Extraordinary Times, Intentional Collapse, and Takedown of the U.S.A – How it was Done – Part 3 of 3

Extraordinary Times, Intentional Collapse, and Takedown of the U.S.A - How it was Done - Part 3 of 3

It is likely that the "American Century" is over and that the "New American Century" will really be the "No American Century." Outside of select pockets of prosperity around financial centers, resorts, and military installations, the U.S. is being destroyed.

As an example, the residents of once-prosperous towns in Michigan have turned to the illegal manufacture of meth-amphetamine now that the jobs are gone. We have been used and abused, though often suckered into it by our own stupidity and greed. We have allowed ourselves to serve the will of an alien force—the world’s financial elite. Our payback now appears to be a looming national catastrophe.

Economic Restructuring

Economically, what is left of America must be rebuilt from the ground up. The flaw is not in the productivity of nature, the availability of resources, our ingenuity, nor our ability to work. The flaw has been in the capitalist financial system. We must now rebuild three things: American family farming, since a nation that cannot feed itself cannot long exist; then infrastructure and manufacturing, which will require energy conservation and redevelopment of our energy resources; then income security tied to productivity but not always to employment—a basic guaranteed income for all. The best available treatment of the history and benefits of a guaranteed income may be found in Steven Shafarman’s new book, Peaceful, Positive Revolution, Tendril Press, 2008.

The concept of a guaranteed income as a benefit of a modern industrial economy has been around for a long time. But it is often confused with job-creation. As indicated earlier, during the 1930s, British economist John Maynard Keynes came up with the idea of using government deficits to try to out-run unemployment through government-controlled pump priming. But in the long run his methods were doomed to fail as debt-based economic growth eventually reached its limits due to inflation. This is where we are today, with President George W. Bush now the largest deficit spender in history.

The most successful attempt to define a rationale for an honest and democratic monetary system, one based on human labor and not financial chicanery, was the Social Credit movement founded by British engineer C.H. Douglas (1879-1952). He first set forth his ideas in his book Economic Democracy in 1918 and continued to teach his system for the next thirty years, attracting a considerable following in Great Britain, Canada, New Zealand and Australia.

Douglas explained the dynamic whereby the incredible productivity of modern technology can readily be harnessed to provide the material sustenance for all members of society, but fails to do so because there is a chronic shortage of purchasing power from the cumulative societal income realized through wages, salaries, and dividends. The main reasons income cannot keep pace with prices is that the latter include retained earnings for savings and reinvestment, along with depreciation of capital—i.e., the tools and facilities of production.

But the "gap" between prices and earnings (what Keynes was to call "aggregate demand") was viewed by Douglas as a benefit of a modern industrial economy rather than the curse which in the Depression was causing farmers to dump their milk in the fields because consumers lacked the money to purchase it.

Douglas saw this gap as the natural appreciation of the potential producing economy to which everyone in society was entitled as monetized shares. He said this appreciation should manifest in regular payments of a National Dividend by government from a calculated credit account not dependent on taxation or government borrowing. The National Dividend could be paid by a combination of regular stipends to citizens and/or through a system of price subsidies. And it would be non-inflationary. Douglas went further by explaining that in real life the price-income gap was in fact filled—nature abhors a vacuum—but by bank lending at usury. This was why the banks got richer, while everyone else struggled just to survive. Banks also use their credit creating ability to acquire securities, such as Treasury bonds, with the government paying interest that is compounded because the debt is constantly being re-financed. Interest on the U.S. national debt is expected to exceed $500 billion in fiscal year 2009. To pay it, many social programs will be cut.

The technical explanation is provided by Canadian Social Credit expert Wallace Klinck, "Expanding interest charges being paid on exponentially compounding debt accumulate due to an industrial cost accountancy error related to allocating capital charges in retail prices which do not distribute equal incomes within the same production cycle. The growing disparity between prices and incomes is progressively worsened by the replacement of human labor by capital (technology)."

Under the current system, the banks steal the fruits of economic wealth which properly belong to the public as a whole, both workers and non-workers and while the financiers were well aware of Douglas’s system, they hated it. Word went out in the 1920s that his name was never to be mentioned in the British press. John Maynard Keyes was said to have developed his own deficitspending theories as a means to counter Douglas’s influence. And when Douglas visited the U.S. in the late 1930s, he was told to his face that he would never be allowed to introduce his ideas in this country.

Next Steps

To accomplish a program of real reform will require a strong president but possibly a political revolution to get one. Congressman Ron Paul has made history as the first major presidential candidate to call for the abolishment of the Federal Reserve. He is right. The first thing a president worthy of the name should do is eliminate the Federal Reserve as a bank-of-issue, get rid of our debtbased monetary system and depose the bankers and Wall Street financiers from the seats of power. Ron Paul is also right that the U.S. should withdraw its military from overseas and stop trying to control the world.

What Ron Paul’s candidacy proves is that in the internet age, with financial crises jumping from the headlines every day and authorities such as Ben Bernanke, chairman of the Federal Reserve and Secretary of the Treasury Henry Paulson manifestly having no intention of making real changes, the public is ready to listen to new ideas. But even progressive analysts are so locked into outmoded concepts that they fail to realize an entirely new type of monetary system is needed. The basic concept that must be understood, as expressed repeatedly by this author in past articles, is that credit is a power of nature that is part of the human "commons." Credit allows society to materialize value by drawing from future potential productivity into present actualized reality. Credit therefore should be treated legally as a public utility, like water or electricity.

Credit is not a mathematical abstraction that should be manipulated into building pyramids of debt. Such practices are suicidal for an economy. Rather credit is organic, deriving ultimately from human labor (including mental labor, as in the application of technology), along with the sun, the soil, natural resources, and the rain. Thus we have gone full circle to the beginning of this article, where Russia and the U.S. were cited as the two nations that best understood where real wealth comes from.

The management of credit may be licensed to responsible private parties who are accountable to public authority, but it should never be given away or "privatized" to individuals or corporations who manipulate it mainly for their own profit, as banks do today. It is the privatization of credit through the banking systems of the world which has loaded humanity with debt, rendered short-term profits the highest priority of all business endeavors and made modern industrialization as much a curse as a blessing.

Note that credit differs in this discussion from the legitimate investment of capital derived from profits or savings whereby an individual risks a portion of his wealth through a contract with a producing entity. Capital markets that facilitate this type of investment fall under the category of commerce, not usury. A national monetary system should reflect the treatment of credit as a public utility and thereby make possible responsible economic activity and the fair distribution of wealth. Some of the measures which should be implemented are contained in the American Monetary Institute’s draft American Monetary Act. (www.monetary.org/) The resulting currency could be issued, not in the form of debt instruments like Federal Reserve Notes, but silverbacked Treasury certificates as in President Kennedy’s program of 1963.

Features of a new monetary system could be as follows:

    • A guaranteed income, followed by a National Dividend, should be paid directly to citizens from a Treasury credit account without recourse to either taxation or government borrowing. (C.H. Douglas’s theory of the National Dividend as the monetization of the net appreciation of the productivity of a modern industrial economy is set forth in this author’s Global Research article entitled, "An Emergency Program of Monetary Reform for the United States," April 26, 2007.) The National Dividend, currently estimated at over $12,000 per capita annually, could be distributed in a variety of ways, in addition to a subsistence stipend.This could include price subsidies for consumer purchases, taking over existing Social Security payments, universal health insurance, or payments to women with young children. Another way to issue a National Dividend would be to monetize food production, whereby anyone who delivers food products to wholesalers receives a government payment as a producer’s subsidy, thereby discounting food at the consumer point-of-sale.

      This would work in a similar fashion to farm parity pricing programs of bygone days. As explained by Wallace Klinck, "Social Credit policy is to compensate retail prices at the point-of-sale. It is not, however, to subsidize production which would be subject to consumer choice and fully supported by consumers having at all times financial income adequate to fully liquidate the costs of production. That is, production policy is to be determined essentially by consumers—this being the Social Credit concept of genuine economic democracy with maximum decentralization or dispersion of power over production policy.

      Price controls under the present financial cost-accountancy system, where continued economic activity is dependent upon an inflationary expansion of credit to meet rising costs arising consequent to flawed accountancy, is demonstrably impossible. Price regulation; however, would appear to be both necessary and realistic under a self-liquidating Social Credit system of finance. Although not generally recognized, prices are ‘controlled,’ (or manipulated) under the present system of finance in a most deleterious manner."

    • The government should also spend money directly into circulation, as it did with Greenbacks in the 19th century, both for operating expenses and for infrastructure projects at the federal, state and local levels. A national infrastructure bank could be capitalized by state and local infrastructure bonds without any impact on the federal budget. Such spending would again be without recourse to borrowing or taxation. Infrastructure spending could be either through grants or low-interest loans. As with Congressman Dennis Kucinich’s current proposed infrastructure bank legislation, the program could specify that a requisite proportion of funding be spent on American-made products such as steel.
    • We should reform banking by eliminating the catastrophic privatelycontrolled fractional reserve system. Instead, the government should lend money at a low rate of interest to banks, then use the proceeds to help pay for legitimate government expenditures in the areas of regulation or services. Use of the proceeds, combined with the new Greenbacks and savings from no longer having to pay interest on an unnecessary national debt, would eliminate the need for the federal income tax, allowing the 16th Amendment to be repealed. In fact, under a monetary system such as the one described herein, probably threefourths or more of the current societal tax burden could be eliminated.
  • In order to clear the way for these reforms, bankruptcy reorganization of the entire $50 trillion of existing debt in the U.S. should be undertaken, with debt being restructured and paid down over time or simply written off. Bank lending for speculation, such as for mergers and acquisitions, equity and hedge fund speculation and purchase of securities on margin has been explosively enabled through bankers’ ability to move massive amounts of funds electronically. These leveraging practices should be outlawed, as they are abuses of the public interest. (According to the London Times, one John Paulson made $3.7 billion in hedge fund trading last year. "Mr. Paulson’s firm, Paulson & Co, made a fortune from shorting America’s sub-prime mortgage markets.")

A national fuel conservation program with real teeth should also be instituted. And at least half of the U.S. military budget should be eliminated, with half of the remainder devoted to energy R&D and domestic public works. Employees of the military-industrial complex will find many new career opportunities as the domestic economy revives.

As these measures are taken, the United States will no longer be dancing to the financiers’ tune. We would be helping prepare a future where man’s inhumanity to man as expressed through war and financial exploitation is no longer glorified. Such a future would be a milestone in the eventual enlightenment of the human race. But these are measures that must be implemented now, before it is too late. While we await these epochal changes, more modest steps may be in order.

The author is often asked for personal financial advice. His advice is to invest in yourself and in other people. Plant a robust home garden. Learn new skills. Start community food co-ops that buy local products. Establish local currencies and barter networks. Join or form a union. Raise bees. Put kids through school. Get out of debt. Pray and meditate. Become politically active. Demand change.

Richard C. Cook is a former U.S. federal govt analyst, whose career included service with the U.S. Civil Service Commission, the F. D. A., the Carter White House, NASA, and the U.S. Treasury Department. His articles on economics, politics, and space policy have appeared on numerous websites. His book on monetary reform is entitled We Hold These Truths: The Promise of Monetary Reform and will be published this autumn by Tendril Press. He is also the author of Challenger Revealed: An Insider’s Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age, called by one reviewer, "the most important spaceflight book of the last twenty years." His website is at www.richardccook.com. Questions, comments, or contributions may be directed to economicsanity@gmail.com