Organized Crime Nation

August 14, 2008 – A lamentation about how the U.S. today is run like an organized crime syndicate, all nice and legal, with a humorous introduction.

By The Cerebral Aesthetic Vagabond

A Typical Day At The Compound

[Scene: Four capos are sitting around a conference table plotting strategy.]

...

Bennie “Bucks”, hands clasped as if praying: Should I start the “helicopter” now, Henry?

Henry “Bazooka”, calmly and authoritatively lighting a cigar: Not yet, not yet. Let’s see if we can trick the Chinese or the Arabs into buying some more Treasury bonds first. If not, then you can crank up the helicopter.

Georgie “The Brain”, looking up from his doodling on a piece of paper: Hey, I’ve got an idea. If the Chinese want a piece of the action in Iraqi oil, why not demand that they buy some more bonds?

Henry “Bazooka”: Yeah, that’s what I’m thinking too.

Dicky “Shotgun”: Yeah, and if they don’t want to play ball, we’ll just take the gloves off! By the way, when are we going to hit Iran?

Georgie “The Brain”: Christ, Dicky, can’t you think of anything else? I’ve got my legacy to think about and our guys are going to get slaughtered in the election as it is.

Dicky “Shotgun”, leaning forward and slapping his palms on the table: So what? Who gives a fuck what the voters think? Just cancel the damned election – you have unitary power – and let’s get on with taking down Tehran!

Henry “Bazooka”: That might not be such a great idea for the economy. We’ve pretty much got everybody where we want them right now. All those morons that trade with us bet the farm on our economy, so now they have to bail us out or go down with our ship. If we attack yet another country they might decide to swallow their losses and let us sink. We pulled out all the stops to pound down oil and commodity prices and pump up the dollar and the stock market in time for the election. Let’s not throw away all that effort by causing oil to shoot through the roof. [Chuckling and raising his cigar to his lips.] Besides, maybe the Israelis will make the first move against Iran anyway.

Bennie “Bucks”, timidly raising a finger: We do have a problem, though. We’re running out of Treasuries to trade for worthless securities. Sooner or later we’re going to have to start up the printing presses.

Henry “Bazooka”, leaning back and slowly exhaling a perfectly circular smoke ring: I’ve got that covered. The SEC isn’t going to look too closely at the books anymore, so companies can hide their worthless junk in the level three category and doll up their quarterly financials. We’ve got our banker pals protected from naked shorting, so their stock ought to hold up pretty well without any more intervention on our side. And Georgie here just signed the housing bailout bill, so we have unlimited Treasury funds now to use for anything we want. Congress isn’t going to look very closely at what we do with that money. So just be patient, Bennie.

Georgie “The Brain”: That reminds me, Bennie. The missus wants to build a second guest house down at the ranch. After all I’ve done for the bankers, you think they can get us a good “loan”?

Bennie “Bucks”: I’ll make some calls ...

Dicky “Shotgun”, impatiently interrupting: Well, if we can’t go to Tehran, can we at least stir up a little trouble for the Russians in Georgia?

Georgie “The Brain”: Go for it! I never liked that pecker, Putin, anyway. Hee, hee. Pecker Putin, Pecker Putin. Hey, that’s funny! I crack myself up! Pecker Putin! Thinks he’s so tough because he knows karate. Big deal! I know how to do stuff ...

Henry “Bazooka”: Georgie, please! Give it a rest! Dicky, I don’t see a problem with that. Just don’t let it get out of control like you almost did with those nukes from North Dakota last summer. Jesus! What the hell were you thinking?

Dicky “Shotgun”: Excellent! Hey, Henry, you got any more of those cigars?

Henry “Bazooka”, pulling a cigar out of his pocket and sliding it across the table to Dicky: What’s the matter? Can’t you afford them?

[All four capos burst into gut-splitting guffaws.]

...

Organized Crime Nation

Recently I’ve commented to several people and in several forums that I feel like I’m living in a town run by an organized crime family. There are no laws or rules other than what the crime family bosses say there are. And if the existing rules prove inconvenient for the bosses, they simply ignore them until they get around to changing them. Meanwhile, the rest of us struggle to keep abreast of the latest rules, ever afraid of displeasing these bosses, even if unwittingly.

Americans seem to harbor a romantic but naive fondness for gangsters. Consider one of this nation’s most cherished movies, The Godfather. While it’s a great movie, it glorifies violence and criminality, albeit with a touch of class and honor. The pervasive message in this movie is, if you have a disagreement with someone or find yourself competing against them in business, the solution is to just kill them. Or take the popular television show, The Sopranos, which portrays the same mentality.

I’ve got news for Americans, we’re living the fictions portrayed in those films! And the real life gangsters aren’t low class thugs, but are the captains of business and politics, the elites.

Three Class Society

I used to think of the U.S. as having a two class society comprised of elites and masses, but I now believe there’s a third class, which I call the enlightened: a significant number of people who understand how the system truly works, who are repulsed by it, but who really don’t know what to do about it. Some, like me, write about it as an outlet for their frustration; others start political foundations to explore alternative systems; many throw up their hands in despair and leave the country.

By “class” I’m not employing the traditional meaning of socioeconomic class, but rather I refer to ideological or psychological class.

The Elites (“The Bad”)

A tiny percentage of the population comprises the elite class. This class is not defined by breeding, culture, character, education or wealth, although its members are never poor. It’s virtually impossible to be a member of this class and fail to become rich. One can be a complete nincompoop, but as long as they are a member of this class they will be rich. Nevertheless, its members belong to this class not by virtue of their wealth but by virtue of their insider status. These are people have extensive connections to other insiders and they are willing to get their hands dirty and take maximum advantage of the system without regard to scruples, principles, justice, honor, integrity or the harm they cause to other people or the nation. The power and wealth of individuals within this group spans a broad spectrum. There is little to no distinction between government or private sector members of this class, and they seamlessly wend their way back and forth between the two sectors. There is no distinction between nationalities either; citizens of any nation are free to participate in the system, so long as they possess the proper elite credentials. Members of the elite class travel freely across national borders and own houses, businesses and assets in many different countries. Should one country’s laws prove inconvenient, members of the elite class can find safe haven in a more accommodating country until their lawyers can arrange for the purchase of the mitigating indulgences.

Did you know that the presumed Republican candidate for President and his wife are reputedly worth $200 million? I had no idea, but it seems par for the course for our “representatives” today. A former president and his wife, who began their political career possessing rather humble means, are now worth at least $100 million. It’s interesting how money seems to be gravitationally attracted to those in politics. According to this article in American Free Press:

IF YOU STILL DOUBT that the big media is determined to keep under wraps the organized crime origins of the $200 million fortune of John McCain and his wife Cindy, take note of how the prestigious Washington Post touched on the issue in its July 22 edition. Rather, instead, note how the Post covered up the matter.

Notice how the article emphasizes the reputed connection between the candidate and organized crime, as if there is really any difference between organized crime and politics today.

The Masses (“The Ugly”)

The vast majority of the population (90% or more) occupies the class I call the masses. The wealth of these people also varies widely, encompassing everyone from the abjectly poor and homeless through the very wealthy. The primary distinguishing characteristic of the masses is that they are utterly disenfranchised from the levers of power. They may own modest sized businesses, be quite wealthy, serve on legislatures, be celebrities, be political activists, make campaign contributions, vote diligently, make a lot of noise, but they are still utterly disenfranchised and none of them are even aware of that fact. This ignorance of their impotent status is an essential determinant of their membership in this class known as the masses; were they not ignorant, they might be members of the enlightened class. The masses continue to play the rigged “game,” retaining faith in the “system,” at most acknowledging that it’s not perfect, but believing that perhaps with a little effort and the right leadership it can be “fixed.”

The Enlightened (“The Good”)

Finally there is the third class I mentioned, the enlightened, who see clearly how the system works but are essentially powerless to change it. These people are significant in number in absolute terms, but represent a tiny minority in relative terms. These people, too, span a wide socioeconomic spectrum, although it’s nearly impossible for someone to be wealthy and enlightened at the same time. Along the path to riches people face a repetitive dilemma: to maintain their integrity and principles or sacrifice them “just a little bit” for gain. By the time they find their pot of gold, their integrity and principles are so compromised that the people have likely become full fledged members of the elite class. I’m sure there are exceptions, people who do manage to become rich while maintaining every ounce of their integrity and principles, but such people would be truly exceptional.

While some enlightened people see a narrow but incisive slice of the corruption, others, such as me, see a broad but shallow panorama. Nobody can see the entire picture of corruption that permeates the system, but my belief is that it is total: every legislative process, regulatory apparatus, law enforcement agency, procurement process and election is compromised today.

Despite my jaded attitude, I’m surprised almost daily by new revelations. For example, earlier today I read an article by former U.S. Marine, Scott Ritter, describing how he believed his life was threatened by the U.S. Government itself when he sought to investigate WMDs in Iraq. A little later today I read an article by the awe-inspiring Catherine Austin Fitts that revealed breathtaking criminality within the government in her discussion of the Housing and Economic Recovery Act of 2008, which President Bush just signed into law. To quote one shocking paragraph from her article:

After I began researching HUD fraud in the late 1990s, I would be contacted by people with experience with HUD fraud. They insisted that the same home was being used to create ten or more mortgages that were placed into different pools. They alleged that Chase as the lead HUD servicer and the other big banks were implementing such systems. This was why we would see the same house default two, three, or four times in a year, they claimed. FHA mortgages had to be churned through multiple defaults to generate the cash to keep all these fraudulent pools afloat. This, they insisted, was all going to finance various secret government operations and private agendas. [My emphasis]

By the way, I can’t recommend highly enough Ms. Fitts’ epic Dillon Read & the Aristocracy of Stock Profits for an insight into the sheer criminality that pervades our system. Another must-read is the aptly named article, The Nearly Unfathomable Depths Of Pentagon Corruption, a lengthy, two-part exposé that left even me stupefied. It is incisive stories like these that enrich my understanding of how pervasive and deep the decay and corruption is in our system.

Complicity

The elites obviously participate in this corrupt system because they’re making staggering fortunes. Naturally, they want to keep the system going as long as possible, but they are so consumed by greed that they don’t understand the need for balance, for sharing the wealth. It’s this unmitigated greed that’s creating the socially destabilizing inequity we see brewing today. How much of an advantage do these elites enjoy? Consider this just-released report from the Government Accountability Office (GAO), which says that between 1998 and 2005 over 60% of the approximately 1.3 million U.S. Controlled Corporations (USCCs) reported no tax liability. As we all know, corporations are the playthings of the elites. Do average citizens get a similar pass when it comes to paying taxes? Just ask Ed and Elaine Brown of New Hampshire. It must be sweet to be one of the elite: deferred prosecution, guaranteed markets, government protected monopolies, and no income taxes.

The masses have no choice but to participate in this corrupt system. The elites own the hamster cage, the masses live in the hamster cage, and they’d better run on that wheel if they want access to food, water, energy, money, jobs, health care, education, information, entertainment, or even to disseminate their own ideas through publishing. Only the Internet is outside of the control of the elites, which is precisely why they are trying so desperately to control it. The Internet is the most powerful and egalitarian tool for the dissemination of information ever devised.

The Internet must not be allowed to be destroyed. If we do nothing else to improve our condition, we must protect this sanctuary of enlightenment.

Members of the enlightened class that remain in this country have little choice but to participate in this corrupt system as well. There are signs, however, of people seeking a way out of the system. Some people live “off the grid.” Some, like me, have deliberately sought to distance themselves from the system as much as possible, by ceasing the pointless practice of voting, reducing their dependence on a high income, minimizing entangling alliances with corporations, producing their own food and energy, relying on bartering, living in locales that afford them physical separation from the “system.” Some people have recognized that since our system revolves around money the best way to withdraw support from the system is to stop feeding it money. The enlightened would surely like to have a greater impact than they are having, but there is a huge obstacle: the elites are simply too powerful. They have worked assiduously for decades, perhaps more than a century, to build this system from which they now enjoy unfathomable profits. (Hedge fund managers have been known to “earn” a billion dollar salary in a single year!) This system is fully legitimized by a staggering number of laws, each having at least one cash-dripping lobbyist to defend it, making it next to impossible to “reform” the system. Of course, that’s by design. Still, the enlightened have begun to climb out of the hamster cage and create an alternative existence, hoping to set an example for the masses that they will follow, but they are not yet following.

The only way the enlightened class can hope to overcome the legitimacy and financial and military power the elites now control is through force of numbers, but there simply aren’t enough enlightened people to mount such a challenge. They need the support of the masses, whose number is immense, but the problem is how to get through to those masses.

So many people among the masses have been so thoroughly brainwashed into believing that their government is not only legitimate but pristine, and that they must always be subservient to the authority of government, that it is next to impossible to convince them to join the enlightened. (Even after everything that’s been revealed, even as the economy goes down the drain, the President enjoys the support of something like 25% of the populace!) From time to time I have fancied attempting to enlighten a family member about just one vein of criminality slicing through our system, only to realize that such a task would involve several hours of persuasion, not to mention several hours of research beforehand in order to assemble a body of convincing evidence. This daunting effort is required to enlighten a single person about a single problem. (Over the years I have had to read dozens of books and literally tens of thousands of articles to acquire the limited understanding I now possess.) It’s beyond impractical to try to convince large numbers of people that the system is a criminal enterprise through and through, especially if they don’t want to know about this stuff anyway. In any case, such efforts are pointless because enlightenment cannot be given to people; they have to seek it out and discover it for themselves. All we can do is point them in the right direction, and only when they are ready.

I’ve always loved my nation, and I’ve come to my conclusions about the system in place today slowly and reluctantly. My beliefs do not ensue from a predisposition to “hate America.” Nevertheless, were I to try and enlighten some of these people about the true nature of our system, I have little doubt that I’d be dismissed as a kook at best, and at worst I’d be accused of being “unpatriotic.”

In any case, I wouldn’t even know where to begin to educate the clueless masses about this sorry state of affairs and the myriad people responsible for it. Even if they were receptive to being made aware of this knowledge, it would take months to give them an adequate introduction to the problems and convince them to take meaningful, constructive action toward solving them. It seems like the only practical route for the masses to achieve enlightenment is painful first hand experience, after which the masses will finally begin to see the truth about the world they live in, provided they mange to see through the elites’ misdirection. Unfortunately, such poverty and oppression is the stuff of which revolutions are made. It would be nice if we could enlighten the masses and start truly reforming the system and bypass revolution.

Countries that export goods to the U.S. are complicit in supporting this system as well, needing to maintain the volume of exports to the U.S. in order to maintain social order in their own nations. Consequently, they’re caught in a sort of Catch-22: the longer they associate with the U.S., the more corrupt their own system becomes; yet to withdraw from the U.S. would result in more immediate turmoil and hardship in their own countries. Some of these countries are in a second Catch-22 with respect to financial issues: thanks to the one-sided export relationship they have with the U.S. in which they sell real goods in exchange for electronic digits called dollars, they have now accumulated vast quantities of dollar-denominated financial instruments that will surely decrease substantially in value over time; yet if they try to sell these financial instruments they will decrease in value even faster. My suspicion is that these trading partners recognize that they are in such a Catch-22 with regard to these financial issues, so they have established numerous sovereign wealth funds to quietly unload these financial instruments, but that approach has so far not been terribly successful at profitably shedding their massive accumulation of dollar reserves. However they are still looking for opportunities to unload their dollars and sooner or later they will probably discover a successful avenue. If the holders of vast quantities of dollars discover a painless way to get rid of them, the game may well end abruptly and the whole house of cards that shields the corrupt U.S. system from scrutiny may come tumbling down, because the U.S. will no longer be able to sell its debt to anyone. It will have to resort to “printing” money and likely end up like Zimbabwe, which last I heard, had 2,000,000% annual inflation.

I offered the following speculation in my own essay titled What Would It Look Like If Civilization Had A Nervous Breakdown?:

There is, however, a new variable in the house price equation that didn’t exist until recently: foreign buyers. The globe is awash in trillions of U.S. dollars that the U.S. manufactured to satisfy its hungry appetite for imported goods. If the U.S. dollar continues to decline sharply in value, as it’s been doing for years, those foreign holders of dollars may seek to spend them before they lose any more value. What better place to spend U.S. dollars than in their country of origin, on residential, commercial, and even agricultural real estate, on infrastructure, and on what remains of our industrial base.

Well, according to this recent article, sovereign wealth funds are seeking to do just what I speculated:

One sovereign fund, said to have earmarked $29 billion to purchase foreclosed residential real estate, recently hired a West Coast mortgage broker and is starting to search for bargains.

While Americans are no longer be able to afford homes in this country, foreign buyers are coming in, buying those homes, and keeping their prices elevated, thus keeping the game going when what’s really needed is a massive downward correction, a purging of excess. I won’t be surprised if cash-strapped U.S. states start selling off public assets to holders of vast quantities of dollars, making foreign countries the proud new owners of our formerly public assets, such as highways, bridges, water and energy infrastructure, and maybe even public parks. I hope the postage to mail payment for my electricity bill to China isn’t too much.

A Levitating Leviathan

Although it’s difficult to prove because secrecy is endemic in the government, there’s a lot of circumstantial evidence that the government, in collusion with key insider companies, routinely manipulates pretty much all the financial markets: currencies, bonds, commodities, precious metals, stocks, and now even housing.

The government has more than once expressed interest in preventing house prices from falling. While counterintuitive to us lowly citizens who cannot afford today’s house prices, it does make sense to lenders, who are on the hook for the inflated prices, to keep house prices elevated rather than suffer losses. Physical housing is also the cornerstone of an elaborate house of cards of derivative financial instruments. If house prices decline, then a derivative house of cards many times the size of the physical housing market suffers huge losses.

How does the government manipulate house prices? By maintaining artificially low, effectively negative interest rates, for one. The Federal Reserve sets the federal funds target rate, which affects short term interest rates for such things as home equity loans, which are now all but dead. By manipulating long term bond prices upward, long term mortgage interest rates can be driven downward. In addition, for at least the last year the government has been bailing out the banking industry with hundreds of billions of dollars in “loans” and “liquidity injections.” These bailouts are an indirect form of house price manipulation because when the government keeps the banks afloat and effectively absorbs their losses, the banks can keep on lending without regard to risk, which helps maintain higher house prices. In addition, the maximum loan value that Fannie Mae and Freddie Mac – which together own more than 50% of all mortgages in America – can purchase was recently increased substantially, offloading one more element of risk – big loans – from the banks to the government, thus helping to maintain higher house prices. Were the banks instead forced to suffer the consequences of their profligacy, lending would shut down and house prices would plummet (even faster than they are already plummeting). While such a scenario would produce financial carnage, it would be over with swiftly and at the end of it all houses would be far more affordable. Finally, as Ms. Fitts points out, the manipulation of the housing market has now become overt and legitimized in the new Housing and Economic Recovery Act of 2008.

Whether by design or happenstance the U.S. Government is in a unique position internationally to manufacture money at will simply by typing numbers into a computer, and players continue to play along, in part, because of forced complicity. No other country in the world enjoys this monetary luxury.

As already noted, countries presently hold trillions of U.S. dollars. Were they to cease accepting dollars in exchange for their goods, the value of their existing dollars would plummet, costing them hundreds of billions of dollars. In addition, in order to maintain favorable exchange rates between their currencies and the dollar and thus keep their export machines humming, many countries are forced to debase their own currencies, which artificially elevates the value of the dollar relative to other currencies. Thanks to long standing agreement, most oil sold on the planet is priced in dollars, and many other goods sold internationally are priced in dollars. These trade practices create artificial demand for dollars, thus elevating their value. While the dollar is no longer backed by gold, it is in a sense “backed” by oil, as well as military muscle. It has been noted by many that Iraq was attacked not long after it ceased selling its oil for dollars. I believe that might well have been one of several reasons why Iraq was attacked, especially since immediately after the U.S. occupied Iraq its oil was again being sold for dollars.

So government-led manipulation, subtle extortion and even military force are used to keep the system levitated. Without such active intervention, the system would probably disintegrate rapidly.

What Went Wrong

The founders of this nation sought to create a decentralized federation of states, primarily to maximize individual freedom and self governance and minimize the likelihood of tyranny developing. Such decentralization also had the advantage of thwarting large scale corruption.

However, from the earliest days of this nation’s history, at least as far back as Abraham Lincoln, our “leaders” have often been hostile to the Constitution, finding it too constraining, utterly missing the point that “constraint” was the primary goal of the Constitution. Slowly but surely, the federal government eviscerated the Constitution, one article and amendment at a time, so slowly that hardly anybody noticed or uttered a peep of objection. Today we have a leviathan of a central government that has usurped powers far outside those authorized by the Constitution. As a result, it has become a veritable one stop shop for people seeking to corrupt the system; no longer do such people need to negotiate corrupt deals with fifty separate state governments. Even the manner of corruption has become sanitized and legitimized: it’s called campaign contributions. If one wants to corrupt the system today all they have to do is make some well placed, juicy campaign contributions and, voilá, a new law is crafted specifically to benefit the donor, all nice and legal. To paraphrase Ms. Fitts’ Dillon Read web site, modern business operates on the maxim of, “buy a lawmaker, make a law, make a business.” Nevertheless, there is still plenty of “old school” sleazy corruption and illegality as well.

How Much Longer

One question I frequently ask myself is, “How much longer can this all continue?” How much longer can the government continue to manipulate the price of everything? How much longer will exporters continue to play along and accept our dollars for their real goods? How much longer will the masses remain sequestered in a state of self-imposed blissful ignorance? How much longer can businesses in the U.S. continue to hide their losses? How much longer can the government keep monetizing everything with impunity? How much longer can this country keep exporting its wealth-creating jobs and industries without acknowledging the repercussions?

Frankly, I’m awed by the acumen with which the elites have been able to keep the game going thus far. I expected to see starker signs of disintegration long before now, but even now things seem to be moving in slow motion.

Psychological Toll

When I was a kid, values like integrity, honor and trustworthiness were lauded. I actually believed in those values as a kid and still do today. I can still recite from memory the Boy Scout Oath and the Scout Law. To our leaders, however, those values are duplicitous marketing slogans that are mocked in private. I can picture our leaders having a hearty chuckle in private at the foolish masses who believe in slogans like “freedom” and “democracy,” while they pat themselves on the back for their staggering personal windfalls derived from propping up friendly dictators and killing millions of innocent people.

While I joke about the state of affairs under which we live, it has taken a profound psychological toll on me. Knowing that I live in a system of organized crime has crushed my spirit and extinguished what minuscule ambition I once possessed. I see little point in planning for or working toward any sort of future knowing that the system can capriciously turn against me at any moment. I’m no longer willing to play the rigged game as a “serf” or compromise myself to achieve “success.” To preserve my sanity I’ve felt compelled to “check out” of the system and content myself with mere existence, as a “useless eater” and “useless drinker.” But if it helps my case any with the elites who supposedly want to exterminate all the useless eaters, I eat like a bird these days because I’m dieting.

Update – 04 February 2009

Well, it took a while, but people are starting to see things my way. According to this article, a Chinese central bank official has had the temerity to intimate that our former Treasury Secretary is a “gangster.”

A Chinese central bank official attacked reported comments by U.S. Treasury Secretary Henry Paulson that China’s high savings rate helped trigger the global credit crisis.

“This view is extremely ridiculous and irresponsible and it’s ‘gangster logic,’” Zhang Jianhua, the bank’s research head, said. His comments were in an interview with the state-run Xinhua News Agency, posted on a government Web site today. [My emphasis]

The End