The Financial Crisis&A Father Who Cares • Ithaka Fellowship • January 2009
In the Last Year… • Failure of: • Bear Stearns- Investment Bank • Lehman Brothers- Investment Bank • Fannie Mae/ Freddie Mac- Mortgage Providers • AIG- Insurance • Wachovia, Washington Mutual, Indy Mac • Near Collapse/ Bailout of • GM, Ford, Citigroup, Bank of America
Signs of the Times • $50 Trillion+ total national debt • $10 trillion+ in government debt • Personal savings rate is negative • Oil moves from a record high to decade low in 8 months • Unemployment nearing 10% • Money supply increased by 70% since Oct* • Housing Market collapse/ Foreclosures • $Trillions in bailouts have been earmarked by the Federal Government • Iceland Bankrupt • Global Bailouts • Federal Funds Interest Rate Targeted at 0%! • Debt-GDP ratio over 300%= 3rd world nation state • *estimated
Symbols of the Times • $50 Billion Ponzi Scheme • U.S. Treasury Secretary Personal Income Tax issues • $150 Million Presidential Inauguration • Yankees Keep Spending hundreds of millions
Main Thesis: • The current global financial system is inherently unstable, unethical, and has fueled the fires of greed and idolatry that are rooted in every human heart. It permeates every crevice of society physically and spiritually and needs to be abolished and reformed immediately for the short and long term health of God’s creation.
100 Person Global Village • 60 Asians • 14 African-American • 50 do not have reliable daily food • 30 suffer malnutrition • 2 have a college education
Global Wealth • 50% of wealth held by 2% of adults • 37 million Americans live in poverty • Of the top 100 economic entities, 51 are corporations and 49 are countries • 60% of world pop. (3.5 Billion) receives 6.3% of total world income • Per capita income of Third world countries $1,200. (4.6 Billion) • Per capita of rich countries is $26,000 (900 million)
3rd World Debt • 1970- $62 Billion • 1980- $481 Billion • 1998- $2 Trillion
Ultimate Monopoly • Where does “The Banker” get his Money?
“If the American people only understood the rank injustice of our money system, there would be a revolution before morning.” • President Andrew Jackson- 1829
“There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” • President John Adams
“if the foundations are destroyed, what can the righteous do?” • Psalm 11:3
A History of the Financial System&The Ethics of Money Production • Real Trade • Direct exchange of useful goods • Commodities as a Medium • Money promotes market expansion • Available, durable, moldable, intrinsic value • Every modern currency est. as a unit of weight of gold or silver
Money Warehousing • Warehouse does not owe, it stores • Bailment contract vs. debt contract • Homogenous goods open the door for embezzlement • Grain • Money
Temptation to Counterfeit • Increase in money supply (Inflation) • Changes distribution of wealth • Alters the structure of relative prices • Permanent changes in income distribution • Hidden Tax • Bid resources away from genuine owners • Perversion of genuine money production
Legalized Counterfeiting • Government Paper Money • Fractional Reserve Loan Banking • Establishes a permanent partnership between government and banks • Lobbyists & politicians laxed the laws to treat deposits as credit vs. bailment
1694- Bank of England • Financial Revolution • Right to Issue money from gov. to private banks • 1.2 million pounds to 885 million in a century • Direct Taxation of the people • Two major functions of a Central Bank • Finance government deficits • Cartelize private banks • Alleviates run on the banks
1815- Rothchild Coup • Nathan Rothchild spreads false rumors that Napoleon had won Battle of Waterloo • Would become biggest bank in the world after buying British bonds on the cheap.
1830s- Andrew Jackson • Eliminates Hamilton’s Central Bank • Established free trade for the last time • Paid off the federal debt for the last time • Vicious fight with private bankers • “The bank is trying to kill me, but I will kill it.”
1862- Lincoln & Greenbacks • Gov. issued paper money • Represented man-hours vs. gold • Financed Civil War • Assassinated in 1865
1881- James Garfield • “Whoever controls the volume of money in any country is absolute master of all industry and commerce. And when you realize the entire system is very easily controlled, one way or another by a few powerful men, you will not have to be told about how periods of inflation and depression originate” • -Assassinated 4 months into office
1890-1900 Wall Street Diminishing • Losing dominance over the banking system • Post- Civil War dominance waning to State Banks • State banks now with more than 50% of business.
Robber Barons • Morgan- Finance • Carnegie- Steel • Rockefeller- Oil • They didn’t build. They bought • Hated competition • Money “Trusts” • Dominated entire fabric of the economy
House of J.P. Morgan • Started as banker during Civil War • $3.50 rifles for $22 • Built extraordinary political clout • Trusts- concentrated money in the hands of a few • Controlled railroads • Progressive spirit
Bank Panic of 1907 • Rumors that major banks were insolvent • 1900-1907 propaganda • Public stages a run on the banks • Morgan imports $100 million worth of gold from Europe • “The people” now desire banking reform… • Money Trust caused the panic
Trilateral Commission • Bilderbergers and New World Gov. • Multinational consolidation of commercial and banking interests • Goal to control 4 centers of power • Political • Monetary • Intellectual • Ecclesiastical
2 Steps in Cartel-Gov. Regulation • 1. Pass the Bill and establish the structure • 2. Select the proper personnel • Morgan Empire in control of the Fed • Benjamin Strong as Fed Chairmen until 1928
Jekyll Island • 6 of the most powerful groups represented • Secret meeting • Competitors in alliance • Aldrich Bill turns into Federal Reserve Act
1913- Federal Reserve Act • Passed through Congress 3 days before Christmas • Private central bankers win a 100 year war • “Elastic currency”- Fedspeak begins • Authorized central bank to create $$$ • Financial system turned over to profiteers • Obtain greatest profits through use of other people’s money • Institutional usury
The Federal Reserve is Born • NOT owned by the government • 12 regional Federal Reserve Banks • Fractional Reserve Banking • Monopoly on the issue of all bank notes • National banks forced to become members of the Fed • No more need for gold • 10% reserves requirement • Immediately doubled $$ supply- World War I
Federal Income Tax • Previously deemed unconstitutional • 1913- Sixteenth Amendment w/ Fed Reserve Act • Congress shall have the power to lay and collect taxes on income • Tax code was 14 pages • Today the tax code is 17,000 pages • IRS employs 144,000 • Pays interest on the National debt
World War I • JP Morgan sole underwriter of British/ French bonds • Bonds floated in U.S. to pay for arms and goods from America • Morgan now has enormous stake in Britain/ France victory • U.S. enters war
Gold Stock is Nationalized • Americans weaned off of gold • Gold exports prohibited • Gold reserves tripled to 74% • Confiscation of private gold
The Great Depression • Stock market crash in 1929- largest bank run in history • Fed had made money plentiful in “Roaring 20s” through low interest rates • Robber Barons promoted markets • Common man can buy stock on margin • Gold flowing to U.S. • Low rates causing inflation • 1929-1933 money supply contracts 1/3 • 1/3 of banks close • Federal Reserve Scheme Failed
FDIC- Shell Game • Federal Government provides backup money to prevent bank failures • Not really insurance • Payoff- small banks • Selloff- arrangements made for a large bank • Bailout- “too big to fail” • FDIC covers all bank deposits • Wealthy investors are fully protected
FDR- New Deal- Keynes • Alliance of Rockefellers • Lehman & Goldman Sachs • Permanently off the gold standard in early 1930s results from annihilation of the currency • Federal Reserve Notes are legal tender • Fannie Mae created
More Taxes • Accounts receivable tax, building permit tax, capital gains tax, corporate income tax, unemployment tax, Medicare tax, real estate tax, property tax, road usage tax, social security tax, telecom tax, vehicle sales tax, sales tax. • 40% of avg. citizens income goes to taxes
1971 Bretton Woods • Foreign investors doubt solvency of U.S. • Viet Nam War had plunged U.S. into debt • Nixon takes the U.S. off International gold standard • Oil quadruples in the 1970s • Foreign creditors threaten to exhaust gold reserves by turning in paper dollars • Fiat Currency globally • Currencies now float in the market in competition • Currency manipulation is born
Modern Events • Internet • Repeal of Glass-Steagal Act in 1998 • Stock Market Bubble in 2000 • Housing Bubble
Housing Saves the System • New Borrowers needed to keep new debt-money afloat • Transfer of wealth from public to banks • Public took risk, properties appreciate • Banks created money and lend it to the people • We spend the money to prop up economy • HELOC & credit cards • Banks own the property and we are on the hook to pay back inflated prices
Financial Tsunami • Inflation and deflation collide • Money supply pumped up with new money as loans • Defaults extinguish money supply • Stagflation- price inflation without economic growth • Fed needs high rates to attract foreign $ • High interest rates create more housing defaults • Defaults extinguish money supply
The A-Bomb- Derivatives • A bet on the movement of a security • Example of 2 people flipping a coin for a trillion dollars • 97% of bank held derivatives in the 5 largest banks • Estimated at $200 trillion for U.S. Banks
Credit Default Swaps • Buyers and sellers place bets on the likelihood that loans will default. • Insurers are risk counter-parties • Insurers backed corporate bonds backed by subprime mortgages • Insuring against a collapse in the housing market
Bailout • Bailout legislation is smoke and mirrors • We are propping up derivatives gone bad • Fannie Mae, AIG, Banks • Massively debasing the currency • Deflation then inflation • Fighting inflation with more inflation • Dollar headed for collapse…?
Summary Conclusions • Free markets work, but only when the foundation is laid appropriately. • International private bankers create money and control credit and hence, control human society. • Power of lobbyist bribes have influenced the entire social structure. • Dollar is dead. The economic system has been destroyed.