It’s ‘Globalization,’ Stupid! by Harley Schlanger

Book Review
The Evils of Monetarism:
It’s ‘Globalization,’ Stupid! by Harley Schlanger
Too Big To Fail: The Inside Story of How Wall Street and Washington Fought To Save the Financial System—and Themselves
by Andrew Ross Sorkin New York: Viking, 2009 539 pages, hardcover, $32.95
On the Brink: Inside the Race To Stop the Collapse of the Global Financial System by Henry M. Paulson, Jr. New York: Hachette Book Group,
2010 453 pages, hardcover, $28.99
They are sticking with their story! The swindlers and thieves among the world’s leading bankers from the City of London and Wall Street,  and the charlatans in university economics departments  and  think  tanks  who  provide  academic  rationales  for  their  corruption,  insist  that  the  post-Bretton  Woods  free-market system of “globalization” is just fine, thank  you,  and  would  function  perfectly,  if  it  were  not  for  continued interference by government.
You can read their sophistical arguments daily in the  major  press,  and  hear  them  spout  off  endlessly  in  the  electronic media. And now, through a proliferation of  books  on  the  “greatest  financial  crisis  since  the  Great  Depression,”  we  are  being  bombarded  with  their  self- congratulatory paeans, as they wax on about how they  have “saved civilization.”
What nonsense!
As physical production continues to ratchet down- wards at an accelerating rate, unemployment remains at
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the  highest  levels  in  80  years, and home and com- mercial  foreclosure  rates  are  skyrocketing,  these  self-proclaimed  saviors  are  creating  mountainous  levels  of  debt  which  will  never be paid off, through  a  continued  bailout  of  worthless  paper  assets,  which remain on the books  of  financial  institutions,  instead  of  placing  those
institutions into bank- ruptcy     reorganiza- tion.
The  debt,  then,  becomes  the  excuse  for demanding Hitler- style fascist austerity,  as  in  President  Obama’s  so-called  health-care  bill,  as  human lives are being  sacrificed  as  “useless  eaters,”  just  as  they  were  in  Nazi  Germany, to provide whatever minimal income stream can  be squeezed out, to service the growing debt.
They Should Have Listened to LaRouche
Books such as the two which are the subject of this  review, Too Big To Fail, by Andrew Ross Sorkin of the  New York Times, and On the Brink, by former Treasury  Secretary Henry M. Paulson, Jr., should be sold as fic- tion, because, in spite of the “facts” that are presented by the authors, it is clear that they still have no clue as  to the insanity of the financial-monetary system which  they claim, in their books, has been saved, by the pro- cess of endless bailouts.
At the outset, let me note that, had these authors, and  any of those self-styled “Masters of the Universe” with  whom  they  collaborate,  paid  attention  to  the  volumi- nous  writings  and  accurate  forecasts  of  economist  Lyndon LaRouche, there would have been no reason to  write these books, as the continuing crisis they purport  to cover would never have happened.
On  July  25,  2007,  as  the  first  signs  of  the  “credit  crunch”  were  becoming  visible,  LaRouche  opened  a  webcast with a warning that should have been included  by  these  authors,  if  they  were  seriously  attempting  to  provide insight into what the nation, and the world, has  been forced to suffer over the last several years.
He began: “[T]he world monetary financial system  is actually now currently in the process of disintegrat- ing. There’s nothing mysterious about this; I’ve talked  about  it  for  some  time,  it’s  been  in  progress,  it’s  not  abating. What’s listed as stock values and market values  in the financial markets internationally is bunk! These  are  purely  fictitious  beliefs.  There’s  no  truth  to  it;  the  fakery is enormous. There is no possibility of a non-col- lapse  of  the  present  financial  system—none.  It’s  fin- ished, now! The present financial system can not con- tinue  to  exist  under  any  circumstances,  under  any  Presidency, under any leadership. . . . Only a fundamen- tal and sudden change in the world monetary financial  system  will  prevent  a  general,  immediate  chain-reac- tion type of collapse.”
Within days after this warning, LaRouche specified  precisely what he meant by a “fundamental and sudden  change,” with his drafting of the Homeowner and Bank  Protection Act (HBPA). Had this legislation, which was  endorsed  by  local  and  state  governments  throughout  the United States, been passed by Congress, more than  2.5 million families would still be in their homes. Fur- ther, the banking system, as a whole, would have been  put through a Franklin Roosevelt-style bankruptcy re- organization,  freezing  trillions  of  dollars  of  worthless  assets, to be written down, or written off entirely, later,  and there would never have been the atrocity known as  a bank “too big to fail.”
In addition to the HBPA, which would have protected  the  legitimate  functions  of  banks,  an  utterance  of  hun- dreds  of  billions  of  dollars  of  productive  credit,  by  the  U.S. Congress, focused initially on job creation in pro-
ductive infrastructure, including, but not limited to, high- speed  rail  construction,  nuclear  power  production,  and  water and power management, would have reversed the  45-plus years’ collapse of physical goods production and  employment, and initiated a real economic recovery.
It’s Called ‘Physical Economy’
What the financial wizards, whose thoughts and ac- tions  are  chronicled  in  Sorkin’s  book,  have  not  yet  grasped,  is  that  an  economy  is  not  about  money,  but  about  the  production  and  distribution  of  the  physical  goods needed, today, to sustain a global population of  more than 6.8 billion, while, at the same time, investing  in the future, in areas which will allow for the scientific  and  technological  progress  needed  to  provide  for  the  next several generations.
Physical economy is the subject of LaRouche’s life  work,  centered  around  his  assimilation  of  the  crucial  discoveries of scientists and physical economists of the  past,  such  as  Johannes  Kepler,  Gottfried  Leibniz,  and  Bernhard Riemann, and his advancement of their work,  through his own unique discoveries about the American  System of economics. It was this system, introduced by  Benjamin Franklin and his protégé Alexander Hamil- ton, and revived by John Quincy Adams and Abraham  Lincoln, which allowed the United States to break suc- cessfully  from  the  monetarist  system  of  the  British  Empire,  to  establish  our  nation  as  the  world’s  leading  industrial-agricultural producer, and the model for the  unprecedented physical economic development of na- tions such as Germany, France, and Japan, at the end of  the 19th Century.
Under  the  mis-leadership  of  pro-British  traitors,  from Teddy Roosevelt and Woodrow Wilson, to Calvin  Coolidge and Herbert Hoover, the American System of  physical-economy was replaced by a typical imperial,  speculative,  bubble  economy  in  the  1920s,  which  popped,  causing  the  Great  Depression.  The  City  of  London bankers and their Wall Street allies, such as the  Harriman family, backed the coup that placed Hitler in  power  in  Germany,  to  accelerate  the  looting  of  the  German people, to pay the debt allegedly owed to the  British and American bankers.
Fortunately  for  the  U.S.,  Franklin  Roosevelt  re- jected fascism as a solution, and moved quickly to re- verse the speculative, free-market policies which led to  the Depression, imposing instead, bankruptcy reorgani- zation, on the day of his Inauguration, and using legis- lation, especially the Glass-Steagall banking regulation
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creative commons/Ikradionews    White House/Pete Souza
The assumptions of officials such as Federal Reserve chairman Ben Bernanke (left), and former New York Federal Reserve president (and current Treasury Secretary) Timothy Geithner (right, with Larry Summers looking on), that led to the meltdown of the financial system, were repeatedly, devastatingly wrong.
bill,  to  return  the  U.S.  to  an  economy  based  on  infra- structure development (called “internal improvements,”  under  our  early,  anti-British,  anti-monetarist  leaders),  and  investment  in  energy-intensive  forms  of  agro-in- dustrial production.
FDR’s  American  System  approach  was  again  re- versed, by the same London-centered financial forces,  to some extent, after FDR’s death, and then with a ven- geance, following the British assassination of President  Kennedy. In the subsequent five decades, we have seen  an all-out assault against physical production and a reg- ulated system, in favor of what is known as “globaliza- tion,”  a  radical  free-market,  deregulated  monetary  system,  where  increasingly  bizarre  and  worthless  “fi- nancial instruments” have become the main product of  the so-called economy.
The ‘Crash’ Occurred Before 2007
The  sophistical  trick  that  underlies  the  writing  of  economic “journalists,” such as Sorkin, and fraudsters  such as the mega-speculator and former Goldman Sachs  CEO Paulson, is that they argue that the “wealth” pro- duced by these “financial instruments” is real, and is the  basis  of  a  strong  economy.  Instead  of  viewing  the  de- tachment  of  investment  from  physical  economy,  to  purely speculative churning of financial instruments, as  a  net  loss  for  the  real  economy,  they  look  only  at  the  monetary profits which can come from the building of a
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bubble, as a plus for the economy. Although  they,  at  times,  accurately  portray  the
manic and dangerous tactics of policymakers to manip- ulate the “market,” to save their firms, their careers, and  their personal portfolios—for example, both books are  full of stories of CEOs who acknowledge that what they  are carrying on their books, for their own accounts and  their  clients,  and  trading  with  their  counterparties,  is  “crap” (see below)—they argue that there is nothing in- trinsically wrong with the systemic shift, from the pro- duction  of  goods,  to  proliferation  of  instruments  of  “risk,” such as collateralized debt obligations (CDOs)  and  credit  default  swaps  (CDS),  and  such  hyperinfla- tionary,  non-productive  investments  as  those  typified  by currency speculation in the “carry trade.”
Given  that  he  has  spent  the  last  years  studying  the  disintegration of this system of “financial innovation,”  from  his  perch  as  “Dealbook”  editor  of  the  New    York Times, Sorkin’s book must qualify as an outright fraud.  His opening statement of the problem shows that he had  to be “in” on the game, as it is impossible that he could  believe  the  absurdity  of  the  explanations  offered  by  himself, or the players involved.

Sorkin  writes  that,  by  2008,  Wall  Street  had  gone  from  “celebrating  its  most  profitable  age  to  finding  itself on the brink of an epochal devastation. . . . As the  unraveling  began,  many  on  Wall  Street  confronted  a  market  unlike  any  they  have  ever  encountered—one
but  the  dicing  and  slicing  of  mort- gages  from  home  purchases  into  the  now-notorious  MBS—then,  using  them  as  leverage  for  short-term  bor- rowing to purchase even more exotic,  unregulated  financial  derivatives,  while  arguing  that  the  short-term  speculative  profits  derived  from  this  practice  represented  real  economic  growth.  Both  authors  argue,  fool- ishly, that the collapse of manufactur- ing  and  productive  jobs—which,  in  reality,  has  been  ongoing  since  the  mid-1960s—was  a  mere  side  effect  of the popping of the housing bubble,  and  these  jobs  will  ultimately  come  back, thanks to the bailouts!
Thus,  in  spite  of  massive  evi- dence, presented in these two books,  of the insanity of the post-industrial,  speculative casino economy, and the  criminal  lunacy  of  creating  trillions
gripped  by  fear  and  disorder  that  no  invisible  hand  could tame. They were forced to make the most crucial  decisions of their careers, perhaps of their lives, in the  context of a confusing rush of rumors and policy shifts,  all based on numbers that were little more than the best  guesses. Some made wise choices, some got lucky, and  still others lived to regret their decisions. In many cases,  it’s  still  too  early  to  tell  whether  they  made  the  right  choices.”
How dramatic! Lest the reader get caught up in what  one reviewer described as an authentic modern tragedy,  the “fall of the Titans,” examine, instead, the fallacious  implied  assumption  that  the  “most  profitable  age”  of  Wall  Street  was  actually  “profitable,”  and  good  for  Americans!  Even  as  he  takes  us  through  repeated  ex- amples  of  how  insane  the  trading  practices  at  leading  banks were, and how the assumptions of officials such  as Federal Reserve chairman Ben Bernanke, and former  New York Federal Reserve president (and current Trea- sury  Secretary)  Timothy  Geithner,  were  repeatedly,  devastatingly  wrong,  the  assumption  is  that  there  was  nothing  wrong  with  the  system—just  a  dose  of  over- exuberance related to the housing market, and the sub- sequent  failure  to  price  assets  properly,  such  as  mort- gage-backed securities (MBS).
Contrary to the assertions of both Sorkin and Paul- son, the problem was never caused by housing per se,
of dollars of new debt to bail out the bankers and finan- ciers who created history’s greatest Ponzi scheme, nei- ther  Sorkin  nor  Paulson  ever  question  its  underlying  legitimacy!
‘So I’m the Schmuck?’
An astute reader can, if sufficiently motivated, find  massive evidence of the hypocrisy of the leading play- ers in both of these books, though that is clearly not the  intention of either author. One such example is the be- lated admission, before a Congressional committee, by  former Fed chair Alan Greenspan, who deserves much  of the blame, as architect and chief cheerleader for the  disastrous  policies  imposed  since  his  tenure  began,  at  the  time  of  the  October  1987  stock  market  crash,  that  there was a “flaw in our system.”
Greenspan,  who  at  the  height  of  the  speculative  bubble  was  nearly  universally  proclaimed  to  be  the  “guru”  or  the  “maestro”  (except,  of  course,  by  La- Rouche, who repeatedly exposed him as a faker), said  of his once-beloved “financial innovations,” which he  had  promoted  with  a  vengeance,  that  “. . . some  of  the  complexities of some of the instruments that were going  into CDOs bewilders me. I didn’t understand what they  were doing or how they actually got the type of returns  out  of  the  mezzanines  and  the  various  tranches  of  the  CDO that they did. And I figured if I didn’t understand
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it, and I had access to a couple hundred Ph.D.s, how the  rest of the world is going to understand it sort of bewil- dered me.”
These  “complexities”  never  interfered,  however,  with traders at Lehman Brothers, Merrill Lynch, Gold- man  Sachs,  and  Morgan  Stanley,  just  to  name  a  few,  who were buying and selling these instruments for their  own profit, while filling up the portfolios of their unsus- pecting clients with this garbage, benefiting from the  churning of the markets that they caused.
Following the government takeover of Fannie Mae  and Freddie Mac in a vain effort to halt the collapse of  the market for mortgage-backed securities (MBS), the  collapse of Bear Stearns, and with Lehman and Merrill  heading into the dump by September 2008, a “sudden,”  momentary  honesty  emerged  among  the  principals,  which  is  chronicled  by  both  authors,  and  shows  that  they knew all along that their high stock valuations and  super-profits were based on fraud.
After  all,  when  in  history  had  any  sane  investment  banker accepted leverage rates of 30.7 to 1, which was  the valuation at Lehman, or 26.9 to 1 at Merrill, with the  “1” representing the value of the firms’ overpriced assets?  Sorkin reports that, “the CEOs of the firms that sold these  products had no better comprehension of it all.” Instead  of mark-to-market accounting, by which the value of an  asset  is  determined  by  the  price  it  would  get  if  sold,  “banks  valued  their  illiquid  investments  simply  at  the  price they paid for them, rather than venture to estimate  what they might be worth on any given day.”
The  arbitrary  nature  of  who  was  to  be  bailed  out,  and who would be allowed to fail, i.e., whose worthless  assets  would  be  guaranteed  by  the  Federal  govern- ment—and whose not—was too much for the anguished  CEO of Lehman Brothers, Richard Fuld, who responded  when  told  that  Lehman  would  not  be  bailed  out,  “So  I’m the schmuck?”
‘Free Money’
Of Merrill Lynch, which claimed its CDO exposure  was “nearly fully hedged,” Sorkin writes that as “market  condition  worsened,  it  became  clear  that  the  metrics  they  were  using  had  no  grounding  in  reality.”  AIG,  which sold a new form of “risk insurance” called credit  default  swaps  (CDS)  manufactured  by  their  financial  products  division  in  London,  concluded  from  their  computer  models  that  these  devices  “seemed  fool- proof.” The holders of such swaps—mostly banks and  investment  firms—could  expect,  according  to  Sorkin,
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“to  receive  millions  of  dollars  in  premiums  a  year.  It  was like free money.”
AIG has already received over $180 billion in Fed- eral bailout funds, in addition to untold billions more in  loan  guarantees,  and  is  lining  up  for  yet-another  bail- out.  Its  counterparty  exposure  in  notional  derivatives  stood at over $2.7 trillion when the bailout began. Lloyd  Blankfein, who replaced Paulson as CEO of Goldman  Sachs, said of AIG, that it was “marking to make-be- lieve”;  while  James  Lee,  a  J.P.  Morgan  Chase  official  involved in the review of AIG’s books, is quoted asking,  “Who is going to buy this shit?”
The answer is, that the American people, and their  children and grandchildren are buying this “shit,” as the  bailout continues. The question which should be posed  is: “free money” for whom?
Sorkin, whose book contains page after page of such  raw material, which would be of great value for a Pecora  Commission, to prosecute the swindlers who have, in- stead, been the beneficiaries of the largesse of both the  Bush  and  the  Obama  administrations,  nevertheless  fails, because of his acceptance of the axioms of global- ization and the post-industrial economic paradigm. His  failure, therefore, to treat what he has chronicled as real  crimes against the American people, sadly deserves for  his book the subtitle, “Too Big To Read,” as it ultimately  leads the reader nowhere.
It would be a much better use of time—and money— for one wishing to reverse the collapse of our nation’s,  and  the  world’s,  economy,  to  spend  time  at  La- RouchePAC.com, and study the webcasts and writings  of Lyndon LaRouche, to become a knowledgeable ad- herent  of  the  American  System  of  physical  economy.  One can begin with LaRouche’s answer to the fifth ques- tion from his March 13, 2010 webcast, and his follow- up  discussion  of  that  answer,  posted  as  the  “Special  Weekly Update” on April 1, 2010 [in last week’s EIR].
As for former Secretary Paulson, it is hard to believe  that he could have been as self-deluded as he presents  himself. Typical is his description of his state of mind  after  another  one  of  his  “weekends  at  Bernie’s”  in  the  Autumn of 2008, as he and his fellow superheroes, Ber- nanke and Geithner, crafted one bailout after another, to  prevent “a meltdown” and to “save” the system: “Per- haps I should have foreseen the problems ahead, but for  the moment that night, as I fell asleep, I just felt good.”
That is more than can be said for the rest of us, who  will  likely  spend  many  sleepless  nights  undoing  the  damage done by these criminals.