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The Washington Post and the Coming Crash

Posted in the database on Saturday, January 21st, 2006 @ 16:40:55 MST (1578 views)
by Gracchus Jones    The Wayne Madsen Report  

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The Washington Post is one of the world’s “great” newspapers. But to the American-European financial establishment, it is much more than that. It is one of their house organs, with close ties to the U.S. government intelligence community. The Post’s job is to shape the news the way the East Coast establishment wants it shaped. No one should think for an instant that rookie reporters Bob Woodward and Carl Bernstein would have been allowed to unmask President Richard Nixon if the intelligence/financier elite hadn’t decided it was time for the cursing Californian to go. Nixon’s crime? Probably not so much the dirty tricks and use of the IRS to hound those on his “enemy list” as much as his use of the Federal Reserve under Arthur Burns to radically ease credit in order to create a mini-economic boom in time for the 1972 presidential election. The Federal Reserve, you see, is an institution the establishment guards jealously as their own private preserve, one that not even presidents can tinker with.

After the Washington Post was founded in 1877, it became the first daily newspaper in the nation’s capital. Eventually it went bankrupt and was purchased at auction by a California-born financier named Eugene Meyer in 1933. It is not generally recognized, but Meyer had played a key role in some of the most destructive economic events in U.S. history.

The Post’s official history on its website tells nothing about Meyer’s background before buying the newspaper. In fact, Meyer was one of the linchpins of the New York financier establishment from the time he graduated from Yale in 1895 and went to work for the New York banking house of Lazard Frères, where his father was a partner. By 1915, Meyer had amassed a personal fortune of $40 million, gigantic for the times.

Just two years before, in 1913, Congress had enacted the Federal Reserve Act. Contrary to its name, the Federal Reserve is not a government agency. Rather it is a privately-owned central banking institution to which Congress ceded its constitutional authority to issue currency and set its value. This came after 50 years of gradual concentration of American financial power in the hands of Wall Street and European bankers, eventually including J.P. Morgan, his Rockefeller allies, and the Rothschilds, following passage of the National Banking Acts of 1863-4 during the Civil War.

The United States government financed its role in World War I by borrowing through the Federal Reserve. The national debt was $1.191 billion in 1915. By 1919, it had soared to over $25 billion. It was Eugene Meyer, as head of the War Finance Corporation, who presided over the creation of this permanent mortgage of America’s future. Later, President Coolidge named Meyer chairman of the Federal Farm Loan Board, and President Hoover made him chairman of the Federal Reserve, where he served from September 16, 1930, to May 10, 1933.

It was at the Federal Reserve that Meyer carried out perhaps his worst mischief. Despite the crash of the stock market on October 29, 1929, by the spring of 1930 a recovery was underway. Unemployment that year was under nine percent. A return to prosperity, said the press, “was just around the corner.”

But Europe had never really recovered from the economic devastation of World War I. Part of the problem was due to the fact that the gold standard prevented the European banks from expanding the money supply and generating the production that could fuel the economic growth needed for recovery, including payment of wartime debts to the U.S. On September 21, 1931, Great Britain abandoned the gold standard, with other European central banks following suit.

The Federal Reserve, under Chairman Eugene Meyer, stubbornly refused to budge. According to the book, An Empire of Wealth, by John Steele Gordon (Harper Perennial 2004): “In the United States…the Federal Reserve moved aggressively to defend the dollar and maintain the gold standard as foreign central banks and investors moved to repatriate gold. It was an utterly disastrous decision, perhaps the greatest of all the mistakes made in these years. Maintaining the gold standard required raising interest rates and cutting the money supply, causing an already severe deflation to become much more severe. Banks called in loans to stay liquid, while customers postponed purchases in expectation of lower prices. In the next year and a half more than half a million mortgages would be foreclosed. Unemployment ballooned. And bank depositors, well aware of the sudden rash of bank failures a year earlier, rushed to withdraw their money from banks while the withdrawing was good. In just the first month after Britain abandoned the gold standard, 522 American banks failed.”

More than any other individual in America, Eugene Meyer, exercising the almost unlimited power of the Federal Reserve to contract the money supply at will, brought on the Great Depression. While the unemployment rate soared, the banks reaped a bonanza from foreclosed farms, homes, and factories.

After Franklin D. Roosevelt was inaugurated as president in 1933, Meyer, his public “service” over, bought the Washington Post, and spent most of the rest of his life running his new hobby newspaper, even spending some of his time in the newsroom helping write stories. He appointed his son-in-law, Phillip Graham, publisher in 1946. After Graham committed suicide in 1963, his wife Katherine, Meyer’s daughter, took charge, serving as chairman of the executive committee until her death in 2001. Her son, Donald Graham, was publisher from 1979 until 2000, when Boisfeuillet Jones, Jr., a graduate of Harvard Law School, became publisher and CEO.

While the Post took stances that largely favored moderates within the Democratic Party, along with certain carefully-defined liberal causes, it was never really “progressive” in a broader sense of favoring economic justice. In the years after the Kennedy assassination, the Post attacked anyone who suggested that the murder may have been a conspiracy, even after such a conclusion was reached by the House Select Committee on Assassinations in 1978. In fact, the Post so vehemently defended the flawed conclusions of the Warren Commission, along with the New York Times and figures from the Yale Law School, that Professor Donald Gibson of the University of Pittsburgh concluded in his book on the subject that the Kennedy assassination cover-up was virtually “a project of the Eastern establishment.”

More recently, the Post has vociferously opposed any retention of trade barriers, even when the result has been massive export of U.S. manufacturing jobs, and has cheered on George W. Bush’s Iraq War. It has made special targets of the regimes of Egyptian President Hosni Mubarek and Russian President Vladimir Putin. The Post is also an habitual apologist for the Federal Reserve, dutifully announcing any raising of interest rates as taking place to “control inflation,” when in reality what the Fed has been doing lately has been to allow the banks to skim the cream off the current “jobless recovery.”

Eugene Meyer’s former banking house, Lazard Frères, has continued to move in the same orbit that the Post has occupied. From the 1960s, the firm has been a major player in the worldwide trend toward the kind of corporate mergers and leveraged buyouts that eliminate jobs and drive up short-term profits. Felix Rohatyn, a director of the company’s New York branch, headed the Municipal Assistance Corporation during the 1970s and 80s which restructured New York City’s finances by cutting costs and services to pay off enormous debts to the big banks. Rohatyn was rumored to be the designee as John Kerry’s Secretary of the Treasury had Kerry beaten Bush in the 2004 presidential election and recently wrote an op-ed piece for the Post in favor of an infrastructure investment authority at the federal level similar to the New York City MAC.

The thing to remember about the Post’s political stance is that its top priority is and will remain the control of the U.S. by the private banking industry which runs the global economy out of Wall Street and which in turn controls the American monetary system through the privately-owned Federal Reserve. Unlike the radical right, which would just as soon destroy the ability of the U.S. government do to anything other than wage war and provide police protection to the rich, the Post would like to see us remain a viable nation, but one that is firmly under the control of the international financiers who are increasingly viewing themselves as the real world government. To these people, the U.S. economy has always been viewed as their own personal cash cow. Naturally, they do not want the cow to die, but they want to be sure to get the cream that flows from it and the best cuts of meat as the herd is culled.

Unfortunately, under the onslaught of globalism, the American cash cow is not in very good shape anymore. During the contraction of the currency engineered by Federal Reserve chairman Paul Volcker in 1979 following the Nixon-Burns hyperinflation of the 1970s, the American public and manufacturing infrastructure crashed and has never fully recovered. The dot.com stock market boom of the Clinton years, combined with government austerity, produced a degree of renewed prosperity, but this has been squandered by the irresponsible policies of the George W. Bush administration.

Under Bush and Federal Reserve Chairman Alan Greenspan, a spurious economic recovery has been cranked up by tax cuts to the wealthy that have gone, not for industrial production, but to create a massive bubble of housing prices. The government loves bubbles like this, because tax revenues also shoot up when houses at inflated prices are bought and sold. The banks love it, because they can create huge numbers of new loans with solid collateral. Combined with soaring credit card debt, the result has been a national debt burden from all sources estimated at as much as $38 trillion. But the problem is that there is no real economic driver within the U.S. economy today. Nothing new is being produced. Rather dollar hegemony in the world economy has allowed the U.S. to run huge trade deficits and consume the production by underpaid workers of goods from China and elsewhere.

The Post reflects what is going on in the columns that appear in its pages by a writer on economics named Robert Samuelson. If you ever want to know what the Eastern establishment believes on any given economic topic, Samuelson will tell you. One of the things he is constantly harping on is how the nation cannot afford for people to retire under present programs such as Social Security. So he favors major cuts in retirement benefits and other government entitlement programs as his main prescription for national economic health. He also wants the retirement age extended, even though there are no jobs available any longer for older workers.

In an op-ed column on Wednesday, December 21, 2005, Samuelson delivered a Christmas present to the American elite establishment by declaring, “The economy is strong.” Jobs, said Samuelson, have increased, the unemployment rate is lower than the average for the 1990s, and productivity has been rising at a 3.3 percent rate. What Samuelson did not mention is that the U.S. poverty rate is increasing, family purchasing power continues to decline, the new jobs are in the low-paying service sector while automobile and other manufacturing jobs continue to be exported, and all the productivity gains have been appropriated by managers and stockholders at the expense of employees whose wages are stagnant.

Samuelson stated, “Households’ net worth—what people own minus what they owe—is a record $51 trillion.” He expressed puzzlement that consumer confidence is down since 1985 and said, with characteristic arrogance, “One reason is that Americans have developed perfectionist standards.” Because of this perfectionism, people seem more bothered than they should be by “high energy prices, high health care costs, Hurricane Katrina’s aftermath, and a possible real estate ‘bubble’.”

Neither the Federal Reserve nor Samuelson have explained why soaring energy, health care, and housing costs will be cured by higher interest rates that will drive people into bankruptcy and foreclosure. In fact, the housing market is stalling, and the banks are hiring foreclosure experts to handle the fallout. According to a study by Merrill-Lynch, housing inflation and the liquidity that has been pumped into the economy through mortgage and home equity loans has accounted for a full 50% of U.S. economic growth in the last year. The net worth cited by Samuelson represents little real value. It is paper wealth, the classic definition of a speculative bubble.

Nothing is backing up the housing bubble, and the higher prices will be passed on to the next generations of home buyers—our children and grandchildren. They are the ones who will be saddled with ruinous mortgages. Samuelson makes the assumption, which someone with his knowledge knows is wrong, that housing inflation is an economic driver, which it emphatically is not. There have been many economic drivers in American history which have produced quantum increases in output and wealth. Examples have been the building of the Erie Canal, the transcontinental railroad, the steel and petroleum industries, electrification, the family-owned automobile, the New Deal Reconstruction Finance Corporation, the chemical industry, the interstate highway system, the Apollo program, the computer, and the internet.

All these economic drivers were forged during peacetime. Wars provide an economic boost but typically produce little of lasting value. But in America today, there is no economic engine, and if there is one thing modern economic history proves, it is that you cannot have prosperity without one. The impetus of the dot.com boom is largely spent through the typical institutionalization of the new technology. Rebuilding of the Gulf Coast states after Hurricane Katrina has potential, but that opportunity may be wasted if redevelopment takes too long, is on too small a scale, or focuses on non-productive investments like entertainment palaces or casinos.

Samuelson and the Washington Post may be happy that their patrons in the investment banks are reaping a bonanza on mortgages or by loaning on margin for Wall Street gamblers and their clients to buy inflated stocks and gambling-chip derivatives, but meanwhile, our economy is being propped up only by foreign investment due to a strong dollar that further erodes manufacturing jobs by reducing our ability to compete in world markets. How long this articificial heart-and-lung machine that is keeping the economy alive can keep functioning is anyone’s guess. Eugene Meyer, as Chairman of the Federal Reserve in the early 1930s, made a major contribution to bringing on the Great Depression. He found refuge in the newspaper business, but now, his successors at the Washington Post may be doing similar dirty work as they cover-up the signs of the onrushing peril.

Gracchus Jones is the pen name of an historian and monetary theorist from Washington, D.C.



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