Let's Bank On Ourselves

The New York Times, that venerable voice of the establishment and neighbor to Wall Street since 1851-- confesses puzzlement over the current economic meltdown. You would think that of all institutions of the free press in America The Times would certainly be able to tell us just how much debt the Wall Street Bankers are actually in, but instead their February the second front-page story entitled: Risks Are Vast in Revaluation of Bad Assets reads: "How should these troubled assets be valued? Not just billions, but hundreds of billions of taxpayer dollars at at stake." Well, don't count on The Times to tell you. See no evil.

Given how he answered reporters in in his first press conference, even the new President of the United States, though he is determined to "save" them, doesn't know how much debt the bankers are in. So perhaps The New York Times is merely cooperating in a cover-up of one of the greatest financial swindles ever perpetrated in the United States; or perhaps they are just as ignorant as they pretend. I don't suppose that we could just ASK THE BANKERS themselves, for that would be all too obvious, and might even prevent them them from off-loading their own indulgences at some future price favorable to them, and eventually turning these "bad assets" into reasonable profits. (Since when did the wizards of American capitalism stop keeping an account of their assets and liabilities? The days of Calvin Coolidge perhaps?) If a "failed" bank has no unequivocal ledger of its assets, then how on earth can taxpayers determine what they are worth? The impression thus persists that these "failed" banks do not seem to want us to know what they are truly worth, even though we, the American people, have already bailed them out to the tune of an initial 150 billion dollars, a sum now all but declared "lost" by knowledgeable investors like George Soros and likewise all but implicitly confirmed today as "lost" by the Secretary of the Treasury. All this has fundamentally obscured whether we are fattening a goose, or getting ready to serve up an an emaciated gander.

Because the Obama Administration has now swallowed the lie that, in Geithner's words: "governments are not good at running Banks", (which is equivalent, of course, to saying that they those who have run them into the ground are somehow better at it) the course is now set for this government to throw more good money after bad, even though this will exacerbate and lengthen several years of fast-approaching depression. (How many people would buy a majority share in any enterprise but then demur from managing it purely on ideological grounds, claiming that that they don't have the right bone-rattle or headdress?)

What does it take, after all, to run a bank? Secretary Geithner said today that "your banks transfer earnings of workers into loans for cars and educations", but that service is only secondary to what for-profit Bankers do. What Banks really do under our system is "to create money from nothing" by awarding themselves money that they simply do not have. Banks have become so exceptionally greedy and mismanaged precisely because they alone, in our entire social order, are given the unique privilege of creating money as debt. Should we be surprised that the history of finance is so full of bubbles and crashes when we allow private profit-seeking individuals to expand and then contract credit-money at will, according to their own private wishes and investments? Should we be further surprised when these individuals then indulge in every conceivable form of speculation and gambling? Since money does not in the first place represent tangible "wealth" to them, as it must to the rest of us, shouldn't we also expect the logical consequence --that fearing no loss in their inability to create debt-money on demand-- they also have absolutely no fear about losing money? Why should they? In normal times they can make it all up by the day after tomorrow when the next loan doubles the last deposit.

This of course explains why the first 150 billion given to the Banks has apparently been spent on prostitutes, jet-transport, self-awarded "bonuses" for failure, office-decoration in the millions, and Las Vegas junkets, much to the chagrin of all right-thinking members of the media-ocracy. But these predictable behaviours are merely a logical extension of the ability of one class of people to make money from the very existence of money.

The real question is why we continually rely, in the first instance, on the private greed and the historical excess of bankers to provide we the people with the most democratic right of all-- the democratic right to sound and stable credit? Secretary Geithner says that the current crisis was caused by "businesses and governments borrowing beyond their means", but government, as the constitutionally empowered producer of currency through Congress, cannot in principle borrow what it cannot, in principle, repay; so this reasoning is deformed. If this were not so then we would not see the government be willing to throw billions, perhaps, perhaps ultimately trillions, down the private garbage-shoot of an indeterminate global-debt, when in effect, they have already "nationalized" some banks by becoming their majority shareholders.

The latest Treasury plan seems to be that the government will act to entice private "Capital" into the murky recesses of bad bank assets by buying or pretending to buy them. All one can say about this is to wonder that those who have such an unnatural fear of any solution which is socialistic: meaning: one which would serve the broadest interests of the whole of society, should be at the same time so distrustful of letting market mechanisms actually work. As Congressman Ron Paul said the other day, "If an asset is of doubtful value, then perhaps it is of NO value." If there is little value in these assets then what we need is a garage-sale, not a "bailout". The best solution is thus likely to be the one none of these "Capitalists" prefer: the death of institutions who deserve to die. We really only need to ask ourselves two questions: Are banks capitalist enterprises? Can capitalism dispose of any player? The answer to both of these questions is yes. Short of their own self-resurrection we should not give these businesses a penny, but should support smaller, already solvent banks, whom will we could easily and immediately fertilize to take the place of the gigantic failures. In the meantime, until the crisis passes, we could encourage businesses themselves to grant one another "credit" by the simple exchange their own goods and services. The Swiss have had such a system, one called "Wirtschaftsring-Genossenschaft" or WIR, since 1945, and it has exchanged an average of 1.6 billion Swiss Francs annually, successfully overcoming many recessions. A "Bank" is simply any group of people able to trust one another; which, of course, must leave us to define Wall Street as a den of legal thieves.

The late philosopher Gregory Bateson noted that complex ecologies may collapse because of the absence of an unknown element. Determining what element is "missing" involves moving beyond the observable to act upon any new information, or, "any difference that can make a difference." It appears that the Obama Administration on the other hand has decided to ignore all the new information which this crisis presents us; namely: a confluence of permanent changes in the world's ecology, technology and economy. What is most observable about the present crisis is also what makes it similar to, yet different, from from the Great Depression. The first Depression was a civilizational transition from the last of an agricultural economy to an completely industrial one; just as this one is the transition from an industrial economy to a global, informational economy. But the difference is also striking; we did eventually "buy" or "kill" (because of World War II) our way out of the Great Depression, but due to the globalization of finance and markets today, it is at best uncertain that one ought to use classic Keynesian stimulus to revive a patient whose nerves and organs are spread out on operating tables all over the world.

So the real question is what economic "growth", as opposed to "sustainability", we should now seek in a system where every new "job" created is just another national debt incurred-- and this against a background of soon-to-be exploding demand for entitlements and health-care. In a world where we will soon need our best minds merely to defend civilization itself against its own capacity to heat the entire planet, does it make sense to continually demand that the overall economy "grow", and thus generally increase demand upon the environment-- even as we employ a corps of scientists to decrease that same demand on the world's resources? The plans of this administration thus far sound to me like hiring one rower to paddle forward (creating "green jobs") while hiring another to row the boat backwards (pretending that we can provide full employment and a constantly "growing" rather than a sustainable economy.) The mad and irrationally speculative "growth" of the housing industry in recent years is one of the sources of our problems, not a solution. The name for a cell that is always growing is: cancer.

The economist Bernard Lietaer, who predicted the present crash in his 2002 book The Future of Money, wrote in that text that it is today possible for our society to sustain all its basic services by employing as few as five per-cent of its members. Some employment that has disappeared during globalization will never return; other employment has vanished due to the very successful paths of miniaturization, mass-production, and information technology that we have so assiduously pursued for the last thirty years. Looking ahead-- we should be less concerned with providing employment to all members of society than with providing all members of society with justice and and a good quality of life. A Universal Basic Income, extended to each American, could have already been instituted sufficient to last one year for nearly the same amount which has already been squandered in the first stage of the Paulson-bank-bailout; and would provide one sufficient to last for five years with any one of Geither's two Trillion dollars, perhaps for even less if levied through taxes. If you put money in the hands of those few who already have it I notice that you are said to be "stimulating" the economy, but if you put the same money into every citizen's pockets then you are said to be, I suppose, to paraphrase Mr. Scrooge, "increasing the surplus population." If greed got us into this mess, why is yet more greed the only way out?

Surely it is clear by now that this crisis is presenting civilization with a last chance to stop acting like a cancer and to become instead a maturing ecology. The way to mature is to diversify, and the way to diversify is to stop making the same mistake of almost every state since the cities of ancient Mesopotamia--namely: STOP INSISTING ON BEING ONLY A CENTRALIZED STATE. There is only one real reason for a centralized and all powerful state-- and that is to entertain the vanity of empire while inviting the decay of democracy and self-reliance that such egoism always entails.

If every Bank in America disappeared tomorrow, it would still be perfectly possible for the people of the United States to award themselves the power of credit in an instant, a power undiluted by interest-taking or by debt, free and unencumbered by any force except their own desire to work or to create. They would then need only the power vested in the humblest council of democratically-elected alderman to help set up a local-currency and a single democratically-controlled local bank-- to set up an economy which could then fairly distribute all the products and services of their town, county, or region. So much for another "Great Depression". The great empire of imaginary wealth would then all vanish in a second, as swiftly as the clicking of Dorothy's ruby slippers. This crisis is an opportunity to end debt-money banking and to make the people themselves the masters of credit. Since this will never happen from "above", it is only possible to create it from "below".

Yet that is not the "real world" you may say. Instead, in the "real world" Secretary Geithner will have the Federal Reserve Bank dole out one Trillion dollars to pay for the Banker's most recent speculative party, as well a probable second Trillion to "recapitalize" the banks; for, as he put it, "to let our (my emphasis) present system fall would be an 'incalculable' loss".

The limit of any ecologic system is expressed when it can only be sustained by a missing element. A "Capitalism" of unlimited greed will always collapse into its shadow-- a "Socialism" of limits and constraints, just as idealistic Communism's shadow is tyrannical Feudalism. But we cannot administer cures to any of these patients by directing all our energies against the "emerging shadow". To engage such extravagant financial resources as we proposing to restore a system which was unjust at the start-- is pure folly; and to do so when the world itself has changed in ways which admit so much new information, is criminal.

It is all too clear to this writer, as it is to many other people, that the only "incalculable loss" involved in this crisis is the loss to that class whom the old system has served, and to no one else.

Will Morgan
February 10, 2009