Goodbye, America

America, as we know it, ended late Friday night, February 13, 2009. When the Senate passed the American Recovery and Reinvestment Act of 2009, it plunged the knife up to the hilt into the heart of American capitalism. For all intents and purposes, our financial system and economy have been nationalized.

When President Barack Obama signs this so-called stimulus package into law on Tuesday in Denver, America will become officially a socialist or, more accurately, a fascist nation. Even if businesses remain in private ownership, the federal government will control their operations. In many cases, the government itself will take over majority ownership.

Of course, it is no surprise. Socialists and communists have mentored Obama since his teens. Nor can he bear total blame for this end of American capitalism and financial freedom. We have been on this road for a long time, since President Lyndon Johnson’s War on Poverty and President Franklin Roosevelt’s New Deal. Republicans, too, share blame. Never in my wildest dreams [or nightmares] would I have believed that a Republican President, George W. Bush, would nationalize the banks like he did by signing the first “stimulus” package that was rushed through Congress last Fall.

All sides acknowledge, now, that package did not work. Did Congress learn from that hasty mistake? Obviously, it did not. Most Democrats and a few Republicans stubbornly believe, despite all historical evidence to the contrary, that it is possible to spend our way out of recession. They often cite the example of FDR’s New Deal, forgetting that World War II, not the New Deal, lifted this country out of the Great Depression.

Analysis of this legislation has just begun. The Act, which spends $787 billion, is 1,071 pages long. Legislators had only fifteen hours to digest it before the vote. It is safe to say not one single Congressman or Senator read this bill before voting on it. They would have to have read 71 pages per hour or just over one page per minute, without any breaks during those fifteen hours. Previously, Speaker Nancy Pelosi had promised they would have at least 48 hours between release of the bill’s text and the vote being taken. And, it was only released in printed form. Normally, bills are published digitally, which allows Congressional staffers to do computer keyword searches to evaluate the worthiness of any piece of legislation.

The devil will be in the details. Supporters claim this act will create 3.5 million new jobs. Most economists put the number lower, at 2.5 million. But, let’s give the Democrats the benefit of the doubt and go with the 3.5 million number. That means it will cost $224,857 in government spending for each one of those jobs. Let me say that again so its truth can sink in: every single new job created by this stimulus act will cost taxpayers $224,857!

The press, both left and right, is finding all kinds of funky features buried in this bill. Some are silly, like the millions to save some endangered mouse in Speaker Pelosi’s district. Although maddening, voters should not let themselves be diverted by these trifles. This bill is too dangerous at the macro-level for us to be consumed by such micro-details.

The most alarming fact about this stimulus act is how much it raises the statutory limit on the national debt. It allows the national debt to increase from its current limit of $789 billion to $12.1 trillion. Think about it. We have never had a national debt over $1 trillion, yet the Democrats and three “Republicrats”voted for our nation’s credit line to go to a mind-boggling $12.1 trillion.

So far, the media has barely noticed this all-important detail. Yet, it is perhaps the most dangerous provision. What does it mean to allow such an increase in our national debt limit? It tells us just how much spending the Democrats are planning to do. This $787 billion must be just a down payment.

If the Democrats under Obama pass the kind of spending a $12.1 trillion national debt limit allows, it means hyperinflation. Even the U.S. with its sterling international credit rating cannot borrow that kind of money. There simply is not that much investment money in the entire world to support that kind of spending. And, some international bankers are expected to lower our nation’s bond ratings. That means higher interest rates on what we are able to borrow. If we cannot borrow the money to support our spending at reasonable rates, the government has one other option and that is to print money. It monetarizes the debt, lowering the value of the dollar so that high value dollars borrowed are repaid with lower value dollars.

This is what President Carter did in the early eighties when we had the worst recession since the Great Depression. We had double-digit inflation in a stagnant economy. If we come even close to a $12.1 trillion debt, we will have triple-digit inflation. We will be like the Germans during the Weimar Republic before Hitler. Then, it took a wheelbarrow of cash to buy a loaf of bread. That is what Americans will soon face unless the Democrats are held in check, and I am not at all optimistic that we can or will do that.

President James Madison warned, "If our nation is ever taken over, it will be taken over from within." The Socialists have taken possession of the land. Goodbye, America.

Why Is Karl Marx Cheering from the Grave?

Karl Marx, the author of the failed economic system of communism, must be cheering from the grave over the prospect of Barack Hussein Obama becoming President of the United States. If the polls are correct (and I pray they are not), then the American people are about to elect a trained and avowed Marxist as President. How can I say this?

It is the result of having read both of Obama's books, Dreams from My Father and The Audacity of Hope. In them is revealed the degree to which Obama has been and continues to be influenced by the principles of Marx and Marxism. Likewise, his continued relationships with radical leftists, whom he refuses to disavow, also show it. Finally, his actions as an Illinois State Senator and a U.S. Senator illustrate his commitment to radically changing America’s economic system of capitalism.

As a youth, Obama disdained American middle-class values, what Marx would have ridiculed as “bourgeois” [capitalist] values. “Theirs [his white grandparents] were the faces of American Gothic, the WASP bloodline’s poorer cousins…the world in which my grandparents had been raised, the dab-smack, landlocked center of the country, a place where decency and endurance and the pioneer spirit were joined at the hip with conformity and suspicion and the potential for unblinking cruelty…where fear and lack of imagination choke your dreams…” (Dreams from My Father, Three Rivers Press: New York, pgs. 12-13; 15)

Obama’s white mother, who grew up in the Midwest, tried to instill her values (“Honesty – Fairness - Straight talk - Independent judgment”) in him, but he rejected them. “My mother could give voice to the virtues of her Midwestern past…I would dutifully nod my assent, but she must have known that many of her ideas seemed rather impractical…My mother’s confidence in needlepoint virtues depended on a faith I didn’t possess…a faith that rational thoughtful people could shape their own destiny…” (Ibid. pgs. 49-50) Later, he wrote, “…Her [his mother’s] faith in justice and rationality was misplaced, that we couldn’t overcome after all, that all the education and good intentions in the world couldn’t help plug up the holes in the universe or give you the power to change its blind, mindless course.” (Ibid. p. 96)

One of Obama’s early mentors, a kind of father figure during his teen years in Hawaii, was a man he calls by only his first name, “Frank,” in Dreams from My Father. He warned Obama as he prepared to enter college, “Understand something, boy. You’re not going to college to get education. You’re going there to get trained. They’ll train you to want what you don’t need. They’ll train you to manipulate words so they don’t mean anything anymore. They’ll train you to forget what it is that you already know. They’ll train you so good, you’ll start believing what they tell you about equal opportunity and the American way and all that shit…” (Ibid. p. 97)

Who was this “Frank”? He was a black poet named Frank Marshall Davis. He was also a card-carrying member of the Communist Party U.S.A. [CPUSA] during the years it was controlled by the Soviet Union. Davis joined the CPUSA during World War II and never resigned before his death in 1987. His membership was confirmed in a 1951 report of the Commission on Subversive Activities to the Legislature of the Territory of Hawaii and the House Un-American Activities Committee (HUAC). He moved to Honolulu from Kansas in 1948 and wrote columns for the Honolulu Record. Davis was a friend of Obama’s white grandfather, who introduced the young Obama to Davis.

Professor Gerald Horne, a contributing editor of the Communist Party journal Political Affairs and a history professor at the University of Houston, talked about the relationship between Obama and Davis in March 2007 in a speech, "Rethinking the History and Future of the Communist Party," at the Tamiment Library at New York University where CPUSA archives are housed. “Davis ‘befriended’ a ‘Euro-American family’ that had ‘migrated to Honolulu from Kansas and a young woman from this family eventually had a child with a young student from Kenya East Africa who goes by the name of Barack Obama.’” Horne wrote Davis “became the young man's mentor, influencing Obama's sense of identity and career moves.” (Cliff Kincaid, "Obama's Communist Mentor," Accuracy in Media, Feb. 18, 2008 http://www.aim.org/aim-column/obamas-communist-mentor/)

Dr. Kathryn Takara, a professor of Interdisciplinary Studies at the University of Hawaii at Manoa did her dissertation on Davis. She confirmed Davis was the “Frank” in Obama’s first book. She notes that Davis had “‘an acute sense of race relations and class struggle throughout America and the world’ and that he openly discussed subjects such as American imperialism, colonialism and exploitation.” He "espoused freedom, radicalism, solidarity, labor unions, due process, peace, affirmative action, civil rights, Negro History week, and true Democracy to fight imperialism, colonialism, and white supremacy." (Ibid.)

Writing of his days at Occidental College, Obama heeded his mentor’s advice, “To avoid being mistaken for a sellout, I chose my friends carefully. The more politically active black students. The foreign students. The Chicanos. The Marxist professors and structural feminists and punk-rock performance poets…We were resisting bourgeois society’s stifling constraints.” (Op.cit. pgs. 100-101) While there, he became involved in the efforts to force Occidental College to divest its investments in apartheid South Africa. Among his efforts was “contacting representatives of the African National Congress to speak on campus” (Ibid. p. 105) The African National Congress [ANC] was and is a communist-backed front group.

Obama completed his undergraduate studies at Columbia University in New York City. He continued his Marxist studies, where, “Political discussions…came to take on the flavor of the socialist conferences I sometimes attended at Cooper Union or the African cultural fairs that took place in Harlem and Brooklyn during the summers – a few of the many diversions New York had to offer…” (Ibid. p. 122)

Upon graduation, Obama set out to become a community organizer. However, he could not find a job in that field. “Eventually a consulting house to multinational corporations agreed to hire me as a research assistant. Like a spy behind enemy lines, I arrived every day at my mid-Manhattan office.” (Ibid. p. 135) Frustrated working in a capitalistic, profit-making enterprise, “In search of some inspiration, I went to hear Kwame Touré, formerly Stokely Carmichael of SNCC and Black Power fame, speak at Columbia. At the entrance to the auditorium, two women, one black, one Asian, were selling Marxist literature and arguing with each other about Trotsky’s place in history. Inside Touré was proposing a program to establish economic ties between Africa and Harlem that would circumvent white capitalist imperialism.” (Ibid. pgs. 139-140)

Finally, Obama was hired by Marty Kaufman, a white Chicago community organizer and moved to Chicago. There he “came into contact with more far-left political forces, including the Democratic Socialists of America, which maintains close ties to European socialist groups and parties through the Socialist International (SI), and two former members of the Students for a Democratic Society (SDS), William Ayers and Carl Davidson.” Marx founded the SI.

After two-and-a-half years, Obama decided to enroll in law school. His stated purpose was to learn “power’s currency in all its intricacy and detail, knowledge that would have compromised me before coming to Chicago but that I could now bring back to where it was needed…bring it back like Promethean fire.” (Ibid. p. 276) He returned to Chicago after receiving his law degree from Harvard Law School and went to work as a Civil Rights attorney. Later, he was a part-time professor of Law at the University of Chicago.


Obama remained true to his Marxist disdain of the bourgeoisie, even when he began visiting Trinity Christian Church in Chicago and consulting with its pastor Rev. Jeremiah Wright. Tellingly, he wrote, “There was one particular passage in Trinity’s brochure that stood out…’A Disavowal of the Pursuit of Middleclassness,’ the heading read. ‘While it is permissible to chase ‘middleincomeness’ with all our might,’ the text stated, those blessed with the talent or good fortune to achieve success in the American mainstream must avoid the ‘psychological entrapment of Black ‘middleclassness’ that hypnotizes the successful brother or sister into believing they are better than the rest and teaches them to think in terms of ‘we’ and ‘they’ instead of ‘US’!’” (Op.cit. p. 284)

In 1996, Obama ran for the Illinois State Senate. He received the endorsement of the Chicago branch of the Democratic Socialists of America (DSA). “DSA describes itself as the largest socialist organization in the United States and the principal U.S. affiliate of the Socialist International. The Socialist International (SI) has what is called ‘consultative status’ with the United Nations.” ("Is Barack Obama a Marxist Mole?” Accuracy in Media Report, March 18, 2008 http://www.aim.org/aim-report/is-barack-obama-a-marxist-mole/)

“Later, the Chicago DSA newsletter reported that Obama, as a state senator, showed up to eulogize Saul Mendelson, one of the ‘champions’ of ‘Chicago's democratic left’ and a long-time socialist activist.” Chicago Democratic Rep. Jan Schakowsky endorsed Obama and “was honored in 2000 at a dinner sponsored by the Chicago chapter of the DSA.” (Cliff Kincaid, "Obama's International Socialist Connections," Accuracy in Media, Feb. 14, 2008 http://www.aim.org/aim-column/obamas-international-socialist-connections/)

With DSA encouragement, U. S. Senator Obama sponsored “The Global Poverty Act” (S.2433), which “commits the U.S. to spending hundreds of billions of dollars more in foreign aid on the rest of the world, in order to comply with the ‘Millennium Goals’ established by the United Nations.” Sen. Joseph Biden, chairman of the Senate Foreign Relations Committee and Obama’s vice presidential pick, pushed S.2433 through the committee. It is currently awaiting a vote by the full Senate. (Op.cit.)

Much has been written about William Ayers, the self-admitted and convicted Weather Underground domestic terrorist, and Obama’s working friendship with him. Obama served on the board of the Woods Foundation and authored the foreword to Ayers’ book. Ayers and his wife Bernadette Doerhn, another Weather Underground terrorist, helped launch Obama’s state Senate campaign by hosting an early “Meet and Greet” party in their home.

Few have looked at Obama’s on-going relationships with other Chicago radical leftists. Carl Davidson is active in the Committees of Correspondence for Democracy and Socialism (CCDS), an offshoot of the old CPUSA; he “helped organize the 2002 rally where Obama came out against the Iraq War.” (Cliff Kincaid, "Obama's Communist Mentor," Accuracy in Media, Feb. 18, 2008 http://www.aim.org/aim-column/obamas-communist-mentor/)

Another CCDS activist is Leslie Cagan, who organizes anti-Iraq War demonstrations through a group called United for Peace and Justice (UPJ). Herbert Romerstein, a former Congressional investigator on communist activities, said the CCDS has “a close working relationship with the Stalinist remnants in the former East Germany, now called the Party of Democratic Socialism.” ("Is Barack Obama a Marxist Mole?” Accuracy in Media Report, March 18, 2008 http://www.aim.org/aim-report/is-barack-obama-a-marxist-mole/)

Lance Fairchok wrote accurately, “Barack Obama has a thing for Marxists. He befriends them, listens to their counsel, and he even hires them to work in his campaign. And they seem to feel the warmth.” For example, Sam Graham-Felsen is Obama’s official presidential campaign blogger. He also a writer for the Socialist Viewpoint, the mouthpiece of the Socialist Workers Organization (SWO). Graham-Felsen, “after being expelled from Socialist Action in 1999,” helped found the SWO “in an attempt to carry on the project of building a nucleus of a revolutionary party true to the historic teachings and program of Marx, Engels, Lenin and Trotsky.“ (Lance Fairchok, "Another Obama Marxist," American Thinker, April 2008 http://www.americanthinker.com/2008/04/another_obama_marxist.html and Socialist Viewpoint socialistviewpoint.org)

"Marx once compared revolutionary struggle with the work of the mole, who sometimes burrows so far beneath the ground that he leaves no trace of his movement on the surface. This is the old revolutionary ‘mole,' not only showing his traces on the surface but also breaking through." Frank Chapman, a CPUSA supporter, penned these words in a letter to the party’s newspaper “hailing the Illinois senator's victory in the Iowa caucuses.” (Cliff Kincaid, "Obama's Communist Mentor," Accuracy in Media, Feb. 18, 2008 http://www.aim.org/aim-column/obamas-communist-mentor/)

Forgotten Wisdom: "Neither a Borrower Nor a Lender Be"

Will the proposed $700 billion bailout of the banking industry work? Or, is an economic collapse into a deflationary depression unavoidable? Maybe, maybe not. What I do know is that our economy is a house of cards, as I have warned for years.

Ever since going off the gold standard, the economy has been based on worthless paper or, more accurately, paper that is worth only what the market pretends it is worth. It has no intrinsic value. Banks are holding piles and piles of mortgage papers that the market has now decided are worth zero. The banks have run out of fools to buy these "toxic" loans, so they are stuck with them. Thus, they are unable to borrow more funds from the Federal Reserve to continue lending additional monies to new or existing customers. These banks are at their lending limits under funds' reserve rules that require them to have a certain percentage of their total funds as "cash" on hand. This has frozen the credit markets.

Now, let me make clear I am not an expert on investment or mortgage banking; my expertise and experience is in consumer lending. But, I have been a student of banking and credit issues for many years, and I worked in credit card operations for one of the largest banks in the world. I have railed against many of the changes in our banking system for years.

How did we get into this crisis? First and foremost, we foolishly went off the gold standard. That was the first step down this road to economic oblivion. If we ever hope to have a truly stable economy again, we must return to a monetary system based on gold, a commodity with intrinsic value. We cannot do that suddenly or immediately. If we did, our economy would completely collapse. However, returning to the gold standard should be our ultimate goal. We must recognize that the transition will be painful but necessary for long-term stability.

The next most disastrous change made in the banking system was deregulation that allowed federal banks to go into the mortgage, securities, and insurance businesses. This is the direct result of a mass amnesia regarding our economic history, specifically the Crash of 1929. I do not know if it is a failure of history education or a certain innocence that causes us to think such a disaster could not happen again to us. Whatever it was, we as a nation collectively forgot the lessons of the Great Depression.

Before that catastrophe, banks were heavily involved and leveraged in mortgages, security investment schemes, and insurance or risk management. After the crash, regulations in the the Glass-Steagall Act of 1933 were put in place that strictly separated banking from mortgages, securities, and insurance. Mortgages were offered by Savings & Loans. Securities were handled by stock brokers, and insurance was sold only by insurance agencies. Commercial (consumer) banks could not engage in investment banking. "Never the twain would meet" was the rule to keep these different financial businesses separate.

These regulations kept the financial markets relatively stable for over sixty years until 1999. Then, the Gramm-Leach-Bliley Act, passed by the Republican Congress and signed into law by the Democratic President Bill Clinton, discarded these stabilizing rules. "Universal banking" became the standard, launching a feeding frenzy of larger national and international banks gobbling up local and regional banks. Banks, stock brokerages, and insurance companies cannibalized each other. The lines between commercial and investment banking blurred. Financial institutions ballooned in size and diversity of products offered.

Although the process is too complicated to explain in this essay, the end result of banking deregulation of U.S. banking was the transformation of our economy from one based on industrial capitalism to financial capitalism. For an excellent analysis of this process, go to http://www.atimes.com/atimes/Global_Economy/II06Dj01.html . There, Henry C. K. Liu, chairman of a New York-based private investment group, explains, "Finance capitalism is a system in which capital is only a notional value upon which to build a gigantic mountain of hidden debt." In such a system, financial instruments, including stocks, are traded with valuations not based on physical assets. Instead, their value becomes "conceptual," something that exists only in the ether of financial computer systems or cyberspace. Critics' concerns about institutional and economic risk exposure have been dismissed as silly and old-fashioned in a post-modern financial world without borders.

Liu wrote for Asia Times in 2007:

"As an economist, Ben Bernanke [U.S. Federal Reserve Chairman] no doubt understands that the credit market through debt securitization has in recent years escaped from the funding monopoly of the banking system into the non-bank financial system...The Fed can only intervene in the money market through the shrinking intermediary role of the banking system, which has been left merely as a market participant in the overblown credit market. Thus the Fed is forced to fight a raging forest fire with a garden hose." [Henry C.K. Liu, "CREDIT BUST BYPASSES BANKS Part 1: The rise of the non-bank financial system," Asia Times Online, September 6, 2007 http://www.atimes.com/atimes/Global_Economy/II06Dj02.html]

Liu understood that "the liquidity crunch is a symptom, not the disease. The disease is a decade of permissive tolerance for credit abuse in which the banks, regulators and rating agencies were willing accomplices." [Ibid.] The SEC is suppose to be the watchdog of these markets and an advocate or protector for investors. Liu said in 2007that there has been massive withholding of information from investors on the actual condition of many firms' books. He accuses, "The aim of this charade has not been to enhance the return on the public's investment, but to exploit the public trust to shore up a declining market and postpone the inevitable demise of wayward institutions." [Ibid.]

Liu warned in 2002 that unregulated markets always collapse. He went on to say,

"Such a decline can happen in a period of days in this age of program trading and socialized risk, even with circuit breakers and trading curbs. When that happens, structured finance will be a sea of dead and wounded in counterparty casualties, regardless of who won and who lost." [op.cit.]

He was spot-on as proven by the headlines of this past weekend.

Ultimately, our current financial crisis can be laid at the feet of our national foolishness in creating the Federal Reserve Bank. Our most esteemed founding fathers warned against ever establishing a central bank. Thomas Jefferson wrote, "If Americans ever allow banks to control the issue of their currency, first by inflation and then by deflation, the banks will deprive the people of all property until their children will wake up homeless." James Madison, father of the Constitution, understood the danger of tyranny if a central bank controlled the currency. He advised, "History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance."

We did not listen, and we created a monster that was intended to protect free markets but is now about to devour our free market economy. As Liu states in his most recent essay,

"The lender of last resort has become a predator of last resort, nationalizing all dying enterprises. But it seems to be racing headlong onto the road of nationalization not so much as to help the common people as to keep dying financial dinosaurs alive." [Henry C K Liu, "Too big to fail versus moral hazard," Asia Times Online, September 23, 2008 http://www.atimes.com/atimes/Global_Economy/JI23Dj13.html]

This is exactly where we find ourselves today. We failed to learn the hard lessons of history. Treasury Secretary Paulson, along with the Federal Reserve Chairman and the SEC Chairman, are trying to persuade Congress and the American people that it is absolutely necessary to bail out the banks to the tune of $800 billion. The arguments of necessity can take away liberties as surely as conquering armies, as Thomas Jefferson warned.

Let us be very clear. If Congress approves this bailout, then we will cease being a capitalistic society. We will have slipped into national socialism if we nationalize our financial markets. We will no longer have a free market economy. Do we even remember who the last great advocate of National Socialism was? It was Adolf Hitler.