From the "Wealth of Nations" to the "Debt of Nations"

As everyone from Paul Krugman to Simon Johnson has noted, the banks are so big and politically powerful that they have bought the politicians and captured the regulators (and see this).

But it's not just a question of regulatory capture and corruption. It's actually a loss of sovereignty.

As Damon Vrabel wrote in July:

It seems ridiculous to point this out, but sovereign debt implies sovereignty. Right? Well, if countries are sovereign, then how could they be required to be in debt to private banking institutions? How could they be so easily attacked by the likes of George Soros, JP Morgan Chase, and Goldman Sachs? Why would they be subjugated to the whims of auctions and traders?

A true sovereign is in debt to nobody and is not traded in the public markets. For example, how would George Soros attack, say, the British royal family? [Vrabel is presumably referring to Soros' currency speculation against the British pound and other currencies.] It’s not possible. They are sovereign. Their stock isn’t traded on the NYSE. He can’t orchestrate a naked short sell strategy to destroy their credit and force them to restructure their assets. But he can do that to most of the other 6.7 billion people of the world by designing attack strategies against the companies they work for and the governments they depend on.

The fact is that most countries are not sovereign (the few that are are being attacked by [the big Western intelligence services] or the military). Instead they are administrative districts or customers of the global banking establishment whose power has grown steadily over time based on the math of the bond market, currently ruled by the US dollar, and the expansionary nature of fractional lending. Their cult of economists from places like Harvard, Chicago, and the London School have steadily eroded national sovereignty by forcing debt-based ... currencies on countries.

We long ago lost the free market envisioned by Adam Smith in the “Wealth of Nations” [the book widely considered to be the foundation of modern economic theory]. Such a world would require sovereign currencies.... Only then could there be a “wealth of nations.” But now we have nothing but the “debt of nations.” The exponential math of debt by definition meant that countries would only lose their wealth over time and become increasingly indebted to the global central banking network.

An obvious example of a nation which has lost it's sovereignty and gone from the "wealth of nations" to the "debt of nations" is Ireland. The Irish bailout won't really help the Irish people, but will help the big banks which invested in Ireland. See this and this. Ironically, German banks may actually be more at fault for the Irish crisis than the Irish banks themselves. See this, this and this.

And the EU is now arguably trying to tell Ireland what to do (while using pleasantries and niceties to appear not too pushy), and somewhat ignoring Ireland's status as a sovereign nation. See this, this and this.

Similarly, Americans - without their knowledge or consent - are bailing out banks all over the world . See this, this and this.

Of course, there is no bright line between private and central banks, since big banks own the Fed, and the world's central banks - in turn - own the BIS.

Central bankers are not elected by - or accountable to - the people of the nations in which they sit, nor are the IMF or World Bank. The IMF often loans money to countries and then imposes draconian austerity packages.

Sure, Irish and American politicians were irresponsible and corrupt, and both peoples were spendthrifts.

But - as I've repeatedly pointed out - the game has also been rigged in favor of the banks and against the sovereign nations.

For example, economist Michael Hudson points out that debt grows exponentially, while the economy only grows in an s-curve. So the amount of debts will always surpass the size of the real economy. If private banks have the power to create debt, then the biggest banks will always eventually win out over the sovereign nations, especially when the amount of credit which can be created (i.e. the size of the monetary base) is not limited by real assets, but is simply based on a system of fiat currency.

As I wrote in October, in a post entitled "The Founding Fathers' Vision of Prosperity Has Been Destroyed":

The ability for America and the 50 states to create its own credit has largely been lost to private bankers. The lion's share of new credit creation is done by private banks, so - instead of being able to itself create money without owing interest - the government owes unfathomable trillions in interest to private banks.

America may have won the Revolutionary War, but it has since lost one of the main things it fought for: the freedom to create its own credit instead of having to beg for credit from private banks at a usurious cost.
And see this.

But - whatever one thinks about public banking or paper currencies - one thing should be clear to everyone: the giant banks are rapidly chipping away at the sovereignty of virtually all of the world's nations.
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