Blast from the Past

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Ten years ago this month, I was furiously studying American and economic history, hoping to discover how things had gone so wrong.  I'd just retired my medical and DEA licenses in August, 2007.  The hypocrisy of the system, along with the stubborn resistance to change, made it impossible for me to pretend I was doing any good within the field of psychiatry.  It seemed psychiatrists were as deluded as the government and public about the appropriate role of psychiatry in the social insanity we have convinced ourselves is normal.

 

Now, in 2017, we are seeing an avalanche of consequences that began long ago, with empire-building conquerors--like Julius Caesar and Alexander the Great--and the attitude that might makes right.  A common denominator is the use of other people's money, support, and trust to suppress or subdue the "others," or to kill them off.  

 

Recently, I've begun to wonder why it is considered acceptable for the government to do what individuals are not allowed to do.  Government is allowed to create money out of thin air and spend like there's no tomorrow.  Considering what it's spending on--like war--it may guarantee there is no tomorrow, so the debt will never need to be repaid.  The government can justify murder in war and other situations when "national security" is presumed to be threatened, but murder by individuals is a heinous crime.  Why the discrepancy? This hypocrisy, built into our social system, represents a duplicitous set of values that deserves a closer look.

 

The following excerpts from my November, 2007 journal suggest the upcoming financial meltdown was well underway before the public realized what was happening.  At that time, I was also reading books like The Creature from Jekyll Island:  A Second Look at the Federal Reserve, by G. Edward Griffin, and The Robber Barons, by Matthew Josephson, among others, as well as a variety of newspapers and magazines on current events and economic trends.

 

CURRENT EVENTS:  ECONOMICS

 

ON STRUCTURED INVESTMENT VEHICLES

Thursday, November 1, 2007 – The financial balloon is bursting.  The so-called “structured investment vehicles” or “SIVs” are caving in.  These are bundled securities packed to the gills with bad debt, probably a lot more than good debt, and it is money backed by money backed by money, and maybe a few tangible assets way down the line.  Those unlucky subprime mortgage borrowers were led into the debt trap unawares by bankers who abdicated their fiduciary duties by selling loans they knew the borrowers couldn’t afford.

 

Of course the lenders weren’t selling homes, which is what people thought they were buying.  Realtors, developers, lawyers, local governments and bankers were selling mortgages, in the most unsavory and predatory of ways, and they deserve to suffer for the betrayal.

 

THE FED AND MONEY

Thursday, November 1, 2007 – Wachovia-Visa cancelled my card, as I requested, and removed the late charge and finance fee.  Good for them.  Unfortunately, I can’t change my website to acknowledge this pitiful concession, since the site access problem began right after I uploaded the Spotlight Therapy page about Wachovia-Visa and the Fed.

 

Oh well.  The Fed was forced to lower interest rates yesterday, to “stabilize the economy.”  Poor Fed.  Citibank is the most strung out on SIVs, something like one-third of the market.  They are worried profits will go down.

 

But true to G. Edward Griffin’s explanation in The Creature from Jekyll Island, the Fed created a few billion dollars to bail out Citibank’s investors and shareholders long enough for them to unload the baggage on some other sucker.  If these SIVs are traded down enough times, they may come closer to their true value.

 

This is a banker’s crisis, nothing more.  Their house of cards is caving in, and they are left naked and shamefaced, Adam without so much as a fig leaf for cover.

 

To imagine that these clowns have any control over anything when they have so little self-control is ludicrous.  That they have gotten away with it for so long is the amazing part.

 

Nations and individuals in debt are not free.  But people haven't been ready to be free.  I wonder about the Native American cultures the Europeans trampled, or any peace-loving cultures that were self-contained and unprepared for the European invasion.  They didn’t understand greed, except in individual, limited cases. The Europeans and their descendants exploited tribal cultures’ trust and gullibility over and over, or obliterated anyone who stood in their way.  The African cultures, too, by British, French, and Dutch, and of course the Romans before them.

 

I don’t believe blacks are naturally aggressive people, just as rural dwellers aren’t.  The natives get restless when their quarters are overrun, their survival threatened, their choices restricted, their dignity insulted.

 

G. Edward Griffin seems afraid of the implications of his research. He says abolish the Fed without much conviction that it will happen.

 

The idea that anyone can truly control the money supply is silly.  If you need something and it is available, anything the seller considers of equal value becomes money.  To assume that government deserves a whit of that is ridiculous.  Bottom line is the concept of money is a huge government scam to fund itself.

 

GOVERNMENT FUTURES

Sunday, November 4, 2007 - We ought to sell government futures on the commodities market.  I wouldn’t invest a zinc penny, but if others believe the government has a future, they can throw in a few trillion electronic dollars to pay for it.

 

THE DOLLAR’S RELATIVE VALUE

Thursday, November 8, 2007 – The dollar has lost ground against the euro, but no one reports what’s happening vis a vis the yen.  The euro is just as unstable as the dollar but has more credibility because it is new and untested.  The reason for the change in relative value is the Fed is lowering interest rates without really admitting it, a point last month, another ¼ point last week.  No one says this is the equivalent of devaluing the currency when it is debt-backed, but it was the Fed’s tampering that reduced the dollar’s value in Europe.

 

It’s potentially a good thing, says the Associated Press.  Europeans may want to visit the US and spend money.  Americans may find their dollars don’t go so far in other countries.

 

Imports are more expensive, exports more easily sold.  Good for “the economy” if we were importing anything of value or exporting anything we don’t need ourselves.

 

But of course, we’re not.  We are exporting the good stuff and importing junk, and American taxpayers are paying through the nose for the blow job.  Blowing money, that is.

Comments

Leroy Added Nov 12, 2017 - 1:23pm
Interest article Katharine.  With all the underfunded pensions and obligations out there, we need to resign ourselves to paying more and more for less and less.  Some states are already at the point of paying retired teachers more than what they are paying active teachers--and it is getting worse.
 
Concerning the Federal Reserve, I read an article (on Zero Hedge, I believe it was) on how surprised we might be to how private the Federal Reserve actually is.  This printing of money is not to the benefit of Americans or the American government.  Only through this lens does its actions make sense.  It represents private interests.
 
To the extent that this borrowed money was used wisely, we might actually see growth.  To the extent it was not, we will eventually see a contraction of the economy.   Most of the money hasn't gone to anything productive.  In the case of China, debt is snowballing, yet the economy is slowing.  At some point, the piper has to be paid.  Bush the Younger set us on the debt trajectory of no return.  O catapulted us well beyond it.  We will never pay the debt off.  It will be a slow suffocation.
George N Romey Added Nov 12, 2017 - 2:31pm
The system is designed and controlled by the .1%. The politicians are their shrills. Eventually our economic system will 
collapse from corruption and abuse.
Tubularsock Added Nov 12, 2017 - 4:16pm
War is just a side business used to sidetrack the citizen while they are gutted. It is a useful tool to keep the slaughterhouse solid.
 
The fun part is that we get to wave the flag!
Neil Lock Added Nov 13, 2017 - 3:58am
Recently, I've begun to wonder why it is considered acceptable for the government to do what individuals are not allowed to do.
 
That's built into the system, Katharine. The 17th-century political system that allows the "sovereign" to do things without being held responsible for the consequences of its actions.
Dino Manalis Added Nov 13, 2017 - 9:56am
Psychiatry is constantly becoming more and more important, because most people have some kind of mental illness and need treatment, including children!  Older people are angry and desperate and would like some hope in their lives!
Dave Volek Added Nov 13, 2017 - 11:14am
Katherine
 
Nice article. I especially liked:
 
To imagine that these clowns have any control over anything when they have so little self-control is ludicrous.  That they have gotten away with it for so long is the amazing part.
 
I wouldn't call them clowns as they are--more or less--doing what we the people want them to do. I'm not too sure they have much choice. Any political party in the west that seriously cuts "wasteful spending" is going to find itself "unelected" pretty quick.
 
But you are right: do they really know what they are doing with their monetarist economic policies? The recession in 2008 was pretty obvious to many of us without any formal training in economics (i.e. don't lend money to people who can't afford the mortgage payment). Yet the PhD's in charge could not see this.
 
 
 
 
 
 
 
 
 
 
 
Even A Broken Clock Added Nov 13, 2017 - 12:51pm
Thanks for your thoughts from 10 years ago. Good insight on the factors influencing the economy at that time. Now, 10 years later, are the bubbles that have developed grown so large that the banking system won't be able to save itself?
 
Unfortunately, the banking system had to be bailed out in order to keep enough liquidity to enable the real economy to function. As a result, the banking segment keeps growing, and it takes more and more borrowing to gain a positive response in the real economy. We may be reaching the point where the Fed is pushing a rope, and is unable to gain a positive response to any tool that it uses to react to a crisis. When that happens, the jig is up.
Katharine Otto Added Nov 13, 2017 - 1:08pm
Leroy,
You are affirming my suspicions about the Fed and the downhill trajectory of the economy.  The Fed is shrouded in mystery and may be the invisible hand behind the destruction of the middle class and the shifting of resources to the ominous .1%. 
 
Those who want to re-distribute wealth may hope for a cut of that wealth themselves, but under the current scenario, the re-distribution will most benefit that unsavory .1%.
 
Katharine Otto Added Nov 13, 2017 - 1:14pm
George,
The more I learn about the banking industry, Wall Street, and governments, the more horrified I am by what a fraudulent scam it is.  That so many people trust their retirement money to these crooks (because there are no alternatives) makes regular people afraid of rocking the boat.  When you have fiat money, even the old idea of hiding it under the mattress becomes meaningless.  
 
Of course a big part of the problem is the debt-backed currency, which creates the illusion that you have money "in the bank."  In reality, that "money" is government debt, meaning the government must survive for you to get any return on your "investment."  If we had gold or even silver backing, it would be harder to invent money to suit government whim.
 
Save coins.
Katharine Otto Added Nov 13, 2017 - 1:17pm
Tubularsock,
War is only a side business when you're not under fire.  But you are right that it detracts attention from the fact that the real war is on citizens who pay the taxes that pay for the bloodshed.  Rah, rah, America.
Katharine Otto Added Nov 13, 2017 - 1:20pm
Neil,
I know that, but it doesn't make it right.  Perhaps it's time for us to re-visit that old sovereign notion and to claim "foul".  Are we obligated to support self-proclaimed "leaders" who lead us to destruction, at the risk of losing our own humanity?
Katharine Otto Added Nov 13, 2017 - 1:23pm
Dino,
Agreed, but the psychiatrists need to do some self-examination themselves.  The tactics they are espousing, in my opinion, only feed the problems.  Best for psychiatrists to inspire individuals to use their minds to work for instead of against them.  Instead, they peddle diagnoses and pills all with the apparent intent of keeping people sick and dependent.
Katharine Otto Added Nov 13, 2017 - 1:39pm
Dave,
Rather than cast blame on any specific group, I will concede that everyone is caught up in some of the same illusions.  I have made it my personal challenge to understand how the system works, for some kind of overview.  
 
While politicians may be doing what (some) people want them to do, they act in many ways like indulgent parents who try to "buy love" from their demanding children.  In my opinion, any deficit spending is "wasteful," but you won't find a single banker or Keynesian disciple to agree with me.  
 
The ability to say "no" requires utmost courage, but "no" with reasonable explanations inspires respect.
Katharine Otto Added Nov 13, 2017 - 1:55pm
Clock,
I don't believe in predictions, but my observations ten years ago were perhaps prescient.  The economic debt bubble has grown to international proportions.  It leads me to speculate on what the "real economy" is, and what is truly of value.  
 
Remember, the Fed's main power lies in its ability to fiddle with interest rates, but if no one is borrowing, and if people, companies, and governments are going bankrupt or walking away from debt, the Fed loses leverage.  That's why they invented the World Bank and International Monetary Fund, to widen the shell game and spread risk worldwide. 
 
What is actually produced in all this money-and-debt churning?  The actual producers are cutting back, and the markets for tangible products are glutted.  (But for war toys, which continues to be a burgeoning market.)
 
An economic downturn may be the best thing that could happen.  All this frenzy over money and "the economy," jobs, employment, and angst over things not directly related to survival seem out of proportion to more basic values and simple enjoyment of life.
George N Romey Added Nov 13, 2017 - 2:36pm
Katharine our economy is increasingly reliant upon low value services and hence the glut of low paying, gig, temporary and part time jobs. When we produced hard goods of value we had good paying jobs.
 
Since the bankers, politicians and corporate titans have no answers to the economic nightmare they’ve created they gin up financial wizardry. It benefits only them and a relatively few others. However like all Ponzi schemes it’s not sustainable. At some point just like 1929 and 2008 the cabal will collapse. And yes next time we will go to the next level, SDRs, the equivalent of fake global fiat currency. 
Dave Volek Added Nov 13, 2017 - 3:49pm
Katherine
 
Keynesian economics has never truly been tried. The second part of Keynes is that when an economy recovers, there should be surplus tax revenues to start paying down the debt. However that surplus tax revenue is used to buy votes of various kinds--and the debt is not reduced. 
 
Monetarist economics and Keynes economics are not the same thing. Monetarists fiddle with the interest rate and money supply to attain a certain inflation rate and unemployment rate. If they are doing their job properly, they are trying to ensure an economy does not become "overheated." But someone was sure asleep at the switch in the years previous to 2008, which then begs me (and others) to wonder: Do they really know what they are doing?
 
 
Katharine Otto Added Nov 13, 2017 - 9:11pm
George,
Maybe the "low value" services are more valuable than earned income indicates.  I would rather pay for useful skills than bureaucratic oversight.  It may also be good to have more part-timers working and earning less, to deflate the currency to reasonable levels.  The currency is drastically over-inflated.  A little monetary cleansing may be the best boost to the economy anyone could want.  
Katharine Otto Added Nov 13, 2017 - 9:21pm
Dave,
I'm no expert on economics, but the economy isn't recovering, either through Keynes' ideas or the monetarists'.  And inflation works for debtors but not for savers.
 
The more I read about how the system works, the more convinced I become that it's a huge shell game, in which the power brokers play with other people's money to gain their ill-begotten wealth, while spreading the risk to regular people who don't have the understanding or wherewithal to fight back.  
George N Romey Added Nov 14, 2017 - 4:29am
Katharine I’m afraid like the 1930s the rich will be protected and everyone else will suffer. Hoover believed the stock market crash would punish the offenders and like 2008 they only profited. The system is rigged so they always will.
Ari Silverstein Added Nov 14, 2017 - 9:28am
In any time period of any market cycle, you will find prediction of collapse.  The problem is that when the economy is expanding few people actually put their money where their mouth is. So while it may appear we knew the bubble was going to burst, the overall sentiment of the time was that it wasn’t. I would also add that a subprime borrower was lucky to be living in a time when banks were clamoring to lend money.  I’d also add that the all the same things that led to the recession of 2009 are in place today and that the bubble today is even bigger than the one that previously collapsed.    
George N Romey Added Nov 14, 2017 - 11:33am
Ari is very correct.  We have several big bubbles, all interconnected.  When this one burst (the popping of one will burst all bubbles) its going to look like 1929 or worse.  You can't have a made up economy for long.
Katharine Otto Added Nov 14, 2017 - 2:00pm
Ari and George,
I agree with you both.  The same practices that got us in this fix are continuing and getting worse.  Little has changed except the 'global economy" has become more inter-dependent, so everyone will feel the effects.  Also, the wealthy are more heavily invested in the status quo (since the money is worth nothing if the government(s) collapses), so they will resist attempts to bring honesty or accountability to the system.
 
If we had a gold or even silver standard, even a fractional standard, currency would be more grounded, and these bubbles couldn't get so big.  
 
With the whole world maxed out on credit, I suspect the "little people" have lost incentive to work or try very hard, because they are always playing catch-up.  This is not an environment conducive to "growing" the economy, especially if it requires even more debt to get started.
Katharine Otto Added Nov 14, 2017 - 2:15pm
George,
Your hero FDR's first order of business was to save the financial system, and his own family's wealth, by declaring a bank holiday then wooing depositors to return their gold to the banks.  Then he took us off the gold standard and made it illegal to trade in gold.  This thrilled Keynes and his followers, and the bankers, who now felt unchained to gold and started the inflationary binge that continues today.  While the federal government played rescue, it actually took more than it gave and helped consolidate the wealth and power in the hands of the government and the "elites" you rail against. 
 
When the government rushes in to help, it creates disincentives for people to help themselves, and they lose confidence in their potential for solving their own problems.  I suspect you're finding that out with FEMA.  Who really benefits from government help?  Multiply that by all the federal agencies (about 135 of them), and the rules and regulations that accompany them, and you may understand better why the "economy" is imploding.  Government employees are paid in second-hand money and produce nothing on their own. 
 
By the way, I just finished reading FDR, by Jean Edward Smith.  The chapter on FDR's first hundred days in office is eye-opening. 
mark henry smith Added Nov 14, 2017 - 3:18pm
Katherine, is it all right if I fall in love with you? Intellectually?
 
As an economist, I love saying that, it's like Trump saying, as a lover of women, a purely personal endeavor, never tested for its merit, I have been predicting the bankruptcy of the US government since 1984 when I wrote about Reagan and his tripling of the debt in four years. Think about that. We elected a fiscal conservative who then tripled the deficit and we didn't have one riot about it.
 
It appeared to me that we had just seen the new normal, a a pattern of campaign promises in terms of deficit spending that had absolutely no relation to policy and no one minded. That is insane. It is the beginning of an insane doublespeak meant to keep the American people confused about what anything means in terms of how the government does business with private interests, so the powerful can do whatever the hell they please with the government.
 
The government is the whore of the wealthy being sold to the American people to perform cheap tricks. The wealthy are those predatory pimps who take care of the prostitutes who take care of the johns. That's what we, the citizens become in this relationship.
George N Romey Added Nov 15, 2017 - 7:29am
Katharine first it was the creation of the Federal Reserve and then a switch to fiat money that has put us onto a path of a low value economy. The dollar today is worth 3 cents compared to 1913. In this system the cabal destroys the economy for their own gain and the government bails them out. That is why I’m for a jubilee. It would destroy the money changers and we’d be forced back into an economy based upon savings and investment. As it stands now our debt based model is literally killing Americans.
 
To Mika you are just too stupid to understand something so complex. So just go back to watching Rachael Maddow and think you are “informed.”
Leroy Added Nov 15, 2017 - 10:49am
There are a lot of myths that abound.  After the 29 crash, the rich were not protected.  In fact, for 50 years, the common man become relatively richer and the rich go relatively poorer.  Perhaps another crash will bring about another realignment.  I am not so sure how well the rich will be protected in the case of the collapse of the bond market.  The derivatives market will make a lot of rich poor.
George N Romey Added Nov 15, 2017 - 10:56am
Leroy the rich have gotten much smarter since 1929.  They found a total patsy in Obama.  They got the Federal Reserve to be their savior.  They took control of the media.  They destroyed the union movement. 
 
Still, there are two kinds of rich.  The first one are the wise ones (usually old money) that understand the system for what it is and protect themselves so. Think Joe Kennedy in the 1930s.  Then there is the other kind, usually new money like traders.  They really believe its all real and unstoppable.  They believe their own total bullshit.  When it ends they are holding paper assets not worth much more than a roll of toilet paper.  Then with their dream life in total taters they thrown themselves off a building or in front of a train. It happened again in 2008 and 2009.
Katharine Otto Added Nov 16, 2017 - 10:46am
Mark Henry,
Thanks for the compliment.  I'm so glad to get affirmation from people like you and George, because when I first started talking like this, people scorned or ignored me.  More aware people are speaking up, now, since the problem has grown so much larger than when Reagan was president.
 
I'm about to post notes from sections of Creature from Jekyll Island and The Robber Barons, which I read ten years ago, and about The House of Morgan, which I just finished.  The system is so intentionally confusing that I don't believe anyone really understands it.  I certainly don't.  However, I do believe it is grossly unfair, and the money churners are very sophisticated in the ways they manipulate this shell game.
Katharine Otto Added Nov 16, 2017 - 10:51am
George,
I agree creation of the Fed started the downhill slide this time.  It was an enormous hoax that eventually got us off the gold, and then the silver standard.  Now we barely even have a copper standard, as the penny has been 97.5 percent zinc since 1982.  I didn't know the dollar is now worth only 13 cents, compared with 1913.
 
What, exactly, is a "jubilee?"  You keep referring to it, but you've never explained what it means.  Is that a case of worldwide default on debt and starting over from zero?  
George N Romey Added Nov 16, 2017 - 10:51am
Katharine thanks for the compliment.  Americans are lied to about our economic system starting in grade school.  The dumbing down by technology has only made matters worse.  Those that mock you (and me) are too lazy and mentally eroded to do real research.  They sit home and watch Rachael Maddow and think they've are a genius.
George N Romey Added Nov 16, 2017 - 10:54am
Katharine that is exactly what it is and its been done repeatedly through history.  Mankind has shown a willingness to use credit beyond a sane degree.  Yes it reeks total havoc and destroys the banking system for a number of years but its like a cleansing.  Think of the times you've been sick, vomited (something none of us ever want to do) but felt better afterwards.
Katharine Otto Added Nov 16, 2017 - 11:00am
Leroy,
According to The House of Morgan, the rich suffered from great losses in the 1929 crash, but they remained vastly more wealthy than anyone else.  Also, the steady loss of value from the dollar has made it appear the lower income earners were wealthier than they were.  Also, taxes have increased substantially.  FDR turned the income tax, the "class tax," into a "mass tax," according to Shelley L.  Davis in Unbridled Power:  Inside the Secret Culture of the IRS.
 
The "global economy" has revved up significantly since then, and more regular people have retirement and other investments in the stock and bond markets.  These are usually managed by fund managers, who have enormous power to influence the markets by single transactions of pots of other people's money.  
George N Romey Added Nov 16, 2017 - 1:59pm
Much of that money is now part of HFT. Ultimately the market will be run by bots not highly paid traders and investment advisors,

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