Aug 8, 2009


From The Final Call, Vol. 15, No.6, January 17, 1996

On June 4, 1963, a little known attempt was made to strip the Federal Reserve Bank of its power to loan money to the government at interest. On that day President John F. Kennedy signed Executive Order No. 11110 that returned to the U.S. government the power to issue currency, without going through the Federal Reserve. Mr. Kennedy's order gave the Treasury the power "to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury." This meant that for every ounce of silver in the U.S. Treasury's vault, the government could introduce new money into circulation.

In all, Kennedy brought nearly $4.3 billion in U.S. notes into circulation. The ramifications of this bill are enormous. With the stroke of a pen, Mr. Kennedy was on his way to putting the Federal Reserve Bank of New York out of business. If enough of these silver certificats were to come into circulation they would have eliminated the demand for Federal Reserve notes. This is because the silver certificates are backed by silver and the Federal Reserve notes are not backed by anything.

Executive Order 11110 could have prevented the national debt from reaching its current level, because it would have given the gevernment the ability to repay its debt without going to the Federal Reserve and being charged interest in order to create the new money.

Executive Order 11110 gave the U.S. the ability to create its own money backed by silver. After Mr. Kennedy was assassinated just five months later, no more silver certificates were issued. The Final Call has learned that the Executive Order was never repealed by any U.S. President through an Executive Order and is still valid. Why then has no president utilized it? Virtually all of the nearly $6 trillion in debt has been created since 1963, and if a U.S. president had utilized Executive Order 11110 the debt would be nowhere near the current level.

Perhaps the assassination of JFK was a warning to future presidents who would think to eliminate the U.S. debt by eliminating the Federal Reserve's control over the creation of money. Mr. Kennedy challenged the government of money by challenging the two most successful vehicles that have ever been used to drive up debt - war and the creation of money by a privately-owned central bank.

His efforts to have all troops out of Vietnam by 1965 and Executive Order 11110 would have severely cut into the profits and control of the New York banking establishment. As America's debt reaches unbearable levels and a conflict emerges in Bosnia that will further increase America's debt, one is force to ask, will President Clinton have the courage to consider utilizing Executive Order 11110 and, ifso, is he willing to pay the ultimate price for doing so?

By virtue of the authority vested in me by section 301 of title 3 of the United States Code, it is ordered as follows: Section 1. Executive Order No. 10289 of September 19, 1951, as amended, is hereby further amended- By adding at the end of paragraph 1 thereof the following subparagraph (j):

(j) The authority vested in the President by paragraph (b) of section 43 of the Act of May 12,1933, as amended (31 U.S.C.821(b)), to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury not then held for redemption of any outstanding silver certificates, to prescribe the denomination of such silver certificates, and to coin standard silver dollars and subsidiary silver currency for their redemption and

-- By revoking subparagraphs (b) and (c) of paragraph 2 thereof. Sec. 2. The amendments made by this Order shall not affect any act done, or any right accruing or accrued or any suit or proceeding had or commenced in any civil or criminal cause prior to the date of this Order but all such liabilities shall continue and may be enforced as if said amendments had not been made. John F. Kennedy The White House, June 4, 1963.

Michael Hudson: The Parasitic Finance Sector

Fred Harrison interviews Michael Hudson
RenegadeEconomist, London (February 27 2009)
Transcript by Peter Myers (July 30 2009)
See the video - Hudson at his best:

Fred Harrison: How do we solve the Debt problem today?
Michael Hudson: The only way to do it is to wipe out the debts that can't
be paid. If a mortgage is $500,000 on a $250,000 house, you've got to
write down the mortgage to the market price, and you've got to have the
creditors take a loss for their bad loans.
FH: Is the bailout of the banks going to solve this financial crisis?

MH: No, the bailout of the banks is only paying the creditors, and giving
the creditors the money for the bank loans, without giving a penny of debt
relief to the actual debtors. All it means is that the government is
taking over the creditor position, kicking out the homeowners and throwing
the homes on the market.

FH: But won't the taxpayers get their money back in the end?
MH: If the taxpayers could get their money back, you can be sure that
private enterprise would have come in and bought the mortgages. If you
have the marketplace NOT buying the mortgages, if you have the banks
saying, "These are junk mortgages, and this is toxic waste", how on earth
can taxpayers make money off this toxic waste? Is it really a good
investment for the taxpayers to come in and bail out the banks that say,
"We've made junk mortgages, and this is toxic waste, and we weren't able
to sell it, to find a greater fool". There's no way the taxpayers can make
money out of that. [And even if they COULD make money, is it a good idea
for them to do so by kicking defaulting mortgagees out of their homes?]

FH: Ok, now I know you've been an economist in Wall Street, you teach
economics in universities, all over the world, actually. You're a
consultant to governments around the world, and yet you think there are
lessons to be learned from the Ancient World ­ that somehow in the
Biblical times the debt cancellation was something that we can learn from
today. In what way?
MH: Well, for 3,000 years, from Sumer to Babylonia to
the Jewish lands with the Jubilee law, they had the same policy. When a
new ruler would take the throne for the second year in Babylonia and
Sumer, he had a three-pronged solution: He would liberate the
debt-bondsmen, he would return the lands to people who'd lost them for
foreclosure, for homes ­ the basic means of self-support - and he would
annul the personal debts. By wiping the bad debts off the books, he'd
create a clean slate. This was the policy that was taken over in Jewish
law, in Leviticus, by the Jubilee Year.

FH: So you're now saying that there is a way to translate that history
into modern economics, to solve the global financial crisis.
MH: Yes. Antiquity managed to last for 3,000 years, without a financial
bubble, without an economic bubble, and continually restoring order. And
Antiquity realized something that the modern economists don't: they
realized that debts tend to grow in excess of the ability to pay. And when
the debts did that in Antiquity, the ruler would cancel the debts. Now
that was very easy in Antiquity, because most debts were tax debts owed to
the Palace ­and it's easy to cancel debts when the debts are owed to you.
It's harder to cancel debts once you got to Greece and Rome, and the debts
were owed to private creditors; that's where the problem began.

FH: So, now, 2,000 years later, we can't just cancel the debts by rule of
the Government.
MH: Well, you actually can, because the debts are going to be written off
already they estimate they've said there are eight trillion dollars worth
of bad real estate debts. Now if the Government would have just left
market conditions to take their place, when Lehman Brothers went bankrupt
in September, Lehman Brothers mortgages were trading on the market at 22
cents on the dollar. Now at this point, buyers could have come in, bought
the mortgages at 22 cents on the dollar, and then gone to the home-owners
and the real-estate on this, and said, "OK, we're going to re-negotiate
your mortgage at 22 cents, maybe 24 cents on the dollar, or even 25 cents
on the dollar" - that would have given them a profit. They would have
marked down the debts to the ability to pay, or to the market price. And
one way or other the debts are going to have to be written down to the
ability to pay, otherwise they're not going to be paid. If people can't
pay more debt, they won't pay. The question is, "How won't they pay"?

FH: So why aren't Governments doing that, writing off the debts, or
allowing the debts to be cancelled today?
MH: Very good question. The reason is that the largest contributor to the
political campaigns is the Financial Sector, and the Governments have a
choice: they can save the economy, or they can save the creditors who made
the bad loans. They've said, "We don't care about the economy, we're
bailing out the creditors ­ that's our constituency". And that's what the
Governments are doing today. They're not saving the economy; they're
saving their constituency, the creditors: they're saving London City,
they're saving Wall Street, and they're saving the bourse, and the
economy's left to shrink. And until the Government saves the economy, and
writes down the debts to the ability to pay, there's not going to be a

FH: You're saying, then, Governments are acting in bad faith.
MH: They're not acting democratically. What the Governments have done has
been to turn from a Democracy into an Oligarchy. And we're seeing an
Oligarchy, and in fact a Kleptocracy emerge here. And the Governments are
not doing what the people expected them to do ­ they're not representing
the interests of their constituents.

FH: But President Obama says he's going to effect a change, it's not
business as usual in Washington.
MH: When Obama talks about change, he's not talking about financial
change; he's not talking about economic change. He's talking about
workmen's laws, health reform, racial equality; he's not talking about any
economic change at all, because, in fact, he's re-appointed the Bush
administrators and the Clinton administrators. He's brought back the same
people who brought us the Russian crisis. And if you want to see what
their plans are for the United States, look what Obama's team did when
they had a free hand in Russia in the 1990s. They brought the biggest
inequality and kleptocracy in modern times.

FH: So, Michael, you're in London to address a conference here at the
University of London. What is it that you're going to tell them?
MH: Well, I'm going to tell them that the Finance sector, and the Real
Estate and the Insurance sector are not part of the real economy of
production and consumption. The asset and wealth sector is different from
the production sector. You can think of the financial sector as being
wrapped around the real economy, almost like a parasite, and that's why
it's been called parasitic for so long. The financial sector extracts
interest from the economy, the property sector extracts economic rent, as
do monopolies. Now the key thing about parasites, is that it's not simply
that they extract nourishment from the host. The parasite takes over the
host's brain, to make it think it's part of the economy, to make it think
it's part of the host's own body, and, in fact, that's it almost like a
child of the host, to be protected. And that's what the financial sector
has done today. You have Obama coming out and saying, "We have to save the
banks in order to save the real economy". The fact is, you can't serve
both the parasite and the host. Now the amazing thing is that we have the
economic training tablets from Babylonia, from 2000 BC, and the
mathematical models they had of the economy, in 2000 BC, are more
sophisticated than any of the mathematical models that they use today for
government planning. And the reason is that they calculated how long it
takes for a debt to double. Any interest-rate has a doubling time. They
knew in 2,000 BC that the debts double; they also knew that the economy
grew in an S-curve. They had mathematical models for the growth of herds
in an S-curve, for agricultural production, so they knew that the tendency
was for debts to grow faster than the economy can grow, and that's why,
when every new ruler took the throne, they cancelled the debts.

FH: But, look, we've had Nobel-prize-winning economists telling hedge
funds how to operate. Are you saying they are clueless on mathematics?
MH: Well, that's a very good question. You look at the fact that Long Term
Credit Management went broke using the Nobel-prize-winners. The
mathematical models that won the Nobel Prize have led to 450 trillion
dollars of Derivative contracts that are now junk. So, what they won the
Nobel Prize for, is junk mathematics that have led to junk derivatives and
junk mortgages. That's what's happened.

Mounting popular opposition to the war in Afghanistan

CLG 07 Aug 2009
A series of recent polls have shown growing popular opposition in Europe to the US-NATO war in Afghanistan. One recent poll puts opposition in Germany to the presence of German troops in Afghanistan at 85 percent. The latest poll in France shows 55 percent opposed to the war and in favor of the immediate withdrawal of French soldiers. In Britain, according to the latest ComRes poll, more than half of the people (52 percent) want troops to be withdrawn straight away, while some 64 percent say British forces should be removed "as quickly as possible." Read all

Surprise: America is fascist

Fascist America: Are We There Yet?
By Sara Robinson - August 6, 2009

All through the dark years of the Bush Administration, progressives watched in horror as Constitutional protections vanished, nativist rhetoric ratcheted up, hate speech turned into intimidation and violence, and the president of the United States seized for himself powers only demanded by history's worst dictators. With each new outrage, the small handful of us who'd made ourselves experts on right-wing culture and politics would hear once again from worried readers: Is this it? Have we finally become a fascist state? Are we there yet?
And every time this question got asked, people like Chip Berlet and Dave Neiwert and Fred Clarkson and yours truly would look up from our maps like a parent on a long drive, and smile a wan smile of reassurance. "Wellll...we're on a bad road, and if we don't change course, we could end up there soon enough. But there's also still plenty of time and opportunity to turn back. Watch, but don't worry. As bad as this looks: no -- we are not there yet."

In tracking the mileage on this trip to perdition, many of us relied on the work of historian Robert Paxton, who is probably the world's pre-eminent scholar on the subject of how countries turn fascist. In a 1998 paper published in The Journal of Modern History, Paxton argued that the best way to recognize emerging fascist movements isn't by their rhetoric, their politics, or their aesthetics. Rather, he said, mature democracies turn fascist by a recognizable process, a set of five stages that may be the most important family resemblance that links all the whole motley collection of 20th Century fascisms together. According to our reading of Paxton's stages, we weren't there yet. There were certain signs -- one in particular -- we were keeping an eye out for, and we just weren't seeing it.

And now we are. In fact, if you know what you're looking for, it's suddenly everywhere. It's odd that I haven't been asked for quite a while; but if you asked me today, I'd tell you that if we're not there right now, we've certainly taken that last turn into the parking lot and are now looking for a space. Either way, our fascist American future now looms very large in the front windshield -- and those of us who value American democracy need to understand how we got here, what's changing now, and what's at stake in the very near future if these people are allowed to win -- or even hold their ground.

What is fascism?
The word has been bandied about by so many people so wrongly for so long that, as Paxton points out, "Everybody is somebody else's fascist." Given that, I always like to start these conversations by revisiting Paxton's essential definition of the term:

"Fascism is a system of political authority and social order intended to reinforce the unity, energy, and purity of communities in which liberal democracy stands accused of producing division and decline."

Elsewhere, he refines this further as
"a form of political behavior marked by obsessive preoccupation with community decline, humiliation or victimhood and by compensatory cults of unity, energy and purity, in which a mass-based party of committed nationalist militants, working in uneasy but effective collaboration with traditional elites, abandons democratic liberties and pursues with redemptive violence and without ethical or legal restraints goals of internal cleansing and external expansion."

.Jonah Goldberg aside, that's a basic definition most legitimate scholars in the field can agree on, and the one I'll be referring to here.

From proto-fascism to the tipping point
According to Paxton, fascism unfolds in five stages. The first two are pretty solidly behind us -- and the third should be of particular interest to progressives right now.
In the first stage, a rural movement emerges to effect some kind of nationalist renewal (what Roger Griffin calls "palingenesis" -- a phoenix-like rebirth from the ashes). They come together to restore a broken social order, always drawing on themes of unity, order, and purity. Reason is rejected in favor of passionate emotion. The way the organizing story is told varies from country to country; but it's always rooted in the promise of restoring lost national pride by resurrecting the culture's traditional myths and values, and purging society of the toxic influence of the outsiders and intellectuals who are blamed for their current misery.

Fascism only grows in the disturbed soil of a mature democracy in crisis. Paxton suggests that the Ku Klux Klan, which formed in reaction to post-Civil War Reconstruction, may in fact be the first authentically fascist movement in modern times. Almost every major country in Europe sprouted a proto-fascist movement in the wretched years following WWI (when the Klan enjoyed a major resurgence here as well) -- but most of them stalled either at this first stage, or the next one.

As Rick Perlstein documented in his two books on Barry Goldwater and Richard Nixon, modern American conservatism was built on these same themes. From "Morning in America" to the Rapture-ready religious right to the white nationalism promoted by the GOP through various gradients of racist groups, it's easy to trace how American proto-fascism offered redemption from the upheavals of the 1960s by promising to restore the innocence of a traditional, white, Christian, male-dominated America. This vision has been so thoroughly embraced that the entire Republican party now openly defines itself along these lines. At this late stage, it's blatantly racist, sexist, repressed, exclusionary, and permanently addicted to the politics of fear and rage. Worse: it doesn't have a moment's shame about any of it. No apologies, to anyone. These same narrative threads have woven their way through every fascist movement in history.

In the second stage, fascist movements take root, turn into real political parties, and seize their seat at the table of power. Interestingly, in every case Paxton cites, the political base came from the rural, less-educated parts of the country; and almost all of them came to power very specifically by offering themselves as informal goon squads organized to intimidate farmworkers on behalf of the large landowners. The KKK disenfranchised black sharecroppers and set itself up as the enforcement wing of Jim Crow. The Italian Squadristi and the German Brownshirts made their bones breaking up farmers' strikes. And these days, GOP-sanctioned anti-immigrant groups make life hell for Hispanic agricultural workers in the US. As violence against random Hispanics (citizens and otherwise) increases, the right-wing goon squads are getting basic training that, if the pattern holds, they may eventually use to intimidate the rest of us.
Paxton wrote that succeeding at the second stage "depends on certain relatively precise conditions: the weakness of a liberal state, whose inadequacies condemn the nation to disorder, decline, or humiliation; and political deadlock because the Right, the heir to power but unable to continue to wield it alone, refuses to accept a growing Left as a legitimate governing partner." He further noted that Hitler and Mussolini both took power under these same circumstances: "deadlock of constitutional government (produced in part by the polarization that the fascists abetted); conservative leaders who felt threatened by the loss of their capacity to keep the population under control at a moment of massive popular mobilization; an advancing Left; and conservative leaders who refused to work with that Left and who felt unable to continue to govern against the Left without further reinforcement."
And more ominously: "The most important variables...are the conservative elites' willingness to work with the fascists (along with a reciprocal flexibility on the part of the fascist leaders) and the depth of the crisis that induces them to cooperate."

That description sounds eerily like the dire straits our Congressional Republicans find themselves in right now. Though the GOP has been humiliated, rejected, and reduced to rump status by a series of epic national catastrophes mostly of its own making, its leadership can't even imagine governing cooperatively with the newly mobilized and ascendant Democrats. Lacking legitimate routes back to power, their last hope is to invest the hardcore remainder of their base with an undeserved legitimacy, recruit them as shock troops, and overthrow American democracy by force. If they can't win elections or policy fights, they're more than willing to take it to the streets, and seize power by bullying Americans into silence and complicity.
When that unholy alliance is made, the third stage -- the transition to full-fledged government fascism -- begins.

The third stage: being there
All through the Bush years, progressive right-wing watchers refused to call it "fascism" because, though we kept looking, we never saw clear signs of a deliberate, committed institutional partnership forming between America's conservative elites and its emerging homegrown brownshirt horde. We caught tantalizing signs of brief flirtations -- passing political alliances, money passing hands, far-right moonbat talking points flying out of the mouths of "mainstream" conservative leaders. But it was all circumstantial, and fairly transitory. The two sides kept a discreet distance from each other, at least in public. What went on behind closed doors, we could only guess. They certainly didn't act like a married couple.

Now, the guessing game is over. We know beyond doubt that the Teabag movement was created out of whole cloth by astroturf groups like Dick Armey's FreedomWorks and Tim Phillips' Americans for Prosperity, with massive media help from FOX News. We see the Birther fracas -- the kind of urban myth-making that should have never made it out of the pages of the National Enquirer -- being openly ratified by Congressional Republicans. We've seen Armey's own professionally-produced field manual that carefully instructs conservative goon squads in the fine art of disrupting the democratic governing process -- and the film of public officials being terrorized and threatened to the point where some of them required armed escorts to leave the building. We've seen Republican House Minority Leader John Boehner applauding and promoting a video of the disruptions and looking forward to "a long, hot August for Democrats in Congress."
This is the sign we were waiting for -- the one that tells us that yes, kids: we are there now. America's conservative elites have openly thrown in with the country's legions of discontented far right thugs. They have explicitly deputized them and empowered them to act as their enforcement arm on America's streets, sanctioning the physical harassment and intimidation of workers, liberals, and public officials who won't do their political or economic bidding.
This is the catalyzing moment at which honest-to-Hitler fascism begins. It's also our very last chance to stop it.

The fail-safe point
According to Paxton, the forging of this third-stage alliance is the make-or-break moment -- and the worst part of it is that by the time you've arrived at that point, it's probably too late to stop it. From here, it escalates, as minor thuggery turns into beatings, killings, and systematic tagging of certain groups for elimination, all directed by people at the very top of the power structure. After Labor Day, when Democratic senators and representatives go back to Washington, the mobs now being created to harass them will remain to run the same tactics -- escalated and perfected with each new use -- against anyone in town whose color, religion, or politics they don't like. In some places, they're already making notes and taking names.

Where's the danger line? Paxton offers three quick questions that point us straight at it:
1. Are [neo- or protofascisms] becoming rooted as parties that represent major interests and feelings and wield major influence on the political scene?
2. Is the economic or constitutional system in a state of blockage apparently insoluble by existing authorities?
3. Is a rapid political mobilization threatening to escape the control of traditional elites, to the point where they would be tempted to look for tough helpers in order to stay in charge?
By my reckoning, we're three for three. That's too close. Way too close.

The Road Ahead
History tells us that once this alliance catalyzes and makes a successful bid for power, there's no way off this ride. As Dave Neiwert wrote in his recent book, The Eliminationists, "if we can only identify fascism in its mature form—the goose-stepping brownshirts, the full-fledged use of violence and intimidation tactics, the mass rallies—then it will be far too late to stop it." Paxton (who presciently warned that "An authentic popular fascism in the United States would be pious and anti-Black") agrees that if a corporate/brownshirt alliance gets a toehold -- as ours is now scrambling to do -- it can very quickly rise to power and destroy the last vestiges of democratic government. Once they start racking up wins, the country will be doomed to take the whole ugly trip through the last two stages, with no turnoffs or pit stops between now and the end.

What awaits us? In stage four, as the duo assumes full control of the country, power struggles emerge between the brownshirt-bred party faithful and the institutions of the conservative elites -- church, military, professions, and business. The character of the regime is determined by who gets the upper hand. If the party members (who gained power through street thuggery) win, an authoritarian police state may well follow. If the conservatives can get them back under control, a more traditional theocracy, corporatocracy, or military regime can re-emerge over time. But in neither case will the results resemble the democracy that this alliance overthrew.

Paxton characterizes stage five as "radicalization or entropy." Radicalization is likely if the new regime scores a big military victory, which consolidates its power and whets its appetite for expansion and large-scale social engineering. (See: Germany) In the absence of a radicalizing event, entropy may set in, as the state gets lost in its own purposes and degenerates into incoherence. (See: Italy)
It's so easy right now to look at the melee on the right and discount it as pure political theater of the most absurdly ridiculous kind. It's a freaking puppet show. These people can't be serious. Sure, they're angry -- but they're also a minority, out of power and reduced to throwing tantrums. Grown-ups need to worry about them about as much as you'd worry about a furious five-year-old threatening to hold her breath until she turned blue.

Unfortunately, all the noise and bluster actually obscures the danger. These people are as serious as a lynch mob, and have already taken the first steps toward becoming one. And they're going to walk taller and louder and prouder now that their bumbling efforts at civil disobedience are being committed with the full sanction and support of the country's most powerful people, who are cynically using them in a last-ditch effort to save their own places of profit and prestige.

We've arrived. We are now parked on the exact spot where our best experts tell us full-blown fascism is born. Every day that the conservatives in Congress, the right-wing talking heads, and their noisy minions are allowed to hold up our ability to govern the country is another day we're slowly creeping across the final line beyond which, history tells us, no country has ever been able to return.
How do we pull back? That's my next post.

Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future Source