Why Protectionism without Glass-Steagall Risks Total Failure
With the application of protective tariffs applied across the board by President Trump, many are proclaiming the age of Neo-Liberalism dead.
Neoliberalism was another name given to Globalization, and the intention was always toxic.
The notion was as simple as it was evil… Instead of producing for ourselves, the productive industrial powers of each nation state would be stripped down to dependent shells of their former selves. Under this program outlined by David Rockefeller’s Trilateral Commission, which literally took over the US government in 1973, the world would be now organized around a caste system of first, second and third worlds.
In this caste system, ‘first world’ nations were told to embrace a culture of ‘post-industrial’ consumerism without the means to produce for themselves.
Meanwhile, ‘second world’ nations were told to become cheap labor sweat shops who would be forced to remain too poor to consume those cheap goods they would now export to ‘first world’ consumers’. If they wished to receive IMF or World Bank ‘aid’, these second world nations would now have to accept adopting ‘conditionalities’ that would prevent them from building up large scale infrastructure as so many assassinated nationalist leaders had aspired to do for decades.
Finally, “third world” (typically dark skinned) nations were denied even the smallest benefits of factory sweat shops, and would instead be seen simply as resource extraction zones to be run by mineral cartels as vast slave plantations.
That was a model of social organization begun in earnest in 1971 when the US dollar was removed from the Gold Reserve system and fixed exchange rate to April 2, 2025.
The theories of Milton Friedman, and Friedrich von Hayek were now applied in full force across the Trans-Atlantic as a ‘post-Keynesian’ dialectic where de-regulation, and open markets would now define the new world trajectory towards nation-stripping and power transfer into the hands of a small oligarchical class that would control all aspects of human life.
Meanwhile, “economic value” itself was literally redefined as merely financial services devoid of any reality. This loss of sense of value in reality literally transformed the economy of the trans-Atlantic into a time bomb built atop mountains of hyperbolically growing speculative bubbles that would be destined to pop.
How Capitalism Became a Time Bomb and the Need for a New System [OUR INTERESTING TIMES w/Tim Kelly and I]
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June 18, 2022
![How Capitalism Became a Time Bomb and the Need for a New System [OUR INTERESTING TIMES w/Tim Kelly and I]](https://substackcdn.com/image/fetch/$s_!5ruj!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fbb6bca84-8e8e-48ac-acea-a08918cc4a5d_1017x569.jpeg "How Capitalism Became a Time Bomb and the Need for a New System [OUR INTERESTING TIMES w/Tim Kelly and I]")
While critics of tariffs and the nation state system (such as eco-Keynesian-globalist Jeffrey Sachs) scream and holler about the incompetence of this maneuver by President Trump, the fact is that during its 250 years of life, the only times the USA has successfully industrialized and increased the productive powers of labor has been due to the application of protective tariffs. Taking that same time frame into account, the same fact applies to literally every nation of the world. When unbounded free trade was the norm, industrial growth has diminished, speculation has increased, and empires have benefited through their ability to keep their victims underdeveloped, corrupt and poor.
The cold hard facts supporting my claim are found in myriad scholarly sources, not the least of which are Anton Chaitkin’s Who We Are: America’s Fight for Universal Progress volume 1 and vol 2, Michael Kirsch’s The Challenge of Credit Supply, and EIR’s American System Reports.
A recent lecture by historian Sam Labrier titled ‘Trump, Tariffs and Treason’ sketched the most thorough proof of the effectiveness of protective tariffs that I have ever seen, which I invite everyone to watch now:
That said, protective tariffs are not enough.
If the massive time bomb built into our trans-Atlantic banking system through the form of a $700 Trillion derivatives bubble is not quickly addressed, then these noble efforts to re-industrialize American industry will be for naught.
It is with this intention that I have decided to write the following short overview of America’s last battle against the Wall Street-City of London banks who orchestrated a major depression. How these same fascist-promoting banks went on after WW2 to create the Bilderberg Group and systematically destroy the very regulation that had kept them at bay will also be addressed.
Some Necessary Background
“The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.” – Franklin Delano Roosevelt, first Inaugural Address 1933
Knowing that the “money changers” had only been able to create the great bubbles of the 1920s via their access to the deposits of the commercial banks, Franklin Roosevelt made the core of his battle against the abuses of Wall Street centre around a 1933 piece of legislation entitled “Glass-Steagall”, named after the two federally elected officials who led the reform with FDR.
This was a bill that forced the absolute separation of productive from speculative banking, guaranteeing via the Federal Deposit Insurance Corporation (FDIC) only those commercial banking assets associated with the productive economy, but forcing any speculative losses arising from investment banking to be suffered by the gambler.
The striking success of this law inspired other countries around the world to establish similar bank separation. Alongside principles of capital budgeting, public credit, parity pricing and a commitment to scientific and technological development, a dynamic had been created that would express the greatest hope for the world, and the greatest fear for the financial empire occupying the City of London and Wall Street.
The death of John F. Kennedy ushered in a new age of pessimism and cultural irrationalism from which our society has never recovered. The destruction of a long term vision as exemplified by the space program, the St. Lawrence Seaway and the New Deal projects had resulted in a tendency within the population to increasingly look upon present pleasures as the only reality and future goods as the mystical expression of the sum of present pleasures.
In this new philosophical setting, so alien in previous epochs, money was permitted to act as a power unto itself for short term gains instead of serving the investments into the real productive wealth of society.
With this new paradigm shift into the “now”, a new economic model was adopted to replace the industrial economic model, which had proven itself in the years preceding and following World War II.
The name for this system was “post-industrial monetarism”.
This would be a system ushered in by Richard Nixon’s announcement of the destruction of the fixed-exchange rate Bretton Woods system and its replacement by the “floating rate” system of post 1971 fame. During that same fateful year of 1971, another ominous event took place: the formation of the Rothschild Inter-Alpha Group of banks under the umbrella of the Royal Bank of Scotland, which today controls upwards of 70% of the global financial system.
The stated intention of this Group would be found in the 1983 speech by Lord Jacob Rothschild:
“… two broad types of giant institutions, the worldwide financial service company and the international commercial bank with a global trading competence, may converge to form the ultimate, all-powerful, many-headed financial conglomerate.”
This policy demanded the destruction of the sovereign nation-state system and the imposition of a new feudal structure of world governance through the age-old scheme of controlling the money system on the one side, and playing on the vices of credulous fools who, by allowing their nations to be ruled by the belief that hedonistic market forces govern the world, would seal their own childrens’ doom.
All the while, geopolitical structures foreign to the United States’ constitutional traditions were imposed by nests of Oxford-trained Rhodes Scholars and Fabians who converted America into a global “dumb giant” enforcing a neo colonial program under a “Anglo-US Special Relationship”. The Dulles brothers, Rhodes Scholar George McGhee, McGeorge Bundy, Henry Kissinger, and Bush all represent names that advanced this British-directed plan throughout the 20th century.
The Big Bang
The great “liberalization” of world commerce began with a series of waves through the 1970s, and moved into high gear with the interest rate hikes of Federal Reserve Chairman Paul Volcker in 1980-82, the effects of which both annihilated much of the small and medium sized entrepreneurs, opened the speculative gates into the “Savings and Loan” debacle, and also helped cartelize mineral, food, and financial institutions into ever greater behemoths.
Volcker himself described this process as the “controlled disintegration of the US economy” upon becoming Fed Chairman in 1978. The raising of interest rates to 20-21% not only shut down the life blood of much of the US economic base, but also threw the third world into greater debt slavery, as nations now had to pay usurious interest on US loans.
In 1986, the City of London announced the beginning of a new era of economic irrationalism with Margaret Thatcher’s “Big Bang” deregulation.
This wave of liberalization took the world by storm, as it swept aside the separation of commercial, deposit and investment banking which had been the post-world war cornerstone in ensuring that the will of private finance would never again hold more sway than the power of sovereign nation-states.
After decades of chipping away at the structure of regulation that FDR’s bold intervention into history had built, the “Big Bang” set a precedent for similar financial de-regulation into the “Universal Banking” model in other parts of the western world.
The Derivative Time Bomb is Set
In September 1987, the 20 year foray into speculation resulted in a 23% collapse of the Dow Jones on October 19, 1987. Within hours of this crash, international emergency meetings had been convened, with former JP Morgan tool Alan Greenspan introducing a “solution” that would have the future echoes of hyperinflation and fascism written all over it.
“Creative financial instruments” was the Orwellian name given to the new financial asset popularized by Greenspan, which were otherwise known as “derivatives”. New supercomputing technologies were increasingly used in this new venture, not as the support for higher nation building practices, and space exploration programs as their NASA origins intended, but would rather become perverted to accommodate the creation of new complex formulas that could associate values to price differentials on securities and insured debts that could then be “hedged” on those very spot and futures markets made possible via the destruction of the Bretton Woods system in 1971.
So while an exponentially self-generating monster was created that could end nowhere but in a meltdown, “market confidence” rallied back in force with the new flux of easy money. The physical potential to sustain human life continued to plummet.
NAFTA, the Euro and the End of History
It is no coincidence that within this period, another deadly treaty was passed called the North American Free Trade Agreement (NAFTA).
Speaking to the Los Angeles Times in 1993, Henry Kissinger (who had just been knighted by Queen Elisabeth II as a member of the Order of St. Michael and St. George for his service to the Empire) described NAFTA in the following terms:
“It will represent the most creative step towards a new world order taken by any group of countries since the end of the Cold War… The revolution sweeping the Western Hemisphere points to an international order based on cooperation… It is this revolution that is at stake in the ratification of NAFTA.”
With this Agreement made law, protective programs that had kept North American factories in the U.S and Canada were struck down, allowing for the export of the lifeblood of highly skilled industrial workforce to Mexico, where skills were low, technologies lower, and salaries lower still. With a stripping of its productive assets, North America became increasingly reliant on exporting cheap resources and services for its means of existence.
Again, the physically productive powers of society would collapse, yet monetary profits in the ephemeral “now” would skyrocket. This was replicated in Europe with the creation of the Maastricht Treaty in 1992, establishing the Euro by 1994, while the “liberalization” process of Perestroika replicated this agenda in the former Soviet Union. While some personalities gave this agenda the name “End of History,” and others “the New World Order”, the effect was the same.
In 1996, American economist Lyndon LaRouche presented his triple curve collapse function illustrating this process in its simplest terms, warning that if systemic interventions were not made, then the world economy would be irreversibly driven towards a hyperinflationary collapse akin to the 1923 destruction of Weimar Germany… except now on a global scale. Unfortunately, his words went unheeded at that time and the slide into insanity continued apace.
Universal Banking, NAFTA, Euro integration and the creation of the derivative economy in a space of just several years would induce a cartelization of finance through newly legalized mergers and acquisitions at a rate never before seen. The multitude of financial institutions that had existed in the early 1980s were absorbed into each other at great speed through the 1990s in true “survival of the fittest” fashion.
No matter what level of regulation was attempted under this new structure, the degree of conflict of interest and private political power was uncontrollable, as evidenced in the United States by the shutdown of any attempt by Securities and Exchange Commission head Brooksley Born to fight the derivative cancer at its early stages.
By 1999, a politically-castrated Bill Clinton found himself signing into law a treaty authored by then Treasury Secretary Larry Summers known as the Gramm-Leach-Bliley Act, which would be the final nail in the coffin for the Glass-Steagall separation of commercial and investment banking in the United States. The new age of unregulated trading and creation of over-the-counter derivatives caused these strange financial instruments to grow from $60 trillion in 2000 to $600 trillion by 2008.
The 2000-2008 Frenzy
With Glass-Steagall now removed, legitimate capital such as pension funds could be used to start a hedge to end all hedges. Billions were now poured into mortgage-backed securities (MBS), a market that had been artificially plunged to record-breaking interest rate lows of 1-2% for over a year by the US Federal Reserve, making borrowing easy, and the returns on the investments into the MBSs obscene. The obscenity swelled as the values of the houses skyrocketed far beyond the real values, to the tune of one hundred thousand dollar homes selling for 5-6 times that price within the span of several years.
As long as no one assumed this growth was abnormal, and as long as the unpayable nature of the capital underlying the leveraged assets locked up in the now infamous “sub-primes,” and other illegitimate debt obligations were ignored, then profits were supposed to just continue infinitely. Anyone who questioned this logic was considered a heretic by the latter-day priesthood.
The stunning “success” of securitizing housing debts immediately induced a wave of sovereign wealth funds to come into prominence, applying the same model that had been used in the case of mortgage-backed securities (MBS) and collateralized debt obligations (CDO) to the debts of entire nations. The securitizing of bundled packages of sovereign debts that could then be infinitely leveraged on the de-regulated world markets would no longer be considered an act of national treason, but the key to easy money.
Conclusion
This is the system that died in 2008. Contrary to popular belief, nothing was actually resolved.
For all the talk of an “FDR revival” under Obama, speculation wasn’t actually regulated under the Dodd-Frank Act or the Volker Rule of 2010. No productive credit was created to grow the real economy under a national mission, as was the case in 1933-1938. Banks were not broken up, while derivatives GREW by 40% with the new bubble concentrated in the corporate/household debt sector now collapsing. During this time, nation states continued to be stripped, as austerity was rammed down the throats of nations.
It should be no surprise that in the midst of this despair, a creative alliance was consolidated in defense of the interests of sovereign nation states and humanity at large, led by the leadership of Russia and China.
This leadership took the form of the China-led Belt and Road Initiative, which has grown to embrace over 130 countries today, and which is looking more and more like an Asian-led version of the New Deal of the 1930s.
Indeed, China’s capacity to unleash long term credit for thousands of international long term infrastructure projects was made possible by the fact that it was the only country on the globe that had not given up the principles of bank separation, which were destroyed in every other nation. Very few western figures stood up to this self-induced destruction over the decades, but one notable exception here worth mentioning is the figure of the late American economist Lyndon LaRouche (1922-2019), who not only resisted this process for over four decades, but fought alongside the Schiller Institute to promote the New Silk Road as early as 1996.
With the 2016 Brexit vote and election of President Trump, a new wave of nationalist spirit has become a fire that the technocrats have lost their capacity to snuff out.
Increasingly, the idea that nation states have a power over the private banking system has become revived, and discussion for reforming the now dead Trans-Atlantic system is increasingly shaped not by the calls for a “New World Order” as Sir Kissinger would have liked, but rather for a New Silk Road and a true New Deal.
The Eurasian nations are already firmly committed to this new system, and if the West is to qualify morally to take part in this new epoch, then the first step will be a return to a Glass-Steagall.
Follow my work on Telegram at: T.me/CanadianPatriotPress
Matthew Ehret is the editor-in-chief of The Canadian Patriot Review, Senior Fellow of the American University in Moscow and Director of the Rising Tide Foundation. He has written the four volume Untold History of Canada series, four volume Clash of the Two Americas series and Science Unshackled: Restoring Causality to a World in Chaos. He is also co-host of The Multipolar Reality on Rogue News and Breaking History on Badlands Media where this article was first published.
One cannot but be enthralled with the depth of information and brilliant analysis of Mathew. Just finished reading his book, "Science Unshackled" - "Restoring Causality in a World of Chaos" which he so aptly presents as a world that is a dichotomy of created chaos and one filled with natural intelligence.
This is essential reading of the highest order.
This puts our current predicament in clear perspective. Among other things it illuminates the West’s increased need for resource theft around the world. That agenda involves an expected grand prize of Russia’s resources on land and arctic to stave off the hyperinflation until China & the remainder of Asia are summarily choked into submission by those who would own the world.
Russia, China et al. understand these realities and are acting accordingly, in many ways enacting FDR’s new deal. It’s most unfortunate the citizenry of the Western powers (with the possible exception of the French Yellow Vest movement) don’t realize any of this and that they too are on “the menu.” With the the collective East pushing back, they may find themselves there sooner than later.
Thank you for this essential article!