Well, this just shines new light on the inherent problem with capitalism--it's all about serving the needs of capital first, and the country, its citizens, the environment and all else second. Up to now, the economic pie was big enough that even the crumbs were sufficient to provide a comfortable life for most people. Yet with all the real wealth relentlessly concentrating in fewer and fewer hands--and this process no longer able to be masked by increasing national debt--the proverbial chickens are coming home to roost.

And no, I'm not advocating communism--that had a similar failing: serving the needs of the state first, and its citizens, the environment and all else second. We need a new economic vision that reverses the priorities, recognizing that a truly functional, sustainable society and ecosystem will come only as a byproduct of protecting the public commons and nurturing each human being toward reaching their full potential to contribute back to the system.

Bill Miller
Sustainovation

Menlo Park, CA

I cannot agree with William Greider's proposed continuance of the Federal Reserve in the August 18/25 issue of The Nation. New regulations and oversight are not enough.

In Greider's 1989 book, Secrets of the Temple: How the Federal Reserve Runs the Country, he reveals that the church created the doctrine of purgatory in order to allow for usury, as it enables the rise in the standard of living in society. The problem is, purgatory all too easily becomes hell. Since 1913, with the creation of the usury based Federal Reserve note, the standard of living in the United States has dramatically increased. At the same time corruption and suffering increased. Regulation following the great depression stemmed the worst corruption, but no regulation can ever eliminate the wars that erupt as a result of the corruption.

Our Constitution mandates usury-free gold and silver issuance as our national currency. Lincoln issued greenbacks, fiat issuance, to pay for the Civil War. While, greenbacks were not gold and silver, they were usury-free issuance. The 1913 creation of the Federal Reserve note desecrated the Constitution's usury-free currency mandate. The Federal Reserve exists in spite of the fact that it is "bad" law. Bad law has to be allowed to stand as long as more harm results from dismantling it then would result from keeping it. No longer can it be said that it would be more harmful to dismantle the Federal Reserve than it would be to keep it. Forget about returning to the regulation "Band-Aids" introduced after the great depression. We need to clean slate our monetary system and get back to debt-free US Treasury issuance. Only with debt-free issuance will we enable real freedom and prosperity for all to re-emerge in the United States.

Mary T. Ficalora

Agoura Hills, CA

Members of Congress, each of whom is responsible for an equal part of the national debt, can't impeach (the testimony of) bankers any more than they can impeach Bush.

In order to impeach Bush for ordering the war that has taken the lives of nearly 4,700 of their constituents, Congress would have to create conditions that demanded that Bush present evidence in favor of the war, the lack of which evidence would, in turn, demand the impeachment of all members of Congress who claim to have voted for the war because they were so ignorant that they were snookered by Bush--and demand it before Bush's impeachment, and in order that there exist in Congress people qualified to attempt to impeach Bush.

Show me a lawyer who would advise his client to volunteer evidence against himself.

Essentially, most of us in these United States are without representation in Congress.

Cameron Jones

Indiana, PA

When political power was privately held, it was called monarchy, yet even the most stalwart of conservatives today are not monarchists, as we have all learned political power can be managed more effectively as a public trust. Currently there has been a strong push to privatize as much of the public commons and government as possible, yet it is obvious that it doesn't work in the context of the current level of social and economic complexity. So the issue is how to frame the relationship between public trust and private initiative as effectively as possible for a healthy society, economy and environment.

Money is a medium of exchange and store of value. These work at cross purposes because as a medium of exchange, money functions as a public utility, while as a store of value, it is a form of private property. It is as private property that most people think of it, yet modern monetary systems are primarily a medium of exchange and only as a function of that do they store value, as they have no backing other than faith in the issuing institution and must be invested or spent in order to remain in circulation. The monetary system, with its broad connectivity, is similar to a road system. You own your car, house, business etc., but not the roads connecting them. Money is not private property. You cannot print what you want, as the government retains copyrights, but loans that out to the private banking system. Its value is based on public faith in the institution issuing it, so the taxpayer is ultimately responsible for guaranteeing its value. Thus private gains and public risk.

This isn't socializing wealth, but understanding what money is in the first place. The effort to privatize Social Security is a good example of the reality, since there is no place to invest this amount of additional savings and would only be a boon to the brokers handling it. We invest in our old age by investing in our parents' old age, so that our children might continue the practice. It is a clear example of investing in the larger community as a viable form of savings.

The problem with capitalism is the ability to store wealth is determined by the potential for productive investment, not by the needs of every individual to feel secure. Thus the demand for money is far greater than the ability to invest it. This encouraged ever more lax lending standards as a way to absorb savings and sustain further growth of the money supply. Now that bubble is bursting, the nature of a system of stored abstract wealth needs to be re-examined. If people cannot suck value out of their social connections and environment, they would have to resort to putting their efforts and desires to increase status and build security directly back into restoring and strengthening social and environmental health. Not only are the enormous pools of personal wealth this abstraction of value enables an excess the planet can no longer afford but it is a destructive economic model, as hoarding currency draws it out of broad circulation and inflates the value of investment. Wealth is a convective cycle of rising assets and precipitating benefits. Slowing this process creates large clouds of counterproductive wealth hanging over a parched economy.

Since the public is responsible for maintaining the value of the currency, then the public should reap the rewards as well. An effective financial system would have a national currency, while the banking system would be distributed across the various levels of government, with the profit generated by moderate interest rates needed to insure wise investment a form of public income to support the infrastructureof a healthy economy. While government may be slower than the private sector, its perspective is longer term.

If hoarding currency lost its civic standing, inflation wouldn't be necessary to maintain circulation, so accounting values could be more stable.

John Merryman

Sparks, MD

Mr. Greider is an acknowledged independent expert on matters of finance with many enlightening books to his credit. His comment on the impending collapse of finance as practiced by loosely regulated rulers of finance is a dose of reality. It is clear that all the players on Wall Street and in the federal government have great responsibility for this disaster as Mr Greider has outlined. The final act in this tragedy was wrought by US Treasury Secretary Robert Rubin (from Goldman Sachs) and then Sen. Phil Gramm getting Congress to pass and President Clinton to sign the Gramm-Leach-Bliley-Bank Act of 1999 repealing the 1933 Glass-Steagall Bank Act. Now another US Treasury Secretary from Goldman Sachs, Mr. Paulson, and Prof. Bernanke, from Princeton, struggle to falsely reassure the public that the damage is repairable.

What is missing from all the hand-wringing by the guilty and economist enablers is the fundamental cause: our money supply is created by interest-paying debt! The private banks create money by making loans and the federal government is required to borrow its own legal tender, creating a needless national debt. Private debt money must be redeemable in legal tender: a bank check must be cashable! There is not enough legal tender, cash in circulation, to support the tottering tower of debt that those subprime mortgages now crown. Debt money demands that ever more interest-paying debt be created just to pay the interest. This is unsustainable and causes the periodic financial crises, of which this is likely the last.

After the tower of debt has crashed to the ground the new financial order must be rebuilt with legal tender free of national debt, spent directly into circulation from the US Treasury. Private banks may continue to "print" their debt money via Fractional Reserve Banking, but with a much higher reserve requirement. Credit card debt and other evasions invented over years of lacks supervision and an accommodating Congress must be "on the books."

Robert W. Zimmerer

Longmont, CO

William Greider states that "foreign portfolio holdings of US long-term debt securities [have reached] 18.8 percent." Does this mean that 18.8 percent of US long-term debt is held by foreign portfolios (not so scary, in my opinion)? Or does it mean that foreign portfolios have placed 18.8 percent of their holdings in US long-term debt securities (which is scary)?

Timothy J. Maloney

Lambertville, MI

We would be a lot better off today if Mr. Greenspan had stopped playing rescuer-in-chief during his tenure in office and allowed market forces to bring about periodic, manageable recessions, thereby preventing the record levels of debt now menacing the economy. Better to have suffered a series of manageable, market-induced recessions along the way, than to pursue a policy of "endless prosperity" culminating in a crushing debt load leading to another Great Depression.

Regrettably, one of the problems with American democracy, is that no politician or Fed chief, for that matter, will espouse a "hands off," laissez-faire capitalist approach to the economy, much as they talk a good game of a "market economy," the "invisible hand" and Ayn Rand Objectivism. Whisper the R word and the stampede is on to rescue the economy, with taxpayers left holding the bag.

However, the solutions policymakers resort to invariably involve the creation of more debt, either private or public. Republicans fixate on tax cuts, which simply create more government debt, in effect socializing the borrowing excesses from the private sector. The Democrats tend to favor government spending as the antidote to recession, with essentially the same effect on the national debt. The Fed's only tool is to print money so as to lower interest rates, providing banks with more money to lend at cheaper rates so as to encourage more borrowing and spending in the private sector.

What all of these remedies have in common is that they prescribe more debt to cure a patient suffering from too much debt! That's nuts! Welcome to the Mad Hatter's tea party.

All that these recession-avoiding schemes will accomplish is to delay the day of reckoning and cause a deeper and longer Great Depression when the defaults start cascading in earnest, as they now appear to be doing (see: IndyMac, First National Bank of Nevada, First Heritage Bank of Newport Beach, and Bear Sterns).

The day of reckoning has been postponed for a while by borrowing from foreigners. However, Americans are about to learn the "Golden Rule": whoever has the gold makes the rules. The day is not far off when foreigners cash in their IOUs for controlling interests in Corporate America. They are already laying the groundwork by lending huge sums of money to the likes of Citibank, Merrill Lynch, Morgan Stanley and other premier US financial institutions. With friends in high places, foreigners will find it easier to overcome jingoistic objections to their purchase of America's corporate crown jewels.

Sad to say, (and no politician or policymaker will say it), another Great Depression is just what America needs and deserves. (This is both a prescription and a prediction.) We deserve it because we have become a nation of spendthrifts, driven to buy our HD television sets, SUVs and overpriced houses on cheap credit obligingly provided by ambitious foreigners; we don't save; we allow ourselves to be led by politicians with no other interests at heart than preserving their own power, beholden only to greedy corporate executives who pay themselves obscene amounts of money while begrudging working stiffs pay raises, health care and pensions.

We need another Great Depression to cleanse America of its excessive debt, through default, restructuring and repayment, and to teach today's Americans the lessons learned the hard way by those who lived through the 1930s: to live responsibly within our means, save for rainy days and retirement, and avoid debt.

"Those who cannot remember the past are condemned to repeat it." --George Santayana.

For additional commentary, visit my website and blog.

David L. Smith

San Francisco, CA

Very nice article. I agree 100% percent with Mr. Greider's five suggestions at the bottom. Unfortunately, at this point, as we both know, the corruption is too deep for any of them to happen. We're looking at a revolution to save our country.

Richard Clark

MiddleClass2008.com
Gaithersburg, MD

William Greider is correct as far as he goes, but the biggest banking reform we need is to place a cap on all loans of any kind, including especially credit card balances, of no greater than 5 percent. Charging more than 5 percent was considered barbaric in twelfth- and thirteenth-century Europe. Nothing has changed in the twenty-first century science "days of miracle and wonder" that changes the reality of the evil that men and women do, the reality of economic, social, political and other injustice.

Richard Aberdeen

www.FreedomTracks.com
Nashville, TN

Gee, Greider, why stop with the finacial system? Just nationalize the entire US econmoy à la Europe and be done with it. Of course, with a statist system and all the social and economic perfection it would bring, what would you have to write about every week?

B. Marks

Richardson, TX

I read Mr. Greider's Secrets of the Temple years ago and had a niggling sense of the Fed's queer contemporary behavior. The myopia of the "one-eyed chairman," the rash repeal of the Glass-Steagall Act, bail-outs of the too big to fail financial institutions and proposed oversight role of the Fed of its confrere institutions, threatens, as Greider asserts, to blindside America with another Depression. His prescriptions are well drawn from the evidence, although heretofore the nation's septic politics have despoiled the integrity to implement them. For instance, three Republican administrations oversaw the accumulation of two-thirds of the $10 trillion US National Debt, with debt interest payments, a "back door tax," exceeding $3.5 trillion per decade--this from the party of "no new taxes." If we allow wedge politics to obscure the basic fact that both parties tax the people, then we won't unify and exercise clear-sighted judgment in the management of this nation's affairs.

Sioan Stephen Bethel

Brooklyn, NY

Yes, sir. Please keep on yelling the message loud and clear. The rot in Washington, DC, and on Wall Street is so deep that we may have reached the tipping point and we have alienated most of our international allies to the point that we are not going to get a lot of sympathy from them. Our present debt to other nations is so vast that we have literally mortgaged our kids' futures and most of us are so overwhelmed by the Kudlow/Cramer/Greenspan/Rubin doublespeak that we are literally frozen into inactivity. In the old economy we would have prosecuted this kind of economics as a pyramid scheme. The only place this kind of behavior would have been permitted would have been in a carnival and only after 10 o'clock at night.

James Pinette
retired

caribou, me.