes” and their houses as “sties.”  They were frightened as well by state governments like Rhode Island’s that were more open to popular influence, declared debt moratoria, and issued paper currencies to help farmers and others pay off their debts.  These developments signaled the need for a stronger central government fully capable of suppressing future debtor insurgencies.

Federal authority established at the Constitutional Convention allowed for that, but the unrest continued.  Shays' Rebellion was but part one of a trilogy of uprisings that continued into the 1790s.  The Whiskey Rebellion of 1794 was the most serious.  An excise tax (“whiskey tax”) meant to generate revenue to back up the national debt threatened the livelihoods of farmers in western Pennsylvania who used whiskey as a “currency” in a barter economy.  President Washington sent in troops, many of them Revolutionary War veterans, with Hamilton at their head to put down the rebels. 

Debt Servitude and Primitive Accumulation

Debt would continue to play a vital role in national and local political affairs throughout the nineteenth century, functioning as a form of capital accumulation in the financial sector, and often sinking pre-capitalist forms of life in the process. 

Before and during the time that capitalists were fully assuming the prerogatives of running the production process in field and factory, finance was building up its own resources from the outside.  Meanwhile, the mechanisms of public and private debt made the lives of farmers, craftsmen, shopkeepers, and others increasingly insupportable.

This parasitic economic metabolism helped account for the riotous nature of Gilded Age politics. Much of the high drama of late nineteenth-century political life circled around “greenbacks,” “free silver,” and "the gold standard."  These issues may strike us as arcane today, but they were incendiary then, threatening what some called a “second Civil War.”  In one way or another, they were centrally about debt, especially a system of indebtedness that was driving the independent farmer to extinction.

All the highways of global capitalism found their way into the trackless vastness of rural America.  Farmers there were not in dire straits because of their backwoods isolation.  On the contrary, it was because they turned out to be living at Ground Zero, where the explosive energies of financial and commercial modernity detonated.  A toxic combination of railroads, grain-elevator operators, farm-machinery manufacturers, commodity-exchange speculators, local merchants, and above all the banking establishment had the farmer at their mercy.  His helplessness was only aggravated when the nineteenth-century version of globalization left his crops in desperate competition with those from the steppes of Canada and Russia, as well as the outbacks of Australia and South America.

To survive this mercantile onslaught, farmers hooked themselves up to long lines of credit that stretched back to the financial centers of the East.  These lifelines allowed them to buy the seed, fertilizer, and machines needed to farm, pay the storage and freight charges that went with selling their crops, and keep house and home together while the plants ripened and the hogs fattened.  When market day finally arrived, the farmer found out just what all his backbreaking work was really worth.  If the news was bad, then those credit lines were shut off and he found himself dispossessed.

The family farm and the network of small town life that went with it were being washed into the rivers of capital heading for metropolitan America.  On the “sod house” frontier, poverty was a “badge of honor which decorated all.”  In his Devil’s Dictionary, the acid-tongued humorist Ambrose Bierce defined the dilemma this way: “Debt. n. An ingenious substitute for the chain and whip of the slave-driver.”

Across the Great Plains and the cotton South, discontented farmers spread the blame for their predicament far and wide.  Anger, however, tended to pool around the strangulating system of currency and credit run out of the banking centers of the northeast. Beginning in the 1870s with the emergence of the Greenback Party and Greenback-Labor Party and culminating in the 1890s with the People’s or Populist Party, independent farmers, tenant farmers, sharecroppers, small businessmen, and skilled workers directed ever more intense hostility at “the money power.”

That “power” might appear locally in the homeliest of disguises.  At coal mines and other industrial sites, among “coolies” working to build the railroads or imported immigrant gang laborers and convicts leased to private concerns, workers were typically compelled to buy what they needed in company scrip at company stores at prices that left them perpetually in debt.  Proletarians were so precariously positioned that going into debt -- whether to pawnshops or employers, landlords or loan sharks -- was unavoidable.  Often they were paid in kind: wood chips, thread, hemp, scraps of canvas, cordage: nothing, that is, that was of any use in paying off accumulated debts.  In effect, they were, as they called themselves, “debt slaves.” 

In the South, hard-pressed growers found themselves embroiled in a crop-lien system, dependent on the local “furnishing agent” to supply everything needed, from seed to clothing to machinery, to get through the growing season.  In such situations, no money changed hands, just a note scribbled in the merchant’s ledger, with payment due at “settling up” time.  This granted the lender a lien, or title, to the crop, a lien that never went away.

In this fashion, the South became “a great pawn shop,” with farmers perpetually in debt at interest rates exceeding 100% per year.  In Alabama, Georgia, and Mississippi, 90% of farmers lived on credit.  The first lien you signed was essentially a life sentence.  Either that or you became a tenant farmer, or you simply left your land, something so commonplace that everyone knew what the letters “G.T.T.” on an abandoned farmhouse meant: “Gone to Texas.”  (One hundred thousand people a year were doing that in the 1870s.) 

The merchant’s exaction was so steep that African-Americans and immigrants in particular were regularly reduced to peonage -- forced, that is, to work to pay off their debt, an illegal but not uncommon practice.  And that neighborhood furnishing agent was often tied to the banks up north for his own lines of credit.  In this way, the sucking sound of money leaving for the great metropolises reverberated from region to region.

Facing dispossession, farmers formed alliances to set up cooperatives to extend credit to one another and market crops themselves.  As one Populist editorialist remarked, this was the way “mortgage-burdened farmers can assert their freedom from the tyranny of organized capital.”  But when they found that these groupings couldn’t survive the competitive pressure of the banking establishment, politics beckoned.

From one presidential election to the next and in state contests throughout the South and West, irate grain and cotton growers demanded that the government expand the paper currency supply, those “greenbacks,” also known as “the people’s money,” or that it monetize silver, again to enlarge the money supply, or that it set up public institutions to finance farmers during the growing season.  With a passion hard for us to imagine, they railed against the “gold standard” which, in Democratic Party presidential candidate William Jennings Bryan’s famous cry, should no longer be allowed to “crucify mankind on a cross of gold.”

Should that cross of gold stay fixed in place, one Alabama physician prophesied, it would “reduce the American yeomanry to menials and paupers, to be driven by monopolies like cattle and swine.”  As Election Day approached, populist editors and speakers warned of an approaching war with “the money power,” and they meant it.  “The fight will come and let it come!”

The idea was to force the government to deliberately inflate the currency and so raise farm prices.  And the reason for doing that?  To get out from under the sea of debt in which they were submerged.  It was a cry from the heart and it echoed and re-echoed across the heartland, coming nearer to upsetting the established order than any American political upheaval before or since. 

The passion of those populist farmers and laborers was matched by that of their enemies, men at the top of the economy and government for whom debt had long been a road to riches rather than destitution.  They dismissed their foes as “cranks” and “calamity howlers.”  And in the election of 1896, they won.  Bryan went down to defeat, gold continued its pitiless process of crucifixion, and a whole human ecology was set on a path to extinction.

The Return of Debt Servitude

When populism died, debt -- as a spark for national political confrontation -- died, too.  The great reform eras that followed -- Progessivism, the New Deal, and the Great Society -- were preoccupied with inequality, economic collapse, exploitation in the workplace, and the outsized nature of corporate power in a consolidated industrial capitalist system.

Rumblings about debt servitude could certainly still be heard.  Foreclosed farmers during the Great Depression mobilized, held “penny auctions” to restore farms to families, hanged judges in effigy, and forced Prudential Insurance Company, the largest land creditor in Iowa, to suspend foreclosures on 37,000 farms (which persuaded Metropolitan Life Insurance Company to do likewise).  A Kansas City realtor was shot in the act of foreclosing on a family farm, a country sheriff kidnapped while trying to evict a farm widow and dumped 10 miles out of town, and so on.

Urban renters and homeowners facing eviction formed neighborhood groups to stop the local sheriff or police from throwing families out of their houses or apartments. Furniture tossed into the street in eviction proceedings would be restored by neighbors, who would also turn the gas and electricity back on.  New Deal farm and housing finance legislation bailed out banks and homeowners alike.  Right-wing populists like the Catholic priest Father Charles Coughlin carried on the war against the gold standard in tirades tinged with anti-Semitism.  Signs like one in Nebraska -- “The Jew System of Banking” (illustrated with a giant rattlesnake) -- showed up too often.

But the age of primitive accumulation in which debt and the financial sector had played such a strategic role was drawing to a close. 

Today, we have entered a new phase.  What might be called capitalist underdevelopment and once again debt has emerged as both the central mode of capital accumulation and a principal mechanism of servitude.  Warren Buffett (of all people) has predicted that, in the coming decades, the United States is more likely to turn into a “sharecropper society” than an “ownership society.”

In our time, the financial sector has enriched itself by devouring the productive wherewithal of industrial America through debt, starving the public sector of resources, and saddling ordinary working people with every conceivable form of consumer debt.

Household debt, which in 1952 was at 36% of total personal income, had by 2006 hit 127%.  Even financing poverty became a lucrative enterprise.  Taking advantage of the low credit ratings of poor people and their need for cash to pay monthly bills or simply feed themselves, some check-cashing outlets, payday lenders, tax preparers, and others levy interest of 200% to 300% and more.  As recently as the 1970s, a good part of this would have been considered illegal under usury laws that no longer exist.  And these poverty creditors are often tied to the largest financiers, including Citibank, Bank of America, and American Express.

Credit has come to function as a “plastic safety net” in a world of job insecurity, declining state support, and slow-motion economic growth, especially among the elderly, young adults, and low-income families.  More than half the pre-tax income of these three groups goes to servicing debt.  Nowadays, however, the “company store” is headquartered on Wall Street.

Debt is driving this system of auto-cannibalism which, by every measure of social wellbeing, is relentlessly turning a developed country into an underdeveloped one.  

Dr. Jekyll and Mr. Hyde are back.  Is a political resistance to debt servitude once again imaginable?

© 2013 Steve Fraser

Steve Fraser

Steve Fraser is Editor-at-Large of New Labor Forum and co-founder of the American Empire Project (Metropolitan Books). He is, most recently, the author of Wall Street: America’s Dream Palace. He teaches history at Columbia University.

The Politics of Debt in America From Debtor’s Prison to Debtor Nation

Shakespeare’s Polonius offered this classic advice to his son: “neither a borrower nor a lender be.”  Many of our nation’s Founding Fathers emphatically saw it otherwise.  They often lived by the maxim: always a borrower, never a lender be.  As tobacco and rice planters, slave traders, and merchants, as well as land and currency speculators, they depended upon long lines of credit to finance their livelihoods and splendid ways of life.  So, too, in those days, did shopkeepers, tradesmen, artisans, and farmers, as well as casual laborers and sailors.  Without debt, the seedlings of a commercial economy could never have grown to maturity.

Ben Franklin, however, was wary on the subject. “Rather go to bed supperless than rise in debt” was his warning, and even now his cautionary words carry great moral weight.  We worry about debt, yet we can’t live without it.

Debt remains, as it long has been, the Dr. Jekyll and Mr. Hyde of capitalism.  For a small minority, it’s a blessing; for others a curse.  For some the moral burden of carrying debt is a heavy one, and no one lets them forget it.  For privileged others, debt bears no moral baggage at all, presents itself as an opportunity to prosper, and if things go wrong can be dumped without a qualm.

Those who view debt with a smiley face as the royal road to wealth accumulation and tend to be forgiven if their default is large enough almost invariably come from the top rungs of the economic hierarchy.  Then there are the rest of us, who get scolded for our impecunious ways, foreclosed upon and dispossessed, leaving behind scars that never fade away and wounds that disable our futures. 

Think of this upstairs-downstairs class calculus as the politics of debt.  British economist John Maynard Keynes put it like this: “If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”

After months of an impending “debtpocalypse,” the dreaded “debt ceiling,” and the “fiscal cliff,” Americans remain preoccupied with debt, public and private.  Austerity is what we’re promised for our sins. Millions are drowning, or have already drowned, in a sea of debt -- mortgages gone bad, student loans that may never be paid off, spiraling credit card bills, car loans, payday loans, and a menagerie of new-fangled financial mechanisms cooked up by the country’s “financial engineers” to milk what’s left of the American standard of living.   

The world economy almost came apart in 2007-2008, and still may do so under the whale-sized carcass of debt left behind by financial plunderers who found in debt the leverage to get ever richer.  Most of them still live in their mansions and McMansions, while other debtors live outdoors, or in cars or shelters, or doubled-up with relatives and friends -- or even in debtor’s prison. Believe it or not, a version of debtor’s prison, that relic of early American commercial barbarism, is back. 

In 2013, you can’t actually be jailed for not paying your bills, but ingenious corporations, collection agencies, cops, courts, and lawyers have devised ways to insure that debt “delinquents” will end up in jail anyway.  With one-third of the states now allowing the jailing of debtors (without necessarily calling it that), it looks ever more like a trend in the making.

Will Americans tolerate this, or might there emerge a politics of resistance to debt, as has happened more than once in a past that shouldn’t be forgotten?  

The World of Debtor’s Prisons

Imprisonment for debt was a commonplace in colonial America and the early republic, and wasn’t abolished in most states until the 1830s or 1840s, in some cases not until after the Civil War.  Today, we think of it as a peculiar and heartless way of punishing the poor -- and it was.  But it was more than that.

Some of the richest, most esteemed members of society also ended up there, men like Robert Morris, who helped finance the American Revolution and ran the Treasury under the Articles of Confederation; John Pintard, a stock-broker, state legislator, and founder of the New York Historical Society; William Duer, graduate of Eton, powerful merchant and speculator, assistant secretary in the Treasury Department of the new federal government, and master of a Hudson River manse; a Pennsylvania Supreme Court judge; army generals; and other notables.

Whether rich or poor, you were there for a long stretch, even for life, unless you could figure out some way of discharging your debts.  That, however, is where the similarity between wealthy and impoverished debtors ended.

Whether in the famous Marshalsea in London where Charles Dickens had Little Dorritt’s father incarcerated (and where Dickens’s father had actually languished when the author was 12), or in the New Gaol in New York City, where men like Duer and Morris did their time, debtors prisons were segregated by class.  If your debts were large enough and your social connections weighty enough (the two tended to go together) you lived comfortably.  You were supplied with good food and well-appointed living quarters, as well as books and other pleasures, including on occasion manicurists and prostitutes. 

Robert Morris entertained George Washington for dinner in his “cell.” Once released, he resumed his career as the new nation’s richest man.  Before John Pintard moved to New Gaol, he redecorated his cell, had it repainted and upholstered, and shipped in two mahogany writing desks.

Meanwhile, the mass of petty debtors housed in the same institution survived, if at all, amid squalor, filth, and disease.  They were often shackled, and lacked heat, clean water, adequate food, or often food of any kind.  (You usually had to have the money to buy your own food, clothing, and fuel.)  Debtors in these prisons frequently found themselves quite literally dying of debt.  And you could end up in such circumstances for trivial sums.  Of the 1,162 jailed debtors in New York City in 1787, 716 owed less than twenty shillings or one pound.  A third of Philadelphia’s inmates in 1817 were there for owing less than $5, and debtors in the city’s prisons outnumbered violent criminals by 5:1.  In Boston, 15% of them were women.  Shaming was more the point of punishment than anything else.

Scenes of public pathos were commonplace.  Inmates at the New Gaol, if housed on its upper floors, would lower shoes out the window on strings to collect alms for their release.  Other prisons installed “beggar gates” through which those jailed in cellar dungeons could stretch out their palms for the odd coins from passersby.


Poor and rich alike wanted out.  Pamphleteering against the institution of debtor’s prison began in the 1750s.  An Anglican minister in South Carolina denounced the jails, noting that “a person would be in a better situation in the French King’s Gallies, or the Prisons of Turkey or Barbary than in this dismal place.”  Discontent grew.  A mass escape from New Gaol of 40 prisoners armed with pistols and clubs was prompted by extreme hunger. 

In the 1820s and 1830s, as artisans, journeymen, sailors, longshoremen, and other workers organized the early trade union movement as well as workingmen’s political parties, one principal demand was for the abolition of imprisonment for debt.  Inheritors of a radical political culture, their complaints echoed that Biblical tradition of Jubilee mentioned in Leviticus, which called for a cancellation of debts, the restoration of lost houses and land, and the freeing of slaves and bond servants every 50 years.

Falling into debt was a particularly ruinous affliction for those who aspired to modest independence as shopkeepers, handicraftsmen, or farmers.  As markets for their goods expanded but became ever less predictable, they found themselves taking out credit to survive and sometimes going into arrears, often followed by a stint in debtor’s prison that ended their dreams forever. 

However much the poor organized and protested, it was the rich who got debt relief first.  Today, we assume that debts can be discharged through bankruptcy (although even now that option is either severely restricted or denied to certain classes of less favored debt delinquents like college students).  Although the newly adopted U.S. Constitution opened the door to a national bankruptcy law, Congress didn’t walk through it until 1800, even though many, including the well-off, had been lobbying for it.

Enough of the old moral faith that frowned on debt as sinful lingered.  The United States has always been an uncharitable place when it comes to debt, a curious attitude for a society largely settled by absconding debtors and indentured servants (a form of time-bound debt peonage).  Indeed, the state of Georgia was founded as a debtor’s haven at a time when England’s jails were overflowing with debtors.

When Congress finally passed the Bankruptcy Act, those in the privileged quarters at New Gaol threw a party.  Down below, however, life continued in its squalid way, since the new law only applied to people who had sizable debts.  If you owed too little, you stayed in jail. 

Debt and the Birth of a Nation

Nowadays, the conservative media inundate us with warnings about debt from the Founding Fathers, and it’s true that some of them like Jefferson -- himself an inveterate, often near-bankrupt debtor -- did moralize on the subject.  However, Alexander Hamilton, an idol of the conservative movement, was the architect of the country’s first national debt, insisting that “if it is not excessive, [it] will be to us a national blessing.”

As the first Secretary of the Treasury, Hamilton’s goal was to transform the former 13 colonies, which today we would call an underdeveloped land, into a country that someday would rival Great Britain.  This, he knew, required liquid capital (resources not tied up in land or other less mobile forms of wealth), which could then be invested in sometimes highly speculative and risky enterprises.  Floating a national debt, he felt sure, would attract capital from well-positioned merchants at home and abroad, especially in England.

However, for most ordinary people living under the new government, debt aroused anger.  To begin with, there were all those veterans of the Revolutionary War and all the farmers who had supplied the revolutionary army with food and been paid in notoriously worthless “continentals” -- the currency issued by the Continental Congress -- or equally valueless state currencies.

As rumors of the formation of a new national government spread, speculators roamed the countryside buying up this paper money at a penny on the dollar, on the assumption that the debts they represented would be redeemed at face value.  In fact, that is just what Hamilton’s national debt would do, making these “sunshine patriots” quite rich, while leaving the yeomanry impoverished.

Outrage echoed across the country even before Hamilton’s plan got adopted.  Jefferson denounced the currency speculators as loathsome creatures and had this to say about debt in general: “The modern theory of the perpetuation of debt has drenched the earth with blood and crushed its inhabitants under burdens ever accumulating.”  He and others denounced the speculators as squadrons of counter-revolutionary “moneycrats” who would use their power and wealth to undo the democratic accomplishments of the revolution.

In contrast, Hamilton saw them as a disinterested monied elite upon whom the country’s economic well-being depended, while dismissing the criticisms of the Jeffersonians as the ravings of Jacobin levelers.  Soon enough, political warfare over the debt turned founding fathers into fratricidal brothers.  

Hamilton’s plan worked -- sometimes too well.  Wealthy speculators in land like Robert Morris, or in the building of docks, wharves, and other projects tied to trade, or in the national debt itself -- something William Duer and grandees like him specialized in -- seized the moment.  Often enough, however, they over-reached and found themselves, like the yeomen farmers and soldiers, in default to their creditors. 

Duer’s attempts to corner the market in the bonds issued by the new federal government and in the stock of the country’s first National Bank represented one of the earliest instances of insider trading.  They also proved a lurid example of how speculation could go disastrously wrong.  When the scheme collapsed, it caused the country’s first Wall Street panic and a local depression that spread through New England, ruining “shopkeepers, widows, orphans, butchers... gardeners, market women, and even the noted Bawd Mrs. McCarty.”   

A mob chased Duer through the streets of New York and might have hanged or disemboweled him had he not been rescued by the city sheriff, who sent him to the safety of debtor’s prison.  John Pintard, part of the same scheme, fled to Newark, New Jersey, before being caught and jailed as well.

Sending the Duers and Pintards of the new republic off to debtors’ prison was not, however, quite what Hamilton had in mind.  And leaving them rotting there was hardly going to foster the “enterprising spirit” that would, in the treasury secretary’s estimation, turn the country into the Great Britain of the next century.  Bankruptcy, on the other hand, ensured that the overextended could start again and keep the machinery of commercial transactions lubricated.  Hence, the Bankruptcy Act of 1800.

If, however, you were not a major player, debt functioned differently. Shouldered by the hoi polloi, it functioned as a mechanism for funneling wealth into the mercantile-financial hothouses where American capitalism was being incubated.

No wonder debt excited such violent political emotions.  Even before the Constitution was adopted, farmers in western Massachusetts, indebted to Boston bankers and merchants and in danger of losing their ancestral homes in the economic hard times of the 1780s, rose in armed rebellion.  In those years, the number of lawsuits for unpaid debt doubled and tripled, farms were seized, and their owners sent off to jail.  Incensed, farmers led by a former revolutionary soldier, Daniel Shays, closed local courts by force and liberated debtors from prisons.  Similar but smaller uprisings erupted in Maine, Connecticut, New York, and Pennsylvania, while in New Hampshire and Vermont irate farmers surrounded government offices. 

Shays' Rebellion of 1786 alarmed the country’s elites.  They depicted the unruly yeomen as “brutes” and their houses as “sties.”  They were frightened as well by state governments like Rhode Island’s that were more open to popular influence, declared debt moratoria, and issued paper currencies to help farmers and others pay off their debts.  These developments signaled the need for a stronger central government fully capable of suppressing future debtor insurgencies.

Federal authority established at the Constitutional Convention allowed for that, but the unrest continued.  Shays' Rebellion was but part one of a trilogy of uprisings that continued into the 1790s.  The Whiskey Rebellion of 1794 was the most serious.  An excise tax (“whiskey tax”) meant to generate revenue to back up the national debt threatened the livelihoods of farmers in western Pennsylvania who used whiskey as a “currency” in a barter economy.  President Washington sent in troops, many of them Revolutionary War veterans, with Hamilton at their head to put down the rebels. 

Debt Servitude and Primitive Accumulation

Debt would continue to play a vital role in national and local political affairs throughout the nineteenth century, functioning as a form of capital accumulation in the financial sector, and often sinking pre-capitalist forms of life in the process. 

Before and during the time that capitalists were fully assuming the prerogatives of running the production process in field and factory, finance was building up its own resources from the outside.  Meanwhile, the mechanisms of public and private debt made the lives of farmers, craftsmen, shopkeepers, and others increasingly insupportable.

This parasitic economic metabolism helped account for the riotous nature of Gilded Age politics. Much of the high drama of late nineteenth-century political life circled around “greenbacks,” “free silver,” and "the gold standard."  These issues may strike us as arcane today, but they were incendiary then, threatening what some called a “second Civil War.”  In one way or another, they were centrally about debt, especially a system of indebtedness that was driving the independent farmer to extinction.

All the highways of global capitalism found their way into the trackless vastness of rural America.  Farmers there were not in dire straits because of their backwoods isolation.  On the contrary, it was because they turned out to be living at Ground Zero, where the explosive energies of financial and commercial modernity detonated.  A toxic combination of railroads, grain-elevator operators, farm-machinery manufacturers, commodity-exchange speculators, local merchants, and above all the banking establishment had the farmer at their mercy.  His helplessness was only aggravated when the nineteenth-century version of globalization left his crops in desperate competition with those from the steppes of Canada and Russia, as well as the outbacks of Australia and South America.

To survive this mercantile onslaught, farmers hooked themselves up to long lines of credit that stretched back to the financial centers of the East.  These lifelines allowed them to buy the seed, fertilizer, and machines needed to farm, pay the storage and freight charges that went with selling their crops, and keep house and home together while the plants ripened and the hogs fattened.  When market day finally arrived, the farmer found out just what all his backbreaking work was really worth.  If the news was bad, then those credit lines were shut off and he found himself dispossessed.

The family farm and the network of small town life that went with it were being washed into the rivers of capital heading for metropolitan America.  On the “sod house” frontier, poverty was a “badge of honor which decorated all.”  In hisDevil’s Dictionary, the acid-tongued humorist Ambrose Bierce defined the dilemma this way: “Debt. n. An ingenious substitute for the chain and whip of the slave-driver.”

Across the Great Plains and the cotton South, discontented farmers spread the blame for their predicament far and wide.  Anger, however, tended to pool around the strangulating system of currency and credit run out of the banking centers of the northeast. Beginning in the 1870s with the emergence of the Greenback Party and Greenback-Labor Party and culminating in the 1890s with the People’s or Populist Party, independent farmers, tenant farmers, sharecroppers, small businessmen, and skilled workers directed ever more intense hostility at “the money power.”

That “power” might appear locally in the homeliest of disguises.  At coal mines and other industrial sites, among “coolies” working to build the railroads or imported immigrant gang laborers and convicts leased to private concerns, workers were typically compelled to buy what they needed in company scrip at company stores at prices that left them perpetually in debt.  Proletarians were so precariously positioned that going into debt -- whether to pawnshops or employers, landlords or loan sharks -- was unavoidable.  Often they were paid in kind: wood chips, thread, hemp, scraps of canvas, cordage: nothing, that is, that was of any use in paying off accumulated debts.  In effect, they were, as they called themselves, “debt slaves.” 

In the South, hard-pressed growers found themselves embroiled in a crop-lien system, dependent on the local “furnishing agent” to supply everything needed, from seed to clothing to machinery, to get through the growing season.  In such situations, no money changed hands, just a note scribbled in the merchant’s ledger, with payment due at “settling up” time.  This granted the lender a lien, or title, to the crop, a lien that never went away.

In this fashion, the South became “a great pawn shop,” with farmers perpetually in debt at interest rates exceeding 100% per year.  In Alabama, Georgia, and Mississippi, 90% of farmers lived on credit.  The first lien you signed was essentially a life sentence.  Either that or you became a tenant farmer, or you simply left your land, something so commonplace that everyone knew what the letters “G.T.T.” on an abandoned farmhouse meant: “Gone to Texas.”  (One hundred thousand people a year were doing that in the 1870s.) 

The merchant’s exaction was so steep that African-Americans and immigrants in particular were regularly reduced to peonage -- forced, that is, to work to pay off their debt, an illegal but not uncommon practice.  And that neighborhood furnishing agent was often tied to the banks up north for his own lines of credit.  In this way, the sucking sound of money leaving for the great metropolises reverberated from region to region.

Facing dispossession, farmers formed alliances to set up cooperatives to extend credit to one another and market crops themselves.  As one Populist editorialist remarked, this was the way “mortgage-burdened farmers can assert their freedom from the tyranny of organized capital.”  But when they found that these groupings couldn’t survive the competitive pressure of the banking establishment, politics beckoned.

From one presidential election to the next and in state contests throughout the South and West, irate grain and cotton growers demanded that the government expand the paper currency supply, those “greenbacks,” also known as “the people’s money,” or that it monetize silver, again to enlarge the money supply, or that it set up public institutions to finance farmers during the growing season.  With a passion hard for us to imagine, they railed against the “gold standard” which, in Democratic Party presidential candidate William Jennings Bryan’s famous cry, should no longer be allowed to “crucify mankind on a cross of gold.”

Should that cross of gold stay fixed in place, one Alabama physician prophesied, it would “reduce the American yeomanry to menials and paupers, to be driven by monopolies like cattle and swine.”  As Election Day approached, populist editors and speakers warned of an approaching war with “the money power,” and they meant it.  “The fight will come and let it come!”

The idea was to force the government to deliberately inflate the currency and so raise farm prices.  And the reason for doing that?  To get out from under the sea of debt in which they were submerged.  It was a cry from the heart and it echoed and re-echoed across the heartland, coming nearer to upsetting the established order than any American political upheaval before or since. 

The passion of those populist farmers and laborers was matched by that of their enemies, men at the top of the economy and government for whom debt had long been a road to riches rather than destitution.  They dismissed their foes as “cranks” and “calamity howlers.”  And in the election of 1896, they won.  Bryan went down to defeat, gold continued its pitiless process of crucifixion, and a whole human ecology was set on a path to extinction.

The Return of Debt Servitude

When populism died, debt -- as a spark for national political confrontation -- died, too.  The great reform eras that followed -- Progessivism, the New Deal, and the Great Society -- were preoccupied with inequality, economic collapse, exploitation in the workplace, and the outsized nature of corporate power in a consolidated industrial capitalist system.

Rumblings about debt servitude could certainly still be heard.  Foreclosed farmers during the Great Depression mobilized, held “penny auctions” to restore farms to families, hanged judges in effigy, and forced Prudential Insurance Company, the largest land creditor in Iowa, to suspend foreclosures on 37,000 farms (which persuaded Metropolitan Life Insurance Company to do likewise).  A Kansas City realtor was shot in the act of foreclosing on a family farm, a country sheriff kidnapped while trying to evict a farm widow and dumped 10 miles out of town, and so on.

Urban renters and homeowners facing eviction formed neighborhood groups to stop the local sheriff or police from throwing families out of their houses or apartments. Furniture tossed into the street in eviction proceedings would be restored by neighbors, who would also turn the gas and electricity back on.  New Deal farm and housing finance legislation bailed out banks and homeowners alike.  Right-wing populists like the Catholic priest Father Charles Coughlin carried on the war against the gold standard in tirades tinged with anti-Semitism.  Signs like one in Nebraska -- “The Jew System of Banking” (illustrated with a giant rattlesnake) -- showed up too often.

But the age of primitive accumulation in which debt and the financial sector had played such a strategic role was drawing to a close. 

Today, we have entered a new phase.  What might be called capitalist underdevelopment and once again debt has emerged as both the central mode of capital accumulation and a principal mechanism of servitude.  Warren Buffett (of all people) has predicted that, in the coming decades, the United States is more likely to turn into a “sharecropper society” than an “ownership society.”

In our time, the financial sector has enriched itself by devouring the productive wherewithal of industrial America through debt, starving the public sector of resources, and saddling ordinary working people with every conceivable form of consumer debt.

Household debt, which in 1952 was at 36% of total personal income, had by 2006 hit 127%.  Even financing poverty became a lucrative enterprise.  Taking advantage of the low credit ratings of poor people and their need for cash to pay monthly bills or simply feed themselves, some check-cashing outlets, payday lenders, tax preparers, and others levy interest of 200% to 300% and more.  As recently as the 1970s, a good part of this would have been considered illegal under usury laws that no longer exist.  And these poverty creditors are often tied to the largest financiers, including Citibank, Bank of America, and American Express.

Credit has come to function as a “plastic safety net” in a world of job insecurity, declining state support, and slow-motion economic growth, especially among the elderly, young adults, and low-income families.  More than half the pre-tax income of these three groups goes to servicing debt.  Nowadays, however, the “company store” is headquartered on Wall Street.

Debt is driving this system of auto-cannibalism which, by every measure of social wellbeing, is relentlessly turning a developed country into an underdeveloped one.  

Dr. Jekyll and Mr. Hyde are back.  Is a political resistance to debt servitude once again imaginable?

Debt Ceiling Games – Court Could End Leverage

The Constitution of the United States:

Fourteenth Amendment, Section 4: 
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. 
     
Twenty-Seventh Amendment: No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened.

In the debate over whether the president should simply pay bills owed by the United States, missing is the key aspect of whether the Courts would back him up. The bill passed in the House Wednesday, set for passage in the Senate, delays the debt ceiling for four months but ties the action to House and Senate salaries. The courts, including the Supreme Court, would likely confirm the president’s Constitutional obligation to pay the U.S. debts and would declare unconstitutional the link to issuing congressional paychecks. The congressional leadership insisted on reading the full Constitution aloud at the beginning of the session. We do not believe they skipped the relevant sections.

Under contract law, entities must pay bills for expenses they obligate. So must the U.S. government. The 14th Amendment, Section 4 states: "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." The “inclusion” is to emphasize those are a part of what must be paid, not the sole items. 

The latest House bill “holding salaries of Members of Congress in escrow upon failure to agree to budget resolution” directly flies in the face of the 27th Amendment to the Constitution, which states: “No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened.”

A court ruling affirming presidential power under Amendment XIV of the Constitution would remove congressional leverage for another “fiscal cliff” and end stop the now-regular debt ceiling games. It would give teeth to President Obama’s statement that paying the country’s debt is “not a bargaining chip” despite congressional demands that debt be used as leverage to make cuts in Social Security and Medicare. Court approval would stop the congressional fiscal cliff insanity. The White House should institute or support this move.

Congressional legislation on the debt is not needed and has only been passed since 1917.  Prior to 1917 Congress simply “authorized” the funding — which it still separately does in “authorization” bills.


The new Republican strategies are “a reflection of the same kind of politics of that 112th Congress, which reflected political gamesmanship rather than substantive policy," Steny Hoyer, the House Democratic Whip, said. In four months, Republicans will continue to try to use the debt ceiling as leverage.

House Democratic Leader Nancy Pelosi said that she would use the 14th amendment to pay US debt "in a second." House Democratic Assistant Leader Jim Clyburn (D-N.C.) told us, "The president should just use the Constitution."  

Former President Bill Clinton, who Obama says should be "Secretary of Explaining Stuff," stated he would use the 14th amendment "without hesitation."  Former House Speaker Newt Gingrich (R-Ga.) asserted the debt ceiling is "frankly a dead loser” because “the whole national financial system is going to say, ‘The entire economy of the world will collapse,’” and Congress “will cave.” 

Rep. John Conyers (D-Mich.), Ranking Member of the House Judiciary Committee and the second longest serving Member of Congress, argued, “It’s my belief that the courts would support the president if he cited the 14th Amendment and instructed our executive agencies to pay the nation’s debts.”  He told us that the new salary tie “is not constitutional” and “shows how superficial” the legislation is.

Top constitutional authorities Michael Dorf, former law clerk for U.S. Supreme Court Justice Kennedy and law professor at Cornell University, and Neil Buchanan, law professor at George Washington University, wrote in the Columbia Law Review in October, “Given the balance of constitutional, practical, and prudential considerations,” the most constitutional choice “would be for the president to continue to issue debt, in the amounts authorized by the duly enacted budget of the United States.”

President Obama has been reluctant so far to say he will invoke the 14th Amendment. The president is by experience a state and federal legislator who has worked by successful compromise and consensus. The White House may not realize the likely Court support for paying the nation's bills.
 
If President Obama wants his 2nd term agenda not to be handcuffed by ongoing debt ceiling games, he could seek Court support against the constant threats to throw our economy under the bus.

GOP Budget Violates Boehner’s New Rules on Debt

Credit: Center for American Progress When John Boehner picked up the Speaker's gavel in January 2011, he also laid down some new rules regarding the U.S. national debt. Despite the near-doubling of the red ink and the seven debt limit increases un...

US House approves to lift debt ceiling

US House of Representatives lifts temporarily the debt ceiling. (file photo)

The US House of Representatives has approved to temporarily lift the country’s debt ceiling.

The House voted on Wednesday to temporarily suspend the national debt ceiling at USD 16.4 trillion until May 19 and at the same time to urge lawmakers to adopt a budget resolution by April 2015.

The US Congress is headed towards a new stalemate with President Barack Obama wanting to raise taxes to curb the USD-16-trillion-plus debt, while Republicans are opposed to any tax hikes.

Republican Paul D. Ryan said on Wednesday that his party’s budget proposal includes balancing the country’s budget within a 10 years’ time without imposing any new tax revenues.

Obama and the democratic leaders in Congress have proposed reducing spending by hundreds of billions of dollars over the next ten years.

Official figures from September 2012 show that more than 46 million Americans, 15 percent of the US population, are living in poverty, making it the highest rate during the past 40 years.

CAH/HN

David Cameron Accused Of Misleading Claim That UK’s Debt Is Falling

David Cameron has been accused of misleading voters after claiming the government was “paying down Britain’s debt”.

During a Conservative Party political broadcast on Wednesday evening, the prime minister said voters wanted to know the “facts” about the country’s finances.

“So though this government has had to make some difficult decisions, we are making progress. We are paying down Britain’s debts,” he said.

However Labour are pointing to figures from the Office for National Statistics published this week which showed that the national debt has risen from £811.3 billion (55.3% GDP) in the second quarter of 2010, to £1,111.4 billion at the end of December 2012 (70.7% GDP).

Rachel Reeves, Labour’s shadow chief secretary to the Treasury, has today written to Andrew Dilnot, the chair of the UK Statistics Authority to ask for clarity.

"This suggests that the Conservative Party may be attempting to deliberately mislead the public about these statistics and the Government’s record,” she said.

On Thursday morning the prime minister’s official spokesperson acknowledged that debt as a percentage of GDP “has risen” since the election, adding that the deficit had been reduced “by a quarter”.

“The government is taking measures to bring debt under control,” he said. “The point the prime minister is making is the prime minister’s government is taking tough decisions to deal with the economic crisis the government inherited.”

“The government’s policy is for the debt as a percentage of GDP to be falling in 2016/17.”

However the spokesperson denied that Cameron had misspoken in his broadcast. Asked if the prime minister understood the difference between the debt and the deficit, he said: “Yes, he does”.

The UK’s national debt is the total amount of money the country owes historically. The budget deficit, in contrast, is the amount added to that debt each year: the difference between what the government spends and what it receives in revenue.

House raises debt ceiling to avoid US default

The opening session of the 113th US House of Representatives at the US Capitol in Washington. (AFP Photo / Saul Loeb)

The opening session of the 113th US House of Representatives at the US Capitol in Washington. (AFP Photo / Saul Loeb)

The House is expected to vote on legislation Wednesday that will raise the debt ceiling for three months and delay a US default. Even though this is just a short term fix, the Obama administration said it supports it.

The legislation would prevent a devastating default of US debt and payments next month and instead give Congress three more months to come up with an agreement on the budget, taxes, spending and the deficit. The move would cause the congressional budget battles to once again take place – but this time in March.

The legislation contains a “no budget, no pay” segment that ensures both House and Senate members will no longer receive their paychecks if a budget isn’t agreed upon by April 15, putting further pressure on legislators to come up with a plan. Although President Obama prefers a long-term solution and said incremental increases in the debt ceiling ultimately harm the economy, continued disagreement in Congress has prompted him to support the extension. While House Democrats appear widely opposed to the measure, Senate Democrats are reluctantly supporting it, AP reports.

The March talks will come at a time when automatic spending cuts are set to go into effect and severely affect the Pentagon budget. The military would face a 30 percent reduction in operating costs for Army posts, while the Pentagon would have to determine how it could come to terms with $500 billion in cuts over the next decade.

“The fiscal situation and outlook are serious. Our funding is in doubt as we support forward-deployed troops, those training and Wounded Warriors," wrote Army Secretaries John McHugh and Gen. Raymond Odierno in a letter to commanders.

The automatic cuts would trim $85 billion from the 2013 budget, which the GOP plans to re-sequester during the next budget battle. Members of Congress who oppose the spending cuts will be forced to come up with an agreement on how to replace them, if they want to come up with an agreement on the deficit. A battle on raising taxes will likely ensue.

“We feel by moving the issue of raising the debt ceiling behind the sequestration … that we reorder things in a way that Democrats will have to work with,” Rep. John Fleming, R-La., told AP. “The cuts are the kind of cuts we want, they’re just not in the places we want. But they’re also not in the places that the Democrats want. So hopefully they’ll be forced to come to the table and work with us on a bipartisan basis to put them where they need to be, where it has the less pain.”

The three-month extension allows Congress to prolong talks about the $16.4 trillion deficit and it has caused stock markets to trade cautiously on Wednesday. By midafternoon in Europe, stock indexes were lacking momentum and Wall Street opened with equally little momentum, as the markets were awaiting the vote in Congress.

The credit agency Fitch Ratings said this month that it would consider downgrading America’s credit score if there is any sort of delay in coming up with a budget plan to raise the debt ceiling by March 1. The agency has not commented on Wednesday's vote, but the move might prompt it to lower the US credit rating, thereby lowering international trust in US borrowing.

With the economy depending on the decision that lawmakers will be forced to come up with to avoid a default, the uncertainty about the US economic future has once again been prolonged with the extension as partisanship continues to rage through Congress.

“The sequester is arbitrary, but the fact is that when the sequester goes into effect… it will have a pretty dramatic effect of people’s attitudes here in Washington, and they may get serious about cuts to the mandatory side of the spending equation,” said Speaker of the House John Boehner.

The Trillion Dollar Coin: A Debt Solution for the People

Coin standing on edge(Photo: Klaus M)Far from being a gimmick, having the US Treasury mint high-denomination coins is a solution that cuts to the root of America’s financial problems. And Benjamin Franklin would have liked it, too.

On Friday, January 11, economist and New York Times columnist Paul Krugman urged the White House to mint a platinum coin worth $1 trillion, as a counter to what was then a threat to block federal spending that Congress had already approved. (Republicans made good on that threat yesterday, putting the United States in danger of default.)

The White House responded by saying the trillion dollar coin is off the table, because the Federal Reserve declared that it “wouldn’t view the coin as viable.”

Even Krugman called the coin idea “silly.” He just thought it was less silly—and less dangerous—than playing with the debt ceiling.

But it is not silly. We have forgotten the role that money issued directly by the government has played in our history. The American colonists did not think it was silly when they escaped a grinding debt to British bankers and a chronically short money supply by printing their own paper scrip, an innovative solution that allowed the colonies to thrive.

Many people believe that the U.S. government creates its own money. This is not true. Today, the Federal Reserve creates trillions of dollars on its books and lends them at near-zero interest to private banks, which then lend them back to the government and the people at market rates. We have been brainwashed into thinking that it makes more sense to do this than for the government to simply create the money itself, debt- and interest-free.

In fact, the trillion dollar coin represents one of the most important principles of popular prosperity ever conceived: nations should be free to create their own money without incurring debt. Some of our greatest leaders, including Benjamin Franklin, Thomas Jefferson, and Abraham Lincoln, promoted this essential strategy. They realized that the freedom to print money offers a way to break the shackles of debt and free the nation to realize its full potential.

Money creation is an all-important power that has been fought over for centuries, in a largely secret battle between governments and private banks. For the last two and a half centuries, the banks have had the upper hand, making us forget that any other option exists. But we are learning the great secret of money: that how it gets created determines who has the power in society—we the people, or they the bankers.

It is no secret who has that power today. Witness the great bailout of 2008 that rewarded banks for making irresponsible and fraudulent gambles in the subprime mortgage scandal. None of the bankers responsible served time in jail. Then there was the robosigning scandal, in which banks skipped important steps in the process of foreclosing on the homes of ordinary Americans, and came away with a slap on the wrist. Now we are seeing the LIBOR scandal unfold, in which traders at the Swiss financial services company UBS were convicted of colluding with other banks to tweak interest rates for their own financial benefit. We can make an educated guess as to how this too will turn out for them (hint: well). While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

We may rail against the banks and demand change, but change will not come until we grasp the fundamental secrets that are the foundation of their power: those who create the nation’s money control the nation, and nearly the entire money supply today is created by banks in concert with the Federal Reserve.

Remembering our roots

Everyone knows that Benjamin Franklin played an important role in the founding of the United States. Fewer know his views on the printing of money. “Experience, more prevalent than all the logic in the World,” he wrote, “has fully convinced us all, that [paper money] has been, and is now of the greatest advantages to the country.”

When the British forbade new issues of paper scrip by the colonial governments, Franklin went to London and argued that issuing their own money was responsible for the colonies’ prosperity.

The response of the king, leaned on by the Bank of England, was to ban all issues of paper scrip. Without their paper money, the money supply collapsed, and the economy sank into a deep recession. The colonists then rebelled. They won the revolution, but the bankers retained the power to create money by setting up a banking system like that dominated by the Bank of England.

Fourscore and six years later, in 1862, President Abraham Lincoln boldly took back the power to create money during the Civil War. To avoid exorbitant interest rates of 24 to 36 percent, he decided to print money directly from the U.S. Treasury as U.S. Notes or “greenbacks.” The issuance of $450 million in greenbacks was the key to funding not only the North’s victory in the war but an array of pivotal infrastructure projects, including a transcontinental railway system.

After Lincoln was assassinated, however, the greenback program was quickly discontinued. Repeated popular attempts by farmers and laborers to revive it failed. They were opposed by a wave of banker activism to maintain the banks’ control over the printing of money, which had been established by the National Bank Act of 1863.

In 1872, New York bankers sent a letter to every bank in the United States. The letter, as quoted by Lynn Wheeler in Triumphant Plutocracy: The Story of American Public Life from 1870 to 1920, read in part:

Dear Sir: It is advisable to do all in your power to sustain such prominent daily and weekly newspapers…as will oppose the issuing of greenback paper money, and that you also withhold patronage or favors from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country. [T]o restore to circulation the Government issue of money, will be to provide the people with money, and will therefore seriously affect your individual profit as bankers and lenders .

Bank-created money, including paper bills and now electronic money, could be rented to the people at a profit. The people’s debt-free money was limited to coins, which today compose less than one ten-thousandth of M3, the broadest measure of the money supply.

Lincoln’s assassination and the abandonment of debt-free greenbacks marked the exchange of physical slavery for what has been called “debt peonage” or “wage slavery.” Today, as a result, the American government and American people are so heavily mired in debt that only a radical overhaul of the monetary system can free us.

Gimmick or game-changer?

This is the real context and backstory of the trillion dollar coin. The stakes are much higher than just fending off the debt ceiling. We the people need to take back the power to issue our own money, and we can’t do it with nickels and dimes. We’re going to need coins bearing some very large numbers.

The idea of minting large-denomination coins to solve economic problems seems to have first been suggested by a chairman of the Coinage Subcommittee of the U.S. House of Representatives in the early 1980s. He pointed out that the government could pay off its entire debt with some billion-dollar coins. The Constitution gives Congress the power to coin money and regulate its value, and sets no limit on the value of the coins it creates.

That may have been true then, but in legislation initiated in 1982, Congress chose instead to impose limits on the amounts and denominations of most coins. The one exception was the platinum coin, which a special provision allowed to be minted in any amount for commemorative purposes.

An attorney named Carlos Mucha, who at the time was blogging under the pseudonym “ Beowulf ,” proposed issuing a platinum trillion dollar coin to capitalize on this loophole, after he heard me mention the trillion dollar coin in a Thom Hartmann interview. At first, he said, it was just an amusing exercise. But with the endless gridlock in Congress over the debt ceiling, it got picked up by serious economists as a way to checkmate the deficit hawks.

Philip Diehl , former head of the U.S. Mint and co-author of the platinum coin law, confirmed that the coin would be legal tender:

In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).

Warren Mosler, one of the founders of Modern Monetary Theory (MMT), reviewed the idea of the trillion dollar coin and concluded it would work operationally. And Joe Firestone pointed out that the trillion dollar coin has far greater game-changing potential than mere political maneuvering. The coin could put within the government’s grasp the power to solve its debt problems once and for all, replacing austerity with the abundance enjoyed by our forefathers.

The invariable objection to government-issued money is that it will lead to hyperinflation. The trillion dollar coin can evoke images of million-Deutschemark notes filling wheelbarrows. But as economist Michael Hudson points out:

Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending.

And as professor Randall Wray observes, the coin would not circulate in the general economy. Instead, it would be deposited in the government’s account and held at the Fed, so it could not inflate the circulating money supply.

As far as spending goes, the fact that the Treasury has money in its account doesn’t mean Congress could or would go wild spending the funds. The budget would still need congressional approval. To keep a lid on spending, Congress would just need to abide by some basic rules of economics. It could spend on goods and services up to full productive capacity without creating price inflation (since supply and demand would rise together). After that, it would need to tax—not to fund the budget, but to shrink the circulating money supply and avoid driving up prices with excess demand.

Time to take back the money power

The current political stalemate cannot be solved with the thinking that created it. There is simply not enough money in the system to fund the services that Americans desperately need, create full employment, pay down the debt, and keep taxes affordable. The money supply has shrunk by $4 trillion since 2008, according to the Fed’s own website.

The only real solution to the unemployment created by this shrinkage is to add more money to the economy, and that means that someone needs to create it. Either the Fed does this in the way that it is currently done, by adding the money nearly interest-free to the balance sheets of banks to be lent to the government and the people at interest; or the Treasury does it and adds the money to the government’s account debt- and interest-free.

After a century of domination by the Federal Reserve, it is time we tried something new. In flatly rejecting the Treasury’s legal tender, the Fed as representative of the banks is asserting itself to be more powerful than the elected representatives of the people. If the Fed won’t acknowledge the coins created by the government, perhaps the government needs to charter a publicly owned bank that will.

We have a chance today to end the charade of big money gridlock politics, as well as the reign of the big banks. But the current government is so thoroughly captured by the bank-created money of our time that it is unlikely to take action without pressure from the people. Our ignorance on these issues has played into the hands of the 1 percent, who are dependent on the current system for their wealth and power. However, the massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

We have the power to choose prosperity over austerity. But to do it, we must first restore the power to create money to the people.

The Trillion Dollar Coin: A Debt Solution for the People

On Friday, January 11, economist and New York Times columnist Paul Krugman urged the White House to mint a platinum coin worth $1 trillion, as a counter to what was then a threat to block federal spending that Congress had already approved. (Republicans made good on that threat yesterday, putting the United States in danger of default.)

We have forgotten the role that money issued directly by the government has played in our history.

The White House responded by saying the trillion dollar coin is off the table, because the Federal Reserve declared that it “wouldn’t view the coin as viable.”

Even Krugman called the coin idea “silly.” He just thought it was less silly—and less dangerous—than playing with the debt ceiling.

But it is not silly. We have forgotten the role that money issued directly by the government has played in our history. The American colonists did not think it was silly when they escaped a grinding debt to British bankers and a chronically short money supply by printing their own paper scrip, an innovative solution that allowed the colonies to thrive.

Many people believe that the U.S. government creates its own money. This is not true. Today, the Federal Reserve creates trillions of dollars on its books and lends them at near-zero interest to private banks, which then lend them back to the government and the people at market rates. We have been brainwashed into thinking that it makes more sense to do this than for the government to simply create the money itself, debt- and interest-free.

In fact, the trillion dollar coin represents one of the most important principles of popular prosperity ever conceived: nations should be free to create their own money without incurring debt. Some of our greatest leaders, including Benjamin Franklin, Thomas Jefferson, and Abraham Lincoln, promoted this essential strategy. They realized that the freedom to print money offers a way to break the shackles of debt and free the nation to realize its full potential.

While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

Money creation is an all-important power that has been fought over for centuries, in a largely secret battle between governments and private banks. For the last two and a half centuries, the banks have had the upper hand, making us forget that any other option exists. But we are learning the great secret of money: that how it gets created determines who has the power in society—we the people, or they the bankers.

It is no secret who has that power today. Witness the great bailout of 2008 that rewarded banks for making irresponsible and fraudulent gambles in the subprime mortgage scandal. None of the bankers responsible served time in jail. Then there was the robosigning scandal, in which banks skipped important steps in the process of foreclosing on the homes of ordinary Americans, and came away with a slap on the wrist. Now we are seeing the LIBOR scandal unfold, in which traders at the Swiss financial services company UBS were convicted of colluding with other banks to tweak interest rates for their own financial benefit. We can make an educated guess as to how this too will turn out for them (hint: well). While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

We may rail against the banks and demand change, but change will not come until we grasp the fundamental secrets that are the foundation of their power: those who create the nation’s money control the nation, and nearly the entire money supply today is created by banks in concert with the Federal Reserve.

Remembering our roots

Everyone knows that Benjamin Franklin played an important role in the founding of the United States. Fewer know his views on the printing of money. “Experience, more prevalent than all the logic in the World,” he wrote, “has fully convinced us all, that [paper money] has been, and is now of the greatest advantages to the country.”

When the British forbade new issues of paper scrip by the colonial governments, Franklin went to London and argued that issuing their own money was responsible for the colonies’ prosperity.

The response of the king, leaned on by the Bank of England, was to ban all issues of paper scrip. Without their paper money, the money supply collapsed, and the economy sank into a deep recession. The colonists then rebelled. They won the revolution, but the bankers retained the power to create money by setting up a banking system like that dominated by the Bank of England.

Fourscore and six years later, in 1862, President Abraham Lincoln boldly took back the power to create money during the Civil War. To avoid exorbitant interest rates of 24 to 36 percent, he decided to print money directly from the U.S. Treasury as U.S. Notes or “greenbacks.” The issuance of $450 million in greenbacks was the key to funding not only the North’s victory in the war but an array of pivotal infrastructure projects, including a transcontinental railway system.

After Lincoln was assassinated, however, the greenback program was quickly discontinued. Repeated popular attempts by farmers and laborers to revive it failed. They were opposed by a wave of banker activism to maintain the banks’ control over the printing of money, which had been established by the National Bank Act of 1863.

In 1872, New York bankers sent a letter to every bank in the United States. The letter, as quoted by Lynn Wheeler in Triumphant Plutocracy: The Story of American Public Life from 1870 to 1920, read in part:

Dear Sir: It is advisable to do all in your power to sustain such prominent daily and weekly newspapers…as will oppose the issuing of greenback paper money, and that you also withhold patronage or favors from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country. [T]o restore to circulation the Government issue of money, will be to provide the people with money, and will therefore seriously affect your individual profit as bankers and lenders .

Bank-created money, including paper bills and now electronic money, could be rented to the people at a profit. The people’s debt-free money was limited to coins, which today compose less than one ten-thousandth of M3, the broadest measure of the money supply.

Lincoln’s assassination and the abandonment of debt-free greenbacks marked the exchange of physical slavery for what has been called “debt peonage” or “wage slavery.” Today, as a result, the American government and American people are so heavily mired in debt that only a radical overhaul of the monetary system can free us.

Gimmick or game-changer?

This is the real context and backstory of the trillion dollar coin. The stakes are much higher than just fending off the debt ceiling. We the people need to take back the power to issue our own money, and we can’t do it with nickels and dimes. We’re going to need coins bearing some very large numbers.

The coin could put within the government’s grasp the power to solve its debt problems once and for all.

The idea of minting large-denomination coins to solve economic problems seems to have first been suggested by a chairman of the Coinage Subcommittee of the U.S. House of Representatives in the early 1980s. He pointed out that the government could pay off its entire debt with some billion-dollar coins. The Constitution gives Congress the power to coin money and regulate its value, and sets no limit on the value of the coins it creates.

That may have been true then, but in legislation initiated in 1982, Congress chose instead to impose limits on the amounts and denominations of most coins. The one exception was the platinum coin, which a special provision allowed to be minted in any amount for commemorative purposes.

An attorney named Carlos Mucha, who at the time was blogging under the pseudonym “ Beowulf ,” proposed issuing a platinum trillion dollar coin to capitalize on this loophole, after he heard me mention the trillion dollar coin in a Thom Hartmann interview. At first, he said, it was just an amusing exercise. But with the endless gridlock in Congress over the debt ceiling, it got picked up by serious economists as a way to checkmate the deficit hawks.

Philip Diehl , former head of the U.S. Mint and co-author of the platinum coin law, confirmed that the coin would be legal tender:

In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).

Warren Mosler, one of the founders of Modern Monetary Theory (MMT), reviewed the idea of the trillion dollar coin and concluded it would work operationally. And Joe Firestone pointed out that the trillion dollar coin has far greater game-changing potential than mere political maneuvering. The coin could put within the government’s grasp the power to solve its debt problems once and for all, replacing austerity with the abundance enjoyed by our forefathers.

The invariable objection to government-issued money is that it will lead to hyperinflation. The trillion dollar coin can evoke images of million-Deutschemark notes filling wheelbarrows. But as economist Michael Hudson points out:

Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending.

And as professor Randall Wray observes, the coin would not circulate in the general economy. Instead, it would be deposited in the government’s account and held at the Fed, so it could not inflate the circulating money supply.

As far as spending goes, the fact that the Treasury has money in its account doesn’t mean Congress could or would go wild spending the funds. The budget would still need congressional approval. To keep a lid on spending, Congress would just need to abide by some basic rules of economics. It could spend on goods and services up to full productive capacity without creating price inflation (since supply and demand would rise together). After that, it would need to tax—not to fund the budget, but to shrink the circulating money supply and avoid driving up prices with excess demand.

Time to take back the money power

The current political stalemate cannot be solved with the thinking that created it. There is simply not enough money in the system to fund the services that Americans desperately need, create full employment, pay down the debt, and keep taxes affordable. The money supply has shrunk by $4 trillion since 2008, according to the Fed’s own website.

The massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

The only real solution to the unemployment created by this shrinkage is to add more money to the economy, and that means that someone needs to create it. Either the Fed does this in the way that it is currently done, by adding the money nearly interest-free to the balance sheets of banks to be lent to the government and the people at interest; or the Treasury does it and adds the money to the government’s account debt- and interest-free.

After a century of domination by the Federal Reserve, it is time we tried something new. In flatly rejecting the Treasury’s legal tender, the Fed as representative of the banks is asserting itself to be more powerful than the elected representatives of the people. If the Fed won’t acknowledge the coins created by the government, perhaps the government needs to charter a publicly owned bank that will.

We have a chance today to end the charade of big money gridlock politics, as well as the reign of the big banks. But the current government is so thoroughly captured by the bank-created money of our time that it is unlikely to take action without pressure from the people. Our ignorance on these issues has played into the hands of the 1 percent, who are dependent on the current system for their wealth and power. However, the massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

We have the power to choose prosperity over austerity. But to do it, we must first restore the power to create money to the people.

This work is licensed under a Creative Commons License

Ellen Brown

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. She is president of the Public Banking Institute, http://PublicBankingInstitute. org , and has websites at http://WebofDebt.com and http://EllenBrown.com

The Trillion Dollar Coin: A Debt Solution for the People

On Friday, January 11, economist and New York Times columnist Paul Krugman urged the White House to mint a platinum coin worth $1 trillion, as a counter to what was then a threat to block federal spending that Congress had already approved. (Republicans made good on that threat yesterday, putting the United States in danger of default.)

We have forgotten the role that money issued directly by the government has played in our history.

The White House responded by saying the trillion dollar coin is off the table, because the Federal Reserve declared that it “wouldn’t view the coin as viable.”

Even Krugman called the coin idea “silly.” He just thought it was less silly—and less dangerous—than playing with the debt ceiling.

But it is not silly. We have forgotten the role that money issued directly by the government has played in our history. The American colonists did not think it was silly when they escaped a grinding debt to British bankers and a chronically short money supply by printing their own paper scrip, an innovative solution that allowed the colonies to thrive.

Many people believe that the U.S. government creates its own money. This is not true. Today, the Federal Reserve creates trillions of dollars on its books and lends them at near-zero interest to private banks, which then lend them back to the government and the people at market rates. We have been brainwashed into thinking that it makes more sense to do this than for the government to simply create the money itself, debt- and interest-free.

In fact, the trillion dollar coin represents one of the most important principles of popular prosperity ever conceived: nations should be free to create their own money without incurring debt. Some of our greatest leaders, including Benjamin Franklin, Thomas Jefferson, and Abraham Lincoln, promoted this essential strategy. They realized that the freedom to print money offers a way to break the shackles of debt and free the nation to realize its full potential.

While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

Money creation is an all-important power that has been fought over for centuries, in a largely secret battle between governments and private banks. For the last two and a half centuries, the banks have had the upper hand, making us forget that any other option exists. But we are learning the great secret of money: that how it gets created determines who has the power in society—we the people, or they the bankers.

It is no secret who has that power today. Witness the great bailout of 2008 that rewarded banks for making irresponsible and fraudulent gambles in the subprime mortgage scandal. None of the bankers responsible served time in jail. Then there was the robosigning scandal, in which banks skipped important steps in the process of foreclosing on the homes of ordinary Americans, and came away with a slap on the wrist. Now we are seeing the LIBOR scandal unfold, in which traders at the Swiss financial services company UBS were convicted of colluding with other banks to tweak interest rates for their own financial benefit. We can make an educated guess as to how this too will turn out for them (hint: well). While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

We may rail against the banks and demand change, but change will not come until we grasp the fundamental secrets that are the foundation of their power: those who create the nation’s money control the nation, and nearly the entire money supply today is created by banks in concert with the Federal Reserve.

Remembering our roots

Everyone knows that Benjamin Franklin played an important role in the founding of the United States. Fewer know his views on the printing of money. “Experience, more prevalent than all the logic in the World,” he wrote, “has fully convinced us all, that [paper money] has been, and is now of the greatest advantages to the country.”

When the British forbade new issues of paper scrip by the colonial governments, Franklin went to London and argued that issuing their own money was responsible for the colonies’ prosperity.

The response of the king, leaned on by the Bank of England, was to ban all issues of paper scrip. Without their paper money, the money supply collapsed, and the economy sank into a deep recession. The colonists then rebelled. They won the revolution, but the bankers retained the power to create money by setting up a banking system like that dominated by the Bank of England.

Fourscore and six years later, in 1862, President Abraham Lincoln boldly took back the power to create money during the Civil War. To avoid exorbitant interest rates of 24 to 36 percent, he decided to print money directly from the U.S. Treasury as U.S. Notes or “greenbacks.” The issuance of $450 million in greenbacks was the key to funding not only the North’s victory in the war but an array of pivotal infrastructure projects, including a transcontinental railway system.

After Lincoln was assassinated, however, the greenback program was quickly discontinued. Repeated popular attempts by farmers and laborers to revive it failed. They were opposed by a wave of banker activism to maintain the banks’ control over the printing of money, which had been established by the National Bank Act of 1863.

In 1872, New York bankers sent a letter to every bank in the United States. The letter, as quoted by Lynn Wheeler in Triumphant Plutocracy: The Story of American Public Life from 1870 to 1920, read in part:

Dear Sir: It is advisable to do all in your power to sustain such prominent daily and weekly newspapers…as will oppose the issuing of greenback paper money, and that you also withhold patronage or favors from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country. [T]o restore to circulation the Government issue of money, will be to provide the people with money, and will therefore seriously affect your individual profit as bankers and lenders .

Bank-created money, including paper bills and now electronic money, could be rented to the people at a profit. The people’s debt-free money was limited to coins, which today compose less than one ten-thousandth of M3, the broadest measure of the money supply.

Lincoln’s assassination and the abandonment of debt-free greenbacks marked the exchange of physical slavery for what has been called “debt peonage” or “wage slavery.” Today, as a result, the American government and American people are so heavily mired in debt that only a radical overhaul of the monetary system can free us.

Gimmick or game-changer?

This is the real context and backstory of the trillion dollar coin. The stakes are much higher than just fending off the debt ceiling. We the people need to take back the power to issue our own money, and we can’t do it with nickels and dimes. We’re going to need coins bearing some very large numbers.

The coin could put within the government’s grasp the power to solve its debt problems once and for all.

The idea of minting large-denomination coins to solve economic problems seems to have first been suggested by a chairman of the Coinage Subcommittee of the U.S. House of Representatives in the early 1980s. He pointed out that the government could pay off its entire debt with some billion-dollar coins. The Constitution gives Congress the power to coin money and regulate its value, and sets no limit on the value of the coins it creates.

That may have been true then, but in legislation initiated in 1982, Congress chose instead to impose limits on the amounts and denominations of most coins. The one exception was the platinum coin, which a special provision allowed to be minted in any amount for commemorative purposes.

An attorney named Carlos Mucha, who at the time was blogging under the pseudonym “ Beowulf ,” proposed issuing a platinum trillion dollar coin to capitalize on this loophole, after he heard me mention the trillion dollar coin in a Thom Hartmann interview. At first, he said, it was just an amusing exercise. But with the endless gridlock in Congress over the debt ceiling, it got picked up by serious economists as a way to checkmate the deficit hawks.

Philip Diehl , former head of the U.S. Mint and co-author of the platinum coin law, confirmed that the coin would be legal tender:

In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).

Warren Mosler, one of the founders of Modern Monetary Theory (MMT), reviewed the idea of the trillion dollar coin and concluded it would work operationally. And Joe Firestone pointed out that the trillion dollar coin has far greater game-changing potential than mere political maneuvering. The coin could put within the government’s grasp the power to solve its debt problems once and for all, replacing austerity with the abundance enjoyed by our forefathers.

The invariable objection to government-issued money is that it will lead to hyperinflation. The trillion dollar coin can evoke images of million-Deutschemark notes filling wheelbarrows. But as economist Michael Hudson points out:

Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending.

And as professor Randall Wray observes, the coin would not circulate in the general economy. Instead, it would be deposited in the government’s account and held at the Fed, so it could not inflate the circulating money supply.

As far as spending goes, the fact that the Treasury has money in its account doesn’t mean Congress could or would go wild spending the funds. The budget would still need congressional approval. To keep a lid on spending, Congress would just need to abide by some basic rules of economics. It could spend on goods and services up to full productive capacity without creating price inflation (since supply and demand would rise together). After that, it would need to tax—not to fund the budget, but to shrink the circulating money supply and avoid driving up prices with excess demand.

Time to take back the money power

The current political stalemate cannot be solved with the thinking that created it. There is simply not enough money in the system to fund the services that Americans desperately need, create full employment, pay down the debt, and keep taxes affordable. The money supply has shrunk by $4 trillion since 2008, according to the Fed’s own website.

The massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

The only real solution to the unemployment created by this shrinkage is to add more money to the economy, and that means that someone needs to create it. Either the Fed does this in the way that it is currently done, by adding the money nearly interest-free to the balance sheets of banks to be lent to the government and the people at interest; or the Treasury does it and adds the money to the government’s account debt- and interest-free.

After a century of domination by the Federal Reserve, it is time we tried something new. In flatly rejecting the Treasury’s legal tender, the Fed as representative of the banks is asserting itself to be more powerful than the elected representatives of the people. If the Fed won’t acknowledge the coins created by the government, perhaps the government needs to charter a publicly owned bank that will.

We have a chance today to end the charade of big money gridlock politics, as well as the reign of the big banks. But the current government is so thoroughly captured by the bank-created money of our time that it is unlikely to take action without pressure from the people. Our ignorance on these issues has played into the hands of the 1 percent, who are dependent on the current system for their wealth and power. However, the massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

We have the power to choose prosperity over austerity. But to do it, we must first restore the power to create money to the people.

This work is licensed under a Creative Commons License

Ellen Brown

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. She is president of the Public Banking Institute, http://PublicBankingInstitute. org , and has websites at http://WebofDebt.com and http://EllenBrown.com

GOP May Back Away from Debt Ceiling Theatrics, But Plutocrats Still Calling the Shots

A important shift in the Republicans’ negotiating stance over the austerity fight (do we go Dem lite or Republican high test?) was duly noted in the Financial Times a day ago, but a search in Google News (“debt ceiling”) suggests a lot of other commentators have not yet digested its significance, so it seemed worthy of a short recap here.David Koch and his allies may be rethinking the wisdom of their debt ceiling brinkmanship, but they still have their eye on the big prize: dismantling the public sector and eviscerating the common good. (Getty Images)

Although extremism and brinksmanship have become preferred negotiating tactics of the Republicans, the most relentless practitioners are under the sway of libertarian funders and stealth organizers, primarily the Koch brothers, and intellectual leaders (not quite an oxymnoron) like Grover Norquist. In the new year, some elements of the Republican party have been taking more and more extreme positions, even saying that defaulting on US Treasuries would be a good idea, hewing to the “execution at dawn focuses the mind” school of thought.

Although financial markets didn’t yet take that bluster seriously, if it went on any length of time, they might have. Fitch bothered sending a warning shot, effectively indicating they regarded this sort of talk as bluster, but if anyone got serious, they’d review US debt ratings. The reason that was significant isn’t so much that it would affect bond yields (the Fed has been keeping a lid on them of late) but that the possibility of a downgrade by a second rating agency could widen repo haircuts on Treasuries and government guaranteed bonds, and the effects would ripple through the entire financial system.

The Kochs apparently decided things were getting out of hand. As the Financial Times