How the West Was Won: Counterinsurgency, PSYOPS and the Military Origins of the Internet, Part 3: The War is Over, The Good Guys Lost
How the West Was Won: Counterinsurgency, PSYOPS and the Military Origins of the Internet, Part 3: The War is Over, The Good Guys Lost
COIN+TELPRO was a series of illegal operations conducted by the FBI between 1956-1971, to disrupt, discredit and neutralise anyone considered a threat to national security, including members of the Women’s Liberation Movement and even the Boy Scouts of America.
And it wasn't just the customary wiretapping, infiltration and media manipulation, the FBI committed blackmail and murder.
In the 1960’s a Washington Post expose by army intelligence whistle-blower, Christopher Pyle, revealed a massive surveillance operation run by the Army, called CONUS Intel. It involved thousands of undercover military agents infiltrating and spying on virtually everybody active on what they deemed ‘civil disturbances.’ It turns out, many of those targeted had done nothing even remotely subversive, unless you consider attending a left-wing college presentation or church meeting, revolutionary.
These programs came to a head in the 1970’s, when an investigation by the US Senate, conducted by the Church Committee, uncovered decades of serious, systemic abuse by the CIA. As if predicting the internet as an instrument for mass surveillance, Senator Frank Church warned that the NSA's capabilities could "at any time could be turned around on the American people."
Before the internet, the deployment of PSYOPS was limited to legacy media and permitted only on foreign soil. But that all changed in 2013, when the government granted themselves permission to target ordinary Americans.
Conceived at the end of the cold war as the Broadcasting Board of Governors, USAGM is a lesser-known government agency charged with broadcasting thousands of weekly hours of US propaganda to foreign audiences, that has played a major role in pushing pro-American stories to former Soviet Bloc countries ever since Perestroika.
For decades an anti-propaganda law, known as the Smith-Mundt Act, made it illegal for the government to conduct PSYOPS against US citizens. But that all changed in 2013 when the National Defence Authorization Act repealed that law and granted USAGM a licence to broadcast pro-government propaganda inside the United States.
To what extent US citizens are being targeted by propaganda is anyone's guess, since PSYOPS largely take place online, where it's difficult to distinguish between foreign and domestic audiences.
What we do know is that in 2009 the military budget for winning hearts and minds at home and abroad had grown by 63% to $4.7 billion annually. At that time the Pentagon accounted for more than half the Federal Government's $1 billion PR Budget.
An Associated Press (AP) investigation in 2016 revealed that the Pentagon employed a staggering 40% of the 5,000 working in the Federal Government's PR machines, with the Department of Defence, far and wide, the largest and most expensive PR operation of the United States government.
The Facebook’s-Intelligence-Harvard Connection
Consistent with the opaque nature of Facebook's origins, shortly after its launch in 2014, co-founders Mark Zuckerberg and Dustin Moskovitz brought Napster founder Sean Parker on board. At the age of 16, Parker hacked into the network of a Fortune 500 company and was later arrested and charged by the FBI. Around this time Parker was recruited by the CIA.
To what end, we don’t know.
What we do know is that Parker brought Peter Thiel to Facebook as its first outside investor. Theil, who remains on Facebook’s board, also sits on the Steering Committee of globalist think tank, the Bilderberg Group. As previously stated, Thiel is the founder of Palantir, the spooky intelligence firm pretending to be a private company.
The CIA would acquire an equity stake in the firm through their venture capital arm, In-Q-Tel. At the time of his first meetings with Facebook, Theil had been working on resurrecting several controversial DARPA programs.
Which begs the question: With intelligence assets embedded in Facebook's management structure from the get-go, is everything as it seems at 1 Hacker Way?
According to Lauren Smith, writing for Wrong Kind of Green:
“Some of Facebook’s allure to users is that Mark Zuckerberg and his friends started the company from a Harvard dorm room and that he remains the chairman and chief operating officer. If he didn’t exist, he would need to be invented by Facebook’s marketing department.”
By the same token, if Facebook didn't exist it would need to be invented by the Pentagon.
To achieve this, you would need to embed government officials in Facebook's leadership and governance. Cherry picking your candidates from, say, the US Department of Treasury, and launching the platform from an academic institution, Harvard University, for example.
According to the official record, Zuckerberg built the first version of Facebook at Harvard in 2004. Like J.C.R Licklider before him, he was a psychology major.
Harvard's President at that time was economist Lawrence Summers, a career public servant who served as Chief Economist at the World Bank, Secretary of the Treasury under the Clinton Administration, and 8th Director of the National Economic Council.
Now here's where it gets interesting. Summers' protege, Sheryl Sandberg, is Facebook’s COO since 2008. Sandberg was at the dials during the Cambridge Analytica scandal, and predictably, manages Facebook’s Washington relationships. Before Facebook, Sandberg served as Chief of Staff at the Treasury under Summers and began her career as an economist, also under Summer, at the World Bank.
Another Summers-Harvard-Treasury connection is Facebook’s Board Member, Nancy Killefer, who served under Summers as CFO at the Treasury Department.
It doesn’t end there. Facebook’s Chief Business Officer, Marne Levine also served under Summers at the Department of Treasury, National Economic Council and Harvard University.
The CIA connection is Robert M. Kimmett. According to West Point, Kimmett “has contributed significantly to our nation’s security…seamlessly blending the roles of soldier, statesman and businessman. In addition to serving on Facebook's board of Directors, Kimmett is a National Security Adviser to the CIA, and the recipient of the CIA Director’s Award.
The icing on the cake, however, is former DAPRA Director, Regina Dugan, who joined Facebook’s hardware lab, Building 8, in 2016, to roll out a number of mysterious DARPA funded-projects to, essentially, hack people’s minds with brain-computer interfaces.
As luck would have it, just before Duggan’s arrival at Facebook, the social media giant orchestrated the controversial mood manipulation PSYOP, known as the Social Contagion Study. The experiment would anticipate the role social media went onto play during the pandemic.
In the study, Facebook manipulated the posts of 700,000 unsuspecting Facebook users to determine the extent to which emotional states can be transmitted across social media. To achieve this, they altered the news feed content of users to control the number of posts that contained positive or negative charged emotions. As you would expect, the findings of the study revealed that negative feeds caused users to make negative posts, whereas positive feeds resulted in users making positive posts.
Once we understand this, it becomes clear how fear of a disease, which predominantly targeted people beyond life expectancy spread like wildfire in the wake of the Wuhan Virus. In locking down the UK, Boris Johnson warned the British public that we would all lose family members to the disease. When nothing could be further from the truth. The pandemic largely happened in the flawed doomsday modelling of epidemiologists, it happened across the corporate media, and it happened on social media platforms like Facebook. It wasn’t so much a pandemic, but the social contagion experiment playing out in real time.
But there was more than just social media manipulating our emotional states, fear, shame, and scapegoating was fife throughout as the British government deployed behavioural economics to, essentially, nudge the public towards compliance.
Launched under David Cameron's Government, the Behavioural Insights Team (BIT), (affectionately known as the Nudge Unit), are a team of crack psychologists and career civil servants tasked with positively influencing appropriate behaviour with tiny changes.
But according to whose measure of appropriate behaviour, exactly?
A clue lies in the fact that BIT was directed by Sir Mark Sedwill during the first lockdown. He’s one of Britain’s most senior national security advisors with links to M15 and MI6.
That’s an intelligence operative ruling by psychological manipulation. Though we are led to believe, in a democracy the government is an agency of the people, given force of law by the will of the people.
But what happens when our consent is manipulated by those in power?
One consequence is that the foxes take charge of the chicken coop. Another is that we begin to see drastic changes to the constitutional landscape. Politicians acquire impunity from public scrutiny and an entire nation is kept under house arrest.
But this demonisation of the masses is also the backwash of a protracted counterinsurgency crusade waged on ordinary people. When the Berlin wall came down in the nineties and decades of counterinsurgency was rendered obsolete, the battlelines moved from East to the West, from the Soviets to the lower orders of society. The mythos of communist infiltration, that gave rise to the threat of terrorism, is the ancestor of today’s biosecurity state. A government that tightens its grip, using fear of a common enemy, will find no shortage of common enemies, to continue tightening its grip.
From Green Pass to Digital Nexus
Strong-arming the world’s population under the rubric of biosecurity would not have been possible without the internet, and if the expulsion of the military and intelligence community from academic institutions in the 1960's had not resulted in the creation of Silicon Valley, they would not have acquired total information awareness, the precursor to the Green Pass.
But this formidable goal also caused the US to morph into the opponent it had been fighting during the cold war, as predicted by public intellectuals in the 1960s.
And so, with an annual budget of $750 billion and 23,000 military and civilian personnel in their employment, the Pentagon failed to denounce what many armchair researchers called out in the early days of the pandemic. That a global coup was underway was patently obvious, as crisis actors played dead in Wuhan, China.
Instead, those charged with protecting the west from Soviet-style putsch failed to apprehend it happening right under their noses. It's not so much that they were caught with their trousers down, it’s that they aided and abetted the coop. Years of fighting a statist, expansionist adversary, caused the intelligence state to mutate into their nemesis, namely China.
It is uncanny that the country with the worst human rights record on earth became the global pacemaker for lockdowns, as western democracies exonerated their existential threat and bowed to China’s distinct brand of tyranny.
As a result, the big tech data analytics pioneered by Silicon Valley luminaries, that was road tested in China, finally landed on the shorelines of western democracies.
And in an ironic twist of fate, the intelligence state created at the end of world war II, under the National Security Act, conceived the very corporations that would bring about the end of constitutional democracy, that would author a new bill of rights from their own community standards de jour, and that would shift us from sovereign nation states to global governance, into the collectivist future the Pentagon had been charged with protecting us from.
As Goethe quote goes ‘None are more hopelessly enslaved than those who falsely believe they are free.’ Namely, anyone still looking through rose-tinted lenses in the digital age, oblivious to the fact they are victims of systematic addiction. The bread and circuses of the internet influences the same dopamine rewards centres and neural circuitry motivators as slot machines, cigarettes, and cocaine, as was originally intended by psychologists like JCR Licklider, at the helm of this new technology that would exploit basic vulnerabilities in the human psyche.
As we descend further into the maelstrom of the digital age, the algorithms will get smarter, the psychological drivers will become more persuasive and digital rubric will become more real. Until eventually we will lose touch with reality altogether. But don't worry, this war of attrition is happening in conjunction with the roll out of new software and devices, and most will be too busy building their digital avatars or dissenting on social media to know any better.
Bank Busts Lead to Sweetheart Deals
Amidst the wreckage of bank failure grow lucrative deals. Shares of New York Community Bank Inc. surged with the announcement that the FDIC had made NYCB a “sweetheart deal” as the deposit insurer “priced the assets to move quickly,” wrote Wedbush analyst David Chiaverini in his upgrade of the stock, as reported in Bloomberg. “In exchange for the $2.7 billion discount on acquired loans [assets], plus the interest income earned on the loans and securities, NYCB will give up only $300 million in equity appreciation rights to the FDIC,” added the Wedbush analyst.
Plus, the takeover didn't include Signature's $4 billion in crypto-related deposits, included all of Signature's branches, and some of its loan portfolio, reports Business Insider. Emphasis was added because Signature didn’t have to take any bad loans.
"With New York Community's addition of certain deposits and assets of Signature's Bridge Bank, NYCB's balance sheet could be improved with less reliance on higher-cost wholesale funding. NYCB's loan-to-deposit ratio should decline from a high 119% in Q4 with the assumption of Signature deposits, while $12.9B in loans were bought for $2.7B, which equates to a 79% haircut," Bloomberg Intelligence analyst Herman Chan commented.
The FDIC killed two birds with one stone with the move, moving cherry-picked assets and deposits from a failed bank (Signature) to one that was overleveraged (119% loan-to-deposits) and possibly headed for trouble (NYCB).
Of course, sweetheart deals are nothing new. Post the 2008 crash, Rialto (a division of homebuilder Lennar) bought a 40 percent share of $1.2 billion in loans from failed banks for 40 cents on the dollar, with the FDIC carrying a loan for $1 billion of the deal at zero interest for seven years.
This was called a partnership, however, when a government entity carries its partner’s share at zero percent interest for seven years that term doesn’t seem to apply. The RE Action Committee explained at the time:
Lennar (Rialto) acquired indirectly 40% managing member interests in the limited liability companies created to hold the loans for approximately $243 million (net of working capital and transaction costs), including up to $5 million to be contributed by the Rialto management team. The FDIC is retaining the remaining 60% equity interest and is providing $627 million of non-recourse financing at 0% interest for 7 years. The transactions include approximately 5,500 distressed residential and commercial real estate loans from 22 failed bank receiverships.
Attorney Bryan Knight, in 2011, called the Private-Public Investment Programs (“PPIP’s”), such as Lennar/Rialto “ the biggest waste of government spending and most damaging program to the American public.”
Rialto was given a $600 Million interest free non recourse loan by the Federal Government to purchase assets of failed banks. Therefore, Rialto has no risk in collecting on assets because no interest is accruing and Rialto is not liable to pay back the loan since the loan is a non-recourse. This gives Rialto even more incentive to refuse loan workouts and to collect asset management fees. It is not rocket science, a bank that has risk of taking a loss is more likely to work with a borrower. Here Rialto has no risk.
How the FDIC hands out favors is described perfectly by Patrick Newman in his book Cronyism writing:
Cronyism [is] when the government passes policies to benefit special-interest politicians, bureaucrats, businesses, and other groups at the expense of the public.
The rewards of cronyism take the form of monetary gains, particularly increased incomes and profits for individuals and businesses, or psychic gains from greater power and authority.
The case of Silicon Valley Bank is especially egregious cronyism. Joseph Wang, the CIO at Monetary Macro who previously was a senior trader on the Fed’s open markets desk told Roger Hirst on Real Vision:
So, the bailout of Silicon Valley Bank was, in a sense, the bailout of millionaires and billionaires who weren't the clientele of Silicon Valley Bank. Those are guys who mismanaged your cash badly and wanted to bail out. Now, if you were going by the rule of law, you'd say that yeah, you guys. You can take it, and these are the rules. But these guys were also politically connected and very loud in social media and in the press. And so, they have influence and they can, I guess, encourage the government to bend the rules in their favor.
Winston Churchill and later Rahm Emmanuel famously said “Never let a crisis go to waste.” Cronyism never does.
Artificial Intelligence Enhances Consumer Sovereignty
Despite the fears that Artificial Intelligence will disempower consumers, companies find it easier to keep up with ever changing preferences of consumers by applying AI technology. Companies apply AI to the infinite areas of business operations, production, pricing, customer experiences, and manufacturing processes. Firms are racing one another to integrate AI applications into their business practices to meet consumer needs.
The reality is that consumers do, in many ways, steer the production and prices of economic goods and service offerings. The consumer is sovereign in a market economy; unfortunately, some still think otherwise. Why? Because artificial intelligence is mediating streams of knowledge between buyer and seller, exposing consumers to changing market conditions, prices, and circumstances. There is an antimarket camp; this camp is not keen on the fact that consumers steer the direction of pricing and production. The result is that AI integration into business practices is strikingly on the consumer's side.
As far as businesses entities are concerned, unsurprisingly, a 2023 customer poll found that "the majority of consumers (73 percent) believe there is potential for impact on customer experience, particularly in digital settings," according to Businesswire. With firms increasing their uses of AI in operations, finance, sales, and production, it becomes apparent that the simplest input into AIaas will likely tilt toward maximizing consumer demand. Techcrunch said in a recent article, "Every organization has their gold-standard employee, and AI learning can analyze employees' traits and behaviors in customer interactions, raising the bar for all." Another tool to used to maximize human productivity within a company! On the bright side, “AI can learn from top performers and share what makes them so great,” The author added, "Every employee can be a top performer.” Ludwig von Mises said, "the consumer is sovereign and cannot be replaced in a marketplace economy." Similarly, a recent Forbes article projected positive AI trends in 2023 and beyond; the author listed ten trends to look for in the use of AI in 2023, except one of the most important, unsurprisingly, the betterment of consumer sovereignty. Consumer sovereignty is not coercive in the exchange relationship between buyer and seller. Instead, it happens “only by serving the consumers, since again, the sale is voluntary on the part of both producers and consumers,” according to Murray Rothbard.
Along with AI technologies, human touch, and interaction are required and expected in many buyer and seller transactions. However, AI will assist business owners in a big way, providing enhanced customer experiences via the use of AI-powered websites, apps, manufacturing, et cetera., and other services that consumers demand. Despite all mounting evidence showing that AI-enabled applications can address customer uneasiness in a market economy because AI is a consumer-centric tool that maximizes consumers' market information, the antimarket camp does not believe that the consumer is sovereign. We must understand that AI is a maximizing tool with generative output data. In other words, AI will allow consumers and producers to spontaneously adjust their actions in market cooperation. Artificial intelligence adapts to consumer preferences and learns the top choices within data input units over time. AI learns via natural learning systems, which virtually enlarges its storage that adjusts to preferences and parameters of pricing and production, especially in reducing cost and adopting price changes.
Therefore, the economics of information – perfect or imperfect information – does not hold in the epoch of AI—spontaneous information dispersed with the aid of AI technology between buyer and seller reigns supreme. However, the spontaneous flow of information aided by AI goes against the precepts of mainline economics that support the economy of information and the so-called equilibrium. AI is an institution of the extended order in a market economy; it drastically changes the perfection or imperfection of information, spontaneity, or stagnate forms of knowledge of market conditions. AI enables consumers' sovereignty by enabling firms to reach and satisfy customers in different places, times, and circumstances giving sellers and buyers more or less information and vice versa, precisely as F.A. Hayek and Mises have preached for so long.
More Supervision and Regulation to Prevent Bank Runs?
Was That the Dip?
A few days from now marks the one-year anniversary of the article: Will You Buy the Dip? It was there I told everyone I know that eventually the Federal Reserve will conclude its Quantitative Tightening (QT), and a new round of Quantitative Easing (QE) would emerge. This was both inherent and inevitable due to the inflationary nature of central banks. So the idea was to buy the stock market once the Fed resumed the QE process.
The question is: Did last Sunday’s announcement of the Bank Term Funding Program usher in a new easy money era, i.e., was this the dip / pivot / stock market buy signal?
Consider the last two years of the Fed’s balance sheet. Between March and May of 2022, the Fed’s assets topped out at just under $9 trillion. Since then the Fed began its slow descent into QT, where last month it reduced its balance sheet, composed mostly of US Treasuries (UST) and Mortgage-Backed Securities (MBS), by around $80 billion a month. During this entire round of QT the broad stock market made no new highs and has instead slowly declined.
The Fed’s balance sheet has also become quite interesting as of late:
Incredible! It took one year for the Fed to reduce the balance sheet by $600 billion, and in just one-week, from March 8-15, the balance sheet increased by $300 billion!
This is what I was referring to, some event or crisis occurring that would be used as an excuse to get the Fed to return to the market… but human action is complex, and nothing seems to go according to plan. The increase in the balance sheet is not a result of the Fed buying-up more US debt or mortgage securities. As far as the public is aware, the Fed is still committed to QT via rolling off its existing UST and MBS holdings.
The balance sheet increase actually came from the loans the Fed granted for troubled bank relief. Details in the Fed’s notes reveal the elements comprising the $8.689 trillion balance.
Loans amounted to $318 billion, whereas a week prior, it was only $15 billion. The current $318 billion consists of Primary credit ($152 billion) and Other credit extensions ($142 billion). The new Bank Term Funding Program only accounted for $11.9 billion.
On one hand the Fed is reducing ownership of securities owned (loans to government), but on the other hand it’s creating money to loan to banks. It would be great to know how large this temporary one-year program will get, but we’re not privy to this information. However, with no limits on how much the Fed could create, it could amount to trillions of dollars.
Like the World Bank and IMF which grant loans to bankrupt nations, only to make them worse off by ending up in more debt, the Fed appears to be engaging in a similar scheme. By lending to bankrupt institutions, the hope is that within a year from now these failed banks will be better off than they are today, paying back the Fed in full plus interest.
The new funding program may very well push the Fed’s balance sheet to new all-time highs, and if it were to expand by a few trillion dollars more, one could expect to see this reflected in asset prices. But having no idea as to how big these bank loans will get, coupled with the Fed’s continual shredding of UST and MBS holdings, I still lack conviction that the Fed is serious about pumping the stock market back to new highs at the moment. Good luck in your trades.
How Does a Bank Collapse in 48 Hours?
“How does a bank collapse in 48 hours?” Asks the CNN headline. Especially a bank that reported a profit of $3.4 billion just last year. Murray Rothbard answered the question years ago in What Has Government Done To Our Money?, “No other business can be plunged into bankruptcy overnight simply because its customers decide to repossess their own property. No other business creates fictitious new money, which will evaporate when truly gauged.”
If you watched the Fed Chair Jerome Powell testify before the Senate and the House this month you heard over and over that banks are well capitalized. The non-sequitur inspiring the Shakespearean quote “Methinks you protest too much.”
The very next day after the hearings, shares of SVB Financial Group, parent of Silicon Valley Bank, fell 60 percent (the bleeding continued in after hours trading) after a Wall Street Journal article revealed, the bank “had sold large portions of its securities portfolio and would raise fresh capital, highlighting a broader problem for U.S. lenders who have seen rising interest rates hammer the values of their bond holdings.”
A day later Silicon Valley Bank depositors ran for the exits attempting to pull $42 billion out on Thursday, leaving the firm with a negative cash balance of almost $1 billion, regulators said. joining shareholders the same day the WSJ article appeared. The FDIC promptly closed the bank Friday morning saying: "Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). At the time of closing, the FDIC as receiver immediately transferred to the DINB all insured deposits of Silicon Valley Bank."
Almost Daily Grant’s wrote “Total deposits stood at $175.4 billion, with $151.6 billion of those uninsured. Those with deposits in excess of the FDIC’s $250,000 insurance threshold will receive a receivership certificate for their funds, with payments to follow as the regulator sells down remaining assets.” (emphasis added)
Roku, Roblox, and Blockfi are among the companies that had millions on deposit at SVB, uninsured. “The company’s deposits with SVB are largely uninsured,” Roku said. “At this time, the company does not know to what extent the company will be able to recover its cash on deposit at SVB.”
Overseas this weekend, leaders of roughly 180 tech companies sent a letter calling on UK Chancellor Jeremy Hunt to intervene. “The loss of deposits has the potential to cripple the sector and set the ecosystem back 20 years,” they said in the letter seen by Bloomberg. “Many businesses will be sent into involuntary liquidation overnight.”
While SVB was a lender to the venture capital industry and tech sector, the investments that did the bank in were bonds backed by the full faith and credit of the U.S. government. However, the value of those bonds has plunged as interest rates have increased dramatically.
Banks are able to use a little accounting trickery pokery as it concerns bonds designated “available-for-sale,” as opposed to “held-to-maturity.” The available-for-sale label allows banks to “exclude the paper losses on those holdings from its earnings and regulatory capital, although the losses [do] count in equity.” Held-to-maturity allows banks “under the accounting rules to exclude paper losses on those holdings from both its earnings and equity.”
This problem is not particular to the bank serving techland.
The Federal Deposit Insurance Corp. reported that U.S. banks’ unrealized losses on available-for-sale and held-to-maturity securities totaled $690 billion as of Sept. 30, up 47% from a quarter earlier, reported the WSJ.
Bank analyst Christopher Whalen wondered in a tweet, “Is it possible that nobody has asked Chair Powell about the deteriorating solvency of US banks due to QE? Where do you think that -$600 billion number will be at the end of Q1 '23” (emphasis added)
MarketMaven’s Stephanie Pomboy weighed in on the same subject with this tweet, “I'm puzzling to understand how THIS isn't the only thing people are talking about today????????? Someone tell me about the rabbits. and fast!”
But again on Capitol Hill and at the Eccles Building no one was uttering a discouraging word. However, FDIC Chairman Martin Gruenberg said in a December 1, 2022 speech, “The combination of a high level of longer-term asset maturities and a moderate decline in deposits underscores the risk that these unrealized losses could become actual losses should banks need to sell investments to meet liquidity needs.”
Now Gruenberg’s prophecy is coming to fruition. Silicon Valley said it decided to bite the bullet and sell holdings and raise fresh capital “because we expect continued higher interest rates, pressured public and private markets, and elevated cash burn levels from our clients as they invest in their businesses.” The fresh capital could not be had at any price.
Rothbard reminds us, “The bank creates new money out of thin air, and does not, like everyone else, have to acquire money by producing and selling its services. In short, the bank is already and at all times bankrupt; but it's bankruptcy is only revealed when customers get suspicious and precipitate ‘bank runs.’”
So the banks are well capitalized Mr. Powell? Bank depositors and ex-depositors will decide that. Silicon Valley Bank is the first this cycle to fail, but likely not the last.
How Reporters Manipulate You
An article in the New York Times last night by reporters Jonathan Swan and Maggie Haberman is an excellent example of one of the common ways “hard news” reporters can put their thumbs on the scale and push a preferred agenda.
On Monday Florida governor, and likely presidential candidate, Ron DeSantis said on Fox News that “becoming further entangled in a territorial dispute between Ukraine and Russia” is not a vital interest of the United States.
The people who work at and manage the New York Times clearly disagree with this opinion. That’s clear to anyone who has consumed their war coverage and seen the way they frame the conflict.
However, the paper wants its reporting to continue to appear nonpolitical as can be seen in this disclaimer halfway down the article.
So how do they dissuade readers of DeSantis’s point without appearing to rebuke it? They launder their opinions through experts and notable people with the same view.
In this article, they focus on some of DeSantis’s fellow Republicans who happen to agree with the New York Times on this particular issue.
The article presents reactions from seven Republicans who strongly denounce the DeSantis statement. They rake the Florida governor’s name through the mud with their comments. They call him weak and say that he’s so wrong it’s a risk to national security.
The article also quotes a Wall Street Journal columnist who criticizes GOP noninterventionists for wanting to “surrender” to Putin.
The article has one single quote from someone who agrees with DeSantis, but only because he wants the U.S. to focus more on combating China. Pure noninterventionism is given no voice, only a dissenting interventionist.
In paragraph 23, Haberman and Swan do admit one important detail that the readers who made it that far would be forgiven for getting completely backward. The opinions of those highlighted in this piece are unpopular with the GOP base compared to the skepticism of U.S. intervention in Eastern Europe voiced by Donald Trump and Ron DeSantis.
Readers will come away from this article thinking that DeSantis said something on TV that most people, including leaders and prominent members of his own party, think was stupid.
That is the exact kind of point you’d expect from the paper’s Editorial Board. But here it’s presented by reporters writing in the “hard news” section of the supposed paper of record.
Larry Summers Apologizes for his Rothbardian Insight and George Selgin Exhales
Larry Summers affirms the Rothbardian critique of fractional-reserve banking on Twitter...
SVB committed one of the most elementary errors in banking: borrowing money in the short term and investing in the long term. When interest rates went up, the assets lost their value and put the institution in a problematic situation. https://t.co/HxsgqpZOuL— Lawrence H. Summers (@LHSummers) March 14, 2023
...but then takes it back...
Responding to some of the comments here: Of course banks borrow short and lend long, but properly managed and supervised banks limit duration mismatch between liabilities and assets so their capital position is not gravely compromised by rising long-term interest rates.— Lawrence H. Summers (@LHSummers) March 14, 2023
...and free banker George Selgin breathes a sigh of relief at "Prof. Summers" retraction.
I'm glad to see, upon reading on, that Prof. Summers explains himself in the comments. Still, I was taken aback upon first seeing this tweet by him attributing SVB's troubles to its having done what all banks always do! https://t.co/EAAYc4ZrOS— George Selgin (@GeorgeSelgin) March 14, 2023
The Banking System is Built on Deception
There's nothing like a bank failure to get people thinking about the banking system. And though it appears the Fed has bought the nation's banks some time, the pair of bank runs on Friday and Sunday again exposed the fragility of the nation's banks.
But fragility isn't the only problem. As Rothbard hammered home decades ago, our banking system relies on a deceptive scheme, authorized and supported by the government, called fractional reserve banking.
To quickly review how fractional reserve banking works, say you deposit some of your dollars into your bank account. If the bank's reserve ratio is 5%, it then loans 95% of those dollars to other people who spend them on goods and services. The sellers of those goods and services then deposit the dollars in their own bank accounts.
Again, 95% of the dollars get loaned out and deposited in yet more bank accounts. However, all of these dollars still appear in every one of these accounts. Eventually, we'll arrive at a situation where most of the dollars you see in your bank account also show up in the accounts of many other people, appearing to them as their own dollars.
This gives the illusion that there is more money in the economy. But all that's really happened is that the bank has created new claims on the same amount of dollars. Specifically, a property claim on money stored has been transformed into a sort of callable loan that simultaneously appears available to a number of other bank customers.
Advocates of free banking argue that, on the free market, some bank customers would choose to invest in these types of collectivized callable loans. I agree. But these would certainly trade at a discount compared to cash because of the underlying risk of default.
But in today's banking system, these collectivized callable loans trade at par with cash. That indicates that enough bank customers are ignorant about the nature of their bank accounts. And banks benefit tremendously from this ignorance. They get to loan money into existence without account holders behaving any differently.
The banking deception relies mainly on concealment with a touch of duplicity. Watch banking commercials or read webpages about opening a checking account. You'll find common selling points like ease of access, security, connection to the digital financial system, a large ATM network, and the ability to send money to friends and family. All of these are also features of 100% reserve warehouse-style banking. The fractional reserve process is largely concealed from the customer, while the language used can mislead about the nature of bank accounts.
For instance, when a bank says, "your money is secure," they mean that there are measures in place to ensure only you can access your account and alert you when there is a suspicious login. What they do not mean, but what a lot of people surely understand them to mean, is that your money will not suddenly disappear from your account as it has at these banks that failed.
But that is exactly what can happen with these collectivized callable loans. It's why the funds in bank accounts are not the perfect money substitute that most people are misled into thinking they are.
Fractional reserve banking presents multiple people with what they believe to be a property claim over the same dollar. Beyond being risky and unstable, modern banks systemically rely on ignorance, deception, and government privilege. Until that changes, we remain teetering on the edge of the next crisis.
How a Libertarian Church in the Nation of Georgia Helped Undermine Military Conscription There
Georgia is a country at the intersection of Eastern Europe and Western Asia. It was occupied by the Soviet Union in 1921 and remained part of it until 1991. Military service was mandatory in the USSR because the Soviet leadership didn't respect individuals’ lives and used them as mere pawns.
This practice remained intact in contemporary Georgia until a libertarian party called Girchi established a "Christian, Evangelical, Protestant Church of Georgia—Biblical Freedom" in 2017 to free people from being government slaves, as priests were legally allowed to avoid conscription.
Since its creation the church managed to free individuals in nearly 50,000 cases from this form of modern slavery, but recently the government introduced a new law making it illegal to avoid conscription this way. Therefore, Girchi is now battling against the government to completely cancel the military draft and make the service fully voluntary by offering willing soldiers a decent salary, contrary to how it is nowadays when the government pays them less than $25 per month.
For all these years, the immoral practice of forcibly taking 18 to 27-year-old boys and exploiting their labor has been justified with patriotic slogans and the unwillingness of the government to stop treating people like a free resource for the duration of 12 months. However, patriotism is not just a word; it's an act of showing your respect in material form to the people who voluntarily want to defend your country, because patriotism or any other virtue can only be moral if it's done voluntarily and not under the threat of force.
There's been research done on the topic of whether the size of an army is an important factor when it comes to winning the battle, but it turns out it's not the size of the army but other factors such as motivation, weaponry, and tactics that play the main role.
Therefore, concentrating only on soldier quantity without guaranteeing that the army is staffed with people who voluntarily chose this profession and are equipped with decent weaponry, only points out that the government places no value on individual lives, as unmotivated and inadequately armed soldiers are doomed to an undeserved death.
There have been cases when conscription was justified with false argumentation that it's a duty of every patriot to serve in the army. But this reasoning overlooks a simple fact that defense is a public service that's financed from the state budget, therefore it is in fact taxpayers who keep army well-fed and armed.
This, it is no more of a patriotic act to serve in the army than to be employed or run a business so then the government can take taxes in order to actually keep the army financed and functioning. Especially nowadays when modern armies are exclusively dependent of high-tech equipment and weaponry, it is foolish to hope merely on troop numbers rather than directing the funds towards a fully professional and well-armed voluntary army.
No army is as effective as the one that is staffed with people who have willingly accepted their occupation as a soldier and it is in fact counterproductive to keep unmotivated people in the army, as it’s a waste of financial resources required for the training as well as dear lives when it comes to the actual battle.
In some cases, Girchi's church was criticized from a religious perspective that it's a sinful act to help people avoid the conscription, however the Bible itself states the following in 1 Samuel 8:10:
Samuel told all the words of the lord to the people who were asking him for a king. He said: This is what the king who will reign over you will claim as his rights: He will take your sons and make them serve with his chariots and horses, and they will run in front of his chariots. Some he will assign to be commanders of thousands and commanders of fifties, and others to plow his ground and reap his harvest, and still others to make weapons of war and equipment for his chariots. He will take your daughters to be perfumers and cooks and bakers.
He will take the best of your fields and vineyards and olive groves and give them to his attendants. He will take a tenth of your grain and of your vintage and give it to his officials and attendants. Your male and female servants and the best of your cattle and donkeys he will take for his own use. He will take a tenth of your flocks, and you yourselves will become his slaves. When that day comes, you will cry out for relief from the king you have chosen, but the lord will not answer you in that day.
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Denying Western Provocations Risks Prolonging War in Ukraine
The war in Ukraine has become a bloody grind — and there's no end in sight.
As some Western allies express doubt that Ukraine can completely expel Russian forces, Britain, France and Germany have entertained the idea of a defense pact with Ukraine. Their hope is that the prospect of closer ties to NATO will encourage Ukraine to negotiate a peace deal with Russia. While searching for a path to negotiations is a worthwhile endeavor, recent history suggests that the proposal of a post-war defense pact could push Putin even further away from potential peace talks.
Although many in the West don’t want to admit it, it was Ukraine’s growing relationship with the West — threatening to pull the country further from Russia’s sphere of influence — that kindled the conflict in the first place. In other words, Putin’s invasion of Ukraine was not completely “unprovoked” as the media often suggests.
Eastern Europe has been increasingly tumultuous ever since the Bucharest summit in 2008 when NATO declared that Ukraine and Georgia “will become members” of the alliance. Russia’s Deputy Foreign Minister Alexander Grushko asserted that this was a “huge strategic mistake,” and President Putin called it “a direct threat” to Russian security.
Months after this declaration, a war broke out between Russia and Georgia. In 2014, the U.S. aided a coup that resulted in the ousting of Ukraine’s pro-Russian president Viktor Yanukovych, arousing Russia’s invasion and annexation of Crimea.
After the U.S. and Ukraine co-hosted military exercises with over a dozen nations in 2021, the Kremlin reiterated that NATO expansion into Ukraine is a hard red line. Despite this, weeks later the U.S. and Ukraine signed the U.S.-Ukraine Charter on Strategic Partnership, which doubled down on the 2008 Bucharest Declaration and even explicitly said Crimea is a territory of Ukraine despite being under Russian control.
In January of 2022, an agitated Russia, having amassed troops on Ukraine’s border, demanded a number of written guarantees from the U.S., including that Ukraine would never become a member of NATO. The U.S. refused. Russia invaded Ukraine less than a month later.
The West’s refusal to heed any warnings that courting Ukraine could create serious conflict played a major role in triggering this war. To be clear, this doesn't excuse Putin’s illegal invasion and the devastation that has ensued. But the media’s portrayal of the West’s supposed innocence perpetuates a false narrative.
Foreign policy expert John Mearsheimer, a professor at the University of Chicago, has written about the events leading to the war at length and argues that the West is “principally responsible for the crisis” in Ukraine. Even back in 1998, George Kennan, best known for formulating the U.S. “containment” policy during the Cold War, warned that NATO expansion was the “beginning of a new cold war” and “a tragic mistake” that would provoke adversarial reactions from Russia.
William J. Burns, the current CIA director and once U.S. ambassador to Russia, wrote to Secretary of State Condoleezza Rice in 2008 that "Ukrainian entry into NATO is the brightest of all red lines for the Russian elite (not just Russian President Vladimir Putin). In more than two-and-a-half years of conversations with key Russian players… I have yet to find anyone who views Ukraine in NATO as anything other than a direct challenge to Russian interests."
Admitting the West’s role in the lead-up to this war is necessary as Western governments seek to foster negotiations. Any approach to negotiations that fails to understand the causes of the war is likely to encourage extended Russian aggression.
This war was not solely instigated by a fanatic. Rather Russia viewed Ukraine’s gradual incorporation into the West and the prospect of further NATO expansion as a direct threat to its security.
So, while an agreement for a post-war defense pact between NATO allies and Ukraine might encourage Ukraine to negotiate, it would likely discourage Russia from engaging in conversation. Without an honest analysis of the causes of this war, the West risks pushing Putin further from negotiations and prolonging this brutal conflict.
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