By Richard C. Cook 5/2/07

The author of this independent report worked for the Carter White House and NASA, then spent 21 years with the U.S. Treasury Department. In the report, he explains that the U.S. financial system headed by the Federal Reserve System has failed and that only an emergency program of monetary reform can address conditions which may be leading to a catastrophe like the Great Depression or worse. Such an assessment has become increasingly familiar as economic storm clouds continue to gather. But the analysis and recommendations contained in the report may be surprising, even to many progressives.


The mass media show attractive images of the comfortable lifestyles of the upper income earners who benefit from the cash-rich global economy. Which luxury car to drive, which championship golf course to frequent, which hedge funds to invest in, which stock brokers to consult–good questions if you’ve got the money! But behind this attractive scenery, debt, bankruptcy, and poverty are a tsunami that is overwhelming much of the world’s population, including growing numbers in the U.S.

Following close on the heels of these calamities is a worldwide breakdown in law and order. Drug dealing, money laundering, gangsterism, white collar crime, political corruption, weapons trafficking, human slavery, terrorism, and endemic warfare are the dark side of a global financial system where everything has a price, the rich seem above the law, and individual security is almost impossible to attain.

Behind the fences of our gated communities, we fancy ourselves the “good guys” in this scenario. We’ve learned to blame the victim, failing to see that it’s a world the U.S. and the other Western powers have fashioned through our centuries-long march to own or control everything that can have a price tag attached to it.

Meanwhile, “dollar hegemony” has flooded the world with U.S. currency, loans, or debt instruments to support our fiscal and trade deficits, pay for our extraordinary level of resource utilization, induce foreign governments to purchase our armaments, ensure the allegiance of their governing elites, and maintain their economies in subservience through World Trade Organization and International Monetary Fund trade and lending policies.

Today we are engaged in the outright military conquest of the Middle East. Our political leaders tell us that if we don’t fight the “terrorists” in Bagdad we will have to fight them on our own shores. But India, which has become our largest armaments customer, has seen a soaring number of suicides among bankrupt farmers left out of that nation’s economy. The illegal immigrants who have flooded the U.S. from Mexico have watched NAFTA destroy their own family farms, where 600 Mexican farmers a day are forced off the land.

But now our pigeons are coming home to roost. The CEO of one of our leading brokerage houses received over $53 million in bonuses in 2006. Not far from his plush Wall Street office, veterans of two Iraq wars sleep in homeless shelters.

While U.S. corporations, including the financial industry, are reaping enormous profits, our domestic economic problems are growing, including an enormous load of cumulative societal debt, a continuing decline of real family income, and increasing wealth and income gaps between the rich and the rest. Despite the reports in the mainstream press about the economy’s “soft landing” and the continued record-setting performance of the stock market, the financial markets have been shaken by the bursting of the housing bubble and soaring home foreclosures. Meanwhile, the relentless decline of our domestic manufacturing sector continues.

But one thing is connected to another. A good investigator always asks, “Who benefits?” The most salient feature of our financial system is that the creation of new purchasing power through credit–loans, mortgages, credit cards, etc.–is controlled by private financial institutions and, though regulated, works principally for their profit. Because we are never taught about alternative economic structures, we take this system for granted, though earlier generations had profound fears of becoming what President Martin Van Buren prophetically called a “bank-ridden society.”

The private control of credit has given vast wealth and ironclad political dominance to what Van Buren and his 19th century contemporaries warned about–the Money Power, even though our Constitution gave Congress authority over our monetary system. This authority had been compromised through the system of state-chartered banks before the Civil War. But with the National Banking Acts of 1863-4 and the Federal Reserve Act of 1913, Congress largely ceded its powers over money to the private banking industry.

Today, high finance rules our economy and most of the violence-wracked world. The system came into existence in order to provide the capital for economic growth during the industrial revolution, but those who ran it figured out how to do so in ways that vastly increased their own wealth and power. They rule the world today.

But the system is man-made, with functions and effects that can be measured and analyzed. The system was created by historical forces, but if we want to, we can identify these forces and change the system. What we have lacked is the understanding of our possible choices, along with the discernment and moral courage to act on our understanding.

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