U.S. Financial Crisis


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U.S. Financial Crisis

  1. 1. AN AMERICAN FREE PRESS SPECIAL REPORT The U.S. Financial Crisis: WHY WE ARE WHERE WE ARE AND WHAT WE CAN DO ABOUT IT What Can Average Americans FED CHAIRMAN BEN BERNANKE Expect to See in Near Future? largest debtor nation the world has ever By Mike Finch seen. In only 20 years we owe the world over 13 trillion—with a ‘T’—dollars. any prominent economic M That’s a bad number, but what’s worse is analysts are predicting bear our national debt is increasing at the rate markets, recession and of one trillion every 15 months. It’s sim- even possibly a global de- ple arithmetic at how fast it’s going to go pression in the years to come because of up, but its pretty terrifying arithmetic,” banking and federal mismanagement. Rogers said. “It does not take a genius to “We think that the markets could de- figure out that it’s a currency that is cline 50 or 60 percent. We hate to say going to be going down for some time to something so somber, but it’s not the time come.” to be optimistic or pessimistic, it’s the Rogers’ outlook has not changed time to be realistic. Our whole system since 2007; in fact it has gotten worse. has been built on credit expansion—we “I’m extremely worried,” Rogers said have to grow credit year after year in in a February interview with CNN order to keep things going. The economy Money. “I have been for a while, but I is not going to grow, it’s going to suffer just see things getting much worse this recession, and once it enters recession it’s time around than I expected.” going to cascade on itself,” David Tice of Rogers said that the Fed’s attempts to Prudent Bear Fund said in a 2007 televi- save the country from a recession are in sion interview. fact making things worse. The market has not yet come close to “Conceivably we could have just had the 50 to 60 percent devaluation mark, recession, hard times, sliding dollar, in- potentially because of the maneuverings flation etc., but I’m afraid it’s going to be of the Fed. But Tice primarily blames the much worse,” he said. “Bernanke is Federal Reserve for the devaluation of printing huge amounts of money. He’s the dollar. out of control and the Fed is out of con- “The Fed screwed up,” Tice said. “The trol. We are probably going to have one fed should not have kept interest rates so Formula Saves Big Bucks on Mortgage of the worst recessions we’ve had since low in the past. We should have experi- the Second World War. It’s not a good enced some mini-recessions along the applied to the loan grows as the interest ou can save big bucks on Y scene.” way. Right now the bubble has gotten so portion drops. That’s why it’s best to do your house with loose Rogers looks at the Fed’s willingness big . . . that it’s going to be very traumatic this early in the game. change. Round figures will to add liquidity to an already inflationary [when it bursts].” As homebuyers grew wise to this, be used here. Say you pay environment and sees the history of the Billionaire financial commentator some banks inserted a clause in their $300 a month on a 30-year mortgage. 1970s repeating itself. One example of and Ron Paul supporter Jim Rogers also loan agreements that rendered early Your amortization schedule shows that, an area of the Fed’s mismanagement is predicted a recession in a 2007 interview payments moot for the first one or two on your first payment, $287 goes to in- how they are dealing with bailing out the with the Financial Times. He had been years. So, in settling on a home pur- terest and $13 to equity. So, write a housing lenders. predicting a big recession for about 10 chase, ask if the lender has such a rule check for $313 and you have knocked This month Bloomberg.com broke years (as has AFP), and is finally seeing and how long does it apply. an extra month’s payment off your bal- down Rogers most recent interview his predictions come true. He blames If you are already paying for a home, ance. Do this every month and your about an example of the Treasury De- both the federal government and the Fed- ask your bank the same question, get an house is paid for in 15 years, not 30. partment’s mismanagement and money eral Reserve. amortization schedule and start making Of course, as the months and years creation. “The U.S. dollar is a terribly flawed “extra” payments. go by, the share of your payment that is “The U.S. Treasury Department’s plan currency. As recently as 1987 the U.S. was a creditor nation. We are now the See EXPERT’S SEVEN-POINT, page B-6
  2. 2. B.2 AMERICAN FREE PRESS • August 2008 THE U.S. FINANCIAL CRISIS: A SPECIAL REPORT FROM AFP The U.S. Dollar vs. the Euro: Predicting How Low Will it Go met as they have tried to absorb some of the loss rather By Pat Shannan than pass through the price increases to consumers. hen currency exchange rates change, busi- W A few European shops and restaurants have refused to nesses must adapt quickly. In this era of accept dollars from American tourists this summer be- international trading, knowing how a cause the business owners don’t know what the exchange weaker American dollar is likely to affect will cost them when they go to the bank the next morn- one’s business may avoid some critical mistakes. ing. Others have simply added an extra 5% tariff over The dollar has shown continued weakness against and above the known exchange rate of that day in order other currencies as well, including the British pound, to protect against that unknown of tomorrow’s rates. In Australian pound and Japanese yen. However, the most some countries in the last century, the hyper-inflating dramatic losses have occurred against the euro. From its currency got so out of hand that people were paying for low of 84 cents in July 2001, the euro has risen steadily their restaurant meals at the time they ordered, fearing in value, stopping just short of $1.60 on July 11, 2008. that the cost would increase before they could finish eat- When it rose to the then-record of $1.29 on Jan. 13, ing. 2004, Jean Claude Trichet, European Central Bank This brings to mind an anecdote from the 1923 post- (ECB) president, signaled mounting concern over the WWI hyperinflation in Germany. A woman was standing euro’s rapid rise by saying “brutal moves” in the dollar in line outside the grocery market holding a bushel bas- and “excessive exchange rate volatility were not wel- ket full of deutschmarks, waiting to buy bread and a few come and not appropriate” and that Europe’s policy mak- other staples. Suddenly, her four-year-old child broke and ers were concerned. His remarks and those of other ran from the sidewalk into the dangerous street. The there no longer is anything behind it to keep it sound, European officials triggered a sharp fall in the euro. young mother set down her basket full of cash and ran and no fiat currency is any more intrinsically valuable However, observers note that talk without supporting ac- after the child, grabbing and scolding him. When she re- than another. tion usually produces only short-term results, and the turned only a half minute later, her paper money was Richard Russell, who is sensitive to changes in mar- dollar continued to trend downward in value. dumped on the sidewalk, and someone had stolen her ket sentiment, commented on his web site July 7, 2008: In recent years, Ferrari, the Italian sports car maker, basket. reported that it is losing money on each car it sells in the This is the ultimate result of any paper currency un- To start with, my instinct tells me that we are U.S., its largest market, because of the falling value of backed by something of intrinsic value, and no fiat cur- moving into an era of momentous events. I believe the dollar. Other European carmakers, including BMW, rency in the history of this planet has ever survived. The that huge changes are being thrust upon us. I don’t Volkswagen and Porsche, have seen their profits plum- term “sound as a dollar” is gone with the wind because think these changes are being recognized as yet. I believe that underlying those changes will be the Is Money the 12th and FINAL Religion? subject of fiat money and the importance of central banks throughout the world. The creation of What Does the Bible Teach About Money? “wealth” through the mechanism of fiat money is basically irrational and yes—immoral. You cannot mandate prosperity through the process of printing money. Yet nations and their politicians and central MONEY: AL L -NE W BOOK FROM banks have been doing this since 1971. My guess T HE BARNES REVIEW is that we are fast moving toward the period in which “the piper will be paid.” That’s the big pic- ture as I see it. THE 12TH & FINAL RELIGION The U.S. dollar index was 120 seven years ago. It is A now 72, a decline of 40 percent. Market participants be- UTHOR R. DUANE WILLING gives you the key to understanding why the illumi- lieve that the dollar will continue to fall against the nated ones of the New World Order need to substitute secrecy for justice. Learn how God euro. Forecasts that the euro will continue its increase Moloch, devoid of any capacity for either mercy or forgiveness, is moving with brute are rampant as the once great American dollar continues force for world control behind the myth called Israel. The Moloch myth conceals the invention of its decline. U.S. firms that export their products to Eu- credit based money. Belief in money drives the human condition to prey on the planet and its in- rope can look for another banner year. U.S. firms that habitants. Money creation has Biblical consequences called usury. The key to usury is hidden in the import from Europe should protect themselves by hedg- legend of the Holy Grail. The covenant obligation to take dominion and prosper in harmony with ing in foreign exchange markets, say the experts. And nature is subverted by secretive organizations. There is talk of Bilderbergers, and various councils and globalist corporations. As if by design, the collective mind remains hypnotized by their Moloch what are the implications for U.S. citizens? One financial magic of central banking with its perpetual (national) debts, money at interest and stock exchanges writer put it this way: “Have you ever seen the Grand and income taxes. Canyon?” Consider yourself forewarned. # Money: The 12th & Final Religion Pat Shannan is the assistant editor of American Free Press. See more Softcover, 193 pages, #508, $17. TBR subscribers take 10% off price above. Order from TBR BOOKS, 645 Pennsylvania Avenue SE, Suite 100, from Pat at www.patshannan.com or www.AmericanFreePress.net. He is the author of One in a Million: An IRS Travesty from AFP. Softcover, 270 Washington, D.C. 20003. Inside U.S. add $3 S&H. Outside U.S. add $10 S&H. Call 1-877-773-9077 toll free to charge to Visa/ or MC. pps., $20. Call 1-888-699-NEWS toll free to charge to Visa/MC.
  3. 3. B.3 August 2008 • AMERICAN FREE PRESS THE U.S. FINANCIAL CRISIS: A SPECIAL REPORT FROM AFP Retail Store Closures Symptomatic ofAiling Economy stores in an effort to cut costs. seems to be suffering the worst impact of the recession. By Pat Shannan Both Sharper Image, known for its high-tech novelty Eddie Bauer, established in the northwest in 1920, has gadgets, and Lillian Vernon, which sells low-cost gifts and ollowing on the heels of the surge of small F shuttered 27 stores already and has earmarked at least two gadgets through it catalog and website, have filed for business closings all over the country, dozens more for shutdown by the end of the year. Ann Taylor is bankruptcy. of chain stores have announced massive cut- closing 117 nationwide; the owners of Lane Bryant, Fash- Other store names, some better known to Americans backs and closings of less productive outlets. ion Bug, and Catherine’s have earmarked 150; Women’s than others, that have closed, are closing or are in a “cut retailer Cache announced “20 to 23”; Talbots knocked back mode” are Zales and Piercing Pagoda from the jew- Among the larger chains, Home Depot said it is closing about 78 last year and will close 22 more this year; Pa- elry industry; Walt Disney, Children’s Place and KB Toys 15 stores due to the slumping economy and poor housing cific Sunwear of California, having closed 74 outlets in for children; Sprint/Nextel and CompUSA in the com- market. This is the first time the world’s largest home im- 2007, has now announced that the remaining 154 are to go puter and electronics market; Macy’s Department Stores; provement chain has ever closed an outlet for performance away in 2008. Movie Gallery and Hollywood Video stores; Wilson’s and reasons, and the move will affect over 1,300 employees. Gap Inc. is closing 85 stores. In addition to its name- the Leather Experts; Lowes and Office Depot. Shoe seller Foot Locker announced a year ago that it sake chain, Gap also owns Old Navy and Banana Repub- Even the great department store chain, reborn in the had begun drastic clearance sales to move out the inven- lic. The company said the closures—all planned for fiscal 1930s through the efforts of one of its founders, James tory of 250 of its stores prior to closing the doors, and 2008—will be weighted toward the Gap brand. Cash Penney, following the crash of 1929, is scaling back CEO William Dillard II announced earlier this year that Both Levitz and Wickes, longtime furniture retailers, in an effort to avoid another wipeout. J.C. Penney’s revival Dillard’s Inc. will continue to focus on closing underper- are going out of business. Wickes, a 37-year-old retailer was one of the great business success stories of the De- forming stores, reducing expenses and improving its mer- that targets middle-income customers, filed for bank- pression Era. Now it could be over. chandise in 2008. ruptcy protection last month. Richard Levitz opened his Meanwhile, the Bush administration and Ben Ber- Late last year the Bombay Company closed all 384 of first furniture store in Lebanon, Pa. in 1910, and the next nanke at the Federal Reserve Bank continue to insist that its U. S.-based stores. The company’s online storefront has generation introduced the warehouse-showroom concept the economy is stable. And they’ll keep telling you that as discontinued operations as well. to its customers in the 1960s. Another furniture retailing long as you’ll believe it. The clothing industry, especially women’s apparel, giant, Ethan Allen, is closing 12 of its more than 300 # Common Cents Solutions Exist to U.S. Energy Crisis crisis is over, that dire warning could literally come true. cific coasts. By Pat Shannan There is no third choice. We cannot purchase enough We went apoplectic at the thought that anyone would oil or gas from other countries, no matter how much mazing how $4 a gallon gas has made disturb the caribou in the remote northern corner of A we’re willing to pay (with shrinking “dollars” many every politician in the country ready to Alaska by trying to drill for oil. don’t even want), to preserve and protect our present help solve the energy crisis, isn’t it? Well, We refused to allow any new refineries to be built in lifestyle. not quite everyone. Nancy Pelosi and the the U.S.—even in places that were desperate to have one. Our present policies are costing us a fortune. They are Democratic leadership in the House of We also refused to build any new nuclear power reducing our standard of living. And they are financing Representatives are refusing to allow a floor vote on leg- plants—even though the evidence is overwhelming that the enemies of freedom. Isn’t it long past time to change islation to allow drilling in the Alaska wilderness or off- nuclear is the safest, most efficient way to generate elec- them? shore. tricity that has ever been invented. Where are we going to get the energy we need? Here The solution to this so-called energy crisis was being We’ve also refused to allow any new pipelines to be are three places we can start: discussed 30 years ago, and the answers are still the built, to import natural gas from Canada. • Coal. The United States has rightly been called “The same. Everyone who can read knows that there’s oil Now, George Bush is getting headlines for finally lift- Saudi Arabia of Coal.” We have enough of the black stuff buried under the oceans and the arctic tundra. We may ing the Presidential ban on offshore drilling. “It’s all underground to supply a major chunk of our energy not know exactly how much. We can, however, be fully Congress’s fault,” the White House declares—hypocrit- needs for at least another century. Let’s figure out better confident that it’s more than we’re getting now. Mean- ically ignoring all that the administration has done—and ways to extract it and cleaner ways to burn it. Sixty years while, any chance of finding how much there is and get- is still doing—to prolong the energy crisis. ago, Germans invented technology to turn coal into oil. ting our hands on it is being blocked by Nancy Pelosi Why didn’t the White House lift the ban seven years Why can’t we do it today? and her cohorts in the Democratic leadership. ago? Why doesn’t it release some of the billions of dol- • Nuclear. There is absolutely no question that nuclear Of course, this is not an energy crisis but a leadership lars worth of oil and gas that are locked up in its “strate- power is the cleanest, safest, most efficient way to pro- crisis, and we have to think back a long way to remem- gic reserves?” duce energy that we’ve ever discovered. Why have we ber when there was a worse example of “leadership” in If you want to lower prices, there’s no better way to do allowed a handful of hysterics to keep us from building Congress. This is the most blatant betrayal of America’s it than by increasing supplies. one new power plant in the past 30 years? interests—and the clear wishes of an overwhelming ma- In regards to the energy crisis, the United States has • Oil and gas. It is absolutely insane not to encourage jority of the American public—that’s happened in years. two choices, and only two choices, before us today. the people and the companies who can produce more en- Once again, we’re permitting Congress to stick it to • We can determine to do everything possible to pro- ergy for us to go out and do so. Instead, we permit a us, and just how much more evidence do we need to see duce more energy here. Despite the negative laments you handful of demagogic grandstanders in Washington to that the crisis is contrived. hear from Washington, there’s a great deal we can do, treat the oil companies like criminals. Instead of prom- For the past 30 years or more, former Alaskan starting here and now, to increase domestic energy pro- ising to seize all their so-called windfall profits, how pipeline Chaplain Lindsey Williams has been citing the duction. Specifics to follow. about we give them incentives to produce more energy? United States government-mandated policies that were • We can face the terrible consequences of doing Insanity out of Washington? What else is new? It’s al- absolutely guaranteed to create an energy crisis in this without. Remember the last time we had gas lines and most like the whole thing has been planned for a long country. Consider: fuel shortages and more than a few people muttered, time, isn’t it? # We prohibited new drilling off the Atlantic and Pa- “will folks be freezing to death in the dark?” Before this
  4. 4. B.4 AMERICAN FREE PRESS • August 2008 THE U.S. FINANCIAL CRISIS: A SPECIAL REPORT FROM AFP Fiat Money: Transferring your wealth to the wealthy—as planned Are you really concerned that Social Security will By Pat Shannan soon be broke? What an out-of-focus worry that is. Some hile the benefits to the money creators go W blowhard senator planted that fear in your mind last year beyond this basic reason, the very purpose so he can claim to have fixed it next year. Note this: no of the invention of paper “money” was to government-funded program will go broke as long as the transfer all production and wealth to the printing presses and credit computers are operating. state and the banksters without payment. Americans have been living in this fantasy world Anything that can be created to infinity with political since June 24, 1968—the day that the banks quietly incentive eventually becomes worthless. There are no ex- closed the window on silver redemption for the lawful ceptions. So while so many of the common phrases in Federal Reserve notes promising to “pay to the bearer on today’s rhetoric are no more than double-speak, there is demand” the designated amount of lawful money. In one that is very real—inflation—and with it we see the short, the banksters reneged on the promise because they destruction of the American economy before our very had created too much paper to possibly redeem with real FORMER FED CHAIRMAN eyes. specie. Such a move did manage to postpone the in- ALAN GREENSPAN Most Americans simply do not understand that gaso- evitable, but now the chickens are coming home to roost. line prices are not up, but that the dollar is down. The re- 12 USC 152: “The terms ‘lawful money’ and ‘lawful to portray) at this time last year. All of it is smoke and cent doubling in the amount of Fed notes necessary to money of the United States' shall be construed to mean mirrors. own gold and silver is but a reflection of the shrinking gold and silver coin of the United States.” Their economic theory states that there are four major value of the paper currency. As more is created, such as The “notes” that have been issued since June 24, 1968 factors that determine the exchange rate between two with the harebrained scheme called “Economic Stimu- (and for five years before) are not lawful because they do currencies: the comparable interest rates; the relative in- lus,” where 130 million American households got $1,200 not offer to pay anything to the bearer. In effect, the “re- flation rates; the comparative level of income; and the or so, nothing is stimulated except the soon-to-arrive hy- ceipt” for the gold and silver in the storehouse was trans- macro policies of the respective governments—with a perinflation. The modern “dollar” is a myth. formed into the entity. A “dollar” was no longer a whole lot of blah-blah-blah in and around each citing. With imaginary money, such things as the “national measurement of gold or silver but a simple piece of We say that there is a much simpler way for Joe Av- debt” and “taxpayer’s money” are imaginary, too. How paper claiming to be the actual dollar. It was sort of like erage in the street to understand why his favorite ciga- can there be such a thing as “taxpayer’s money” when the hatcheck girl telling the patron that she was keeping rettes are now $50 a carton and why he now has to think there is no lawful money circulating in existence? The his hat but that he could now wear the check on his head twice before taking his car out of the garage. There is no income tax funds nothing. Everything is “paid” with the because it was the same thing. government hocus-pocus or gobbledy-gook here: the creation of “money.” The people are “taxed” to maintain Mainstream media “economists” like to write about more paper “money” pieces you insert into the system, the illusion that they are actually funding something and the government’s curbing of inflation and that it is the less each individual piece becomes worth. Very little “paying their fair share” to keep the nation operating. “down” to 4 percent this quarter when it was “up” to education is sufficient to understand this. Nothing could be further from the truth. eight percent (or whatever imaginary figure they want Short term interest rates and trade deficits be damned, fiat money is tyranny, and it guarantees a criminal gov- The Lost Science of Money: ernment. All modern wars are paper money wars. Paper money pays the politicians their lavish profligacy, and they all The Mythology of Money—the Story of Power (except Ron Paul) keep their mouths shut about the fiat system. All the tyrants in modern history did their dirty Stephen Zarlenga’s new book, The Lost Science of Money, work with paper “money.” Governments suppress the traces the money power through three-and-a-half millennia from truth (with control of the press) and oppress the people barter to the euro. This book draws fascinating, previously lost mon- (by arming more agents to enforce unconstitutional etary principles from ancient Greece and Rome, from the experi- statutes) with the power of a paper currency creatable at ence of the Moslems, Venice, the Templars, the Jews, the Bank of will. Fiat money from its inception was created to de- Amsterdam and the Bank of England, plus the Federal Reserve Sys- fraud. tem. The phony monetary system builds the centralized The book also shows that the question of usury is far from set- power within the state and diminishes the individual. It tled, and that monetary reform is more a matter of morality and law bestows all power on the money creators and enslaves than of economics. Zarlenga’s book also demonstrates that a good the people. Paper money, personal freedom and privacy money system must be based in law, not in commodities. The book are incompatible, and while its own inflation will be its also defines the essential elements needed to remove structural in- ultimate destroyer, the process will first take the wealth, justice from our money system. life savings, land and homes from a large percentage of The Lost Science of Money (hardcover, 724 pages, item # 1070, $80—AFPRC Members pay $70) the people. # is available from FIRST AMENDMENT BOOKS, 645 Pennsylvania Avenue SE, Suite 100, Washington, D.C. 20003. Call 1-888-699-NEWS (6397) toll free to order by Visa or MasterCard. Pat Shannan is the assistant editor of American Free Press. See more from Pat at www.patshannan.com or www.AmericanFreePress.net.
  5. 5. B.5 August 2008 • AMERICAN FREE PRESS THE U.S. FINANCIAL CRISIS: A SPECIAL REPORT FROM AFP GOLD STANDARD:The Remedy for Rising Prices? The key to economic growth is savings. Savings al- plies. While it is true that governments have fraudulently By Antonius J. Patrick lows for production which takes place over time. Sav- found ways to debase commodity money throughout his- ings “pays” for the wages, purchases the supplies and s nearly every American is painfully tory, such underhandedness is difficult to do so on a rou- A resources during the period of production before an aware, prices of just about all goods, es- tine basis. The present fiat system (today a feature of eventual good is brought to market. Increases in the pecially fuel and food, have escalated sig- every nation) is a counterfeiter’s, dream. money supply will only dilute its purchasing power. Ad- nificantly over the past year. Even the The “value” of a dollar, under a gold standard, would ditional saving allows for more production and thus, in government, which is loath to admit such be determined by “market forces,” not arbitrarily at the the long run, greater amounts of goods and services. things, has confirmed the obvious with the latest Labor behest of the power elite. A gold standard would benefit Under a gold standard, money (which is gold) cannot be Department report for the month of June showing a 1.1 all, but especially wage earners, retirees, and those on increased without it being mined and minted—an ardu- percent increase in consumer prices. fixed incomes while it would impose a mighty check on ous process. In contrast, under central banking, the Fed- The notion, often put forward by the clueless media, bankers and governments from inflating. eral Reserve can create money virtually costless without that the rise in overall prices is the result of higher fuel One of the great misconceptions of the present era is restraint, by merely printing paper bills. costs is a fallacy. Instead, the rising prices which Amer- The existing political establishment wants nothing to icans are suffering through is the result of the expansion do with a gold standard. Elites understand that if the U.S. of the money supply by the Federal Reserve. “The Federal Reserve is able to or other nations convert to a gold standard, one of their The Federal Reserve is able to do such mischief be- do such mischief because the U.S. chief power-enriching mechanisms would be lost. This is cause the U.S. dollar is not tied to a commodity (gold or dollar is not tied to a commodity why they have tried to marginalize one of this era’s great silver) which thus allows the Federal Reserve, which has proponents of the gold standard, Ron Paul, in his recent monopoly control of the money supply, to increase it ad which thus allows the Federal presidential bid. infinitum. There is no check on such power. Reserve to increase it ad infinitum.” No one should be surprised that in a time when nearly The Fed’s reckless expansion of the money supply (in- every social institution is in steep decline, the lifeblood flation) has been going on since the start of the current of economic life should also be corrupted. Gold has long financial bust as monetary officials have sought to avert since proven to be the supreme monetary medium of ex- a general collapse by bailing out the mortgage industry. that the money supply is needed to be increased to sus- change. It is “honest money” which is why the Estab- The “cost” of the bailout has been higher domestic prices tain economic growth. Nothing is further from the truth. lishment has always sought to discredit it and those who and a fall in the purchasing power of the dollar overseas. Money, by its very nature, is a medium of exchange. have championed it. Until there is a limit put on the nation’s central bank It facilitates exchange, without it, mankind would Until there is a return to a monetary system based on to print money or a different system is put in its place, quickly revert to primitivism becoming completely self gold, American consumers can expect rising prices, eco- price inflation will continue. The only viable solution to sufficient and desperately poor. nomic stagnation and the continual devaluation of the the current situation and the key to sustained economic Unlike any other good, money is not “consumed” in dollar. # growth is a return to a gold-backed monetary system and an exchange such as food or gasoline. Since money is the termination of the Federal Reserve. not consumed, it remains in “circulation.” Thus, increas- Antonius J. Patrick is the pen name of a college professor who lives Under a gold standard, the only way money can be ing its supply will only decrease its “value” (purchasing in the Washington, D.C. area. “produced” is by mining it or converting existing sup- power). 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  6. 6. B.6 AMERICAN FREE PRESS • August 2008 THE U.S. FINANCIAL CRISIS: A SPECIAL REPORT FROM AFP BAD MONEY: Reckless Finance & the Global Crisis of U.S. Capitalism since, has converted the United States into speculator- By John Tiffany type economy, where financial sector firms seek to ex- ith an unconstitutional, privately W tract a profit by the manipulation of balance and income owned central bank, our monetary statements. The goal, seemingly, is to get money without system is based on a dollar that is any actual production of goods or services. based on nothing solid. If it is based The government lies to itself as well as us. As a re- on anything, it is based on debt. sult, we are now $50 trillion in debt. Smaller banks operate on the basis of a “fractional re- Phillips points out that over the last 30 years, incred- serve system” that is nothing else than legalized crime. ibly, “financial services” have nearly doubled, to a record BAD MONEY Our economic system is a house of cards. In a new book, 20% of GDP, while manufacturing’s share has halved, to Bad Money: Reckless Finance, Failed Politics and the 13%, greatly imperiling the economy. Global Crisis of American Capitalism, onetime Repub- Along the way, Washington has provided government Hardback, #BAD, 239 pages, $26. lican strategist Kevin Phillips documents in painful de- bailouts and/or liquidity when big banking barons got Just $23 for AFPRC members. Order from FIRST AMENDMENT BOOKS, 645 Pennsylvania tail how those cards started tumbling. themselves into trouble (e.g. S&L crisis; Citibank forced Ave. SE, Suite 100, Washington, D.C. 20003. No S&H This reality should, in the words of Thomas Jefferson, into technical failure, but allowed to stay open; bailing inside the U.S. Outside the U.S. add $6 S&H per book. wake us up and “fill us with terror.” out junk bond investors by lowering the federal funds Call 1-888-699-6397 toll free to charge to Visa or MC. Yet even now, most of the media refuses to expose the rate etc.). This only encourages bigger problems down disaster facing us. Where are the investigations of the the road. greedy and unscrupulous billionaire speculators? That’s The positive impact of borrowing has declined who gave us the subprime crisis, or, in Phillips’s words, tremendously from the 1970s and 1980s, when such counting those who gave up and quit looking for a job). the “reckless finance,” that brought the market down, monies would mostly be used for useful things like fac- This is the modern equivalent to the coin clipping and sending prices and joblessness up. tory and highway construction, compared to today’s in- debasement of yore, when money consisted of gold You can’t really track these mounting problems by creasingly likely use for increasing leverage for hedge and/or silver coins, says Phillips. watching TV or even reading many of our so-called funds, leveraged buyouts and other forms of speculation. Phillips makes numerous comparisons between the newspapers, which failed to cover the crisis as it was Meanwhile, the likelihood of families experiencing a U.S. today and the Great Depression (e.g., total indebt- building steam from 2002 to 2006, and when it might huge (say 50 percent) drop in income has increased dra- edness was three times the size of GDP in 2007, higher have been stopped. matically from 1970 than the prior record set in the years of the Great De- Deregulation, especially of the banking and financial Our own awareness of our problems has been covered pression), as well as the declines of Rome, Holland, services sector, and privatization policies, started by up with tricky revisions to the CPI (understating costs of Spain and Britain. # Carter in 1978 and continued by all American presidents home ownership) and unemployment measures (not Expert’s Seven-PointAction Plan Makes Good Sense Continued from page B-1. 4. Save and invest. tightening lending standards. Home prices are falling at 5. Elect politicians who will protect our freedoms and the fastest rates on record, while the surging cost of virtu- to shore up Fannie Mae and Freddie Mac is an unmiti- our country’s sovereignty over capital appreciation ally everything else—gas, food, airline tickets, utility bills gated disaster and the largest U.S. mortgage lenders are 6. Buy gold as a hedge against the eroding dollar. and more—is swallowing up $117 billion of economic basically insolvent, according to Rogers. “Taxpayers will 7. Diversify your investments. stimulus checks. And everywhere, the debts are coming be saddled with debt if Congress approves U.S. Treasury Rogers said the commodities bull market has “a long due—massive debts accumulated over decades that can- Secretary Henry Paulson’s request for the authority to buy way to go.” Many other analysts agree. Rogers advised not be refinanced, often cannot be paid and, ultimately, unlimited stakes in and lend to Fannie Mae and Freddie buying agricultural commodities and investing in China cannot even be papered over by the Fed or Congress.” Mac,” Rogers said. “They’re ruining what has been one and the East. In 2007 Rogers moved his family to Singa- Many around the world, including the Royal Bank of of the greatest economies in the world,” Rogers said. pore because he wanted to be where he thinks the action Scotland, are warning of the possibility of a global de- Bernanke and Paulson “are bailing out their friends on will be during this century. Safe Money agrees—energy, pression. Wall Street but there are 300 million Americans that are commodities, overseas investments and precious metals That’s right, it could get worse. Safe Money Report pre- going to have to pay for this.” are the staples of an inflation-ridden market. dicts double-digit global inflation with three “explosive Many share the sentiment put forth by The Last Trum- The maneuverings of the Fed and the government forces” driving inflation. First, the global food crisis; sec- pet Newsletter: could stabilize the economy for a while, but eventually the ond, the world energy crisis; and third the huge emerging “The United States of America is a malfunctioning and bubble will burst. Several economists are saying that if markets that are “growing at a breakneck pace.” dying corporation. The economy of our nation is termi- bigwig decision makers continue as they are now, we are So what can the average reader do in response to such nal, and all indicators reveal that there is great trouble just headed for a major economic disaster within the next 10 dire predictions? ahead.” years regardless of any maneuvering by bankers. Donald S. McAlvany in The McAlvany Intelligence # The current state of the dollar is affecting the economy Advisor has seven “Foundations” to live by: in several ways. 1. Put faith and family first—remember finances are “Our GDP grew an anemic 0.9 percent in the first Mike Finch is an intern for AFP. He has a Master’s degree in journal- ism and is working on his Ph.D. in Communication. At the end of Mike’s in- merely a means to an end. quarter,” Martin Weiss from Safe Money Report said. ternship, he promises he will continue to submit articles to American Free 2. Live within your means—spend less than you make. “Corporate America is shedding jobs, driving unemploy- Press on important, under-reported topics. 3. Stay out of debt. ment claims to the highest level in four years. Banks are
  7. 7. B.7 August 2008 • AMERICAN FREE PRESS THE U.S. FINANCIAL CRISIS: A SPECIAL REPORT FROM AFP Bailout of Mortgage Giants May Kill Bond Market Roosevelt’s New Deal. It was intended to be a private en- By Pat Shannan tity, although “government sponsored,” that would enable “If Bernanke continues to provide Americans to finance buying of homes as part of the ot long ago there was an eruption of polit- N unlimited liquidity to prevent a banking country’s attempt at economic recovery. Freddie Mac was ical correctness because the National system collapse, he risks destroying formed by Congress in 1970, to help revive the home- Weather Bureau named hurricanes after loan market. Congress started the companies to promote women only, and the inevitable result was the U.S. corporate and Treasury bond home buying and their charters give the Treasury the au- that the storms are now bi-gendered. How- market and with it the dollar. thority to extend a $2.25 billion credit line. ever, the coming financial storm could appropriately be If Bernanke acts to save the bond Freddie Mac owes $5.2 billion more than its assets tagged with a name of dual gender—maybe “Fan- market by raising interest rates, today are worth, meaning under current U.S. “fair value” nie/Fred”—as the nation continues its nosedive toward it will only trigger the next devastating accounting rules, it is insolvent. Fair value of Fannie Mae financial Armageddon. assets has dropped 66 percent to $12 billion and may go Far from calming financial markets, the announce- round of shock waves.” negative next quarter. As home prices continue to fall ment by U.S. Treasury Secretary Henry Paulson, together across America, and corporate bankruptcies spread, the with Federal Reserve Chairman Ben Bernanke, that the reality is in a panic mode as he is caught in a “Catch-22.” size of the negative values of the two will explode. U.S. government will bail out the two largest guarantors If Bernanke continues to provide unlimited liquidity On July 14, Treasury Secretary Paulson, former chair- of the country’s housing mortgage debt—Fannie Mae and to prevent a banking system collapse, he risks destroying man of the Wall Street investment bank Goldman Sachs, Freddie Mac—has confirmed what so many financial the U.S. corporate and Treasury bond market and with it stood on the steps of the Treasury building in Washing- watchers have been warning: the financial tsunami that the dollar. If Bernanke acts to save the heart of the U.S. ton and announced that the George W. Bush administra- began in August 2007 in the relatively small “subprime” capital market—its bond market—by raising interest tion would submit a proposal to Congress to make high-risk mortgage securitization market is only gather- rates (the Fed’s only anti-inflation weapon), it will only government guarantee of Freddie Mac and Fannie Mae ing momentum. trigger the next even more devastating round in tsunami explicit. In effect, in the present crisis it will mean na- The United States economy is in the early phase of its shock waves. tionalization of the $6 trillion agencies. worst housing-price collapse since the 1930s. No end is With so many deceivers in print, it is refreshing to read The bailout statement by Paulson was accompanied in sight. Fannie Mae and Freddie Mac, as private stock one of the few who understands and will say it. by an announcement by Bernanke that the Fed stood companies, have gone to excesses in leveraging their risk, Lew Rockwell explains: ready to pump unlimited liquidity into the two compa- much as many private banks did. The financial market nies. It will sound the death knell for the stability of the bought the bonds of Fannie Mae and Freddie Mac be- Place the blame not only on the banks, but also American economy, already hanging by a thread. cause they bet that the two were “too big to fail,” that is, on the institutions that are siphoning off their lia- The Federal Reserve is already the world’s largest fi- in a crisis the government would be forced to step in to bilities for irresponsible behavior, and that would nancial garbage dump. Now it agrees to add to its trash bail them out. be Freddie and Fannie. And who created these? pile another $6 trillion in GSE (Government Sponsred In case you have wondered, “Fannie Mae” comes from “They were created by FDR in 1938 to fund Enterprise) real estate debt. Is this insanity in action or a the acronym FNMA, which is Federal National Mortgage mortgages insured by the Federal Home Adminis- planned collapse ? Association, created in 1938. “Freddie Mac” was derived tration. They were used by every president as a Yet the disaster in the two private companies has been from Federal Home Loan Mortgage Corporation means to achieve this peculiar American value that obvious to some for five years or more when grave ac- (FHLMC, 1970). every last person must own a home, no matter counting abuses were made public. In 2003, William The scale of the latest wave to hit, the collapse of con- what. So they were given the legal permission to Poole, then president of the St. Louis Federal Reserve, fidence in the two government-sponsored entities, Fred- purchase private mortgages and make them part of publicly called for the government to cut its implied guar- die Mac and Fannie Mae, is a harbinger of worse to come their portfolios. Still later, under LBJ and Richard antee of Freddie Mac and Fannie Mae, claiming then that in what will be the most devastating financial and eco- Nixon, they became public companies and sold the two lacked capital to weather a severe financial crisis. nomic catastrophe in United States history. The impact stock. Poole, whose warnings were dismissed by then-Fed will be felt globally. Chairman Alan Greenspan, called repeatedly in 2006 and While he is getting praise in the financial media for The U.S. government passed the law creating Fannie again in 2007 for Congress to repeal their charters and his “innovative” and quick reactions to the unraveling cri- Mae during the Great Depression as part of Franklin D avoid the predictable cost of a huge bailout. sis, those in the know say that Fed Chairman Bernanke in # Experience the power of consumer patriotism when you read Roger Simmermaker’s much-heralded How Americans Can Buy American WHILE MANY HAVE ARGUED PASSIONATELY that it is time to put America strategies outlined in this book help keep profits and jobs within our and Americans first, author Roger Simmermaker shows us how in the borders. We only vote once every two years in November at the polls, third edition of his popular book How Americans Can Buy American: but we vote EVERY DAY at the stores and on the Internet. 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