Home / The Case for Fraud: What’s Next?

The Case for Fraud: What’s Next?

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A couple of posts and what seems now like ages ago, I still held on to a modicum of hope concerning this country's future, that of the West, and our culture and way of life in general. Despite the parasites on Wall Street and the crumbling of the markets, for all the ineptness on the part of the government to deal with the present crisis, I dreamt of unsung heroes. After the manner of the fictional characters from Ayn Rand's novels, they were certain to rise from the ashes and make us believe that all was not lost, that values such as honesty, industry and hard work were bound to persevere and could once more be reclaimed as part of our national heritage, that America could regain its rightful place among the leaders of the world in championing democracy, freedom and individual self-determination as Everyman's birthright. Surely our once-cherished beginnings as "the Great Experiment" were far from over but would go on indefinitely, and that we were slowly approaching, if we only stayed on course, what some have euphemistically referred to as "The End of History."

After all, there were still people like Bill Dettering, the Applian CEO, and many others like him — all industry leaders, all young, innovative, and enterprising, who were above the fray and the current frenzy of making a quick buck but who were moved instead by their own vision of the world in the making. True, our manufacturing base may have dwindled, and along with it, our economic prowess; but we were still the world leader in the field of computer technologies, the undisputable nerve center of all future industries and business enterprises. Like the captains of industry of old or the heroes of Ayn Rand's universe, it is they who would surely lead us out of our present-day morass into the brave new world of the uncertain future. Such were my musings and ruminations only a while ago, when it was still possible to believe; and I held on to those beliefs with all my might, feverishly, frantically, blindly. I couldn't let go (See "The Met on the Net," for example, or "Setting Matters Straight, Part II.").  No longer!

I realize now that all my hopes and sense of cautious optimism have been in vain. They’ve all presupposed a certain morality in government, the kind of decency we’ve come to expect from our public servants, politicians, and elected officials. Which isn’t to disparage anyone in particular, any person, that is, you may or may not know, elected or appointed, who have ever had the privilege to serve in public office. For all intents and purposes, he or she may be a paragon of virtue, exactly as we’ve imagined them to be as when we voted for them in the ballot box. It is, rather, that the culture of Washington, and every other power center emanating therefrom, had become so corrupt, so deeply stained, so much beyond repair, that it is nearly impossible for any one individual or a group of individuals, however well-meaning or well-intentioned, to reverse the process. The marriage of Washington and Wall Street is well-nigh complete; and it is Wall Street which is the master. It’s all on the pages of Catherine Austin Fitts’ memoirs, Dillon Read & Co, Inc., and the Aristocracy of Stock Profits. I’m only the messenger.

If you think for a moment the present crisis is just another business cycle, a phase we must go through, think again.

• 533,000 jobs lost in the month of November alone while the figures for December are no less promising
• The recent string of bank failures and the resulting credit crunch
• Industrial giants like Ford and General Motors on the verge of bankruptcies and government’s frantic attempts at rescue
• Unprecedented daily swings in the Dow Jones and other market indicators
• The plummeting of oil futures and the corresponding drop of prices at the pump
• Reports of labor unrest in conjunction with business closures (such as of Republic Windows and Doors in North Side Chicago)
• The folding of such icons of the publishing world as the Chicago Tribune
• The rise of modern-day piracy

This bullet list is nowhere near complete; and I’m certain you could modify it at will, as almost daily we’re being treated to tidbits of news and information that only yesterday would have made our heads spin. One thing, however, is beyond dispute: the situation we’re facing defies all comparisons. Even the Great Depression of 1929 was, relatively speaking, a local phenomenon. The present crisis is global in every conceivable dimension because of worldwide trade-agreements, the interconnectedness of the markets, and geopolitics. To my thinking, it signifies nothing less than a general loss of confidence in the West and its bankrupt economic policies. For better or worse, raw capitalism, rampant and unchecked, has hijacked the institutions of liberal democracy; and the entire world is falling apart at the seams.

I’ve long since stopped listening to conservative talk-show hosts for a variety of reasons, but occasionally a sound byte can’t escape me. Glenn Beck had it right the other day when he said:

"Unlike the contestant in More-On Trivia that couldn't find the downside of printing money, there is always a price to be paid. The dot-com bubble burst. We cured it with a housing bubble. It burst. We're curing that with a money bubble. It's the last bubble. When this one bursts, there ain't anything left because our money will be worthless.  Indeed, once the “money bubble” is burst, there’ll be no place to hide!"

In her Solari blog, Catherine Austin Fitts writes: "People often ask whether I am concerned about inflation, deflation, peak oil, or a global financial meltdown . . . . [But] the risk scenario I weight most heavily is not listed above. I call it the “Slow Burn.” She then goes on to explain what she means by “Slow Burn”:

"The “slow burn” is a political culture and economy managed through principles of economic warfare in which insiders systematically protect themselves and centralize control and ownership of resources by using:

• Central banks
• Currency and lending systems
• Taxation
• Regulatory and enforcement policies
• Controlled media and entertainment

Insiders use these means to drain the time, resources, and life of people on the outside. Although insider cartels compete and jockey for power, they are able to settle their squabbles by increasing control and draining everyone and everything else. This is why the bubble economy continues to deplete the real economy. It is likely the reason why Dick Cheney said, 'Deficits don’t matter.'"

In a slow burn scenario, it is possible to prop up trillions of dollars in financial asset values by systematically arranging subsidies that ultimately liquidate life. This is what “managing” markets really means: de-populating people and places to maintain phony values created and necessitated by derivative bets.

The reason why it is difficult for sophisticated financial people to discern that a slow burn is taking place is because we have not yet collectively mastered the operational detail of how it is implemented. This is an extremely important subject.

One of the most important aspects of the Paulson Plan to reengineer US financial regulation is the assertion of complete control of payment systems by the Federal Reserve and gaining access to the data of essentially any financial institution. Combined with 1) the ability to print money and 2) digital communication payment and surveillance technology (satellite), this will consolidate greater power into fewer hands than at any time in recorded history.

As Nicholas Negroponte said, “In a digital age, data about money is worth more than money.”
Taken word-for-word, it’s the most astute appraisal I’ve heard yet. The consolidation of eco-nomic power (by the insiders) is on while the governments, if not accessories before the fact, ap-pear powerless to act. Meanwhile, everything and everyone is being gobbled up.

In light of her own down-to-earth assessment of the crisis, I find it difficult to understand Ms Fitts’ unfaltering faith in the future, for in the same blog she writes:

"The future is something to be created, rather than feared. Allocating our time, networks, and resources to deal with a variety of high-risk scenarios frees us to become proactive and to build positive futures instead of negative ones. I like to understand what these scenarios mean in terms of managing risk and to know how we can succeed within all possible futures."

Likewise with her would-be solutions.

She speaks, for instance, of investing in local communities –- locally-owned and operated banks, small businesses, etc. –- creating thus what she calls a climate of “financial permaculture” which would divert hard-earned money, individual savings, resources and what have you, from centralized institutions on Wall Street that only take from the community, never give. Included in the concept are such strategies for rebuilding our communities as “repositioning of distressed assets,” “forming strategic partnerships,” “aligning incentives” and “identifying and eliminating financial waste” (see link below).

Don’t get me wrong. The centralization of economic power at the hands of the few –- institutions financial or otherwise which are only self-serving –- is the heart of the matter and the cause of all our ailments; and decentralization is the obvious remedy. But how realistic is it, really? Given the years of indoctrination, the established patterns of consumer spending and investing, the ease and the economy of dealing with centralized banking and telecommunication systems (be they Bank of America or AT&T), and generally speaking, “the Wall-Mart” phenomenon, the odds are rather negligible that there could result anything but a very insignificant shift of resources from concerns which are harmful to the well-being of our communities to those which are not. The best one could hope for are only a few relatively-speaking self-sufficient communities, insular and unto themselves, but too few to make a difference. It reminds one, I’m afraid, of the good ole’ hippie revolution in the 60s: only the die-hards joined the hippie communities at the prompting and, so the story goes, lived happily ever after.


Ms. Fitts has a perfect out, of course. “My business is investment, not prophecy,” is her disclaimer. Fair enough. But I think it behooves us to venture into prophecy even at the risk of being wrong. The big boys aren’t just going to take it lying down while the power slips through their hands. There’s got to be a showdown!

So what’s next?

The subject matter of political vs. economic power, of their co-operation and confrontation, is a fascinating subject in its own right, the present notwithstanding. Historically at least, in a zero-sum game, politics – or the military, if you will -– would always win out. What’s peculiar about the present is the degree to which all governments – the totalitarian regimes such as Russia or China excluded –- have become susceptible to the dictates and whims of the corporation. It’s not so much a statement about the relative decline of political power; it is, rather, a testimonial to the unprecedented rise in the power of a global conglomerate and its hold on us. In the olden days, the corporation was an arm of the government so to speak – its good-will ambassador, the pro-vider of goods and services, even a mercenary if need be. The East India Trading Company is one example. And there are many other examples from the history of the Spanish Empire, for instance: the very formation of missions is a case in point. It is considerations such as these that only a while ago had lead me to believe that we’ve reached the point of no return, a point at which corporate power was inviolable, that no power on earth could possibly usurp it. I was wrong.

An episode from Isabel Allende’s first novel, The House of the Spirits, comes to mind. After years of internal squabbles between the Liberal and the Conservative parties, now one party tak-ing the reins of power and then another, the people have had it. A socialist-based movement called “The People’s Party,” a relative newcomer to the political scene, wins the elections hands down and throws the rascals out. There is singing and dancing in the streets and the mood is cel-ebratory. But the festivities are short-lived. The conservative element of the just-deposed regime sponsors a coupe, as a result of which the military takes over and the newly-elected government is on the run. Terror and violence is the order of the day.

Things don’t go, however, as planned. What was originally transacted for as a period of “peaceful” transition -– to enable the conservatives to regain their grip on power -– becomes a living nightmare. Power acts as an aphrodisiac and the military is reluctant to let go. Even the con-servatives are persecuted, no less so than the more “subversive” elements, as part of the martial law. No one is safe! When Esteban Trueba, a rich landowner and a former senator of the Con-servative Party, points out to the uncooperative functionary that the very gun he packs in his hol-ster has been bought and paid for by him and others like him, that the economic power is still in the hands of the conservative elite, he’s met with a summary dismissal. “That may be so,” replies the functionary, “but now we are in charge.” To add insult to injury, poor Esteban is asked to turn in the keys to his car. So what had started as an attempt to see “the minister” in order to intercede on behalf of his imprisoned daughter, Blanca, ends in total humiliation.
Granted, the scene of action is South America – presumably Chile, the place of Isabel Allende’s birth – although the narrator is careful not to make references to any such. And given the general proclivity of South American countries to resort to military dictatorships at the slightest signs of trouble –- their entire history in fact –- one is liable to dismiss this example as too parochial, too regional in nature to serve as an object lesson. “Blame it on the Latin blood,” is the predictable response. I beg to disagree. The fascist elements are always with us, and they’re not respectful of time and place, of blood- or ethnic boundaries. It’s in the nature of the beast. The history of the world is replete with examples of wide pendulum swings from one extreme to the other and all kinds of atrocities on either side. Which leaves us in an unenviable position of having to choose between the worst of the alternatives: brute force or slow and protracted exploitation. Compared to the horrid conditions described in Isabel Allende’s novel, the past may have seemed like a lark.

I’d like to close with another memorable episode. Blanca’s parents, Esteban and Clara, are both dead. All she’s left with is her mother’s diary, her own child, and her memories of course. The express purpose of the diary, in Clara’s words, was to help Blanca “reclaim the past and over-come terrors of [her] years.” It was to help her “understand the relationship between events.”

We’re at the novel’s end. Blanca has a decision to make: the life of vengeance or forgiveness, of retribution or letting go. She’d been wronged and she’d be fully justified. Her soliloquy speaks for itself:

"And now [that] I seek my hatred . . . I cannot seem to find it. I feel its flame going out as I come to understand the existence of Colonel Garcia [her half-brother, interrogator and rapist] and others like him, as I understand my grandfather and piece things together from Clara’s notebooks, my mother’s letters, the ledgers of Tres Marías, and the many other documents spread before me on the table. It would be very difficult for me to avenge all those who should be avenged, because my revenge would be just another part of the same inexorable rite. I have to break that terrible chain. I want to think that my task is life and that my mission is not to prolong hatred but simply to fill these pages while I wait for Miguel [husband], while I bury my grandfather, whose body lies beside me in this room, while I wait for better times to come, while I carry this child in my womb, the daughter of so many rapes or perhaps of Miguel, but above all, my own daughter."

The message rings loud and clear: “It’s a celebration of life. Life is a miracle and nothing on earth, no political upheaval or economic distress, is going to change that.”

On that note, I’d like to close. We’re heading for hard times. And things are bound to get worse before they get better. The exact shape of things to come, the contours of the world in the mak-ing, is anyone’s guess. And I’m certain that years from now it’ll be beyond our recognition. There’s another thing, however, which gives me a reason for hope: in the end, we shall persevere.

Glenn Beck Article
Solari Blog
New York Times Article
Wikipedia entry on Allende's The House of the Spirits

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About Roger Nowosielski

  • bliffle

    Good article.

    Fraud is the new industrialism.

    However, in the course of creating the new Financial-Industrial empire in order to fleece naive citizens, The Masters Of The Universe have trained some peons in the intricacies of fraud, and then found it necessary to layoff those same trained peons. frustrated in their attempts to find semi-legitimate employment, some of these peons have turned to what they know best: fraud.

    These peons threaten to turn fraud into a cottage industry by their free-lancing. For example, my foster daughter was recently defrauded of her entire paycheck when she deposited it in her bank. Strange. How could that happen? Well, this is how: she recently had received a missive that claimed she had won a lottery (a lottery she knew nothing about) for $5000, and a check was enclosed. She had deposited the check, preferring to believe in a windfall rather than suspecting a fraud. Subsequently, the check bounced, as a counterfeit or NSF. But the fraudsters took advantage of frailties in the banking system that allowed them to reach into her account and transfer her legit money to a covert account. She protested to the bank, which simply stonewalled her, discontinued her account and told her to get lost. So did the next bank she went to, to open a new account.

    This fraud demonstrates pretty sophisticated knowledge of the banking system and the account reconciliation system in Banking. It has poor security and depends on complexity and that knowledge is sparse. But the banking system is certainly frail and subject to all kinds of fraud.

    So, many potential fraudsters are set loose in society as the Fraud-Industrial system finds it necessary to devour their own peons to fully realize their destiny.

    Will we soon be threatened by a Fraud Bubble?

  • Thanks for incisive comments. Look forward to yet another article in the series, “Mr. Obama’s Stimulus Plan,” soon to appear on my own website and, hopefully, this one as well, concerning the likelihood that we’re facing yet another scheme – and “bubble” – in the making. These people never give up!

  • Cindy D


    Thanks for this excellent article. I also went to your blog, where I found a number of other interesting articles.

    This regards the one on prisons. It was interesting to have the history on the first private corporate prison. I was wondering if you came across this Pew study yet? Some selected quotes from the Pew article:

    Washington, DC – 02/28/2008 – For the first time in history more than one in every 100 adults in America are in jail or prison…

    …many inmates are low-level offenders or people who have violated the terms of their probation or parole.

    …the most recent U.S. Department of Justice data (2006) found that while one in 30 men between the ages of 20 and 34 is behind bars, the figure is one in nine for black males in that age group.

    …one in every 53 adults in their 20s is behind bars…

    …prison growth and higher incarceration rates do not reflect a parallel increase in crime, or a corresponding surge in the nation’s population at large. Instead, more people are behind bars principally because of a wave of policy choices…

    In November, a number of news articles (WSJ, for example) reported that increases in jailing of illegal immigrants is a large boon to the prison profit.

    Sorry, I did not address the article above you wrote. Later I will have more time to do that.


  • Thank you for your comments, Cindy. No, I wasn’t aware of the Pew study you mention, but I’m glad you pointed it out. All my info concerning “the prison industry” had come from Catherine Austin Fitts’ website – and I will make it a point to forward it to them.

    By the way, you might want to check that site yourself for lots of eye-opening insights. Ms Fitts was once a bona fide member of the Wall Street elite until she’d slowly come to realize the extent to which fraud and corruption have become embedded in everyday practices and ways of “doing business,” merging Wall Street & Washington into one as it were. The “prison industry” was just one of Ms Fitts’ examples.

    I look forward to more of your comments. Thanks to online magazines like Blogcritics, there’s a viable forum for exchanging ideas and perhaps coming together on some of the important issues and ailments which of late are besetting our society. We may make a difference yet! (See, for example, “The Future of Blogging” in the “Sci/Tech” section.)


  • This was a very interesting article, Roger. I guess one has to be optimistic; you sound much like a popular writer of the 1920’s, Frederick Lewis Allen, in some of your writing conclusion.

    About 35 years ago, a man, Paul Erdman, wrote a series of books predicting such a financial meltdown. The one that comes to mind is “The Crash of 1979”.

    But today, in the meltdowns we see, there are no sexy girls in Swiss chalets to be had. We just appear to be headed for very hard times, and a reintroduction for all of us to the children of Aphrodite, the goddess of sex – Panic and Terror.

    Terror is almost an old friend already. His brother, Panic, is not.

  • I remember Erdman. He was lucky he was writing fiction. He seemed to come up with a new novel on the same subject every couple of years after whatever financial disaster he’d predicted in his previous one failed to materialize.

  • Thanks for interesting comments, guys – I mean Ruvy and Dr Dreadful. I’m certainly gonna look these fellows (i.e., Erdman & Allen)up.

    Apropos fiction, I’m toying with the idea of writing an Ayn Rand type of novel (I’ve written two already, yet to be published)- with a modern-day John Galt type of hero (& disciples of course)and the Internet (or some other clandestine network) as the only means of communication and rebuilding the society from scratch as it were. She was a true visionary, it turns out, to have addressed some of her concerns as far as sixty years ago. The kind of scenario(s) she envisages is/are much more probable today. (See, for example, “Setting Matters Straight,” parts I & II, on my own weblog.)

    I don’t, by the way, look forward to “the meltdown,” but I think it’s an unavoidable consequence of a system that’s on a verge of breakdown. And when that happens, I’m afraid the truth will be stranger than fiction.

    PS: I mean “guys” in the generic sense. One can never be certain of gender identity on the Internet. Not that it matters!

  • Roger,

    PS: I mean “guys” in the generic sense. One can never be certain of gender identity on the Internet.

    My wife gives me permission to tell you that I’m the man of the house.

    Erdman’s writing seems turgid considering the out-dateness of his work. It was a lot more exciting in the mid-’70’s.

    Frederick Lewis Allen (I had the name wrong the first time) wrote “Only Yesterday: a Popular History of the 1920’s”, and was a writer for Atlantic Magazine.

    Some of your prose and his looked remarkably similar, particularly at the conclusion of your article. From Allen’s final chapter:

    The truth was that what had taken place since the Big Bull Market was more than a cyclical drop in prices and production; it was a major change in the national economy. There were encouraging signs even when things were at their worst: the absence of serious conflict between capital and labor, for instance, and the ability of the Federal Reserve System to prevent a money panic even when banks were toppling. Doubtless prosperity was due ultimately to return in full flood. But it could not be the same sort of prosperity as in the nineteen-twenties: inevitably it would rest on different bases, favor different industries, and arouse different forms of enthusiasm and hysteria. The panic had written finis to a chapter of American economic history.

    You can read (or perhaps download) the book from the link I provided.

    As a writer looking at this particular juncture of history, I strongly suggest to you the book “A Century of War”, by George Engdahl. Sheikh Zaki Yamani, the Energy Minister for “Saudi” Arabia in 1973, wrote that Engdahl’s analysis most closely came to the actual truth of the events occurring that led to the tripling of oil prices in 1973. That is high praise.

    In reading the book myself, I sensed that Engdahl had caught the true pulse of events as they reflected themselves in my own life from the 1960’s till now.

    Looking at your last name, I suspect you celebrate Christmas rather than Hanukkah, so I wish you a merry Christmas from the cold hills of Samaria in Israel, along the Patriarch’s Road (the Nazareth Trail) in the mountains north of Jerusalem.

  • Thanks Ruvvy for your detailed response. I’ll definitely look these guys up.

    For your information, I am part Jewish, although having been raised in Poland, I’m rather foreign to Jewish ways and culture. Have graduated from high school in Netanya, as a matter of fact, and still have relations in Tel Aviv. As far as I am concerned, all roads lead to Rome, so I am not hung up on religious differences. We have far more important issues on the burner – like the future of humanity, culture and way of life.

    So Happy Holidays to you and yours.


    PS: You might want to look at my own website for a couple of excerpts from my two novels. I’d be interested to hear what you think.

  • bliffle

    Fraud? I think we will shortly see a boom in the fraud industry as laid-off workers seek remunerative freelance income.

    Last time we went thru massive layoffs everyone I knew went into the real estate business, and look what happened. Lots of churning, some fortunes made, then lost.

    It’s the American Way.

    I can just see infomercials in the wee hours: “Carlton Sheets shows how you can profit in the booming fraud industry with No Money Down!”

    There’ll be a fraud boom, new fraudsters will be defrauding each other. They’ll be flipping fraud schemes.

    Then a fraud bubble will make everyone broke again.

  • Dear Roger and commentators,

    Having surfed across your blog, I thought that this might be a ‘safe haven’ for expressing what I think is next: the World Bank acting as global Central Bank with a www dot single global currency dot org – at 2% inflation. That’s Cassandra speaking, but you can to to the website yourself.

    After I put a link to it on my blog, I got an email from somebody related to them who wanted to do ‘business’ with me, i.e. pay me $12 per link which would last for ever and allow the other end change what my link refers to any time…

    So I thought I better refrain from giving them attention. But maybe there is a difference between ‘internet exposure’ and e-attention.

    I’ve been on Ms Fitts’ list for a while, too. I know more about the system than I ever wanted to know. And I strongly believe and feel that the ‘crisis’ is designed, planned and steered. What baffles me is that it is possible. Who pulls which institutional strings?

    But I guess I don’t really want to know. I feel I’m courageous enough talking to the ‘enemy’ in the UK, the only hope I have, for I live 6 tube stops away from the ‘political entertainment’ in Westminster.

    Keep writing, everybody, and thanks for reading!

  • Jet


  • Jet

    If a commentator had a child, would it be a commentator tot?