Tuesday, November 24, 2009


"Today's history lesson is on..."

With those faithful words my high school history teacher would proceed to put half the class (often myself included) into a near catatonic state. Education is another one of those things 'wasted on the young'.

Well now I am at an age -- and living through a moment in history -- when what has happened in the past really does offer all of us some insight into the future. A good piece of 'a long time ago' holds an incredible power to help us come to grips with today . In case you haven’t noticed, we are living at the very edge of a financial precipice from which many Americans will soon fall to their death. Let me set the stage.

Michael Douglas had a famous line in a 1987 movie called Wall Street. He said: “Greed is good.” Thankfully he and his protegee (Charlie Sheen) ended up reaping what they sowed and the Securities and Exchange Commission finally ended the party, just like in Bernie's case. Too bad Hal Holbrook couldn't at least have saved Bud.

But last year’s Bernie Madoff debacle -- as painful as it was to many private investors -- pales in comparison to J.P. Morgan’s ruthless ways. He was the man who destroyed America’s monetary system in the early 1900’s simply so he could be an extremely rich and powerful man.

Morgan’s banks held a lot of commercial loan paper at the time allowing him to rule a rather large financial empire. When President Teddy Roosevelt betrayed his former backers and went after banks in 1907, Morgan first set out to crush his biggest competitor, the H. J. Heinz Banks (yes, the pickle people).

After creating a ‘run’ on the Heinz banks Morgan crafted a propaganda campaign that spread across the country, skillfully conviencing people that they needed to hoard money. That dried up funds for many other banks leaving the J.P. Morgan group as the only game in town.

Along with sweet talking Congress (what we are going through now with corruption is nothing new), Morgan got permission to print $200 million in Morgan Bank Notes so he at least had unsecured credit -- ‘funny money’ -- to put out for loans. Along the way he also managed to get Congressional approval to swallow the Heinz family’s greatest asset, Heinz Steel. This was a sticky deal because he had already purchased U.S. Steel and to own both was your average textbook example of ‘antitrust’.

These are the type of people, specifically in large financial institutions, who have been actually running this country for more than a hundred years.

Why is that so important? Simple. Commentator Bill Still puts it this way: “It’s not what backs the money, it’s who controls its quantity. Big Banks are always going to be in the governing business as long as government borrows money from them. ”

I pointed out in my “Auditing the Fed” article recently that the Federal Reserve Bank is NOT a government agency (even though it has a ‘.gov’ URL address on the Internet. It is comprised of a group of privately held banks and people at the Federal Reserve click their heels every week and make money (in the form of credit) magically appear.

When Morgan created that $200 million years ago, he was doing exactly the same thing!

So what have they been up to lately at J.P. Morgan?

According to stats from the end of June in 2009, J.P. Morgan is holding $80 Trillion in commercial paper or 5.7 times the entire value of the U.S. GDP ($14 Trillion). That’s not 1/5 of the GDP, that’s 5 times the value of everything our country produces.

In fact, it holds 1.18 times the entire value of the World’s GDP. It is a company that holds 40% of all the assets in the world. But truth is, it could not sell a fraction of these assets (derivatives) to perhaps 99.9% of the people or companies on earth.

Why should we care? That’s where the ‘too big to fail’ mantra has come from in the past twelve months.

But is there really anything the United States government can really do about things? Here’s a hint.

J.P. Morgan holds nearly $80 TRILLION in virtually worthless commercial paper as ‘assets’. It’s hard assets (those that might actually be salable) total $1.57 Trillion to back up the debt. So that means it’s funny paper is 50 times more than its real money.

Let’s take a look at the other financial players.

Goldman Sacks has $40,477,262,000,000 in dubious paper.

( $40 Trillion or 333 times its $120 Billion in assets)

Bank of America $39,064,884,000,000 in dubious paper.

( $40 Trillion or 27.6 times its $1.45 Trillion in assets)

Citi National Bank $31,943,721,000,000 in dubious paper.

( $32 Trillion or 27.47 times its $1.165 Trillion in assets)

When all four of these financial institutions are combined the misery index nearly climbs out of sight.

Together they own $191.427 Trillion in questionable paper. Do you really think that when our government drops by the cashier’s window in China and asks for 100 Billion from time to time for ‘bail out money’, they are doing anything more than spitting at a typical California wild fire?

So now perhaps you realize things are indeed very bad. The politicians were lied to. The politicians lied to everyone else. Americans were kept too busy living a life beyond their means to pay any attention and they all got away with it. Think Barney Frank was doing any of us any favors? Not a chance. I believe he isn't stupid, just ruthless like J.P. Morgan. I hold to the belief that Frank wanted everyone to own a home because taxes on real estate are the number one source of income for government. You don't own your own home. You merely rent it from the government. Strange how the United States Constitution recognizes the Right To Own Property as one of its core beliefs...

President Obama spoke the other day of a ‘double dip’ Recession. That means just when it looks like our economy might come out of the woods, we are going to realize it’s actually on the verge of doing it all over again. He wasn’t talking about somewhere down the road in say five or ten years. He meant that like a little fawn struggling to climb to her feet, one small challenge could easily come along and knock Bambie right to the ground. Do you realize that our country has a history (there's that word again) of living through a 30 year downturn in its economy? Are you ready for that to happen again?

It’s time to learn to live with less. A lot less. Some adults may be able to grasp that concept but there will be many who will chose to live selfishly in a state of denial. Those are the ones who will star in the sequel for Escape From New York. Heaven help the young people who have rarely had to go without thanks to our abused credit laden society. They will take what they want and God help you if you are in the way.

Many people have often said that the “Gun Control” agenda was to prevent the citizens of the United States from launching an uprising against an unresponsive government. While there is a great deal of truth in that, all of us may have a much more local and immediate need to protect what is theirs from the world at their doorstep.

Good luck and God's speed to each of you.

No comments:

Post a Comment