[Note from CAF: This post was originally published here in February of 2009.
In light of recent events, I am republishing.]

By Catherine Austin Fitts

In the fall of 2001 I attended a private investment conference in London to give a paper, The Myth of the Rule of Law or How the Money Works: The Destruction of Hamilton Securities Group.

The presentation documented my experience with a Washington-Wall Street partnership that had:

  • Engineered a fraudulent housing and debt bubble;
  • Illegally shifted vast amounts of capital out of the U.S.;
  • Used “privitization” as a form of piracy – a pretext to move government assets to private investors at below-market prices and then shift private liabilities back to government at no cost to the private liability holder.

Other presenters at the conference included distinguished reporters covering privatization in Eastern Europe and Russia. As the portraits of British ancestors stared down upon us, we listened to story after story of global privatization throughout the 1990s in the Americas, Europe, and Asia.

Slowly, as the pieces fit together, we shared a horrifying epiphany: the banks, corporations and investors acting in each global region were the exact same players. They were a relatively small group that reappeared again and again in Russia, Eastern Europe, and Asia accompanied by the same well-known accounting firms and law firms.

Clearly, there was a global financial coup d’etat underway.

The magnitude of what was happening was overwhelming. In the 1990’s, millions of people in Russia had woken up to find their bank accounts and pension funds simply gone – eradicated by a falling currency or stolen by mobsters who laundered money back into big New York Fed member banks for reinvestment to fuel the debt bubble.

Reports of politicians, government officials, academics, and intelligence agencies facilitating the racketeering and theft were compelling. One lawyer in Russia, living without electricity and growing food to prevent starvation, was quoted as saying, “We are being de-modernized.”

Several years earlier, I listened to three peasant women describe the War on Drugs in their respective countries: Colombia, Peru, and Bolivia. I asked them, “After they sweep you into camps, who gets your land and at what price?” My question opened a magic door. They poured out how the real economics worked on the War on Drugs, including the stealing of land and government contracts to build housing for the people who are displaced.

At one point, suspicious of my understanding of how this game worked, one of the women said, “You say you have never been to our countries, yet you understand exactly how the money works. How is this so?” I replied that I had served as Assistant Secretary of Housing at the US Department of Housing and Urban Development (HUD) in the United States where I oversaw billions of government investment in US communities. Apparently, it worked the same way in their countries as it worked in mine.

I later found out that the government contractor leading the War on Drugs strategy for U.S. aid to Peru, Colombia and Bolivia was the same contractor in charge of knowledge management for HUD enforcement. This Washington-Wall Street game was a global game. The peasant women of Latin America were up against the same financial pirates and business model as the people in South Central Los Angeles, West Philadelphia, Baltimore and the South Bronx.

Later, courageous reporting by several independent investigative reporters confirmed in detail that the privatization and economic warfare model I discussed in London had deep roots in Latin America.

We were experiencing a global “heist”: capital was being sucked out of country after country. The presentation I gave in London revealed a piece of the puzzle that was difficult for the audience to fathom. This was not simply happening in the emerging markets. It was happening in America, too.

I described a meeting that had occurred in April 1997, more than four years before that day in London. I had given a presentation to a distinguished group of U.S. pension fund leaders on the extraordinary opportunity to re-engineer the U.S. federal budget. I presented our estimate that the prior year’s federal investment in the Philadelphia, Pennsylvania area had a negative return on investment.

We presented that it was possible to finance places with private equity and re-engineer the government investment to a positive return and, as a result, generate significant capital gains. Hence, it was possible to use U.S. pension funds to significantly increase retirees’ retirement security by successfully investing in American communities, small business and farms — all in a manner that would reduce debt, improve skills, and create jobs.

The response from the pension fund investors to this analysis was quite positive until the President of the CalPERS pension fund — the largest in the country — said, “You don’t understand. It’s too late. They have given up on the country. They are moving all the money out in the fall [of 1997]. They are moving it to Asia.”

Sure enough, that fall, significant amounts of moneys started leaving the US, including illegally. Over $4 trillion went missing from the US government. No one seemed to notice. Misled into thinking we were in a boom economy by a fraudulent debt bubble engineered with force and intention from the highest levels of the financial system, Americans were engaging in an orgy of consumption that was liquidating the real financial equity we needed urgently to reposition ourselves for the times ahead.

The mood that afternoon in London was quite sober. The question hung in the air, unspoken: once the bubble was over, was the time coming when we, too, would be “de-modernized?”

In 2009 — more than seven years later — this is a question that many of us are asking ourselves.

Part II: Rethinking Diversification

Related Reading:

Dillon, Read & Co. Inc. and the Aristocracy of Stock Profits

151 Comments

  2. So here’s the big question… After reading Catherine’s online book, at http://www.dunwalke.com/ and half-way through a front-to-back re-read of Rupert’s “Across The Rubicon”, how much of the results of what is occurring with regards to the new (additional) Taxpayer debt is manufactured?

    In other words, there is little doubt that the Economy is totally in the toilet, but how much of the “bailout” is just another manufactured rape of some of the last available wealth in the the world, the American Middle Class?

    If it wasn’t for the fact that it feels like we’re (again) getting robbed blind, I could be accused of being paranoid 🙂

    Regards,

    John C.

  3. Hmmm…

    Almost turning out to be more of a group ‘therapy’ session around here as well. All concerns having relative consequence that appears to support our present situations, finding common ground with what we’re experiencing of the economic and financial environments we are facing today.

    Did that explain things right?

    I dunno.

    Historic elements as the World Trade Center (which had previous attempts of destruction) now appear as an ironic/iconic event which reflects the frustrations and misaligned behaviorisms of those who most propably had been influenced by geneations of western attitudes and subjective culture shock both through economics and ‘imperialism’ enterprize. They found an avenue in which to vent their impatience, bigotry and ignorance.

    Had this become such an iconic event, as mentioned, to represent an exercise in efforts to halt Americanism? To bring down the industrial and a major world power giant as the ‘financial coup d’ etat’ was well underway? While then, in the menatime, the ‘War in Iraq’ provided a distraction and provide a shield for what was to further take place behind the scenes of such global, unification of such a conspiracy?

    Wars have a way of taking center stage, while other projects are taking place within less prioritized and attention getting environments. At least, from the common man, the masses in general. Who then, haven’t the foggy-est of what’s really going on and… why. It hardly became headliners or coffee shop conversations. (How bourgeois, the financial, coup d’etat. It does fit so well.)

    Many of us have been ‘skunked’. Be it on the international level between world leaders, or border-sharing governments and nationalistic (prejudiced and pro-ethnic) peoples, or that of those with only local and personal concerns as an economy or industrial status.

    We have been distracted, haven’t we?

    Even to the extent of our own personal finances, as example, re-financing of our homes and businesses. Hey, recall the mortagage folks offered up 125+% of what your propperty was REALLY worth? Not clear economics but a period of licensed financial freedoms and greed, for both parties.

    Here we are today, huh.

    A new reality check, for everyone, at all levels and finding a common ground together. Making a ‘feel good’ moment for everyone who writes in and shares their view. (Any solutions?)

    Like this therapy session here, we call a blog. Like other blogs? What IS a ‘blog’, really?
    (Soapbox derby.)

    Maybe it should be called, a blah-blah. Think? Or, have I just made an oximoronic comparison? Eh.

    Whatever. Its still bigger than all of us, isn’t it?

    Harry

  4. Human nature.
    The seven deadly sins.
    Awareness and the lack thereof.
    Beliefs.
    Seems like the whole problem derives from that human propensity to either believe or disbelieve.
    Belief or disbelief in a God.
    Belief or disbelief in the goodness of man.
    Belief or disbelief in the idea that there is enough for everyone and greed is not necessary.
    Belief or disbelief in the idea that there is not enough to go around.
    Belief or disbelief that greed is good, or bad.
    Are not all human “sins” merely human desires that get out of control?
    Are not hoarding, packing away for the future, and “getting it all” just ways to manage fear that there isn’t enough for everyone?
    Isn’t there an irony in the fact that “hedge” funds were a gamble against failure, and brought about that failure?
    Isn’t there an irony in the fact that fear exercised seems to always bring more to fear?
    The Gold Standard? I like the quote, “He who has the Gold, Rules.”
    Isn’t money really a product of human productivity?
    As each new person comes into the world, he/she brings his/her value as a member of society, contributing the talent, labor, genius, whatever that he/she brings to the mix, and that is worth something more than gold, silver or other pieces of metal.
    Get rid of the Fed, but forget the Gold Standard.
    What America needs is a return to the Constitution. It worked for a long, long time.
    It can work again.
    If we can find a way to clean our own house and treat each other with the respect, dignity and honor that we each owe each other as human beings and fellow American Citizens, we can re-gain our freedom, and the respect of the world, as well as our own respect, which we seem to have lost.

  5. “The acquisition of wealth is no longer the driving force in our lives. We work to better ourselves and the rest of humanity.”

    — Picard to Lily Sloane
    First Contact

    In fifty years, it seems greed of money/currency will be replaced by hoarding of energy and drinkable water, both which have a limited supply and insatiable demand.

  6. Just one last note. We here in Ecuador have been experiencing pretty much all in a nutshell from 90s to present revolution of citizens who said enough. Banks going broke and taking with them pretty much half or more of the economy. All this Bankers are now in USA and happy ever after protected by US government. John Perkins book is completely right as we ecuadorian citizens have lived it all and seen it all happen in front of our eyes!.
    Bankers here did not even respected olders and youngsters (kids) saving accoutns. My kids savings account was wiped out. An old lady last savings ($400-600USD) also wiped out. She was in front of me at Bank line trying to get her money. They just said: Sorry. No money in this Account. Many people lost all including myself and family. We had to start over luckily we own our business and thank God a good steady one (beer distribution territory).
    I yeeled at then and to wind: “SCOUNDRELS, THIEVES!” right in Bank offices. That was all to it.
    All this happened in the mid late 90s in Ecuador. Then came dolarization as only hope and inflation of 100%. Acumulated inflation before dolarization also around same number in less than a decade. Interest in Banks now (dolarized economy) 10 spread. 5% for your CDs or less. 15% or more for a mortgage loan on 10 -12 years..
    Average income around $500 USD per capita. Cost of energy 10-12cts USD KW/hr. Gas regular $ 1.60 USD. National Debt to IMB and WB 14 billion.
    This is what 30 years of exploiting oil left us.
    Do you think we dont know what real reality is in Ecuador?..
    Neoliberism is gone…
    And we dont want Socialsm worst communism or drugs. Ecuador exports pretty much everything but drugs. Anyway, we were bombed cause Farc guys come inside our territory since Uribe cant control their army wors their terrorist. Push them to our border and expect us to do the dirty job..and if we dont do it. Get bombed!. Great. If they have means to find somebody in middle of jungle why they dont find them in Colombia territory? Is the goddamm same jungle for christ sake.
    And if south america is such a bunch of bad guys. Then what about Saudis. Royal antidemocratic country. Home of Osama B. Women treated like animals there. And nobody sayd or does anything. WHY?.
    You know damm well WHY.
    To finish just say that I forgot this: instead of trying to find the WHOS. Try better WHYS, WHATS AND HOWS.
    Best luck to all and God bless us.
    The Eagle must meet the Condor soon.
    Watch this:http://www.youtube.com/watch?v=EGUi2eDq3Fs&feature=related
    PEACE

  7. I appreciate the wisdom that Anastacio is passing along as it is the type of information that will be much in need and very much helpful to survive. What stands out is the human connection through it all as opposed to the spiritless living of the rich and elite. Two of my children spent some time living in the Democratic Republic of Congo and when visiting there it occurred to me that it takes much skill to survive in poverty and there is much to be learned and gained from those who perservere through disadvantage.

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