Daily Bell: For those who don't know,
give us a rundown of your current business and economic preoccupations.
Catherine Austin Fitts: I publish
the Solari Report,
a private bridge call and blog focused on building personal and family
wealth. I also provide investment advisory services through
Solari
Investment Advisory Services LLC and
Sea
Lane Advisory LLC.
Daily Bell: Give us a sense of your background and childhood.
Catherine Austin Fitts: I grew up in Philadelphia in the United States.
As a child, I witnessed the destruction of wealth by networks engaged in
organized crime and financial fraud and the covert operations that
supported them. It started a life-long fascination with understanding
how money and the financial system work, including in places, and how
healthy cultures could prevail.
My mother was an economist who retired from the Philadelphia Federal
Reserve to have children. My father was a surgeon and trauma expert who
loved caring for people. I watched them struggle with the growing
corruption as it ultimately tore our family apart.
I traveled around the world during college, studying Mandarin in Hong
Kong, and then graduated from the University of Pennsylvania and
received an MBA at Wharton. After graduation, I went to work at Dillon,
Read & Co. Inc., a small Wall Street investment bank that is now a part
of UBS.
I chose Dillon Read as the firm offered me a chance to work in
many different areas. I kept moving from one area and type of work to
another, trying to understand different parts of the economy and
financial system.
Dillon had a tradition of public service. After I became a managing
director and member of the board, we sold the firm and after our initial
employment contracts ended, numerous members of the firm joined the Bush
Administration. I did as well, becoming Assistant Secretary of Housing - Federal Housing Commissioner in 1989.
After serving in
the Bush
Administration for 18 months, and deeply disturbed by the mortgage
fraud, I left and started an investment bank, Hamilton Securities Group.
My hope was to use software technology and the Internet to help
decentralize the capital raising process in a manner that could, in
combination with government reengineering, revive the US economy and
improve pension fund returns as globalization was shifting significant
employment and income abroad.
Decentralizing the economy in a manner that grows decentralized equity
ownership was not the direction taken by Washington and Wall Street.
Instead, the strong dollar policy was instituted and a debt bubble, led
by a global housing debt bubble, financed enormous shifts of capital
globally in a manner that aggressively centralized political and
economic control. I have described this process as a "financial coup
d'état." (See
http://solari.com/blog/financial-coup-d'etat/).
To help facilitate the US housing bubble, the federal government
targeted Hamilton. I spent eleven years engaged in litigation. This
process forced me to research the US black budget, including related
organized crime and financial fraud both domestically and globally.
I have described these events in detail in writings available online.
(See http://www.dunwalke.com/gideon/, including the link to: Dillon,
Read & Co. Inc. & the Aristocracy of Stock Profits).
During that time, I had a number of private families request my
assistance in protecting their assets from the risks created by the
changes underway. I found that I very much liked helping individuals and
families directly. Consequently, after completing the litigation, I
started Solari Investment Advisory Services.
I had a number of my clients in funds managed offshore.
After Dodd
Frank, the funds were returned to US investors and I started Sea Lane
Advisory with my partner Chuck Gibson of Financial Perspectives in the
San Francisco Bay area to provide an alternative.
Daily Bell: Are things getting better or worse from a corruption and
freedom standpoint in the US?
Catherine Austin Fitts: Things are
getting worse. On a positive note,
there are some advantages to have the "beast" come out of the closet.
Daily Bell: Give us a summary of your perspective regarding Wall Street
- and what happened to you in a little more detail.
Catherine Austin Fitts: I think Wall Street is the pit bull, not the
master. The $64,000 question is, of course, who is really in charge and
why are they behaving this way?
I have had the opportunity to operate at high levels in Washington and
Wall Street and have never met a person who did not function as if they
were a prisoner of the system. Often, that "system" did not permit them
to function on a lawful basis. This implies highly centralized
governance if this many people are functioning in an insecure, limited
or unlawful way.
The people who manage our financial system are also operating with
significant double binds. This is what I try to describe with my red
button story:
"In the summer of 2000, I asked a group of 100 people at a conference of
spiritually committed people who would push a red button if it would
immediately stop all narcotics trafficking in their neighborhood, city,
state and country.
Out of 100 people, 99 said they would not push such
red button. When surveyed, they said they did not want their mutual
funds to go down if the U.S. financial system suddenly stopped
attracting an estimated $500 billion - $1 trillion a year in global
money laundering.
They did not want their government checks jeopardized
or their taxes raised because of resulting problems financing the
federal government deficit."
So it is not appropriate to assume that the corruption is just at the
top.
Indeed, most citizens in the first world have been the economic
beneficiary of what
James Turk calls "the central banking-warfare
model."
At the same time, we have all been limited by suppression or control of
knowledge and technology that could significantly improve global living
standards. The spiritual, environmental and cultural costs of this model
are enormous.
What my experience helped me to understand is that we are governed by a
group of people who have the power to kill, and otherwise break the law,
with impunity.
As the Secretary of HUD once said in my presence,
"I
don't have to obey the law, I report to a higher moral authority."
This power appears to come in part from the ability to use deeply
invasive digital systems to gather intelligence, transact and monitor as
well as from invisible weaponry, including satellites and weaponry
controlled or delivered from space.
As Western countries move investment into the emerging markets, their
satellites and military move to police this global investment. Investors
do not invest where they cannot enforce.
So in a sense, financial
globalization is pressuring the United States to become a global
military empire.
Daily Bell: Can Wall Street be cleaned up?
Catherine Austin Fitts: Of course it can. However, before it can, the
question is: What is the investment and financial model that will
replace the central banking-warfare model and how will it be
implemented?
Part of the economic warfare that is raging throughout the
financial markets relates to the squabbles between the different
countries and factions that want to come out on top. The greater the
uncertainty about the model and the greater the change, the uglier the
process will be.
Depending on the politics, market forces and new technology have the
potential to significantly reduce Wall Street's market share in the
global financial system.
Daily Bell: Is
the SEC the regulator to do it?
Catherine Austin Fitts: Our society has integrated warfare with
financial markets. So, for example, if we want to checkmate the Chinese,
the oil price is driven up. Or when Treasury wanted to bubble the
dollar, the gold price was suppressed.
Yelling at the SEC or
the CFTC to
regulate more is not going to solve the problem.
In a sense, to regulate
in these markets you need the SEC to team up not only with the CFTC but
also with DOD and ONI. And they need to coordinate with their
counterparts around the world. And you need greater literacy in the
investing public about how financial systems really work.
Our political class believes that
dumbing people down and
using
controlled media, entrainment technology and subliminal programming to
manipulate is the way forward.
I am from the Winston Churchill school,
"Tell the people." The greatest waste in our society is the broad-based
intelligence that is not being unleashed because our markets are not
truly
free markets.
Clearly, the political class has been instructed to make sure they do
not work.
Daily Bell: Does financial regulation work? Will more work better?
Catherine Austin Fitts: The Tao Te Ching says:
The more restrictions and prohibitions there are, the poorer the people
become
The sharper the people's weapons are, the more national
confusion increases
The more skill artisans require, the more
bizarre their products are
The more precisely laws are articulated, the more thieves and outlaws
increase
More laws or regulation will not address the underlying failure of
enforcement and the need for a new investment model.
Daily Bell: Would markets be better off if they were MORE free and
private watchdogs were allowed to take over from public ones?
Catherine Austin Fitts: Not necessarily. Again, we need to address the
question,
"Who is the breakaway civilization, what are their weaponry
and surveillance systems and what systems will work successfully to
shift their behavior in a positive manner?"
This, of course, leads to
additional questions, such as,
"What do they know that we do not know
and how would we behave if we had that knowledge?"
Setting private watchdogs to regulate these guys is a bit like landing
on Normandy Beach with a water pistol.
This enforcement question is one of the reasons I focus on the power of
transparency combined with individual intention and action to bring
positive change.
A few regulators are an easy target. Millions of private citizens and
investors shunning dirty players in the markets are not. Globally, they
become a mighty force. However, that means that as a cultural matter the
human race must become deeply committed to respecting everyone's
individual rights, not just one's own.
Daily Bell: Are central banks responsible for much of the current chaos?
Catherine Austin Fitts: This takes us back to the central question
- who
is in charge and why are they behaving the way they are behaving? I
don't think we know the answer to those questions.
Daily Bell: Would you like to see central banks shut down? Or do you
think banks like
the Fed ought to be nationalized, as Ms.
Ellen Brown
wants?
Catherine Austin Fitts: I agree that a Federal Reserve System under the
ownership and control of the US government would better serve us in a
system in which the information and clearance systems are owned,
controlled and operated by government employees NOT by private defense
contractors and where the rules regarding access to information are
strictly observed and enforced.
Of course, that means we would have to return the Treasury and US agency
information systems back to government employee management.
If you map out the information systems and databases at the US
government, including at the Department of Justice, the SEC and the US
Treasury, you will understand why I say that there has been a financial
coup d'état. There has also been a financial data coup d'état.
During the
hearings on Enron, I pointed out that the Department of
Justice had not asserted control of Enron's documents. However, as the
chairman's of Enron's finance committee was a key investor and board
member in a company that was running information systems for the
Department of Justice and the SEC, it would appear that Enron insiders
had asserted control of the government's documents.
Can you imagine investigating someone who is a controlling investor in a
company running the information systems for your enforcement division?
How is that supposed to work?
Financial sovereignty requires information sovereignty.
Daily Bell: Let's switch gears. If the United States is an empire, will
this century see another power rise to challenge it? China perhaps?
Catherine Austin Fitts: The greatest threat to US hegemony in Asia is
Japan. Or at least it was Japan
until Fukushima happened.
I don't underestimate the threat that Germany poses, particularly if we
get a real split of the Anglo-American alliance from the continent as a
result of the re-arrangements around the euro and Germany grows closer
to Russia. Remember, one of the reasons that the European Union happened
was that the rest of Europe, with bitter memories of WWI and WWII,
wanted to integrate Germany into the whole of Europe.
China is formidable, but they are checkmated by the need to feed and
employ such a large population.
Right now, the United States' lead in satellites, weaponry and control
of the sea lanes makes it dominant. The question is how long that can
continue if America itself devolves into a barbaric country. Force and
technology alone do not result in greatness and the invasiveness of the
model has become not just financially oppressive but deeply perverted.
As China is burdened with a large population, the United States has an
aging population that is not prepared for the changes underway. How the
US is going to manage their expectations and fund their retirement is an
unanswered question.
Daily Bell: The invention of the Gutenberg Press was, in our opinion,
the proximate cause, eventually, of the Thirty Years peasant war that
raged across Europe - a war generated by an elite that had the most to
lose from the Gutenberg Press's ability to bring literacy to the masses.
Are we seeing a similar paradigm today?
Catherine Austin Fitts: Yes. Digital technology permits higher learning
speeds generally. However, it also makes highly centralized management
and manipulation possible, aka "the matrix."
Daily Bell: Is war necessary for those in charge of the US Empire to
maintain control?
Catherine Austin Fitts: Yes. The US Empire is
financially dependent on
the violation of individual rights globally and access to cheap natural
resources. This requires various forms of covert and economic warfare as
well as overt military wars.
Daily Bell: Once the Empire topples, or as it does, will another take
its place?
Catherine Austin Fitts: I do not assume that the Empire will topple. It
has the ability to NOT topple.
Whether it does or not is a political and
military question - not an economic or financial question. The Empire's
challenge is how to maintain liquidity without trust and how to maintain
productivity without markets. It is trying to do too much with force and
covert methods.
If it does topple, the competition to become the regional hegemons will
accelerate and organized crime will move into the power vacuum. As ugly as the Empire can be, there are uglier forces at work.
Ask
yourself: Does the Russian mafia have nuclear weapons? I assume so.
Daily Bell: What would be the result of more global centralization?
Catherine Austin Fitts: It would be more of the same - including
increases in poverty, slavery and depopulation. Aaron Russo knew what he
was talking about when he said
warned us that these folks want spy chips
in everyone and everything.
Daily Bell: Is a gold standard, or a
gold and silver standard, the
normal outcome of a peaceful, market-based society?
Catherine Austin Fitts: Not necessarily. Currency systems are part of
governance systems. We should look at the currency question integrated
into the question of who is going to govern and manage and in what
process with what kinds of disclosure.
For example, there are many attractive features of a gold and silver
standard. However, the ownership of precious metals is limited to a
small group of the global population. If we suddenly adopt gold and
silver as our currency standard, it will benefit a small group of people
in a manner that could make things worse.
Nevertheless, I would far prefer that to a digital system working
through the Internet and hand-held devices that allow all financial data
to be centrally accessed and controlled.
Bottom line: Don't fall into the trap of proposing currency systems on a
stand-alone basis. You want to know who is going to run things and with
what processes and disclosure. Then you get into the aspects of the
different financial tools that help us do that.
When I look at a company, the first thing I look at is the quality,
experience and networks of the people who govern, manage and own it.
It
is the same with the global financial system. Without high quality
people who are free to govern in the best interests of all concerned or
as stated by law, charter and contract, there are no solutions. Put
excellent people in charge throughout society and I assure you they can
run things remarkably well, even if forced to struggle with lousy
currency systems.
Along with better currency systems, we also need to shift out of
dependency on debt and into an equity based financial system. Equity
tends to build alignments and cooperation.
Debt facilitates warfare with
"buy now, pay later" economics that makes sure the financiers can win no
matter the outcome.
Daily Bell: Does the Internet have a role in a new monetary system?
Catherine Austin Fitts: Yes. However, the Internet is the ultimate
surveillance "op." Which means we have to have monetary systems that
offer us robust transactions and value storage options in the material
world that offer complete privacy without debasement. That means we need
systems that function offline between private parties.
Daily Bell: Is
the Austrian School making substantial inroads?
Catherine Austin Fitts: Yes, thank heavens. Let's hope they make more.
However, as the centralizers want to use social media and online systems
to help centralize transactions and move to digital control of
currencies, anticipate lots of "woo-woo" proposals about "new money
systems."
I was just at a wonderful conference in Switzerland and heard some of
the most terrifying proposals for "a world without money."
Having the
Austrians by my side did me a world of good. I kept trying to explain to
the most wonderful people that after you have turned over trillions of
dollars of bailout money to one group who has now centralized tremendous
ownership and power, to voluntarily swear off money means to decrease
your power in a way that increases theirs. Is that a good idea?
We need to look at all these ideas through the prism of economic
warfare. An eco-village can be a wonderful idea if the people who
participate choose to create it and grow it well. However, that idea in
the hands of the wrong people can be a design for labor camps.
So
be careful with monetary ideas. The best monetary reforms are ones you
will do in your life, today, now. Change starts with me and what works
for me right now in my day-to-day transactions.
For example, check out the calculator we
made with Franklin Sanders of the Moneychanger to support people who
want to
use silver and gold to conduct transactions. Otherwise interesting ideas can turn
into weapons in the hands of those who do not have our best interests at
heart.
Again, one man's eco-village is another man's labor camp. One man's gold
standard is another man's plan to reduce a population to a feudal state
to his advantage.
Daily Bell: What about the EU and the euro? Will either or both survive?
Catherine Austin Fitts: Force can make any system go, if you apply
enough force and are willing to tolerate sufficient wealth destruction
and depopulation. Witness the dollar. Numerous benefits come to the
average American as a result of the dollar being the reserve currency.
At the same time, the force used to make the system go and the
debasement of both the currency and the culture that results is
destroying America.
The same is happening in Europe. My expectation is that the euro will
survive for some time with fewer countries subject to
the Lisbon Treaty.
The euro as a currency system makes no sense. Europe has different
people, with different languages, in different economies. There is no
"we" here.
Different currencies would allow markets to work. So Europe would be
wealthier with different currencies. But then the people centralizing
the economy would not be able to pick up equity cheap in the PIGS with
disaster capitalism tactics.
Do they have the force to keep the system
going? Yes, at least until enough people can see the game for what it is
and are prepared to act in the face of force.
Daily Bell: Do you have an opinion on China? We believe it's headed for
a crash landing.
Catherine Austin Fitts: China is struggling in the shift from exporter
to the West to a country with more significant internal consumption.
Their political challenges are formidable - including keeping one
billion people employed and managing a new generation that is dominated
by too many single male children.
However, China has an extremely productive culture and people. They
think strategically, are very hard-working and love to learn and invest.
The Roman Empire and the British Empire went broke trading with the
Chinese, until the Brits turned to opium.
I think a growing China is here to stay. Yes, they may slow down as,
like the rest of us, they choke on misallocations of capital that occur
in bubbles. I don't think they will crash unless the currency wars lead
to a global meltdown and war. Their long-term outlook is quite positive.
Remember that our success is very much tied to their success.
Oversimplified, if the young people of this world are not successful
what would happen to all of us? Elders need youngsters. In part, that is
what the shift of capital to the emerging markets is all about.
Daily Bell: What are some of the most important issues pertaining to
free markets, in your opinion?
Catherine Austin Fitts: The most important issue is transparency. The
second is integrity of contracts and agreements.
Daily Bell: What are the fundamental obstacles to recovery?
Catherine Austin Fitts: We are experiencing an ongoing financial coup
d'état that is centralizing power.
Symptoms include an absence of
transparency, deteriorating integrity of contracts and agreements,
environmental deterioration, a "breakaway civilization" that appears
"out of control."
I would add to this the use of financial markets for
warfare as opposed to facilitating the allocation of capital and trade.
The ultimate codification of things like transparency and integrity of
transactions is not the law; it is the culture. A variety of forces are
systematically breaking down our physical health and our culture. That
cultural corruption is the greatest obstacle.
Daily Bell: What are the fundamental issues pertaining to a healthy
recovery?
Catherine Austin Fitts: We have to get to the bottom of who has been
centralizing and why, what is the technology they have and where it is
they are planning to go with this.
Daily Bell: Is there
a power elite that is trying to create
one-world
government? If so, is it succeeding?
Catherine Austin Fitts: Yes, there is a concerted effort to create a
one-world government and evolve to a one-world currency. It has been
succeeding.
As the "financial coup d'état" becomes more obvious,
centralization is entering a critical stage as more and more people
globally react negatively to the effort and related tactics.
Indeed, our current currency wars reflect a natural pulling away from
centralization that is healthy.
Daily Bell: What endeavors are you involved in that you want to point
out to our audience? What's most important to you that you would like
our audience to be aware of and support?
Catherine Austin Fitts: My focus is on the preservation and growth of
family wealth.
If you study the economy bottom up, it is built by
people. Successful economies are built by family enterprises that
ultimately contribute significant amounts of financial and civic capital
and provide environmental stewardship, not to mention raising our future
leaders.
Family wealth is threatened by centralized control. Specific issues that
I tend to focus on include the centralization of the seed and food
supply in combination with the patenting of life.
Others include
environmental pollution, financial fraud and insufficient transparency
to support individual investors and erosion of property rights and
individual liberties.
Daily Bell: What are the most important
- seminal - works of yours that
you would encourage everyone to read? Where can they be found?
Catherine Austin Fitts: I have spent quite a lot of time thinking about
how we could shift the management of institutional capital to a new
model. You can read more about
the Solari Investment Model.
Daily Bell: Finally, give us your best estimate of where is gold headed,
pricewise, over the near- and long-term.
Catherine Austin Fitts: Gold is still in a long-term bull market. I
anticipate the high for 2012 being somewhere between $2000-2200. Where
the price ends up long-term is very much a function of monetary policy
in the long-run. Gold is not increasing in value so much as fiat
currencies are debasing.
I believe that inflation will continue to be the policy choice to manage
global debt positions.
One of my greatest concerns is the push for a Constitutional Convention
in the United States. If such a process were hijacked in a manner that
fundamentally altered the Constitution, it would create the conditions
to make it much easier to manage through deflation. That could have a
significant impact on the relationship globally between financial paper
and tangibles, including precious metals.
The amount of new technology that could be integrated over the next
decade is quite significant. In a more positive scenario, a combination
of the global rebalancing and new technology could cause the equity
markets to shake off the debt burden and leave precious metals in the
dust.
That still leaves the question of how people are going to access the
necessities of life if technology provides what labor used to AND the
centralizers continue to handicap or disallow small business and
entrepreneurship and force hundreds of millions of farmers off their
land and into the cities.
If hedge funds can borrow at 1% or less in a carry trade but I have to
pay 30% to finance the local farm or meat market, the transition to
devalue labor can offset the monetary inflation, but it can also make
for a very ugly world.
Daily Bell: On behalf of all of our readers we thank you for sharing
your views with us, and hope to hear from you again soon. And we
encourage all readers to visit Solari.com and consider learning more
about your work. Thank you.
Catherine Austin Fitts: Thank you! I enjoy reading the Daily Bell and am
honored to have this opportunity. Thank you for all you and your readers
do in this world.
Daily Bell: Thank you.
