The era of global cooperation between Communism and monopoly capitalism begin with Khrushchev¹s announcement in 1959 that the Soviet Union would no longer play the leading role in the Communist world takeover but would allow each Communist country to develop in the way it wanted. In the late 1970s, following the Great Leap Forward into famine and the chaotic Cultural Revolution, Chinese Premier Deng Hsiao P’eng opened China to foreign development in a 200-mile strip along China’s coast. Negotiations between Wall Street firms and Communist China are obscure to us at this point, but we know that Goldman Sachs played a leading role in negotiating Western investment in China, and Goldman Sachs invested in Chinese banks. Sam Walton was one of the favored investors in Communist China. Wal-Mart built hundreds of factories in Communist China in the 1970s and 1980s and became the low-price leader in the retail industry due to its advantage from hiring low-cost labor in China. Communist China became the location of a new gold rush for multinational corporations when given special provision by the Chinese government. Although this was presented to the public as “free trade,” China maintained close control over which firms were granted access.
This sell-out to Communist China was a stealth program of deception that was negotiated in secret and never announced to the public. No one voted in the United States to build up Communist China. This arrangement was merely one episode in a long history of Western leaders selling out their people to globalism, the New World Order.
The Era of Cooperation continued with the opening of the former Soviet Union to Western corporations under the Reagan-Gorbachev agreements. Over 200 Western corporations were given special access to Russia under these treaties. Under Reagan and Thatcher, multinational corporations were encouraged to enter every nation deemed to have a suitable infrastructure for capitalist development, the so-called emerging markets. The global controllers sold this to the public as development of nations, but it was really intended to be the destruction of nations and favored status for multinational corporations. The negotiation of free trade agreements then created a global framework which prevented nations from legislating any aspect of trade, including health regulation, environmental standards, or worker rights. Free trade agreements are a supergovernment designed to destroy national sovereignty and further the expansion of global monopoly capitalism. The Era of Cooperation was actually a period of economic war by favored multinational corporations against national and local industries. How America waged economic war against Mexico by passing NAFTA is the subject of our video, The NAFTA Conspiracy.
For nations with a history of Democratic Socialism, including the United States and the nations of Europe, a model of cooperation between government socialism and monopoly capitalism had already been established. For socialists, this is the “golden goose” model, in which corporate profits are taxed and redistributed to the Left’s favored supporters. This model of private/public cooperation also allows corporations to lobby for corporate welfare, tax breaks, investment credits, and other special treatment from governments. Republicans and Democrats in the United States competed for power and influence under this arrangement, but neither party seriously questioned the basic assumptions of state-supported capitalism and the deficit spending philosophy of John Maynard Keynes. The two parties competed to see who could loot the Treasury while in power, but neither party opposed government subsidies for big agriculture and big industry, the multinational corporations contributed to both parties, and both parties generally supported the framework of the welfare state. Only the dupes at the bottom of the pyramid continued to argue about “left” versus “right” in this Era of Cooperation.
The multinational corporations were required to adopt Neo-Communist policies of environmentalism, multiculturalism, and feminism and to establish quotas for minority hiring. The subversive policies of feminism and multiculturalism were approved as Communist fronts by Joseph Stalin at a Communist Party Politburo meeting in 1942. In retrospect, this was one of the fastest and easiest Communist revolutions in history. The rapid adoption of Communist policies gave the global Communists at the UN, the European Union, and in the Democratic Party hope that capitalism could be regulated to Communism¹s ultimate benefit even as the world entered a new phase of capitalist dominance. The new Era of Cooperation featured Communists as leading global spokesmen through UN agencies, the negotiation of free trade agreements, the prominence of Wall Street bankers as sources of capital investment and market penetration, old-fashioned Roosevelt welfare-state socialism in the socialist democracies, and the stealth establishment of the North American Union to take over the governments of Canada, the United States, and Mexico.
The Communist state-owned enterprise model of the old Soviet Union did not completely disappear. Such state enterprises still exist in China, Cuba, North Korea, Vietnam, and Venezuela, but the multinational corporate model became the leading model around the globe as it had access to capital investment and superior technology, and it promised the economic growth that Communism had never delivered. One great advantage for corporations entering China was, they could take advantage of China¹s slave labor system. If you are not aware of how Chinese laborers are treated, Jennifer Baichwal’s films, particularly Manufactured Landscapes, will inform you. Reviews here and here are a starting point.
As the multinationals spread around the globe and exported their products back to the United States and Europe, high price levels in these countries and low labor costs at their factory sites served to increase corporate profits. This era appears to be the golden age of capitalist global expansion and a victory for the old American/British axis of economic imperialism. But the corporations had been infiltrated with a Communist orientation (“changing the system from within”), and trouble was brewing just below the surface due to the tensions and dislocations the global economic system was causing. Fundamentally, the global financial system can only continue to survive as long as people are duped into supporting it. More importantly, it crashed in September of 2008.
Losers in the Era of Cooperation included small business, the Western working class, and any coherent society with a nationalist or historical cultural orientation. Islamic terror groups organized to drive Western imperialists out of Islamic countries. Nuclear weapons proliferated. There were currency crises in Asia, job losses in the United States, waves of migration and dislocation, a race for control over African natural resources, an oil grab, and declining market share for many national corporations as they faced foreign competition. U.S. jobs were outsourced to China and India, the Asian economies grew, and NAFTA allowed big agriculture to dump U.S. corn into Mexico and turn Mexican farmers into migrant farm workers.
With no real loyalty to the United States as their country of origin, all of the U.S. multinationals outsourced jobs to foreign countries. This outsourcing included design, production, accounting, and even customer support jobs. The multinational corporations did not create a single job in the United States; instead, over 5 million U.S. jobs were exported. In 2008, the United States lost 2 million jobs. As long as outsourcing affected only the working class, it was generally accepted by the “liberal elites” without protest.
The Era of Cooperation created a floating global class of experts. Unemployment reporting was adjusted to make the number of unemployed workers in the United States appear small. The Democratic Socialists were now relying on a coalition of feminists, minorities, environmentalists, government bureaucrats, and teachers for their votes and largely abandoned appeals to white male laborers. However, surprisingly, many working class people appeared to be unaware that Bill Clinton had exported their jobs to Mexico through NAFTA and to Communist China by way of the World Trade Organization, and many ignorant working people continued to vote against their own futures by voting Democratic. The Democratic Socialists approved of the build-up of Communist China’s economy. A few sharp leftists demonstrated against the World Trade Organization meetings, generally on the issue of environmental regulation and worker rights rather than China’s cooperation with Wall Street and the multinationals. The Era of Cooperation was really of the level of a Stalin-Hitler pact, and it should have sent shockwaves of protest through the Left. Perhaps the Left believed that global capitalism would eventually fall under their control or become irrelevant as the global economy developed. As long as the economy appeared to be growing, elites in both parties seemed reasonably happy.
The Role of Wall Street in the Global Economy
The leading globalist politician of the era was Bill Clinton. Hillary Clinton sat on the board of Wal-Mart and led feminist delegations to Communist China for indoctrination. Clinton’s campaigns were financed by Wall Street and Communist China, and Clinton brought China into the World Trade Organization. Though he posed as a socialist, Clinton was under the control of Goldman Sachs CEO Robert Rubin, and Clinton often traveled to Wall Street to make speeches and raise cash. Clinton transferred missile technology to China in return for their illegal campaign contributions. He appointed Rubin as his Secretary of the Treasury, and Rubin presided over the takeover of assets in Mexico by Citigroup and Goldman Sachs. Clinton’s public cooperation with global gangster capitalism was an embarrassment for the Democrats, but Clinton maintained his popularity with the Left, perhaps because of their lack of morality or intellectual capacity or ideological commitment.
The movement of Wall Street insiders to the U.S. Department of the Treasury was one of the great legal crimes of the late twentieth century. Robert Rubin and Henry Paulson directed the global financial system and exploited it for the benefit of Goldman Sachs, Citigroup, other favored Wall Street firms, and any foreign leaders who were willing to betray their people.
The Problem of Fractional Reserve Banking
The U.S. banking system is based on fractional reserve lending, which allows banks to create credit (debt) by lending from 10 to 30 times their deposit base, keeping a fraction (usually about 8 percent) of their deposits as reserve to fund their cash needs (account withdrawals). The U.S. money supply expands through loans, which is credit created out of nothing. Loans are a kind of counterfeit money created by an accounting entry and a promise to repay the loan, with interest. The U.S. banking system requires the constant creation of new credit to keep the system functioning. New debtors must constantly be found to keep inflating the money supply and keep banks profitable. If no new creditors were to appear, the banks would go out of business. Bank lending itself is inflationary and devalues the currency. This system has been working for hundreds of years to the profit of bankers and the detriment of consumers (dollar holders). Many have noticed that the inflated prices of assets over time are merely the measure of the lower value of the currency over time. How long can this system continue to function?
British financial analyst Chris Cook observes:
“Exponential economic growth required by the mathematics of compound interest on a money supply based on money as debt must always run up eventually against the finite nature of Earth’s resources.”
(From Ellen Brown, “Financial Meltdown Conspiracy: Bank Scam Collapse.”)
The fundamental problem of credit creation by banks is merely background to the combination of policies that created the present financial crisis. If well managed, the system could perpetuate itself long into the future, as long as people take out new loans to keep the banks afloat. But two policies, the requirement that mortgage lenders extend loans to uncreditworthy borrowers and the packaging of mortgages into bundles by Wall Street banks, brought on the present global financial crisis.
Deregulating Wall Street
The Gramm-Leach-Bliley bill of 1999, which repealed the Glass-Steagall Act, turned Wall Street banks into predatory cash machines. Glass-Steagall was passed during the Depression. It was designed to keep commercial banks from acting as investment banks, which create insurance products and investment securities. By removing this “wall” between commercial and investment banking activities, commercial banks put their depositor accounts at risk by taking on investment banking activities. Wall Street firms acquired insurance companies and invented new derivative products. The Gramm bill allowed bigger Wall Street firms to get bigger and more leveraged. The increase in new derivative products meant that Wall Street was growing the financial economy far out of proportion to the real productive economy. Henry Paulson led a lobbying effort, while he was CEO of Goldman Sachs, to prevent legislation that would have restricted the ability of Wall Street firms to increase their leverage.
Those who opposed the Gramm legislation warned that big firms would have too much economic influence, they would become too big to fail. The concentration of wealth at the big Wall Street firms was a major factor in causing the worldwide crisis. This is exactly the present policy of the Treasury and the Fed, that the big Wall Street firms are too big to be allowed to fail. That is why they are pursuing the bailout strategy rather than allowing failing companies to enter bankruptcy. The crisis is a crisis of big capitalism rather than small-scale capitalism (capitalism as competition among many competing small businesses). Wall Street firms spread many of these risky practices to major banks around the world, particularly in Europe, and it unloaded its mortgage bundles and mortgage insurance products on these same big banks and big insurance companies. As mortgage defaults rose, major banks around the world were forced to write down the value of bad assets on their books and report quarterly losses. It dawned upon the foreigners that they had been suckered by Wall Street sharpies into taking bad debt. Europe responded with outrage and began to assume a more defensive nationalistic posture with regard to the United States. Europe began to understand that it was in an economic war with the United States, as did any country around the world that had allowed its banks to assume U.S. mortgage debt products. Now the crisis is global, and the world is organizing for economic war against the United States. Treasury Secretary Paulson has been forced to pay reparations to foreign banks to appease the major bankers and their political representatives.
The Wall Street brokerages also leveraged their investments above the legal standard of 12:1. By using other people¹s money to create highly leveraged market positions in an era of global trading, Wall Street was able to take profits from highly leveraged momentum trades and siphon off the capital that might otherwise cause stocks to appreciate gradually, in line with rates of economic growth. During the same period, over 9000 hedge funds formed to take advantage of momentum trading. Many hedge funds use computerized trading programs to scalp profits from short-term market moves. Overleveraging of investments and trading in derivative products worked for years to increase profits at Wall Street firms and hedge funds, but, when the mortgage defaults and foreclosures began to rise, these same policies contributed to large losses for firms on the wrong side of the trade.
Former New York Governor Eliot Spitzer, who established a reputation as a regulator of Wall Street, seems to have grasped the problem with allowing large banks and brokerages to have controlled global investment while opposing regulation. See his article at Slate, “Too Big Not to Fail.” Was Spitzer’s sex life exposed to discredit him because he had opposed Bush and Wall Street’s predatory globalism?
For a look at how the crisis developed from the point of view of a Wall Street insider, see Michael Lewis, “The End,” at Portfolio.com. This is a brilliant article that reveals the malfeasance and ignorance of Wall Street brokerage firms and bond rating agencies about the developing credit crisis that was about to drive many of them into bankruptcy. Lewis reveals a pervasive attitude of greed that must give anyone pause who wishes to reconstruct or salvage these predatory firms.
For more on the history of this group of insiders who worked to build up the Wall Street firms, see the article by Michael Chossudovsky, “Who Are the Architects of Global Economic Collapse,” at GlobalResearch.ca. Cooperation between the government insiders and the Wall Street firms led to a series of predatory economic strikes around the world, including the looting of Korea and other Asian economies during Asia’s currency crisis in the 1990s.
Chossudovsky names the names and describes the roles of the individuals who are responsible for waging economic war. But we already know these names. These same individuals are now the inner circle advising Barack Obama.
Conclusion: Wall Street was allowed to become even more predatory during the Era of Cooperation. A series of major reforms is needed to bring investment practices in line with the real economy and the interest of the average investor. The attitudes of the financial elite are so far removed from considering the interests of the average citizen that a major reorientation is needed for this class to function in a cooperative system. For this to happen, America needs a moral leader to lead a reform movement that will establish ethical practices and strict regulation of the financial industry.
UN Communist Policies Contributed to the Crisis
The socialists were not sitting on their hands during this Era of Cooperation. The Communists at the United Nations formulated global policies designed to bring every nation under UN Communist control. The Democratic Party in the United States acted as a front for global Communism by advocating environmental, feminist, educational, human rights, and other policies designed to undermine democracy and the sovereignty of nations. To grasp the extent to which the Democratic party adopts Communist policies from the UN, see the article “Our Global Big Brother” by Henry Lamb. Here is a quote from Lamb’s article:
“Article 11 of the International Covenant on Economic, Social and Cultural Rights gave rise to the 1977 Community Reinvestment Act, which was expanded in 1995 to essentially require banks to make housing loans to unqualified people. This is the root cause of the current chaos in financial markets.”
The Carter and Clinton administrations passed legislation requiring banks to make loans to unqualified applicants. The Right has criticized Rep. Barney Frank and Sen. Christopher Dodd for sponsoring legislation requiring banks to make loans to unqualified applicants, for receiving contributions and special favors from mortgage brokers, and for failing to supervise the financial soundness of Freddie Mac and Fannie Mae as the number of bad loans they had underwritten increased. Cozy corrupt relationships developed between Democrats in Congress, the mortgage companies, and Fannie and Freddie.
The Left argues that merely requiring an increase in the number of unqualified mortgage-holders under the 1977 Community Reinvestment Act was not the cause of the crisis. The Left prefers to focus on Wall Street and Bush administration policies. For example, Robert Gordon, “Did Liberals Cause the Subprime Crisis,” argues that a 30-year-old law could not have culminated in a crisis in 2008. Moreover, less than half of the banks were required to lend to unqualified buyers under the CRA mandate.
Nevertheless, while it seems obvious that an increase in mortgage defaults alone was not enough to create a global financial crisis, requiring half the banks to make such loans did initiate a new era of loose credit on a large scale following the 1995 legislation. The problem was then exacerbated by Wall Street’s packaging of these loans and associated loan insurance products and the widespread sale of these products to big banks worldwide. The Left consistently overlooks the corruption on the Left and seems always to be surprised that their policies consistently end with negative consequences.
The global financial crisis was a perfect storm resulting from the combination of Communist policies and Wall Street predatory practices that allowed Wall Street firms to increase their leverage and speculation. Lack of government oversight contributed significantly to the problem. When housing prices began to fall and mortgage default rates increased, banks worldwide were forced to write down the value of their mortgage-based assets. The combination of higher losses, short selling of brokerage stocks, and a cash shortage at major brokerages caused a wave of selling to spread across the global markets and drive down stock and commodity prices starting in September of 2008. Today, all corporations around the globe are attempting to position themselves in a cash-rich, low-debt position and restructure themselves to face a lower demand cycle stemming from huge financial losses and more stringent credit requirements. Households are doing the same. But governments around the world are being encouraged to follow the lead of the United States, to flood their economies with credit to stimulate consumer demand for credit so that the banks can maintain their solvency. Here we see the essential nut of the problem, that governments in cooperation with banks attempt to reinflate the amount of credit in circulation to solve a crisis caused by excess credit in circulation. These policies constantly work against the interests of businesses, taxpayers, and households and make bankers rich.
Conclusion: Adopting UN Communist policies was a fundamental cause of the global financial crisis. Wall Street and Communism were working together during the Era of Cooperation to create a new global economic system and build up Communist China. Governments and central banks usually act to support banks at the expense of citizens by lowering interest rates and issuing cheap credit. That is the nature of the banking system.
Was the Crisis Planned?
Was the current global financial crisis planned deliberately by either of the two parties that compete to control the New World Order? This seems unlikely as the success in passing free trade agreements was moving the globe toward the creation of three regional trading blocs following the planning documents of the Club of Rome. However, there is anecdotal evidence that a banking crisis might have been in the interest of the leaders of the U.S./British monopoly capitalism party.
There is a clear recent precedent for the present credit crisis, the Savings and Loan crisis of the late 1980s. See the short article at The Economic Adviser on the history of the Savings and Loan bailout. The looting of banks by the issuance of bad loans that are never repaid but are insured by the government is the master model of global gangster capitalism.
Governor Eliot Spitzer of New York blamed the Bush administration for relaxing state bank examination standards in an article in the Washington Post on February 14, 2008. Spitzer complains in this article that the Bush administration blocked enforcement of state laws against predatory lending practices. Spitzer’s initiative was supported by all 50 state governors. Placing the blame on Bush makes sense from a historical perspective, namely, that he was merely copying his father in creating a banking crisis, then rewarding those who caused it. NWOU is not smart enough to know whether George Bush created a banking crisis, but he definitely cooperated with the UN Communist mandate to extend credit to the uncreditworthy and blocked enforcement of existing laws that protect the public.
Bush family corporations have been taking advantage of government-insured loans and distressed or foreclosed HUD properties for many years. To understand how they do it, see the article “Bushwhacked: HUD Fraud, Spooks, and the Slumlords of Harvard” by Uri Dowbanko at Conspiracy Digest. Real estate investment trusts in Denver have been acquiring HUD properties at bargain prices, upgrading them, and increasing rents under a special arrangement with HUD. Properties involved in drug seizures have also been given to insiders connected with the Bush family.
Another way of looking at the sudden bankruptcy of Wall Street firms is from the point of view of their predator CEOs. Many CEOs were pulling tens and hundreds of millions out of the corporations they headed before their companies went bankrupt. Tom Eley offers details about how CEOs mismanaged their firms and then cashed out prior to the economic crisis at Global Research.
Many elite CEOs know how to loot corporations and leave the remains to the stockholders. This looting of corporations by bad loans, the transfer of assets into subsidiaries, off-balance sheet accounting, and other criminal practices is relatively widespread. This is a fundamental weakness of corporate form of organization and a major priority for reform if we are to have an honest financial system. Enron was one recent model of corporate looting by insiders.
There is some evidence that the global economic crisis was initiated, on purpose, by Henry Paulson. We know that there was a secret meeting of Congress on March 13, 2008, in which “someone” told Congress that there would be a stock market crash in October, 2008.
Senator Inhofe reports that, right before the TARP legislation was passed, Treasury Secretary Paulson warned Congress that failing to pass the bailout legislation would lead to depression, a stock market crash, and a declaration of martial law by the government.
Speaker Pelosi complained during bailout week that the Congress had been steamrolled by false alarms from Secretary Paulson. However, Pelosi said that the second bailout bill (the first one failed to get the necessary votes) was right and necessary. The Left was solidly behind the bailout, even though it originated in the Bush administration and was aimed to help Wall Street manage bad loans. Isn’t that curious? No, because the Left had originated the bad-loan policy by requiring U.S. banks to make loans to unqualified applicants, so the Democrats went along with the bailout strategy to cover their culpability.
Paulson obviously created fear among the Congress. The Federal Reserve and the Treasury then acted secretly over weekends to close down or merge Bear Stearns, Lehman Brothers, Morgan Stanley, and other firms while funneling huge amounts of money to AIG and Citigroup. The lack of transparency regarding these activities means that we shall probably never know the true condition of these companies or the reasons why some companies survived under bailout while others went bankrupt or were merged.
The bailout legislation itself was unconstitutional. The bill originated in the Senate, and all revenue bills are supposed to originate in the House. Polls showed that around 70 percent of voters disapproved of the bill. Paulson was given a free hand to distribute the money as he saw fit. There was no oversight of Paulson, no testimony of experts before Congress, no review of his negotiations with individual firms. Paulson switched the focus of the funding and maintained secrecy in his dealings. The economy was not officially in recession, but Paulson described the credit crisis as so severe that bailout rather than bankruptcy was required. From anecdotal evidence about the availability of loans and bank reporting, it appears the credit crisis was real enough and was spreading to other banks around the world and other sectors of the economy. However, the amount of the bailout, today estimated at over $8 trillion, seems so excessive that we must raise the question of why the bailout amount was so large.
In spite of all that has been said about the financial condition of the failing firms, we shall probably never know the entire truth about their activities. The secrecy, switch tactics, and favoritism for AIG, Goldman Sachs, Bank of America, and Citigroup does not mean that the global economic crisis was initiated and directed by Paulson, only that his concern was to support his friends by bailing out their firms rather than allowing them to take the normal course into bankruptcy.
One can argue that the bailouts prevented large-scale credit defaults, but the FDIC could have insured bank accounts and money market funds without bailouts. The amount of loans in default was around $200 billion, not $8 trillion. What is hanging in the balance now is the adequacy of the bailout funding versus the requirement of more bailouts to come to shore up the biggest firms. That is, will the big firms be able to do business without defaulting on the debt they are holding?
Federal Reserve Chairman Ben Bernanke recently took over $200 billion in loans from nonbank financial institutions, rated AAA. The Fed will not auction these securities because they are valued at around 20 cents on the dollar, and banks are holding $3 trillion of them. The Fed strategy prevents a market from being made in these bond pools and thus prevents a market-based solution. It also keeps the banks from going bankrupt in the short run. The question is, how long can the Fed stand as the protector of the banks? The answer is, as long as it takes, because the Federal Reserve banks can create money out of nothing, to infinity.
Although main street banks are generally solvent, the failure of the Wall Street banks removes $2 trillion in loans per year to the real economy. Other agencies must make up this shortfall for the economy to return to its previous level of credit in circulation.
The amount of mortgage-backed derivatives is estimated at $500 trillion worldwide. It seems possible that the flood of new capital and new loans from central banks around the world may be insufficient to prevent widespread debt default worldwide and restart the global credit economy.
Conclusion: This crisis is a special financial crisis and not a normal recession occurring from the so-called business cycle. The failure to enforce regulations safeguarding the financial system contributed to the present crisis. Many observers suspect that the crisis was deliberately caused. Both parties cooperated in causing the crisis, and both are united in supporting the favored Wall Street firms that are the central focus of the present policy. The S&L bailout may have served as a model for looting the banks, then bailing out preferred friends with government guarantees of bad loans. The global gangsters have followed this model many times in recent history.