The late Barry Goldwater

My decision to focus my activism in the sustainability movement has nothing to do with the horror stories climate change and Peak Oil aficionados tell about the horrible future my children and grandchildren face. I have never found terrifying or guilt-tripping people an effective way to engage them politically. It always seems far more likely to generate demoralization and apathy. I choose to focus my time and energy on sustainability-related issues based on the conviction that people who wish to survive coming economic and ecological crisis will need be extremely well organized. After thirty years of organizing, I find that sustainability engages people at the neighborhood and community level in a way no other issue can.

My friends and neighbors get it. They are all affected by the skyrocketing cost of fossil fuels, mainly because high energy and transportation costs make everything more expensive. They are all acutely aware that something in society has to change drastically. This realization makes them open, to varying degrees, to trying new, less energy intensive ways of doing business and meeting their families’ basic needs.

The only stumbling block I face in organizing around sustainability is efforts by the corporate media to demonize us as liberals or “greenies.” I can see why they do this. Corporate media coverage of climate change and sustainability-related topics is heavily dominated by the fossil fuel industry, which has a vested interest in discouraging people from reducing their use of oil, natural gas and coal.

How Terms like “Conservative” and “Liberal” Lost Their Meaning

Labels such as “conservative” and “liberal” are totally meaningless when it comes to implementing less energy-intensive lifestyles. This relates in part to the bastardization of the word “conservative” by neoliberals, which started with the so-called Reagan revolution in the 1980s. Neoliberalism can be broadly defined as the elimination of all government functions, other than law enforcement, security and defense, in the service of corporate-controlled governance. It’s a radically reactionary political viewpoint that’s consistent with Mussolini’s definition of fasicsm: “Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power.” It bears no relation whatsoever to the conservatism my grandparents, parents and I (prior to age 21) subscribed to. Like our role model Barry Goldwater, we were staunch fiscal conservatives who believed in allowing other people total freedom to make their own lifestyle choices, provided they didn’t interfere with someone else’s freedom.

Ironically some of the strongest adherents of neoliberalism as so-called liberals like Bill and Hillary Clinton and Barack Obama. This can be seen in their aggressive promotion of pro-corporate globalization treaties, privately run charter schools and other initiatives to privatize public education and the scaling back and privatization of welfare and now social security.

The confusion generated by political labels is especially problematic for sustainability activists like myself who believe that economic and monetary reform are the centerpiece of building a truly sustainable society. Especially as the specific economic and monetary reforms we seek are fiscally conservative in nature. Below are some examples:

1. An end to the drive for perpetual growth.

Sustainability activists believe human beings must commit – quickly – to living within their means, a prime example of fiscal conservatism. They take the position that industrialized society is exceeding the planet’s carrying capacity, and has caused serious depletion in many essential resources. The price of oil and gas are skyrocketing because we have nearly used up the cheap stuff. What remains is difficult and expensive to extract and refine. Likewise we have nearly exhausted the ocean’s fish stocks, much of the earth’s topsoil and, in many parts of the world, fresh water.

2. The replacement of debt-based money creation by private banks with a reserve-based monetary system run by a publicly accountable governmental body.

Elimination of debt is part and parcel of living within one’s means.

3. Improved efficiency of production and distribution through economic relocalization, i.e. reducing energy and transportation costs by producing and sourcing food, energy, clothing, and building materials at a local and regional level.

In the case of electricity, there is a 30-40% enegy loss in the process of generation and transition. We can recoup this lost power by creating local distributed generation systems. “Waste not, want not” is also a basic principle of fiscal conservatism.

4. Community-supported initiatives to Reduce, Reuse and Recycle.

I also heard many variations on this principle growing up. Only purchase what you really need. Darn, mend, sharpen and repair to extend the lifespan of clothes, tools and appliances. Pass on what you no longer need to someone else who can use it.

The Day Goldwater Called Himself a Liberal

A few years before he died, Goldwater himself acknowledged that the terms “conservative” and “liberal” had ceased to have any meaning. In 1996, he joked with Senator Bob Dole, who also resisted the takeover of the Republican Party by neoliberalism and the religious right: ”We’re the new liberals of the Republican Party” (see Conservative pioneer became an outcast).

(This is the second of four posts debunking the myths we are told about the global economic crisis.)

The government finances its $15 trillion debt by selling US Treasury Bonds. As of November 2011, China is no longer the largest holder of US Treasury Bonds. The US taxpayer (via the Federal Reserve) is – see http://cnsnews.com/news/article/fed-now-largest-owner-us-gov-t-debt-surpassing-china. Although the Federal Reserve is a consortium of private banks, they use US Treasury or taxpayer dollars for bailouts and to buy Treasury Bonds. As of their latest report, the Federal Reserve now owns (on behalf of US taxpayers) $1.665 trillion worth of US Treasury Bonds. China owns $1.1483 trillion of US Treasury bonds. The other $12.2 trillion of US Treasury Bonds are owned mainly by investment banks and pension funds.

Since the US government already runs at a deficit, it’s unlikely the Fed used $1.665 trillion in cash to purchase these Treasury Bonds. More likely, the $1.665 trillion simply represents a number on a balance sheet, as when Goldman Sachs creates money out of thin air to generate a new loan. When the government creates money to cover its operating expenses (in this case to pay the interest on its $15 trillion debt), the technical term is monetization. It’s derisively referred to as “printing money,” even though the new money is created electronically through a balance sheet entry.

The US Treasury (which gave the money to the Federal Reserve) has simply added $1.665 trillion in new debt to its balance sheet to purchase $1.665 in Treasury Bonds. These funds, in turn, were used to make interest payments on the $15 US debt – to investment banks, China, Saudi Arabia and other countries, pension funds, and a few individuals.

Borrowing from Goldman to Pay Off Goldman

This is ironic, given that the federal government came by most of this debt by assuming the toxic debts – by bailouts and other means – of investment banks that were technically bankrupt due to large numbers of subprime mortgages that can never be repaid. I try really hard to visualize this, but my mind boggles at the sheer insanity. In 2008 and 2009, the US Treasury and Federal Reserve borrowed money from Goldman Sachs and other investment banks, which the banks created out of thin air (*see below), by selling them Treasury Bonds. The government, in turn, used this borrowed money to bail them out with free (0%) loans. The US government now owes Goldman et al interest payments (of 3-5%) on the Treasury Bonds they sold them.

QE-1, QE-2 and QE-3: the New Wordspeak

Neither Bernanke nor Obama will admit that the US Treasury and Federal Reserve are monetizing the federal debt. This is due to a bipartisan taboo on monetization because it supposedly leads to hyperinflation. A year ago, Benanke announced QE-2 (QE-1 occurred during the bailouts), that the Federal Reserve would use government funds to purchase $700 of US debt (Treasury Bonds). However he used the term “quantitative easing (QE),” which supposedly doesn’t cause hyperinflation, as opposed to monetization, which does. This is just wordspeak. It deflects attention from a major crisis in democracy. Obama and the Federal Reserve are monetizing the US debt by stealth, without the knowledge or consent of the lawmakers who supposedly represent us.

The truth is that the US Treasury and Federal Reserve have been monetizing the US debt since 2009, when billions of dollars of buyer-less Treasury Bond sales began appearing on Treasury balance sheets. When Bernanke announced in August 2011 that there would be no QE-3 – that the Federal Reserve would “hold off” on any more quantitative easing – he was fudging the truth. According to their own reports, the Federal Reserve’s purchase of Treasury Bonds started in 2009 and never stopped.

The Hyperinflation Mythology

Ellen Brown and other non-corporate economists challenge the claim that monetization causes hyperinflation (see her book The Web of Debt http://www.webofdebt.com/articles/monetizethis.php). Inflation occurs when the amount of money in circulation exceeds the amount of real wealth in an economy. If Goldman Sachs can create interest-bearing debt out of thin air without causing hyperinflation, there’s absolutely no reason why government creation of interest-free money should do so. If anything, debt creation with an interest burden injects more “money” into circulation and is more prone to cause inflation. Unfortunately Obama and the Federal Reserve seem to be engaged in the wrong kind of monetization, which creates new money to make payments to investment banks (we all know where that ends up). The Japanese government has been printing new money to bail their banks out for two decades, and their problems with debt and deflation just keep getting worse.

With the other, good kind, of monetization, government creates new money that it spends directly into the economy to create jobs and repair infrastructure. Owing to the Eurozone debt crisis (triggered in large part by anti-austerity and OWS protests), public discussions of monetization as a debt reduction strategy are occurring in Europe and elsewhere. Yet, they are still rare in the US, where the current crisis in democracy allows Obama and the Federal Reserve to engage in secret monetization without public or Congressional input.

*Contrary to popular misconception, the government doesn’t issue money. Nearly all new money is created by private banks when they generate new loans. On average, most banks only have 7% of a new loan on deposit. The rest is generated out of thin air. This system started in 1694 when the Bank of England was created.

To be continued.

Book Review (Part 1 of 3)

Tragedy and Hope: A History of the World in Our Time

Carroll Quigley (1966 MacMillan)

Tragedy and Hope is a free download from http://sandiego.indymedia.org/media/2006/10/119975.pdf

Ex-mentor to former president Bill Clinton, Princeton, Harvard and Georgetown professor Carroll Quigley also served as an adviser to the Pentagon and Foreign Service. He was the ultimate Washington insider. The mythology is that MacMillan published Tragedy and Hope by accident – that their editors found the 1090 page manuscript too long and intimidating to read it properly. What I find most impressive about Quigley’s masterpiece is his detailed analysis of ways in which private banks create economic crises by manipulating the money supply – and its clear applicability to the role banks played in the 2008 economic collapse. The expectation is that historians from the ruling elite will teach us that wars, recessions and depressions are accidental occurrences that can’t be avoided. It’s extremely rare for one of their own to tell the truth about the role of the corporate/banking elite in precipitating global calamities that have cost the lives  of millions of ordinary people.

How Banks Control Government

In essence Tragedy and Hope is an exacting account of how the Bank of England, the Federal Reserve, the European central banks, and the investment banks that control them (e.g. Goldman Sachs and JP Morgan) came to control all western governments. In describing the system set up in the 18^th and 19^th century whereby all western governments became dependent on private banks to finance government services, Quigley states, “…[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalistic fashion by the central banks of the world acting in concert by secret agreements arrived at in frequent private meetings and conferences” (page 277).

According to Quigley, banks have controlled most western governments – by controlling their money supply – since the creation of the Bank of England and the fractional reserve lending system in 1694. Moreover, owing to the secrecy under which they operate, Quigley asserts that most elected officials are totally unaware of the immense control central and investment banks exert over the so-called democratic process.

How Banks Orchestrate Wars, Recessions and Depressions

He goes on to describe in exhaustive detail how all historical inflationary and deflationary crises, panics, wars, recessions and depressions were orchestrated behind the scenes by the banking establishment, for the purpose of increasing their private wealth. In his epic portrayal of three centuries of western civilization, he also describes how the banking aristocracy financed the rise of Communism in Russia, China and Eastern Europe, as well as bringing Hitler, Mussolini, Stalin and Roosevelt to power and guiding their governments from behind the scenes.

The early chapters of Tragedy and Hope lay the groundwork by providing elementary instruction in the macroeconomics of wealth accumulation and capitalist production. They also include an analysis of unique economic and political features that ultimately led to the formation of the British Empire, a superstate of unprecedented scope and power. Among these was a powerful landed gentry that was unique in Europe in their ability to force peasant farmers off communal lands through the Enclosure Act.

How Banks Create Money “Out of Nothing”

The single act, according to Quigley, that guaranteed Britain’s two century preeminence over the rest of the world was the development (in 1694), by British investment banks, of the fractional reserve lending system. This system, which many economists blame for the 2008 economic collapse, allowed English investment banks to be the first in the world to lend money (to industry and the British government) that didn’t actually exist. Somehow the Federal Reserve and other central and investment banks managed to keep the fractional reserve lending system (and the major threat it poses to democracy) secret from most of the developed world until five years ago. However the banking fraternity knew exactly what they were doing. Quigley quotes William Patterson, the founder of the Bank of England: “The Bank hath benefit of interest on all moneys which it creates out of nothing.”

Quigley also makes a very convincing case that it was the fractional reserve lending system (rather than superior weaponry or military strategy) that defeated Napoleon at Waterloo in 1815. The latter’s downfall (according to Quigley) stemmed from his short sighted reliance on “sound money” and refusal to borrow or incur debt to finance French military operations.

To be continued.

There’s a great article in the November issue of Adbusters (www.adbusters.org) “What’s Wrong with Being the World’s #2?” by Roland Kelts. The title is a direct quote from Renho, Japan’s 42 year old Minister of Administrative Reform. She was referring to a supercomputer – not to Japan’s economy – at the time. However she caught enough flack for the comment that she subsequently published a book Do We Have to be Number 1?

Japan has had an essentially stagnant economy for two decades – not because they did anything wrong – but simply because they fell victim to the “stagnation” that is inevitable in end-stage capitalism (see “Is Capitalism Doomed?” http://stuartbramhall.aegauthorblogs.com/2010/08/14/is-capitalism-doomed/). And ever since the current economic crisis began in 2008, US economists and politicians have been wringing their hands about the “Japanization” of the US economy – terrified the same thing was happening in the US.

A Model for a No-Growth, Steady State Economy

In his article Kelts points out that Japan provides an excellent model for a no-growth, steady state economy – something that sustainability activists and more and more intellectuals know is the only solution to the dual crisis of resource scarcity and catastrophic climate change. The reality is that we live on a finite planet with finite resources and the unlimited perpetual growth trumpeted by free market economists simply isn’t possible.

Retaking Control of the Money Supply

Renouncing growth in the US won’t be easy because it will require a total revamp of the way we create money. The first thing that needs to happen for the public to retake control of the money supply, which they gave up in 1913 when they handed it over to the Federal Reserve.

At present “money” is created through the Fractional Reserve Lending System, which is basically a Ponzi scheme that allows banks to create money out of thin air. In the US money is created when borrow money on your mortgage or credit card (in other words it doesn’t exist until you borrow it). That money only comes into existence when you start to make payments on that debt.

Like all Ponzi schemes, it only works by constantly drawing new suckers into it. Because that money doesn’t exist anywhere in the economy until people borrow it, there is no hope of them repaying their debts without constant growth and wealth creation (which is why there is constant pressure on consumers to consume).

I think it’s time for US political and economic leaders to accept that the economy isn’t recovering – that this model simply isn’t working any longer. And as Kelts suggests, to take a closer look at the trends developing in Japan.

De-ownership, De-materialism, and De-monetization

Kelts refers to an interesting article in Treehugger in September (see http://www.treehugger.com/files/2010/09/japanese_trends.php) by Japanese environmentalist Junko Edahiro outlining a new Japanese paradigm she refers to as De-ownership, de-materialism and de-monetization. All seem to come easily to the Japanese. who have a long tradition of frugality associated with the ideal Samurai lifestyle.

• De-ownership – is associated with a decreasing emphasis on owning (“consuming”) high ticket items that can be shared among individuals and families, and is seen in a trend toward house and car sharing, renting one-time use items, such as CDs and DVDs, and second hand purchases.
• De-materialism – is associated with valuing intangibles, such as nature, the outdoors, and relationships over material things.
• De-monetization – is associated with a shift from full time work to a part time lifestyle that allows people time to produce basis necessities (such as food) rather than earning money to pay for them.