Recently by Gary North: Liberal PBS Runs an Article on Government Default
The best description of the reversal of fortune is Mary’s Magnificat, recorded in the Gospel of Luke, chapter 1, verses 46-55. “He hath put down the mighty from their seats, and exalted them of low degree” (v. 52).
This was a fundamental theme in the Old Testament. We are told that those who hold their position by means of political power and corruption always lose their position. They are always overthrown. They look unbeatable. They are always defeated. The prophets of Israel came before kings and commoners with this message. Isaiah 1 is a good example. Isaiah even identified a major technique of the power elite: inflation. “Thy silver has become dross, thy wine mixed with water” (Isa 1:22).
The more things change, the more they stay the same.
THE POWER ELITE
What do I mean by the power elite? The phrase was coined by Leftist sociologist C. Wright Mills in 1956. His book remains a classic. Its main chapter is here. Liberal columnist Richard Rovere in 1956 called it the American Establishment. Conservatives refer to it as the Insiders or the Conspiracy. David Rothkopf, writing from inside, calls them the superclass. Sometimes they are called the PTB: the Powers that Be. I think conservative journalist and historian Otto Scott said it best: the behind-the-scenes fellows who are too clever by half.
Who are they? They are men of influence and wealth who gain a lock on this wealth through political power. They use economic leverage – debt – recklessly because they can protect themselves from losses by means of political leverage: government bailouts. Some of them lose, but as a class they do not.
The key to their economic position is their unseen political manipulation. They are the masters of backroom politics. Theirs is not the backroom politics of the old big city political bosses, who were their class enemies, and whom they had generally replaced by the late 1950s. The novel The Last Hurrah (1956) describes this transfer of power, although it ignores the system that replaced the Catholic power base. The battle of the Boston Brahmins – merchants and lawyers – who had replaced the Boston Puritans by 1700, vs. Boston’s Irish Catholics after 1870 is the archetype. The battle lasted for about 90 years. The triumph of Jack Kennedy, which seemed to be the triumph of the Irish Catholics of Boston, was in fact the victory of the Brahmins, by way of Harvard. His father got Jack into Harvard. Then he bought him the Presidency. “Honey Fitz” Fitzgerald’s grandson was the symbol of this transfer of power.
The central battleground has always been the control of the faculty of Harvard, from 1636 until today. This includes the Harvard Business School and Harvard Law School. Harvard is both the symbol and the supreme leverage point. The other Ivy League schools are the second tier in this ring of power. So are the late-comers: Stanford University and the University of Chicago, which were created by two very rich capitalists in the late 19th century, who wanted into the circle of social influence, and who created universities to buy their way in. Leland Stanford never quite made it in. John D. Rockefeller, Sr.’s son did, by way of Brown University and the Rockefeller Foundation, which he took over in 1917.
New York City and Washington, D.C. – Wall Street and the Beltway – are where the anointed exercise their rule. This mirrors the circles of power in England: Oxford, Cambridge, and the City of London, a legally separate jurisdiction from the city of London.
Bankrolling the American power elite are fewer than a dozen large banks, mostly in New York City. They have an insurance company: the Federal Reserve System. Bankrolling the British power elite – called the Old Boy Network – is a similar system of banks. Their insurance company is the Bank of England, which is the model for the FED.
Note: the transfer of power began in 1660, with the restoration of Charles II to the British throne. Cromwell, the Lord Protector, had died in 1658. The Restoration displaced Cromwell’s Puritans. But Cromwell had never consolidated his rule where it mattered: Oxford. He technically ruled over Oxford for almost a decade, but he never made any reforms. Next came the Glorious Revolution of 1688 and the creation of the Bank of England in 1694. This 34-year consolidation of social and economic power – the displacement of Puritan rule – was paralleled in Boston in these same years.
The power elite’s members do not sit in the cigar smoke-filled rooms of the history textbooks. Most of them do not smoke these days. Indeed, their non-smoking status is one mark of their superior status. But, just like the old political bosses, they depend on politics for their position. That is their Achilles heel. By becoming dependent on politics to protect themselves from free market competition, they will eventually overplay their hand. They will bet the farm – and ours – on a busted flush. Imploding debt will remove them from the scene.
Why do I believe this?
To answer this, I begin with North’s three laws of bureaucracy.
1. Some bureaucrat will inevitably enforce an official rule to the point of imbecility.
2. To fix the mess which this causes, the bureaucracy will write at least two new rules.
3. Law #1 applies to each of the new rules.
This is a convenient way to express the principle set forth by Ludwig von Mises in his essay, “Middle-of-the-Road Policy Leads to Socialism.” Each attempt to fix the problems caused by a previous government intervention creates new problems.
Mises also argued that socialism is inherently irrational, because it destroys the market for capital goods. It destroys market pricing. He wrote that in 1920.
Conclusion: all socialist systems must collapse.
Semi-socialist systems move in the direction of bureaucracy. They fall under North’s three laws.
Conclusion: The power elite will blow it. Give them time.
Their great temptation is private debt. Their salvation is the federal government. But the government depends on three things: low-interest debt, central banking, and bureaucracy. None of the three is trustworthy. The free market will displace them all. I call this event the Great Default.
THE ECONOMIC CRISIS OF 2008/9
Do you believe that the Insiders engineered the economic crisis of 2008 and 2009? If you believe this, then you are ignoring crucial facts about what happened – well-known facts.
Also, if you believe this, how do you expect to see the replacement of the power elite? If they are that clever, their opponents – you and I – are doomed.
I argue the opposite. Keynesian economics is unsound, fiat money is unsound, massive federal debt is unsound, and there will be a day of reckoning. On that day, the existing establishments will go on the defensive. More than this: they are already on the defensive. This is something new. The crisis of 2008/9 was the tipping point.
I say this as a student of conspiracies in history. I wrote my first essay on this in 1958. In 1985, I wrote the Prologue and Epilogue to Larry Abraham’s Call It Conspiracy, which was a revision of the book that he and Gary Allen wrote in 1971, None Dare Call It Conspiracy. I was a friend of Gary Allen. We worked together on a few projects.
I took my Prologue and Epilogue and produced a full-length book. You can read it for free here.
In short, I was not born yesterday. What I am about to tell you, you would be wise to take seriously if you regard yourself as a believer in conspiracies.
KEYNESIANISM PRODUCES DISASTERS
Those conspiracy theorists who think that the conspirators always engineer the economic crises are ignorant of economic theory. They also ignore the obvious. Let me give you an example. Lehman Brothers was a major player in the United States economy in the summer of 2008. That private investment bank had been in operation for over 150 years. It was gigantic. But in the September crisis, it went bankrupt. Why? Because Hank Paulson, who was Secretary of the Treasury, decided not to bail it out with government money or guarantees.
What if the Secretary of the Treasury in the fall of 2008 had been the ex-CEO of Lehman Brothers rather than the ex-CEO of Goldman Sachs? Do you think Lehman Brothers would have gone out of business? Or do you think Goldman Sachs might have gone out of business?
The idea that They, with a capital T, engineered the crisis of 2008 raises a question: Who were They? If They did not include Lehman Brothers, then I do not know who They were. The supposed fact that They controlled things, and They engineered things, did no good for Lehman Brothers. That was the largest bankruptcy in the history of finance. If They engineered the crisis, why wasn’t Lehman’s CEO Dick Fuld invited in on the planning sessions?
I hope you see my point. The idea that conspirators in the American banking world engineered the crisis of 2008, which took down one of their largest organizations, is ludicrous. It assumes that the Keynesians who are in control understand Austrian School economics. Nobody else was predicting a crisis in 2007 except the Austrians. The Austrians were predicting it because they had an analytical system that enabled them to make the forecast. I was one of them.
Austrians are a fringe group. Nobody paid any attention to them in 2008. We are pariahs in the academic community, and we are equally pariahs in the banking community. So, why does anyone believe that the people who were running the system, who were dedicated to the economics of Keynes, Paul Samuelson, and Paul Krugman, were able to figure out that they could precisely manipulate the world economy, taking it to the brink of failure, and then escape at the very end, coming out far wealthier? The suggestion is ludicrous. Yet it is widely believed among conspiracy theorists.
The person who says that the power elite created the crisis are of necessity saying that Keynesians used Austrian School theory to manipulate the economy into a crisis, and then carefully used a doubling of the monetary base in four months to save the system (minus Lehman Brothers). Yet no academic theory of economics prior to this had ever provided an analytical defense of a doubling the monetary base in four months. The decision was 100% ad hoc. There was no theory to justify it.
Then how should we explain what happened? By first abandoning that form on conspiracy theory that declares that nice guys finish last. I hold to the anti-Durocher view of long-term social causation: nice guys finish first. Eventually.
PREDESTINATION BY CONSPIRACY
For over 40 years I have been told by people who have a smattering of knowledge about conspiracies and conspiracy theory that the power elite has engineered every crisis in American history. They believe that the power elite is in fact the functional equivalent of God. They believe that the power elite predestinates the affairs of men.
I am not saying that every conspiracy theorist holds this, but a lot of them do, and I think the vast majority of their followers do. My father-in-law, R. J. Rushdoony, called these people gravediggers. He said that they believe that the conspiracy is the equivalent of God, and the conspiracy is inherently evil. Therefore, the conspiracy has the capability of keeping most people blinded most of the time. The conspiracy – just one – runs the show.
If this is true, then how can it be replaced? How can evil be overturned? Their typical answer is this: education. I ask: Of whom? By whom? At what price? By what means?
Back in the early days of the conservative movement, this answer was obviously hopeless. In 1954, there were only three tiny conservative book publishing firms: Regnery, Devin-Adair, and Caxton. Hardly anyone knew about them. There was no direct-mail system. That came only with Ricard Viguerie’s efforts after the election of 1964: the Goldwater donors’ list. There was no National Review. There was no Freeman.
In those days, there was no way that a rock-solid conspiracy theorist in the United States had any plausible plan for overturning the conspiracy. He had never heard of the Council on Foreign Relations. That revelation came with Dan Smoot’s book, The Invisible Government (1960). What a conspiracy theorist knew was this: he surely had no influence. Nobody he had ever heard of did. Senator Bob Taft had died in July 1953. Also, no one in the conservative movement knew that Taft had been a member of Skull and Bones, just as his father President Taft had been, and his grandfather had been. His grandfather had co-founded it in 1833. No one in the general public in 1954 knew of Skull and Bones. That revelation awaited Ron Rosenbaum’s September 1977 Esquire article. That was when I first learned of it. Antony Sutton’s books came half a decade later.
Side note: there has never been a comparable exposé of the Harvard secret society that predates Skull and Bones by a generation: Porcellian. Teddy Roosevelt was a member. Franklin Roosevelt could not get in, which was his greatest disapointment in life, he later maintained.
Widespread education is never free of charge, and widespread education is controlled in every country by the government. If the conspiracies control all of the governments, then how can widespread education ever roll back the conspirators?
So, there are two views, sometimes held by the same people: (1) the power elite is collectively God walking on earth; (2) mass education can unseat the power elite, and then never let other evil insiders replace them. We are either to believe in the immovable object of conspiracy or the irresistible force of democracy.
I’m not buying it. I never have.
CONSPIRACIES NEED LEVERAGE TO MOVE THE MASSES
The main idea behind most conspiracy theories is this: the bad guys behind the scenes are fooling the masses, thwarting the good hearts of the masses.
This is an intensely anti-biblical view of social cause and effect. The biblical view is that people get what they deserve politically. Moses warned that evil hearts in the masses would bring corrupt rulers (Leviticus 26; Deuteronomy 28). This was the message of the prophets. In short, ethics has consequences.
So, what are we to make of the power of the conspirators? This: the conspirators share most of the beliefs of the masses. If this were not true, a conspiracy could never be successful.
A conspiracy that believed that space aliens control the Board of Governors of the Federal Reserve System would be nothing more than a crackput cult. Hardly anyone would take this group seriously. The group would have no influence. (Note: if space aliens are smart enough to travel through space and then control human minds, how is it that the best they can do is write Ben Bernanke’s speeches?)
Conspirators invoke the language and the beliefs of the masses. They tell the masses what the masses want to hear. For instance, they say that the government will protect the people from an economic collapse. The government has the power to eliminate economic crises, we are told, if the politicians will pass new laws. The government will continue to fulfill its promises regarding Social Security and Medicare.
Do the conspirators believe this? Yes. Of the 6,600 richest or most influential people on earth, insider David Rothkopf writes in Superclass, something like 30% attended one of 20 universities (p. 290). The ideology of salvation through legislation is basic to the social science departments of all of those universities. The faculties are overwhelmingly Keynesian in outlook.
This information is nothing new. Bill Buckley made his reputation in 1951 with God and Man at Yale, Regnery’s first best-seller. He wrote about Yale’s Keynesianism. This has been a constant theme in the conservative movement ever since. The same is true of the libertarian movement. I have never heard a conspiracy theorist suggest otherwise.
If you believe that the power-brokers are Keynesians, you believe correctly. But if you believe this, please follow the logic of your position. The nation’s rulers overwhelmingly believe that the central government can produce prosperity.
So do the voters.
Consent is basic to democracy. The masses consent to be ruled over by people they have elected. Their rulers tell them what they want to hear. The fact that an elite screens the two parties’ candidates for President does not change the nature of consent by the masses.
The masses are deceived about the political process. This is not the same as saying that the masses are not in agreement with the outcome of this process.
Are the masses deceived about the process? Consider this. The Presidential election in 2004 was between a pair of Skull and Bones members. What are the odds against this in an open system of political screening? The masses have never heard of Skull and Bones.
Would the masses care if they knew? No. They just want their government-funded subsidies.
This is an American tradition. How was it that in 1860, the Presidency was going to be won either by Abraham Lincoln, a lawyer for the Illinois Central Railroad, or by Stephen A. Douglas, a lawyer for the Illinois Central Railroad? Nobody asked. The textbooks still do not ask. How was it that the election of 1864 would see either the election of lawyer Lincoln or his former boss at the Illinois Central Railroad, George McClellan? The voters did not ask in 1864. Neither do not the textbooks. It was just one of those things, just one of those crazy things.
Most historians do not not know or care. Why should the masses care?
February 19, 2013
Copyright © 2013 Gary North