How Financial Oligarchy Replaces Democracy

ilene's picture

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JohnsonSmith's picture

Spending more than you earn is not a good idea for individuals or countries. In other words there should be balance between income and spending. I think for avoiding these kind of situation, the most simple mantra is to stay out of debt. Same day loans

Fiat Money's picture


Prof. Michael Hudson, "obama's CLASS WAR  REPUBLICAN [style] PRESIDENCY" -  YouTube video @1:40

 and full 1 hour audio here - 

 Prof. Hudson:  "Unless Glass Steagall is REINSTATED,  you will need BAILOUTS AGAIN & AGAIN & AGAIN."

Bob's picture

Great links.  Gracias!

Diogenes's picture

How is the Icelandic government responsible for their banks? What is to stop the government from stepping back and letting them fail? Why should the government be responsible for the banks mistakes?

Same question re other bank bailouts.

Bob's picture

Iceland put together a beautiful plan, yeah?  Reform, not revolution . . . what a blueprint that would be for the rest of the smaller debtor nations. 

FunkyOldGeezer's picture

I still say the governments of the world could trump the rich if they so desired. Who has control of the guns and the armies?  No one billionaire, or group of them. The armies, navies and airforces still take their orders from their political heads, SFAIK.

A loaded tank outside one's pad, ready to discharge its weapons would be one hell of a frightener. So, the money men flee to some third world hangout that'll have 'em only to be confronted with the prospect of nukes being dropped on it. Problem solved.

FeralSerf's picture

The political heads (The Sheep Herders) take their marching orders from the the Power Elites (The Flock Owners) that put them in their positions and can remove them from those positions (JFK is an example).  The money buys the guns, feeds the guns and controls the guns.  Sheep don't elect their herders, the flock owners do.  The proles are herded like sheep, most of them getting their directions from their flat screen TVs.

"I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls Britain's money supply controls the British Empire, and I control the British money supply."  -- Nathan Meyer Rothschild (1777-1836)

Bob's picture

Hey, ilene, major props to you for your recent posts of Hudson's work.  I have seen nobody writing so coherently about the "big picture" . . . something that is tragically missing from the public dialogue, even in the financial world. 

What we usually get is little more than whack-a-mole analysis analogous to a keystone cops movie composed of nothing but tight close-up shots. 

Hudson's a whole different kinda cat!  No surprise that he follows Bill Black, btw.


blindman's picture

Yusuf (Cat Stevens) - The Wind - Live in Naples

Bob's picture

Interesting that the ratings agencies, being so conscientiously helpful in shaping the dialogue on sovereign crises with their pre-emptive warnings about haircuts, never offer alternative strategies like taxation of financiers.

If we're not going to prosecute and jail them, nor string them up on lamp posts or default, we have only one weapon with which to defend ourselves: Taxation.

How could that be “off the table”?

wombats's picture

Nobody forced the Greeks to go into debt in the first place.  Nobody forced the Greeks to have a fubar tax system.  The banksters may be slime, but the Greek problems are entirely of their own making.

FeralSerf's picture

Not true.  The Greeks were conditioned, trained and brain-washed by the financial power elites to embrace their debt slavery, just as Americans are while they're watching their daily dose of TV lies and sales pitches.  The science of herding the proles is well developed and works.  There may be a few people that see through the frauds, but it is very few, probably less than 5%.

"The conscious and intelligent manipulation of the organized habits and opinions of the public is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country." -- Edward Bernays (the father of modern advertising who convinced America's women that smoking was chic.)

blindman's picture

The Global Debt Crisis: How We Got in It and How to Get Out
Monday 6 June 2011
by: Ellen Brown, Truthout
"The system, however, contains the seeds of its own destruction. The source of its power is also a fatal design flaw."
"The process by which banks create money was explained by the Chicago Federal Reserve in a booklet called "Modern Money Mechanics." It states:

"The actual process of money creation takes place primarily in banks." [p 3]

"[Banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts. Loans (assets) and deposits (liabilities) both rise [by the same amount]." [p 6]

"With a uniform 10 percent reserve requirement, a $1 increase in reserves would support $10 of additional transaction accounts." [p 49]

A $100 deposit supports a $90 loan, which becomes a $90 deposit in another bank, which supports an $81 loan etc.

That's the conventional model, but banks actually create the loans FIRST. They find the deposits to meet the reserve requirement later. Banks create money as loans, which become checks, which go into other banks. Then, if needed to clear the checks, they borrow the money back from the other banks. In effect, they borrow back the money they just created, pocketing the spread between the interest rates as their profit. The rate at which banks can borrow from each other in the US today - the Fed funds rate - is an extremely low 0.2 percent.

How the System Evolved

The current system of privately issued money is traced in "Modern Money Mechanics" to the 17th century goldsmiths. People who left gold with the goldsmiths for safekeeping would be issued paper receipts for it called "banknotes." Other people who wanted to borrow money were also happy to accept paper banknotes in place of gold, since the notes were safer and more convenient to carry around. The sleight of hand came in when the goldsmiths discovered that people would come for their gold only about 10 percent of the time. That meant that up to ten times as many notes could be printed and lent as the goldsmiths had gold. Ninety percent of the notes were basically counterfeited.

This system is called "fractional reserve" banking and was institutionalized when the Bank of England was founded in 1694. The bank was allowed to lend its own banknotes to the government, forming the national money supply. Only the interest on the loans had to be paid. The debt was rolled over indefinitely.

That is still true today. The US federal debt is never paid off, but just continues to grow, forming the basis of the US money supply."

Fiat Money's picture

Ellen Brown (and her website, is (are) terrific.  

  Now, if we can just get her, the amazing, excellent Professor Hudson,  and the other top-notch  "contrarian" economists &  Fed/banking/DEBT observers to notice:  the U.S. "BIG BANKERS" are run by, RULED by, the  rothschilds jewish banking cabal (with its many different, even within the family, faces & fronts). 

 "House of R's DOMINATES, CONTROLS, America's Largest Banks & Wealthiest bankers..."  (good brief history/survey)

  And that modern banking in its current  predatory state is just the usual "rape, pillage, plunder, massacre, divide & CONQUER"  "genocidal warfare by other means"  AS EXPRESSED IN THE BIBLE:  

Exodus 12:36 “The LORD had made the Egyptians favorably disposed toward the people, and they gave them what they asked for; so they PLUNDERED the Egyptians.”

Other translations use the words “DESPOILED” & “STRIPPED the Egyptians of their wealth” for “plundered


(although note how the site tries to spin the  above as harmless - "the gold was borrowed” and “it was owed,” etc.)

We know that the fleeing israelites had TAKEN GOLD from SOMEONE, because of that golden calf story – they covered their ‘graven image’ in gold, which is not found just lying there in desert sands by a downtrodden, panicked people in flight!

A close & objective reading of the Exodus storyu reveals that the israelites were probably another – of many – HIRED MERCENARY WARRIOR TRIBES the Egyptians (and all other empires) used to BUFFER their empire. 

  Right there in the bible, is a BLUEPRINT for how one minority is ENTITLED to DESPOIL their neighbors & countrymen.

  is the ROTHSCHILDS engineered  Economic 'DEBT CRISIS' in America (and Europe) TODAY, merely a REPEAT of the biblical looting of Egypt ?!!

 (not to mention,  this is ROUND TWO for America: the r's dominated,  so-called 'Federal' Reserve central bank ALREADY ENGINEERED the GREAT DEPRESSION credit bubble > bust > credit CONTRACTION depression,  on us wee American peobles, back in the 1930s...!

Fiat Money's picture

 (duplicated in error - see above)

Fiat Money's picture

" The crisis for Greece – as for Iceland, Ireland and debt-plagued economies capped by the United States – is occurring as bank lobbyists demand that “taxpayers” pay for the bailouts of bad speculations and government debts stemming largely from tax cuts for the rich and for real estate, shifting the fiscal burden as well as the debt burden onto labor and industry. 

 The financial sector’s growing power to achieve this tax favoritism is crippling economies, driving them further into reliance on yet more debt financing to remain solvent. Aid is conditional upon recipient countries reducing their wage levels (“internal devaluation”) and selling off public enterprises."

  yes, after PROMISING "change" from the DESPISED economic policies of bush, cheney, hank paulson (former GODDAMN-SACHS CHAIRMAN, before becoming Bush-W's final Treasury Secretary - who presided over economic MELTDOWN and then "BAILOUTS" -  the abject TRANSFER of wealth  FROM American working, taxpaying families, TO THE FAILED, BANKRUPT, INSOLVENT banks FRONTING for they hyper-wealthy) and the Greenspan/Bernanke Fed, 

...Barack Obama gave us Americans MORE of the SAME  Goddamn-Sachs & Fed dominated financial corruption & extortion,

 the HAMMERING of wages & labor (& DECONSTRUCTION of America's industrial base; and degeneration of our infrastructure bridges & transportation system)  for the benefit of the wealthy. 

FunkyOldGeezer's picture

It's all very well assuming that all the holders of the debt are BIG money people, but they're not.

Let's say all sovereign countries took the same route, or offered say, 10 cents on the Dollar. For every billionaire who'd now have just $100M, there would be thousands of Joe public types who would have their pensions and savings decimated. I agree that the taxpayers should not foot the bill, so why should they be hit with a double or triple whammy?

That is where this article falls down. It doesn't address the 'real world', just an idealogical one. An ideal I agree with, but the devil is in the detail.

Fiat Money's picture

Yes, f.o.g. - Hank Paulson used the EXCUSE "we MUST SAVE PENSIONS and middle-class America's INVESTMENTS and SAVINGS!" as a RATIONAL to goad then House Speaker Nancy Pelosi to just HAND OVER $700 BILLION to him (in that infamous 3 page "no body can examine or criticize  who I give the money to" request) 

  ...but this SUPERFICIAL  EXCUSEIGNORES  the fact that over the past dozen years,   The HYPER-WEALTHY have GOTTEN RICHER, while EVERYONE ELSE has gotten poorer!

  This is no accident - the wealthy (can hire) with their ARMY of tax experts (the best FORMER  IRS  agents money can buy), accounting experts, finance experts, and in-pocket economists & politicians,  INTENTIONALLY ENGINEER government tax & spending policies to THEIR OWN BENEFIT.

  "Absoute power CORRUPTS absolutely" and,  FREE OF RESTRAINT,  the hyper-wealthy have become VERY EFFICIENT at LOOTING the wealth of not just lower- and middle-class America, but the upper-middle-class as well! 

  (McMansions now a fraction of their former prices - but great estates & Park Avenue penthouses still appreciating.)

  Obviously,  REINSTATING or improving on GLASS STEAGAL Act - preventing the mega-banks from USING SMALLER BANKS (and our savings)  as CASINO CHIPS - would be a good start to PRESERVING middle class wealth, savings, & pensions.

Fiat Money's picture

lol -  the St. Louis Fed bank  spits out a little whitewash,

"U.S. Income Inequality - It's NOT SO BAD" after all !!!   

     they really are SHAMELESS thieves,  liars, & economy gutting traitors...  

honestann's picture

Greece:  DEFAULT.

Everyone:  DEFAULT.

So-called "government debts" are utterly unethical and completely immoral.  The very notion of dumping a huge debt on people when they enter the workforce is exactly and precisely SLAVERY.  Reject it.

Nobody wants to say it, but I am happy to.


And while debt is bad for individuals, it is absolutely, completely and utterly malicious and evil for governments (for many reasons, including the one I mentioned above).

DEBT forces workers to pay "interest".  In other words, part of what they pay goes to pay FOR NOTHING.  That is not efficient, that is blatantly irresponsible.  But it is worse than irresponsible in a world of fiat, fake, fraud, fiction, fantasy, fractional-reserve debt-money because most loans to government come from predator-gangster-bankster organizations who LITERALLY create money out of thin air at zero cost.  Paying interest is insane enough, paying interest to people who did not produce anything to get the money to lend is blatantly vile, obscene, criminal theft and SLAVERY.

End slavery.  End government debt.




PS:  If you take a personal loan from someone who actually earned the money he lent you, then pay it back.

praps's picture

Great article I enjoyed reading it.

I think it misses the big point that the rich are those who own most of everything. They own the majority of land, stocks and bonds and collect the rent, dividends and coupons. This income stream is undertaxed and is handed over to the bankers to invest it on their behalf in more land, stocks, bonds. The bankers are merely acting on behalf of the rich (who may often be one and the same).

The rich hide behind a veil of ‘agents’ e.g. bankers, land agents, law makers, law enforcers etc. The rich operate anonymously behind the veil. Their ‘agents’ take do all the dirty work and take all their flak and so are amply rewarded. The public can only see the veil and so are ever tilting at it, but it is the small minority behind the veil that is the real problem.

The game, described in the above article, of socialising losses starts when the investments on behalf the bankers clients have gone wrong. But trying to solve that problem, without first solving the problem of why an increasingly richer, small minority own most of everything, is futile.

Fiat Money's picture

@praps: agreed!

see my above comments... and how the psychology behind concentration of wealth, and license to LOOT your neighbors & countrymen, may well be encoded in and saturated throughout the bible...  

 (in this video interview with Maria Bartiromo,  evelyn de rothchild says  "we MUST SAVE CAPITALISM" - by GIVING  billions upon trillions of dollars of "bailouts" to the failed, bankrupt, insolvent big banks!

  This is exactly the TRANSFER of wealth -  EXTORTION by Govt. agents (IRS, congress, TAX collectors) from American household wealth, HANDED OVER TO the big banks who front for the wealthy. 

  Indeed, ZH earlier reported, was "Brown's Bottom" - the sale of HALF of Britain's ENTIRE GOLD RESERVES at MARKET BOTTOM prices -a  secret, back-door BAILOUT of the LBMA & Rothchilds   - did they try to NAKED SHORT gold, and get caught with their pants down?!

Marty Rothbard's picture

Infrastructure should be paid for, by the people who use it.  If, for instance,  roads are turnpikes, they get built, where they will carry the most traffic, , and thus, will be most profitable, not where the legislators brother in law's land is, or where the poor neighborhoods are, so the land can be condemned, and sold to said brother in law.  Even if government does build the roads, they should be financed out of motor fuel taxes, so the people who benefit directly from the roads will pay for them. 

   When this principal is used, it tends to drive the provision of services into the private sector, where price, and quality competition keep prices down.  Have you ever noticed the difference in service, between the US post office, and United Parcel Service?  Have you ever compared the congestion, pavement quality, and aesthetic appeal of the Florida turnpike, to that of I-95 in Florida?  Where do you think that your twelve year old, will get the best education, and be least likely to be beaten, and raped, in, say Washington DC?  The public school, or a private one, which actually is much cheaper, per pupil, than said public school.  I wont even go into the difference between the police force, and the cheaper private security company, since the police will admit, if pressed, that it is not their responsibility to protect the public.  It is the lies promulgated by the media, and public schools that cause fools to belive the police protect them.

   As to the EU.  Countries that do not keep up their commitments should be ejected.  Just like I would be if I did not pay my rent.  If the bankers know this will happen, they will not make loans, unless they are sure the debtor can repay them.  It's called moral hazard, and well understood by economists, and bankers.


ebworthen's picture

Allowing the IMF to run roughshod over Greece and it's sovereignty using funds confiscated from taxpayers worldwide is no different than confiscating someone's house to pay for the Mayor's and Judge's gambling debts.

We've already done this is the U.S. with the Supreme Court KELO decision.

The IMF and world central banks taking away Greece sovereignty is a precursor to the banking cabal confiscating any assets you own to pay for the "irresponsibility" of the populace versus the gambling and theft of the banking elites and their paid off politicians.

Tic tock's picture

Succinct, I've been wondering what the issue is that these events may turn around: capacity to pay, it's a nice addition to the key terms.

Eternal Student's picture

Thanks for posting this, Ilene. It's one of the best current summaries of the situation that I've seen recently. Not surprising that it's done by Michael Hudson. I'd only add that this is a situation coming soon to the U.S..


topcallingtroll's picture

About the only point I believe you missed is that debt is a choice and taking on excessive debt is a series of choices a country makes. Everything else that happens subsequently is a result of those previous choices.

It is not germany's responsibility to permanently subsidize the choices that greeks make, particularly their choice to retire in their early 50's.

If greece wants to stay in the euro and receive further loans they will obey their new masters. They can also choose to repudiate the debt and leave the euro. No one is forcing them to accept the loan conditions that include austerity and forced privatization.

FeralSerf's picture

That's just like claiming that swallowing the bait is a choice for the fish.  It's not a real choice if that's the path they nearly always take.  It's an engineered herding of the flock instead of a free choice.  It's cause and effect.

"There is no mind absolute or free will, but the mind is determined for willing this or that by a cause which is determined in its turn by another cause, and this one again by another, and so on to infinity."  -- Benedictus de Spinoza, 1673

AnAnonymous's picture

About the only point I believe you missed is that debt is a choice and taking on excessive debt is a series of choices a country makes.


Sure. Using USD to trade commodities is a choice. US style and US enforced kind of choice.

michigan independant's picture

They are past pregnant with the EU. Who screwed who is no difference now. Putin would of rolled the tanks in already I assume. Skank comes to mind given the brain drain.

Carpathia's picture

Invoking the German response to the onerous burden of repaying the reparations after the Versailles Treaty is right on point.  This private monetization of national assets is an assault.  Greece will not be preparing for war.  But the sinews of Europe are being strained in much the same way that pre-ordained the Second World War.  Greece, Default Now!  Elephteria!


topcallingtroll's picture

Greece is not forced to accept their new masters. They may choose to reject the loans and the conditions attached to them.

rocker's picture

It seems that socializing banks loses and capitalizing labors profits are what the banks are all about.

It is now confirmed. We work to serve the banking cartel managed by the Fed to make bankers rich.

They do wrong and they get no jail time. A first in financial crisis. No Jail for Goldman and JP Morgan yet.

As Charlie Munger said, 'Bank bailouts saved civilization, so those struggling should 'suck it in and cope'.

He should have said, thanks taxpayers for saving us, now let us steal your retirements and financial future.

The banks are rich again.

blindman's picture

Replacing Economic Democracy with Financial Oligarchy
Political Economy | Michael Hudson |
By Michael Hudson

Read more:
"My UMKC colleague, Prof. Bill Black commented recently in the UMKC economics blog: “One of the great paradoxes is that the periphery’s generally left-wing governments adopted so enthusiastically the ECB’s ultra-right wing economic nostrums – austerity is an appropriate response to a great recession. … Why left-wing parties embrace the advice of the ultra-right wing economists whose anti-regulatory dogmas helped cause the crisis is one of the great mysteries of life. Their policies are self-destructive to the economy and suicidal politically.”[8]

Greece and Ireland have become the litmus test for whether economies will be sacrificed in attempts to pay debts that cannot be paid. An interregnum is threatened during which the road to default and permanent austerity will carve out more and more land and public enterprises from the public domain, divert more and more consumer income to pay debt service and taxes for governments to pay bondholders, and more business income to pay the bankers.

If this is not war, what is?"

topcallingtroll's picture

My simple response is to stay out of debt and you avoid these problems.

Spending more than you earn is not a good idea for individuals or countries.

Somebody ultimately had to be the adult and severely restrict the greek credit card. They proved themselves unable to maintain any semblance of balance between income and spending.

morkov's picture

your simple response is too simple. Greece was admitted into the EU, because there were expectations of excessive profits from the eastern-european countries...and it worked for a period of time. it's over now.

Bob's picture

TCT, that is indeed a simple response, something that often has merit--but I have to wonder: Did you read the article?

It's not quite as simple as your kitchen table proposition, but on the other hand, it sure ain't rocket science, either.

smartknowledgeu's picture

Since all fiat currencies are created as debt, it is impossible to stay out of debt as long as you use fiat currencies. Get rid of all debt in society and all fiat currencies would literally disappear. You own any fiat currencies, you own debt. Period.

Bob's picture

Some little technicality that one is, eh?  Of course, buying debt-money from private banks given every further conceivable advantage in the "free market" economy don't make things any better, either. 

AnAnonymous's picture

You own any fiat currencies, you own debt. Period.


But of course. But the admission of this point is beyond US citizens as it implies that the whole amount of USD as a world reserve currency is debt and that they have been on the good side, moving the largest amount of wealth in history to the US from the exterior.

US citizens want to perceive themselves as victims when they are certainly not in this game of getting real wealth against debt.

Justice or even fairness is beyond US citizens by now: they have grown richer and richer through injustice and unfairness way too  much for them to consider justice and fairness.