PERSON OF THE WEEK: Some questions defy easy answers, especially when the query relates to present-day economics. For Dr. Steven Yates, a philosophy professor at the University of South Carolina Upstate in Spartanburg, S.C., the roots of the nation's contemporary economic problems can be traced back through history.
In his new book, ‘Four Cardinal Errors: Reasons for the Decline of the American Republic‘ (published by Brush Fire Press International), Yates traces the roots of the current miasma back to the colonial period and through the course of American history. Yates spoke with MortgageOrb regarding his view of what went wrong and how things can be improved.
Q: Your book mentions that the first fatal mistake made by American leaders came after the Revolutionary War, when the first generation of leadership failed to gain full control of the economy from the British Crown and the European banking community. How did this negatively impact the young nation, and how does it impact us today?
Yates: I've concluded that every population has a minority – maybe 5% or so – who is fascinated by and drawn to power. This is hardly new, and it isn't a conspiracy theory; anybody who observes populations for any length of time sees how a small minority automatically assumes control over the whole body. This minority can rise either by proving itself able to serve the entire body politic, producing something of value or inventing a political machine that rules by force or threat of force, perhaps with a promise to protect the population from some enemy – real or imagined.
We ought to mention that this minority, being drawn to power, is threatened by people or ideas that suggest independence, which our founding fathers certainly tried to do! The British Crown saw an independent republic on American soil as a threat to its goal of world domination from the get-go. Its denizens would have been motivated to operate against the independence of the new republic.
Now whether Alexander Hamilton, who founded the first central bank on U.S. soil over Thomas Jefferson's explicit objections, was secretly working for the Crown, I don't think anybody knows for sure – even back then, these people knew better than to leave paper trails lying around. Hamilton's contributions to the ‘Federalist Papers’ are all about establishing a British-style mercantilism, supposedly without British control. Whether you want to say this ‘negatively impacted’ the development of this country is a matter of perspective.
The European banks were sources of financing, and they helped build American enterprise. On the other hand, they had enough power to send the economy into a depression in the 1830s in retaliation for Andrew Jackson shutting down the Second Bank of the United States. Because money never comes without strings attached, we were never truly independent of their influence, even during the period ranging from the 1830s until 1913, when we had no central bank. The bankers kept working behind the scenes, and were able to manipulate the U.S. economy, financing corporations, fomenting crises, until they got a central bank that lasted: the Federal Reserve System, in 1913. The rest, as they say, is history.
The bottom line is, a relative handful of large extended families came to control much of the world by controlling the world's finances. These families have names: Rothschild, Schiff, Warburg, Rockefeller, Morgan. They bankrolled those projects they wanted done, while less desirable ones were forced into oblivion. They built corporate empires devoted to basing energy technology on the extraction of fossil fuels while pulling the plug on Nikola Tesla. And they are all still around, of course.
Q: Your book also cites another key mistake in the failure of the nation's leaders to recognize the importance of the British Fabian Society and its impact on international banking. How, exactly, did that damage U.S. economic and banking interests?
Yates: The Fabians got organized in 1884, and in 1890, they released their credo, which was made available on both sides of the Atlantic. They stated openly that they were socialists. Back then, the word didn't have the bad connotations then it has today. Their goal was to end capitalism, just like Marx but without violent revolution. In 1895, a huge grant from a deceased member gave them the resources to establish the London School of Economics, which became the largest institute of its kind in the world.
In 1900, George Bernard Shaw, one of the earliest Fabians, started working closely with those who founded the British Labour Party by penning the party's founding credo. So the British Labour Party was Fabian-guided from the outset. Though it gets us ahead of things, how many people know that former British prime ministers Tony Blair and Gordon Brown are past presidents of the British Fabian Society?
It seems clear that Fabians were behind the Progressive movement on U.S. soil. They established ‘cells’ in prestigious universities such as Harvard, Princeton, Columbia and other institutions where the next generation of political figures and intellectuals encountered their ideas. One of the former was Franklin D. Roosevelt, when he was an undergraduate at Harvard. Later, the Fabians realized that ‘socialism’ wouldn't fly on American soil, so they hijacked the word ‘liberal.’
I don't think there is any doubt that banking leviathans such as Rothschild and Morgan approved. Though they probably had different temperaments, they were part of that minority that is drawn to power, so they wanted the same thing: global dominance. The Fabians weren't stupid about it – they realized socialism couldn't be built overnight, and that it would suit their purposes and temperament far better to bend capitalism in the direction they wanted it to go, so that's what the liberals did.
The Fabians had a phrase: ‘penetrate and permeate.’ Penetration meant infiltration of an organization by members of the Fabian society. Permeation meant hijacking that organization so that at the very top it pursued Fabian goals, even if its leaders never so much as heard of the Fabian Society, except maybe in passing.
I don't know if we want to say the bankers were Fabian-permeated. They and the Fabians had basically the same goals: social control through economic control. The bankers realized that if populations could be led to embrace collectivism, they could be more easily controlled. So the marriage between the two into what I call the ‘super-elite’ came naturally and easily. This marriage was complete by the time Woodrow Wilson became president and the Federal Reserve was founded.
They also had the national public education system to work with, and they did. The American public embraced public schools, although they weren't a part of our founding heritage, and they were steeped in a European philosophy of subordination of the individual to the state that is alien to our founding principles. The Rockefellers bankrolled John Dewey's Progressive Education movement, though, and again, the rest is history. For all practical purposes, we haven't had economic freedom since 1913 – it is significant that the Internal Revenue Service was created that same year – nor have we had much in the way of educational freedom.
It's sometimes said that public schools have failed because they don't educate. Those of us who teach university courses sometimes have students who can't put together a coherent paragraph and can't name the three branches of the federal government, nor can they tell you when the Bill of Rights was added to the Constitution. But public schools were designed to turn out a compliant, obedient workforce – a workforce that would become consumers of what corporations produced, voters who believed in the ‘democratic system’ of constrained choice between two elite-approved candidates, and otherwise support or at least fit into the dominant trends of the time instead of questioning them. It certainly didn't set out to produce intellectuals!
Q: Many people in Washington blame Wall Street for the 2008 economic meltdown, while many people in the financial services industry blame government incompetence for fueling that meltdown. Which side is rightÂ – or are both to blame?
Yates: I'd have to say both are to blame – but, as usual, there's a larger picture. Let's look at it this way: In American society, if we work for a regular employer, we get paid in Federal Reserve Notes – that's what the dollar is in the U.S. I can't tell the university I work for to pay me in, say, one ounce silver eagles or in gold bullion. For all practical purposes, the Federal Reserve controls the broadest tendencies of the economy.
The Federal Reserve is technically a private corporation, not a branch of the government – ‘independent within the government’ according to its own literature. The Fed is very secretive about who its shareholders are, but we can be assured that they include those wealthy families I mentioned, some of whom are not American.
It's sad that most Americans, even most with a good education and advanced degrees, can't tell you what the Fed does. It controls the economy by controlling the money supply and interest rates. Some of this is technical in its own right and involves variables like M1, M2 and M3 to refer to different kinds of money – M1 being the physical cash in circulation plus what is in every checking account, M2 including M1 plus what is contained in every savings account, and M3 incorporating M2 with every large-scale deposit, all institutional money-market funds – everything that has been loaned out. M3 is the broadest measure of the money supply, which the Federal Reserve stopped reporting on March 23, 2006. To those of us paying attention, this was a sure-fire sign that something was amiss, and they knew it.
The point is, the Fed can cause a ‘boom’ by expanding the money supply and, as economists say, ‘keep the economy from overheating’ by ending the expansion. The Fed can speed up the economy by lowering interest rates and slow it down by raising them. This sort of centralized monetary policy puts the lie to all the talk about ‘free markets’ and ‘laissez-faire’ capitalism. We haven't had that kind of system in over a hundred years. We've had a kind of corporatism or monopoly capitalism, if you will, very much tied to government and wired into non-governmental, non-market institutions such as the Fed.
I don't think even this goes to the heart of the matter, though. As early as the 1600s, bankers knew they could manipulate economies and governments through the process known as fractional reserve lending. Unless we understand that bankers really do create money out of thin air by entering data onto their books – or, these days, entering data into their computers – we aren't going to see what is going on.
Of course you can't keep a secret like that bottled up forever; it's been told many times, but a large portion of the public refuses to believe it, neither politicians nor the media will talk about it and most of the public has been ‘educated’ to believe this is a conspiracy theory. In this way, central bankers have become the core of a global super-elite and literally control much of the world by controlling the world's finances.
They can't control everything, of course. They're not gods, or even demigods; they're just finite, fallible human beings, and they do make mistakes. When we had a semblance of a gold standard back in the Bretton Woods days, we had some control over debt. President Richard M. Nixon, at the urging of Federal Reserve Chairman Arthur Burns, took our money system completely off the gold standard in 1971. We've been piling on mountains of debt ever since, and it didn't matter which party controlled Congress or the White House.
Q: How do you view the government's current policy for addressing the problems facing the housing market? And what is your view of the lack of movement to reform the government-sponsored enterprises Fannie Mae and Freddie Mac, which have been in federal conservatorship for more than three years?
Yates: I don't think the current administration has a policy for addressing these problems, or for ‘reforming’ Fannie Mae and Freddie Mac, which is why they've stayed in conservatorship all this time (at taxpayer expense, I might add). I don't think they have a clue what to do, and any ‘reform’ made in isolation from a lot of other ‘reforms’ will just be a quick fix that will cause more problems than it will solve.
The only viable strategy right now is going to have to be revisiting economic fundamentals – and I mean from the ground floor up. But they will not do this, because such a revisiting of fundamentals would soon reveal that in the broad scheme of things, American civilization peaked in the 1950s and 1960s, only to go into a slow reversal and head downhill in the 1970s, when education began to decline, wages began to stagnate, and the gulf between rich and poor began to increase again.
The generation that founded this country would be horrified if they could see what it has turned into! These are the sorts of things we need to have a national conversation about, not the Casey Anthony trial or the Kardashian sisters' dresses or the latest celebrity divorces!
Q: Your book's subtitle refers to a republic in decline. What would you prescribe to reverse that decline? Or, is it too late?
Yates: Things may be bad, but it's never too late. Or, at least, I'd like to hope so. Not that there isn't a case for pessimism. Great civilizations have risen in the past, turned into overextended empires with bloated, bureaucratic governments that took themselves for granted; greed and expediency supplanted principle and thoughtful, long-term planning; and then they went into steep decline and into the history books.
Can we turn things around? I don't know. Right now, I tend to think the majority of the American public still believes in the system – even the Occupy protesters believe in the system, because they are making demands for it to be reformed. Belief that reform is possible is a sign that you believe things can be turned around.
To make things better, though, we're going to have to make some tough choices, and I think we're in for a rough ride, no matter what we do, because we've gone so far down the road of building up a debt-driven economy based on a materialistic, entitlement-driven philosophy of public life. It starts with education, and by that, I don't mean public education – I mean self-education. How does a free economy work? What are its premises? What sorts of things are we going to have to learn, because these are the sorts of things a free people know how to do?
With these economic tough times, I think a lot more people are asking questions about why this happened, and where we went wrong. In a sense, these troubled times have given us a golden opportunity. A lot of people are starting to wake up and unplug from the Matrix, as it were, whether they align themselves with the political right and the so-called Tea Party or with the left and Occupy Wall Street. Perhaps the best thing we can do is stop making demands on the political system and start taking direct action while we still can.
I would urge readers to adopt a mind-set of long-term thinking. Let's start thinking about what kind of future we really want and what we are willing to do to build it. These are things we can do and that we can teach our children to do. Working this way, locally, is probably what we are going to have to do to bail ourselves out of this mess when the government is bailing out the big banks with funny money.
It's up to us – all of us – because no one else is going to get the job done, and because I presume that on some level, we still want our children and their children to inherit a better world than ours has turned out to be.