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Ending Welfare as We Know It

Chapter Four: The Social Security Shuffle[1]

Social Security is a federal insurance program that, not by accident, implies a contract or pact with the government to provide for people in their retirement or during disability. The fact that we pay taxes to fund Social Security signals to most people that a benefit is to be gained from an investment already made. Journalists and researchers have shown time and again how Americans resist the implication that Social Security represents a form of government welfare. They feel that they get, or should get, what they’ve been taxed to pay for.

Contrastingly, Supreme Court rulings have favored the opinion that what one pays into Social Security in the form of FICA taxes is just that—a tax. The payor has no more redeemable interest in his or her FICA contributions than a citizen has in relation to any other tax. By the same token, no American citizen has the right to direct the investment of said taxes in any manner that may or may not be wealth-producing.[2] In a “pay-as-you-go” system, the government taxes the non-retired to cover its Social Security outlays and anything left over is routinely spent by the government.

This was not the original vision of those who created the system.

The Inception of Social Security

When plagued by the Great Depression, President Herbert Hoover’s unwillingness to create entitlements of any sort stemmed from his belief that government solutions to people’s problems would only serve to undermine economic liberty and individual freedom.[3]

Nevertheless, his insistence on small government and his reliance on the market to resolve the Great Depression resulted in widespread problems the longer the issues persisted. Nationwide hunger, joblessness, and homelessness induced the erection of shantytowns, particularly near the capitol, where the Veterans of WWI gathered after their bonus march. Having tried unsuccessfully to achieve early redemption of their $1,000 dollar post-war bonus certificates, the Veterans’ peaceful demonstration represented no threat to the nation’s security, yet Hoover ordered it to be dispersed with tanks and bayonets.[4] In short, Hoover was not moved by the plight of the homeless and destitute.

It would take the ascendance of President Roosevelt and his willingness to try anything, just so long as the government tried something, to abate the Great Depression.

In the first place, Roosevelt helped millions of unemployed workers by expanding the tasks and categories of government employment, most notably by creating the TVA, or Tennessee Valley Authority. In the second place, he put a floor beneath wage scales, abolished child labor, and set reasonable parameters for everyday working hours. In the third place, he created Social Security for the retired, disabled, and aging poor. He was also willing to assist agribusiness by paying farmers to enrich their crop soils during periods when they were allowed to lie fallow, to store surplus production, and to grant part of that surplus to the poorest among the public.[5]

But it was still true that the Great Depression lingered until America entered World War II and the President was led to mobilize the economy in pursuit of its prosecution. This, as we have seen, meant that price controls, coupled with rationing and full employment, produced a glut of savings which led to a post-war boom for manufacturers and consumers.

The Ghost of Herbert Hoover

When President Reagan took over in 1981, he embraced Hoover’s callousness with a return to small government that created record levels of homelessness and brought to mind the shantytowns, called Hoovervilles, which housed hundreds of thousands of people living in slum conditions during Hoover’s 1930s. Deriding every public program, including Social Security, as wasteful government welfare, Reagan proceeded to gut government programs with unprecedented savagery.

In Peter Dreier’s words:

Reagan eliminated general revenue sharing to cities, slashed funding for public service jobs and job training, almost dismantled federally funded legal services for the poor, cut the anti-poverty Community Development Block Grant program and reduced funds for public transit….[He also] halved the budget for public housing and Section 8 to about  $17.5 billion and for the next few years he sought to eliminate federal housing assistance to the poor altogether.[6]

Afterward, Reagan said that “people who are sleeping on the grates…the homeless…are homeless, you might say, by choice.”[7] He also downplayed the number of homeless, saying, “Well, it’s been so exaggerated. Millions, there aren’t millions. Real research reveals probably 300,000 or less, nationwide. And a lot of those are the type of people that have made that choice. For example, more than 40% of them are retarded, mentally deficient people…”[8]

Not that Reagan had much empathy for the disabled. In fact, no one was more zealous and effective in getting them off the government rolls.

The Social Security Disability Purge

Based on a small government study and Social Security’s own research, it was assumed that anywhere from 18 percent to 24 percent of Social Security’s disability insurance was being paid to beneficiaries who were no longer disabled. As such, legislation was passed in 1980, which mandated review of those receiving benefits and the removal of those who no longer qualified. The process, scheduled to start in January 1982, was accelerated by Reagan, who believed that disqualifying beneficiaries could save the government as least $10 million over 5 years or, according to a study by the GAO (Government Accounting Office), as much as $2 billion a year.[9] As a result of Reagan’s zealous backing, recipients were dropped from the rolls without proof of medical improvement or even being interviewed. Nor were the disabling effects of multiple conditions considered in combination. With “higher initial cessation rates than Congress or the public expected, the SSA [Social Security Administration] was accused of engaging in a wholesale “purge” of disability beneficiaries.”[10] The courts became swamped with lawsuits that overturned the denials of benefits. In response, the Social Security Administration didn’t change its position. Instead, it issued its own ruling of arbitrary “noncompliance.”

Ultimately, it took the rebellion of nine state governors to halt and reverse the policies initiated by Reagan.

The 1977 Social Security Legislation

Under President Carter, the stagflation of the 1970s had a deleterious effect on Social Security’s long-range actuarial balance, which was projected over a 75-year period. In the near term, “the program was already in annual deficit, and assets of the trust funds had to be redeemed to make up the shortfalls.”[11]

As such, Congress passed legislation in 1977 to increase the Social Security payroll tax to 6.2 percent (which is still the current rate) while simultaneously reducing benefits for those who had other retirement plans. In terms of government savings, 26 percent stemmed from the payroll tax increase, whereas 74 percent stemmed from benefit cuts.[12]

According to a report from Social Security:

[The legislation was] said to have restored solvency to the program for the next 50 years, rather than the full 75 years that had traditionally been used as the projection period. Clearly, the long-term financing issues had not been fully resolved by the 1977 legislation.[13]

This, at any rate, was the government’s official position. The situation was said to become worse when price inflation hit 13.5 percent in 1980 and wage growth declined by 4.9 percent—“producing a double blow to the program’s financing by simultaneously increasing costs as revenues declined.”[14] The trustees of the Social Security Trust Fund called for more drastic measures.

Never mind that the Trust Fund’s income was already back on the upswing by 1983, due to rising employment[15] and increased payroll taxes.

The Reagan-Greenspan Effect

In 1981, Reagan inherited a budget deficit of $74 billion from President Carter. When this was added to the effects of Reagan’s tax cuts (a reduction of 25 percent on average, phased-in over three years), the deficit ballooned to $200 billion.[16]

Having promised to cut taxes and increase military spending while balancing the budget, Reagan’s standing as a fiscal conservative demanded a funding solution.[17]

As one author put it:

A man with the talents of Ronald Reagan could tell a lot of big lies and possibly never get caught…His first one was straight out of fantasy land. Reagan said he would cut income tax rates by 30 percent over a three-year period, and end up with more revenue than before the cut in rates. [This lie] led to the biggest lie of all. Once it became clear that supply-side economics was not working, Reagan had a big crisis on his hands…He desperately needed to find a new source of revenue to offset the revenue which had been lost because of the cut in income tax rates. Alan Greenspan…came to the rescue…[He] told Reagan that they could raise payroll taxes, and say they were doing it to strengthen Social Security. Then they could use the surplus revenue just like income-tax revenue.[18]

Accordingly, Greenspan went to work. In his letter to Congressional leaders of May 21,

1981, Greenspan wrote:

As you know, the Social Security System is teetering on the edge of bankruptcy. Over the next five years, the Social Security trust fund could encounter deficits of up to $111 billion, and in the decades ahead its unfunded obligations could run well into the trillions. Unless we in government are willing to act, a sword of Damocles will soon hang over the welfare of millions of our citizens.[19]

Reagan then proclaimed that saving Social Security was his number one priority.

This, combined with Greenspan’s scare tactics, resulted in the “rescue” legislation of 1983, which adopted the 16 proposals of the Greenspan Commission.

In terms of specifics, the bill:[20]

  • Extended coverage to all new employees of the federal government and to employees of nonprofit organizations. States were prohibited from opting out of Social Security if they previously had opted in.
  • Shifted the payment date of the annual COLA [Cost of Living Adjustment] from July to January (meaning no COLA was paid in 1983).
  • Raised the FRA [Federal Retirement Age] from age 65 to 67, on a phased basis beginning in 2000.
  • Introduced the Windfall Elimination Provision, drastically reducing Social Security benefits for individuals receiving a pension from employment not covered by Social Security (principally government employees).
  • Advanced the implementation of the tax rate schedule from the 1977 law (but did not change the top rate).
  • Increased the self-employment tax rate to twice that of the individual rate (previously it had been lower than the combined employee/employer rate).
  • Included up to one-half of Social Security benefits as taxable income, with the proceeds to flow back into the Social Security trust funds.
  • Made the operations of the Social Security trust funds “off-budget” starting in 1993.

Upon signing the bill, which was said to have closed the gap in Social Security’s long-term actuarial balance, President Reagan said, “This bill demonstrates for all time our nation’s ironclad commitment to Social Security.”

In real terms, Reagan and Greenspan worked together to create a massive buildup in Social Security’s trust fund, not to cover the future costs of retiring baby boomers (although they were now pre-funding their retirement), but to spend it.

This meant that his successors, George H.W. Bush, Bill Clinton, and George W. Bush, could blithely do so too.

Voodoo Economics and the Pooring of American Workers

To justify and protect the enormous tax cuts afforded to the wealthy (with the hope that later administrations could extend them in perpetuity), Reagan and Greenspan resorted to the most regressive tax policy possible.

As Ravi Batra put it:

The  Greenspan proposal would prove to be a crippling burden for the poor and the self-employed, because it sought to lift rates over and above those provided by [the] 1977 law. Today, a full-time minimum-wage worker…earns about 41,000 annually. On that she has to pay a Social Security and Medicare tax of 7.65 percent…[plus] state and local sales tax averaging 8 percent in big cities…This sum of over $1,500 in taxes can make a difference between homelessness and living in an apartment, between three meals a day and malnourishment, between a doctor visit and living with illness. This is why the commission’s tax proposals amounted to coaxing money out of the destitute, i.e., the millions who subsist on the minimum wage.[21]


A worse outcome awaited those working for themselves. Today a self-employed individual…has to pay nearly 15 percent in Social Security taxes. Once $4,500 is deducted in self-employment contributions, an individual is left with little to support a family, especially when his income is subject to the sales and income tax as well.[22]

In the final analysis, the Reagan-Greenspan plan for “saving” Social Security was inextricably linked to coercing the self-employed and millions of minimum-wage workers into paying the lion’s share of tax cuts for the wealthy.

As such, it should come as no surprise that all subsequent calls for tax cuts are preceded (or offset) by news of yet another crisis facing Social Security.

Onward Reagan’s Soldiers

Whether it was President Clinton embracing neoliberalism or President George W. Bush laying claim to Reagan’s mantle, all Presidents after Reagan worked to dismantle public programs. The baton for “reforming” the nation’s “freeloaders” simply passed from one to the next and they proceeded in lockstep down the path created by Reagan.

They even used his language to do it.

The Republicans’ “Contract with America,” which successfully packed the House with a majority of Republicans during Clinton’s presidency, derived at least half of its language from President Reagan’s 1985 State of the Union Address.[23] As a result, the issues in the “Contract,” taken straight from Reagan’s playbook, included “shrinking the size of government, promoting lower taxes and greater entrepreneurial activity, and both tort reform and welfare reform.”[24] The Republicans’ most coveted change (second only to tax cuts) was the Personal Responsibility and Work Opportunity Reconciliation Act, passed by President Clinton.

Nevertheless, Reagan’s most popular speech was given at the Republican Convention in Detroit:

“For those without job opportunities,” [Reagan said,] “we’ll stimulate new opportunities, particularly in the inner cities where they live. For those who have abandoned hope, we’ll restore hope and we’ll welcome them into a great national crusade to make America great again…We have to move ahead, but we’re not going to leave anyone behind.”

In practice, Reagan did nothing of the sort, but the quote makes it easy to see why President Clinton focused on inner-city initiatives to promote and facilitate workfare. It also shows where President George W. Bush derived “No Child Left Behind” while leaving enough wiggle room for Obama’s “hope and change.” Most literally, it provided Donald Trump with “make America great again.”

The Slippery Slope to Brazil

Since everyone wants to be Reagan, the job of subsequent Presidents is to lead American citizens down the slippery slope of losing rights, benefits, jobs, assets (and ultimately their retirement funds), with a great hip-hooray for free-market ideology. With their so-called infallibility, free markets remove social safety nets and reduce the roles of government. Above all, they absolve the wealthy of responsibility to provide for the less fortunate.

The problem is that it doesn’t look good when America rivals Brazil in terms of income inequality.

It also doesn’t feel good when more than forty percent of America is threatened with real poverty.

For those who can’t, or won’t, deny that everything Reagan inspired is demoralizing and dangerous, it takes a special kind of cheerleader to promote more of the same without being held to account for the top-down swindling of America. It takes…

Compassionate Conservatives

President George W. Bush peddled a “soft side” for conservatives that enabled him to push more of everything Reaganesque. Once he achieved his tax cuts by holding town hall meetings all over the country, Bush went back on the stump, hoping to “reform” Social Security.

Seemingly shocked and appalled, Bush announced to the world at large that the government had spent the surpluses created by Social Security. Worse, the government’s IOUs to Social Security weren’t even remotely redeemable. They were just pieces of worthless paper.

Had Bush been able to make this stick, he would have been the perpetrator of the government’s next great theft. The money owed to Social Security would have been repudiated to reduce the National Debt (or at least not increase it, since Bush was spending trillions to wage war on Iraq).

For Bush, this was important because his trillion-dollar tax cuts were supposed to increase the taxable pie to generate more revenue and thereby balance the budget. Needless to say, this didn’t work for Bush any more than it did for Reagan.

By October 2008, “the national debt had risen to $11.3 trillion, an increase of over 100 percent from 2000 when the debt was only $5.6 trillion. Most debt was accumulated as a result of…the Bush tax cuts and increased security spending.”[25]

Social Security and the Privatization Argument

It was, coincidentally, the year 2008 when I started to listen seriously to the whole Social Security privatization argument. Given that Social Security’s surpluses were being routinely spent by the government, the odds that the government would (or could) borrow to redeem the special Treasuries issued to Social Security to pay retirement benefits in years of income deficits seemed unlikely at best. As such, I decided to devise a privatization compromise, while borrowing language from everyone. If I did, admittedly, have to gag myself in the process, at least it can be said that I made it an inclusive exercise.

The point of reproducing it (after the chapters on welfare reform and the subprime mortgage meltdown) should become fairly obvious. On the one hand, it embraces conservative arguments, hook, line and sinker, with language that I would never use. On the other, it envisions a protective privatization of Social Security (reminiscent of the GSEs created by President Roosevelt), which conservatives would never allow.

Even if it is imperfect, the exercise is a useful one. So I’ll start the following chapter by providing some background discussion before defining the terms and conditions of protective privatization, which also applies to Medicare and Medicaid, since the projected costs of these programs are often lumped together with Social Security to produce more dire predictions than might otherwise be the case.


[1] This chapter contains updated excerpts from a tract that I published in 2008, entitled “Marketing Transition: Underwriting the Cost of Change.”

[2] Hogeboom, Willard, “Social Security: ‘Sacred Cow’ of Entitlement Programs,” USA Today, November 1995,;coll

[3] Bryant, Joyce, “the Great Depression and the New Deal,” Yale-New Haven Teachers Institute, April 4, 1998,

[4] “The Bonus March,” U.S. History Pre-Columbian to the New Millennium,

[5] Ibid.

[6] Dreier, Peter.

[7] Ibid.

[8] _+_Poverty.htm.

[9] DeWitt, Larry, “The Development of Social Security in America,” Social Security Bulletin, Vol. 70, No. 3, 2010,

[10] Ibid.

[11] Ibid.

[12] Ibid.

[13] Ibid.

[14] Ibid.

[15] Batra, Ravi, Greenspan’s Fraud: How Two Decades of His Policies Have Undermined the Global Economy, (Palgrave Macmillan: New York, 2005), p. 16.


[16] Batra, Ravi, p. 13.

[17] Ibid.

[18] Smith, Allen W., Ph.D., “Raiding the Trust Fund: The Big Lie,”

[19] Ibid.

[20] Ibid.

[21] Batra, Ravi, p. 17.

[22] Ibid.

[23] “Contract with America,” Wikipedia.

[24] Ibid.

[25] “Economic Policy of the George W. Bush Administration,”

Artificial Savings

By Jeanne M. Haskin

There are two ways that a neoliberal economy can mask decades of flat or falling wages and little or no savings. The first is to have a strong dollar in relation to other currencies, which makes imports less expensive. The ability to buy more with less helps to sustain the illusion of economic wellbeing, particularly with respect to durable and nondurable goods manufactured in other countries. It allows households to afford appliances and technology, toys, clothing, and footwear, all of which speak to our need for basic comforts. For many, the perception of saving on what is bought, replaces money that is saved to buy. Coupled with consumer credit, this encourages negative savings, thereby increasing the debt of households and leveraging consumption against future wages. The second way to provide the illusion of growth is to have an economic boom period wherein demand for homes and rental properties becomes strong enough to push up prices. When real property is not owned outright but mortgaged, the upward surge in prices lowers the debt to value ratio. The outcome is more equity, or an increased percentage of ownership, which encourages property owners to sell high and upgrade to more expensive properties or cash in on the extra value with a home equity loan to fund more consumer spending. In either case, property owners increase their debt based on the perception of asset-savings, which is really the illusive incentive of a market fluctuation.

Not All Debt is Created Equal

Unfortunately, the persistence of flat or falling wages and little to no real savings means that even though tricks of the market allow consumers to upgrade their standard of living, their debt to income ratio is steadily increasing. Built into every mortgage, home equity loan, or use of consumer credit is the true valuation of a consumer’s ability to pay based on leveraged wages. The risk factor of inelastic earnings, coupled with the inevitability of a market correction (or economic downturn, otherwise known as the “bust” phase of the American business cycle), often translates into higher costs of credit, mandatory mortgage insurance and/or disability insurance, as well as greater fees for origination, underwriting, and closing. Too, homeowners who upgrade or have property reappraisals will pay higher property taxes. As such the degree of leverage may be unsustainable in the long-term, particularly when a market correction decreases property values, inspires employer cutbacks, puts people out of work, and ensures that their new jobs will pay lower wages. In that event the pressure to maintain household payments motivates consumers to take on second and even third jobs on terms that are disadvantageous. For industry, this provides a cornucopia of hiring prospects to choose from and a greater power to ensure that employees remain motivated, no matter the terms of employment.

Homeownership in Historical Perspective

For those who were able-bodied workers and soldiers during WWII, the pent-up real savings created by two working family members at a time of rationing and scarcity ensured that post-war America would experience a housing boom on terms and conditions that were far different from those we know today.
In the first place, the manufacturing sector switched from a wartime footing that overwhelmingly supplied the government to produce for a starved domestic market and reconstruction overseas. In the second place, not all women reverted to a primary focus on homemaking although returning soldiers were expected and even aided to take over women’s wartime jobs.

According to historian Elaine Tyler May:

Most [women] wanted to continue working after the war ended. But, of course, millions of men came back from serving in the military and there was a widespread fear that there would be another depression once the wartime economy shut down. Women were asked to do their part by leaving the job market. Many were fired from their jobs so the returning veterans could be re-employed…[But] women were still employed as secretaries, waitresses, or in other clerical jobs…because they either wanted or needed to keep working.1

Households with forced savings and often two working members absorbed the feverish spread of modestly-modeled housing made even more attractive by one-dollar-down mortgages and preferential loans for Veterans. Couples could also afford to marry, have children, and purchase durable goods.

The difference between the baby boom generation that escaped the Great Depression and the generations that followed is that those who experienced WWII were a nation of savers first.

In Russ Roberts’ words:

[W]orld War II led to a “glut” of private savings because (1) government spending caused full employment, but (2) workers and businesses were forced to save much of their income because the massive shift of output toward the war effort forestalled spending on private consumption and investment goods. The resulting cash “glut” fueled post-war consumption and investment spending.2

In other words, government restraints on consumption produced conservatism and thrift. Only after the war was over did the consumer floodgates open as manufacturers free of profit restrictions scrambled to meet and fuel the increasing tide of demand.
Too, the empowerment of unions under FDR ensured that wages, working hours, and benefits were conducive to a better than modest standard of living.
As such, aging baby boomers do not understand the generations that have steadily lost these benefits and are spenders rather than savers.

Trying to Recapture the Past

Under President Jimmy Carter, the nation was asked to voluntarily embrace a return to wartime-like austerity because the economy that Carter inherited both during and after the OPEC oil shocks was plagued by stagflation. This meant that the costs of all goods and services were increased by the oil price hikes. Pay raises that allowed workers to accommodate price inflation in turn sparked more inflation. As wages chased after prices with no appreciable increase in sales and production, this meant that profits suffered and the economy was moribund. GDP was stagnant, and debtors came out ahead of savers since purchases made on fixed-interest credit were paid back with inflated, or increasingly discounted, dollars.
Those who pointed to Weimar Germany3 and the real danger of increasingly worthless money were not shy of predicting catastrophic consequences. Indeed the collapse of government occurred at least symbolically when Carter returned from his emergency Camp David conference to demand resignations from most of his cabinet members.
Those who replaced the outgoing members were chosen largely for loyalty. As Carter went on to address the nation, he promised to cut government spending and scale back the government workforce to stop government borrowing from crowding out private credit and to balance the federal budget. He also called on workers and producers to cap pay raises and price hikes, saying:

In the last 10 years, in our attempts to protect ourselves from inflation, we’ve developed attitudes and habits that actually keep inflation going once it has begun. Most companies raise their prices because they expect costs to rise. Unions call for large wage settlements because they expect it to happen; it does happen, and once it’s started, wages and prices chase each other up and up…Except for our lowest paid workers, I’m asking all employees in this country to limit total wage increases to a maximum of seven percent per year. From tonight on, every contract signed and every pay raise granted should meet this standard. My price limitation will be equally strict. Our basic target for economy-wide price increases is five and three quarters percent. To reach this goal, I’m tonight setting a standard for each firm in the nation to hold its price increases at least one-half of one percentage point below what they averaged during 1976 and 1977.4

Still later, Carter decried the empty values of a consumption-driven society and urged a return to spiritualism to overcome what he called the nation’s crisis of confidence. He said:

In a nation that was proud of hard work, strong families, close-knit communities, and our faith in God, too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns. But we’ve discovered that owning things and consuming things does not satisfy our longing for meaning. We’ve learned that piling up material goods cannot fill the emptiness of lives which have no confidence or purpose.5

Imposing consumer restraint to restore the value of money became the number one priority. As William Greider noted:

President Carter and a Democratic Congress enacted the Monetary Control Act of 1980 which removed all remaining controls on interest rates and repealed the federal law prohibiting usury (note that sky-high interest rates and ruinous predatory lending have been with us ever since).6

Meanwhile, Paul Volcker, Carter’s chairman of the Federal Reserve, hiked interest rates to unprecedented levels both to encourage savings and to afford the wealthy protection. The cost of money lent skyrocketed both in and outside of America, reaching a prime rate of 21.5% in December 1980—the highest rate in U.S. history.7
At the same time, high interest rates diverted investment from the stock market to the bond market. If the government wanted to borrow, it would do so at higher costs. As it was, the carrying cost of outstanding U.S. debt grew ever greater. Hence fiscal austerity was vital to Carter’s leadership, the largest part of which depended on energy conservation. Carter proposed to weather the OPEC shocks by regulating thermostats, installing solar panels, insulating buildings, and exploiting clean coal and natural gas as sources of domestic energy. Carter’s concern with the rising costs of health care also persuaded health care providers and insurers to experiment with different coverage models.
Finally, Carter deregulated the airline, rail freight, and trucking industries to produce competition that successfully lowered rates.
In all, Carter’s presidency led to an important turning point. A self-reliant America required more competition and sacrifice. Beginning with Ronald Reagan (who fired the on-strike air traffic controllers), unions and middle management would be worn down or phased out over time and never again would wage inflation exceed a minimal percentage.
Above all, it would no longer matter whether a Republican or Democrat ascended to the White House. As Richard Posner put it:

Deregulation was bipartisan. It is entirely speculative to suppose that, had Carter been reelected, the deregulation of banking, including the relaxation of mortgage standards, would have ceased. When the Democrats regained the presidency in 1993, banking deregulation continued, culminating in the repeal of the Glass-Steagall Act, which had split commercial banks from investment banks, and in the rejection of regulation of the new derivatives, notably credit-default swaps. Robert Rubin and Lawrence Summers, Clinton’s principal economic advisers, were steadfast supporters of banking deregulation. They are both Democrats.8

In sum, whether Democrat or Republican, political pandering to Wall Street and the advancement and protection of the wealthiest banks became paramount to legislators.

Asset-Backed Lending and the Battle for Market Share

In the manufacturing sector, the protection of wealth required outsourcing production to undermine unions while employing cheaper labor to increase profit margins. The migration of America’s productive facilities also meant that their real assets of property, plant, and equipment vanished from the U.S. landscape. Left with a service economy that creates or destroys wealth from nothing but market fluctuations, the big banks took an increasingly competitive stance on increasing their share of asset-savings, beginning with home and property mortgages (or what remained of collateralized debt, excluding, for the moment, the market for auto financing).
That said, the banks were faced with a choice. They could undercut the Savings & Loan industry, which, on average, held 53% of all home mortgages, by charging lower mortgage interest. Or they could woo customers away from the thrifts with Certificates of Deposit (CDs) and other savings instruments that paid higher interest in the hope that customers would also move their mortgages once bank loyalty was established. Alternatively, the banks could have paid out high interest and lowered mortgage rates, but this was a losing gambit that could not have persisted indefinitely.
The solution? Disaster capitalism.

Why Compete When You Can Pillage?

The term “disaster capitalism,” as used by Naomi Klein and coined by News Junkie Post editor Gilbert Mercier applies to any profitable destruction that offers more profit in the aftermath. This was the lesson of WWII, which put America back to work and ensured in the aftermath that American goods and services would be provided by the Marshall Plan. From a purely financial perspective, it means blowing up our own industries through deregulation that builds up risky loan portfolios and then breaks them down through unsustainable debt—a necessarily piecemeal strategy in terms of the actual goal, i.e., capturing all asset-savings and/or property-based collateral from the big banks’ other competitors (of which the thrifts were only one) because the destruction of the S&Ls had to be decisive. More than one sector crash, bailout, and sellout could not be sold to the public (at least in earlier presidencies) nor could the bankers run the risk of upsetting the whole economy.
So, under President Carter, the big banks set their eyes on the prize of the Savings & Loan industry. Once the administration deregulated interest rates and repealed the law on usury, the S&L’s, which primarily made long-term fixed-rate mortgages, suffered a loss in mortgage value. Essentially, the higher interest rates wiped out the S&L’s net worth.9 “In 1983 it was estimated that it would cost roughly $25 billion to pay off the insured depositors of failed institutions. But the thrifts’ insurance fund, known as the FSLIC, had reserves of only $6 billion.”10
The point of deregulation was supposedly to make the S&Ls competitive. By allowing the thrifts to pay more interest to depositors and engage in a broader range of banking services, the government would solve the S&L’s problem by virtue of sheer growth. Or so the argument went. In practice, it was, and should have been, obvious that the existing loan portfolios of long-term fixed-rate mortgages would force losses to mount because they were not renegotiable. This was the millstone around the necks of the thrifts, even though they raised deposit-interest to attract more depositors.

Burning the Candle at Both Ends

What higher interest rates did do was open the door to looting the thrifts.
As William Greider put it:

It was the 1980 legislation that took the lid off banking and doomed the savings and loan industry, the mainstay that used to provide housing loans and home mortgages. The thrifts were able to raise capital because they were allowed to pay a half percent more in interest to depositors. Bankers wanted them out of the way. The Democratic party obliged.11

Why? According to Kenneth J. Robinson:

S&Ls have their origins in the social goal of pursuing homeownership…These institutions were originally organized by groups of people who wished to buy their own homes but lacked sufficient savings to purchase them. In the early 1800s, banks did not lend money for residential mortgages. The members of the group would pool their savings and lend them back to a few of the members to finance their home purchases. As the loans were repaid, funds could then be lent to other members…In 1980, there were almost 4,000 thrifts with total assets of $600 billion, of which about $480 billion were in mortgage loans (FDIC). That represented half of the approximately $960 billion in home mortgages outstanding at that time (Board of Governors 2013).12

In other words, the demise of the thrifts was planned both because they were socially-oriented and because of their market share. “Federally-chartered S&Ls were granted the authority to make new (and ultimately riskier) loans other than residential mortgages.”13 The result was overleveraged portfolios blown up by self-dealing to S&L employees, friends, associates, and relatives, most of whom were unqualified. However, the rape of the S&L’s also had criminal origins. A New Yorker named Mario Renda, who, according to his federal deposition, worked in conjunction with the Mob, “brokered as much as $5 billion per year in deposits into 130 S&Ls across the country, all of which failed.”14 According to author Jonathan Kwitny:

[M]any of the deposits were made on the specific condition that the S&Ls would lend money out to borrowers Renda would recommend, who turned out to be local Mafia people or strangers from out-of-state.15

Because money had to be driven into the thrifts for the rape to take effect, other deposit-brokers engaged in a similar scam known as “linked-financing.” These deposit-brokers steered deposits to the thrifts under a preexisting agreement to loan to certain people, who then remitted the loan money directly to the deposit-broker.16
Apart and aside from this, politically-connected luminaries Neil Bush and Jeb Bush benefited from loan transactions where money was siphoned off fraudulently or the loans were made for speculative investments without provisions to secure repayment if the venture proved unprofitable.17

Why Die Small When You Can Go Big?

When alarms were initially raised in 1983, the thrifts could have been rescued for $19 billion. Instead, Congress let it ride until 1989, when it passed the Financial Institutions Reform, Recovery and Enforcement Act, which created the Resolution Trust Corporation (RTC) to dismantle the S&Ls.

The RTC closed 747 S&Ls with assets of over $407 billion. [By then] the ultimate cost to taxpayers was estimated to be as high as $124 billion.18

The total amount of the bailout, however, was nowhere near this modest. According to Stephen Pizzo’s Inside Job and Pete Brewton’s Untold Story, the total cost to U.S. taxpayers was an estimated $500 billion.19 Congress then pushed the RTC to dispose of the thrifts’ surviving assets in a firesale, where investors squeezed the public via the RTC.
As Nomi Prins reports:

At the first RTC auction in Dallas in July 1991, assets worth $25 million sold for 20 cents on the dollar. In May 1992, another RTC auction sold assets for only 17 cents on the dollar. By December 1995—the last year of the RTC’s existence—prices barely reached 70 cents on the dollar. So eventually the assets did regain some value, but only after enough were sold at exceedingly low prices, which had the effect of rendering the remaining assets more valuable.20

In sum:

[T]he RTC…sold off $519 billion worth of assets for 1,043 thrift closings. But the RTC never brought the profits to the American people…Instead it left the public on the hook for $124 billion in losses,21 while the thrift industry lost another $29 billion.22

The Test Becomes the Template

Naturally, the point of blowing up the thrifts was to make money coming and going. What tends to be overlooked is that the genius of bailout money is to free banks from depending on savers while holding down society’s wages. The inability to save (and its undesirability in a consumption-driven society that must push for negative savings to maintain constant growth) is solved not by raises but by government-sanctioned theft. It can’t be called redistribution because the underlying behavior is criminal in nature. When the government bails out fraud, complete with its firesale of assets, it closes the circle of crime with a yet another crime and calls it legislation. Worse, it sets the example for future action that must be even more egregious in terms of fraud and sector penetration to make the next bailout more than a compulsion.
In terms of the bottom line, a repeat-performance was truly irresistible because banks in collusion with government contrived to extract billions of dollars from ordinary citizens while cutting them out as the “middlemen” or rightful earners of capital.
The question then becomes: why not try for trillions?


[1] May, Elaine Tyler, “Women and Work,”

[2] Roberts, Russ, “Does ‘Pent Up’ Demand Explain the Post-War Recovery?

[3] LaRouche, Lyndon H., Jr., “Jimmy Carter’s economy enters into ‘Weimar hyperinflation,’” Executive Intelligence Review, March 25-31, 1980.

[4] Jimmy Carter, “Anti-Inflation Program,” 24 October 1978. Vital Speeches of the Day, Vol. XLV, No. 3, November 15, 1978, pp. 66-69.


[6] Leonard, Andrew, “No, Jimmy Carter did it,” Salon, June 4, 2009,

[7] “Presidency of Jimmy Carter,” Wikipedia, p. 6,

[8] Leonard, Andrew

[9] Robinson, Kenneth J., Federal Reserve Bank of Dallas, “Savings and Loan Crisis 1980-1989.”

[10] Ibid.

[11] Leonard, Andrew

[12] Robinson, Kenneth.

[13] Ibid.

[14] Scheim, David E., “Trust or Hustle: The Bush Record,”

[15] Ibid.

[16] “Savings and Loan Crisis,” Wikipedia, p. 3.

[17] Scheim, David E.

[18] Robinson, Kenneth

[19] Scheim, David E.

[20] Prins, Nomi, It Takes a Pillage, (New Jersey: John Wiley and Sons, 2009), p. 117.

[21] This figure comes from the Fed, which downplayed the losses, in contrast to later research that placed the number at $500 billion.

[22] Ibid.

Debt and the Great Deprivation

by Jeanne Haskin

When all our political swill has us struggle to pay the bills
It’s unsurprising how the consensus lets greed remain relentless
But strange that your free enterprise is publicly subsidized
So serenely egotistical, proper, painless and principled
For you it’s not difficult to return to business as usual
We’re hurting, you think you’re invincible
By all means feed at the trough, but don’t lecture me on core values

Without the efforts of Senator Sanders, it is unlikely that the presidential election of 2016 would have been so adamantly focused on income inequality. This does not mean that our government is not obsessive regarding our debt and household income. To name just a few of the agencies that collect, analyze, and distribute information on what Americans owe, earn, how they spend their earnings, and what they own in terms of assets, the government relies on the Bureau of Labor Statistics, the Bureau of Economic Statistics, the National Census, data from the I.R.S., and reports from the private sector. This tells us that employment demographics, consumer debt and disposable income (or what we have left after taxes) are all important considerations in the matter of taxation. In short, the government decides how much money we should have to manage our household budgets.
This is also true at the state level. Aside from income tax (which is not levied in all states), state legislators can levy excise taxes on everything from vehicles to consumer goods to groceries.
Put differently, both state and federal governments compete with the private sector for a share of our household budgets, including our household debt. The point being that, however it accrued, the national debt is our debt.

Restructuring the Debt to Value Ratio

The issue of economic leveraging, or how much debt a household can hold while still remaining solvent, is dependent on the worth of assets and income, both of which can increase or decrease in proportion to the level of debt. A high demand for assets, such as homes and rental properties, tends to increase their worth. This encourages more borrowing, whether consumers upgrade to more expensive homes or take out equity loans for home improvements or other spending. At the same time, an overheated market, or economic bubble, can not be sustained forever. As soon as the bubble bursts, assets plunge in value and real property owners may owe more than their homes are worth. High interest rates and a recessionary environment will encourage pay squeezes and layoffs, downsizing, and disinvestment as both businesses and households are forced to make do with less. In other words, market-driven inflation is a temporary valuation. The higher the inflationary boom, the more crushing the market correction. This is the long-term cost of buying into the illusion of growth.

The Subprime Mortgage Meltdown

The market bubble that burst between 2008 and 2009 was based on more illusion than demand-driven inflation. In the first case, mortgage lenders tapped every possible customer by both relaxing lending standards and faking supportive documents. In the second case, stock market brokers exhausted their imaginations in creating new investment vehicles based on the subprime mortgages. At the farthest end of the spectrum, investments weren’t even directly linked to the mortgages but tied instead to the Price Index. In the third case, the nation’s top credit rating agencies colluded with the banks and stock brokers to issue falsely positive ratings on blatantly toxic assets. This allowed stock brokers to sell to hedge funds, which are typically viewed as the safest investment vehicles (particularly for retirement purposes) because they can only invest in top-rated securities. Above all, it was a party that no one wanted to end because banks and brokerages wished to maximize their earnings. They also had a very real need to unload their toxic assets before the music stopped. Only then could they bet on the downside as well as the upside of the stock market. In practice, the brokerages and banks ended up stuck with what they churned out.
If not for the intervention of the government and the Federal Reserve, which not only backed, repackaged, and remarketed the toxic securities but also dropped interest rates to zero in order to discourage saving in favor of investment in the stock market, the banks would have had to sell at a loss, if they could have sold at all. By then, many teetered on the brink of insolvency. For its part, Lehman Brothers could not have been saved by any means.
By bailing out the banks, the Federal Reserve restored confidence in the market, but in doing so it assumed a dual mandate. Once it got the stock market moving, it engaged in a policy of “quantitative easing,” which means that it bought Treasuries and other securities to free up more money for bank lending (without printing bank notes). It also issued $2.6 trillion in zero-interest loans to banks that didn’t even touch the money. Instead they opted to leave it on the books of the Fed, thereby demonstrating that behavioral economics (providing monetary incentives and economic disincentives) is not always successful in terms of government goals. In this case, the bankers sat out the Great Recession, only after which they began ultra-selective lending. As for the other half of its mandate, the Fed hoped to blunt the effects of the Great Recession with a corresponding growth in wages. The point after deflation that wiped out value for homeowners, retirees, smalltime investors and small businesses was to induce a targeted 2% inflation in wages, a figure that seemed safe enough that the Federal Reserve held steady at zero interest until the end of 2015. But just as the bankers refused to lend, there was little movement in wages.

Inflating Our Way Out of Debt

Obviously, re-inflating the economy to achieve a lower ratio of National Debt to GDP (Gross Domestic Product) would make holding our National Debt seem less risky in the eyes of creditors. Insofar as the U.S. is largely a paper economy, re-inflating the stock market became the number one priority.
But by late 2015, some market analysts gauged stocks to be overvalued by 70%. And since the banks were not lending, the shadow banking sector (comprised of non-bank commercial lenders) grew in leaps and bounds. Households took on more debt through the shadow banking system until the same practices of relaxed and even fraudulent lending standards that led to the subprime mortgage meltdown of 2008-2009 became prevalent once more.
Since many borrowers, who were tapped out by the Great Recession, became more indebted just to stay afloat, the obvious implication is that homeowners, retirees, smalltime investors and small businesses are about to get burned again. This is not only a matter of market correction. It is the Republican agenda.
Forgetting for the sake of convenience that both National Debt and household debt were necessary and instrumental to economic recovery (and not just in America but all across the world) Republicans now insist that the Fed overstepped its bounds. They seek Congressional control of the Fed through audits and policy input. They are also pressuring the Fed to raise interest rates, which would reinstate deflation. Accordingly, the increased National Debt that ended the Great Recession would assume true crisis proportions in its ratio to GDP. So, too, would household debt in proportion to household income. In short, the imperative to rein in fiscal policy and reduce the National Debt will no longer be a matter of Republican ideology.

How, Then, Can We Be Self-sustaining?

Like it or not, our economy is dominated by Wall Street. Banks and brokerage firms were literally forced to merge during the government bailout as a matter of our country’s economic survival. Those who insist that we need to break up the banks may be understandably angry about the burden it placed on taxpayers, but as of now, with the loans made by the Fed, the banks are in no way near insolvent. They have tightened their criteria for lending and become so selective that only the wealthiest and most stable entities remain viable clients.
The issue for the next president will not be saving the major banks but the shadow banking system. Having admitted during their surge of growth that the non-bank commercial lenders were frantically driving the pace for expansion, their hope of government invention once their own pool of toxic assets goes belly up is not based on “too big to fail” but “too big to be ignored.”
In that event, the government can’t hope to offer a bailout, not with all the residual anger over the last bailout and certainly not with the furor over our National Debt. This means that the burden for saving the system will likely be borne by consumers. Large-scale liquidation would be the obvious answer, and judging by the precedent set by the banking system, all manner of shady practices (such as alleging that a customer can skip a payment without repercussions and then foreclosing on the loan or offering terms of refinance that are rigged to trigger default) are bound to come into practice. Too, Congress may elect to restructure the bankruptcy laws, as it did in the wake of Hurricane Katrina, to ensure that fewer people are eligible for protection. In that event, consumers will lose their assets as well as their credit ratings. In the long term, the damage might be much worse. They could lose their jobs in the market downturn and join the ranks of the unemployed.

The No-Mans Land of Long-Term Unemployment

It is generally accepted that unemployment near or at 5% is healthy for the market. On the one hand, it provides a reserve pool of labor that remains fairly consistent. On the other hand, it doesn’t tighten demand to cause an increase in wages.
Unfortunately, this sweet-spot of 5% unemployment has changed from a transitional state, where workers cycle in and out of jobs, to one of relative permanency for the long-term unemployed. Potential employers who base their hiring decisions on uninterrupted work histories and favorable credit scores have consigned the long-term unemployed to a virtual no-mans land. Their unemployment benefits can either expire or be ended. New regulations get people off the rolls by requiring participation in job-training programs which are known not to exist. Republicans who were reluctant to re-fund unemployment, even at reduced levels, under President Obama may seize the opportunity to end the program completely.
Too, the unemployment statistics do not report the under-employed and those employed at poverty wages.

Shifting the Burden onto the States

In the worst-case scenario, the long-term unemployed and chronically under-employed become dependent on the state. They may have to rely on Temporary Assistance to Needy Families (TANF), food stamps (SNAP benefits), their state’s Medicaid program, or private charities and food banks. The danger to beneficiaries is that these programs are also on shaky ground.
In states where governors tout the benefits of free-market “solutions,” they either slash funding and benefit levels for social programs of last resort or apply a cynical calculus to payments and eligibility. In 2015, Scott Walker, the governor of Wisconsin, who gave businesses huge tax breaks, cut funding for food banks just in time for Christmas. Some lawmakers even pass legislation to prohibit people from feeding the homeless in public. Where they do not, the private sector can raise rents on charities to stop them from feeding the poor.

Financial Stress and Suicide

The so-called “ennobling of the poor” (or forcing them to work) may sound like a lofty ideal to legislators. In reality, it is a visceral attack on society’s most vulnerable. Forced to turn to a job market that doesn’t even want them, it is no wonder that suicide statistics have been climbing in proportion. The last is not just an American issue. Nations all over the globe suffer the same problem.
In response to criticism, The IMF (International Monetary Fund) has finally conceded that its “made-in-America” neoliberal prescription for restructuring client economies has increased income inequality while providing financial windfalls for society’s richest people. As an institution that has its nose in every country’s business, the IMF’s first response to criticism was to recommend stop-gap measures for the poor in debtor countries. However, these measures were impossible to fulfill, since they ran against the grain of economic restructuring and were not, in any way, funded.

Other Punitive Measures

The reactions of county governments to citizens who try to be self-sufficient are not always favorable. A man was arrested and sentenced to prison for simply collecting rainwater. A couple was ordered to remove the garden that occupied their front lawn. As for two separate men who lived completely off the grid, their homes were considered unsafe for lack of city utilities. These men faced eviction once their homes were condemned.
In Los Angeles, the city reacted to the construction of tiny homes for the homeless by declaring them “bulky” constructs for immediate confiscation.

Political Economics

The issue of political economics brings us back to demographics. The persistence of redistricting and gerrymandering has allowed both Democrats and Republicans to excise needy communities and keep them isolated. If the Tea Party had its way, non-homeowners would not be able to vote. Now Republicans are insisting that the poor should have no vote. Republicans also oppose early voting, claiming that it allows the poor to vote in large numbers. Republicans further insist that people should pay to vote if it is necessary to keep the polling stations open after hours.
In the 2016 presidential primaries, illegal shenanigans at the polls included purging eligible voters and infrequent voters, limiting voting opportunities to registered Republicans only, misdirection of voters and obfuscation of the voting process. In the state of California, where Hillary Clinton presumably won the primary, nearly three million provisional ballots still remain uncounted. For that matter, Senator Sanders has been shafted at every turn.
Under DNC Chair Debbie Wasserman Schultz, Sanders was cut off from using the DNC’s registered voter list for accidentally accessing Hillary Clinton’s campaign voter list. Wasserman Schultz also stated that the reason we have superdelegates is to prevent establishment candidates from being challenged at the grass-roots level. Finally, there has been all but a full media blackout wherever Sanders has campaigned.

Reducing the Rolls through Incarceration

The Alabama police recently admitted that they specifically targeted blacks by planting incriminating evidence to result in prison terms.
Although President Obama is pressuring the states to restore voting rights to non-violent felons who have already served their time and Virginia has actually done so, the overall trend is not just to incarcerate the poor but to keep them incarcerated or send them back to prison via unpaid fines and fees for services. It is no longer true that every indigent facing trial has the right to a public defender. With the de-funding of the justice system, all costs, including appearance in court, must be borne by the offender.
So, too, the maxim of “innocent until proven guilty” becomes a meaningless phrase. Since the offender bears the financial burden of facing the court system, he or she is penalized up front, regardless of guilt or innocence. It also means that innocent people lacking representation often go to prison. Because they are indigent in the first place, the burden for keeping family members out of prison has fallen disproportionately on women.
In states that “service” private prisons, contracts require them to maintain full occupancy and/or a prisoner quota.
In other words, criminalization is now market-driven. And because the market has no place for the disadvantaged, there was, in at least one prison, an involuntary sterilization program targeting poor women.

Social Engineering

The full implication regarding the disadvantaged is that once they are down and out, the collusion of market and government will either ensure they stay that way or fall into deeper distress. Those who are eligible for food stamps (SNAP benefits) receive debit cards and have their spending allotments reduced because the banks take their cut with every financial transaction. Nor are food stamps exempt from excise taxes.
It is doubtful, however, that food stamps will survive the next administration, since the Republicans have proved quite willing to end school lunch programs for poor children. It is also a myth that this would disproportionately affect minorities. In fact the largest percentage of food stamp recipients consists of poor white families.
There is no reason to believe that Veterans benefits and Social Security would not be slashed in turn. Lastly, Republicans are committed to repealing the Affordable Care Act by any and all means.

Religion and Morality or Meek and Docile Constituents?

President Obama’s commitment to funding preschool education and encouraging college participation are not Republican goals. Republicans would prefer to abolish the Department of Education. Their determination to replace the nation’s core curricula with educational agendas more suited to evangelism have already played out in states such as Maine, under Governor Paul LePage. His appointed Commissioner of Education is biased toward Creationism.
Too, Republicans seem enamored with revisionism. From claiming that blacks were better off during slavery to refusing to read the portion of the Constitution that portrays blacks as less than full persons, these acts are predictive of other changes in education. In Texas, for example, a school text book referred to slaves as migrant “workers,” which presumably is the place reserved for blacks in a Republican-controlled future, once illegal immigrants are expelled from the country.
In the most forward-looking sense, the insistence that America is a Christian nation is predictive of persecution, whether it manifests in a “sin” tax for people of alternate religions or non-hiring of non-Christians. If onerous and pervasive, such developments would result in forced conversions or religion-based territorial cleansing.

The Danger of Ruling through Disincentives

Because we live in a world that is constantly manipulated by behavioral economics, we must understand that no nation has ever avoided revolution by ruling through disincentives. Yet cutting everything possible in the name of Republican ethos is just what Republicans mean to do. To paraphrase the words of House Speaker Paul Ryan, the Republican Party is more important than the United States of America.
This is where neoliberalism gives way to neoconservatism, and the latter will be much worse.
It implies, on the one hand, that Republicans would willingly sabotage our government both politically and economically. On the other hand, the majority of Republicans have overtly stated that they would welcome a military coup before they would allow another Democrat to become President.
The precedent for this is the Iraqi Provisional Government headed by Paul Bremer.
At worst, Republicans would plunge the entire world in a period of voluntary contraction that I have called The Great Deprivation. At best, Republicans would have us align our expectations with policy failure in Iraq. The idea that there could be a different outcome on Republican terms and conditions is pure fantasy run amok.

Vassalage of the Middle East and Europe

You don’t really need inside info to see that the game is over and that there is an understanding between the Russians and the Americans. Remember: the first sign was the setup of Erdogan in the shooting of SU-24, which removed Turkey as a player and made possible an alliance between the “good” Kurds and the Russians, next to the US and the other Kurds. I think one of the main objectives was to weaken Turkey, maybe dismember it, through the creation of Kurdistan, done in concert by the two powers. Then it will come the time to deal with Israel and the Saudis.

The rest is just more or less theater.

In other words, the vassalage of the entire ME should be complete. We don’t know the full spectrum yet. What we see is that Syria and Iran (maybe Iraq) are now subservient to the Russians. Turkey cannot continue as an independent power, neither Israel or the Saudis. The new world order means a new re-division of the vassalage in the new world.

Of course, anybody can see, that’s what the conflict between the big powers is all about.

In this game the bad guys are only the so-called independents. First, it was Ceausescu of Romania, who was big on national sovereignty and independence. Then Milosevic, and the fiercely independent Serbs. Then the independent Saddam of Iraq, then the independent Gaddafi of Libya. When it came to Iran and Syria, it became clear that if they don’t swear allegiance to one or the other, they will perish. They called Russia for protection just in time, before too late.

We see the new vassalage structure emerging.

Syria is a small prize for Russia, a bit more than Granada was for Reagan. Russia is in the business of taking over control over the Western Europe and the gas lines from Qatar were a nuisance, they had to be stopped in the tracks. The battle for the last 70 years was/is over the sovereignty over Europe, and I believe it is inescapable in the hands of Russia for many reasons. I could point you to an interesting book written in 1992. Next time.
Ship Carrying Over 11 Tons Of Low-Enriched Uranium Leaves Iran For Russia.
So Iran is no longer an independent nation. Too bad, but true. Once this issue of the nuclear weapons is done with, I would be looking to see the other shoe drop, i.e. the Israeli question should be in the focus, and its nuclear weapons be dealt with, in some way. That’s how I read the writing on the wall.

Kissinger Delivered a Plan for a New World Order to Putin

To respond to some questions in the comments regarding my post about Kissinger visiting Putin, we now have a better idea:

Kissinger Delivered a Plan for a New World Order to Putin

What was pure speculation on my part at the time, proves to have been correct. In 2012 Kissinger indeed gave Putin the ultimatum: “On January 20th 2012, he arrived in Moscow to give Vladimir Putin an ultimatum and ‘friendly advice’ not to run again for President of Russia. Because otherwise the U.S. will grind Russia into powder: ‘the third term of Vladimir Putin, this is a war that Russia will lose’.”

This year, Henry Kissinger “did not ignore Ukraine, which, in his opinion should become a bridge between Russia and the West, and not an outpost of one of the parties.” Same for Syria. A softening of his previous ultimatum.

And what did Putin say? He might have said he’d think about making “Alaska a ‘bridge’ between Russia and America”.

War or no War?

The more I think about the pros and cons of the possibility of an upcoming World War 3, the more I see that this year is crucial, as far as the elections in the US.

The war parties, Hillary for the Democrats and Jeb/Marco for Republicans, have already been voted out by the American Supreme Elite Council. However, the war parties still control enough ammunition to derail the peace process, that’s why Russia has a General waiting in the wings, if needed to replace Putin.

But for now, Sanders and Trump are anointed to continue in the open what Obama started by playing a double game. This conclusion is supported by the major American pull-back from confrontation at every critical juncture under the Obama administration’s duplicity.

Without Obama’s soft retreat at every head-on war buildup moment, Russia’s bold offensives and reversals of the odds could not have been possible.

Is Russia’s next President a War General?

To me this is further evidence of more serious war preparations against Russia are on the table. No kidding.
Real war is coming. If one checks the MSM headlines of the last few weeks, it is quite obvious that the West’s is setting up the media campaign for the upcoming confrontation. Level heads should be aware of the political costs incurred by the Russians in order to provide the Syrian people with victories on the battlefield and I very much hope that the Russians will not run short of their resources and calculated moves.
See the Western headlines for yourself:


1. RFE/RL: ‘I Love Russia. I Am A Patriot:’ Pussy Riot Strikes At Prosecutor.
2. New York Times: Pussy Riot Video Mocks Russian Prosecutor Accused of Corruption.

3. RFE/RL: U.S. Senator Predicts Revelations Of Putin’s Wealth Will Destabilize His Rule.

4. International New York Times: Masha Gessen, Russian Banks, Lies and Emojis.

5. The Guardian (UK): Timothy Garton Ash, Putin must be stopped. And sometimes only guns can stop guns. The time for diplomacy will come again, but it is not now: Ukraine urgently needs military support, and a counter to Russian propaganda.
6. The Independent (UK): Joan Smith, President Putin is a dangerous psychopath – reason is not going to work with him. A secret war in Ukraine, murder in London, incursions into others’ airspace. His behaviour is getting worse.

7. Maclean’s (Canada): Michael Petrou, How Litvinenko’s poisoning fits into Putin’s power play. Everything Vladimir Putin has done to reassert Russian power has seemed farfetched, outlandish and inconceivable-until he did it

8. BBC: World War Three: Inside the War Room. (Video)
9. Washington Times: Russia could overrun Baltics in 3 days. NATO forces would face severe casualties.

11. Wall Street Journal editorial: A NATO Message for Mr. Putin. A new combat brigade could deter ‘a little green men’ incursion.

12. The National Interest: America Reveals ‘Great Power’ Plans Against Russia and China.

13. Reuters: William Pomeranz, A whiff of panic in the Kremlin as Russia’s economy sinks further.

14. The New Yorker: Masha Lipman, Putin’s Shaky Tsardom. With Russia’s political environment growing more chaotic, just how much is Putin in control?
15. Carnegie Moscow Center/ Andrei Kolesnikov, By Bread Alone: Why Poor Russians Aren’t Protesting.
16. Pakistan Observer: Alexander J. Motyl, PUTIN IS STEERING RUSSIA TO COLLAPSE.

17. Bloomberg: Can Russia Be More Miserable? Judging by Oil, the Answer Is Yes. Combining inflation and unemployment, Russia is among the world’s unhappiest economies.

18. Paul Goble: Why Germans Supported Hitler to the End and Why Russians May Do the Same with Putin.

19. Moscow Times: What Do Russians Really Think? The Truth Behind the Polls.
20. Hannah Thoburn, For Putin, For Stalin. Fearful of unrest, Russia’s president is using the memory of Stalin to exhort his people to sacrifice.
21. Carnegie Europe: Judy Dempsey, Russia’s Manipulation of Germany’s Refugee Problems.

22. The Daily Telegraph (UK): Russia accused of clandestine funding of European parties as US conducts major review of Vladimir Putin’s strategy. Exclusive: UK warns of “new Cold War” as Kremlin seeks to divide and rule in Europe.
23. Human Rights Watch: Human Rights Violations in Russia’s North Caucasus.

24. Deutsche Welle: Dirty propaganda wars in Russia. Mud sticks – that’s why politicians love to throw it at their opponents. But in Russia it’s become an art form with TV programs making allegations to discredit government critics. Fiona Clark reports from Moscow.

25. Anna Nemetsova, How Putin created a monster in Chechnya. A crazed Chechen leader, once a Putin favorite, is embarrassing the Kremlin by threatening everyone.
26. Alexander Baunov, More Putin than Putin. Ramzan Kadyrov Tries to Take Center Stage.

27. Moskovskiy Komsomolets: Putin criticised for “inaction” over Kadyrov’s attacks on opposition. (Mikhail Rostovskiy)
28. Kennan Institute: Maxim Trudolyubov, Russia’s Got Talent: Kadyrov’s Electoral Politics.

29. New York Times: Maxim Trudolyubov, More Than a War of Words.

30. Eleonora Zbanke, Russia’s year of cinema, or a return to silent films. In Russia, 2016 has been designated the Year of Cinema. But any new films are likely to be ‘silent’, lacking any voice of their own.

31. The Diplomat: Quentin Buchholz, Russia and Climate Change: A Looming Threat. Recent rhetoric notwithstanding, there is reason to be skeptical about Moscow’s attitude to climate change.

32. Paul Goble: Putin Using Specter of Russia’s Disintegration to Avoid Reform, Rogov Says.

33. The American Interest: Lilia Shevtsova, HOW THE WEST MISJUDGED RUSSIA. What Do the Normativists Stand For?

34. The Wilson Quarterly: Jill Dougherty, PUTIN’S HARD/SOFT STRATEGY. The unpredictability of Vladimir Putin’s “hard” and “soft” sides constantly confound the West, but his approach has an internal logic of its own.
35. New York Times: Railing Against Graft, a Georgian Leads Calls for a Cleanup in Ukraine.

*  *  *

Putin is vilified today, but Putin is coming from the soft arm of the military/defense complex – the intelligence. If Russia goes for an Army General as the next President, then the real hard power is prepared to be deployed. Putin is a softie (like a holstered pistol) by comparison to the heavy fire coming from the big guns, to be used next.

Maj. Gen. Aleksey Dyumin–Russia’s next President ?

Non-governmental media are confident that Putin has designated his successor, and announced the beginning of a grandiose special operation whose results will become evident in 2018.

State media dry announcements concerning the nomination of Aleksey Dyumin to the post of the Tula Region are interspersed with conspiracy theory-laden interpretations by the “free media” suggesting that the process of advancing Putin’s successor to the post of president has begun.
Even though the next presidential election is still more than two years away, the law permits the current president to serve one more term, and so far there are no indications Putin would not run again, the theme of Putin’s successor is already the subject of guessing games in both Russia and the rest of the world
Why did the nomination of an ordinary governor cause such widespread reaction, especially among the so-called opposition?
It can be explained by one thing only: Aleksey Dyumin is one of the most trusted individuals in the president’s entourage, someone whom Putin trusted with his own life more than once.
Dyumin, moreover, has a range of out of the ordinary abilities which he acquired and honed during his career in the Federal Protection Service and the Ministry of Defense. It is he who commanded the Crimea operation, who saved Yanukovych, he enjoys the highest degree of respect within the armed forces, and moreover he is young and full of vigor. His meteoric career is nothing short of exceptional.
There was only one “but” which spoils the otherwise ideal picture, the absence of serious civilian experience. Though one should note that Russian generals, as a rule, found themselves just fine in civilian professions, they usually turn out to be good managers and the most outstanding governors.

According to the well-known Russian journalist Sergey Dorenko, Dyumin’s nomination to the Tula governorship will help him acquire the necessary experience.
The major general who commanded Russian special operations forces is also a well-known figure in the West, which definitely wouldn’t want to have to deal with a Russian president who is also the general who carried out the brilliant Crimea operation.
They couldn’t cope with a KGB lieutenant colonel, and now there is a general on the horizon.
Naturally, so far these are only guesses plus a simple juxtaposition of facts. There are no official comments on this topic and there cannot be, but the flywheel of Western propaganda is acquiring momentum and the topic of Russia’s 2018 presidential elections is starting to make headlines.

Congress to reverse its stand on Ukraine?

By Andrej Kreutz

Adjunct Professor, University of Calgary

Affiliated Expert, European Geopolitical Forum

During the last year, on December 4, 2014 and on March 24, 2015, the US Congress adopted two resolutions very hostile to Russia. The well-known former Republican Congressmen Ron Paul called the first of them, H.Res.758, a declaration of war on Russia and “one of the worst pieces of legislation ever.”1 The second resolution, which was adopted on March 24, shortly after the conclusion of the Minsk-2 Agreement, calls for arming Ukraine, and according to the Ron Paul Institute it made clear that, “Congress wants a war in Ukraine and will not settle for a ceasefire.”2

As both resolutions are constitutionally not binding and the Presidential administration does not have to implement them, they do not represent a direct threat. However, they are still important and significant political statements and, I believe, what is most worrisome is that the Congress in fact followed the general mood prevailing in the country, which is shared not only by the ruling elites and special interest groups, but also by the majority of Americans. According to the recent Gallup public opinion poll, most of them perceive the Russian Federation as the major national threat, worse than North Korea, China, or Iran.

That would mean that any broad-based peace movement (like others in American history, which have sometimes even been effective) would be quite difficult or perhaps impossible to set in motion. The public opinion of the country is now largely formatted by PR efforts, and due to a number of causes — including the decline of the traditional well-educated and politically-involved middle class, and the perfection of the means of social and political influence, including stricter control of the school and university curriculum — the chances of creating a social movement on the pattern of the 1950s and 1960s are very low.

At the same time, I do not want to say that public opinion is no longer important. Andrew Korybko rightly indicates that the deep state is far more important in the American foreign policy-making process than elected officials, and in fact a similar situation also prevails in many other traditionally liberal-democratic nations. However, even authoritarian governments have to take into account the social mood in their countries, and some social groups are far more influential than others.

The Russian Federation does not currently threaten any important US interests, and cooperation with Moscow as a more or less equal, or at least tolerated, partner might be quite advantageous for Washington in Asia, the Middle East, and even in Europe. If a wide-scale public mobilization is not in the cards, then business people, intellectuals and other experts who support such a view might be more likely to be heard and make an impact.

The deep state and the media’s anti-Russian campaign is to a large extent caused by the belief that America, boosted by its ABM development, could win a nuclear war with Russia. Some influential people put their trust in the US missile defense system, the European extension of which is currently being deployed practically on Russia’s borders. Some others think that by its first pre-emptive strike the US can hit Russia so hard that Russia would not be either able or even willing to retaliate in fear of a second blow and total destruction. The vast collateral damage entailed and the impact of such a horrible operation on the Old Continent does not seem to be taken into account. The likely impact on North America, too, has hardly ever been mentioned.

An open discussions of all these and related challenges would be the most effective form of pro-peace activity, and experts in the fields of nuclear physics and nuclear energy can play a leading and the most needed social role. With recent indications showing that Russia is preparing for a potential nuclear war and the bombshell news that Russia has developed electronic warfare technology that leaves the US military virtually deaf, dumb, blind and defenseless, we see some dire warnings and other key information coming out to support the idea that World War III is on our doorstep.

Lord Jacob Rothschild recently warned that the global “geopolitical situation is perhaps as dangerous as any we have faced since World War II.” There is chatter about the Ukrainian Maidaneks obtaining second passports and Canadian citizenship,  preparing to retreat as they will no longer be of use to the West. And now Daniel Estulin, author of The True Story of the Bilderberg, informs us in a video that the US and Britain are willing to “massively escalate the confrontation with Russia up to the threshold of a thermonuclear war.” It is clear that we are at our most dangerous time in history.

According to Mr. Estulin, President Barack Obama is attempting to orchestrate a regime change to topple Russian President Vladimir Putin, and the US and Britain have “reactivated a policy of threatening tactical nuclear warfare against Russia and China to force them to submit to the crumbling transatlantic financial empire.”

In August 2014, Putin spoke at a youth forum where he sent out a very clear warning when he stated, “I want to remind you that Russia is one of the most powerful nuclear nations. This is a reality, not just words.” (Source – CNN)

In late November 2014 and again in January 2015, reports showed that Russia has also been preparingeconomically by stockpiling vast quantities of gold in their vaults. As we watch Putin strengthen political ties with BRIC nations, and China specifically, while the US “decimates” its own military and weakens the US dollar, it becomes apparent once again that pitting a community organizer (Obama) against a former KGB mastermind (Putin) is like bringing a knife to a gun fight.

This is going to get ugly.

1 Ron Paul, “Reckless Congress Declares War on Russia,” Ron Paul Institute for Peace and Prosperity, December 4, 2014.

2 Daniel McAdams, “Congress Demands War in Ukraine,” Ron Paul Institute for Peace and Prosperity, March 23, 2015.

Hate and Hostage Politics: Begging for a Coup

by Jeanne Haskin

Even though he stressed that it was not a plan for action, the American military coup that Charles J. Dunlap, Jr. hypothesized in 1992 could not take place in 2012 because President Obama sustained the new vigor that he had brought to American politics by campaigning for hope and change. President Obama successfully addressed the issue of universal health care while creating the impetus for increased political activism by mortgaging more of our future with the bailout of Wall Street. By eliminating two of Dunlap’s preconditions for a military coup, i.e., voter apathy and broad non-access to health care, the president restored faith in the power of the electorate. Now President Obama has passed the baton to progressives, and no candidate has generated more excitement than Senator Bernie Sanders.

In large part, Dunlap’s essay depended on a desperate and disenchanted people’s desire for a good man and a strong man to lead America back to greatness. This is a common dictatorial theme, but by perching the American people on the slippery slope that begins with military good deeds and ends with the corruption of absolute power, Dunlap overlooked America’s real history in Central and South America as it pertains to promoting coups, their purpose, immediate functions and the brutality that sustained them long before day one. As such, this article will show how America has all but replicated preconditions for a Latin American-style coup and that the Republican game of chicken played out through the threat of more government shutdowns and reluctance to raise the debt ceiling are not just a matter of intransigence but also a signal to the military that America can no longer govern itself. Coupled with plans to militarize the National Guard, revamp military retirement, scrap social programs to improve veterans’ benefits, and ensure that soldiers are paid during shutdowns, Republicans are holding out rewards to secure their seat at the table if, as 57% of Republicans hope, Provisional Government comes to town.

Irreversible Reformation

FDR’s New Deal was not an attack on American capitalism but rather a stop-gap measure to address the draining effects of capitalism on average American citizens. By creating a social safety net and new rules of the road for banking, finance and international trade, FDR was mistakenly perceived as the enemy of big business when, in fact, his creation of global institutions (The World Bank, The International Monetary Fund and the United Nations) paved the way for Free-market Reformation to take the world by storm.

This required acceptance of inequality by a small sector of the populace, which became rich beyond its imaginings in exchange for embracing the brutality required to liberalize the economy throughout Central America and later the Southern Cone.

In Central America, and Nicaragua in particular, U.S. reformers found willing candidates in authoritarian presidents supported by wealthy landowners who expected, and received, more land free of social responsibility. Repression of the landless already took place with anti-vagrancy laws and the deployment of private armies to put down peasant revolts. Thus, U.S. offers to train the countries’ National Guards as presidential constabularies (militarized police), skilled in U.S. methods of terror, were efficiently carried out.

In some ways, terror required no other motivator than to protect the ruling class but members of the National Guard were thoroughly corrupted by encouragement to launch extortion schemes. Murder, torture and the “disappearance” of communist sympathizers and left wing organizers fit hand in glove with the needs of foreign-owned businesses and, naturally, the West.

By the time that attention was tightly focused on reforming the Southern Cone, U.S. economists refined the art of liberalization with a detailed instruction manual, otherwise known as “the brick.” Not subject to negotiation, this required deeply discounted divestiture of the countries’ most precious assets into foreign hands, the dissolution of social safety nets, the abolishment of unions, tight labor controls, and cheap exports, made even cheaper by currency devaluations and cash-crop redundancies. It also required elimination of dissent via control of the press, militarily-rigged voting (even against puppet opposition, created to maintain the pretense of democratic elections), intimidation, imprisonment and displacement to other countries.

Ostensibly “aided” by foreign loans, Latin American governments stayed afloat until currency speculation dried up their foreign reserves, thus requiring more loans. Once debt-dependency was thoroughly assured, Paul Volcker, Carter’s chairman of the Federal Reserve, launched a fight against inflation which persisted long after the fight was won. For this was not so much an American issue as one that concerned the neighboring continent. With Volcker’s hand at the wheel, Latin America’s debt redoubled itself, scaling unsustainable heights and leaving no hope of change for the poor.

The result: Irreversible Reformation that only the far-right could love and huge numbers of inconvenient people, whose misery and deprivation argued against the “miracle” of neoliberal reform.

 The American Adaptation

The dream of our most affluent has always been to offload the costs of government while controlling its repressive machinery, but not before exhaustive exploitation of government subsidization and regulatory overthrow to reshape the legal landscape in favor of complete deregulation and permanent protectionism.

Running as a contender for the Libertarian Party in 1980, David Koch promised torepeal federal campaign finance laws; abolish the Federal Election Commission; abolish Medicare and Medicaid; end compulsory insurance; deregulate the medical insurance industry; repeal Social Security; privatize the postal service; end all personal and corporate income taxation; repeal minimum wage laws; ensure the complete separation of education and State; repeal compulsory education laws; abolish the Department of Energy; dissolve all government agencies concerned with transportation; return America’s rail system to private ownership; privatize public roads and the national highway system; abolish the Federal Aviation Administration; abolish the Food and Drug Administration; end all government welfare, relief projects and “aid to the poor” programs; privatize inland waterways and the distribution system that brings water to industry, agriculture and households; abolish the Occupational Safety and Health Act; abolish the Consumer Product Safety Commission; and repeal all state usury laws.

“The brick,” in other words, had made its way to America.

However, the question still remained: how to prepare the populace?

Step One: Incarcerate the Poor

America’s War on Drugs was seen as a way to clean up the streets, fight inner-city gangs, reform drug users and protect poor neighborhoods. Perhaps deliberately, however, the budget for this war funded all but the justice system. Reluctant to raise taxes in order to fund the newly overwhelming demand for criminal court services, both red and blue states adopted offender-funded justice, or pay-for-service fees, including a $50-$200 charge to apply for a public defender. For those who can not afford an application, lack of representation often means harsher sentences and jail or prison time. Even for a minor infraction, such as stealing a $2 can of beer, an offender spent twelve days in jail.
Pay-for-service fees also extend to incarceration. Men and women who land in prison because they are too poor for representation face re-incarceration if they have no means to pay for prison “consumption.”

In the words of Noel Brinkerhoff:

Defendants can be billed for a public defender in 43 states and the District of Columbia. Prisoners can be charged room and board for their incarceration in 41 states. Those on probation or parole in 44 states can get billed for these services. Anyone ordered to wear an electronic monitoring device in 49 states (except Hawaii and the District of Columbia) must pay for it…Some states also apply “poverty penalties,” including late fees, payment plan fees, and interest when people are unable to pay all their debts at once…Alabama charges a 30 percent collection fee, while Florida allows private debt collectors to add a 40 percent surcharge on the original debt. Some Florida counties also use so-called collection courts, where debtors can be jailed but have no right to a public defender.

Those who are hit the hardest serve time in private prisons, where slave-labor is common and those who own the prisons either bribe judges to hand down longer prison terms and/or require contracts with the state to guarantee a percentage of occupancy.

Private prisons become overcrowded and the prisoners themselves are caught in a vicious cycle.

 As Brinkerhoff reports: “African Americans are six times more likely to be incarcerated than a white person and non-white Latinos are almost three times likely to be incarcerated.” Without a high school education, young black and Latino men find the odds especially challenging. Eleven percent of black men, aged between 20 and 34, are doing time at the prime of their lives, when most people start their careers and begin to vote in elections.

Step Two: “Disappear” Blacks via Secret Rendition

According to an article on, this is an issue involving Democrats. Secret, illegal detentions for harassment and interrogation occurred in Chicago under Mayor Rahm Emanuel (President Obama’s former top advisor) and persisted for eleven years. Citing from an investigation by the UK’s GuardianNewspaper:

[P]olice in the city of Chicago “disappeared” or “vanished” 7,185 people at a secret, “off-the-books interrogation warehouse” on Chicago’s west side…Between August of 2004 and June of 2015, approximately 6,000 of the 7,000 detainees held were African American, representing 82.2 percent of all the “vanished” at Homan Square…Incredibly, only 68 of the 6,000 blacks detained were permitted access to legal counsel, or information of their whereabouts disclosed to family members, per the police’s own records.

The facility at Homan Square has no publicly accessible phone number, nor do records exist of those imprisoned. If an attorney suspects that his or her client has been taken to Homan Square, it is almost impossible to find them. Without access to representation, prisoners are intimidated, threatened, and pressured to turn informant by militarized police in a militarized facility, unknown to much of the world.

Step Three: Extend the War on Drugs

Thus far, Republican efforts to prevent people from receiving state and/or federal benefits have led to drug-testing Food Stamp (SNAP) beneficiaries (the results of which were very disappointing for the state of Tennessee) and the ludicrous assertion that seniors, too, should be tested because receiving Social Security results in heroin addiction.

There is, in fact, a problem with middle-aged white Americans abusing drugs and committing suicide.

As an issue of fear and hopelessness, this may correlate directly with Republican initiatives to shame the beneficiaries of shrinking social programs and get them off the rolls with required participation in nonexistent job-training programs. Because Republicans know that such programs do not exist, this will leave needy people with neither the skills to re-enter the job market nor the means to feed their families.

Step Four: Restrict the Right to Political Representation

Aside from the Republican and Democratic gerrymandering that put many of the far-right candidates and Hillary Clinton in office by limiting their voting districts to those who would likely elect them, Republicans are hoping for a Supreme Court ruling that would restrict representation only to registered voters.

In the state of Alabama, where the BBC interviewed the Ku Klux Klan and left the door wide open for the online group Anonymous to publish the names and occupations of 1,000 KKK members, 31 offices of the Department of Motor Vehicles were closed—all of them in counties with a 75% black electorate. For the impoverished blacks who live there, obtaining an acceptable photo ID is not just a matter of driving to a DMV in another district. Most of them have no transportation.

Even if blacks do have proper ID, the voting machines in underprivileged communities are so outdated and decrepit that they are prone to the worst malfunction: overriding a voter’s choice, regardless of who it is.

Step Five: Change the Discourse to one of Hatred

Whether it is Jeb! Bush announcing that he’ll end “free stuff for blacks” or Donald Trump demanding a Great Wall of China and a deportation force for a repeat performance of “Operation Wetback,” the rise of contempt for vulnerable people is less a matter of blowback against immigrant workers, “anchor” babies, affirmative action, political correctness, and those who rely on social programs than restoring the freedom to hate—openly and violently, without reservation. This divisive force in American politics panders to the far-right fringe and white militant movements.

It is also shaking us slowly to pieces by creating a new “normal” which includes the slaughter of schoolchildren and the torture that ends in murder of suspects in police custody.

The Oathkeepers, a former veteran of which plotted to “detain” members of the U.S. Congress and Senate who supported the Iranian nuclear deal and ultimately arrest President Obama for treason, have created a new instructional video for The Oathkeepers to infiltrate first-responder organizations. Their strategy: to gain access as volunteers for recruitment among the agencies and the communities they serve—to paramilitarize where possible as sappers against the government.

If they are successful, expect the hate crimes to escalate.

Step Six: Pile on More Debt

Leading up to the subprime mortgage meltdown of 2007-2008, Wall Street colluded with the ratings agencies to gain AAA ratings on any and all debt that could be bundled into a security of some form, despite tremendous risk, in order to infiltrate hedge funds and other investment vehicles, the rules of which were conservative and only allowed holdings of triple-A rated securities. The whole point was to keep the good times rolling by deceiving more and more customers, constantly bending the rules, and conceiving of “innovations.”

Unfortunately, the end of the Great Recession was predicated on more debt, not just to bail out the banks but to create a new boom in junk bonds, enlarge the shadow banking system, re-inflate the housing bubble and increase consumer debt. The Federal Reserve’s policy of purchasing bonds for “quantitative easing” and making zero-interest loans ($2.6 trillion of which went to central banks but are parked on the books at the Fed as excess reserves, over and above the required $107.1 billion) has pushed the Fed’s balance sheet to $4.5 trillion.

According to a report on MSNBC, our total debt outstanding is more than “$18.15 trillion, nearly double of where it stood in 2008. Corporate debt has jumped to $8.1 trillion, a nearly 50 percent gain over the same period, and household debt has passed $14 trillion for the first time ever.”

Despite this, reduced consumer purchasing power has led to a lack of pricing power. The horror of “deflation,” or reduced prices for American goods and services, is compounded by income weakness. Americans either have no money to buy or are so deeply in debt that they can hardly risk more buying. And deflation won’t stop there. According to one Wall Street analyst, stocks are 70% overvalued, junk bonds are in serious trouble, and the re-inflated housing bubble won’t take much longer to burst. Naturally, Republicans would like the Fed to administer the bitter medicine of rising interest rates to cause the next market meltdown before the 2016 election so they can blame it on Obama. Speaking to Fed chairman Janet Yellen, one Wall Street headline read, “Get off zero now!”

Yellen isn’t budging, but despite the Fed’s insistence that its policies were, and are, meant to cause “good inflation” (an increase in wages) there is no doubt that its beneficiary has been the business community.

Fear of losing “herd control”

Today, a small percentage of America’s richest people feel that the government must redress income inequality from fear of an insurrection. In the words of Cartier chief Johann Rupert, “We are destroying the middle classes at this stage and it will affect us…How is society going to cope with structural unemployment and the envy, hatred and the social warfare?”

The shaky consensus among the rich is that the solution must lie with the government. However, they feel justified in rolling back the New Deal and would be even more content to roll back the twenty-first century.

Here is how they’ve tipped their hand toward a Latin American-style coup, the precedent for which, as it pertains to an American military leader, lies in the Provisional Government headed by Paul Bremer, which sold Iraqi assets into foreign hands during the occupation.

For at least the past few decades, high-powered political donations have been more or less evenly distributed to Republicans and Democrats. This was less a matter of the rich hedging their bets than of a tacit two-party agreement whereby Republicans and Democrats both supported big business.

Too, there was such a demand for retired military officials to act as lobbyists and speakers that the phrase “rent a general” had long been in usage.

Now, with the victories of the Labour Party in the UK and Canada, this, for the business community, is an ominous indication that they’ve lost “herd control.” Coupled with the perception of conservatives that America’s Republican Party is dissolving into chaos, a military coup would either head off, or end, the potential of a Democratic president. It is not that the business community lacks an ally in Democratic contender Hillary Clinton; it is that Senator Bernie Sanders is a genuine threat to Clinton and the far-right has too much at stake to face the threat of defeat.

For one thing, they have not lost sight of the fact that the next president will be appointing at least two or possibly four new Supreme Court Justices. Their campaign on hot-button issues would thoroughly be endangered by a Democratic shakeup.

And so we have come full circle. The Republican Freedom Caucus is driving the game of chicken (at the cost of $24 billion in losses for the last government shutdown) from sheer determination to have a seat at the table once they have done enough damage to incite a “protective” coup—one that would honor their goals and rule without need for consensus.

Is there any more to be said? Actually there is.

Win, lose or draw, get ready for the Great Deprivation

Like it or not, President Obama’s recovery plan has helped to drive the country toward the next economic meltdown. Add in our national debt and IMF-style reform becomes the preferred solution.  Since at least half of the country believes there are other options, Republicans alone can not impose “the brick,” or the Koch Libertarian platform. They must run the government off the rails to persuade the military to take over, and if it does take over, it will usher in a new era of pain for the American nation that may be called the Great Deprivation.