by Catherine Austin Fitts
February 2, 2009
from
TheSolariReport Website
|
Note from CAF:
This post was originally published here
in February of 2009.
In light of recent events, I am
republishing. |
Part I
In the fall of 2001 I attended a private investment conference in London to
give a paper,
The Myth of the Rule of Law or How the Money Works:
The Destruction of Hamilton Securities Group.
The presentation documented my experience with a Washington-Wall Street
partnership that had:
-
Engineered a fraudulent housing and debt
bubble
-
Illegally shifted vast amounts of
capital out of the U.S.
-
Used “privitization” as a form of piracy
- a pretext to move government assets to private investors at
below-market prices and then shift private liabilities back to
government at no cost to the private liability holder
Other presenters at the conference included
distinguished reporters covering privatization in Eastern Europe and Russia.
As the portraits of British ancestors stared down upon us, we listened to
story after story of global privatization throughout the 1990s in the
Americas, Europe, and Asia.
Slowly, as the pieces fit together, we shared a horrifying epiphany:
the
banks, corporations and investors acting in each global region were the
exact same players. They were a relatively small group that reappeared again
and again in Russia, Eastern Europe, and Asia accompanied by the same
well-known accounting firms and law firms.
Clearly, there was a global financial coup d’etat underway.
The magnitude of what was happening was overwhelming. In the 1990′s,
millions of people in Russia had woken up to find their bank accounts and
pension funds simply gone - eradicated by a falling currency or stolen by
mobsters who laundered money back into big New York Fed member banks for
reinvestment to fuel the debt bubble.
Reports of politicians, government officials, academics, and intelligence
agencies facilitating the racketeering and theft were compelling. One lawyer
in Russia, living without electricity and growing food to prevent
starvation, was quoted as saying,
“We are being de-modernized.”
Several years earlier, I listened to three peasant women describe the War on
Drugs in their respective countries:
I asked them,
“After they sweep you into camps, who gets
your land and at what price?”
My question opened a magic door.
They poured out
how the real economics worked on the War on Drugs, including the stealing of
land and government contracts to build housing for the people who are
displaced.
At one point, suspicious of my understanding of how this game worked, one of
the women said,
“You say you have never been to our
countries, yet you understand exactly how the money works. How is this
so?”
I replied that I had served as Assistant
Secretary of Housing at the US Department of Housing and Urban Development
(HUD) in the United States where I oversaw billions of government investment
in US communities.
Apparently, it worked the same way in their countries as
it worked in mine.
I later found out that the government contractor leading the War on Drugs
strategy for U.S. aid to Peru, Colombia and Bolivia was the same contractor
in charge of knowledge management for HUD enforcement. This Washington-Wall
Street game was a global game.
The peasant women of Latin America were up
against the same financial pirates and business model as the people in South
Central Los Angeles, West Philadelphia, Baltimore and the South Bronx.
Later, courageous reporting by
Naomi Klein and
Greg Palast
confirmed in detail that the privatization and economic warfare model I
discussed in London had deep roots in Latin America.
We were experiencing a global “heist”:
capital was being sucked out of country
after country.
The presentation I gave in London revealed a
piece of the puzzle that was difficult for the audience to fathom.
This was
not simply happening in the emerging markets.
It was happening in America,
too.
I described a meeting that had occurred in April 1997, more than four years
before that day in London. I had given a presentation to a distinguished
group of U.S. pension fund leaders on the extraordinary opportunity to
reengineer the U.S. federal budget. I presented our estimate that the prior
year’s federal investment in the Philadelphia, Pennsylvania area had a
negative return on investment.
We presented that it was possible to finance places with private equity and
reengineer the government investment to a positive return and, as a result,
generate significant capital gains. Hence, it was possible to use U.S.
pension funds to significantly increase retirees’ retirement security by
successfully investing in American communities, small business and farms -
all in a manner that would reduce debt, improve skills, and create jobs.
The response from the pension fund investors to this analysis was quite
positive until the President of the CalPERS pension fund - the largest in
the country - said,
“You don’t understand. It’s too late. They
have given up on the country. They are moving all the money out in the
fall [of 1997]. They are moving it to Asia.”
Sure enough, that fall, significant amounts of
moneys started leaving the US, including illegally.
Over
$4 trillion went missing from the US
government. No one seemed to notice. Misled into thinking we were in a boom
economy by a fraudulent debt bubble engineered with force and intention from
the highest levels of the financial system, Americans were engaging in an
orgy of consumption that was liquidating the real financial equity we needed
urgently to reposition ourselves for the times ahead.
The mood that afternoon in London was quite sober.
The question hung in the
air, unspoken:
once the bubble was over, was the time coming when we, too,
would be “de-modernized?”
In 2009 - more than seven years later - this is a question that many of us
are asking ourselves...
Part II
Rethinking Diversification
For our entire lives, most of us have depended on highly centralized
systems.
Our food comes from a thousand or more miles away. Our savings is
shipped into distant financial centers and invested by strangers in
enterprises run by strangers.
We watch highly scripted news that serves the
same spin no matter how many channels we try.
We bank at impersonal global
banks with criminal records that would make a felon blush and have no idea
where our money goes, just that the government guarantees that we will get
it back.
Within this centralized system, diversification means having your financial
assets deposited into a “one-stop-shop” brokerage account invested in
securities representing different global industries, the idea being when one
industry is doing poorly, another “countercyclical” industry would be doing
well.
But suddenly, we find that we may not be able to trust these centralized
systems.
Suddenly,
traditional portfolio theory no longer addresses our
anxiety. This is because we need to shift from diversification within a
centralized system to real diversification in a decentralized, possibly “out
of control” world.
If you study the investment patterns of families and wealth that has
survived through the generations, including through periods of lawlessness
and warfare, you come to understand that for those who want to thrive in all
economic and political scenarios, diversification has had a far deeper
meaning than what is commonly understood in the financial markets today. For
the astute strategist, it means not putting all your eggs in one basket in
every important aspect of your life.
Given what is happening in our world
and economy, it’s time to revisit the deeper meaning of diversification.
Diversification means that our assets are invested such that an economic,
political, or natural event - particularly a catastrophic event - cannot
wipe us out. So, for example, we don’t invest all of our savings in a single
financial institution or fund. Investors who lost their life savings in
the Madoff scandal were not practicing even the most basic form of financial
diversification.
Diversification also means having multiple types of assets and custodians in
multiple places. Custodians (i.e., those who hold our assets for us) might
be brokerage firms, banks, depositories or our own safe.
Diversification by place means locating our assets in states or countries
subject to different legal and political risks. It means denominating our
assets in currencies of multiple countries. It means selecting assets
subject to different risks of loss due to climate change, weather
conditions, social conditions and other uniquely local vicissitudes.
Local
investment is a great idea, but the people who lived through Katrina can
tell you why having all of your eggs in one local basket may not be the best
idea.
Diversification means that we don’t have all of our savings in just one type
of asset. So we don’t invest in securities only - we also invest in
tangibles. If possible, we buy a house without debt, or with debt that can
be serviced by one family member’s income, or invest in our home to lower
energy and food costs permanently.
We also maintain a sufficient inventory
of household goods. And it’s a good idea to invest in disaster preparedness
if we live in an area that experiences earthquakes, floods, hurricanes, or
tornadoes or is prone to power outages.
Having all your money in one currency or one country is pretty risky - a
risk many in the US tend to take. Ask your Jewish friends whose parents got
out of Germany in time because they had gold coins or family and assets
abroad. Gold coins may hold their value if the dollar collapses, but they
can also disappear in a burglary or if you forget where you put them.
Digital gold may be a great thing, but if the Internet is not reliable where
you are, cold cash may be a good thing. Or if your cash is worthless, a
stockpile of food, vitamins and liquor can be priceless.
However, food,
vitamins and liquor are only good when you are bartering with someone who
wants them or is close by. Which takes us back to gold coins or digital gold
or some other currencies. So you see, there is no magic bullet - just
diversification.
Diversification of life risks is an integral part of all matters related to
financial capital. Living things are the source of all wealth.
That includes
you and me.
Diversification means that we invest in our physical and mental well-being.
We invest our time in understanding the toxic chemicals, drugs and other
influences that increasingly contribute to poor health and cause us to need
so much more funding for more drugs and medical treatments to cure what ails
us. One of the greatest - and growing - threats to our financial health is
physical illness.
The notion that corporate stock investments will create
security while one saves money eating unhealthy food is contradictory to the
principles of building real wealth.
Diversification means that we invest not just in our own human capital but
also in the human capital of other members of our family and those around
us. In this way, we are not betting on financial assets alone to see us
through. We are investing in each other because it is family, friends and
communities that help see us through.
An active network of
mutually-supportive friends and colleagues is important. For those with
sufficient capital and skills, financing the farmers and companies we depend
on for our daily bread may not provide much of a return - it may, however,
ensure that we have healthy, safe food.
Diversification also applies to the work we do. For most people, our labor
is our most important source of financial assets. Skill diversity can mean,
for example, that you have a number of skills. If one skill goes out of
favor, another will give you the ability to be economically useful. If you
have a business that fails, you have the ability to start a new business
because you have the experience and diversity of skills to make a business
run.
The ability to generate income through your own business or practice is
invaluable, particularly when the economic environment makes “W-2”
employment more difficult to find.
If you are an employee and your company
closes, if you have taken care to broaden your skill base, your skills can
be valuable commodities for other, different types of employers or employers
in other industries or places less affected by a downturn. Better yet, you
know how to do many things for yourself, thus offsetting lost income with
lower expenses.
Look at those who are successful in the current environment:
what most of them share is a commitment to life-long learning that
translates into a multitude of personal and professional skills.
Diversification is not always easy to achieve. The more resources we have,
the easier it is to diversify.
The fewer resources we have, the more our
diversification focuses on building our human capital and community.
Interestingly enough, many of the best opportunities before us are those
that can happen when people who have a lot of money and people who don’t
have money but have a lot of skills become allies in building greater
diversification together.
Isolation shrinks our options.
Opportunities
expand as we organize and collaborate effectively. Hence, it is critical to
not assume financial capital can provide sufficient diversification alone
and remain isolated from our neighbors and family.
One of my goals for
the Solari Report is to explore options we have to
strengthen and diversify our human and financial capital and to introduce
you to leaders who are taking action to help us do so.
This week, I will be
reviewing recent financial events and discussing indications that more and
more people are concerned about a financial coup d’etat.
Video
Catherine Austin Fitts
The Looting of America
