Eric Sprott: "We Are Now Paying For The Funeral Of Keynesian Theory"

Tyler Durden's picture

Fooled by Stimulus, by Eric Sprott and David Franklin

Despite our firm’s history of investing primarily in equities, we’ve spent much of this past year writing about the government debt market. We’ve chosen to focus on government debt because we fear its impact on the equity markets as a whole. Government debt is an intrinsically important part of the financial landscape. It is the bellwether by which we measure risk, and we believe we have entered a new era where traditional "risk-free" assets are undergoing a tremendous shift in quality.

In studying the government debt market, we have inadvertently been led to question the economic theory that most fervently justified recent government spending programs: that of Keynesian economics. The so called "beautiful theory" of Keynesian economics is arguably the most influential economic theory of the 20th Century, shaping the way Western democracies approached the balance between free market capitalism and government initiatives. Like many beautiful theories, however, Keynesianism has ultimately succumbed to the ugly facts. We firmly believe the Keynesian miracle is dead. The stimulus programs are simply not producing their desired results, and the future debt costs associated with funding these programs may cause far greater strife in the future than the problems the stimulus was originally designed to address.

Keynesian economics was born with the publishing of John Maynard Keynes’ "The General Theory of Employment, Interest and Money" in February 1936. Keynesian theory advocates a mixed economy, predominantly driven by the private sector, but with significant intervention by government and the public sector. Keynes argued that private sector decisions often lead to inefficient macroeconomic outcomes, and advocated active public sector policy responses to stabilize output according to the business cycle. Keynesian economics served as the primary economic model from its birth to 1973. Although it did lose some influence following the stagflation of the 1970s, the advent of the global financial crisis in 2007 ignited a resurgence in Keynesian thought that resulted in the American Recovery and Reinvestment Act, TARP, TALF, Cash for Clunkers, Quantitative Easing, etc., all of which have been proven ineffective, ill-advised and whose benefits were surprisingly short-lived.

The economic historian, Niall Ferguson, recently described a 1981 paper by economist Thomas Sargent as the "epitaph for the Keynesian era".1 It may have been the epitaph in academic circles, but the politicians clearly never read it. Almost thirty years later, we now get to experience the fallout from the latest Keynesian stimulus binge, and the results are looking pretty dismal to say the least.

There are a number of studies we have come across that suggest stimulus is the wrong approach. The first is a 2005 Harvard study by Andrew Mountford and Harald Uhlig that discusses the effects of fiscal policy shocks on the underlying economy. Mountford and Uhlig explain that from the mid-1950’s to year 2000, the maximum economic impact of a two percent increase in government spending was an ensuing GDP growth of approximately three percent. A two percent spending increase inevitably requires an increase in taxes. Due to the nature of interest costs, however, the government would have to raise taxes by MORE than two percent in order to pay back the initial borrowing. According to their data, this increase in taxes would generally lead to a seven percent drop in GDP. As they state in their study: "This shows that when government spending is financed contemporaneously that the contractionary effects of the tax increases outweigh the expansionary effects of the increased expenditure after a very short time."2 Stated simply, ‘borrowing to stimulate’ has never worked as planned because the cost of paying back the borrowed funds surpassed the immediate benefits of the stimulus.

In a follow-on study, Harald Uhlig estimated that an approximate $3.40 of output is lost for every dollar spent on stimulus.3 Another study on the same subject by C’ordoba and Kehoe (2009) went so far as to say that, "massive public interventions in the economy to maintain employment and investment during a financial crisis can, if they distort incentives enough, lead to a great depression."4

If the conclusions of these studies are even close to being correct, we are now in quite a predicament – not just in the US, but across the Western world. Remember that the 2007-08 meltdown was only two years ago, and as we highlighted in April 2009 in "The Elephant in the Room", the US government has spent more on stimulus and bailouts, in percentage of GDP terms, than it did in the Gulf War, Operation Iraqi Freedom, the Vietnam War, the Korean War and World War I combined.5 All that spending was justified by the understanding that it would generate sustainable underlying growth. If it turns out that that assumption was wrong, have the governments made a fatal mistake?

Another recently published Harvard study looked at stimulus at a micro-economic level and derived some surprising conclusions. Entitled "Do Powerful Politicians Cause Corporate Downsizing?", the authors compiled 232 occasions over the past 42 years when either a Senator or a Representative was voted into a controlling position over a big-budget congressional committee. Unsurprisingly, the ascendancy of the politicians resulted in extra spending in their respective districts – typically in the form of an extra US$200 million per year in federal funds. The researchers examined the economic effects of this increase in spending and found "strong and widespread evidence of corporate retrenchment in response to government spending shocks." The average firm cut back on capital investment by 15 percent and significantly reduced its R&D spending.

Companies collectively operating in the affected state reduced capital investment by $39 million a year and R&D by $34 million per year. Other consequences included increases in unemployment and declines in sales growth.6,7 Yikes!! That is not the response we’re supposed to get from government spending!

The Canadian government’s experience with Keynesian-style stimulus has been no better. The Fraser Institute reviewed the impact of the Government of Canada’s "Economic Action Plan" and found that "the contributions from government spending and government investment to the improvement in GDP growth are negligible."8 They state that, of the 1.1% increase in economic growth between the second and third quarter of 2009, government consumption and government investment contributed a mere 0.1%. Of the 1% improvement in economic growth between the third and fourth quarter of 2009, government investment and consumption contributed almost nothing. In the end, it was actually net exports that were the largest contributor to Canada’s growth. No Keynesian miracle in this country.

Our own findings compare favourably to the academic studies cited above. We looked at government spending and current dollar GDP increases in our ‘Markets at a Glance’ entitled, "A Busted Formula". Our findings, using decidedly un-econometric techniques, showed similar results, and are presented in Table A below. We looked at current dollar increases in GDP as published by the Bureau of Economic Analysis (BEA) and current dollar expenditures and receipts for the US government taken from the Treasury. One current deficit dollar resulted in an increase in current dollar GDP of a mere 10 cents. Again - no miracle Keynesian multiplier here.

If we use the Fed’s own numbers, the impact of debt on GDP is even more dismal. In Chart B below, we present the marginal impact of debt on marginal GDP since 1966 using data from the Federal Reserve. Deficit spending, which has generated smaller and smaller increases in GDP over time, is now generating a negative impact on GDP due to the costs of servicing the debt. The chart suggests we have already entered what PIMCO refers to as the "Keynesian endpoint", where the government can no longer afford to increase debt levels.10 No debt = no stimulus. No stimulus = ???

A more timely epitaph for our Keynesian funeral comes from a recent op-ed piece by Jean-Claude Trichet, President of the European Central Bank, that was published in the Financial Times and entitled "Stimulate No More". In it Trichet states that, "…the standard economic models used to project the impact of fiscal restraint or fiscal stimuli may no longer be reliable."11 He explains that while debt in the euro zone has increased by more than 20 percent in only four years and by 35 to 40 percent over the same time period in the US and Japan, we have very little, if anything, to show for it. We agree. New housing sales are at all time lows, consumer intentions for auto purchases are at multi year lows, the University of Michigan consumer confidence index has turned negative, new jobless claims have started to increase, and the ECRI - a composite of leading indicators - is now forecasting a recession (see Chart C).

Since Keynesian economics is no longer relevant, some are now arguing that tax cuts will save the day. Two of the academic studies we reviewed suggest that tax relief is a much stronger stimulus to the economy than government spending, and under normal circumstances this is probably true. But we are not in a normal economic environment. Even if the tax cuts implemented by George Bush in 2006 are extended by the next Congress, the US will still face the ‘Keynesian Endpoint’. A Government Accountability Office (GAO) report published in January 2010 states the following: "In our Alternative simulation, which assumes expiring tax provisions are extended through 2020 and revenue is held constant at the 40-year historical average; roughly 93 cents of every dollar of federal revenue will be spent on the major entitlement programs and net interest costs by 2020."12 Extending tax cuts won’t solve anything.

In the end, Keynesian stimulus ultimately fooled us all. It roped in the politicians of the richest countries and set them on an unsustainable course of debt issuance. Recent Keynesian stimulus has even managed to fool the sophisticated economic models designed by central banks. The process of accounting for massive government spending ‘confuses’ the models into calculating a recovery trajectory when it doesn’t exist. The Bank of England confirmed this with its announced £3.5 million overhaul of its current model due to its inability to generate accurate inflation and recession forecasts.13

Keynesian stimulus can’t be blamed for all our problems, but it would have been nice if our politicians hadn’t relied on it so blindly. Debt is debt is debt, after all. It doesn’t matter if it’s owed by governments or individuals. It weighs on the institutions that issue too much of it, and the ensuing consequences of paying off the interest costs severely hinders governments’ ability to function properly. It suffices to say that we need a new economic plan – a plan that doesn’t invite governments to print their way out of economic turmoil. Keynesian theory enjoyed a tremendous run, but is now for all intents and purposes dead… and now it’s time to pay for it. Literally.


1 Ferguson, Niall (July 19th, 2010) "Today’s Keynesians have learnt nothing". Financial Times. Retrieved on August 10, 2010 from:
For those interested readers "The Ends of Four Big Inflations" by Thomas Sargent can be found at:
2 Mountford, Andrew and Uhlig, Harald (July 2005) "What are the Effects of Fiscal Policy Shocks" SFB 649 Discussion Paper Humboldt-Universität zu Berlin. Retrieved on August 10, 2010 from:, pg. 20
3 Boskin, Michael. (July 21, 2010) "Obama’s Economic Fish Stories" The Wall Street Journal. Retrieved on August 10, 2010 from:
4 Uhlig, Harald (May 15, 2009) "Some Fiscal Calculus" Unpublished. Pg 13. Retrieved on August 10, 2010 from:
5 Sprott Asset Management, Markets at a Glance April 2009. The Elephant in the Room.
6 Reynolds, Neil. (June 9, 2010) "The Hidden cost of Stimulus programs" The Globe and Mail. Retrieved on August 10, 2010 from:
7 Cohen, Lauren; Coval, Joshua; Malloy, Christopher. (March 16, 2010) "Do Powerful Politicians Cause Corporate Downsizing?" Unpublished. Retrieved on August 10, 2010 from:
8 Amela Karabegovic, Charles Lammam, Niels Veldhuis (March 23, 2010) "Did Government Stimulus Fuel Economic Growth in Canada? An analysis of Statistics Canada Data" Fraser Institute. Retrieved on August 10, 2010 from:
9 We used current-dollar GDP numbers provided by the BEA to determine the marginal impact of deficit spending on GDP. There is no separate data set generated by the BEA, however the number is published in their news releases. It is also worth noting the divergence between reported numbers from the BEA. While the current dollar measurement of GDP decreased by $185.1 billion or 1.3% on 2009, real GDP was widely reported as increasing by 0.1%. This divergence is due to seasonality adjustments in real GDP and the percentage change reported is a blended increase over the 4 quarters in 2009.
10 Goodman, Wes and Reynolds, Garfield (June 8, 2010) "Pimco’s Crescenzi Sees ‘Endpoint’ in Devaluations (Update2)" Bloomberg. Retrieved on August 10, 2010 from:
11 Trichet, Jean-Claude. (July 22, 2010) "Stimulate no more – it is now time for all to tighten" Financial Times. Retrieved on August 10, 2010 from:
12 United States Government Accountability Office. The Federal Government’s Long-Term Fiscal Outlook January 2010 Update (GAO-10-468SP). Retrieved on August 10, 2010 from:
13 Aldrick, Philip (August 10, 2010) "Bank of England overhauls forecast model after errors" Telegraph. Retrieved on August 11, 2010 from:


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
ColonelCooper's picture

You know Repugnicant, I know you look at a lot of us with considerable disdain.  Look at it like this:  Have you ever built anything, and what are your hobbies?

I build things for a living.  I get a huge amount of satisfaction when I look at progress, and completion of a job.  I get the same (or similar) feeling when I look at a full freezer.  Or a stacked full pantry.

I grew up on a hobby farm, in the middle of nowhere.  We grew fruits and vegetables, raised meat of all sorts; canned, jellied, pickled, butchered, smoked our own hams, bacon and sausages, picked wild berries and plums, hunted (we ate squirrels, and they're pretty damn good), fished, made wine, etc....  My mom even made our yogurt and cheeses.

I still do almost all of those things.  I didn't always after I moved away from home, but as I got older I got back into it more and more.  I wanted my children to learn what I learned.

When fall is waning, and the hard winter is setting in, it gives me a tremendous amount of satisfaction to look at what our small family did over the year.  We eat healthy, inexpensively, and GOOD.  I don't care if we get a blizzard and the plow doesn't come for three days.  Having a generator isn't a bunker thing; sometimes when the power goes out it takes days to get it back.  That generator keeps our freezers running and we don't miss a beat.

I have guns.  These guns have put hundreds apon hundreds of pounds of meat in the freezer.  Some of them I have now handed down to my son, making it the FIFTH generation.  We still use a cast iron skillet nearly every day that was my grandmothers.  When I got out of the market, I converted to additional acreage, PM's and cash.  If inflation gets out of hand, I would probably TRY to buy more acreage, and more farm equipment.

Do you really see this as bunker?  Not having a grip?  There are a whole bunch of people on this site that know how to cook a squirrel.  Know why?  They're pretty damn tasty.  They didn't learn this in the "Anarchist's Cookbook".  They learned it from their Grandpa.  There are a couple of "Bunker" people here, (you can tell the difference) but mostly it's country people talking about their ACTUAL LIVES.  I think that's why people get so pissed.  We aren't urbanite survivalist wannabe's, we're country people.  Thing is, my life is so different from yours, you can't tell the difference.  So when you go off about how fucking stupid we are (needing a grip), of course we get pissed. 

The biggest difference between you and me is that while we both shop at the grocery store, I really don't need to, and you do.  I just don't spend my spare time playing golf or watching football, or sitting on my ass in general.  I grow things and put them in small jars with salt and garlic.




Rebel's picture

Well said, Colonel.

I am afraid some simply do not understand the difference between standard of living and quality of life. They won't understand it, until it is too late.

They fear people like you, because the implication of you being right are unfathonable to them. They fear you because you are independent, and not running with the herd.

I fear that it will be too late for them before they finally catch on.

ColonelCooper's picture

The truly ironic thing about it all, is that growing up simply, I wanted SO BADLY to live fancy when I grew up.  So I did. (simplistically put)

What a letdown.  It's kind of amazing how expensive it is to get back to where you started. 

To ANY of you who don't think quite along the lines of Repugnicant, and want to make a family connection:  I cannot highly enough recommend a hand crank ice cream maker.  I will never forget making ice cream when I was a kid; a few years ago I bought another one.  Turn your cell phones off, go sit on the deck, and make ice cream with your kids.  Another moment of Zen.  Promise.

Rebel's picture

Hear you on the hand crank ice cream machine. I did make a compromise and get the kind with the cylinder that goes in the freezer, as the brine water is too hard to get rid of. It is still hand cranked, though, which hopefully will meet with your approval.

I find amusing the vitriol directed towards those who would CHOOSE a simpler lifestyle, or those that have it because that is all they have ever known. Lets say, for the sake of argument, that you are wrong, and that the economy kicks back in gear, innovation leads to new products that improve efficiency, and things start booming again. So what is the downside to you? You live a quiet peaceful life, you help your neighbors, you enjoy your time on the earth. Where is the downside? You have fewer cable channels, and your TV is not 60 inches?

ColonelCooper's picture

I think you hit the nail on the head.  My life doesn't change much regardless of whether the economy is good or bad.  Things have been pretty damn good for the last decade or so and I got news for ya: You could count the number of times we go out to dinner in a year on our fingers. 

Tip of the day:  Use your stale bread to make bread pudding.

You don't need to make a brandy sauce for it, sprinkle any fresh fruit with sugar, put it on the pudding, and pour just a little cream, (or half and half) on top.  You can make a dessert for four that will last two days for about $.50.

I apologize to the elite on ZH that I have trouble staying cultured.  I will go now before I piss all over somebody's fine carpet. 

ColonelCooper's picture

Deleted.  Double post.  

Dantzler's picture

Nice one, Colonel.

FWIW, I think Repugnicrat is a troll and enjoys stirring up shit.

I wish there were a way to hook up with folks other than anonymously in silico. I know Rebel is in TX, which is a ways from the PNW, but I know we have some representation here.

I'm an urbanite as I need to be near a city to leverage my training. I manage to funnel my extra energy into learning new skills. It would be cool to hang out with some country folk and talk shop.

I enjoy reading the comments here at least.

FEDbuster's picture

Tree rats is another popular nickname.  Tastes like chicken dark meat.  Slow cooked in a stew or chile works best for me.

merehuman's picture

Each morning 3/4 big grays come to our deck to the sound of peanuts falling and bouncing noisily. Several bluejays attend as well.  At 89 i let her have her way as it is one of the great joys in her life to feed the critters.

It gets expensive real quick. 6.00 per bag of nuts, one bag every 2 days.

Then theres the birdseed in the giant birdfeeder i made for her and we go truh a lot of sugar for the hummingbirds.

feeding birds and chipmunks causes the rats to come as well and i have caught more than 20. Usually traps, hate poison but did clobber a fat one by sneaking up on it and smacking it with a short 2x2 . Broke the wood, got the rat and made my day. So far the rats have chewed 9 places in the house water supply lines. Fixed repeatedly

I recognize the need for austerity, especially with no income but will let her have her way till she dies. To me, some things are worth more than money .

Oh lest i forget,, bread for the crows and beer for the slugs in the garden.


Irrational Exuberance's picture

If I leave the U.S., where the hell do i go that isn't going to be just as shitty once WW4 starts?




You may not have the freedom you have in the U.S., but it is a VERY clean, prosporous, and well run country. 

carbonmutant's picture

Actually the original Joy of Cooking provided diagrams on "How to Butcher and cook a Squirrel"

TheGoodDoctor's picture

I am leaning toward Canadia. My friend said we had to go somewhere where the people loved hockey. I said well, Sweden or Canadia. He wanted to go to Canadia. So, when the SHTF, Canadia it is. I was leaning toward Sweden for the proximity to Europe and of course the hotties. I'm not much for hockey. :)

centerline's picture

The one shining hope is that of technology like the internet and cell phones.  Never before have the masses been connected like this.

TBT or not TBT's picture

One EMP attack and 90% of us would be dead (eaten or starved or dead of deprivation from medicines, comforts, and whatnot) within a year.    EMP means end of of cell phones, regular phones, almost all vehicles, tractors, radios, and duh, computers in existence.   Communication by pony would work where the ponies haven't been eaten.

Strongbad's picture

My grandparents wouldn't notice.

New_Meat's picture

'pends on the attack, but, yah, blanket attack would shut down internet.  Think about being long ES and not being able to recover.  Gotta consider the number of weapons, coe, timing (warning can shut down vulnerable nodes) etc.  FERC, NERC, etc. looking over this a lot.

Fiber optic backbone would mitigate-FO inter-nodes might survive.  Whole purpose of DARPANET (Pournelle shameless here).  Financially wiped out-yes, I'd bet but that would be all hands and also world wide.

Electronic death right on.  Especially all of the new faster, lower power, modern small distance chips.

But the older and  even modern Western Electric/Lucent switches and buildings have this also as a design requirement.  Other mfgs I'd bet same.  Not the chips, but the system.

so: TBT, I  think that your assessment is on the correct path, but, y'know, you -2x guys are wasting assets, so  even if you are close to correct, you end up as a wasting asset.  My vote is not TBT.

prefix-5 bitchez.

- Ned

ColonelCooper's picture

What a large scale EMP attack would do to this country is unimaginable.  It is the one sure way to get to Mako-ville.

I don't fret it much, because like large scale nuclear war, (M.A.D.), the only powers that could launch a big enough attack don't want one right back at 'em. 

WaterWings's picture

Or end foodstamps without any rock solid rationing plan. EMP is just the quickest way to go about it.

grunion's picture

Yeah but don't you think emp induced breakdowns would be the least of our problems were an event of that magnitude to come about.

Sort of like...If you need more than 3 rounds, you probably have bigger problems than will be solved by 2 more rounds.




Fred Hayek's picture

Cell phones are largely a blight on the land.  God how I hate them.

akak's picture


Although I would amend that comment to "Rude and inconsiderate cell phone USERS are a blight upon the land"!

PS: I do own a cell phone, which I keep in my pickup only for emergencies. It was given to me for free, and if it had not been, I would not own one at all.

Shameful's picture

To be honest I'm a lot less concerned about them getting away with their crimes then them riding the beast down fully in control.  If the world must crash and burn that is bad, but would be worse if the oligarchs were still at the helm after the smoke clears.  I want them to be afraid and run off, it means they are not running the show, at least for a while

Francis Dollarhyde's picture

This post is scarier than any Friday the 13th movie.

RockyRacoon's picture

...but would be worse if the oligarchs were still at the helm after the smoke clears.

Hell, man, they've already rammed into the dock and it is in the process of sinking.  How much more damage are we going to allow them to do?  They have already proven themselves unworthy of being at their respective helms.

TBT or not TBT's picture

Ummm, nobody is in fact in charge right now.  The "oligarchs" manage to benefit more than others do from the situation, but their control is an illusion.

RockyRacoon's picture

Their control is not illusory as long as they are making (extorting and embezzling) money (our money) hand over fist.

StarvingLion's picture

Doesn't securitization get around the problem of item #4?  I think the banks would rather have the fees of securitization and all its cybernetic-like advantages.  Why does it have to be suicide?

4. Financial suicide - 65 years in the making (since the end of WWII), compounding principle+interest

Squid-puppets a-go-go's picture

B9K9 gives some good reason to defend Keynesian economics as it SHOULD be applied

occasional government intervention to support the economy WORKS , so long as you, as the govt, stick to a few basic rules

1) spend to stimulate, but DONT BORROW to stimulate

2) when you spend to stimulate, apply it in ways that are going to come back into your tax coffers. DONT throw money at projects/industries for which the profits haemmorhage overseas

3) DONT believe the bullshit about special niches for a global market. ensure that your nation has a range of industries. protectionism is a tool that retains merit in some (but not all) circumstances


Keynesianism works, but you need a relatively closed circuit. Of course its not working NOW coz we've undergone 30 years of wrenching all circuits open


Keynes has risen from his grave and wants BRAAAINZZZ

tom's picture

1) spend but don't borrow, i guess that means monetizing the deficit? makes no sense to me at all. the point of stimulus is to utilize the money that's seeking safe haven during recession. having the government borrow it makes some sense. having the government drain value from everybody blindly by devaluing the currency to fund extra spending makes no sense. maybe you mean don't borrow anything from abroad, as that just comes right out of international competitiveness - that would make sense.

2) ass backwards. if your chess pieces are sliding off the table, do you think that's because you put them in the wrong place, or because the table is tilted? it's the balance of payments. if you're running a financial account surplus, then you're going to run a current account deficit. government borrowing isn't the only component of the financial account, but it does tend to be decisive.

3) this is in fact US policy even under Republicans despite the free trade propaganda, but I don't see what it has to do with Keynesian economics. You're suggesting Keynesian stimulus should be used to support internationally uncompetitive industries? oh great.

I would agree that in a natural business cycle, using some domestic borrowing to increase spending during recessions can help a bit. But enough countercyclical stimulus is built in to modern government through decline of tax revenues and increase pf benefit payments. That won't die with the death of Keynesian economics.

But we will be studying more in the future the differences between a natural business cycle where such countercyclical stimulus should be sustained, and burst bubbles, where government spending has been inflated by the bubble and thus needs to be cut. That's what we had in 2008 - at least 80% of current deficit spending is trying to sustain government spending at bloated bubble levels after the bubble popped, less than 20% is the Keynesian stimulus added on top of that.

grunion's picture

Spot on B9K9!!! People like you give me a margin of hope for our future.

Gully Foyle's picture

Excerpts of the book Critical Path by R. Buckminster Fuller

With legal planning of their lawyer-advised banking leaders, the "haves" have now succeeded in cornering all the world's monetary gold as well as the preponderance of the world's petroleum resources - along with their refineries and world-around petro-delivery systems together also with acquisitions of all the atomic power-generating plants, originally paid for by the US taxpayers - and thereafter in severing the monetary system from the wealth system while marking up the negotiable equity value of gold and petroleum tenfold.

They also have contrived their own game of international monetary banking of international balances of trade and credit accounting, greatly aided by the priorly established existence of 150 "sovereign" nations around planet Earth.

That division of world political power into 150 sovereign nations is a consequence of thousands of years of successive and individually independent contriving of history's most powerful leaders. The number-one strategy of the successful leaders of history's successively established supreme socioeconomic control systems has always been to induce the spontaneous self-divisioning of those designed to be conquered and to keep them spontaneously self-dividing and their divisions lethally interarrayed against one another in order to keep them conquered.

The longer the self-divisionings can be self-perpetuating, the more spontaneously are the divisions accepted institutionally by the successive generations as being "natural" divisions ... The prime vulnerabilities of humanity, which make it subject to spontaneous self-dividing, are those of different speech patterns, skin color, religions, social customs, class or caste systems, political preferences and all varieties of individually unique "troubles", suffering and discontent.

The historical consequence of this aeons-ago-commenced employment of this grand strategy of 'divide to conquer and keep divided to keep conquered" accounts for the "natural" acceptance today by world peoples of the seemingly "God-given" existance of 150 sovereign nations of the world and their respective geographical division of all the world's dry land. ...

The plotted curve of the rate of gain for increasing proportions of all humanity being thus swiftly advantaged by the doing more for more people with less and less matter and energy per function - all accomplished with computers, satellites, alloys, etc. - indicates that 100 percent of all humanity will be thus advantaged before 2000 A.D. In less than twenty years (less than one generation) all humanity is scheduled by evolution (not by any world planning body) to become physically more successful and,metaphysically more interestingly occupied than have any humans ever been in all known history-provided that humanity does not commit ignorance-, fear-, and -panic-induced total-species suicide.

Why might they panic? All the present bureaucracies of political governments, great religious organizations, and all big businesses find that physical success for all humanity would be devastating to the perpetuation of their ongoing activities. This is because all of them are founded on the premise of ameliorating individual cases while generally exploiting on behalf of their respective political, religious, or business organizations the condition of nowhere- nearly- enough-life-support-for-all and its resultant great human suffering and discontent.

Reason number two for fear-wrought panic is because all of the 150 nations of our planet are about to be desovereignized by evolution; that is, they are about to become operatively obsolete - about to be given up altogether. There are millions in the U.S.A., for instance, who on discovery that their government was about to become bankrupt and defunct would become activist "patriots," and might get out their guns and start a Nazi movement, seeking dictatorially to reinstate the "good old days." If people in many of the 150 nations succeeded in re-establishing their sovereignties and all the customs-barrier, balance-of-trade shacklings, it would soon be discovered that the 150 nations represent 150 "blood clots" imperiling the free interflowing of the evolution-producing metals and products recirculation as well as of the popular technical know-how disseminating.

One of my earliest books was Nine Chains to the Moon, written in 1935 and published by Lippincott in July 1938, and now being published by Doubleday. In it I referred so frequently to Finance Capitalism that I developed a contraction of those two words into FINCAP. FINCAP had died a lingering death between 1929 and 1934. In this book, Critical Path, I refer so often to the lawyer-resurrected "capitalism" that it is appropriate to refer henceforth to LAWCAP. LAWCAP's "capitalism" is paradoxically the most highly socialized organization in all history—the citizens of LAWCAP'S welfare-state—the whole body of corporate stockholders—having an annual average dole of $100,000 per capita without their even having to make a pretense of getting a job.


 In the meantime as already mentioned the United States has gone completely bankrupt internally, its national indebtedness coming very close to a trillion dollars and its balance of trade debt to $109 billion—worsening at a horrendous rate due to LAWCAP's arranging to force the U.S.A. to obtain almost half its petroleum energy from the Near East. The U.S.A. has for eight years past been unable to meet even the interest on its internal debt as demonstrated by a negative balance of trade. Its future credit has been hypothecated thirty years beyond Armageddon. Nothing to stop the U.S. Treasury from issuing 2050 notes, but for how far into the future can LAWCAP keep selling U.S.A. promissory notes?
    Unless God has something else in mind, it looks as though it will not be long before LAWCAP's kibitzing of the U.S.A. will have lost the $6-trillion killingry poker game. Russia will not hesitate to "call" the U.S.A. hand and rake in the winnings of omniworld, line-of-supply control—maritime, aeronautical, and astronautical.
    In one way the U.S.A. and U.S.S.R. citizens are in much the same socioeconomic position. The Communist party which runs the U.S.S.R. consists of about 1 percent of their total population, while the U.S.A. is controlled by about the same 1 percent, who are the LAWCAP strategists of the great U.S.A. corporations.
    The U.S.A. is not run by its would-be "democratic" government. All the latter can do is try to adjust to the initiatives already taken by LAWCAP's great corporations. Nothing could be more pathetic than the role that has to be played by the President of the United States, whose power is approximately zero. Nevertheless, the news media and most over-thirty-years-of-age U.S.A. citizens carry on as if the president had supreme power. All that he and the Congress can do is adjust to what the "free-enterprise system" has already done. They are riding on the snapping end of the power-structure dragon's tail.

caconhma's picture

Back in 1917, Jewish thugs socialists on American and British money overthrew Russian government. In the next 5 years, these Jewish socialist gangsters (who called themselves Bolsheviks) slaughtered close to 30 millions people through the civil war, deliberately organized famines, and endless repression. They did not give a shit about Russia and terrible suffering of it people but they created the first socialist country in the world.


This "socialist experiment" imposed with blood and terror on Russia created a "new Dark Age" resulting in

  • Close to 80 millions people were slaughtered or starved to death
  • Another 200 millions were enslaved
  • Creation of a new feudal ruling elite

Soviet socialist economy was unable to function successfully. Consequently, the ruling elite used more and more terror against its own people and was constantly in a state of endless wars with the rest of world (wars with Poland, Finland, Japan, Romania, Latvia, Estonia, the WWII starting with the Molotov-Ribbentrop Pact, the Cold war as well as a support for terrorists all around world).

Since Bolshevism socialism became a total irreparable failure, Stalin imposed his brand of socialism (in a meantime slaughtering almost all Bolsheviks and their families). In 1953, Stalin was murdered together with his socialism.

A new and more "humane" socialism was established in the Soviet Union with "regular" bureaucrats became a new ruling elite. It did not worked either. The Soviet Union collapsed in early 1990s.

Chinese socialism, after failing as a communist state, reinvented itself into a "free market" socialism but, in reality, it became a fascist state.

Even the European Union socialist free-market economies are in deep troubles.

As for the USA, it also embraced socialistic principles. These socialist principals did not worked before and now are about to fail here in the USA.

There are certain basic natural processes in any human society. As soon as there is an interference with these natural processes, the adverse consequences follow. The more interferences take place the more troubles and more severe consequent corrections follow. Socialism is not a long term viable alternative to natural free-market economic processes.

DavidPierre's picture

And then they needed a "useful idiot'' to get another war ...

Prescott Bush And The Boys Get Old Adolf Started


George W. Bush's grandfather, Prescott Bush, is the Managing Director of the notorious investment bank, Brown Brothers, Harriman, from the 1920s through the 1940s and, like his father Samuel Bush, becomes a devoted lifelong minion of the Harrimans, one of the leading families in the U.S. ruling class.

 In league with Averell W. Harriman and his younger brother, E. Roland Harriman, Bush serves as front man for and facilitates investment in and for a score of Nazi businesses.

Bush, the Harrimans, the Rockefeller family, Standard Oil, the Duponts, the Morgans and the Fords provide funding for the Hitler Project, financing Adolf Hitler's rise to power and the takeover of Germany starting in 1923.

This includes direct funding of the SS (Schutzstaffel or Black Shirts) and the SA (Sturmabteilung, storm troops or Brown Shirts).

The "approved" version of Hitler's rise to power has the German people, economically devastated by the First World War and the destructive terms of the Treaty of Versailles...

 (written by the Dulles brothers, the Morgans and the Warburgs among others)

 ...embracing Hitler as their savior. In fact, it took some 300,000 SS and SA thugs, armed and financed by the Rockefellers, Fords, Bushes, Harrimans, Duponts et al to terrorize the German people into submission to the Nazis.

 These same thugs assassinated more than four hundred German politicians who had the courage to oppose Nazism.

The cash supplied by the American ruling class to the SS and SA is channeled through a variety of German companies by International Telephone and Telegraph (IT&T).

 Virtually all of the weapons used by the SS and SA to terrorize the German people, primarily Thomson sub-machine guns and pistols, are supplied by the Rockefellers' Remington Arms and carried to Germany by the Harriman-controlled Hamburg-Amerika line fronted by George W. Bush's great grandfather, Herbert W. Walker.

The Rockefellers’ Chase Manhattan Bank serves as a major source of finance for the Nazis and, as the Nazis send Jews, Gypsies, socialists and other “sub-humans” to the gas chambers in accordance with the eugenics agenda promulgated by the American ruling class, closes the accounts of its Jewish customers.

Chase continues to serve as banker for the Nazis even after Germany declares war on the U.S.

Joseph Kennedy, multi-millionaire bootlegger, Mafia associate, stock market swindler and founder of the Kennedy political dynasty, is a major contributor of capital to the Nazis via Prescott Bush.

Kennedy is a vocal anti-Semite and pro-Nazi who later becomes U.S. Ambassador to Britain. His pro-Nazi statements do much to mold U.S. public opinion.

German arms maker Krupp is in serious financial difficulty but is saved by a $10 million loan from Hallgarten & Company and Goldman Sachs, two of Wall Street's best known investment firms.

The revitalized Krupp will become one of the largest German sources of cash and armaments for Adolf Hitler and the Nazis.

 The planned re-armament of Germany is able to proceed only after Wall Street's Dillon, Read floats $100 million of German bonds on Wall Street.

In the incestuous world of war, dictatorship, arms dealing and international finance, it is almost inevitable that Dillon, Read partner and eugenics proponent William Draper, who did so much to finance the Nazis, will be appointed economic czar of Germany after its defeat in 1945, thus profiting, in the classic manner of the U.S. ruling class, from both sides of the disaster of World War II.

It's just good business….


New_Meat's picture

DP, references please?

I suspect some confusion since SS and SA were only overlapping, with the natural order of presentation being "SA and SS".  The hummingbird cured that overlap.

- Ned

NotApplicable's picture

Everything you need is here in this book, Conjuring Hitler.

DavidPierre's picture

Great place to start is with this free e-book.

Chapter 2 – The Hitler Project

In October 1942, ten months after entering World War II, America was preparing its first assault against Nazi military forces. On Oct. 20, 1942, the U.S. government ordered the seizure of Nazi German banking operations in New York City which were being conducted by Prescott Bush, managing partner of Brown Brothers Harriman. 

Under the Trading with the Enemy Act, the government took over the Union Banking Corporation,in which Bush was a director. The U.S. Alien Property Custodian seized Union Banking Corp.’s stock shares, all of which were owned by Prescott Bush, E. Roland “ Bunny ” Harriman, three Nazi executives, and two other associates of Bush.


{Refences are all footnoted and available in the public record.}

'Their' secrets are all hidden in plane sight for those with 'eyes to see'...

(like the "mysteries" of JFK and 9/11, etc.).




Caviar Emptor's picture

The pro-Nazi King of England, Edward VIII, was forced to abdicate ostensibly on the grounds of marrying a divorced woman. Of course the real reason was treason: a conspiratorial relationship with national (Cliveden Set) and international pro-Nazi organizations intent on a takeover of Great Britain with a repeal of Democracy in favor of totalitarian fascism. Reference below.

 "In October 1937, the Duke and Duchess visited Nazi Germany, against the advice of the British government, and met Adolf Hitler at his Obersalzberg retreat. The visit was much publicised by the German media. During the visit the Duke gave full Nazi salutes.[63]"

Not to be missed: See photos of Edward reviewing SS troops and flirting gleefully with Adolph. 

DavidPierre's picture

Crash of '29-- {or was it 2008?}

A Federal Reserve Production

The Wall Street Crash is the opening act in the Great Depression, the latest production of the boys in the back room who own the private company operating under the deceptive name of the Federal Reserve.

The Federal Reserve was supposedly created to prevent such things as the Wall Street Crash happening. But, from 1921 to 1929, the Fed dramatically increases the U.S. money supply, fueling massive speculation.

Throughout the 1920s, Americans with modest income and savings are lured into the stock market in large numbers by the ruling class including the Rockefellers, the Morgans and the Dillons.

 People who know nothing of the true forces and limitless skullduggery behind financial markets... {HFTs anyone?}...and cannot afford to lose the money they invest are persuaded to pay artificially inflated prices for hundreds of millions of shares.

Suckers are lured into the market with the trick of buying on margin.

A purchaser puts down ten percent of the value of the shares being bought and then counts on the continuing inflation of share prices to make a profit.

It's like getting something for nothing.

With millions of suckers lured into the market, share prices are driven up and, for a while, Jim Q.[uinn] Sucker, looks like coming he's out ahead.

However, that is not the nature of the financial world.

In fact, the Rockefellers, the Morgans, the Dillons and their minions are fleecing ordinary Americans of hundreds of millions of dollars in an orgy of financial scams many of which will be later uncovered in the long-suppressed

Pecora Hearings...

Massive manipulation and speculation drives share prices to unsupportable levels.

A few months before the Crash, word has it that the Rockefellers, Joe Kennedy and all the other scam artists quietly exit the market, selling when the artificially inflated prices are sky high.

On October 24th, the big banks, owned by the same unindicted co-conspirators, call the loans to the suckers. Invevitably, a selling panic ensues and the whole house of cards collapses.

Gee, what a surprise!

It is seldom considered, however, that most of the shares which crashed on October 29 and in the next two weeks had been bought for some thirty billion dollars more than they were ultimately sold for.

An astonishing amount of money in 1929, most of which ended up in the pockets of some individuals in the know. Neither is it considered who rushed in to buy up the vast numbers of shares being dumped during and after Black Tuesday, acquiring companies and their assets for pennies on the dollar.

The Crash and the Depression which followed were, for some, not so much a disaster as simply another business opportunity in which they could snap up assets for a fraction of their true value and, simultaneously, and very importantly, drive down the cost of labor.

"The way to make money
is to buy
when blood
is running in the streets."   John D. Rockefeller
robobbob's picture

thx 4 the linx

operation hummingbird- aka night of the long knives

aka cleaning up loose ends

DavidPierre's picture

"loose ends"... got me free associating...again...


Totally depressing... yet powerful and hopeful ...millions have seen this movie and it still is available. When google takes it down it will be my signal to head back up into the high country of the Chilcotin.  Lots of "Slow Elk" but the grizzlies always get first dibs.