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  1. 1. Pentagon ROADMAP TO RECOVERY FROM THE ECONOMIC, POLITICAL, INTELLECTUAL, AND MORAL DECLINE Through widespread ignorance, the unstable nature of American capitalism had been adroitly hidden from public view for nearly 50 years. The recent fiascos have uncovered holes. The Federal Reserve administration and Wall Street banks were overly dependent on mathematical models that did not reflect economic reality on the streets of America. What the Federal Reserve and the investment bankers might have projected as sound fundamentals for a stable economy may actually be unsound in reality. Incidentally, research shows that stock market crashes have occurred despite low inflation, low interest rates, and low unemployment levels. This suggests that the mere presence of sound economic fundamentals do not ward off stock market crashes or obstruct the generation of economic bubbles. After 1950, the quality of political leadership in America showed rapid decline. Perhaps the extraordinary stature acquired by President Franklin Delano Roosevelt until 1945 made his successors look shabby and dense. In particular, the bombing of Hiroshima and Nagasaki, and the Vietnam War drew attention to lack of maturity in America’s political leadership. In some ways, this forcefully pointed towards a decline in the quality of education in America. Although America is an industrialized superpower, college education did not ordinarily prepare students to grow into independent thinkers who could intelligently participate in the political system of the nation. In some instances, college education discouraged philosophical thinking and debate. After the Great Depression and the world wars, the primary idea behind American college education was to extricate American society from a poverty stricken ancestral working class heritage. During the Vietnam war, the second tier colleges and universities became profit centers by sheltering conscription dodgers. As time progressed, American colleges were persuaded to reinvent themselves as profit centers. The colleges were now more interested in collecting tuition fees than in imparting an education that would be valuable to a democratic society. The American democracy, under the control of big business corporations, needed naive citizens who could blindly support a political leadership. In fact, after 1950, modern college education in America began producing citizens who drifted around with no specific personal ideology. This way, corporate media could be given the task of carrying out fresh indoctrination to suit circumstances. An eminent scholar named Naom Chomsky expressed the view that the American news media was actually Copyright © 2009 by Shivaprasad Srikantia. All Rights Reserved.
  2. 2. engaging in the activity of manufacturing consent. There seemed to be an unholy alliance between corporate media and the politicians holding power. In its new role as a mouthpiece for the White House and the Pentagon, the American media was trying to steer public opinion. Most college educated American citizens were unable to vote intelligently. In fact, they reelected Richard Nixon Incidentally, Thomas Jefferson had believed that it was impossible to build a democracy without well educated and enlightened people. Perhaps, it is worthwhile noting that a citizen’s right to cast a vote in the ballot box is just a small component of the democratic principle. When unenlightened citizens cast votes in a ballot box, undesirable political elements get elected to power. Though middle class American citizens wish to see themselves as members of an equal and egalitarian society, they have allowed about 5 percent of America’s wealthiest to hold almost 50 percent of the wealth of the nation. Throughout history, the economic divide between the rich and poor has been widening in America. Economic divides in America have later guided social, cultural, and intellectual divides. However, as the wealthy elites who control the multi-trillion dollar economy form a minuscule social minority, they appear as a tiny dot on the landscape. In fact, they are not readily visible in American society. They do however, represent an extremely powerful invisible hand. America had a few wealthy families that had actively participated in politics through several generations. Ivy League education systems and the Federal tax laws ensured that they would continue to do so for many more years. A bureaucrat of the American Treasury once disclosed to Congress that the tax rates in America intentionally favored those who were extremely wealthy. This maneuver shifted political power in a democracy from the common citizen to big businesses and wealthy tycoons. In the American democracy, the private enterprise cartel controlled by wealthy tycoons became more powerful than the democratic state. President John Kennedy was deeply suspicious of the Federal Reserve. In a vicious power struggle, the Federal Reserve had taken away vital powers from Congress in matters relating to the supply of money. John Kennedy abhorred the idea of the Federal Reserve consorting with Wall Street banking mammoths to control the supply of money. Afer John Fitzgerald Kennedy was assassinated, the Federal Reserve became an institutional apparatus utilized by the banking giants to fabricate public perception and create economic illusions. Major banks from London, Germany, Paris, and Amsterdam influenced the Federal Reserve. John Kennedy firmly held the view that the Federal Reserve violated the spirit of the American Constitution. But common citizenry within the American democracy were kept unaware that big banks were clandestinely controlling the supply of money through the Federal Reserve apparatus. Economies might actually chug along better with a small string of bubbles. Therefore, the American Federal Reserve seemed open to the idea of making the economy run with a precise set of mathematically stacked bubbles. The Federal Reserve helped create economic bubbles periodically raising and lowering interest rates. The pivotal idea was to create containable bubble cycles within well defined parameters. Perhaps, it was believed that containable bubbles would initially provide a positive impetus to the economy and later deflate without explosive violence. Bubble economies typically run through a course of 14 years. However, mid-term catastrophes may occur after the first 7 years. A successfully run financial bubble scam can run undetected for a period of 14 years. Copyright © 2009 by Shivaprasad Srikantia. All Rights Reserved.
  3. 3. Wall Street bankers and the Federal Reserve also evolved a brilliant financial scheme where big chunks of economic shock could be transferred to unsuspecting economies of European nations. For instance, many foreign banks had been carefully conned to make risky investments in American mortgage-backed securities. This way, banks in Europe were forced to take some of the shock from Wall Street catastrophes. In fact, in the recent financial crisis, the Federal Reserve was unwilling to publicize information on the list of foreign and local banking institutions that were a part of the AIG bailout package. The Federal Reserve wished to conceal the identities of AIG derivative counterparties The element of secrecy clearly points to the likelihood that the Federal Reserve is being covertly used by a powerful banking cartel orchestrating speculative financial rackets on a global scale. The Federal Reserve played an indirect role in misleading investors in the dotcom bubble and the real estate bubble. In both these instances, it tried to create American wealth out of thin air. In American capitalism, the rejection of the Gold Standard for currency was part of a grander design. Republicans in the Richard Nixon administration had probably realized that severing the link between currency and gold would allow greater prosperity through public deception. Meanwhile, wealthy Republicans of the Reagan generation began to believe that financial markets could regulate themselves. In America, stock market crashes are typically engineered to occur in February, March, June, and September. The financial fraternity uses the services of a new breed of mathematicians known as financial engineers. Financial engineers are interested in studying risk and uncertainty to navigate through an economy riddled with bubbles. Instead of trying to understand how genuine free market economics actually plays out, economists and financial engineers are trying to create a virtual reality bubble game that moves away from ground reality and encourages speculation and counter- speculation. There are shrewd financial tycoons in Wall Street who know how to navigate adeptly through economic bubbles and become richer. At the time of World War II, Japan and Germany were America’s worst enemies. After the great war however, bankers in America, Japan, and Germany shook hands and became partners in business. After World War II, Japan and Germany poured money into Wall Street to create economic bubbles. Wall Street became the preferred venue for orchestrating billion dollar financial scams with a transcontinental footprint. This scam structure was devised intentionally by an international cartel of bankers, business tycoons, bureaucrats, and politicians. Swiss banks were part of an extensive international setup to carry out large scale money laundering in complete secrecy. The key reason for the financial fiascos in America was a financial experiment that failed. Mathematicians and economists were trying to force the American economy to run according to an exotic mathematical model they created. In plain terms, this was as challenging as attempting to make mother nature follow the weather patterns forecasted on the NBC evening news channel. In financial circles, Wall Street executives were known for making shady deals. In many historical instances, Wall Street executives have been known to be brilliantly unscrupulous. However, at one point in time, America’s Treasury Secretary was a former Wall Street executive. The idea of Copyright © 2009 by Shivaprasad Srikantia. All Rights Reserved.
  4. 4. allowing the American Treasury to be run by former Wall Street executives might appear distressing. But economists from the Chicago school might collectively point out that many types of deception and fraud actually have a positive impact on the American economy. In many capitalistic societies, the very pillars that support a nation’s economy largely depend on public perception. It follows that some amount of public deception may actually turn out to be good for the economy. Wall street tycoons will claim that deception can be used effectively as a purgative to relieve economic constipation. In Japan, high savings rates gradually lead to excess funds available for speculative investments. Between 1986 and 1990, the Japanese economy supported economic bubbles that successfully inflated stock prices and land prices. Japan’s real estate industry was politically very powerful. Low interest rates created real estate bubbles that encouraged speculation. With ruthless speculation, the price of real estate in Tokyo ripped through roofs. Through economic bubbles, the Japanese added more fizz and sparkle to stock market transactions. In the last century, over half a dozen economic institutions in Japan have collapsed. However, Japanese society sees these casualties as a part of healthy competition in everyday life. Every year, thousands of factories in Japan shut down due to ruthless competition. Incidentally, history records reveal that stock market indices in Japan have witnessed an 800 percent jump in just 15 years. A great deal of share price fluctuations in the stock market and fluctuations in international currency exchange rates occur everyday. It is this type of irrational speculation that causes the price of oil barrels to rise and fall. Speculators can gradually destroy the industrial framework of a nation. There is no running away from this discomforting fact. The fixation on stock markets can ruin good companies. The fact that the share prices of General Motors sharply fell from an outrageously high $ 75 to a horrendously low $ 3 shows that there is something radically wrong with the way stock markets evaluate businesses. Companies are either overvalued or undervalued by speculators. More than inefficiency or outdated technology, random guessing by bad speculators can ruin a good engineering company. Unfortunately, the world economy is being run by speculators, while orthodox industrial production is losing meaning. Some Western economists feel that the thrift practiced by Asian nations are partly responsible for the financial crisis in the West. Emerging Asian economies experiencing high growth rates and high incomes began living frugally and stashing away enormous sums of money. Wealth accumulated through savings was then channeled into speculative investments in real estate the stock markets. Some Asian money was also funneled into America and Europe. The scene was now set to create economic bubbles. Quite simply, many banking institutions in America collapsed under the psychological weight of all this money. Perhaps, Wall Street handled the sudden influx of money from Asia in an irresponsible way. They gambled with the money. One cultural issue that makes America so different from other nations is her optimistic belief that all problems in the urban universe can be phrased as simple mathematical equations and solved elegantly by a computer. In the American banking industry, arcane mathematics and computer simulations were being used in place of precious human intuition to assess financial risk. For nearly two decades, American mathematicians have been trying to discover the use of integral calculus, Copyright © 2009 by Shivaprasad Srikantia. All Rights Reserved.
  5. 5. matrix algebra, and game theory to run civil society. Several decades ago, a mathematical prodigy named Arnold Rothstein, had dropped out of school to devote his time to evolving sophisticated success formulas for gambling, loan sharking, and racketeering operations. Eventually, the Rothstein algorithms found their way into institutions in Wall Street. Thereafter, in 1981, Ronald Reagan brought about more financial deregulation. The new objective of American capitalism was to consolidate economic and political power in the hands of a few. This was done to move political power to the rich classes. In the last century, many American business corporations went bankrupt primarily because they let computers solve business management problems. The unique power of human intuition could never be incorporated into computer programs. Software packages typically oversimplified business problems and provided a solution based on a mechanical algorithm. The absence of human intuition in decision making wrecked many American manufacturing companies. Incidentally, rigorous mathematical analysis and computer simulations at the War Room of the Pentagon had revealed that the war in Iraq could be won in a few days. The war simulation computers serving the George Bush administration oversimplified the invasion, guaranteed a quick victory, and grossly miscalculated the cost of war. Unfortunately, the passion for misapplied mathematics has landed the American nation in a lot of trouble. Until 1925, nations of the world looked up to America to help set higher ethical standards. At that time in history, America was perceived as a role model nation with a praiseworthy agenda. The original intent of American imperialism was to persuasively thrust industrial culture over agrarian nations languishing in poverty. The laudable goal of American imperialism was to extricate third world nations from poverty and make them somewhat prosperous. Americans from the old school were essentially imperialists with noble intentions. After 1950 however, there was a shift in values in the international political arena. After dismantling their colonies, nations in Europe wished to discover new ways of pillaging poor nations for economic gain. So, industrializing nations of the world looked up to America to help set lower ethical standards to facilitate unfair trade, business, and speculation in the markets. The story of America is an enthralling rags to riches story. Without the mandate of common citizens in the American democracy, American capitalism firmly hinged on the idea of attaining economic prosperity at the expense of others. Though mainstream cultural values in America opposed imperialism and unfair trade, an underlying structure of political ignorance in American society allowed politicians with ties to imperialistic multinational corporations to come to power in the White House. In the American democracy, citizens had voting rights but very little political influence. For over 70 years, American multinational corporations in search of crude oil and mineral deposits have engaged in industrial banditry. Subsequently, the corporate tax scheme funneled a part of the pillaged wealth into the American Treasury. Therefore, the American government was utilizing multinational corporations as middle men in a gigantic scheme of looting third world nations. The critical point to note is that governments are not sacrosanct organizations as widely believed. All over the world, governments are manipulated by special interest groups and the ruling elite. Copyright © 2009 by Shivaprasad Srikantia. All Rights Reserved.
  6. 6. The opulence visible in American cities and the White House banquet halls was fundamentally wealth pillaged from poor nations in South America. The enormous sums of money the American government invested in scientific research, medical research, and NASA apace programs was actually money ilegally annexed from weaker nations. With the key idea of reviving faltering economies after World War II, America was chosen to lead industrial societies in Europe down a fresh pathway of consumerism, crafty trade politics, rouge warfare, and corporate fraud. One distinct cultural advantage America had over European nations was that she did not have a critical pool of left wing intellectuals who would stand up and raise issues of ethical propriety. So, American corporate executives could perfect the art of economic deception and corporate fraud without hindrance from high brow intellectuals. In December 2008, the former Chairman of NASDAQ was arrested by law enforcement agencies on suspicion of running an illegal $ 50 billion pyramid money scheme. At present, about 50, 000 cases of corporate fraud are under Federal investigation in America. In modern societies, rapid industrialization had created education systems that focused narrowly on teaching technology, medical science, accounting, and money management. Industrial societies neglected liberal arts education that could have brought a greater level of social civility in a world of ruthless competition. Wall Street bankers without a good liberal arts education have clearly exhibited a lack of inner conscience. They have also failed to discover that there is more to a civilized society than just financial transactions. Psychoanalysts have been researching the complex behavioral patterns of American chief executives. Psychologists have observed that narcissistic traits can propel executives to high positions of power. In management boardrooms, narcissism and haughtiness are actually considered leadership qualities. Lately, top executive talent is being more closely equated with the ability to conceive new accounting schemes and engage in financial gimmicks that help boost share prices. American executives measure their self worth by the perks they receive. Top executives have to flaunt their corporate perks to gain political clout within their fraternity. In corporate boardrooms, executives who travel in sleek corporate jets and choppers command more respect than those who travel first class. Executives who practice austerity run the risk of eroding the brand image of American companies. A former executive of Merill Lynch had to spend over a million dollars to remodel his office while his company was in dire straits. Obviously, the remodeling was an urgent attempt to help boost the sagging image of the company and help restore confidence. Quite often, corporate executives of ailing businesses in America intentionally flaunt their perks to restore public confidence. Incidentally, when Citicorp experienced financial problems, the executives clinched the idea of buying a corporate jet to boost the company’s image. Perhaps, with the honorable intention of restoring faith in American financial institutions, the executive board of Citicorp was willing to cough up $ 50 million for a brand new corporate jet. However, the ploy backfired when President Barack Obama expressed extreme displeasure at the way Federal bailout money way being inappropriately allocated for corporate perks and bonuses. The practice of paying undeservedly high salaries and bonuses for underperforming corporate executives in Wall Street suggests that the elitist classes have formed their own financial club. Boys Copyright © 2009 by Shivaprasad Srikantia. All Rights Reserved.
  7. 7. of this fortune club are insulated from the vagaries of economic recessions. Members of the fortune club are entitled to generous bonuses and golden parachutes even when dark clouds appear over the nation’s economic horizon. American executives of the fortune club can pay themselves hefty bonuses and uncork champaign bottles even when their businesses are going bankrupt. Furthermore, tax payers money in the form of Federal bailout packages can be legally utilized for paying bonuses to corporate executives of sinking businesses. In fact, during the recent economic downturn, incompetent Wall Street executivess took home nearly $ 18 billion in bonuses. Perhaps, the fortune club might point out that the bonus packages were stimulus packages intended to motivate underperforming executives in the fortune club. The recent financial crisis had Hillary Clinton do a reality check and discover that the economies of America and China were gravely intertwined. In reality, during her recent visit to China, Hillary Clinton urged China communists to support instruments of the American Treasury. Chinese communists hold $ 650 billion worth of American securities. At times of economic distress, when communists buy American Treasury bills, they would essentially be bailing out the American government. Therefore, the trade relationship between China and America is actually a laughable financial relationship of dependence between communists and capitalists. Interestingly, the economic success of communism in China is tied to the economic success of capitalism in America. The corollary also holds true. Certain varieties of capitalism in rich countries are sustainable only when cheap labor, cheap minerals, and cheap consumer goods imports are available from impoverished countries. Many high- technology American companies cannot survive in business unless they out source high skill jobs to low wage countries in Asia and cut payroll costs. Their business models are not sustainable with wages prevailing in America. In industrial societies, rapid economic growth and inflation benefit the rich faster than they benefit the poor. In other words, when rapid economic growth begins to occur, economic components that benefit the rich rise more steeply than the components that benefit the poor. This phenomenon widens the economic divide between the rich and poor. Therefore, most communist governments intentionally seek gradual economic growth. Unlike capitalist states, socialist states wish to control key industries and carefully restrict economic growth to smaller increments. To communists, GDP and economic growth rates are ideologically less important than the welfare of the starving proletariat. Therefore, it would be inappropriate to compare growth rates in parallel while evaluating the performances of capitalist and socialist economies. Neither communism nor capitalism in their present forms have the functional sophistication to be able to help nations maintain independently sustainable economies. In fact, both types of economic operating systems have their share of glitches, and bugs. However, until a better economic system is devised, communism and capitalism should both remain as unviable alternatives within the world’s ecological system. In the last century, economic research was hampered by politicians who failed to see communism and capitalism as purely economic issues. By about 1960, the economic issues relating to capitalism and communism began to be politicized in international circles. Instead of amicably sitting down at a round table and objectively examining the pros and cons of these two economic systems, politicians were trying to find a military solution. Copyright © 2009 by Shivaprasad Srikantia. All Rights Reserved.
  8. 8. Here was an economic issue that politicians were trying to solve using military might. Instead of getting top economists from America, Europe, and Asia to take a serious look at the flaws within capitalism and communism, Henry Kissinger was busy closing the missile gap between America and the Soviet Union. There have been serious allegations from socialist groups that governments in third world countries are being corrupted by multinational corporations. Fanatics of socialism often pointed out that capitalists had played a major role in corrupting socialist governments of third world nations. Poorly paid bureaucrats in socialist states had been found to accept bribes from capitalists. Due to widespread capitalistic corruption in the international political arena, socialism was never given a fair chance to succeed. Copyright © 2009 by Shivaprasad Srikantia. All Rights Reserved.