The High Price Of Wall-Street's 'Puffed-Up' Money Machine


The market’s recent plunge to new closing lows complicates the recovery picture for many market bulls, including people who believe the regulatory reforms underway will eventually cure whatever ails us. Recent market action — including the May 6 ‘Flash-Crash’ — should be unsettling to individuals who think free market mechanisms are all we need. The market’s repeated lurches to the downside suggest a growing suspicion that neither free market mechanisms or regulatory reform will solve our gargantuan financial problems. While we need regulatory reform as well as legitimate financial freedoms, our greatest need is for a new financial architecture that disfranchises the illegitimate growth of money in financial markets — “puffed up money” that dilutes the value of honest wages earned by workers engaged in productive enterprises.

Financial markets have created far more paper wealth than justifiable by any honorable logic. Much paper wealth is little more than a future claim against the income, assets or ownership title of others. Wall Street elites have devised surreptitious ways of growing their ownership claim on world assets. They aim to make workers worldwide capitulate sizeable portions of their wage income as governments increase taxes to pay interest on vast amounts of sovereign debt owned by elites. Governments bail out major banks because elites use big banks to loan more funds to governments than governments can service long-term under current taxation norms. Once this situation is priced into bond markets, governments will pay higher interest on sovereign debt. Thus, elites will be able to use the government’s payroll deduction power to collect from workers the tributes gradually laid on them — tributes disguised as “entitlements” and “national defense.”

It should anger every middle class investor that this situation matured as elites created and then capitalized upon disequilibrias in financial markets — disequilibrias that allow them (whether long or short) to grow leveraged money rapidly, then loan it back to governments. One need only look at the profits of Goldman Sachs (in spite of massive employee compensation) to understand the consequences of the trading game!

Counterfeit Money Traded For Your Money

Essentially, financial elites have been running a massive counterfeiting operation, expanding the value of paper assets then cashing in these assets in exchange for the earned wages people save in retirement accounts (i.e., this is what happens when mutual funds buy shares of stock inflated by the steady force of monthly payroll deductions for retirement investing.) These same elites are allowed by their financial institutions to use treasuries as collateral in buying up other people’s businesses, thus gaining greater control over labor markets. Furthermore, these people use treasuries as collateral in gaming commodity prices.

We’re continually reassured about the reasonableness of governments borrowing their way to recovery because so much money is bid for treasuries offered at low rates. But what does this evidence if not the fact that some interests are making piles of money fast. Even more disturbingly, it suggests that hidden interests are motivated to increase the level of their claims against the U.S. Treasury; and hence, against working people. Why? Because stealthy elites want to hold claims on future title to public wealth. These claims will be exercised when an economic sovereignty crisis forces the U.S. government to collateralize treasuries with public lands and natural resources. This is how America is being taken, just like Thomas Jefferson prophesied! Not by war machines. Not by terrorists. But by debt and the blindness of the public mind that accompanies debt.

It Matters How Money Is Made

The day is coming, thank God, when people will realize that the earning of money through honorable, constructive contributions is different than merely acquiring money through shrewd operations, adroit speculation or passive investment. The key to a better America is not more money — there’s already too much money sloshing around in financial markets. What we need is morality and wisdom to help people maximize the value of productive contributions.

Sustainable wealth reflects the value of benefits over total costs, externalities included. Real wealth for society comes from prudent human labor and the wise development of natural resources. Global well-being does not come from inflating paper asset values; that just elevates the power of some people’s claims on other people’s labors and assets.

Modern Warfare: Financial WMDs

Think of it in terms of war: Modern military engagements are costly and large land acquisitions unlikely; for territorial claims by nations are hardened and documented. Thus, to get the wealth of leading nations, elites must conquer through the banking system. (The military is still used to change the leadership and infrastructure in second-rate nations.) If the wealth of the United States is to be transferred between hands it is best accomplished in financial markets where the soldiers are not infantrymen but Ivy League graduates. Many of these Ivy Leaguers are paid high six-figure mercenary bonuses for helping ‘kings without thrones’ conquer the world by acquiring ownership title or shareholder control of corporations and commercial properties. Bit by bit private sectors are taken over by investment fraternities with unspoken understandings. In one treasury offering after another, the government is sold to the highest bidders, such bidders receiving promissory notes, in effect, that taxpayers and natural resources will be auctioned as well.

This is your government, America — a government that is selling you out. This government promises liberty while being the servant of endless corruptions. The U.S. government has been infiltrated by agents of elites and hijacked. If the most dangerous actors are not the people behind debt terrorism, who are they?

The work to recover legitimacy and justice will not progress easily. One important step involves relinquishing a great lie; namely, the lie that promises ‘something for nothing and your prosperity for free.’ Financial stooges promised us an ‘Alice in Wonderland’ fantasy where we live and retire high on the hog, helped by Wall Street funds that double magically each decade. We didn’t want the burden of earning so much money, for that would require too much work. Then, too, government failed to do anything prudent to replace the sham with a sustainable market architecture, government’s inaction seemingly excusing the illegitimacy of market dynamics.

Changes Are Coming

When we finally decide that nothing less than honorable money will do, we’ll be on the road toward national healing. Go tell that to the lobbyists, to the pharmaceutical companies, to the defense contractors and the other big interests. Prepare to get laughed down the street. This makes it apparent that nothing less than worldwide catastrophe will set the affairs of nations straight again. Wait for it. Prepare wisely for it, for it will tarry until later on. We will first go to the economic brink and be rescued stunningly at what appears to be our Waterloo. The dangers of the brink will make it possible for international bankers to get their desired terms — difficult terms for us — in exchange for keeping sovereign states afloat. Nevertheless, the changes to be enacted will appear so massive that much of the world will assume the solutions are in. There will be a tremendous market party. People will give gifts and rejoice. Elites will be declared the victors and the benefactors of humanity.

But wait a little longer. The global agreements will be filled with new deceits. Suspicions will rise and solutions will not hold for more than a few years. Then, everything will come unglued. Don’t despair, for when that trouble finally passes a better day dawns — a day of prudent money use. With a hope like that, recent market wallops don’t feel so bad.