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Financial Coup dEtat
Catherine+ ,e-s . Commentar/ on 0ugust 8+ 2011 at 10:08 pm 2 183
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$inancial Coup d4Etat
5,ote 6rom C0$: %his post -as originall/ published here in $ebruar/ o6
2009. 7n light o6 recent events+ I am republishing.8
!/ Catherine 0ustin $itts
7n the 6all o6 2001 7 attended a private investment con6erence in
9ondon to give a paper+ %he '/th o6 the :ule o6 9a- or ;o- the 'one/
"orks: %he )estruction o6 ;amilton #ecurities <roup.
%he presentation documented m/ e=perience -ith a "ashington-"all
#treet partnership that had:
Engineered a fraudulent housing and debt
bubble;
7llegall/ shi6ted vast amounts of capital out of the U.S.;
Used privatization as a form of pirac! " a prete#t to
move government assets to private investors at
belo$%mar&et prices and then shift private liabilities
bac& to government at no cost to the private liabilit!
holder.
>ther presenters at the con6erence included distinguished reporters
covering privati?ation in Eastern Europe and :ussia. 0s the portraits o6
!ritish ancestors stared do-n upon us+ -e listened to stor! after
stor! of global privatization throughout the '(()s in the
*mericas+ Europe+ and *sia.
#lo-l/+ as the pieces ft together+ $e shared a horrif!ing epiphan!,
the ban&s+ corporations and investors acting in each global
region $ere the e#act same pla!ers. -he! $ere a relativel!
small group that reappeared again and again in .ussia+
Eastern Europe+ and *sia accompanied b! the same $ell%&no$n
accounting /rms and la$ /rms.
Clearl!+ there $as a global /nancial coup detat under$a!.
%he magnitude o6 -hat -as happening -as over-helming. In the
'(()0s+ millions of people in .ussia had $o&en up to /nd their
ban& accounts and pension funds simpl! gone " eradicated b!
a falling currenc! or stolen b! mobsters $ho laundered mone!
bac& into big 1e$ 2or& Fed member ban&s for reinvestment to
fuel the debt bubble.
.eports of politicians+ government o3cials+ academics+ and
intelligence agencies facilitating the rac&eteering and theft
$ere compelling. 4ne la$!er in .ussia+ living $ithout
electricit! and gro$ing food to prevent starvation+ $as 5uoted
as sa!ing+ 6e are being de%modernized.
#everal /ears earlier+ 7 listened to three peasant -omen describe the
"ar on )rugs in their respective countries: Colombia+ 7eru+ and
8olivia. 7 asked them+ *fter the! s$eep !ou into camps+ $ho
gets !our land and at $hat price9 :! 5uestion opened a
magic door. -he! poured out ho$ the real economics $or&ed
on the 6ar on ;rugs+ including the stealing of land and
government contracts to build housing for the people $ho are
displaced.
0t one point+ suspicious o6 m/ understanding o6 ho- this game -orked+
one o6 the -omen said+ @Aou sa/ /ou have never been to our countries+
/et /ou understand e=actl/ ho- the mone/ -orks. ;o- is this soBC 7
replied that 7 had served as 0ssistant #ecretar/ o6 ;ousing at the D#
)epartment o6 ;ousing and Drban )evelopment E;D)F in the Dnited
#tates -here 7 oversa- billions o6 government investment in D#
communities. *pparentl!+ it $or&ed the same $a! in their
countries as it $or&ed in mine.
7 later 6ound out that the government contractor leading the "ar on
)rugs strateg/ 6or D.#. aid to &eru+ Colombia and !olivia -as the same
contractor in charge o6 kno-ledge management 6or ;D) en6orcement.
-his 6ashington%6all Street game $as a global game. -he
peasant $omen of <atin *merica $ere up against the same
/nancial pirates and business model as the people in South
Central <os *ngeles+ 6est 7hiladelphia+ 8altimore and the
South 8ron#.
<ater+ courageous reporting b! several independent
investigative reporters
con/rmed in detail that the privatization and economic $arfare
model I discussed in <ondon had deep roots in <atin *merica.
"e -ere e=periencing a global heist, capital $as being suc&ed
out of countr! after countr!. %he presentation 7 gave in 9ondon
revealed a piece o6 the pu??le that -as di3cult for the audience to
fathom. -his $as not simpl! happening in the emerging
mar&ets. It $as happening in *merica+ too.
7 described a meeting that had occurred in 0pril 199G+ more than 6our
/ears be6ore that da/ in 9ondon. 7 had given a presentation to a
distinguished group o6 D.#. pension 6und leaders on the e=traordinar/
opportunit/ to reengineer the D.#. 6ederal budget. 7 presented our
estimate that the prior /ear4s 6ederal investment in the &hiladelphia+
&enns/lvania area had a negative return on investment.
"e presented that it -as possible to fnance places -ith private eHuit/
and reengineer the government investment to a positive return and+ as
a result+ generate signifcant capital gains. ;ence+ it -as possible to
use D.#. pension 6unds to signifcantl/ increase retirees4 retirement
securit/ b/ success6ull/ investing in 0merican communities+ small
business and 6arms I all in a manner that -ould reduce debt+ improve
skills+ and create Jobs.
%he response 6rom the pension 6und investors to this anal/sis -as
Huite positive until the &resident o6 the Cal&E:# pension 6und I the
largest in the countr/ I said+ @Aou don4t understand. 7t4s too late. %he/
have given up on the countr/. %he/ are moving all the mone/ out in
the 6all 5o6 199G8. %he/ are moving it to 0sia.C
#ure enough+ that 6all+ signifcant amounts o6 mone/s started leaving
the D#+ including illegall/. >ver KL trillion -ent missing 6rom the D#
government. ,o one seemed to notice. 'isled into thinking -e -ere in
a boom econom/ b/ a 6raudulent debt bubble engineered -ith 6orce
and intention 6rom the highest levels o6 the fnancial s/stem+
0mericans -ere engaging in an org/ o6 consumption that -as
liHuidating the real fnancial eHuit/ -e needed urgentl/ to reposition
ourselves 6or the times ahead.
%he mood that a6ternoon in 9ondon -as Huite sober. %he Huestion hung
in the air+ unspoken: once the bubble -as over+ -as the time coming
-hen -e+ too+ -ould be @de-moderni?edBC
7n 2009 I more than seven /ears later I this is a Huestion that man/
o6 us are asking ourselves.
&art 77: .ethin&ing ;iversi/cation
For our entire lives+ most of us have depended on highl!
centralized s!stems. >ur 6ood comes 6rom a thousand or more miles
a-a/. >ur savings is shipped into distant /nancial centers and
invested b! strangers in enterprises run b! strangers. 6e
$atch highl! scripted ne$s that serves the same spin no
matter ho$ man! channels $e tr!. 6e ban& at impersonal
global ban&s $ith criminal records that $ould ma&e a felon
blush and have no idea $here our mone! goes+ =ust that the
government guarantees that $e $ill get it bac&.
"ithin this centrali?ed s/stem+ diversifcation means having /our
fnancial assets deposited into a @one-stop-shopC brokerage account
invested in securities representing diMerent global industries+ the idea
being -hen one industr/ is doing poorl/+ another @counterc/clicalC
industr/ -ould be doing -ell.
!ut suddenl!+ $e /nd that $e ma! not be able to trust these
centralized s!stems. Suddenl!+ traditional portfolio theor! no
longer addresses our an#iet!. -his is because $e need to shift
from diversi/cation $ithin a centralized s!stem to real
diversi/cation in a decentralized+ possibl! out of control
$orld.
76 /ou stud/ the investment patterns o6 6amilies and -ealth that has
survived through the generations+ including through periods o6
la-lessness and -ar6are+ /ou come to understand that 6or those -ho
-ant to thrive in all economic and political scenarios+ diversifcation
has had a 6ar deeper meaning than -hat is commonl/ understood in
the fnancial markets toda/. $or the astute strategist+ it means not
putting all /our eggs in one basket in ever/ important aspect o6 /our
li6e. <iven -hat is happening in our -orld and econom/+ it4s time to
revisit the deeper meaning o6 diversifcation.
;iversi/cation means that our assets are invested such that an
economic+ political+ or natural event > particularl! a
catastrophic event > cannot $ipe us out. #o+ 6or e=ample+ -e
don4t invest all o6 our savings in a single fnancial institution or 6und.
Investors $ho lost their life savings in the :ado? scandal $ere
not practicing even the most basic form of /nancial
diversi/cation.
;iversi/cation also means having multiple t!pes of assets and
custodians in multiple places. Custodians @i.e.+ those $ho hold
our assets for usA might be bro&erage /rms+ ban&s+
depositories or our o$n safe.
)iversifcation b/ place means locating our assets in states or
countries subJect to diMerent legal and political risks. 7t means
denominating our assets in currencies o6 multiple countries. 7t means
selecting assets subJect to diMerent risks o6 loss due to climate change+
-eather conditions+ social conditions and other uniHuel/ local
vicissitudes. 9ocal investment is a great idea+ but the people -ho lived
through Natrina can tell /ou -h/ having all o6 /our eggs in one local
basket ma/ not be the best idea.
)iversifcation means that $e dont have all of our savings in =ust
one t!pe of asset. #o $e dont invest in securities onl! > $e
also invest in tangibles. If possible+ $e bu! a house $ithout
debt+ or $ith debt that can be serviced b! one famil!
members income+ or invest in our home to lo$er energ! and
food costs permanentl!. 6e also maintain a su3cient
inventor! of household goods. *nd its a good idea to invest in
disaster preparedness if $e live in an area that e#periences
earth5ua&es+ Boods+ hurricanes+ or tornadoes or is prone to
po$er outages.
;aving all /our mone/ in one currenc/ or one countr/ is prett/ risk/ O a
risk man/ in the D# tend to take. 0sk /our *e-ish 6riends -hose
parents got out o6 <erman/ in time because the/ had gold coins or
6amil/ and assets abroad. <old coins ma/ hold their value i6 the dollar
collapses+ but the/ can also disappear in a burglar/ or i6 /ou 6orget
-here /ou put them. ;igital gold ma! be a great thing+ but if the
Internet is not reliable $here !ou are+ cold cash ma! be a good
thing. >r if !our cash is $orthless+ a stoc&pile of food+ vitamins
and li5uor can be priceless. Co$ever+ food+ vitamins and li5uor
are onl! good $hen !ou are bartering $ith someone $ho $ants
them or is close b!. 6hich ta&es us bac& to gold coins or digital
gold or some other currencies. So !ou see+ there is no magic
bullet " =ust diversi/cation.
)iversifcation o6 li6e risks is an integral part o6 all matters related to
fnancial capital. 9iving things are the source o6 all -ealth. %hat
includes /ou and me.
)iversifcation means that $e invest in our ph!sical and mental
$ell%being. "e invest our time in understanding the to=ic chemicals+
drugs and other inPuences that increasingl/ contribute to poor health
and cause us to need so much more 6unding 6or more drugs and
medical treatments to cure -hat ails us. >ne o6 the greatest O and
gro-ing I threats to our fnancial health is ph/sical illness. %he notion
that corporate stock investments -ill create securit/ -hile one saves
mone/ eating unhealth/ 6ood is contradictor/ to the principles o6
building real -ealth.
)iversifcation means that -e invest not Just in our o-n human capital
but also in the human capital o6 other members o6 our 6amil/ and those
around us. 7n this -a/+ -e are not betting on fnancial assets alone to
see us through. "e are investing in each other because it is 6amil/+
6riends and communities that help see us through. 0n active net-ork
o6 mutuall/-supportive 6riends and colleagues is important. $or those
-ith suQcient capital and skills+ fnancing the 6armers and companies
-e depend on 6or our dail/ bread ma/ not provide much o6 a return I
it ma/+ ho-ever+ ensure that -e have health/+ sa6e 6ood.
)iversifcation also applies to the -ork -e do. $or most people+ our
labor is our most important source o6 fnancial assets. S&ill diversit!
can mean+ for e#ample+ that !ou have a number of s&ills. If one
s&ill goes out of favor+ another $ill give !ou the abilit! to be
economicall! useful. If !ou have a business that fails+ !ou have
the abilit! to start a ne$ business because !ou have the
e#perience and diversit! of s&ills to ma&e a business run.
-he abilit! to generate income through !our o$n business or
practice is invaluable+ particularl! $hen the economic
environment ma&es 6%D emplo!ment more di3cult to /nd. 76
/ou are an emplo/ee and /our compan/ closes+ i6 /ou have taken care
to broaden /our skill base+ /our skills can be valuable commodities 6or
other+ diMerent t/pes o6 emplo/ers or emplo/ers in other industries or
places less aMected b/ a do-nturn. !etter /et+ /ou kno- ho- to do
man/ things 6or /oursel6+ thus oMsetting lost income -ith lo-er
e=penses. 9ook at those -ho are success6ul in the current
environment: -hat most o6 them share is a commitment to li6e-long
learning that translates into a multitude o6 personal and pro6essional
skills.
)iversifcation is not al-a/s eas/ to achieve. %he more resources -e
have+ the easier it is to diversi6/. %he 6e-er resources -e have+ the
more our diversifcation 6ocuses on building our human capital and
communit/. 7nterestingl/ enough+ man/ o6 the best opportunities
be6ore us are those that can happen -hen people -ho have a lot o6
mone/ and people -ho don4t have mone/ but have a lot o6 skills
become allies in building greater diversifcation together. 7solation
shrinks our options. >pportunities e=pand as -e organi?e and
collaborate eMectivel/. ;ence+ it is critical to not assume fnancial
capital can provide suQcient diversifcation alone and remain isolated
6rom our neighbors and 6amil/.
>ne o6 m/ goals 6or the #olari :eport is to e=plore options -e have to
strengthen and diversi6/ our human and fnancial capital and to
introduce /ou to leaders -ho are taking action to help us do so. %his
-eek+ 7 -ill be revie-ing recent fnancial events and discussing
indications that more and more people are concerned about a fnancial
coup d4etat.