- continued
To place the numbers in additional perspective, Special Inspector General Barofsky now tells us that something close to the entire amount of TARP 1 ("hundreds of billions of dollars," in his words, and likely around $500 billion by our estimates), will be consumed by fraud, or stolen. In other words, roughly twice the value of the nation's entire gold supply will be wiped out not by the original fraud, but by the fraud associated with the bailout money designated to deal with the original fraud. Fraud upon fraud upon fraud, in a mind-numbing daisy chain of crime, corruption and greed.
While Mr. Barofsky spoke about anti-fraud measures the government hopes to implement to mitigate this fraud, it is difficult to have much confidence in them, particularly since he also referred in the same speech to problems the government is experiencing in hiring competent auditors and regulators to oversee bailout spending. After 25 years of regulatory failure, from the S&L crisis, to the dot con scandals, to epic fraud at Enron, Worldcom, and other major corporations, to blatant, illegal Comex precious metals short concentrations and related price manipulation, to the Madoff Ponzi scheme, to the current banking and credit emergencies, it is clear that government has simply been incapable of getting ahead of financial fraud in America. In each and every case cited above, government regulators arrived at the crime scenes long after the frauds had been committed and the money had disappeared. The defrauded have been fortunate to receive fractions of pennies for each lost dollar. Sadly, financial regulation in America is an after-the-fact phenomenon. So Mr. Barofsky's fraud warnings must be taken seriously.
The current cost of the bailout and associated guarantees now exceeds $13 trillion, with no end in sight. The expenditure of every bailout dollar is 100% experimental because the nation has never before faced a financial catastrophe like this, and is therefore flying blind. Given the bailout cost, it is now clear that the equivalent of the nation's entire economy has been plundered. While in the past thieves have concentrated their criminal energies on robbing a bank, art museum, or Brink's vault, the criminals behind our current crisis decided to steal a first-world nation's entire economy. They committed the unthinkable: the theft of a nation.
Sensors in retail stores can detect a package of chewing gum being shoplifted. Payment verification systems can spot a bad check in a tenth of a second. Credit card authorization programs can instantaneously detect an irregular spending pattern, and shut down a compromised account. "Eye in the sky" casino cameras can zoom in on a dealer lifting a $1.00 chip, or a blackjack player rearranging cards to personal advantage. IRS computers, watching a nation of 300 million people, can pick up in seconds a $50.00 mismatch between 1099- and tax return-reported interest income. Fraud detection has become an advanced science and practice throughout the world that can prevent even the smallest of crimes.
But for more than a decade, a multi-trillion dollar Wall Street fraud raged with such virulence and intensity that it has crippled not just the economy of the world's most-powerful nation, but now the global economy. United States regulatory authorities, funded by taxpayers at a cost of billions of dollars per year, never spotted anything, until the entire system, according to Paulson, nearly collapsed.
Is this plausible? Is it plausible that an entire economy could be looted for a decade without regulators, politicians, or banking insiders knowing or doing anything about it? Does that make any kind of logical sense whatsoever? Or is this the colossal kind of crime that billions of dollars' worth of political contributions and lobbyist influence, combined with epic greed, criminality, money know-how and malicious intent, can buy?
In a time of crisis, it is difficult for people to see the obvious. They mourn for better days, which have disappeared. They cling to hope that their circumstances, which have collapsed, will miraculously improve. But it is false hope, because the vacuum of the future has inhaled their past, and that past is never coming back.
What is obvious is this: the creation out of thin air of billions of dollars of bailout money, "hundreds of billions of dollars" of which will be stolen by the same criminals who looted the country in the first place, cannot re-start an economy whose capital has been stolen. There is a saying: "If you keep doing what you have been doing, you will keep getting what you have been getting." And that is what is in store for America, more of the same, unless we fundamentally reassess our approach to this crisis.
If knowledge sets one free, the first thing the people need to know now is that the current economic emergency was not an accident; it was a crime. It was the theft of a nation, and the victims are its people.
Accepting this, they must respond. They must reconsider every idea they have about money, financial security, and the competence of the state to protect their welfare. This process inevitably will result in a paradigm shift on the subject of money. It will lead to the adoption by the people of a new reserve currency: the People's reserve currency. And most likely, they will gravitate to the financial security provided by money that has a 5,000 year history of international value, stability, acceptance and prestige: gold.
From the beginning of civilization, only 5 billion ounces of gold have been produced, in a world of 6.5 billion people, and hundreds of trillions of dollars' worth of paper currencies and paper assets backed by nothing: in other words, anti-money. The people are going to rediscover economic truth, and in particular, the power of the theory of supply and demand. When they do, the paradigm shift will be enacted, as they replace currencies that have utterly failed them with true money that can restore their financial health and set them free.