Straight Talk with Catherine Austin Fitts: We Are Victims of A Financial Coup D'Etat
"Straight Talk" features thinking from notable minds that the ChrisMartenson.com audience has indicated it wants to learn more about. Readers submit the questions they want addressed and our guests take their best crack at answering. The comments and opinions expressed by our guests are their own.
This week's Straight Talk contributor is Catherine Austin Fitts: investment advisor and entrepreneur. She is the founder of Solari Investment Advisory Services, where she offers subscribers guidance for navigating the risks of the global financial system and the political economy. (FYI: Chris will be the guest on her weekly podcast, The Solari Report, on Feb 3).
Her perspective on Wall Street and Capitol Hill are shaped by her past roles as Assistant Secretary of Housing under George H. W. Bush, and before that, as Managing Director and board member for the investment bank Dillon, Read & Co.
1. Despite (or perhaps because of) your time as Assistant Secretary of Housing under Bush Sr., you are extremely critical of the government’s financial stewardship. What, if anything, changes with administrations and how much is institutionally baked into the cake?
The federal financial model is institutional, and its ultimate governance is outside of the government.
However, the federal government lacks sovereignty. It lacks financial sovereignty - it is financially dependent on the banks that control its depository and slush funds, create the currency through the Federal Reserve and manage the accumulated capital of the same syndicates outside the government.
It lacks information sovereignty as its data, information, and payments systems are controlled and operated by private corporations, primarily defense contractors. If we could dig out the true ownership of both banks and defense contractors, my guess is that it would look identical.
Finally, the members of the Administration have no way of guaranteeing their safety and the safety of their families if they defy orders of those who have the weaponry and power to enforce their will by any means necessary.
This means that essentially there is no government as many of us think of it. It also means that the governmental mechanism is quite fractured, with many competing interests that lack an organizing mission. They simply share an organizing imperative to control and concentrate credit and cash flow and to enforce the liquidity of currency and credit that makes the system go.
Since WWII, the American economy has been “fiscalized.” By that I mean that most households, state and municipal governments, and local economies have become highly dependent on federal government credit, contracts, subsidies, and other forms of income and are heavily regulated by federal agencies. This widespread dependency on the federal financial mechanism is the basis for extraordinary central control.
In the summer of 2000, I asked a group of 100 people at a conference of spiritually committed people which of them would push a red button if it would immediately stop all narcotics trafficking in their neighborhood, city, state, and country. Out of 100 people, 99 said they would not push such a red button.
When surveyed, they said they did not want their mutual funds to go down if the U.S. financial system suddenly stopped attracting an estimated $500 billion - $1 trillion a year in global money laundering. They did not want their government checks jeopardized or their taxes raised because of resulting problems financing the federal government deficit.
What this means is that there is widespread political support for the federal credit mechanism to continue to extract global subsidy through a policy of printing dollars and Treasury bonds, forcing people around the world to take them, and using them to attract and engage in trillions of financial fraud and covert capital and operations.
Between 1998 and 2002, over $4 trillion went missing from the federal government. During the Clinton, Bush, and Obama administrations, the US Treasury has consistently refused to produce audited financial statements, as required by law since 1995, or account for missing funds. This is two decades of financial operations run completely outside of the US Constitution and the law.
In short, whether from the centralized private interests that own and control the federal financial mechanism or a large population that is financially dependent on it, the fundamental economics are institutionalized.
That said, the operations involved are far-flung and complex. Numerous factions compete and collaborate, as do numerous intelligence and enforcement agencies and sections of the military. That means the model and the fundamental economics are enduring and institutional. However, what happens day to day can be quite organic and evolving.
2. You were sounding warning bells on fraud in the housing market over a decade before the collapse occurred. How far along are we at this stage in resolving the root causes of this mess? Now that the government has assumed full responsibility for Fannie & Freddie, does all this fraud get swept under the rug?
The first step to resolving the root causes are to bring transparency to the situation. What happened and why did it happen? Such transparency has not happened.
The second step is to identify what assets or equity has been stolen and to recapture and return them. That is, determine what money and property has been stolen and get it back. Such recapture has not happened.
The third step is to hold the people and institutions responsible accountable. This has not happened.
The fourth step is to determine appropriate permanent institutional reforms and integrate them. This has not happened either.
Let’s look at what has happened:
What happened and why it happened is not generally understood.
Essentially no money or property has been identified or returned.
Other than Bernie Madoff, essentially no one has been indicted or convicted. Indeed, the people who engineered the housing bubble and related policies have been rewarded with numerous public and private positions as well as financial compensation. We are watching record bonuses on Wall Street.
The institutions that engineered the housing bubble and the financial crisis have been richly rewarded with $12 trillion in bailouts, expanded access to the federal credit, and government assumption for the debt and liabilities of Fannie Mae and Freddie Mac.
Financial reform legislation has generated lots of make-work and expenses for thousands of companies and financial institutions without providing any meaningful reform.
So what does this all mean? The “strong dollar policy” – including the housing and debt bubble, trillions in financial fraud, and the suppression of the gold price – was part of a intentional plan to move trillions out of North America, both overtly and covertly. I refer to this as a “financial coup d’état.”
Wall Street and Washington issued trillions in fraudulent securities, used it to gain control over trillions in assets, and then were able to engineer the taxpayers refinancing out the fraudulent paper. Think of this as a leveraged buyout of a planet.
To the victors go the spoils. That is why we are seeing the people who engineered the coup so richly rewarded.
Richard Dolan has referred to parts of the military industrial complex as “the breakaway civilization.” That is a good description as we now have groups that have stolen trillions and are confident in their ability to keep it.
I am reminded of a story from Ron Suskind, former Wall Street Journal reporter in his book,
The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’Neill
“In the summer of 2002, after I had written an article in Esquire that the White House didn’t like about Bush’s former communications director, Karen Hughes, I had a meeting with a senior adviser to Bush. He expressed the White House’s displeasure, and then he told me something that at the time I didn’t fully comprehend - but which I now believe gets to the very heart of the Bush presidency.
“The aide said that guys like me were ‘in what we call the reality-based community,’ which he defined as people who ‘believe that solutions emerge from your judicious study of discernible reality.’ I nodded and murmured something about enlightenment principles and empiricism. He cut me off.
‘That’s not the way the world really works anymore,’ he continued. ‘We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality - judiciously, as you will - we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors . . . and you, all of you, will be left to just study what we do.’”
3. You see us experiencing continued asset price bubbles caused by the Fed’s excessive money printing. How do you see this playing out? Is high inflation/currency devaluation avoidable?
The algebra of our current situation is clear-cut. The only way to avoid ongoing inflation and currency debasement is to reduce standards of living, engineer depopulation (whether through war or other means), and/or to introduce and integrate new or suppressed energy, transportation, and health care technology.
4. Do you still advise investors build exposure to precious metals as a defense against money printing?
Yes.
5. What factors would you need to see to begin reversing that advice?
I would need to see one or more of the following. First, that the long-term bull market in tangibles was nearing a top. One indicator would be a gold-silver ratio moving below 20 towards 15. Second, I would need to believe that the efforts for those looking to create a global currency had failed or reached maturity, thus stabilizing one of the key factors that is moving the price up relative to fiat currencies.
Third, I would become persuaded that nano-technology or another new technology or mining in space could shift the inventory of existing bullion in a significant manner or make counterfeiting easy. Obviously, if private ownership of precious metals by US citizens were to become illegal, that would prevent me from advising purchases. However, I think that is unlikely.
6. What advice do you have to offer the average American (e.g. NOT a deep-pocketed investor) who is concerned about our economic future and wants to preserve wealth and quality of life?
Your time and attention count. Stop listening to or associating with people or institutions that have a vested interest in centralization. Start by turning off your TV. Shift your deposits, purchases, and donations to people and companies that you can trust.
Protect your health. The food and water supply is slowly being controlled and poisoned. Taking steps to assure local sources of fresh food and water is essential for your health. So is educating yourself on steps you can take to detox your body and build your immune system.
The rise of environmental and electromagnetic pollution calls for a level of effort to maintain physical energy and strength that was unthinkable a decade ago.
Lower your overhead. Use your time to build as many skills as possible that can help you do more for yourself and barter with those around you.
Invest in tangibles, including precious metals. Do now allow yourself to be drained by what I call the “slow burn.”
Finally, build your understanding and ability to engage in spiritual warfare. The financial corruption is a symptom of a much deeper and very invasive moral and cultural problem. Organize your life to serve whom and what you love.
7. You have said “we don’t have a wealth problem, we have a political problem” in this country. Can you elaborate?
The economy is being managed to ensure central control, not optimization of health and wealth, let alone excellence in our civilization and environment. This kind of centralization and control is destructive of wealth.
8. You’re optimistic on technology’s promise to create economic wealth and productivity. Where do you see the biggest opportunities?
That is a very good question. I don’t feel that I have access to the information I need to provide intelligent answers in this area. My guess would be if the kind of energy technology that Tesla claimed was possible would make both energy and communication essentially free. If he were right, that would have a profound impact on both politics and economics globally.
9. What are your thoughts on Peak Oil?
I believe our dependency on fossil fuels reflects a political choice rather than a material necessity. I also believe that much is being done covertly to keep the price of oil much higher than a market price. That said, we have a growing population and finite resources, so I am a subscriber to the “peak everything” theory.
I suspect one reason why new energy technologies have not been introduced is the fear that it would support even faster population growth that would be unsustainable for the environment.
10. How big of a risk factor do you see it to the trajectory our society is currently on?
Our current investment and cultural models are unsustainable. Change is upon us. Big change.
11. What question didn’t we ask, but should have? What’s your answer?
"To change our investment model, what changes do we need to make and how should we administer our investment capital?"
Here are several blog posts on some of my thoughts:
- Building a New Investment Strategy
- The Solari Model – Total Economic Return
- Rethinking Diversification
Thanks for the opportunity to be part of Straight Talk. It has been my pleasure!
Replies
R -Along with all the other exponential factors.
Derivatives: The Real Reason Bernanke Funnels Trillions Into Wall Street Banks
We’ve been over the numerous BS excuses that US Dollar destroyer extraordinaire Ben Bernanke has made for QE enough times that today I’d rather simply focus on the REAL reason he continues to funnel TRILLIONS of Dollars into the Wall Street Banks.
I’ve written this analysis before. But given the enormity of what it entails, it’s worth repeating. The following paragraphs are the REAL reason Bernanke does what he does no matter what any other media outlet, book, investment expert, or guru tell you.
Bernanke is printing money and funneling it into the Wall Street banks for one reason and one reason only. That reason is: DERIVATIVES.
According to the Office of the Comptroller of the Currency’s Quarterly Report on Bank Trading and Derivatives Activities for the Second Quarter 2010 (most recent), the notional value of derivatives held by U.S. commercial banks is around $223.4 TRILLION.
Five banks account for 95% of this. Can you guess which five?
click to enlarge
Looks a lot like a list of the banks that Ben Bernanke has focused on bailing out/ backstopping/ funneling cash since the Financial Crisis began, doesn’t it? When you consider the insane level of risk exposure here, you can see why the TRILLIONS he’s funneled into these institutions has failed to bring them even to pre-Lehman bankruptcy levels.
Ben Bernanke is a stooge and a fraud, but he is at least partially honest in his explanations of why he wants to keep printing money. The reason is to try to keep interest rates low. Granted, he’s failing miserably at this, but at least he understands the goal.
Of course, Bernanke tells the public and Congress that the reason we need low interest rates is to support housing prices. He doesn’t mention that $188 TRILLION of the $223 TRILLION in notional value of derivatives sitting on the Big Banks’ balance sheets is related to interest rates.
Yes, $188 TRILLION. That’s thirteen times the US’ entire GDP, and nearly four times WORLD GDP.
Now, of course, not ALL of this money is “at risk,” since the same derivatives can be traded/spread out dozens of ways by different banks as a means of dispersing risk.
However, given the amount of money at stake, if even 4% of this money is “at risk” and 10% of that 4% goes wrong, you’ve wiped out ALL of the equity at the top five banks.
Put another way, Bank of America (BAC), JP Morgan (JPM), Goldman (GS), and Citibank (C) would CEASE to exist.
If you think that I’m making this up or that Bernanke doesn’t know about this, consider that his predecessor, Alan Greenspan, knew as early as 1999 that the derivative market, if forced into the open and through a public clearing house, would “implode” the market. This is DOCUMENTED. And you better believe Greenspan told Bernanke this.
In this light, all of Bernanke’s monetary policies and efforts are focused on doing one thing and one thing only: trying to shore up the overleveraged, derivative-riddled balance sheets of the Too Big to Fails, or Too Bloated to Exist, as I like to call them.
The fact that the bank executives taking this money and using it to pay themselves and their employees record bonuses only confirms that these folks have NO interest in taking care of shareholders or their businesses. They’re just going to take the money and run for as long as this scheme works.
I don’t know when this will come unraveled. But it WILL. At some point the $600+ TRILLION behemoth that is the derivatives market will implode again. When it does, no amount of money printing will save the Too Bloated To Exist banks’ balance sheets.
At that point, it’s game over for Wall Street and the Fed.