"Information is the hardest currency."
~Andrew Vachss
By Catherine Austin Fitts: Washington's negotiations to address the fiscal cliff of automatic tax increases
and spending cuts legislatively triggered at the close of 2012 are the latest
in an ongoing effort to address increasing U.S. federal government deficits and
debt levels. Enormous monetary and fiscal stimulus has failed to produce an economic
recovery. In short, the U.S. government and central banks have failed to dig out.
Instead, they are now dug in deeper. What to do now?
What is missing from this and other debates on the reengineering of the U.S.
federal finances is an understanding or discussion of the structural problems
in the federal finances that have been accumulating since WWII, when the United
States - with 6% of the world’s population - found itself the master of
50% of the world’s resources.The purpose of this article is to provide an overview of some of these structural issues in the hope that more citizens will be encouraged to consider how the federal finances flow through the immediate world around us - our household budget, our business, farm or place of work, our municipality - and the government-sponsored organized crime and fraud draining us, so we can begin to implement real solutions.
Ultimately, the fiscal cliff is the tip of the iceberg of our economic and cultural woes. Our problems are deeper. The more of us there are, who are prepared to look honestly at our situation and take responsibility for it, the sooner authentic solutions will become possible and emerge.
As we look over the fiscal cliff into our financial abyss, now is a good time to “Come Clean” about the real state of our lives, our communities, and our economy, starting with the U.S. federal finances that flow deeply and intimately throughout every aspect of our lives.
First, a Story
Imagine that you live in a historical mansion in a large, privileged family on a fine property -- rich with good land, good water and natural resources that your ancestors originally acquired through surreptitious means.Imagine that the mansion and estate have serious structural problems that accumulated over many years. The reasons are complex.
There is enormous distrust within the family. As the vigor of the generations dissipated, expenses rose and numerous members have turned to activities that are unproductive at best, or fraudulent and criminal at worst.
Those in charge of family finances were highly distrustful of the collective family intelligence and wisdom, and have mortgaged the estate and cut reinvestment in infrastructure to liquidate as much capital as possible to reinvest abroad - albeit in hidden legal forms. They have engaged in numerous criminal activities, including ones that had significantly harmed the neighborhood economy.
Almost no one in the family objected as allowances continued to be funded, even increased and promises continued to be made. As long as everyone was getting his or her check, most everyone was willing to ignore the deterioration of the real human and physical assets and equity on the family balance sheet. They were also willing to ignore the harm done to their neighbors.
The occasional relative who demanded a financial accounting of what was happening, or was not satisfied with petty bribes of various kinds, was sent packing or to work abroad, or even occasionally dealt with in a way that we pretend never happens - they developed diseases, were admitted to mental institutes, were said to have committed suicide or just disappeared. These instances were sufficient to strike terror throughout the family, leaving those in command of the family trusts unquestioned, as their offshore accounts and numerous enterprises grew.
The result was a fragile peace that grew thin, as the deterioration in the infrastructure of the estate and the structure of the mansion accelerated. Innovation was not encouraged. The managers were interested in their own global competition. They did not want any pesky entrepreneurs taking risks that could in any way attract attention or create liabilities for their grand plans. Indeed, young members were encouraged to use student loans to get their advanced education, thus ensuring their dependence on their allowance and reluctance to branch out on their own. Thus the family members’ general understanding of the world around them and how to navigate it deteriorated rapidly.
So now the day has come when the deterioration in the management of the estate, the growing debt, the structural problems in the mansion and the diminution of the family trusts has necessitated a dramatic reduction in allowances.
Those
in control face a marketing challenge. How do they arrange a dramatic
reduction in allowances without providing an accounting of where monies
had gone, thus threatening their offshore holdings and enterprises, or
exposing criminal liabilities to their global enemies? How do they
maintain control without the continual flow of allowances to placate
family members? And what would happen when the family members discover
that their retirement savings and benefits are empty promises?A task force was commissioned of family lawyers and counselors to make recommendations as to what could be done. They were instructed by the controlling family members to only make recommendations that involved cutting allowances or required contributions from those receiving them.
Under no circumstances were they to ask for a real accounting, delve into the issues related to where family capital had been shifted abroad, the fundamental flaws in the family governance systems, property infrastructure needs, or the need for serious investment in the mansion foundation, let alone how to reinvigorate the prosperity of the land and property and the productivity and health of family members.
They were to deal only with whose allowance were to get cut and by how much,and how much various family members should contribute to a fund to restore the property.
The family lawyers and counselors wanted to keep their jobs and they certainly did not want to be “suicided.” So for months, they argued over proposals -- none of which addressed the real problems, let alone solved them.
After months of this, the family members reached a unique consensus. Their lawyers and counselors were incompetent and should be replaced by new ones. Who would, of course, be subject to the same restrictions....
U.S. Federal Finances: 22 Challenges
Here are the most significant
challenges we must address to put our federal fiscal house in order.
Each includes a brief description. Click on the link that follows for
more discussion of the particular challenge, including examples and
stories from my experience as well as other recommended references.
Disclosure
We do not have reliable financial information about federal financial operations which provides government officials or citizens with the data they need to easily understand federal operations, to make informed choices or to hold their legislative representatives and their fellow taxpayers accountable.Legality
A significant portion of federal government spending operates in violation of the laws governing federal financial management and reporting and the United States Constitution which stipulates that no payments can be made that are not provided for in an appropriations bill approved by Congress. Specifically, Article 1, Clause 7 states: “No Money shall be drawn from the Treasury but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.Operations
A significant portion of governmental accounting functions, payment systems, and financial operations have been outsourced to private banks and corporations. Indeed, the government has become so dependent on outside corporations, that government officials do not have the knowledge or operational capacity and independence to assert control. And worse yet, the same private contractors and banks that control the government’s data and financial operations also control access to the bond markets that finance the government’s operations? So who is really in charge?On and Off Budget
Assets, revenues and expenses can be accounted for on-budget or off-budget, or simply not accounted for at all. Decisions as to what is on and off-budget are often crafted in a way that is not in the best interests of the citizenry. Rather, they are designed to benefit insiders at the expense of everyone else.Restoration
There are trillions of dollars missing from federal accounts, as documented by the federal government itself.Legacy Economics
The budget and the federal regulatory structure operate in accordance with a legacy industrial-based economic paradigm that is increasingly outmoded in the face of technological advances and globalization. Despite these trends, significant technologies continue to be suppressed.Health
Federal laws and regulations encourage or require practices affecting nutrition, health and pharmaceuticals that significantly and adversely impact the health and well-being of the general population, causing heath care costs to explode, resulting in economic stress and damage to households and small business. These issues along with an aging baby boomer generation are at the heart of the politics surrounding Social Security and Medicare.Black Budget
Significant funds have been diverted into the “Black Budget” since WWII -- with no public accountability in terms of amounts, sources or uses.Monetary Policy
The federal government has delegated the management of monetary policy to a privately controlled central bank, resulting in the debasement of $20-30+ trillion of U.S. savings since its creation.Building Empire
Global “Empire Building” and the deployment of our military to support that effort, has resulted in a huge loss of domestic investment, GNP and tax revenue.Economic Health
The vast majority of the people lobbying the federal government are focused on what is in the specific interest of those who are paying their way, as opposed to what makes the pie bigger for everyone. Unfortunately, those lobbyists and the interests they serve have become our elected officials’ real “constituency”. Consequently, we find few in government or elsewhere whose primary focus and concern is the overall economic health of the domestic economy or the welfare of those they have been entrusted to represent.Federal Enforcement
Federal enforcement is focused on centralizing political control and generating revenues for itself, increasingly placing it into profit-sharing arrangements with successful managers of money laundering, financial fraud and organized crime.Managed Markets
The U.S. stock, bond and commodities markets - and therefore global markets - are all deeply dependent on cash flows and credit flowing from the federal budget and, in turn, cash flows from fraudulent and criminal activities.Military
Federal finances depend on the U.S. dollar’s status as the global reserve currency and the ability of the Treasury and federal agencies to borrow from and transact in financial markets despite their not complying with the basic standards required of state and local governments and private companies to access those same markets.Small Business
The use of the federal budget to centralize political and economic control has had devastating consequences for small business and farms, resulting in significant decreases in employment, income and household wealth, and therefore, tax revenues.Corporate Taxes
While benefits and contracts to private corporations from the federal budget have risen, the corporate portion of U.S. tax receipts has not risen. In 1995, business tax receipts equaled 27% of individual tax receipts. In 2011, business tax receipts equaled 17% of individual tax receipts. However, the political process has become so dependent on corporate contributions and in turn serving corporate interests, there is barely a mention of increasing corporate taxes or of making sure that corporate behavior is not shrinking the health of the pie from which taxes are drawn.War & Organized Crime
The dependence of the U.S. economy and the federal finances on war and organized crime is significant and to date enjoys the popular support of the general population.Force
The political process has devolved into a competition between people who are above the law and have the ability to kill with impunity, and those who respect the rule of law and the sanctity of life. Money is being allocated based on brute force as opposed to competition between constituencies who respect and subscribe to the rule of law and ethical behavior.The Great Governance Mystery
Who is really in charge? And why are they behaving this way? The reality is that we really don’t know.The federal finances are a symptom of a governance system with secret goals that are very different from the ones publicly stated by the front men. Those who are benefiting the most from that system consider themselves above the law. From their perspective, the system is working perfectly and as designed. Any financial system is merely part of a human governance system. It is inconceivable that we can reform a financial system without addressing the overarching governance system and a general agreement on a systems of laws and practical enforcement of those laws.
Performance
The remarkable and miraculous secret is that if our governmental resources were invested to optimize return on investment, the wealth creation possibilities would be exponential. Investment of federal resources is driven by a cocktail of political considerations focused on centralizing control of resources, as opposed to economic performance and fiduciary responsibility. This means that return on investment to taxpayers is ignored. This also means there are limited criteria and incentives to ensure that federal resources optimize human and environmental resources. Essentially, the federal budget is the vehicle used to engineer a financial system that is not aligned, reported or optimized in tandem with our living ecosystems. Combined with fiat currencies, this is the single greatest reason for damage to our living ecosystems globally.The wealth potential that could result from a reengineering of the current governmental investment model is compelling. Consequently, it is worth giving serious consideration to structural changes that will make the pie bigger instead of merely liquidating our world.
Trust
Financial systems operate on trust - on faith in the laws and their enforcement as well as general morality. The growing loss of faith in the government is having a profoundly corrosive impact on the US economy.Who's The Leader?
Ultimately, we must each decide what kind of leader we choose to be and what leaders we choose to follow. Will leadership be defined by force - by those who have the ability to kill with impunity? Or will it be defined according to contribution to civilization and economy -- that is, by standards of excellence in intention, performance, and ethical conduct? Ultimately, we must each decide who is the leader.What Can I Do?
Facing the challenges of the reengineering of the federal budget can
seem overwhelming and can even reduce us to a sense of hopelessness. You
ask yourself, “I am only one person, what can I do?” Let me assure you
that indeed each one of us can do a lot.First of all we can act to protect our families and ourselves as much as possible from being drained and defrauded. Tremendous energy and resources can be gained when you stop feeding the parasite, and instead feed yourself and those whom you love. This includes putting as much distance between you, your health, and your resources and the people and institutions that are currently harming and harvesting you. It also includes shifting where we invest our time and resources, including building new skills.
Second, we can save time by not pursuing fake solutions - things that make us feel good temporarily, but lead to no real change, and distract us and drain more resources.
Third, our shift of consciousness can have a profound impact on the general shift in consciousness that is underway. Indeed, a shift in consciousness is required for real solutions to gain popular momentum.
Finally, we can organize with family, with friends, with neighbors, with colleagues and with local organizations to bring transparency to federal finances in our area and look for ways to reengineer those finances which help rebuild the economy in a manner that serves us well and those around us. Finding ways of attracting young people and advanced technology back to Main Street and shifting current expenditures on things which drain communities - such as lottery sales and hard narcotics - back into productive activities and enterprises is critical to this effort.
I call this process “Coming Clean.” As each one of us comes clean and withdraws from that which is harmful to ourselves and to others and instead engages with that which brings life and vitality, the easier it is for the next person to do so as well.
There is a wealth of information at the Solari website (solari.com) and available to subscribers of the Solari Report to help you explore the many options for you to Come Clean. In response to requests of subscribers, we will publish a collection on Coming Clean in book form this Spring. If you sign up for our updates, you will be notified when it is available. You can sign up for updates here: http://solari.com/updates/ and subscribe to the Solari Report here: http://solari.com/store/solari_report/ .
I have found that Coming Clean is a lifelong process - a journey. Start with what saves you time, gives you energy and work out from there. Each person is different, with each of us having our own unique talents and situations.
Conclusion
I do not have confidence in solutions that can be crafted inside the Washington beltway. The current financial challenges in the federal budget reflect deeply ingrained conflicts and even violent tensions within our society. I do have confidence in extraordinary environmental health and financial wealth that is possible if each one of us takes responsibility to proceed to Come Clean and build our future irregardless.Consider this an invitation to begin. As the composer John Cage once said, “Begin anywhere.”
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