Uncle Scam Peter Souleles B. Com. LLB.

Don't blame money for the current Global Financial Crisis. Blame people, and in particular the governments of the world. In fact money remains by far the greatest enhancement to human productivity along with the wheel. The problem lies in its misuse in the hands of governments which as a result of debasement, misallocation, misappropriation, misrepresentation, manipulation and redistribution end up destroying empires, nations, institutions, families and individuals. In short they can inflict serious damage on civilization. Only gold and silver and human ideals and values escape this madness in the long run.

The United States is guilty on all six counts and here are the reasons:

1. The massive quantitative easing strategy of Ben Bernanke at the helm of the Federal Reserve in creating $1.3 trillion out of nowhere to buy mortgaged backed securities was nothing more than debasement through printing. Lest there be any doubt on this point, I hasten to remind everyone of the following exchange between Ben Bernanke and Ron Paul:

Ron Paul: Well, where did you get the money? You created this money. So you did monetize debt, and that went into the banking system.

Bernanke: (Says nothing, but shakes his head in the affirmative).

2. Pork barrelling and open ended wars are just a couple of the examples of the misallocation that have occurred. Take for example the actions of Senator Shelby who was reported earlier this year as having put an extraordinary "blanket hold" on at least 70 nominations that President Obama had sent to the Senate. The reason was reportedly to finally get approval for two contracts for projects in his home state worth over $40 billion dollars. In another story run by the New York Times in April 2008 the following was noted:

"There were more than 10,000 (earmarks), costing nearly $20 billion last year, according to the Congressional Research Service.... taxpayer money was requested last year for a Christian broadcasting group to build a shortwave radio station in Madagascar, a program to save hawks in Haiti, efforts to fight agriculture pests in Maryland and an "international fertilizer" center in Alabama that assists farmers overseas."

Amongst the 18,750 items in the Ready to Go wish list of mayors for funding from the Obama stimulus were included such items as $2 million dollars for neon lights in Las Vegas and a Shreveport police request for 8 new Harley-Davidson's for their cops. The only stimulus these people really needed was an electric cattle prod.

As for wars, the United States military is happy to pay an average of $400 to put a gallon of fuel into a combat vehicle or aircraft in Afghanistan. Is it any wonder that the cost of the wars in Iraq and Afghanistan have cost close to a trillion dollars not including interest and ongoing costs of veterans for medical and other expenses?

3. Misappropriation of social security funds in return for government IOU's is no secret and has been noted by many commentators. The Federal Government has systematically taken surplus Social Security revenues to spend where it wishes and to hide the size of the annual federal deficits. In fact approximately $4.4 trillion of the total debt is money that the Federal Government has borrowed from itself, by writing IOUs for huge sums taken from the Social Security and Medicare surpluses.

4. The next area of deceit can only be characterized as misrepresentation. This has taken various forms, but two will be noted here. The first is the massive amounts of money owed to the rest of the world and in particular the Chinese and Japanese. As at February 2010, the USA owes $877 billion to China and $768 billion to Japan by way of U.S. Treasury Securities. These amounts were lent on the basis that they could be serviced and repaid upon maturity. Neither is possible as the USA is currently running a budget deficit to the point where even interest is being capitalized. So what chance is there of repaying the capital if you cannot even pay the interest which at present is at record low rates? The U.S. has clearly misrepresented its economic and financial capacity. Moreover, this misrepresentation has enabled the USA to misappropriate a disproportionate share of the world's resources and savings over the last 60 odd years.

The second misrepresentation arises from the fact that the U.S. taxpayer is told only about the Federal Debt that is subject to the $14.3 trillion ceiling. But let us see what Fisher the President of the Dallas Federal Reserve said earlier this year:

"According to our calculations at the Dallas Fed, that unfunded debt of Social Security and Medicare combined has now reached $104 trillion - trillion with a "T" - in discounted present value. And while much attention in recent years has been devoted to Social Security, the lion's share of the total entitlement shortfall (nearly $90 trillion) actually comes from Medicare."

5. Then comes manipulation. In this instance I refer to the manipulation of real money which is gold and silver. I do not propose to discuss this at any length as readers would be aware of the ongoing efforts of so many commentators such as Ted Butler and the countless contributors to gold and silver sites who constantly expose the incredible litany of efforts both over time and by type to suppress their price. It would suffice to remind readers of two things. Firstly, the incredible resistance of the Federal Reserve to have the gold holdings of the US audited. Secondly, they must recall the words of Alan Greenspan who once said, "Central banks stand ready to lease gold in increasing quantities should the price rise." So how much has been leased?

6. Finally comes redistribution. The Federal Reserve has kept interest rates at artificially low rates much to the detriment of decent savers so that banks can continue to invest at handsome rates not only the hard earned savings of taxpayers but also the zero rate money they are given by government to lodge either with the Fed at interest or in government bonds at interest. In the process there is a massive income redistribution from individuals to banks whilst even small business is being wiped out to make way for profit and growth of corporate juggernauts' on the Dow and other indices.

As a result of the above abuses the citizens of the USA are under the illusion that the Federal Government can continue to run deficits, continue to borrow from overseas as well as meet all of its future obligations to its people. Also as a result of these abuses, the people are mostly unaware or only partly informed about the destruction to the value of their dollar holdings as a store of value. In the end neither government nor they will be able to provide for themselves at some point in the not too distant future.

The USA of course is not alone in displaying such behaviour. The Chinese Government has wisely avoided providing Social Security and Medicare benefits to its citizens who in turn save close to 20% of their earnings. Despite this, its people will be sadly disappointed by a future that will place very little value on their PAPER savings. Their savings have been invested in propping up a banking system that lends for white elephant projects, marginal businesses and non-performing loans.

As for the Europeans, the fun and games are only just beginning as they follow in the footsteps of both the Fed and the Bank of England as they too now indulge in quantitative easing. The EU reminds one of the observation that a camel is a horse designed by committee.

Finally, the Japanese people are playing a strange game of recycling their yen by lending it to the government so that they can in turn spend it in the economy on behalf of the taxpayer to stop the place from coming to a grinding halt. Blind loyalty to government will lead to blindness but then again they are the people who have special ATM's where one can insert their currency and have it heated to 392 degrees which supposedly kills 90 percent of certain staphylococcus bacteria before disbursing them to customers looking almost "wrinkle" free.

The bottom line arrives when old age and illness make their debut in an increasingly aging nation. At that point you can no longer hide the effects of debasement, misallocation, misappropriation, misrepresentation, manipulation and redistribution. It will then be too late because the perpetrators will be out of office having taken their spoils and the clever ones will have prepared by buying gold and silver with fast depreciating paper.

Between June 25^th and June 29^th, 2010, The International Society for the Reform of Criminal Law will be holding its 23^rd conference in Lisbon, Portugal. The Conference heading is, Economic Crime, Crimes Against Economies and Economic Influences on Crime.

This conference will be looking at many serious issues revolving around bribery, embezzlement, extortion, influence peddling and abuse of discretion, corruption, proceeds of crime, money laundering, financing of terrorism, economic fraud, identity theft, as well as fraud, theft and extortion of banks. Finally, it will also extend to such issues as environmental crime, human trafficking, piracy, drugs and so on.

In my view however, the learned participants need to broaden the scope of their agenda items. Rather than portraying only governments and their institutions as the primary victims, they also need to examine whether and to what degree the citizens of nations have also become the victims of governments and THEIR institutions.

Who knows, we may perhaps one day witness the establishment of an International Court of Economic Justice that can try economic crimes by governments against their own people. Until then stick to history's favourites - gold and silver.

Peter Souleles

Sydney Australia

P.S. My thanks to the unknown artist of Uncle Scam.

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