From the "Wealth of Nations" to the "Debt of Nations" → Washingtons Blog
From the "Wealth of Nations" to the "Debt of Nations" - Washingtons Blog

Thursday, December 2, 2010

From the "Wealth of Nations" to the "Debt of Nations"

As everyone from Paul Krugman to Simon Johnson has noted, the banks are so big and politically powerful that they have bought the politicians and captured the regulators (and see this).

But it's not just a question of regulatory capture and corruption. It's actually a loss of sovereignty.

As Damon Vrabel wrote in July:

It seems ridiculous to point this out, but sovereign debt implies sovereignty. Right? Well, if countries are sovereign, then how could they be required to be in debt to private banking institutions? How could they be so easily attacked by the likes of George Soros, JP Morgan Chase, and Goldman Sachs? Why would they be subjugated to the whims of auctions and traders?

A true sovereign is in debt to nobody and is not traded in the public markets. For example, how would George Soros attack, say, the British royal family? [Vrabel is presumably referring to Soros' currency speculation against the British pound and other currencies.] It’s not possible. They are sovereign. Their stock isn’t traded on the NYSE. He can’t orchestrate a naked short sell strategy to destroy their credit and force them to restructure their assets. But he can do that to most of the other 6.7 billion people of the world by designing attack strategies against the companies they work for and the governments they depend on.

The fact is that most countries are not sovereign (the few that are are being attacked by [the big Western intelligence services] or the military). Instead they are administrative districts or customers of the global banking establishment whose power has grown steadily over time based on the math of the bond market, currently ruled by the US dollar, and the expansionary nature of fractional lending. Their cult of economists from places like Harvard, Chicago, and the London School have steadily eroded national sovereignty by forcing debt-based ... currencies on countries.

We long ago lost the free market envisioned by Adam Smith in the “Wealth of Nations” [the book widely considered to be the foundation of modern economic theory]. Such a world would require sovereign currencies.... Only then could there be a “wealth of nations.” But now we have nothing but the “debt of nations.” The exponential math of debt by definition meant that countries would only lose their wealth over time and become increasingly indebted to the global central banking network.

An obvious example of a nation which has lost it's sovereignty and gone from the "wealth of nations" to the "debt of nations" is Ireland. The Irish bailout won't really help the Irish people, but will help the big banks which invested in Ireland. See this and this. Ironically, German banks may actually be more at fault for the Irish crisis than the Irish banks themselves. See this, this and this.

And the EU is now arguably trying to tell Ireland what to do (while using pleasantries and niceties to appear not too pushy), and somewhat ignoring Ireland's status as a sovereign nation. See this, this and this.

Similarly, Americans - without their knowledge or consent - are bailing out banks all over the world . See this, this and this.

Of course, there is no bright line between private and central banks, since big banks own the Fed, and the world's central banks - in turn - own the BIS.

Central bankers are not elected by - or accountable to - the people of the nations in which they sit, nor are the IMF or World Bank. The IMF often loans money to countries and then imposes draconian austerity packages.

Sure, Irish and American politicians were irresponsible and corrupt, and both peoples were spendthrifts.

But - as I've repeatedly pointed out - the game has also been rigged in favor of the banks and against the sovereign nations.

For example, economist Michael Hudson points out that debt grows exponentially, while the economy only grows in an s-curve. So the amount of debts will always surpass the size of the real economy. If private banks have the power to create debt, then the biggest banks will always eventually win out over the sovereign nations, especially when the amount of credit which can be created (i.e. the size of the monetary base) is not limited by real assets, but is simply based on a system of fiat currency.

As I wrote in October, in a post entitled "The Founding Fathers' Vision of Prosperity Has Been Destroyed":

The ability for America and the 50 states to create its own credit has largely been lost to private bankers. The lion's share of new credit creation is done by private banks, so - instead of being able to itself create money without owing interest - the government owes unfathomable trillions in interest to private banks.

America may have won the Revolutionary War, but it has since lost one of the main things it fought for: the freedom to create its own credit instead of having to beg for credit from private banks at a usurious cost.
And see this.

But - whatever one thinks about public banking or paper currencies - one thing should be clear to everyone: the giant banks are rapidly chipping away at the sovereignty of virtually all of the world's nations.


  1. It's really pathetic to be in debt to counterfeiters. Without government privileges, the power of the banks would be greatly diminished. Corporations would be forced to issue their common stock to acquire assets and labor thus sharing wealth rather than looting it via loans from the counterfeiting cartel.

  2. If you could print money in your basement, would you borrow from a bank? Of course not. Sovereign nations, unlike you and me, can print money, but instead they borrow from the banks with interest. Why? Because banks have put legislatures in power that disregard constitutions and instead allow banks to issue the currency instead of the sovereign.

    This is the biggest scam ever perpetrated on sovereign peoples.

    Glad you are bringing this issue up. I wonder how long it will take for the economists of the world to start advocating that sovereigns issue the currency rather than banks. Even the most liberal economists are eerily silent on the issue.

  3. re:"If private banks have the power to create debt,"

    And there you have the heart of the problem. End that and the world will be a better place.

  4. You need to go a little deeper than just banker bashing. The US economy has more or less completed its transition from industrial to finance capitalism. This transition, documented by the American economist Thorstein Veblen in Absentee Ownership and Business Enterprise in Recent Times: the case of America, (1923) was already well underway at the beginning of the 20th century. If ‘absentee owners’ no longer wish to be involved in the day to day management of industrial enterprises, they require someone to insure they keep receiving the monetary income from the estates of old (and new) Robber Barons, i.e. bankers, Wall Street and CEOs.

    This is from Ferdinand Lundberg’s “The Rockefeller Syndrome”:
    “In the United States, as the study (The Rockefeller Financial Group, Warner Modular Publications Inc, Module 343, 1973, Andover Mass, LC Catalog Card # 73-3873 – Steven) truly observes, there are ten or more major financial “interest groups” consisting of wealthy corporate families allied with other wealthy families, the leading ones owning stocks in major banks and many sitting on their boards. The banks are the core of a credit-supplying fount for their respective corporation and are allied with enormous pools of capital in major insurance companies and investment entities. Around this insurance-bank nucleus is usually gathered “a set of law firms, investment banking firms, foundations, universities, and other institutions of power and influence associated with the group.” Lyle Stuart, Inc, 1975, pp. 40-41

    Couple it with this:
    WASHINGTON - The Federal Reserve pumped trillions of dollars into all manner of banks, investment firms and major companies during the financial crisis, according to documents released Wednesday that reveal for the first time the full scope of the Fed's emergency lending. – “Trillions pumped into banks, investing firms, big companies, Federal Reserve made wide use of bailouts”,

  5. Ah Yes, the infamous secret Federal Reserve (not Federal or a reserve but a private bank) has finally released some financial bailout figures for the American taxpayer. For us, it’s like the first pictures of the Gulf Oil well disaster two months after the incident and after months of being lied to! Alas, all we get is just a few pictures of the blown out oil well!

    The criminal and psychopathic bankster financial New World Order is right on schedule. It seems that the skillfully planned and executed (conspiracy) Mortgage Fraud, Mortgage Electronic Registration System and the Wall Street derivatives market is the Federal Reserve Central Bank’s economic weapon of mass destruction resulting in the loss of national sovereignty and enslavement of the masses under debt to the World Banksters who created the debt.

    Congress is openly BRIBED (Roberts Supreme Court said it was OK) and are in the World Banksters bag (Treason). Put their names on a list of things to do.

    The mortgage fraud paper and assets are coming home to Papa. There is no mortgage fraud crime, by plan, the Fed will simply print more fiat money and buy back their fraudulent mortgage backed securities that were dealt out from their owners. - For FREE- Oh, TAXPAYER debt.

    The Federal Reserve Central Bank wins, they OWN our assets and our debt and the American people and our government (and most of Europe) is enslaved to them by debt forever- game over (they think).


→ Thank you for contributing to the conversation by commenting. We try to read all of the comments (but don't always have the time).

→ If you write a long comment, please use paragraph breaks. Otherwise, no one will read it. Many people still won't read it, so shorter is usually better (but it's your choice).

→ The following types of comments will be deleted if we happen to see them:

-- Comments that criticize any class of people as a whole, especially when based on an attribute they don't have control over

-- Comments that explicitly call for violence

→ Because we do not read all of the comments, I am not responsible for any unlawful or distasteful comments.