News & Analysis
2008 Crash Caused by Financial Terrorism?
Financial terrorism suspected in 2008 economic crash ... Evidence outlined in a Pentagon contractor report suggests that financial subversion carried out by unknown parties, such as terrorists or hostile nations, contributed to the 2008 economic crash by covertly using vulnerabilities in the U.S. financial system. The unclassified 2009 report "Economic Warfare: Risks and Responses" by financial analyst Kevin D. Freeman, a copy of which was obtained by The Washington Times, states that "a three-phased attack was planned and is in the process against the United States economy." ... The report concluded that the evidence of an attack is strong enough that "financial terrorism may have cost the global economy as much as $50 trillion." – Washington Times
Dominant Social Theme: Terrorists caused the crisis. Economic difficulties are military ones.
Free-Market Analysis: In the other article in today's issue, we focused on ways that the power elite memes were designed to avoid casting blame on central banks. The idea is to create diversionary blame that can then be parlayed into further government action, usually via regulation. In the case of this report, excerpted above, we see a new twist however.
While Britain's central banker Mervyn King blames the private sector, US financial analyst Kevin Freeman, at the Pentagon's request, has penned a report (excerpt above) that blames foreign enemies for the 2008 financial crisis. This is a fairly brilliant fear-based promotion in our view because like King's positioning, it doesn't merely push blame away from central banks it also opens up another entire venue for state expansion – military growth to combat economic terrorism.
Not only does this meme logically support military expansion, it has ominous free-market implications as well. By treating the current, fallacious system as a kind of "gold standard" that cannot be taken down without an attack, one enshrines what is injurious. The conversation moves beyond remedies from reconfiguration to strategic necessities intended to defend what is evidently and obviously the Western economic system.
Only it is not. The central bank economic system that has been put in place by the Anglo-American elite is far from a free-market system. It begins by printing money-from-nothing and as this fiat-currency circulates, it begins to inflate various markets, certainly the stock market. It also fools entrepreneurs into thinking times are better than they really are – and thus firms begin to over expand while other companies create trivial or non-essential products that would not have been successful in a less simulative environment.
Eventually, the economy, stuffed with paper money, reaches a breaking point, usually because price inflation has begun to be a problem and the central bank has started to raise rates. This in turn weakens the economy, slows the circulation of money and eventually has an impact on the stock market, which usually crashes.
People begin to wake from their Dreamtime at this point, rubbing their eyes and realizing that much of the wealth they had accumulated yesterday is considerably devalued today. In some cases the companies they work for are seen as inessential in the new, sober light of day. Housing markets crash. Whole industries shrink radically. This is the business cycle at work; this is the economic system that is in place currently. And the Western elites certainly understand its functioning.
None of this finds it way into the Pentagon's report. "Outside forces," are apparently responsible. "There is sufficient justification to question whether outside forces triggered, capitalized upon or magnified the economic difficulties of 2008," the report says, according to the Washington Times, explaining that those domestic economic factors would have caused a "normal downturn" but not the "near collapse" of the global economic system that took place.
There are suspects of course. The article recites them: "enemies" of the West (and particularly the US) including Middle Eastern states, Islamic terrorists, hostile members of the Chinese military, or government and organized crime groups in Russia, Venezuela or Iran. "Because of secrecy surrounding global banking and finance, finding the exact identities of the attackers will be difficult."
What are the most likely enemies? "Unfortunately, the two major strategic threats, radical jihadists and the Chinese, are among the best positioned in the economic battle space." (No surprise there.) Also, the report lists as suspects advocates of Islamic law, who have publicly called for opposition to capitalism as a way to promote what they regard as the superiority of Islam. Here's some more from the article:
The report states that federal authorities must further investigate two significant events in the months leading up to the financial crisis. The first phase of the economic attack, the report said, was the escalation of oil prices by speculators from 2007 to mid-2008 that coincided with the housing finance crisis. In the second phase, the stock market collapsed by what the report called a "bear raid" from unidentified sources on Bear Stearns, Lehman Brothers and other Wall Street firms. "This produced a complete collapse in credit availability and almost started a global depression," Mr. Freeman said.
The third phase is what Mr. Freeman states in the report was the main source of the economic system's vulnerability. "We have taken on massive public debt as the government was the only party who could access capital markets in late 2008 and early 2009," he said, placing the U.S. dollar's global reserve currency status at grave risk. "This is the ‘end game' if the goal is to destroy America," Mr. Freeman said, noting that in his view China's military "has been advocating the potential for an economic attack on the U.S. for 12 years or longer as evidenced by the publication of the book Unrestricted Warfare in 1999."
Additional evidence provided by Mr. Freeman includes the statement in 2008 by Treasury Secretary Henry M. Paulson Jr. that the Russians had approached the Chinese with a plan to dump its holdings of bonds by the federally backed mortgage companies Fannie Mae and Freddie Mac. Among the financial instruments that may have been used in the economic warfare scenario are credit default swaps, unregulated and untraceable contracts by which a buyer pays the seller a fee and in exchange is paid off in a bond or a loan. The report said credit default swaps are "ideal bear-raid tools" and "have the power to determine the financial viability of companies."
Another economic warfare tool that was linked in the report to the 2008 crash is what is called "naked short-selling" of stock, defined as short-selling financial shares without borrowing them ... In a section of who was behind the collapse, the report says determining the actors is difficult because of banking and financial trading secrecy. "The reality of the situation today is that foreign-based hedge funds perpetrating bear raid strategies could do so virtually unmonitored and unregulated on behalf of enemies of the United States," the report says.
The last paragraph is most interesting, providing as it does, an argument for investigating unregulated hedge funds. Regulating hedge funds has been on the "agenda" for a while now and this report will provide more ammunition for those who want hedge funds (and black pools, etc.) pried open. "Transparency" is the new normal for everyone but the Bank for International Settlements (see other article, today).
Conclusion: This is a most cynical presentation, in our view. Modern crashes are a result of central bank monetary stimulation. Variants of the 2008 crash occurred on a lesser scale in 2000, in 1987, in the 1970s, in 1969, in 1963 and, of course, in 1929. Are we to believe that financial terrorism is responsible for each of these slumps? Or only in 2008? It is obvious nonsense, and yet few if any have bothered to point out the repetitive occurrence of modern-day crashes – which would put the presentation into question. Instead, we have no doubt the report will be used for yet more Draconian regulation and to haul the Pentagon directly into economic matters, creating a kind economic-industrial complex to go along with the military-industrial complex and all the rest. Or perhaps the system, struggling as it is, will merely collapse before this takes place. Doubtless, it will still be blamed on an "enemy." Desperation?
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Posted by David Robertson on 03/02/11 10:15 AM
@ Gretchen
"And forgive me if this sounds cruel -- it's just a question -- wouldn't anyone signing off on a sub-prime loan, knowing full and well they would be living over their head and beyond their means, be equally to blame? "
It is my understanding that most of these loans were sold deceptively to people with little or no financial expertise who found themselves in "over their head" and were trying to get back on an even keel. The mortgage sellers offered them an easy way out with "lower" payments but actually added to their loans and concealed excessive charges which they pocketed. The end result was that those who took out these loans immediately went on to a list of easy targets and were then inundated with high pressure salesmen/women from affiliated companies of the original sellers who then offered to reduce their payments which had somehow increased after the previous rollover. An so it went on...
These mortgages were then wrapped up in trusts and conduits as mortgage backed securities and sold on as AAA investments to pension funds, mutual funds, local government treasurers and here in Scotland to small building societies who subsequently went bankrupt.
Lehman Brothers were very big in this fraudulent enterprise as were all the other big banks, insurance companies and ratings agencies. Huge sums were made by the participants and to date no one has been charged with fraud. On the contrary all the losses have been passed on to the taxpayers. The victims nevertheless have lost their homes to foreclosure, many are now homeless, families have been destroyed, and one can only surmise what other tragedies lurk unreported.
My own view is that banks and others in the field have a duty of fiduciary trust to the public and when they break this trust they must be held responsible for it. This breakdown in public faith is insidiously ripping our societies apart and so far as I can see the end is not yet in sight.
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Posted by Charliew on 03/02/11 10:15 AM
Gretchen what is this WE stuff?
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Posted by Gregg White on 03/02/11 10:06 AM
You Americans are priceless! You blame everything on terrorism. If the Detroit Lions win the Superbowl next year you'll blame terrorists. You had mass hysteria over swine flu while the rest of the world got on with life. US reports blamed that on terrorists. The TSA frisks Americans getting off trains in Georgia! You really are losing it. It is all part of US subjugation of its citizens. In some school districts summer vacations are now 3 weeks longer making it 3 months off school! What? Less chance of terrorist attacks at school presumably.
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Posted by Kirk on 03/02/11 09:58 AM
The banksters have enormous influence and have the resources to generate concensus.
I think Kurt Vonnegut before his death penned some excellent essays re "psychopathic personalities".
These powers that be, pillars of the community, are actually pirates and dont care who they hurt.
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Posted by Kaara on 03/02/11 09:57 AM
This entire mess was caused by massive deregulation in the markets, Click to view linkeed....and more greed! Everyone who could was profiting from this...some won, but most lost. Now we are looking for a scapegoat and "financial terrorism" seems as good as any.
Instead of pointing fingers, we need to put some strong regulations into place that will prevent this kind of thing from happening again, because without regulation, it surely will.
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Posted by Dave on 03/02/11 09:56 AM
Now the Pentagon is piling on? If Sept 11 is any indication, the victims will be severely punished.
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Posted by Gretchen on 03/02/11 09:17 AM
with "the crash" -- most people immediately blame Wall Street (i.e. that new documentary that apparently is sooo goooood it got an Oscar, INSIDE JOB)
Even though I think of myself as a youngin' on the scene of understanding things normally outside my realm of expertise -- what fascinates me in all of this is... which came first?
Wasn't Wall Street simply acting on their own behalf, playing with all the financial trickery and slight of hand, because people pay big money for them to do it? And when, ultimately, the house of cards came down, doesn't that fall under the law of THEY ALL FALL DOWN?
And forgive me if this sounds cruel -- it's just a question -- wouldn't anyone signing off on a sub-prime loan, knowing full and well they would be living over their head and beyond their means, be equally to blame?
Can we not admit we set ourselves up for this perfect storm, that its of our own demise -- that if we had just kept to the principles and scruples this country was founded on, we wouldn't even be having this conversation? But really, which came first -- inside/outside terrorists or the inside job?
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Posted by Argus on 03/02/11 08:53 AM
@ Gretchen
"how do we go back to playing with real money and living in a truly free market"
Click to view link
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Posted by Gretchen on 03/02/11 08:38 AM
So considering the collective brilliance here, understanding of the Central Banking MO going on for far too long now --- how do we go back to playing with real money and living in a truly free market, out of the hands of the evil PE and anyone else, should they care to do us harm? Why isn't THIS the talk of the town and on the evening news with Katie Couric?
Reply from The Daily Bell
Good question.
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Posted by Zenbillionaire on 03/02/11 08:23 AM
"It's not mine."
- Puss, Shrek II, William Steig, 2004
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Posted by Zenbillionaire on 03/02/11 08:15 AM
@ DB
"Are we to believe that financial terrorism is responsible for each of these slumps? "
You're arguing with yourself again. Of course it's economic terrorism, that should be patently obvious. Central banking *is* economic terrorism.
I have literally spent my entire adult life working hard to earn wealth sufficient to guarantee not just the survival of myself and my family, but an improved standard of living for them and for others. Others have paid me to improve their standard of living and in so doing they have improved mine.
Now, along comes a central banker who decides my work is worth less than the market paid and claws back my accumulated earnings. This is terrorism writ large. I am in constant fear of losing my property at the whim of a third party, how is this not terrorism? I must read publications like this one and fret over making the correct investments in order to preserve the fruits of my labor against relentless attack. Gold? Silver? Real Estate? Oil? Strange and complicated option strategies? Ammunition? Beans? Durable Goods? Razor Blades? Who knows?
It is terrorism. One can be fairly certain though that the Pentagon will not be focusing its attention on the real perps though and that is the problem. It's all India's fault.
Absolutely excellent article by the way. Top notch. This is why I read the Bell.
Reply from The Daily Bell
Thanks. Good points.
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Posted by Bluebird on 03/02/11 08:10 AM
If this were not so serious, it would be amusing. Desperate people are dangerous people and if they already happen to be the most dangerous, powerful people, I agree with Vauung, it is not going to end well. The possibilities here are alarming. The only hope is for information like the Daily Bell shares to reach more eyes and ears. Spread the word, folks!
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Posted by Theodorej on 03/02/11 08:05 AM
Greetings Mssrs......To try and fix blame is an act of futility and the complicated interweaving of several clever schemes designed to hide the identity of the so called terorists makes it a task that even the most clever sleuth could not unwind....If we focus on the obvious that being the beneficiaries of this dilema it becomes clear that at the very least if they did not engineer it they participated..
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Posted by Bill Ross on 03/02/11 07:36 AM
I have two real daughters and one virtual daughter called "not me".
We have a wonderful life, except that occasionally, "not me" would do things to upset our family bliss.
When my older daughter moved out to seek her fortune, she took "not me" with her.
Seems to me that "2008 Crash Caused by Financial Terrorism?" is a form of "not me", by the perps, creating a scapegoat and bogeyman.
The issue of course, is that evil be attached to "groups", as opposed to the actions of individuals which can easily be addressed by the law we no longer have, holding criminals to account. Now, the greatest criminals occupy the bench, supported by a "profession" whose sole purpose is to rationalize why "not me" is unaccountable.
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Posted by Timur The Lame on 03/02/11 06:41 AM
No brilliance here. This is out and out desperation. With promotions like this they will surely awaken the dullest of the sufferers in their 'ponzientally' ordered system.
Do they think that some working type noob who is underwater, downsized, unemployed or foreclosed upon is going to think that Wall Street is innocent, the 'Ayerabs' forced his company to re-locate to China, the Chinese forced the 'Ayerabs' to spike the price of oil, his mortgage broker was born in Russia or any other absurd conclusion that the Freeman Report allows for?
This is starting to get amusing.
I personally think that this report has as a major intent the purpose of trying to deflect from the fact that more and more names in any financial (or political as per yesterday's youth group) machination looks like they could have been pulled from the Tel Aviv phonebook.
My two rubles.
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Posted by Ted Newsom on 03/02/11 06:18 AM
The dog ate my homework... and while he was at it, he pulled ten billion out of circulation and crashed the economy. No, really. It's the truth. Just look at the dog. Doesn't he look guilty?
Reply from The Daily Bell
And life's a bitch.
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Posted by Vauung on 03/02/11 04:45 AM
"This is a fairly brilliant fear-based promotion in our view because like King's positioning, it doesn't merely push blame away from central banks it also opens up another entire venue for state expansion ..."
Alongside the creative evolution of money outlined by Ingo Bischoff (from barter, to specie, to the addition of real bills), an oppressive statist counter-evolution is coming into focus. First taxation, then central banking, then pure fiat currency, and now the absorption of finance into the national security state. Private actors can no longer be trusted to engage in monetary transactions without regulatory and military oversight.
What's next? The restriction of 'money' to accounts on government computers within an all-enveloping digital biometric identity system?
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Posted by Joelg on 03/02/11 04:43 AM
"Round up the usual suspects"
-Captain Louis Renault, in Casablanca
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Posted by Vauung on 03/02/11 04:27 AM
Antal Fekete is looking prophetic.
"If the patient resists, like China did in 1840, then a holy opium war must be declared on it in the name of the right of others to free trade. 170 years later a New China once more demurred against the paper-torture treatment it was subjected to by the American debt-mongers and opium pushers."
Click to view link
We now learn that the war talk is not even a metaphor. If China dumps its depreciating US$ holdings it can expect to be treated as a military aggressor, engaged in a 'Phase III' assault upon the United States. (Ditto for the ME oil states.) Apparently the USMC has Bernanke's back. This isn't going to end well.
Reply from The Daily Bell
Vaung, this is brilliant.
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Posted by Leonardo Pisano on 03/02/11 04:13 AM
Ohh, they are so clever, these PE. Create chaos and then pop up, magically, with the perfect solution: MORE control. Once you see the pattern – thank you, DB! – it's visible in plain sight. So the answer to the question (title) is 'yes' – it's only the 'who is behind financial terrorism' Freeman failed to identify properly.
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