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In the British journal Financial News Online in October 2006, Barry
Riley wryly observed:
Until the summer, the trends appeared ominous. The Fed
was raising short rates and inflation was climbing. The price of
crude oil stopped short of $80 a barrel. Sales of new homes
were dropping off a cliff. Then, as if by magic, everything
changed. The oil price went into reverse, tumbling to under $60
with favourable implications for the Consumer Price Index
measure of inflation . . . . Similarly, the gold bullion price “ an
indicator of the potential fragility of the dollar exchange rate “
has crashed from its early summer high. The Dow Jones Average
two weeks ago advanced to a high, at last beating the bubble
top in January 2000.
. . . [T]he pattern is curious. . . . Perhaps bonds and
commodities have been anticipating a recession. But then why
has the equity market climbed?
Conspiracy theories have abounded since Hank Paulson, boss
of Goldman Sachs, was nominated in May to become treasury

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secretary. He had no political qualifications but a powerful
reputation as a market fixer. Was he brought in to shore up the
financial and commodities markets ahead of [the November 2006
elections]?
The suspicion arose that the Fed and its banking partners were
hiding bad economic news in another way -- by actually manipulating
markets. Catherine Austin Fitts, former assistant secretary of HUD,
called it “the Orwellian scenario.” In a 2004 interview, she darkly
observed:
[W]e™ve reached a point . . . where rather than let financial assets
adjust, the powers that be now have [such] control of the
economy through the banking system and through the
governmental apparatus [that] they can simply steal more money
. . . , whether it™s [by keeping] the stock market pumped up, the
derivatives going, or the gold price manipulated down. . . . In
other words, you can adjust to your economy not by letting the
value of the stock market or financial assets fall, but you can use
warfare and organized crime to liquidate and steal whatever it
is you need to keep the game going. And that™s the kind of
Orwellian scenario whereby you can basically keep this thing
going, but in a way that leads to a highly totalitarian government
and economy “ corporate feudalism.16
Latter-day Paul Reveres warned that domestic security measures
were being tightened and civil rights were being stripped. These
developments mirrored IMF policies in Third World countries, where
the “IMF riot” was actually anticipated and factored in when “austerity
measures” were imposed.17 Conspiracy theorists pointed to efforts to
get the Constitution suspended under the Emergency Powers Act,
martial law imposed under the Patriot and Homeland Security Acts,
and the American democratic form of government replaced with a
police state.18 They noted the use of the military in 2005 to quell rioting
in New Orleans following Hurricane Katrina, in violation of posse
comitatus, a statute forbidding U.S. active military participation in
domestic law enforcement.19 They observed that fully-armed private
mercenaries, some of them foreign, even appeared on the streets. The
scene recalled a statement made by former U.S. Secretary of State Henry
Kissinger at a 1992 conference of the secretive Bilderbergers, covertly
taped by a Swiss delegate in 1992. Kissinger reportedly said:



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Chapter 32 - In the Eye of the Cyclone

Today, America would be outraged if U.N. troops entered Los
Angeles to restore order. Tomorrow they will be grateful! . . .
The one thing every man fears is the unknown. When presented
with this scenario, individual rights will be willingly relinquished
for the guarantee of their well-being granted to them by the
World Government.20
Suspicions were voiced concerning the Federal Emergency
Management Agency (FEMA), which was in charge of disaster relief.
In a November 2005 newsletter, Al Martin wrote:
FEMA is being upgraded as a federal agency, and upon passage
of PATRIOT Act III, which contains the amendment to overturn
posse comitatus, FEMA will be re-militarized, which will give the
agency military police powers. . . . Why is all of this being done?
Why is the regime moving to a militarized police state and to a
dictatorship? It is because of what Comptroller General David Walker
said, that after 2009, the ability of the United States to continue to
service its debt becomes questionable. Although the average citizen
may not understand what that means, when the United States
can no longer service its debt it collapses as an economic entity.
We would be an economically collapsed state. The only way
government can function and can maintain control in an economically
collapsed state is through a military dictatorship.21

The Parasite™s Challenge:
How to Feed on the Host Without Destroying It

Critics charge that warfare, terrorism, and natural disasters on an
unprecedented scale are being used to justify massive federal
borrowing, while diverting attention from the fact that the economy
is drowning in a sea of governmental and consumer debt.22 And that
may be true; but policymakers are only doing what they have to do
under the current monetary scheme. In an upside-down world in
which debt is money and money is debt, somebody has to go into debt
just to keep money in the system so the economy won™t collapse. The
old productive virtues “ hard work, productivity and creativity “ have
gone out the window. The new producers of economic “growth” are
borrowers and speculators. Henry C K Liu draws an analogy from
physics:
[W]henever credit is issued, money is created. The issuing of
credit creates debt on the part of the counterparty, but debt is
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not money; credit is. If anything, debt is negative money, a form
of financial antimatter. Physicists understand the relationship
between matter and antimatter. . . . The collision of matter and
antimatter produces annihilation that returns matter and
antimatter to pure energy. The same is true with credit and
debt, which are related but opposite. . . . The collision of credit
and debt will produce an annihilation and return the resultant
union to pure financial energy unharnessed for human benefit.23
Credit and debt cancel each other out and merge back into the
great zero-point field from whence they came. To avoid that result
and keep “money” in the economy, new debt must continually be
created. When commercial borrowers aren™t creating enough money
by borrowing it into existence, the government must take over that
function by spending money it doesn™t have, justifying its loans in any
way it can. Keeping the economy alive means continually finding
ways to pump newly-created loan money into the system, while
concealing the fact that this “money” has been spun out of thin air.
These new loans don™t necessarily have to be paid back. New money
just has to be circulated, providing a source of funds to pay the extra
interest that wasn™t lent into existence by the original loans. A variety
of alternatives for pumping liquidity into the system have been resorted
to by governments and central banks, including:
1. Drastically lowering interest rates, encouraging borrowers to
expand the money supply by going further and further into debt.
2. Instituting tax cuts and rebates that put money into people™s
pockets. The resulting budget shortfall is made up later with new
issues of U.S. bonds, which are “bought” by the Federal Reserve
with dollars printed up for the occasion.
3. Authorizing public works, space exploration, military research,
and other projects that will justify massive government borrowing
that never gets paid back.
4. Engaging in war as a pretext for borrowing, preferably a war that
will drag on. People are willing in times of emergency to allow the
government to engage heavily in deficit spending to defend the
homeland.
5. Lending to Third World countries. If necessary, some of these
impossible-to-repay loans can be quietly forgiven later without
repayment.

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Chapter 32 - In the Eye of the Cyclone

6. Periodic foreclosures on the loan collateral, transferring the collateral
back to the banks, which can then be resold to new borrowers,
creating new debt-money. The result is the “business cycle” “
periodic waves of depression that flush away debt with massive
defaults and foreclosures, causing the progressive transfer of wealth
from debtors to the banks.
7. Manipulation (or “rigging”) of financial markets, including the
stock market, in order to keep investor confidence high and
encourage further borrowing, until savings are heavily invested
and real estate is heavily mortgaged, when the default phase of
the business cycle can begin again.24
Rigging the stock market? At one time, writes New York Post
columnist John Crudele, just mentioning that possibility got a person
branded as a “conspiracy nut”:
This country, the critics would say, never interferes with its free
capital markets. Sure, there™s intervention in the currencies
markets. And, yes, the Federal Reserve does manipulate the
bond market and interest rates through word and deed. But
never, ever would such action be taken at the core of capitalism
“ the equity markets, which for better or worse must operate
without interference. That™s the way the standoff stayed until
1997 when “ at the height of the Last of the Great Bubbles “
someone in government decided it wanted the world to know
that there was someone actually paying attention in case Wall
Street could not handle its own problems. The Working Group
on Financial Markets “ affectionately known as the Plunge
Protection Team “ suddenly came out of the closet.25




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Chapter 33
MAINTAINING THE ILLUSION:
RIGGING FINANCIAL MARKETS


The Dow is a dead banana republic dictator in full military uniform
propped up in the castle window with a mechanical lever moving the
cadaver™s arm, waving to the Wall Street crowd.
“ Michael Bolser, Midas (April 2004)1




W hile people, businesses and local and federal governments
are barreling toward bankruptcy, market bulls continue to
insist that all is well; and for evidence, they point to the robust stock
market. It™s uncanny really. Even when there is every reason to think
the market is about to crash, somehow it doesn™t. Bill Murphy, editor
of an informative investment website called Le Metropole Cafe,
described this phenomenon in an October 2005 newsletter using an
analogy from The Wizard of Oz:
Every time it looks like the stock market is on the verge of collapse,
it comes back with a vengeance. In May for example, there
were rumors of derivative problems and hedge fund problems,
which set up the monster rally into the summer. The London
bombings . . . same deal. Now we just saw Katrina and Rita
precipitate rallies. There must be some mechanism at work, like the
Wizard of Oz behind a curtain, pulling on strings and pushing
buttons.2
What sort of mechanism? John Crudele writes that the cat was let
out of the bag by George Stephanopoulos, President Clinton™s senior
adviser on policy and strategy, in the chaos following the World Trade
Center attacks. Stepanopoulos blurted out on “Good Morning
America” on September 17, 2001:

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Chapter 33 - Maintaining the Illusion

“[T]he Fed in 1989 created what is called the Plunge Protection
Team, which is the Federal Reserve, big major banks,
representatives of the New York Stock Exchange and the other
exchanges, and there “ they have been meeting informally so
far, and they have kind of an informal agreement among major banks
to come in and start to buy stock if there appears to be a problem.
“They have, in the past, acted more formally.
“I don™t know if you remember, but in 1998, there was a crisis
called the Long Term Capital crisis. It was a major currency
trader and there was a global currency crisis. And they, at the
guidance of the Fed, all of the banks got together when that started
to collapse and propped up the currency markets. And they have
plans in place to consider that if the stock markets start to fall.”3
The Plunge Protection Team (PPT) is formally called the Working
Group on Financial Markets (WGFM). Created by President Reagan™s
Executive Order 12631 in 1988 in response to the October 1987 stock
market crash, the WGFM includes the President, the Secretary of the
Treasury, the Chairman of the Federal Reserve, the Chairman of the
Securities and Exchange Commission, and the Chairman of the Com-
modity Futures Trading Commission. Its stated purpose is to enhance
“the integrity, efficiency, orderliness, and competitiveness of our
Nation™s financial markets and [maintain] investor confidence.” Ac-
cording to the Order:
To the extent permitted by law and subject to the availability of
funds therefore, the Department of the Treasury shall provide
the Working Group with such administrative and support
services as may be necessary for the performance of its functions.4
In plain English, taxpayer money is being used to make the mar-
kets look healthier than they are. Treasury funds are made available,
but the WGFM is not accountable to Congress and can act from be-
hind closed doors. It not only can but it must, since if investors were
to realize what was going on, they would not fall for the bait. “Main-
taining investor confidence” means keeping investors in the dark about
how shaky the market really is.
Crudele tracked the shady history of the PPT in his June 2006 New
York Post series:
Back during a stock market crisis in 1989, a guy named Robert
Heller “ who had just left the Federal Reserve Board “ suggested
that the government rig the stock market in times of dire
emergency. . . . He didn™t use the word “rig” but that™s what he
meant.

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