This post was originally published at The Deliberate Agrarian.
Paul Krugman is a popular guy these days. The American economist was awarded a Nobel prize in Economics this year. In a recent interview I heard Krugman say that no one person is responsible for America’s current financial crisis. But, he said former Federal Reserve chairman Alan Greenspan certainly deserves a lot of the responsibility.
As for Greenspan, he spoke this past week before Congress and said he was “in a state of shocked disbelief” about what has happened to the economy. He further stated: “This crisis, however, has turned out to be much broader than anything I could have imagined.”
Greenspan went on to blame the crisis on “explosive demand by investors around the world” for what were (at one time) very profitable mortgage backed securities. To feed the great demand for these investment vehicles, mortgage lenders started giving mortgages to people who, under normal circumstances, would never have been able to get such loans. As a result, the securities being bought by investors all over the world were tainted with what is now known as “toxic assets.”
Meanwhile (and, incredibly) these risky securities were being rated as relatively safe and sure investments. When it came to light that they were not so safe and sure, the house of cards started to fall, and it is still falling.
How could bad investments be rated as good investments? According to Greenspan: “The whole intellectual edifice… collapsed… because the data inputted into the risk management models generally covered only the past two decades, a period of euphoria.”
So, “Surprise. Surprise. Surprise! Sergeant Carter”… the rating agency’s computers were working with flawed data. Here’s another surprise: The whole economic system of the nation is, itself, flawed. Maybe a better word would be skewed, which is to say: “distorted or biased in meaning or effect.”
Even a cursory look at the long term “risk management models” for an economy driven by central bankers, debt-based creation of money, and fiat (paper) currency, will reveal it is both distorted and biased in favor of those few who control and manipulate the machine to serve their own interest for profit and power. Even a cursory look at the kind of economic system we have will reveal a long train of economic abuses in the form of inflation & deflation, booms & busts, recessions & depressions, all brought on by this kind of economic system.
Thomas Jefferson, third president of the United States, understood this problem very well. He had nothing but disdain for conniving, corporate banking interests. He abhorred having a national debt owed to the monied interests. He recognized nothing but specie (gold & silver coin) as the legitimate currency of the Constitutional Republic he helped to found.
The following quotes from Jefferson provide proof of his understanding and his concerns for America if it veered off the path of fiscal responsibility. You can get the references for these quotes and read a much larger selection of Jefferson’s writings on this subject at this University of Virginia link: Thomas Jefferson on Politics & Government
“Specie is the most perfect medium because it will preserve its own level; because, having intrinsic and universal value, it can never die in our hands, and it is the surest resource of reliance in time of war.”
“Paper is poverty,… it is only the ghost of money, and not money itself.”
“The trifling economy of paper, as a cheaper medium, or its convenience for transmission, weighs nothing in opposition to the advantages of the precious metals… it is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted.”
“The trifling economy of paper, as a cheaper medium, or its convenience for transmission, weighs nothing in opposition to the advantages of the precious metals… it is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted.”
“It is a cruel thought, that, when we feel ourselves standing on the firmest ground in every respect, the cursed arts of our secret enemies, combining with other causes, should effect, by depreciating our money, what the open arms of a powerful enemy could not.”
“We are now taught to believe that legerdemain tricks upon paper can produce as solid wealth as hard labor in the earth. It is vain for common sense to urge that nothing can produce but nothing; that it is an idle dream to believe in a philosopher’s stone which is to turn everything into gold, and to redeem man from the original sentence of his Maker, ‘in the sweat of his brow shall he eat his bread.”
“It is said that our paper is as good as silver, because we may have silver for it at the bank where it issues. This is not true. One, two, or three persons might have it; but a general application would soon exhaust their vaults, and leave a ruinous proportion of their paper in its intrinsic worthless form.”
This last quotation is sometimes referred to as “Thomas Jefferson’s Prophecy.” It comes from a letter he wrote to his Secretary of the Treasury, Albert Gallatin.
”I believe that banking institutions are more dangerous to our liberties than standing armies…If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks]… will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. …The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
Yes, Thomas Jefferson foresaw the problems we now have with unjust currencies and usurious banking practices. He warned against them. Our nation has strayed far from the wisdom of our Founding Fathers. We are now firmly in the clutches of a parasitic monster economic system that slowly but surely saps the economic vitality from its host. And as the system currently falters (once again) here in 2008, all the economic wizards of the world are working to fix it. Their fix will not address the systemic problems that Thomas Jefferson spoke about. Their fix will draw us deeper into debt and bondage. Their fix may, likely, trade a measure of American sovereignty by submitting to a new economic world order.
And so, you may wonder, “What’s your point?” My point is simply to educate; to show that the economic system we live under is fundamentally immoral. I am not advocating for some solution. The solution, if it ever comes, will not come easy. America will not revert to the honest and Constitutionally lawful economic “default setting” without very significant financial collapse and, more than likely, a violent revolution. That’s what I think, and I don’t see this happening in my lifetime.
Nevertheless, the realities of the faltering economic system we must deal with can be very harsh, as many people around the world are finding out right now. I’d like to point out that it was exactly a year ago this month that I posted a blog essay here titled Economics Lesson in a $5 Bill (And the Road Ahead). I told you about my friend who sits on the board of a local bank and who had just returned from a bankers convention in Las Vegas. He told me (and I told you) “…[E]very speaker had a gloomy economic forecast. …[W]e are headed for a “deep, dark recession for the next 4 to 10 years.” And “possible depression.”
A lot has happened in the past year. My friend was right. Those in the banking industry knew bad things were coming. But, amazingly, Alan Greenspan was in a “state of shock and disbelief” when the economic crisis started to unfold.
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In closing this series of essays about my recent Virginia vacation, which veered into the subject of Thomas Jefferson’s personal debt, and the whole Jeffersonian attitude towards national debt, and his admonitions about “modern” corporate-banking, I come back to the personal: How do we as individuals and families, living in the midst of a wicked economic system with it’s inflation and recession and unemployment and so forth live our lives without being harmed by the crisis?
This is where I return to the down-to-earth agrarian solution. After all, idealism and proper understandings are what underly pragmatism and practical response. Here is where I recommend to you my essay titled An Agrarian-Style Economic Self Defense Plan (written last January).
Paul Krugman, Alan Greenspan, et al. would not think much of personal agrarianism as a response to the economic crisis. But I’ll bet Thomas Jefferson would.
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P.S. Do you see the irony of putting a picture of Thomas Jefferson on a Federal Reserve Note? It is really an insult to the man.
