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Why are we bailing out the banks? – Part Four – What happens now?

In part one of this series I suggested that the simple reason we were bailing out the banks and simultaneously cutting public spending was because,

If the banks were to be wound up it is their [the wealthiest 10%’s] credit/debt backed ‘money and the assets held in it, which would burn to ash….So the simple reason our rulers insist on bailing out the banks is that by doing so the wealthy and the powerful are simply bailing out themselves and guaranteeing the continuation of a system which suits them perfectly.

In part two I argued that while the simple selfishness answer is true there are also theoretical justifications (albeit flawed ones) for the bail and cut policy.

The two aspects of their policy ‘bail and cut’, they will insist are not contradictory at all. Simply put, they will say they are loosening or increasing the  money supply (QE) in order to invest in growth (classic Keynesian) while simultaneously cutting those expenditures which they feel do not generate growth and which are in fact ‘drains’ on productivity – in their view any ‘public’ expenditure (Classic Free-market). Growth, for them, equals the free-market/private sector, while drains on growth equal government, public spending….Basically – Private Debt good, Public Debt bad.

I argued that one of the legion problems with this world view is the fact that whatever the ideology says should happen, the reality is that giving money to the banks for them to invest has simply not worked. It was never going to work because it is founded on a misapprehension about the nature and business of modern banks. Namely – that they invest for growth. They do not – certainly not in the broader economy during a recession. Banks used to ‘invest’. Today they much prefer to speculate. Investing is long and slow and does not make big bonuses. Speculating on food prices, currency fluctuations and sovereign debt, lending for leveraged, debt ladened buy-outs  – now these things can all provide the quick returns and big bonuses which old fashioned investment does not.

The idea that ‘we are all in this together’ coupled with the other idea that the banks are there to help – or are ‘there for the journey’ as a UK bank advert claims, is wishful thinking at best. These notions may make snappy sound bites but that is all they make. Banks are not there to help. They are NOT a service industry. Banks exist to make a profit as fast and as often as possible for those who own them and large bonuses for those who run them. Which is fine. They are a business. As long as we remember that and treat them accordingly I have no problem. I have a massive problem when, in the good times, the banks insist on being recognized as a business in the free market, to be treated with a laissez faire, light touch. But then in bad times insist even more fervently that they are not just a business to be allowed to live and die by the rules of the market like any other business, but claim instead to be an essential, – no, THE essential public service which must be protected above all else. So essential, in fact, that all ‘other’ public services must be cut in in order to better save the banks.

Let’s be clear the banks are not a public service. Banking – rather than the banks – could be a public service, but it is not run as such today. The banks are run as ruthless businesses. They exist according to an almost entirely selfish philosophy which extends from how they imagine human nature to be – no one, they think, would even turn up for work let alone do a good job unless rewarded more than anyone else – to justifying any and all fraud on the basis that if it makes a profit then who could blame you for trying. Be that as it may…

In part three I suggested that the official policy with its armature of ideological justifications and soundbite explanations was today’s Big Lie and looked at how and why Big Lies work.

In this last part, having looked at the origin and ideological justifications for the ‘bail the banks and cut everything else’ policy, I want to look at where the policy goes now. Because I believe the policies of the last four years have brought us to a critical and unstable juncture.

From crisis to opportunity – The top of the hill
For the last four years our Dear Leaders, political and financial, have been labouring to push everything back up the hill from which it slipped. As they have neared the top, however, I think they have come to see that the policies they have forced upon us can do much more for them than simply restore what they had before. Why stop there, they now wonder? The top of a hill is a place of fantastic opportunity. l think our leaders have come to see that shoved hard in the ‘right’ direction they could propell our societies in almost any direction they desired.

But this state of potential is also perilous. The top of a hill  is the place and the moment when the forces are all finely balanced and almost any ‘unauthorized’ push could send the system off in a direction the Dear Leaders would not like. Victory for the powerful and wealthy seems so close at hand and yet the crisis, far from being over, is also at its most critical juncture. So many possibilities exist together, like overlaid quantum states, in this one moment.

Just as our rulers prepare for one last push, to enforce one more round of austerity and bank bail outs upon us, to propel us more firmly to their desired future, they find there is a building and spreading opposition to everything they are doing. I believe we are at, or very near, that  place of maximum potential and maximum uncertainty where things could tumble down any number of quite different paths.  Irreversible victory is within our leader’s reach. Yet at the same time they are only a stumble, a determined opposing push away, from irrevocable disaster.

This place we are almost in, echoes with triumphant proclamations of imminent success while also being full of suspicion, fear and coercion. It is a moment that speaks of victory and a better future while feeling like the cusp of repression and paranoia, where free speech becomes seen as subversion and disagreement as dangerous dissent. This is the fascination of the non-linear moment when the pencil that writes our history is balanced on its end.

Fire sales and fire storms

When a business is so short of operating cash that it must sell assets in order to raise cash just to stay alive, and buyers know it, then the buyers hold all the power and prices tend to plummet. This is called a fire sale. On the high-street we would call it a ‘Closing-Down’ or ‘Everything Must Go’ sale. It is a perfectly normal part of the workings of the ‘free-market which the banks profess to be so keen on. Keen when it doesn’t apply to them, that is.

One of the many things hanging in the balance right now, I think, is who is going to be forced to sell their assets in a fire sale – the banks or us? No prizes for guessing the bankers preference. More revealing is to ask yourself who our current political leaders think should have them.

During the first two years of the bank debt crisis it was the constant worry of the banks and our Dear Leaders that without large and on-going injections of public cash, the banks would become so short of operating cash, or assets they could use as collateral for loans, that it would be the banks who would be forced to sell their assets in fire sales, which would burn the banks. And as I discussed in part one whose wealth do you  think would turn to dust with them? As this 2012 paper from the BIS (Bank for International Settlements the central bank’s central bank) notes,

At their peak, bank funding strains exacerbated fears of forced asset sales, … fears that funding strains and other pressures on European banks to deleverage could lead to forced asset sales,….

These fears were at crisis level globally in 09 and became a crisis again in Europe throughout ’11 and ’12. Each moment of renewed crisis resulted in our leaders releasing a flood of bail out money for the banks, so they did not have to sell their assets at any price, let alone at fire sale prices. On top of which the banks lobbied hard for and got two other measures both of which ‘protected’ the banks and the wealthy from having to sell anything at a price they did not like. Those measures were the suspension of mark to market accounting which they got in 2009 after some very heavy weight lobbying ( I wrote about it in Liar’s Lexicon – Mark to Market) and then being allowed to transfer all sorts of dodgy assets they had been holding in their Trading Books, where they have to be valued, to their Banking Books where they do not.

The amount of effort that has gone in to ‘protecting’ the banks from having to have fire-sales is a direct measure of the threat it posed and still posses to the banks and the wealthy. But that is only the first strand of the ‘bail and cut’ policy. While ‘bail’ is still very much on-going and about to be implemented again with another round of large bank bail outs, the second strand, ‘cutting’, is where we are now.

The official justification for cutting everything, as I argued in part two of this series, is that they are only cutting non-profit making, therefore non-essential things like welfare, and we should see the pain of those cuts as ‘our’ contribution, our part, of being ‘all in this together’.

It may be that this was indeed how they justified it in their own minds…at the start. But things have moved on. Today, the situation is that national central banks and behind them the Fed and ECB have made sure the banks have cash to operate. The ECB paper on bank funding again,

Euro area banks raised large amounts of funding via the ECB’s three-year LTROs [Euro area bank bail outs in 2012] , covering much of their potential funding needs from maturing bonds over the next few years. Across both operations, they bid for slightly more than €1 trillion. This was equivalent to around 80% of their 2012–14 debt redemption, more than covering their uncollateralised redemptions.

The bail out has bought time. Time for the next part of the evolving plan to take its effect.

It is now nations that are short of cash and finding it hard to borrow. And who is now clamouring for nations to reduce their debts by selling assets, even above investing for growth?  The banks.

The banks who refused to have their assets sold  at recessionary prices in a fire sale are delighted at the prospect – which they have helped bring to fruition – of arranging  a fire sale for ours.  The banks who did not want to see their assets valued in the teeth of a recession are happy to  value ours.  No mark to model for our assets. They will go to the lowest bidder.

And who do you think that bidder will be? Yes you got it. The same financial class who own the banks. The banks will bid and so will the leveraged buyout businesses the banks lend to. And what money will the bank use for this? Right again. The bail out money.

Those who keep assuring us that if we give the banks enough money they will start to invest in the real economy again are lying. The banks are not here to invest. They are here to predate, to scavenge. And our leaders have given them our money with which to do it.

This crisis has seen the paper wealth of the banks and the wealthiest 10% imperiled. The securities, derivatives and shares that make up so much of what the wealthy own, have all lost a great deal of their worth. That has left the banks with large holes in their balance sheets and for the wealthy, whose assets they hold, large losses if ever they were forced to admit them. Let’s not forget, when the banks are allowed to not mark to market it is not just the banks whose wealth is protected. The top 10% of all our nations also own huge swathes of this paper wealth. If the ‘assets’ – were marked to market or forced in to the market to be sold then those people, the people who own and run the banks, insurance companies, accountancy firms, law firms, media companies, the Senators and Members of Parliament, the Cabinet Ministers, lobbyists and experts would also see their ‘wealth’ go up in smoke.

But then along came the story which says nations are now in terrible debt and these debts are so large they cannot be carried, are in fact stifling growth (though how is never made clear) and must be paid down even if it means not only taxing the middle classes and cutting benefits to the poorer, but also also – sad though it makes us to tell you – also selling state assets.

Austerity is a wonderful thing if you want to force a fire sale. And not just any old fire sale either. It will be, if the banks and our leaders get their way, a fire-sale fire-storm.

A fire storm is created when a fire becomes so hot  that it creates a self sustaining feedback loop of in-rushing air which super-charges the original fire causing it to suck in even more air and so on. They have been known where brush fires have spread in tinder dry forests and famously in the carpet bombing of the German cities of Dresden and Hamburg in WWII.

If the banks had been forced to sell their assets, as each bank brought its assets to market they would have exposed the worthlessness of similar assets at other banks and the fire would have spread. An empire of debt backed wealth, that had long since ceased to be worth more than the paper upon which it was written, would have been lost. This did not happen.

Instead we now have banks who have secret losses; Vaults full of paper wealth whose value is still eroding. The question for the banks and our leaders has always been, not how to rescue us, but  how to replace all that lost value?

The answer to start with was just to buy time. Give the banks cash flow with bail outs. They thought that might be enough. But the rot was too deep. The paper assets could not be re-animated. Four years in, a new answer has emerged – an epic-fire storm fire-sale of public wealth and assets. Such a fire sale, if it can be made to sweep from nation to nation, will allow the banks to buy up assets, real ones, electricity grids, power stations, ports, water companies, telecoms companies, airports and roads. Things which produce real wealth not just paper valuations of derelict properties and derivative claims on other people’s debts.  The ‘cut everything’ austerity part of the official plan allows the banks to move from simply staving off admitting their losses to replacing their losses with real wealth producing assets. If the austerity plan can be maintained long enough, the fire will become self sustaining.

The Greek people already rejected the terms of the Austerity programme being force upon them once. This week their rulers will try to vote it through anyway. The plan whose details you can read here is to sell off Greece’s main airports and ports, its Gas company, Nickle industry, Phone company and mobile phone company, its water companies, its power company, Post system and motorways, plus sundry state owned properties, land and investments.

If the Greek fire-sale goes ahead it will set a bench mark, a low one, and a pressure, for similar sales in Portugal, Italy and Spain.  And it will not stop there. The fire will be spread, welcomed, enforced, in Britain and France and Belgium and Holland. Only Germany may escape. For a while.

A fire will have started and the banks will fan its flames. If the banks can force a fire sale they will have created a buying opportunity the likes of which only Russia has seen when it it was looted by the Oligarchs. And our banks and their owners will become the Oligarchs of the fading twilight of our democracy.

This is the bank’s chance to replace the shrinking value of their paper assets with new, ‘real’ assets that produce real wealth. With these assets they can rebuild their paper world of virtual assets and start their game over. All they need is for austerity to reach critical so that the fire storm takes hold.

Could they have acted differently?

I think they could. Still could. They could have put money in to the economy without using the banks. For example the UK has put up £1.4 trillion.  There are about 70 million people in the UK. The government could have ‘given’ £20K to every person earmarked to pay off their debts, with any remaining to be used as the person saw fit.  Or if you balk at funding for large families, and prefer something more modest how about £20K for each adult. My family would have got 40K. That would have paid off our mortgage. I would then have had more of my income to spend on other things. I would have bought double-glazing for my house.  The result would have been the banks having 40K paid off most household’s mortgage debt. That is 40K going in to the banks. So the banks would have still got their pound of flesh. But this way round would also have help the ordinary citizen. I think it was Steven Keen who first suggested this idea and it could still be done.

How different such a scheme would be. Giving money to the banks to lend means if we borrow it we owe them. If the money was given to us and we deposited any of it in the banks, then they would owe us.

“Moral hazard!” I hear someone crying.  Why should we bail out the feckless who got themselves in to debt?  Yet our leaders are happy we should reward the reckless and feckless banks. Moreover we apparently do not worry about the moral hazard of making those who did not create this mess pay to clean it up. What about those of us who did not partake of the orgy of credit and debt? What about those who saved and now see those savings and pensions being eroded?  Apparently the banks and our rulers are sensitive to the moral hazard of giving to us but not of taking.

Had we used stimulus money to pay off peoples’ debts, rather than the banks’ debts, that money would have still made its way to the banks. It would have shrunk their balance sheets, reduced their risk and made them safer – for us.  They would not have had the chance to divert the money to use it for speculating on food and currencies. All good so far. It would have left ordinary people with fewer debts and with more money to spend. This would have helped industry and therefore employment.

….But it would have come from the bottom up. People, ordinary people, would have decided what to do with whatever part of their bail out they had left. That, to me, IS the market deciding.  It is as Free Market as it comes. Financial decisions by the people for the people. Giving the money to the banks and asking them to lend to us, is letting them – just a few huge corporations and the handful of billionaires who own and run them – decide. That is NOT free market. It is banana republic cronyism.

In our present policy of bailing out the banks, they can then lend to us and we owe them interest.  In the bottom up bail out we would be lending to the banks. Remember putting money in to the bank is lending it to them.  They would therefore pay interest to us. Funny how the banks and the wealthy, rentier class who own them prefer the present arrangement where they get the money for cheap and IF they lend it to us, we owe them. In the other version, the heretical version, they would be paying us.

Wealth management and Povert management

The future our leaders see from the hill top is one where banks are there to manage the wealth of the wealthy and governments are there to manage the poverty of the rest. Wealth Investment and Austerity Enforcement – a perfect division of power. IF we let it happen.


The Moving Finger writes; and, having writ,

Moves on: nor all thy Piety nor Wit

Shall lure it back to cancel half a Line,

Nor all thy Tears wash out a Word of it.

From the Rubáiyát of Omar Khayyám

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65 Responses to Why are we bailing out the banks? – Part Four – What happens now?

  1. The Dork of Cork. November 5, 2012 at 4:16 am #

    Sure I agree we are bailing out the top 10% or 1 % but the act of hyperinflating credit which sustains their CLAIMS ON WEALTH has destroyed real physical wealth / physical capital or core capital as I like to call it.

    It follows that if we print (credit real or base money into peoples accounts) many real systems created during the credit boom will also collapse
    It needs to be done but it won’t be pretty.

    I don’t think MMT is really printing as it follows a Keynesian formula (printing double entry money) since it was first used in 1914.

    I am rereading “The first world war vol 1″ by Hew Strachan – the “financing the war section” – a must read.

    The Germans & French held much of the above ground gold ( not unlike China & Japan $ treasuary holdings today ?)
    The UK could “print” more Gold as the Empire had control over most of the below ground stuff in Canada & South Africa.
    While India gave it a favourable balance of trade ( I think Europe of today functions as the modern India although it has other functions – i.e its a theme park for the rich.)

    OK there was a run on the BoE………in my opinion because the US became both China & Saudi Arabia in one monster package.
    The Bank act was suspended and the clearing banks expected the Gold standard to finish as the BoE would need to issue more notes , but HMT issued the notes (legal tender in Scotland & Ireland)

    Keynes hammered home 2 points – the first was the difference between the internal demand for gold and the external.
    1. The first was the internal vs external demand for Gold – the 10shilling notes (paying 5% interest) were for the former.
    By easing the domestic calls for Gold the Bank had more gold available for exchange purposes.

    2. He reiterated throughout the war that it was useless to accumulate gold reserves in times of peace unless it was intended to utilise them in time of danger.
    This is the MMT full employment meme in its ancient form.

    But if HMT just issued raw notes into the economic medium – what would have happened ?
    Would we have had the War to end all wars ?

    Look we are in deep trouble – all of us , Why you say.

    Europe (or at least the financial capitals) is the plantation owners house.
    The rest of the world is the plantation.

    The owner is trying to free up now scarce capital by reducing the input costs to his domestic servants in Europa house.
    The domestic servants wish to continue with this arrangement despite the new hardship as they know no other life and are unable to pick cotton.
    Everything everything flows back to 1648……..everything.

  2. Kimo November 5, 2012 at 4:55 am #

    Well written, and so true about the banks. But Keen’s plan is about reflation, ie, getting back to where we were in 2006. Its a not a sustainable place. Keen’s plan is also about Central Planning, another unsustainable place.

    Reminds me of Enron, and all the people that ‘lost’ their life savings. But the peak of their savings was not real. And neither was 2006. The credit needs to collapse, to find a sustainable place. We are not there now, and stimulus is not a way to get there. Nor is Central Planning.

    Bust the banks, and take the lumps. We earned them.

    Thank you Golum, for your incredible insight.

    • bill40 November 5, 2012 at 12:10 pm #


      I think you need to remember what our currency system is called. It is a debt based fiat system, the key being in debt based. No credit = no money. positivemoney.org makes this point very well.

      What currency system do you have in mind to replace it?

      • Kimo November 5, 2012 at 5:03 pm #

        I said, “The credit needs to collapse, to find a sustainable place”. No mention of eliminate credit. Please read.

        • bill40 November 5, 2012 at 9:18 pm #


          I read what you said, if the amount of credit cannot sustain growth who takes up the slack? This article explains clearly that banks are not to be trusted to create money as debt, they are inept.

          This leaves with the state, however imperfect it is, that is at least, technically, democratically controlled.

          • Kimo November 6, 2012 at 6:03 am #

            Sustainable growth comes from productivity gains. If the system collapses because growth pauses or declines, we need a new system. Credit is appropriate, with 20% down, paid with legitimate savings.

    • Mike Hall November 5, 2012 at 1:16 pm #


      I’m not sure what you mean by “…Keen’s plan is also about Central Planning…”?

      Without specifying precisely what aspect of it you see as ‘Central Planning’ (in caps) or why it is an ‘unstainable place’ (implied ‘bad’), it comes across as some purely ideological position.

      I would think it obvious that ‘Central Planning’ in some form, to some extent, by some sector, is going to take place in our large highly complex societies.

      Answering the detail of those questions and in whose interests it has taken place is perhaps key to the whole present mess.

      • Kimo November 5, 2012 at 5:16 pm #

        Central planning in my mind, is responsible for this “whole present mess”. It starts small, with targeted 2% inflation, and tax inequity. Then release from the gold standard. Relaxing leverage limits. TARP. And now we need to the huge stimulus to the population?
        Can you see a pattern here? The actions required become greater and more profound. The greater the role of central planners, the more the damage from unintended consequences, and the greater the corrective action needed.
        We are making things worse.

        • Roger November 5, 2012 at 8:27 pm #

          There is a close correlation between the targeted inflation rate and the money supply that needs to be created to sustain the debt based fiat money model Kino. Usury is at the heart of it all. Creating money out of thin air without the interest to redeem it leading to the inflation and also to the very profitable foreclosure opportunities inherent in the banking model out with the juicy fire-sales fire storms Golem so vividly brings to life.
          It is a dual problem of Politicians bought into the debt based fiat model as it de-couples political spending from political consequences at the ballot box and allows both the banks and politicians to claim it wasn’t their fault.
          Its a highly cosy system and not one with any relation to any notion of free markets the cronyism is on both sides of the fence through the gold plated revolving door.

          • Kimo November 6, 2012 at 6:42 am #

            Yes, Roger, I know that is the official story line with our debt financed money supply. Its so convenient for the bankers. Defaults will keep currency (not credit) in the system, and like it or not, a tsunami of defaults is on the horizon. It starts with counties reclaiming their gold. When the crowd screams hyperinflation, you can be sure it will be deflation that sits on your doorstep.

    • Trent November 5, 2012 at 8:15 pm #

      i agree with you, but just think how many people were brought into existence by pulling demand with credit forward? Where does that lead?

  3. backwardsevolution November 5, 2012 at 10:48 am #

    Golem – great, great piece. So well written. I agree with it all, except the part that Kimo talks about. The credit does indeed need to collapse because, as Kimo said, it was not real. It was tantamount to a bunch of kids passing leaves back and forth to each other, playing “business” in the back bush. So far we’ve been papering over the banks (which should NOT have happened), which has allowed asset prices to remain high (which suits debtors and the banks).

    Right now in the States banks are purposely holding inventory off the market (in order to keep prices inflated). Not bad if you’re a homeowner because now you get to sell at an artificially high price. The buyers who bought in the early 2000’s, who didn’t pay the inflated prices, but who saw their houses appreciate substantially, have now refinanced into the lowest mortgage rates in history. The others who bought at the end of the boom at hugely inflated prices and who have now walked away from their houses, well the banks (with government help) are now selling those houses (hundreds of them at a time) to large investors (their elite friends) for ten cents on the dollar. It’s one scheme after another after another, and it’s all artificial.

    I’ve been helping my daughter with her Canterbury Tales homework. The bankers remind me somewhat of the characters in that poem – corrupt church officials making money every which way they could: fake relics, indugences. But it wasn’t just the church officials. It seemed almost everyone was out to get something for nothing. I further read where they began selling indulgences for a hundred years, then hundreds of years, then a thousand years. Sounds like derivatives. Times really have not changed all that much.

    None of this was real, it was all make-believe, and yet no one wants to let go of their fake pieces of paper.

    I agree there should be no further bailouts of banks – none. There shouldn’t have been any to start with. They are stalling for time, enough time to make sure they get paid out, while foisting all of the debt onto the taxpayers. Then, yes, you are right, these same people will buy up the countries’ infrastructures. Nice plan.

    Homeowners should not receive money and neither should the banks. All that does is maintain the status quo, like giving artificial respiration to a person whose been dead for four years. We must stop and let this thing collapse.

    • Debra November 5, 2012 at 6:08 pm #

      Perhaps the credit has already collapsed and we just don’t know it yet ?…
      The paper is only worth… what people believe it to be worth, and it reflects their confidence in the.. AUTHORITY which is issuing currency (if indeed it is still pertinent to talk about money in terms of currency, which is not certain).
      The less people believe it to be worth, the less it is worth.
      Behind the notion of debt, and credit there is always the necessity of belief and trust.
      When trust collapses, then.. your banking system goes down, right ?
      But.. NOT JUST your banking system (if you have one…).
      The banks as institutions really got rolling in the Western world with the Renaissance, didn’t they ? The very IDEA of banks ?
      The Renaissance starts the long, slow rise of… the bourgeoisie. As.. ideology, not
      as class, which it is not, principally.
      The Reform was a reaction against corruption perceived to be intolerable. Against an “anything goes” attitude, coupled with the perception that those held in.. authority were no longer legitimate to exercise that authority.
      We are at the same place right now, I… believe.
      But this time, we are increasingly called on to abandon any form of.. faith in the nation STATE.
      Historically, it has proved to be a source of..violence and destruction, both of which have become totally intolerable to our species.
      “We” want to live in a world of 24 hour “peace and love”..
      Our “rulers” are only.. rulers to the extent that we perceive them to be so..
      I, for one, do not perceive “rulers” to be behind this.. revolution.
      I perceive an organic system.
      And, to me, it looks like “we” are heading more and more towards a global… anthill as SOCIAL organization.

  4. Maria das Santos November 5, 2012 at 10:55 am #

    Thank you for this article on how we the 99.99..%are being disabused,whilst we gawp at the audacity we are silent at the behaviour.Just to show how crass our banks are,a little article from Cyprus which is happening now;http://www.zerohedge.com/contributed/2012-11-04/bailout-russian-%E2%80%9Cblack-money%E2%80%9D-cyprus. IS it not delightful to aid our Russian oligarchs in their moment of need.The people paying for this will be the German people AGAIN!

  5. backwardsevolution November 5, 2012 at 11:03 am #

    “You cannot “reform” away the dysfunction of the Status Quo without dismantling the vested interests and the ruling Elites that benefit from the Status Quo.

    The dream of every conventional reform movement is to rid the system of its dysfunctional features while preserving the Status Quo.
    But what the reformers don’t understand is that the Status Quo is dysfunctional not because of bad policies or a few corrupt officials–it is corrupt and dysfunctional from the ground up.

    Dismantle the dysfunctional parts and you’ve dismantled the entire Status Quo. […]

    Doesn’t this apply not just to China but to Greece, Spain, Italy, the E.U. itself, the U.S., Japan and a host of other developed nations all depending on financial slight-of-hand “extend and pretend” to prop up the dysfunctional Status Quo?

    In every case, eliminating the source of the rot and corruption would topple the increasingly fragile regime. In the case of China, corruption isn’t a feature of the regime: it is the regime.

    In the U.S., financialization isn’t a corrupting feature of our financial system: it is the system.

    In the E.U., catastrophically misguided central planning isn’t a feature of the Eurozone: it is the Eurozone.

    In Japan, a stupified government propping up a zombie banking system isn’t a feature of the Status Quo: it is the Status Quo.

    Any reform that actually excised the source of the moral rot, corruption, malfeasance, fraud, malinvestment, moral hazard and self-serving vested interests would bring the increasingly fragile Status Quo crashing down in a nonlinear cascade of interlocking failed systems.”


  6. backwardsevolution November 5, 2012 at 11:08 am #

    “As a case study, let’s look at Greece, a nation that is the leading-edge of Status Quo delegitimization and destabilization. As I noted last week, (In a Dysfunctional Status Quo, Reform Triggers Collapse), corruption isn’t a feature of the Greek Status Quo: it is the Status Quo. Any reformation that eliminated corruption would dismantle the Status Quo and bring down the Elites who have been looting the nation at will.

    Corruption Continues Virtually Unchecked in Greece:

    How can someone who has declared an annual income of €25,000 ($32,400) transfer €52 million abroad? What kind of supplementary income must an individual have who, according to his tax returns, earned €5,588 in 2010, yet still managed to move €19.8 million abroad? And how can it be that a Greek citizen sequesters €9.7 million abroad although he supposedly earned exactly zero euros?

    The “Lagarde List” contains the names of 54,000 Greek citizens who have transferred major assets out of the country. The Greek Establishment is (naturally) doing nothing to investigate these 54,000 people, because the 54,000 are the Greek establishment.”


  7. bill40 November 5, 2012 at 12:04 pm #


    Congratulations on a four piece masterpiece. What I believe you are describing is the transfer of state backed money from public purpose to common purpose. Whilst common purpose sound very innocent and public orientated it is anything but. It directs state backed money to the elites and anyone who disagrees is simply excluded from the system.

    As you know I believe the problem is one of economics not politics. If we the people reject mainstream propaganda the politicians will change with us. Any bail out of us still involves them winning and I’m resigned to that fact.

    The spending constraints on the state are being exposed daily as the lie they are, as you say, make the lie big. Are New Yorks’ Tea Party nutters refusing state help after Sandy? Does Romney still claim that cuts must be made elsewhere to finance the reconstructuion? Would the private sector do a better job?

    All we can do is keep hammering away at public consciouness until the message becaomes clear. It is our state and should act in our own interests. MMT leads the way.

    • Tao Jonesing November 10, 2012 at 5:34 pm #


      Economics is politics. The only difference between the politics of MMT and the politics of neoliberal economics is who gets to do the central planning.

  8. ArtSmith November 5, 2012 at 12:52 pm #

    Another great article David. Personally, I see it more as a mexican stand off. The 1% may have a gun to our heads but mass organised bank runs would put the world economy in free fall. Overleveraging is their achillies heel. They are actually highly vulnerable to deposit withdrawals. I don’t welcome this, btw. Chaos would ensue, along with capital controls and enforcement from the centre by violent means. An enlightened 1% should know compromise was a better outcome all round.
    I think those with their finger on the button underestimate what despair and spite might motivate the population to do. If you can’t win (and we can’t because the system is booby-trapped so that you can’t hurt the banks without hurting the people more), you’ve nothing to lose.

  9. Mike Hall November 5, 2012 at 1:00 pm #


    This is a really well written piece & gets right to heart of things.

    Fundamentally it is much as Marx said – their are two inherently opposing interests. The few percent ‘rentiers’ on the one hand & the 90%+, whose income primarily depends on their labour on the other.

    When the rentiers take over democracy, well, there is no democracy, & the rest are left to defend themselves, as they may. from exploitation. Encouraged by the rentiers’ media control to fight among themselves. This is where we are now.

    The rentiers don’t need to be euthenased or Capitalism toppled (to be replaced with what, even if it were feasible?). But they do need to be removed from positions of democratic representation, public service & media control, and kept away permanently.

    Power between the two opposing forces then becomes balanced. The rentier class exist no more & no less than is useful to society as a whole..

    Does this mean a much flatter income & wealth distribution for the majority? Yes, absolutely. But no one is prevented from achieving great wealth, if they wish, & can do so usefully to society. However, they then permanently exclude themselves from public office & media control.

    Anyhow, back to the article.

    The ‘QE for the people’ idea, that Keen proposes, I first heard from the late Richard Douthwaite of FEASTA & it has also been mentioned by MMT economists like Marshal Auerback, Bill Mitchell & others. It should be understood as a temporary response to a private sector debt bubble situation that should never be allowed to happen again. The financial sector must be reverted to a service to the real economy & no more. In the interests of stability, imo such reversion is better programmed over a period of time to allow winding down of the casino.

    To further clarify the peoples’ QE. It is proposed as regular issuance of smaller, not lump, sums, with the condition that it must first be used to pay down debt. And continue as long as it’s spending stimulus effect does not exceed the capacity of the real economy to produce goods & services & hence cause excessive inflation.

    Alongside this, and as a permanent & enhanced automatic stabiliser, the MMT Job Guarantee should be introduced.

    • Tao Jonesing November 10, 2012 at 5:47 pm #


      “When the rentiers take over democracy, well, there is no democracy”

      There was never democracy, Mike, as the rentiers owned it from the very beginning. If you rip away the idealistic rhetoric of our founding, the US has always been an oligarchy.

      I am not saying that you are identifying a phenomenon that is not real. There is definitely something fundamentally different and wrong about what we are witnessing. I just think you are misidentifying it.

      The reality is that all states are set up to organize the masses to benefit the few, the rentiers and oligarchs. Troubles arise, however, when the rentiers and oligarchs rely on usury to “double-dip” and take more from the masses than the state had allowed. This creates fractures in our understanding of how the state works and calls into question the purpose of the state, which is always presented as promoting the common good but which is always, in actuality, to perpetuate the status of the rentiers and oligarchs. This happened in Athens and Rome, and it is happening today.

      So, the problem is the rentier’s purposeful use of usury to impoverish and enslave the masses. When they are allowed to do that, the illusion of democracy disappears.

  10. John Souter November 5, 2012 at 1:29 pm #

    David – Well done, your best article to date.

  11. Phil November 5, 2012 at 2:10 pm #

    Calling Hawkeye and Falling Leaf, I can make 19th November at the Friends or wherever in London. Let me know.

    • Hawkeye November 5, 2012 at 2:54 pm #

      Hi Phil / FallingLeaf

      I’ve put that date in the diary. Looks like the Occupy Economics WG is on that night which could be worth attending beforehand:


      Then we can try and drum up support for the “People’s United Front against Fraud”, or PUFF for short….(errr..?)

      All others welcome, too – I know Jamie_G and Rowan have expressed an interest.

      • Phil November 5, 2012 at 5:20 pm #

        So are we meeting there at 5pm and can perhaps have a chat after the meeting?

        • FallingLeaf November 6, 2012 at 12:25 am #

          Yeah, I’m down with that – would be great to get as many as possible. Rowan would be great to get down, too. I’ll be there at 5 but really have to run at 7 or possibly a tad earlier.

          • Hawkeye November 6, 2012 at 9:12 am #

            Phil / FallingLeaf

            I will aim to get there for about 5pm. Should be free to stay on for a bit afterwards, too.

            – Hawkeye

          • Jamie_Griff November 6, 2012 at 7:39 pm #

            In! Will try to get there for 5pm, might be a bit late…

    • steviefinn November 5, 2012 at 4:04 pm #

      Brilliant stuff, totally sums it up – A pity most people will probably not cop on to this until it’s too late. The 20 grand per head sounds like a great idea, but I imagine those sitting at the top table would scream about hand-outs & socialism etc. I think this battle is their’s to lose as out of greed & hubris they cannot help but keep pushing until something snaps.

      They seem to have had it nearly all their own way over the past 4 years, surely we are due a totally unexpected event that will lead to chaos or at least an unravelling of big plans. Glenn Hubbard & even Larry Summers I have heard tell as possible candidates for Bernanke’s job, this proves the loonies are definitely still running the show.

      I would love it all to blow up in their smug gluttonous faces, but then I think that I should be very careful what I wish for, but on the other hand something has got to give at some point or we will be gradually herded into serfdom.

      Vaclev Havel – ‘The power of the powerless’ :


      • FallingLeaf November 6, 2012 at 11:15 pm #

        Well, I might as well say this since it wasn’t exactly a private chat and at least half a dozen others heard it. Andy Haldane responded to this private debt jubilee idea (and it was at a lower amount, between 4 and 10k) with uncertainty: Firstly, it would be (as you guessed) a handout; Secondly, it blurs monetary and fiscal policies and he indicated that the BoE wouldn’t be able to do it.

  12. Roger November 5, 2012 at 7:35 pm #

    The result would have been the banks having 40K paid off most household’s mortgage debt. That is 40K going in to the banks. So the banks would have still got their pound of flesh

    Hi David, great piece.
    The above bit i think misses the point that when debt is redeemed in the current banking model the money annihilates. If Steve keens proposal and Positive moneys proposal is followed the debt would disappear from both sides of the banks balance sheet and although under the old model technically it would free up some further lending capacity every one knows that reserves actually became decoupled from lending some point in the dark murky past, my guess when all the carpet bagging was going on with demutualising of the building societies , its an even better idea for the fact the banks would not be issuing new money as debt and MMT could take over with in my preference a guaranteed income which is altogether more modern( Joshing Mike).
    I know you know this stuff anyway and maybe I have misread this paragraph, but I thought it worth clarifying or flagging up.

    Cheers again great article


    • David November 5, 2012 at 8:49 pm #

      Utterly brilliant piece Golem

      Roger’s point is pertinent. As you state, when an individual deposits money in the bank it becomes a liability on the bank’s balance sheet and therefore in a similar fashion reduction of mortgage debt held by a bank reduces the banks assets.


    • Golem XIV November 6, 2012 at 10:21 am #

      Cheers Roger.

      I didn’t really make it clear enough did I! Not going to correct it today. Feeling slightly ropey after operation and have to go give a lecture at Bedford U, which I’m looking foward to but wish it hadn’t clashed with the op.

      Back in action Thursday. May decide to venture into the MMT lions den with some thoughts on it. Mike will have field day! But hey, you only live once.

  13. John G November 5, 2012 at 8:25 pm #

    Getting the assets at fire sale prices IS the plan of the oligarchs. Whether this is all a controlled demolition or happenstance is debatable (I tend to the former) but the intent should be very clear by now to anyone watching.
    Michael Hudson has been on the money about this coming neofeudalism, or “Toll Booth Economy” for a long time.

  14. Golem XIV November 5, 2012 at 9:06 pm #


    I didn’t want to put up a post dedicated to this but I need to tell you that after much hand wringing I have decided to allow adverts on the blog.

    I do not like it at all. It feels like a betrayal but I hope along with my sincere apologies, you will also accept that I would not do this unless I really needed to.

    I don’t want to say more than that because it starts to feel like special pleading and I am acutely aware there are many, including people here, who are in far worse situations than me and mine. But if anyone wants to talk to me further about this and quiz me on why I ‘need to’ please just email me. I don’t want to discuss the details in public.

    I also want to say a profound thank you to all of you who donated to the blog. You will never know how much it meant to me. I understand that putting adverts on the blog undercuts the idea of asking for donations, but thank you again.

    I hope very much the adverts will not ruin the feel of the place we have made together. As I say it feel as if I am vandalizing it. And for that I am sorry.

    If the adverts do ruin things then I will take them down again. Please let me know. This is OUR site not mine.

    Marcus – one of our number – has done all the work to try to make the adverts less unsightly, but there is only so much he can do. Thank you Marcus.

    • GordonDonald November 6, 2012 at 1:02 pm #

      I am sure everyone here appreciates the sacrifices you are making to keep the site going. Your reminder prompted me to make a donation – so perhaps you should prompt us more often. (Apologies for the pathetic size of my contribution but at the moment I am unemployed and have lots of time but not much money).
      Keep up the good work.

      • Golem XIV November 6, 2012 at 1:06 pm #

        PLEASE, please do NOT apologize. That you donate at all is generous indeed.

    • richard in norway November 6, 2012 at 1:15 pm #

      I got no problem with ads, but do you get paid per click, should we all click on the ads and then not buy anything or can we just ignore them and you get paid anyway?

      • Golem XIV November 6, 2012 at 1:20 pm #

        You have to click. No clicky no ticky.

        • richard in norway November 6, 2012 at 2:00 pm #

          Well we will just click away, if they are stupid enough to pay for clicks it serves them right

          • Roger November 7, 2012 at 5:58 am #

            Yes lets all resolve to click and watch a few. Each visit.

          • Jamie_Griff November 7, 2012 at 10:39 pm #


            I don’t think you should just click willy-nilly on the ads.

            Google knows which IP addresses the click-thoughs are coming from and if they suspect fould play they might kick Golem off the Adsense network.

    • BobRocket November 8, 2012 at 12:19 am #

      Adverts are fine with me, I’ll click one on each visit.

  15. G Lemieux November 5, 2012 at 11:02 pm #


    I’ve tried to donate on a couple occasions only to find the I was not provided a choice of country ie the US or state which would not provide the needed information for my charge to go though.


    • Golem XIV November 6, 2012 at 10:16 am #

      Hello G Lemieux,

      What matters is the generous spirit of your intent. Thank you. Sorry my system thwarted you,

      • G Lemieux November 6, 2012 at 7:35 pm #

        I recall not having any problem purchasing your book so suspect that something has changed in the permissions of your PayPal account. Possibly contacting them to see if International purchases are still set. I know how these little things can have a life of there own. Think of the benefit in allowing everyone to express
        their gratitude.



  16. Aaron November 5, 2012 at 11:31 pm #

    I’ve been waiting for you to finish up with the series, and this was worth the wait! Beautiful prose and yes, you nailed it! You managed to capture the essence of what’s at stake, and unmask all the bullshit parading as progressive policy.

    Fabulous job!

    • Golem XIV November 6, 2012 at 10:21 am #

      Thank you Aaron. It’s my pleasure.

  17. TheSwede November 6, 2012 at 8:33 am #

    “The government could have ‘given’ £20K to every person earmarked to pay off their debts,”

    Would this be paid to people like me living in a rental apartment?

    If not, it just sounds like another version of the “flickering and fading democratic twilight”. It will just postpone yet another bubble and create a deeper divide among the population.

    • Golem XIV November 6, 2012 at 10:13 am #

      Hello TheSwede,

      Yes it would include you.

      The idea could be done in several ways. I’m sorry if I didn’t make that clear.

      I should also say it does not have to be done at all. I am personaly in favour of making the banks clear their own debts and going bankrupt as a result. BUT, what then?

      Let’s say several of the banks were to go down and their ‘assets’, properly valued, sold at auction to surviving or newly capitalized banks. The economy would have taken a hit just from the pure disruption. In that time would we wish, as a nation, to see many people going to the wall as employment dipped?

      I personally do not see anything wrong with a governemtn helping its people over hard times. We are not talking about making people millionaires nor of helping one group but not another.

      There would be iniquities – the person who was a month short of their birthday not getting the money but a friend one month older getting it, for example. I do not believe it is beyonbd the wit of humanity to iron-out a few of the worst unfairnesses.

      The result is not to ‘help’ the banks. It would help those that survived but in way that made them safer for us. The main ‘help’ would be for the people of this nation and the real economy in which they live and work.

      This would not be a stand alone, one-off cure-all. I would still argue that all the other changes to banking and money/debt creation are essential. I listed many of them in “A way forward – A modest Proposal” and “The Way Forward – Next Steps”.

      • John Souter November 6, 2012 at 3:37 pm #

        David -surely banks could be placed in administration -retail banking protected and continued while the toxic ‘investments’ are placed in moratorium until their true value (if any) are audited as either capital or asset/liability is known and an accurate balance sheet published.

        While this will have a negative effect on the employment of the financial shamans it would still be less than the gross effect of the money being pumped in at the moment to subsidise their status and welfare while simultaneously stabilizing and encouraging the productivity of the real economy.

        When a myth has been photo-shopped into a mountain it makes little sense of trying to climb it.

  18. plaasmatron November 6, 2012 at 1:12 pm #

    Excellent article. Keep it up.

    To be pedantic, there are no reported firestorms that occurred in WW2 in British cites, only in German and Japanese cities. Taking a quote from Wikipedia…

    As Sir Arthur Harris, the officer commanding RAF Bomber Command from 1942 through to the end of the war in Europe, pointed out in his post-war analysis, although many attempts were made to create deliberate man made firestorms during World War II, few attempts succeeded:

    “The Germans again and again missed their chance, …of setting our cities ablaze by a concentrated attack. Coventry was adequately concentrated in point of space, but all the same there was little concentration in point of time, and nothing like the fire tornadoes of Hamburg or Dresden ever occurred in this country. But they did do us enough damage to teach us the principle of concentration, the principle of starting so many fires at the same time that no fire fighting services, however efficiently and quickly they were reinforced by the fire brigades of other towns could get them under control.”
    —Arthur Harris,

    • Golem XIV November 6, 2012 at 1:22 pm #

      Thanks. I’ll amend that point. I was thinking of Coventry when I wrote it.

  19. Joe Taylor November 6, 2012 at 2:21 pm #

    I just started a discussion about this article on the NatCAN website here http://bit.ly/PTQblz

    A previous discussion in a blog post on the same website, based on the first three articles about bailing out the banks, got 465 views.

    Good work David, the rest of us will try our best to spread the message.

  20. Sir Tagio November 6, 2012 at 4:30 pm #

    Excellent series of articles! If you feel so inclined, I would be interested in you following through to the next step after the fire sale. You state that the banks’ goal is to replace the virutal paper wealth on their books with real world income producing assets. But will the banks really keep businesses and operate them for their income stream? How would this work? Banks are not really set up for that, any more than they are set up to engage in large-scale leasing operations of their foreclosed homes. Wouldn’t they be more likely to flip the assets so acquired to large companies and wealthy investors for a quick profit and large end-of-year bonus?

    Next, given the prevailing mentality regardign “making money” these days, wouldn’t this form of “privatization” of state assets have the predictable end result, as we see developing with the British rail system? First, it’s privatised for profit. The new owners treat it solely as a resource to be extracted, just as they would if the government sold them oil-rich land for pennies on the dollar. Not as a business to be run. They make no large scale capital improvements and over time it just falls into a horrible state, with service declining, etc. When its a complete disaster, and there is no more to be extracted from it, it’s re-nationalised. Rinse and repeat.

    Finally, just how ‘income-producing” are these assets going to be when they’ve impoverished the greater portion of the population?

    Again, great work, and thanks for setting this out in so easy a manner to understand.

    • korual November 8, 2012 at 9:03 am #

      Nice addendum there Sir Tagio. Of course we will be expected to buy the assets back when they aren’t making any money! At a highly inflated price! This has already happened to the NZ rail system.

      The current government in NZ is now turning the nation into an offshore tax haven. So perhaps this is the end-game. Every country in the world is a tax haven. ie no wealth is ever taxed. Funny that.

  21. desmond dillon November 6, 2012 at 6:32 pm #

    thank you Golem , a great read all 4 parts…at the beginning when bailouts were first muted ‘systemic break down’ was the threat of the day. Of course it was not true at the time and because of the actions they’ve since taken it is getting to be a racing certainty. The maxim ‘power corrupts and total power corrupts totally.’ comes to mind. How to thwart it is the challenge we face.
    The masters of the universe are the gods of greed.
    who just need more from the poor upon whose little wealth they feed.
    By swapping money for debt there’s an interesting conundrum
    where the sum of riches amassed turn out not to be gold or even brass
    because it takes a very special class to gather wealth in debt
    that absolutely must be paid or else there are no riches to be made.
    Then the masters of the universe who are the gods of greed
    turn out as thuggish debt collectors who are desperately in need
    of getting it all back again with utmost speed, or at least be getting interest on the debt thats owed from the people pledged to pay by politicians in their day
    who sought to further their careers and serve ‘the masters of greed.’ .

  22. Kate Hudson November 6, 2012 at 9:45 pm #

    Thanks David, brilliant piece. Your insight makes us stronger. The only freedom from the banks tyranny on a personal level is to not owe them money. I have learned this the hard way, by losing everything (and I do mean many millions) in the first round of the financial debacle, but to our amazement, we then entered a world of complete freedom – no borrowing, no power to the bank. It was a revelation. No one to give us any grief. One then questions how important were all those things which we considered essential, for which we borrowed. Not at all important. Maybe “we” also need to rethink how we live. For the sake of “progress” everyday we put our heads in the banks noose, giving them the power over our lives, our very existence and this goes for individuals, businesses and countries. Is there an existence for people without that. Have we gone too far to ever be able to go back to a simple life. I know this is a base level contribution but we the people do have power, the power of numbers. How can we use that power?

    • Helix6 November 9, 2012 at 6:03 am #

      Sorry to say this, Kate, but you are still subject to bank tyranny. The bottom line in the US, and in most of the world outside China, is that the currency you use is issued by banks, and for extending you the “privilege” of having a currency, they will exact their pound of flesh. No matter how you slice it, there is an interest payment — to bankers — associated with every single dollar you have or ever will have. It is like a slow, steady current that you must swim against your whole life. When you are awake and working, you may successfully overcome that current, but every moment you are not exerting energy against it — every moment you are sleeping, every moment you are relaxing, every moment you are having fun with your friends — you are being inexhorably drawn back downstream.

      Have you ever wondered why it is that so many people work their whole lives and end up with practically nothing? The financial media like to blame it on indolance or stupidity, but this is just a McGuffin — a ploy to distract you from pondering the issue at length. The real truth of the matter is that the currency itself is designed to drain the wealth from the people who create it and send that wealth downstream into the hands of the financial industry and its owners.

      Your really have two lines of defense. One is to minimize your contact with the money economy. Hard to do, since taxes must be paid and Federal Reserve notes or their electronic proxy are the only acceptable means of payment. The government is prepared to enforce the bankers’ monetary scheme to the point of stripping you of your entire wealth and depriving you of your freedom if you refuse to participate. The other line is see things the bankers’ way and invest sufficient money to generate a return that will make up for the drain on that money, as well as the money you use to make your way in life.

      It’s an ugly game, but right now, it’s the only game in town for most people.

  23. David Mills November 7, 2012 at 6:27 am #

    The scenario of banks stripping paper wealth into real wealth was already theorized by Jefferson in 1816: “If the American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.” Interesting that the games don’t really change that much even over 200 years and can even be globalized.

  24. syzygy November 9, 2012 at 2:55 am #

    Just to add my praise too… great series of clear, well-written explanation. Thank you. BTW did you see that Steve Keen’s job is going as his economics department is being closed. I doubt that it will stop him but it is food for thought as to the rationale.

  25. Optimist November 9, 2012 at 10:01 pm #

    Thank you David; an inspiring analysis, leaning a bit to paranoia and conspiracy theory, but hey, that doesn’t mean the rich aren’t out to screw the less well off – where else can they get the money from? But:

    “Irreversible victory is within our leaders’ reach. Yet at the same time they are only a stumble, a determined opposing push away, from irrevocable disaster.”

    Convinced as I am by PositiveMoney’s analyses and fixes I have a goal but little idea of where and how to push beyond trying to raise awareness among friends of PM’s ideas and your brilliant polemic.

    Is there a plan for action that we can all get behind?

  26. Glenn Condell November 11, 2012 at 5:29 am #

    Excellent conclusion to a wonderful series Golem. You have dovetailed the issues nicely, with the ‘leaning a bit to paranoia and conspiracy’ suiting me just fine. Paranaoia in these times is a natural response and conspiracy theorising only prudent, given the obvious untruth of the Official Storty, aka The Big Lie.

    In any case, a long view tends to put the tinfoil hat in some pretty good company. David Mills’s Jefferson quote prompted my to look for some others I’d come across over the years. I found them, but a treasury of others too. From the top:

    “Let me issue and control a nation’s money and I care not who writes the laws.” Mayer Amschel Rothschild (1744-1812),

    ‘The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks’ Lord Acton

    Two more from Jefferson:

    “I believe that banking institutions are more dangerous to our liberties than standing armies.”

    ‘The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating’

    ‘Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!’ Andrew Jackson

    ‘The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.’
    Abraham Lincoln

    “The death of Lincoln was a disaster for Christendom. There was no man in the United States great enough to wear his boots and the bankers went anew to grab the riches. I fear that foreign bankers with their craftiness and tortuous tricks will entirely control the exuberant riches of America and use it to systematically corrupt civilization.” Otto von Bismark (1815-1898), German Chancellor, after the Lincoln assassination

    ‘Issue of currency should be lodged with the government and be protected from domination by Wall Street. We are opposed to…provisions [which] would place our currency and credit system in private hands’. – Theodore Roosevelt

    Despite these warnings, Woodrow Wilson signed the 1913 Federal Reserve Act. A few years later he wrote: ‘I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.’

    ”It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning’ Henry Ford

    ‘ We had to struggle with the old enemies of peace–business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob. Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me–and I welcome their hatred’ Franklin D. Roosevelt

    What paranoid leftist ninnies, eh?

    Wouldn’t it be nice to have someone, anyone, within a bull’s roar of power with balls even half the size of some of those quoted? BUt the chances of that have been gamed too. No prizes for guessing who by…

  27. Joe Taylor November 11, 2012 at 10:09 pm #

    I’m in the same position as you are Optimist. I’m also convinced by Positive Money’s analyses and fixes and I push David’s blog every which way I can. But, no matter how more enlightened we become, the situation seems to be getting progressively worse. As I see it, as good a place as any to start putting things to rights would be to stop commercial banks creating 97% of the money supply out of fresh air. For that to happen, realistically, requires legislation. Legislation requires a process driven by political willpower, i.e. a political party.

    The only ‘political party’ idea I’ve seen that might have a remote possibility of actually happening was the one David suggested – try to get one person from each country elected to the EU Parliament on a 99% vs. 1% ticket with ‘Reform The Banks’ as the issue – and those 27 to vote together as a block.

    On the home front, realistically, the only hope is for Labour to make reforming the banks, particularly the Positive Money position, the keystone of their manifesto for the next election. What chance is there of that happening?

    There are lots of us who ‘know the score’ but only a small percent of the population have the time or the inclination to self-educate. They need a simple, emotive message to stir them into action. Public demonstrations, as we know, achieve very little, if anything. Maybe if all of us who are switched on to the situation concentrated on campaigning to get maybe David elected to the EU Parliament and for Labour to make reforming the banks their number one priority…

    Otherwise it wont make any difference who gets elected next time around, the circus will go on with different clowns in the ring.

    Any thoughts?


  1. David Malone: Why Are We Bailing Out The Banks? - Part 4 - November 6, 2012

    […] series by David Malone, author of Debt Generation.  In this last piece of the puzzle, Malone asks what happens now?  What happens, now that the banks have been given our money after holding virtually the entire […]

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