As July 14th came rolling around and Bastille Day was once again the subject of commemoration (a date which is also, appropriately enough, Woody Guthrie’s birthday), it got me thinking again about the piece published in Politico back in 2014 by Nick Hanauer, the extremely wealthy entrepreneur, on how The Pitchforks are Coming For Us Plutocrats. That piece went viral and became a hot topic of conversation, especially among the social media sphere.

However, there seemed to be a lot of accusations leveled at those who joined in the critique on the growing and dramatic imbalance of wealth in this world, as if such critiques were somehow examples of people “hating” on the rich, or being driven by some kind of “class envy.”

This argument is a red herring, one designed to distract from the legitimate and required discussions regarding the underlying causality of the current situation, and the solutions that may be required to help solve it. It is an argument that serves only to personalize the issues at hand, which is the very chum that the corporate entertainment complex feeds off of.

The nature of the problem should no longer be in question. It has been cogently described by everyone from Thomas Piketty to Tom Petty, who pointed out the problem isn’t about people wanting to make money. It’s about people who want to make all the money.

After all, one can obviously make money doing very constructive, contributive things to society, which is a great (and to a certain degree necessary) thing. What should be rejected are those who enrich themselves by gaming the system, manipulating processes that are destructive to people’s lives and well-being, as opposed to supporting and benefiting those lives.

There can be no respect for those who acquire vast wealth through playing games by, say, getting clever with the books in the selling of financial derivatives through a form of control fraud or mortgage backed securities and other forms of market rigging and price fixing, of which the Libor scandal is the most grotesque example.

The corrosion is also manifested in the corporate health insurance scams, where profit is amassed not by providing care to people, but by denying it. It is embodied in the work of the vulture hedge fund capitalists who buy businesses and tear them up, selling off the parts for profit, but leaving the workers and the communities they live in decimated. Operations like these are the poster boy for all of the clichés regarding capitalism at its very worst.

Yet when the fact is pointed out that the typical household income is now worth a third less than even just a decade ago, and that this state of affairs should be considered fundamentally wrong, out come all kinds of defensive and accusatory responses. The fact that critical analysis of the systemic flaws and injustices in our current system can be so readily dismissed as the rantings of class warring “Marxist-loving leftists” who “hate the rich” is testament to the kind of BS that our well-heeled, Frank Luntz-infused propaganda system has managed to frame such criticism as.

Take a term like “job creators.” It’s an attractive enough, yet simultaneously distractive phrase. It is designed to spin perceptions regarding many of the near sociopathic figures responsible for this current state of affairs, from being that of oligarchs to ones of altruists. For these “job creators” to actually realize the kind of world they propagate, they would actually need an environment conducive to the creation of the needed consumer demand necessary to support those jobs. For it is the willingness and ability of the people to purchase those goods and services who are the real “job creators.” For it is a fact that business owners don’t hire in order to support the workers. They hire them only when there is the necessary demand that needs to be filled, and when they need the support and infrastructure of an additional and enabled workforce to be able to fulfill that demand.

Our corporate-backed media provides a more than an ample share of defenders of the current systemic status quo. This even includes platforms like NPR, with its Marketplace program, and their report on the supposed commonality of people’s ability for making it to the 1 percent. This feature has so many things to take issue with one wouldn’t even know where to start. This story reiterates why this may be my least favorite program on public radio, as here it serves to provide an effective advertisement for an ideological framework which is seriously and fundamentally flawed. For one, using the slogan of “the 1%” as a specific metric for measuring the degree of wealth inequality itself misses the mark. The most shockingly dramatic disparity of wealth is found among the .001%, the ramifications of which was disturbingly laid out in a recent Oxfam report on global wealth inequality. Additionally, it is stories such as the Marketplace feature (in this case about someone writing a song and acquiring a lot of money for it, which is an outlier of an experience for the vast majority of musicians and songwriters in this country), which have little to nothing at all to do with the point of a society becoming an oligarchic plutocracy. Or much more dangerously, it serves to advance the conflation of ideas that to oppose oligarchy means to oppose someone’s ability to financially succeed.

A listener’s comment on the Marketplace website left a related, and probably more effectively thorough response in regards to these issues, and in pointing out a couple of the glaring deficiencies of the story (and I would say that entire program)…

“I’m surprised that Marketplace reported on this research so uncritically, as if it somehow blunted the very real issue of income inequality raised by the Occupy movement. The protesters were not shouting themselves hoarse about a songwriter or an app designer lucky enough to make a few hundred thousand one year. They were talking about the investment bankers and corporate tycoons whose wealth gives them access to political power the vast majority of Americans will never have–the people whose unbridled greed and hubris brought the economy to the brink of collapse with almost complete impunity. This is in fact NOT a group that millions of Americans move in and out of each year. If the Occupiers got something wrong it was their math–rather than “the 1%,” it’s probably more like the .01% or maybe even the .0001%. But then again, “We are the 99.999%” doesn’t quote have the same ring….”

“Two things about this report: First, it seems that the more relevant “1%” is not income but wealth. I doubt that that population fluctuates nearly as much as income. Second, if Rank and Hirschl were actually interested in a fair discussion of government policy, they would also discuss what portion of the population spends time in the bottom 10% or 20% of the income scale. This report is silent in that regard, even though Rank and Hirschl probably have access to that data….”

This video on how literally ‪The 1% Are Literally Rich Beyond Measure‬ details some of the key points of the reporting on the topic…

We cannot provide even a brief addressing of this topic without noting what is possibly one of the most disgraceful aspects of mass wealth inequality, that of how Inequality Affects Health. As friend and colleague Dr. Karen Korn once pointed out, “Inequality damages us all. Human health. Environmental health. Political health. It’s unhealthy for any society to have great disparity of income, and even more unhealthy to have a great disparity of wealth. This is clearly demonstrated in history. Why do we even want to question this ‘fact’ unless if it is to attempt to create some sort of collective cognitive dissonance?”

Good question. And speaking of inequality and health, there’s the always relevant Yves Smith, who posted a piece featuring David Llewellyn-Smith on how ebola is an economic black swan, highlighting some of the dramatic consequences which transpire when we default our response to collective problems to “individual incentives” and traditional “market forces.” This specific case is regarding the economic causalities behind the ebola outbreak, but it could very well be about any number such health crisis caused by such related neoliberal economic policies. For in the end, we all pay when this kind of inequality becomes systemic throughout the very processes that our society functions upon, and the kinds of problems it responds to.

Unfortunately, many of the evangelists of neoliberal ideology seem no closer to understanding that “the market” may not be the most efficient and effective arbiter for solving many of the social problems and civic challenges we face. These zombie policies of “trickle down” economics seem to continue to be paraded through the corridors power and the media outlets that serve it, no matter how much damage they do and suffering they demonstrably inflict.

What might be most disingenuous about these efforts is the rather effective propaganda campaign waged in its defense, as if any alternatives are somehow a kind of un-American, leftist commie undermining of our free society, no matter how many times they have been effectively implemented throughout the nation’s history (worker’s rights, social security, public education including state-supported higher education, the public highway system, the list goes on).

Perhaps most ironically, many of these self-perceived patriots would never dare to question the efforts or intentions of America’s so-called “Greatest Generation,” who were fighting explicitly for many of these very things now dismissed as “socialist welfare statism” (see Harvey Kaye’s work on FDR and The Fight for the Four Freedoms). Not only that, but the Second World War itself was won not by letting the “market” solve it, but through the implementation of a form of command economy. It was one that worked by tapping into entrepreneurial business, but on the terms and objectives set by the government. (One would think there resides some historical lessons here regarding approaches to tackling the problems of climate change).

It took the implementation of such a system to win that war, just as it is going to take an increased level of shared effort to address the rapidly growing economic problems being inflicted upon the dwindling middle classes (to say nothing of the already suffering poor), ones caused by the ever-expanding wealth gap. This is a gap which has been politically engineered over the previous decades, particularly since the rise of Reagan and Thatcher. The political re-engineering of such a system, one which increasingly works only for a small minority, is way overdue. And it is becoming not simply about providing needed relief to those in need, but for many, including one could argue for the nation itself, is now a matter of survival.

And one doesn’t have to ‘hate rich people’ to understand that.

Al Capone had nothing on these guys. Face it, folks. We live in a criminal state. If this kind of thing is allowed to stand, then America is over. All hail our new overclass of the rich and privileged, those too rich, too important to have trivialities like mere “laws” impede their efforts at amassing even more wealth for themselves.

Over the last year, federal investigators found that one of the world’s largest banks, HSBC, spent years committing serious crimes, involving money laundering for terrorists; “facilitat[ing] money laundering by Mexican drug cartels”; and “mov[ing] tainted money for Saudi banks tied to terrorist groups”. Those investigations uncovered substantial evidence “that senior bank officials were complicit in the illegal activity.” As but one example, “an HSBC executive at one point argued that the bank should continue working with the Saudi Al Rajhi bank, which has supported Al Qaeda.”

Needless to say, these are the kinds of crimes for which ordinary and powerless people are prosecuted and imprisoned with the greatest aggression possible. If you’re Muslim and your conduct gets anywhere near helping a terrorist group, even by accident, you’re going to prison for a long, long time. In fact, powerless, obscure, low-level employees are routinely sentenced to long prison terms for engaging in relatively petty money laundering schemes, unrelated to terrorism, and on a scale that is a tiny fraction of what HSBC and its senior officials are alleged to have done.

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That’s not merely a dark day for the rule of law. It’s a wholesale repudiation of it. The US government is expressly saying that banking giants reside outside of - above - the rule of law, that they will not be punished when they get caught red-handed committing criminal offenses for which ordinary people are imprisoned for decades. Aside from the grotesque injustice, the signal it sends is as clear as it is destructive: you are free to commit whatever crimes you want without fear of prosecution. And obviously, if the US government would not prosecute these banks on the ground that they’re too big and important, it would - yet again, or rather still - never let them fail.

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Having different “justice systems” for citizens based on their status, wealth, power and prestige is exactly what the US founders argued most strenuously had to be avoided (even as they themselves maintained exactly such a system). But here we have in undeniable clarity not merely proof of exactly how this system functions, but also the rotted and fundamentally corrupt precept on which it’s based: that some actors are simply too important and too powerful to punish criminally. As the Nobel Prize-winning economist Joseph Stiglitz warned in 2010, exempting the largest banks from criminal prosecution has meant that lawlessness and “venality” is now “at a higher level” in the US even than that which prevailed in the pervasively corrupt and lawless privatizing era in Russia.

I believe we’ve crossed a Rubicon here. These criminals have been caught red handed, committing crimes that would put most people away for life. And yet, the authority of the state lets them walk regardless. I’d like to see these banksters get even a quarter of the treatment our government doled out in retribution against Private Manning. The scales of justice are completely broken. Thus, the legitimacy of the state and its authority will inevitably come into necessary question.

There is no law. There is only law enforcement.

If there is no equality under the law, there is no law but power.

And as Maher Arar stated, “Laws that are tailored to protect the powerful from accountability shouldn’t be called laws: they are simply privileges.”

Or “entitlements,” to use the vernacular more familiar to today’s elite political class.

Read the complete article by the always-insightful Glenn Greenwald.

And as Matt Taibbi reported in this scathingly dead on report in Rolling Stone Magazine…

This is the disgrace to end all disgraces. It doesn’t even make any sense. There is no reason why the Justice Department couldn’t have snatched up everybody at HSBC involved with the trafficking, prosecuted them criminally, and worked with banking regulators to make sure that the bank survived the transition to new management.”

It doesn’t take a genius to see that the reasoning here is beyond flawed. When you decide not to prosecute bankers for billion-dollar crimes connected to drug-dealing and terrorism (some of HSBC’s Saudi and Bangladeshi clients had terrorist ties, according to a Senate investigation), it doesn’t protect the banking system, it does exactly the opposite. It terrifies investors and depositors everywhere, leaving them with the clear impression that even the most “reputable” banks may in fact be captured institutions whose senior executives are in the employ of (this can’t be repeated often enough) murderers and terrorists. Even more shocking, the Justice Department’s response to learning about all of this was to do exactly the same thing that the HSBC executives did in the first place to get themselves in trouble, they took money to look the other way.

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So you might ask, what’s the appropriate financial penalty for a bank in HSBC’s position? Exactly how much money should one extract from a firm that has been shamelessly profiting from business with criminals for years and years? Remember, we’re talking about a company that has admitted to a smorgasbord of serious banking crimes. If you’re the prosecutor, you’ve got this bank by the balls. So how much money should you take?

How about all of it? How about every last dollar the bank has made since it started its illegal activity? How about you dive into every bank account of every single executive involved in this mess and take every last bonus dollar they’ve ever earned? Then take their houses, their cars, the paintings they bought at Sotheby’s auctions, the clothes in their closets, the loose change in the jars on their kitchen counters, ever last freaking thing. Take it all and don’t think twice. And then throw them in jail. Sound harsh? It does, doesn’t it? The only problem is, that’s exactly what the government does just about every day to ordinary people involved in ordinary drug cases.

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The institutional bias in the crack sentencing guidelines was a racist outrage, but this HSBC settlement blows even that away. By eschewing criminal prosecutions of major drug launderers on the grounds (the patently absurd grounds, incidentally) that their prosecution might imperil the world financial system, the government has now formalized the double standard.

They’re now saying that if you’re not an important cog in the global financial system, you can’t get away with anything, not even simple possession. You will be jailed and whatever cash they find on you they’ll seize on the spot, and convert into new cruisers or toys for your local SWAT team, which will be deployed to kick in the doors of houses where more such inessential economic cogs as you live. If you don’t have a systemically important job, in other words, the government’s position is that your assets may be used to finance your own political disenfranchisement.

On the other hand, if you are an important person, and you work for a big international bank, you won’t be prosecuted even if you launder nine billion dollars. Even if you actively collude with the people at the very top of the international narcotics trade, your punishment will be far smaller than that of the person at the very bottom of the world drug pyramid. You will be treated with more deference and sympathy than a junkie passing out on a subway car in Manhattan (using two seats of a subway car is a common prosecutable offense in this city). An international drug trafficker is a criminal and usually a murderer; the drug addict walking the street is one of his victims. But thanks to Breuer, we’re now in the business, officially, of jailing the victims and enabling the criminals.

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The American state is reaching a point of total illegitimacy. I would think one of the most effective ways of responding to this criminal hypocrisy, would be for every law enforcement official, prosecuting attorney, and judge, to simply no longer enforce drug laws. What can the administration do? They no longer have any legitimacy or standing to challenge it. I would suggest to any cop or lawyer out there now who bothers to pursue drug enforcement, especially of mere peons of every day citizens for the most minor possession, etc… that they think long and hard about how their actions are complicit in aiding the perpetration of this fraudulent exercise of power by our ‘leaders.’

And here’s The Second Great Betrayal: Obama and Cameron Decide that Banks are above the Law, by the always-insightful William Black, who lays out some of the inside scoop as to how and why Treasury Secretary Tim Geithner helped enable and protect all of this criminality. An essential read for anyone trying to decipher how this was allowed to happen.

What we now know definitively is how hyper-sensitive Geithner is to anything that brings to greater public attention his pusillanimous role in ensuring that fraudulent SDIs and the banksters that control them can commit their crimes with impunity from the criminal laws. As always, I emphasize the ultimate culpability for the shameful “too big to prosecute” indulgence granted to the criminal enterprise known as HSBC rests with President Obama and Prime Minister Cameron. It is also worth noting that the Republican Party and Governor Romney never protested this failure to prosecute and that Obama is largely continuing President Bush’s failure to even investigate seriously the banksters. Welcome to crony capitalism.

Read The Full Article

For those who like their news via video, here’s Matt Taibbi discussing some of these developments in a recent appearance on Democracy Now…

The so-called “JOBS Act” (with an emphasis on “act”) will, if financial fraud investigator William Black is right, set the stage for the mother of all financial crisis.

Legislation like this, and its warm support from “both sides of the aisle,” is evidence that America rapidly descending into a criminogenic banana republic.

This is a must read from Bill Black, a man who helped bring justice to the criminals behind the S&L scandals of the 80’s. Here he sheds insight into all the ways that this bill qualifies as insanity.

The sixth form of insanity is a counterfactual.  The unique aspect about this crisis is that it is the first one in modern U.S. history in which the CEOs directing the control frauds that caused the crisis have done so with complete impunity from the criminal laws and near impunity from civil suits and enforcement actions.  The worst, most destructive fraudulent CEOs have been allowed to become and remain wealthy through their frauds even though several of them caused greater losses than the entire S&L debacle.  The worst fraudulent CEOs who led the prior epidemics of accounting control fraud that drove the S&L debacle and the Enron-era crisis were prosecuted.  Not a single elite CEO from Wall Street or the largest fraudulent lenders has even been charged with fraud arising from such loans even though they, collectively, made over two million fraudulent loans in 2006.  Had the Bush and Obama administrations prosecuted and denounced these elite frauds it would have been politically impossible for an act as criminogenic and cynical as the JOBS Act to be promoted by the Obama administration and adopted by large Congressional minorities.  We are seeing with the JOBS Act the sick face of crony capitalism.

The seventh form of insanity is that there is no greater killer of jobs than elite financial fraud.  Such fraud epidemics can hyper-inflate bubbles (as they did in the U.S. and several European nations) and cause severe financial crises and recessions.  The resulting Great Recession has cost over 10 million Americans their existing or future jobs in this crisis.  It has cost over another 15 million people their existing or future jobs in Europe.  The JOBS Act is so fraud friendly that it will harm capital formation and produce additional job losses.  It may appear to be an oxymoron designed by regular morons, but that underestimates the abilities of the lobbyists that drafted this bill.  They are not morons.  They are doing faithful, clever service to their fraudulent clients.  That makes them more dangerous.

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The Dallas Fed used to object vociferously to all financial regulation because it claimed that markets were “self-correcting” absent regulation.  It now warns that market “incentives often turn perverse, and self-interest can turn malevolent. That’s what happened in the years before the financial crisis.”  Only effective regulatory “cops on the beat” can prevent frauds from creating a perverse “Gresham’s dynamic” (when frauds prosper, market forces become perverse and bad ethics drives good ethics out of the marketplace).  Effective securities regulation has led to U.S. equities trading at a significant premium compared to other nations, which aids U.S. equity issuers.  The JOBS Act threatens the continuation of that premium.  Even the Dallas Fed’s most senior economist and President – and the Dallas Fed has been the leading opponent of financial regulation – now agrees that effective regulation is essential to strong financial markets.  The Obama administration and Congress still worship at the temple of the faith-based economics that has caused our recurrent, intensifying financial crises.  When the temple’s high priests (the Dallas Fed’s leadership) become apostate the politicians should shed their dogma.        

The tenth form of insanity is that the JOBS Act’s primary theme is dramatically reducing transparency in securities law.  If there is any nearly universal principle that writers about the ongoing global crisis emphasized that we needed to learn it was the exceptional virtue of transparency.  Greater transparency makes private market discipline possible, it greatly enhances regulatory effectiveness, it discourages fraud, and it aids investors in making decisions.  The JOBS Act repeatedly embraces opaqueness.  We have known for millennia that this increases fraud.

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And a must see/read is Bill Black talking with Bill Moyers about the ongoing financial fraud investigations into the causality of our current economic crisis.

Why the double-standard lack of accountability for the criminal actions of the financial firms of Wall Street has been a topic of concern of mine for quite some time. The recent story about the woman going to jail for food stamp fraud brings this issue to stark light, as bankers walk free after literally trillions of dollars of fraudulent gains from both criminal activity and unwarranted bailouts from the public treasury. David Sirota addresses this quite well with this piece on the abject criminal hypocrisy that this represents, and the underlying reasoning why justice is simply not being served by our so-called law enforcement agencies.

At the local level, the same governments that plead poverty when they’re asked to enforce their laws on financial fraud have somehow found plenty of resources to deploy their militarized police forces against Occupy protesters. At the federal level, it’s even more blatant. As we learned in a little-noticed Washington Post piece on Tuesday, the same Obama administration that has refused to spend political capital and federal monies to go after Wall Street is expending new resources to crack down on the supposedly rampant problem of food stamp “fraud.”

Tracking an individual example of this phenomenon, Matt Taibbi makes clear that it’s really difficult to overstate just how revealing this kind of thing is. Wall Street crooks who stole trillions of dollars are rewarded by the administration with additional trillions in bailouts. Meanwhile, those crooks - now-impoverished victims, so poor they are on food stamps, mind you - are being targeted by the same administration for criminal investigation for allegedly making a few extra bucks on recycling empty bottles.

Taken together, these microcosmic examples (and there are plenty of others) all illustrate an inconvenient truth: namely, that law enforcement decisions today are not being guided by resource questions or dispassionate analyses of priorities, they are being guided by political will.

In states, it’s not that governors and attorneys general (other than those in New York, Nevada and California) want to go after financial fraud but can’t; it’s that they don’t want to go after that fraud, and they do want to shut down anti-Wall Street demonstrations. Why? Because, in the words of Democratic Gov. John Hickenlooper of Colorado, they fear the demonstrations are “something that could easily catch on.”

Likewise at the federal level, it’s not that President Obama wants to pursue Wall Street crime. It’s that as the biggest recipient of Wall Street cash in American history, he is making deliberate decisions both to avoid prosecuting the financial sector, and to continue past policies that make prospective prosecutions more difficult than they need to be; all while playing to old “welfare queen” demagoguery with a new election-year effort to villainize food-stamp recipients.

In these decisions, we are being taught a lesson we should have learned from the instantaneous changes after 9/11. Before the terrorist attack, we were often told we were so broke, we had no money to address any national priority (other than massive tax cuts for the wealthy, of course). Immediately after the attack, however, we suddenly had unlimited resources to wage adventurist wars and finance the Military/Homeland Security/Police Complex. Of course, nothing about our budget situation changed; the only thing that changed back then was the whims of politicians.

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So, I gather I’m not the only one sensing this? An impending Chernobyl of financial corporate capitalism? The economic fallout could be truly ugly if we are not prepared, or don’t respond effectively to it. There are many in positions of powerful influence in America today who have always truly hated how FDR responded to the previous global crisis with the New Deal. They much prefer Mussolini’s ideas for addressing these issues, both economically and politically.

Lesson number one is that the financial and social causes are linked. Lesson number two is that what links the City banker and the looter is the lack of restraint, the absence of boundaries to bad behaviour. Lesson number three is that we ignore this at our peril.

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Currency markets lost their anchor in 1971 when the US suspended dollar convertibility. Over the years, financial markets have lost their moral anchor, engaging not just in reckless but fraudulent behaviour. According to the US economist James Galbraith, increased complexity was the cover for blatant and widespread wrongdoing.

Looking back at the sub-prime mortgage scandal, in which millions of Americans were mis-sold home loans, Galbraith says there has been a complete breakdown in trust that is impairing the hopes of economic recovery.

“There was a private vocabulary, well-known in the industry, covering these loans and related financial products: liars’ loans, Ninja loans (the borrowers had no income, no job or assets), neutron loans (loans that would explode, destroying the people but leaving the buildings intact), toxic waste (the residue of the securitisation process). I suggest that this tells you that those who sold these products knew or suspected that their line of work was not 100% honest. Think of the restaurant where the staff refers to the food as scum, sludge and sewage.”

Finally, there has been a big change in the way that the spoils of economic success have been divvied up. Back when Nixon was berating the speculators attacking the dollar peg, there was an implicit social contract under which the individual was guaranteed a job and a decent wage that rose as the economy grew. The fruits of growth were shared with employers, and taxes were recycled into schools, health care and pensions. In return, individuals obeyed the law and encouraged their children to do the same. The assumption was that each generation would have a better life than the last.

This implicit social contract has broken down.

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There is strong ideological resistance to the policies that make decent wages in a full employment economy feasible: capital controls, allowing strong trade unions, wage subsidies, and protectionism.

But this is a fork in the road. History suggests there is no iron law of progress and there have been periods when things have got worse not better.

Together, the global imbalances, the manic-depressive behaviour of stock markets, the venality of the financial sector, the growing gulf between rich and poor, the high levels of unemployment, the naked consumerism and the riots are telling us something.

This is a system in deep trouble and it is waiting to blow.

Read The Complete Article

Ellen Brown delivers one of the clearest, most concise, easily understood pieces I’ve read on what makes up our banking and financial system, who runs it and why, and how we got into the current mess that we have, and whose primarily responsible.

Countries everywhere are facing debt crises today, precipitated by the credit collapse of 2008. Public services are being slashed and public assets are being sold off in a futile attempt to balance budgets that can’t be balanced because the money supply itself has shrunk. Governments usually get the blame for excessive spending, but governments did not initiate the crisis. The collapse was in the banking system and in the credit that it is responsible for creating and sustaining.

Contrary to popular belief, most of our money today is not created by governments. It is created by private banks as loans. The private system of money creation has grown so powerful over the centuries that it has come to dominate governments globally. The system, however, contains the seeds of its own destruction. The source of its power is also a fatal design flaw.

The flaw is that banks advance “bank credit” that must be paid back with interest, continually requiring more money to be repaid than was created as loans; and the only way to get additional money from the private banking system is to take out yet more loans, at interest. The system is, in effect, a pyramid scheme. When the banks run out of borrowers to support the pyramid, it must collapse; and we are nearing that point today.

There are more sustainable ways to run a banking and credit system, as will be shown…

Ellen Brown does indeed proceed to show how this can (and should) be done. Read all about it Here.

Danny Shechter delivers one of the best, concise reviews on what happened, and why it happened, regarding the financial meltdown that our nation has been undergoing. It was not, as the recent film Too Big Too Fail tries to imply, due to a bunch of unforeseen circumstances, triggered by simple personal greed and lack of proper processes; but rather, its underlying causality was crime. It was (and is) the product of criminal intent, not simply foolish, greedy incompetence.

There was greed, ambition, ego and money lust. There were personal rivalries and ideological battles, parochial agendas and narrow self-interest. There was panic on THE Street and in the halls of mighty institutions. In many ways, the program recycled and made an official narrative compelling viewing. In the end, everyone was to blame so no one was to blame.

But … what was missing was any notion of intentionality and premeditation, almost no mention of systemic fraud and CRIME, that one word that sums up what really happened for those millions of Americans who have lost jobs and homes. We never saw victims or felt their pain and bewilderment. We were never shown how a shadow banking system emerged or how the finance industry worked with their counterparts in finance and insurance to transfer wealth from the poor and middle class to the superrich.

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At the same time, in those year I watched TV shows glamorize the bank robbing antics of a man named Willie Sutton who also staged jail breaks wearing masks and costumes. When he was asked why he robbed banks, he responded famously, “That’s where the money is.”

And it still is, except in our era, it is the banks that are robbing us.

That’s because what’s now called the “financial Services sector” has gone from about 30 percent of our economy to over 60 percent. Through a process called financialization, they have transformed how all business is done.

Making money from money soon began to surpass making money from making things. What we were never warned about was the danger of getting too deeply in debt, or how the economy was shifting from production to consumption.

Private equity, credit swaps, derivative deals and collateralized debt obligations soon drove the economy. Markets became captives of high performance trading by powerful computers.

When Wall Street became the defacto capital of the country, the bankers accrued more power than the politicians who they bought up with impunity. Their lobbying power deregulated the economy and decriminalized their activities. They killed many of the reforms enacted during the New Deal designed to protect the public. They built a shadow (and shadowy) banking system beyond the reach of the law.

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The truth is that most of the bigger banks have emerged from the financial crisis stronger than ever, with executives cashing in with higher salaries and bigger bonuses. That old saying about criminals who “laughed all the way to the bank” has to be revised because in this case they never left the bank.

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Why are so many us banking on a financial recovery to bring back jobs and a modicum of justice created by the very people and institutions responsible for the crisis?

And why didn’t I learn about these dangers when I first discovered the wonderful world of banking? Isn’t that what schools are for?

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Richard D. Wolff weighs in on the issue in The Crisis Enters Year Five

As Wolff succinctly points out…”The largest corporations and richest citizens long ago learned that if you want to sustain an extremely unequal distribution of wealth and income, you need an equally unequal distribution of political power.”

Plus, Robert Scheer weighs in on the rather disingenuous portrayal of the facts of the matter with his piece Access Journalism: The Movie.

A must see for anyone wishing to understand the real root causes of the current financial problems plaguing this country.

Insightful and educational article by Ellen Brown on our banking system, and why North Dakota has a model well worth emulating in the rest of the country. Highly recommended for those interested in better understanding our current financial situation, and for some real-world, workable public interest solutions to effectively solving them.

Pouring money into the private banking system has only fixed the economy for bankers and the wealthy; it has not done much to address either the fundamental problem of unemployment or the debt trap so many Americans find themselves in.

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In this dark firmament, however, one bright star shines. The sole state to actually gain jobs is an unlikely candidate for the distinction: North Dakota. North Dakota is also one of only two states expected to meet their budgets in 2010. (The other is Montana.) North Dakota is a sparsely populated state of less than 700,000 people, largely located in cold and isolated farming communities. Yet, since 2000, the state’s GNP has grown 56 percent, personal income has grown 43 percent and wages have grown 34 percent. The state not only has no funding problems, but this year it has a budget surplus of $1.3 billion, the largest it has ever had.

Why is North Dakota doing so well, when other states are suffering the ravages of a deepening credit crisis? Its secret may be that it has its own credit machine. North Dakota is the only state in the Union to own its own bank. The Bank of North Dakota (BND) was established by the state legislature in 1919, specifically to free farmers and small businessmen from the clutches of out-of-state bankers and railroad men. The bank’s stated mission is to deliver sound financial services that promote agriculture, commerce and industry in North Dakota.

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The BND’s populist organizers originally conceived of the bank as a credit union-like institution that would free farmers from predatory lenders, but conservative interests later took control and suppressed these commercial lending functions. The BND is now chiefly a “bankers’ bank.” It acts like a central bank, with functions similar to those of a branch of the Federal Reserve. It avoids rivalry with private banks by partnering with them. Most lending is originated by a local bank. The BND then comes in to participate in the loan, share risk and buy down the interest rate.

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The BND studiously avoids competition with private banks, but a publicly-owned bank could profitably engage in commercial lending. A successful model for that approach was the Commonwealth Bank of Australia , which served both central bank and commercial bank functions. For nearly a century, the publicly-owned Commonwealth Bank provided financing for housing, small business, and other enterprise, affording effective public competition that “kept the banks honest” and kept interest rates low. Commonwealth Bank put the needs of borrowers ahead of profits, ensuring that sound investment flows were maintained to farming and other essential areas; yet, the bank was always profitable, from 1911 until nearly the end of the century.

Indeed, it seems to have been too profitable, making it a takeover target. It was simply “too good not to be privatized.” The bank was sold in the 1990s for a good deal of money, but it’s proponents consider it’s loss as a social and economic institution to be incalculable.

A State Bank of Florida?

Could the sort of commercial model tested by Commonwealth Bank work today in the United States? Economist Farid Khavari thinks so. A Democratic candidate for governor of Florida, he proposes a Bank of the State of Florida (BSF) that would make loans to Floridians at much lower interest rates than they are getting now, using the magic of fractional reserve lending…

The state could earn billions yearly on these loans, while saving hefty sums for consumers. It could also refinance its own debts and those of its municipal governments at very low interest rates. According to a German study , interest composes 30 percent to 50 percent of everything we buy. Slashing interest costs can make projects such as low-cost housing, alternative energy development, and infrastructure construction not only sustainable, but profitable for the state, while at the same time creating much-needed jobs.

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Also, for more on issues regarding the almost ponzi-like scams inherent in our current banking system, check out Brown’s webofdebt.com

Ever wonder how North Dakota seems to be surviving the recession (depression?) as well as it is? Perhaps it’s their “socialist” banking system.

It has no automatic tellers or drive-up windows, doesn’t issue credit cards, and tends only a few thousand checking and savings accounts. Its only location is a glass, steamboat-shaped headquarters near the Missouri River, where the business moved from its original 1919 home in a former auto assembly plant.

The Bank of North Dakota — the only state-owned bank in the United States — might seem to be a relic. It was the brainchild of a failed flax farmer and one-time Socialist Party organizer during World War I.

But now officials in other states are wondering if it is helping North Dakota sail through the national recession.

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