Wednesday, December 4, 2013

Lessons from football games both good and bad

By Dan Bodine

Humans being what they are -- forgivable, some of them -- it's hard to believe we have so many jails around. Those are for those who've inflicted a deeper personal hurt against someone, I guess. Actions outside what's considered a normal civilized society. Like losing a football game. Sometimes you just can't describe that hurt.

Many, for instance, were completely flabbergasted when they heard Auburn beat Alabama's Crimson Tide Saturday on the final play of the game -- by running back a deflected field goal 107 yards for a touchdown.

You can't make this stuff up for Ripley's Believe It or Not screenplays. Many of us once were (and many of still are, remember) in places like this. Where football hurt is personal. In the South, let's just simply say, you'll find situations where this is the gravest of losses. They insult the personhood.

An Alabama fan is alledged to have shot and killed a mother of three after this game. All because the woman apparently didn't think the loss was that grave. Was there rioting in the street protesting the mother's death? No. Compounded tragedies, more than likely, is the way many looked at it.

Football losses are terrible. They are the highest order of rape of the inner self, under this mindset, where an extremely loyal fan marshals up all of his or her will into a naked, all-my-soul's-here stand for what's right in this world.

Don't you dare say "No" to that stand, and take something from it. Purgatory has non-flammable, live alligators with 6-in. spiked teeth all waiting at its bottom for you. Just waiting. Meal time! Meal time!

Soccer, the original football game some believe, is futbol in Spanish. Before Noemi and I married, in late '94, we gathered at the Los Comales Restaurant in Ojinaga across the Rio Grande from Presidio one night to watch Mexico and the U.S.A. play. Don't tread on this woman, her actions said loudly that night.

I forget the score, of course, but not Noemi's hurt after Mexico's loss. There was wailing, gnashing of the teeth, chairs and tables tossed about...and, above all, painful crying.

Sometimes in Life I've verbally gotten over on what's called the stupid side, in my reaction to someone, say.. But I knew not to get over there this night. I sat quietly at a table and pretended to be sharing in the sadness that had settled in the room. I ain't that stupid! Nor inconsiderate. Now.

I grew up and played in a high school football town in North Central Texas, too. Know fully well the intensity of those feelings.

When Cleburne was a Texas powerhouse (50's thru early 60's) – the era of Paul Knot, David McWilliams, Pat Culpepper and Timmy Doerr, to name a few—I remember a playoff against the Garland Owls, for instance, around '58, '59. A Garland man lost his cotton gin in a bet. Intense feelings they were.

My senior year, playing at home in Yellow Jacket Stadium against the Nederland Bulldogs ('61 state AAA playoffs quarterfinals), late in the fourth quarter with the score tied, we ended up fourth and about six inches to go. Not just for a first down. But also, it would turn out, to win the game. Tick-tock.

There were no overtimes then. The next decisive statistic for determining a winner would be penetrations, the number of offensive series made inside the opponent's 20 yard line. And we were dead-even in those, too.

Next was total first downs. We were either even or trailing by a tad bit, we'd learn later.

But in one of those memorable football ironies, yes, our six inches needed for a first also would have given us a penetration. The game! We were just outside the Bulldog's 20.

Now I remember vividly this next play, for one reason – I suggested it. I played left end. If the coaches don't send in a play in these occasions, usually, of course, it's the quarterback who calls it. This time was different.

Freddy McFarren, the signal caller (and now retired Army general), had had to come in cold for the starter, Bill Parks, a short time earlier. Bill had “gotten his bell rung.”

Freddy hadn't gotten the feel of the game's nuances yet, I felt--the little weak spots and strong spots that develop in a game in the way opposing players react against each other. In the huddle, he was hesitating. The clock was ticking.

We glanced one more time at the sideline for help. Doyle Weldon was the coach. Hurry, hurry, was the message.

Let's run a 4-3 outside!” I said quickly. “We can get that much anyway.

Freddy quickly repeated it, to the team.

And we broke huddle.

Football, school sports in general, are much more than games of inches or bounces. For those so inclined, they provide a "mental edge" to take on Life. The more collective energies, the most collective progress a pluralistic nation makes toward its goals.

Title IX, the 1972 Education Amendments to the Civil Rights Act that opened up girls' high school sports, was monumental, for example. For all the country. For the extra contributions that came from it. Finding an easier, quicker way to tap into your self-worth, to succeed, is simply immeasurable.

But failures are part of that lesson also. Some say, the toughest.

In Alabama, if a certain kicked football last week had been just an inch or so more inside the goal post, rather than outside, to change the direction of the bounce, there would not be a woman dead, three extra children without a mother, and an accused murderer behind bars.

For the deeper personal hurt. Of that one failed kick. To mention just one single reaction out of thousands to it, no doubt.

In November '61, for the Cleburne Yellow Jackets, a normal 4-3 was simply QB handing off to the left halfback (#4 position in backfield) diving toward the No. 3 hole on the line -- between left guard and left tackle. Butch Wallace was playing left guard; Mike McNiel was left tackle; and I was left end. Darrell Hill was the left halfback, carrying the ball.

A four-three outside, we used when the defensive end opposite me was playing a yard or two further outside, "loose," AND there was some huge, slow defensive tackle with play dough between his ears playing straight-up on Mike -- enough in there that you thought you could play through, anyway.

I could slide over into him, help Mike wedge him to the right; and the left halfback could then veer to the left off my tail and break for daylight in the space still there, from the loose-playing defensive end.

Nederland's linebackers had been playing tight/inside most of the game. Shouldn't be a problem.

But not this time, silly us! The play-dough I'd mistaken for a lucky rabbit's foot, I guess. And hole? What hole? What were we thinking? Jack Proctor, noted sports editor for the Cleburne paper then, noted this later in a story on the game.

Why didn't you run outside? This was a fourth down play! Shudda known the interior line was going to be stacked tight!

Running up to the line, getting set for the play, my eyes widened. It wasn't the cold wind on this sunny afternoon, no. Nederland was stacking the line with a player in every hole! Linebackers in your face like the Great Hurt was coming.

“Hup two, hup three...” Freddie barked out.

I lunged to my inside. Toward that defensive tackle.

What I remember most, next, is straining to push back an oncoming tidal wave.

Every ounce of thought and energy is locked like that, straining, straining; and then, “pop!” – a running back's helmet from behind -- Darrell -- plunges directly into the small of your back.

And you fold in two, backwards, as the wave breaches the line, and oncoming bodies hurl their way over you.

When it was over, referees placed the ball where it'd been earlier. No gain.

Nederland took over on downs; made one first down; and then ran out the clock. And won. On first downs!

Driving home from the game afterward, in the fog of defeat, I was stopped by a policeman for speeding. Not far from the stadium. And handed a ticket. He wasn't happy.

In court the judge acknowledged he himself was a loyal supporter of the Cleburne High School football program, too. And had seen the game. And was very disappointed.

The fine he gave me was stiff. There was no explaining why. Only an admonishment. From a place deep inside him, somewhere it took me years later to figure out. A place called hurt.

“It's a damn shame ya'll couldn't have thought about speeding on that last play, too, isn't is?”

Indeed. I paid and walked out.

Looking back, I'd gotten off lightly.
--- 30 ---

Thursday, November 28, 2013

Finding the fulfillment that you inwardly seek.

I am reading The Values Factor: The Secret to Creating an Inspired and Fulfilling Life By Dr. John Demartiini and want to share this with you:

Only by being true to yourself can you maintain your integrity, achieve your own authority, and find the fulfillment that you inwardly seek. The alternative was chillingly described by Emerson’s contemporary Henry David Thoreau, who wrote, “The mass of men live lives of quiet desperation. What is called resignations confirmed desperation.“ Thoreau saw quite clearly that most people never tap into what really inspires them. Instead, they subordinate themselves to social idealisms (what they think they “ought” to do), the values of others whom they look up to, or their own limited beliefs about what is possible for them. They stand in sharp contrast to the people who dare to leave a legacy by creating a life based on their highest values, a life that makes a unique contribution to current and future generations of humanity.

Isn't it interesting that so many people subordinate themselves to great leaders – political, religious, and artistic leaders – and yet, the great leaders achieved their influence precisely by not subordinating themselves? Great leaders refuse to placate the social norm or to remain stuck in stagnate traditions or old paradigms. Instead, they embrace the challenge of giving birth to new ideas and new visions, and succeed in making significant and novel contributions to the world.

(The Values Factor: The Secret to Creating an Inspired and Fulfilling Life
By Dr. John Demartiini © 2013; Berkley Books, New York, NY; p. 34)

Sunday, November 24, 2013

How Money Is Created: Part 3 – Fractional Reserve Banking

In Part 2, I discussed the illegal activities of the Dutch bankers who came up with the idea of creating money out of thin air. Today, this is called “Fractional Reserve Banking” and it is not only legal – it is the foundation of our banking system. It is also one of the best kept unhidden secrets in the world. I bet you will probably be surprised to hear that most bankers don’t know anything about it either.

Here is how I found out about it. Back in the “old days” I was a banker and graduated from the Graduate School of Banking at LSU (back then it was the School of Banking of the South at LSU). I remember the first class we had about the Federal Reserve. The lecturer worked for the Federal Reserve and everyone in the class was an officer in a bank. He began the lecture that day by saying something like  – “How would you like to learn how to create money out of thin air?” Of course, we all shook our heads “yes.” He looked at us for a few minutes without saying anything and then smiled and said – “You have been doing it for years!”

The amazing thing about this secret is that anyone can find out about it. A great source is the Federal Reserve itself. It published a booklet called Modern Money Mechanics and you can download a pdf version for free at -- When I use quotes from it, I am referring to the “PDF Page Number.”

Let’s begin with a quote from the booklet:

In the absence of legal reserve requirements, banks can build up deposits by increasing loans and investments so long as they keep enough currency on hand to redeem whatever amounts the holders of deposits want to convert into currency. This unique attribute of the banking business was discovered many centuries ago.

It started with goldsmiths. As early bankers, they initially provided safekeeping services, making a profit from vault storage fees for gold and coins deposited with them. People would redeem their "deposit receipts" whenever they needed gold or coins to purchase something, and physically take the gold or coins to the seller who, in turn, would deposit them for safekeeping, often with the same banker. Everyone soon found that it was a lot easier simply to use the deposit receipts directly as a means of payment. These receipts, which became known as notes, were acceptable as money since whoever held them could go to the banker and exchange them for metallic money.

Then, bankers discovered that they could make loans merely by giving their promises to pay, or bank notes, to borrowers. In this way, banks began to create money. More notes could be issued than the gold and coin on hand because only a portion of the notes outstanding would be presented for payment at any one time. Enough metallic money had to be kept on hand, of course, to redeem whatever volume of notes was presented for payment. (Modern Money Mechanics p. 3).

The only things this version left out is that the people depositing the gold and silver didn’t know what the goldsmith-bankers were doing with their money -- and it was illegal.

What is fractional reserve banking. Below is the definition:

A banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal.[i]

This is the definition of reserve:

Currency held in bank vaults may be counted as legal reserves as well as deposits (reserve balances) at the Federal Reserve Banks.
(Modern Money Mechanics p. 4)

Now let’s see how fractional reserve banking works using a reserve requirement of 10%. This means that the bank must keep 10% of every deposit in cash in its vault or on deposit with a Federal Reserve Bank. This example begins with a man named Adam who has $1,000.00 and deposits it in a bank.

The bank takes Adam’s deposit of $1,000 and places $100 in reserve and loans Bill $900. Adam’s bank account shows that he has $1,000 in the bank and Bill’s account shows he has $900 in the bank. The bank only has $100 in cash, thus it created $900 of Bank Credit Money out of thin air. The US Treasury Department and the Federal Reserve were not involved. No Federal Reserve Notes were created. The new $900 Bank Credit Money was created by making an entry in a set of books.

Now, using the above example, you will be able to follow Bill’s $900. Think about the mechanics of each new transaction.

If we looked at the bank’s books at this point we would see this:

Adam’s $1,000.00 deposit has been used to create $5,859.00 of new Bank Credit Money and the bank is now being paid interest on it.

Do you owe the bankers any money? How much does debt influence your life? How much influence and power does it have in the lives of its borrowers? How much real property can a lender take from borrowers if they can’t pay and thus turn money made out of thin air into real property?

There is much more involved here than simply as business transaction. The power to do this creates an elite class of people who affect – our political system, our justice system, our economic system, our educational system, our military, our relationships with one another – just to name a few!

How much money can bankers create out of thin air?  We will discuss that in the next part of this series – Part 4.

PS: Adam’s $1,000 will ultimately create $8,906.00 (see the example in Modern Money Mechanics, pages 6-11). 

Who Are the Primary Dealers of the Federal Reserve?

In “How Money Is Created: Part 1” I mentioned the “Primary Dealers.” They are the only ones authorized to trade directly with the Federal Reserve System and they buy US Treasury Bills, Notes & Bonds and resell them. As of October 31, 2011 according to the Federal Reserve Bank of New York, the Primary Dealers are (I rearranged them by nation):

● Scotiabank Global Banking and Markets
● BMO Capital Markets Corp.
● RBC Capital Markets, LLC

● BNP Paribas Securities Corp.
● SG Americas Securities LLC.

● Deutsche Bank Securities Inc.

Great Britain
● Barclays Capital Inc.
● HSBC Securities (USA) Inc.

● Daiwa Capital Markets America Inc.
● Mizuho Securities USA Inc.
● Morgan Stanley & Co. Incorporated
● Nomura Securities International Inc.

● RBS Securities Inc.

● Credit Suisse Securities (USA) LLC
● UBS Securities LLC.

United States
● Cantor Fitzgerald & Co.
● Citigroup Global Markets Inc.
● Goldman, Sachs & Co.
● Jefferies & Company Inc.
● J.P. Morgan Securities LLC
● Merrill Lynch, Pierce, Fenner & Smith Incorporated

Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence. (John Adams)

Saturday, November 23, 2013

How Money is Created: Part 2 - Creating Money Out of Thin Air

In Part 1 of this series, How Money Is Created, we learned how the Federal Reserve Bank creates money in the form of Federal Reserve I.O.U.s called “Federal Reserve Notes.” In this part we will learn about the origin of another form of money called “Bank Credit.” The story begins in the Netherlands in the 17th century.

The Netherlands had become a commercial crossroads where the East and West met and created a new economic class -- the first middlemen. They discovered how to make huge profits by purchasing unfinished imported products, finishing them, and then selling them to exporters. They became accomplished craftsmen and benefited handsomely.

Their success did not go unnoticed by “old money” aristocrats, who spoke of them with disdain. They called the middlemen “commoners who were only devoted to making money; crude and greedy people that were cursed by bad manners.”[i] But, as the power and wealth of the “commoners” grew, so did their innovations and they transformed commerce --  free ports, secure titles to land, efficient processes for settling lawsuits, teaching bookkeeping in schools, and licensing agents to sell marine insurance

Commercial transactions required immediate access to gold and silver coins or bars, and that created a number of problems and increased risks. Gold and silver were bulky to handle, heavy to transport, robbery was always a risk, just as was the loss of value through normal wear, as well as being “shaved” by thieves who melted down the shavings. The Dutch middlemen looked for ways to simplify financial transactions and decrease the risks involved. A new financial institution was created that accepted foreign and local coinage at its real, intrinsic value. The Bank of Amsterdam was founded in 1609 under protection of the City of Amsterdam and laws were passed that required anyone doing business in the city to have an account at the bank.

The bank accepted deposits of gold and silver and stored them in their vaults, after deducting a small coinage and management fee. The bank was basically a warehouse and was nothing like banks today. Depositors delivered their gold and silver to the bank and received deposit receipts. The bank stored it until the depositor returned and withdrew it. When customers needed gold or silver to transact business, they also had to go to the bank and withdraw it. However, as time passed, customers and merchants discovered they could transact business by simply trading deposit receipts instead of physically handling gold or silver. Deposit receipts became known as “bank money.”[ii]

“Bank money” quickly became very popular and resulted in a rapid increase in bank deposits. But, as time passed, the bankers realized that at any point in time they only needed a small portion of the gold and silver they were holding for depositors to handle the cash requirements of conducting business. They secretly set out to determine the minimum amount of gold and silver they needed to keep on hand to meet the average withdrawal demands of their depositors – and they made sure that it was done in absolute secrecy.

Next, they started lending money, but they gave borrowers “bank money” instead of gold or silver. If a borrower came to withdraw gold or silver that had never been deposited in the bank, the bankers paid him with gold or silver from that owned by another depositor. As long as the majority of their customers did not show up at the bank at the same time and demand gold or silver, the bankers were able to continue the scam -- and they became very rich. How could they not become rich when they created money out of thin air, loaned it to borrowers, and charged them interest?

In the beginning they only lent a small fraction of their customers’ deposits, but slowly they increased it to more than fifty percent. The thing they feared the most, that depositors would lose confidence in the bank and demand their gold and silver, happened in 1791. A major panic occurred and forced the bank to close. Depositors lost a great deal of their deposits.  The bankers were tried and found guilty.[iii] The story of the criminal actions of the bankers faded from memory as time passed, but the huge profits their scam produced by convincing people to trade pieces of worthless paper as if they were gold and silver was not forgotten by an elite few.

So, what do you think happened to the idea of creating money out of thin air? Are you sitting down? Would you be surprised to learn that it became the model for our modern banking system? Today, this system is called “fractional reserve banking,” and we will discuss how it creates huge amounts of money called “Bank Credit” today in Part 3 of this series. Unless you understand “fractional reserve banking,” you cannot understand the facts behind the major economic and political problems facing us now.

[i] The Gods of Money: Wall Street and the Death of the American Century By F. William Engdahl © 2009; published by edition.engdahl; Wiesbaden, Germany, p. 43
[ii] The Gods of Money; p. 48
[iii] The Gods of Money; p. 49

How Money Is Created: Part 1

The first way money is created in American begins with the Congress.

(1) Congress passes laws that specify what the government will pay for.

(2) When money is needed to pay for something that Congress has authorized, the Treasury Department creates Treasury Bills, Notes and Bonds in the amount that is needed. The Treasury Bills, Notes and Bonds are I.O.U.s that taxpayers have to pay.

(3) The Treasury Department orders the amount of money they need and sends the Taxpayer I.O.U.s over to the Federal Reserve Bank to pay for the new money created by the Federal Reserve. (By the way, the Federal Reserve is not a government agency. It is a corporation owned by private banks.)

(4) The Federal Reserve Bank creates the new money ordered by the Treasury Department.

(5) The new money created by the Federal Reserve Bank are I.O.U.s from the Federal Reserve Bank called “Federal Reserve Notes.” The Treasury Department traded Taxpayer I.O.U.s for Federal Reserve Bank I.O.U.s.

(6) The Federal Reserve Bank delivers the new money (Federal Reserve I.O.U.s) to the Treasury Department.

(7) The Treasury Department pays the bills with the Federal Reserve I.O.U.s.

(8) The Federal Reserve Bank sells the Taxpayer I.O.U.s to 21 Primary Dealers (banks or securities broker-dealers). They are the only ones authorized to trade directly with the Federal Reserve System.

(9) The 21 Primary Dealers sell the Taxpayer I.O.U.s to the public for a profit.

(10) Uncle Sam pays the interests due on the Taxpayer I.O.U.s (Treasury Bills, Notes & Bonds) to those who hold them.

(11) If the Treasury Department does not have enough money to pay off the Taxpayer I.O.U.s or the interest due on them, the process starts over again (go back to #1 above).

Making good decision requires knowing the facts about the subject. This lesson should have been taught to you in elementary school. But, I have met many people -- from high school drop-outs to college professors with Ph.D.s -- who knew nothing about how money is created. Now that you understand this phase of money creation, think about who is involved, what they do, and how they make money. 

Make sure you share this with others and teach it to your friends and family. You know that they won't learn about it in most schools.

Well that's enough cogitating for this lesson.

Wednesday, November 20, 2013

Random Thought About the Power of the 1%

The power & wealth of the 1% depend on their ability to keep the 99% weak, poor, ignorant, unformed and in conflict with one another. The institutions they bless with their favor – wealth and support – political, economic, educational, media, and religious are tools they use to accomplish their goals of keeping the 99% weak, poor, ignorant, unformed and in conflict with one another. What do you think?

Thursday, October 17, 2013

When was the last time you went to a Tonsorial?

I was watching "Gunsmoke" and Chester said that he was going to the Tonsorial. Anyone that knows how much I like to study "words," will guess what happened next. I had to stop and look it up -- "pertaining to barbers," 1813, from Latin tonsorius "of or pertaining to shearing or shaving," from tonsor "a shaver or barber," from tonsus, past participle of tondere "to shear, shave." . 

Now we know where Chester was going -- the barber shop.


Wednesday, October 16, 2013

The Rise of the Market Society

Do you know what a Petrodollar is? If the answer is "No," then you are incapable of understanding what is going on in the US economy and political system today. Below is a chapter from an unpublished book I am working on. I hadn't planned on publishing it until later, but with the current debt crisis, I felt that I should go ahead and put this chapter out there (even though the final editing hasn't been completed). Please keep the following in mind as you read it.

Alexis de Tocqueville believed the essential requirements for America to become the nation envisioned by the Founding Fathers, a democratic power that would be a light of freedom for all peoples, American citizens must accomplish the following:

(1) Learn to voluntarily help one another.
(2) Associate with one another for political purposes.
(3) Acquire the habit of forming associations in ordinary life.
(4) Acquire the means of achieving great things by united exertions.

An essential component in accomplishing this is for citizens to have the facts and be able to distinguish between facts and propaganda. As you read the following chapter, ask yourself if you were given these facts by the government, political parties, the media or were taught them in college or a public school. If you didn't get the facts from that list of institutions, then maybe its time for us to do the four things above and change them. 

[beginning of chapter]
The Rise of the Market Society

Wall Street created a disaster in the 1920s when bankers decided to become actively involved in speculating in all kinds of risky and volatile financial products -- from common stocks to debt-instruments of weak third world nations. Banks and brokerage firms hired armies of salesmen to go door-to-door selling these products to ordinary people who had no concept of what they were buying. In addition to investing in things of great risks, many also bought them on high interest credit too.

When the investments began to fail, so did the banks that sold and financed them. Between January 1930 and March 1933, about 9,000 banks failed and wiped out the savings of millions of people. There was also less money available for loans to industry, which caused a drop in production and a rise in unemployment. From 1929 to 1933, the total value of goods and services produced annually in the United States fell from about $104 billion to about $56 billion. In 1932, the number of business closings was almost a third higher than the 1929 level.[i] Americans faced the greatest threat to their economic survival in the decade of the 1930s -- and then December 7, 1941 arrived.

On an otherwise calm Sunday morning on December 7, 1941, the Japanese shocked the world by bombing the American naval base at Pearl Harbor, Hawaii. Over 3,500 Americans were killed or wounded in 2 waves of terror lasting 2 long hours. 350 aircraft were destroyed or damaged. All 8 battleships of the U.S. Pacific Fleet were sunk or badly damaged - including the U.S.S. Arizona. And yet all of America's aircraft carriers remained unscathed. On December 8, the nation was gathered around its radios to hear President Roosevelt deliver his Day of Infamy speech. That same day, Congress declared war on Japan. On December 11, Congress declared war on Germany. The slogan “Remember Pearl Harbor” mobilized a nation and helped awaken the mighty war machine and economic engine that is America.[ii] 

World War II saved America from the Great Depression and united American citizens as they had never to be united before. Everyone became an American first, whatever else second.  Millions of men and women entered military service. With so many Americans serving in the military there was a great shortage of labor in industries that made the supplies needed to fight the war. In many cases, women that had been wives and mothers stepped up to the plate and took those jobs – jobs that had been the exclusive domain of males before.


America emerged from the war as the most powerful and wealthiest nation on the face of the earth with 80% of world’s gold sitting in US vaults.[iv] The US dollar was increasingly taking over the function of gold as a major international reserve asset. This made it possible for the US to be the dominant economy and allowed it to run a trade deficit without having to devalue the dollar.[v] The US military was also at the height of its power, with weapons that included atomic and hydrogen bombs. Mankind had reached a point that made it possible to destroy itself with its own creations.

Men who joined the military as teenagers came home after the war as adults. Many had been to places and seen things beyond what they ever could have imagined. The nation wanted to thank them for their service and one way Congress decided to do it was the G.I. Bill of Rights.  The law gave the following benefits to U.S. soldiers coming home from World War II:
education and training opportunities
loan guarantees for a home, farm, or business
job-finding assistance
unemployment pay of $20 per week for up to 52 weeks if the veteran couldn't find a job
priority for building materials for Veterans Administration Hospitals

For most, the educational opportunities were the most important part of the law. WWII veterans were entitled to one year of full-time training plus time equal to their military service, up to 48 months. The Veterans Administration paid the university, trade school, or employer up to $500 per year for tuition, books, fees and other training costs. Veterans also received a small living allowance while they were in school. Thousands of veterans used the GI Bill to go to school. Veterans made up 49 percent of U.S. college enrollment in 1947. Nationally, 7.8 million veterans trained at colleges, trade schools and in business and agriculture training programs.[vi]

After the war, business was good in America, employment was high, and for many the American Dream was becoming a reality. There was a factor that was unrecognized in the post-war prosperity that many didn’t understand. It was that the economies of other nations had been harmed or destroyed by the war and America had little competition in rest of the world. Also, as a result of the Bretton Woods Agreement reached in 1944 by the 730 delegates from all 44 Allied nations, America played a major role in creating the plan for rebuilding the international economic system after the war.

The World Bank (officially the International Bank for Reconstruction and Development) was set up to make long-term loans "facilitating the investment of capital for productive purposes, including the restoration of economies destroyed or disrupted by war [and] the reconversion of productive facilities to peacetime needs."[vii] The bank’s mission was a huge success. By the end of the 1950s, nations that had been the enemies of the US in the war were rebuilding their economies and becoming competitors to American corporations. One of America’s greatest challengers was Japan.

As foreign companies became more successful in selling their products in US markets, foreign banks acquired increasing amounts of US dollars. Beginning in 1963, foreign central banks requested that their dollar reserves be converted into gold by the US. By the end of the year, gold reserve at Federal Reserve Bank of New York could barely cover its liabilities to foreign central banks. By 1970, the US gold reserve at FRB New York covered only 55% of the liabilities to foreign central banks. One year later, it was down to 22%. From January to August, $20 billion in US gold assets left the US for other countries.

On August 15, 1971, President Richard M. Nixon, without the approval of congress, changed the US monetary and banking system.[viii]  This weakened confidence in the US dollar and created a major crisis for Nixon. He was searching for a solution when, on October 6, 1973, Syria and Egypt launched a surprise attack on Israel. Nixon sent supplies to Israel and the Arab League responded by pressuring King Faisal of Saudi Arabia to stop Aramco from delivering oil to the US. The US was fighting a war in Viet Nam and needed oil for the military. Something that many people do not know is that Aramco was owned by Standard Oil California, Texaco, Standard Oil of New Jersey, and Mobil Oil Company. They received 50% of the profits from Aramco, while the other 50% went directly to King Faisal. With Saudi oil off the market, world oil prices quadrupled.

Nixon sent Secretary of State Henry Kissinger on a secret mission to King Faisal. Kissinger told him that Saudi oil was a US national security priority and, if necessary, the US would use the military to intervene to restore the flow of oil. Faisal secretly arranged for oil shipments to be delivered to the US Navy until the embargo ended in 1974.[ix] Kissinger negotiated another secret agreement and it changed the course of history. Pay close attention to the details:

Saudi Arabia only accepts US dollars in payment for oil.
Saudi Arabia invests excess profits in US Treasury bonds, notes, and bills.
United States military protects Saudi oil fields.

Nixon solved the dollar problem. He switched the dollar from the “gold standard” to the “Saudi oil standard” -- and created the petrodollar.  Look at what happen to the US Money Supply after America switched to the “Saudi Oil Standard.”

Now, as Paul Harvey used to say, here is the rest of the story. Take out a dollar bill and look at it. At the top you will see the words “Federal Reserve Notes.” A “note” is an “I.O.U.” – a debt instrument. The creation of the dollar you are holding required a debt of $1 to be created. Can you guess what happened when the US Money Supply increased so dramatically to produce the dollars needed to buy all of OPEC’s oil?

The “T” on the left side of the graph stands for “trillions.” Take another look at the years 1959 to 1974 on the “Money Supply” graph. The entire US economy operated with a fairly level amount of money. The same is true for the amount of debt. Notice that even in the years America was engaged in major wars, the amount of debt remained fairy level too. America’s economy shifted from an economy based on the production of real goods and services to a financialized economy based on financial products and speculation. Professor Noam Chomsky provides very valuable insights about what happened.

The most important changes took place when the Nixon administration dismantled the postwar global economic system, within which the United States was, in effect, the world’s banker, a role it could no longer sustain. This unilateral act (to be sure, with the cooperation of other powers) led to a huge explosion of unregulated capital flows.

Still more striking is the shift in the composition of the flow of capital. In 1971, 90% of international financial transactions were related to the real economy – trade or long-term investment – 10% were speculative. By 1990 the percentages were reversed, and by 1995 about 95% of the vastly greater sums were speculative, with daily flows regularly exceeding the combined foreign exchange reserves of the seven biggest industrial powers, over $1 trillion a day, and very short-term: about 80 percent with round trips of a week or less.[xii]

The old economy produced jobs and economic opportunities for the masses, but the new economy did not. The goal and mission of CEOs was to maximize shareholder value. This marked the shift from a market economy (old economy) to a market society. A market economy was a tool, a valuable and effective tool, for organizing productive activity. It was a way of life in which market value did not invade everything aspect of life. But, a market society is a place where everything is up for sale and shareholder value is a higher priority than human life.[xiii] This took place in America without any serious public debate about where markets served the public good and where they did harm to the public -- and didn’t belong.

In the new market society, many Americas were surprised to learn that in Iraq and Afghanistan, there were more paid private military contractors on the ground than US military troops. This discussion was also made without explicit public debate. Citizens were never asked whether they wanted to outsource war to for-profit private companies. There are now a growing number of for-profit prisons and, in some California jails, if you don’t like the standard accommodations you can buy a prison cell upgrade.[xiv] Today, it would be hard to find anyone in America that believes that money doesn’t affect the quality of justice people receive. O. J. Simpson and Lindsay Lohan obviously were treated very differently that the thousands of poor that find themselves in the justice system.

The shift from a market economy to a market society resulted from the convergence of many factors -- the loss of America’s dominance in world markets, the Civil Rights Movement, the rise of liberalism, the flood of petrodollars, the transition to financialization, the loss of interest in self-government by citizens, an organized corporate conspiracy, the use of lobbyists to manipulate government, tax havens, and unregulated over-the-counter markets driven by unregulated speculation – to name a few.

This shift marked a decisive period in the demise of the role of citizens in self-government and the goal of living a “good life.” One of the primary factors in this shift was the rise of contemporary liberalism which focuses on individual rights. According to this liberalism, liberty does not depend on our capacity as citizens to share in shaping the forces that govern our collective destiny. Liberty depends on our capacity as individuals to choose our values and ends for ourselves.[xv] In other words, liberty means everyone can do their own thing. The new image of freedom became that of individuals as free and independent selves, unbound by moral or communal ties they had not chosen.

Freed from the dictates of custom or tradition, the liberal self is installed as sovereign, cast as the author of the only obligations that constrain. This image of freedom found expression across the political spectrum. Lyndon Johnson argued the case for the welfare state not in terms of communal obligation but instead in terms of enabling people to choose their own ends.[xvi] History makes it clear that simply dumping tons of money through entitlements to people who do not share a communal obligations or have any accountability for their actions will not produce the results that make our nation a better and safer place. It creates a mass of dependent people that rely on things provided by others with needs that continually increase. 

During this period when jobs were desperately needed by people being helped by Johnson’s “Great Society” programs, shareholder value driven CEOs changed the way they viewed businesses. In the old economy, a business was viewed as a whole and its value included the values it provided for its employees and the community. The new economy viewed a business as a group of individual components that were valued by their market values. Each component was classified as an asset or liability that produces profit or loss. Anything other than monetary value was secondary. Components were kept or sold based on an immediate effect on shareholder value. The fact that longtime employees lost their jobs or and the economies of local communities were destroyed were just part of doing business. In 1969 alone, there were 6000 acquisitions, and over the decade of the sixties, almost 25,000 firms ceased to exist as a result of mergers.[xvii]

The flood of new money created by the petrodollars didn’t make things better for people who needed jobs. Predators created one of the most lucrative fads in history – the leveraged buyout, or LBO. Leverage is debt and the new fad was using massive amounts of debt to buy companies. As a dangerous form of leverage, LBOs rivaled the pyramid holding companies of the 1920s.[xviii] In a basic LBO, a company’s managers and a group of outside investors borrow money to acquire a company and take it private; the company’s own assets are used as collateral for the loans, which are repaid from future earnings or assets.[xix]

This completely changed how management, specifically CEOs, could make huge amounts of money – without the need of existing shareholders, employees and customers. The story of the Burlington Industries LBO makes this very clear. Ron Chernow includes a very good overview of this event in his award winning book, The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance. Important points have been underlined for emphasis.

In early April 1987, reports surfaced that raider Asher B. Edelman was accumulating stock in Burlington, the largest textile company in America, based in Greensboro, North Carolina. Frank Greenberg, Burlington’s chief executive, cast about for a “white knight” to ward of Edelman and his partner, Dominion Textile of Canada. In a meticulous reconstruction of events published in an August 1987 issue of Barron’s, Benjamin J. Stern chronicled what happened next.

On April 15, thirty-two-year-old Alan E. Goldberg of Morgan Stanley telephoned Greenberg and said Morgan would be interested in buying Burlington while retaining current management.  In a follow-up letter of April 21, Bob Greenhill reinforced the naked appeal to Greenberg’s self-interest, saying, “We would have no interest in proceeding except upon a basis agreed to by your management.”

At an April 29 meeting with Greenberg, Morgan Stanley laid out plans to give management a 10-percent stake in the buyout, plus another 10-percent if certain performance standards were met.

Facing a clear-cut choice between a hostile raider, who threatened his livelihood, and the Morgan LBO fund, enticing him with lucrative incentives, could Frank Greenberg render a fair, impartial judgment for his shareholders? As Benjamin Stern noted, Morgan Stanley customarily dangled before management promises of salary increases ranging from 50 percent to 125 percent after a buyout. In this tempting situation, Greenberg granted some exceptional concessions to Morgan Stanley. He agreed to give Morgan a $24-million “break-up” fee in the event it failed to acquire Burlington.

Morgan Stanley justified this princely fee by citing interest it would allegedly forgo by locking up capital during the talks. Yet, as Stern noted, Morgan Stanley had no capital at risk until the taker’s completion – and then only $125 million of its own money. The break-up fee, however, worked out to interest that would have accrued on $7 billion over a two-week period. As Stern concluded, “The `breakup’ fee could be understood only as a form of payoff to Morgan from its partners on the Burlington board for being included in the deal in the unlikely event that the deal cratered. It simply made no sense otherwise.”

Greenburg waited until mid-May before disclosing his secret talks with Morgan Stanley, which was privy to company secrets denied Asher Edelman and Dominion. It was hard to see how both bidder groups were being accorded equal treatment.

In late June, the Morgan Stanley group made a bid of $78 a share, or about $2.4 billion, for Burlington, defeating the Edelman raid. It got about a third of America’s largest textile company for only $125 million and even most of that came from Bankers Trust and Equitable Life Assurance. It also earned $80 million in fees, including profits from underwriting almost $2 billion in junk bonds to finance the deal. Did Burlington profit equally with Morgan Stanley from this financial alchemy?

Before the buyout, the firm had a clean balance sheet, with debt less than half the value of common shareholders’ equity. When the LBO went through, the company suddenly struggled with over $3 billion in debt, or thirty times as much debt as equity. It subsequently had to fire hundreds of middle-level managers, sell off the most advanced denim factory in the world (ironically, to Dominion Textile), close its research and development center, and starve its capital budget to $50 million for a five-year period. All this not only upset the lives of Burlington employees, but drastically weakened the firm’s ability to compete in global markets.

By the last quarter of 1987, Burlington Industries was losing money despite higher earnings from operations. Why? It had to pay $66 million in interest for the quarter. There were profound political and social issues at stake in the LBO fad. Participants hailed the trend as a return to the “good old days” when bankers put their own capital at risk. They didn’t look closely at that history and the conflicts of interest that had resulted from executive coziness between bankers and the companies they financed.[xx]

It is clear who benefited from this LBO – Morgan Stanley, Burlington’s upper management, and the other banks that made the loans, arranged for the junk bonds, and collected huge fees. Who were the ones that were harmed by it – shareholders, employees, communities, and suppliers, to name a few. Now multiply this by the thousands of other companies that were affected by this predatory fad that swept across the world’s economies. But this was just a prelude for what would follow in America’s new financialized market society. [end of chapter]

The process of change begins citizens having facts so they can work together, instead of a steady stream of engineered propaganda designed to to separate and polarize the citizens of the greatest nation on earth. The government is not going to fix things -- neither are political parties, lobbyists, or anyone else who derives their wealth and power from the existing system -- especially "the 1%." So who is left?

"If not now when, if not you -- who?

[iv] Bankruptcy of Our Nation: 12 Key Strategies For Protecting Your Finances in ...  By Jerry Robinson; p. 120
[viii] Bankruptcy of Our Nation: 12 Key Strategies For Protecting Your Finances in ...  By Jerry Robinson; p. 122
[xii] Profits Over People: Neoliberalism and Global Order By Noam Chomsky © 1999; Seven Stories Press, New York, NY; p. 23.
[xv] Public Philosophy: Essays on Morality in Politics By Michael J. Sandel © 2995;Harvard University Press, Cambridge, MA; p.20.
[xvi] Public Philosophy; p. 21.
[xviii] The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance by Ron Chernow © 1990; Grove Press, New York, NY; p. 693.
[xix] The House of Morgan; p. 694
[xx] The House of Morgan; p. 694-698.