The repeated possibility of a default on payments to bidders of some U.S. Treasury securities were greeted with almost universal dismay in some media circles. Prominent in many news reports was the view that such a default would mark a historic break with the federal government's unblemished record of honoring its financial obligations - and might precipitate any variety of dire consequences, from increased interest rates and higher budget deficits to widespread financial panic.
Not surprisingly, Wall Street generally responded otherwise. The entire episode was largely ignored by the financial markets. Yields on Treasury bills during the weeks of the threatened default were virtually unchanged and have remained so. Reportedly in the expectation that the Fed would actually lower its discount rate in December, 1995 the Dow Jones Industrials Average soared to successive new highs above the 5,000 mark. At least one Wall Street guru predicted that yields on long-term government bonds would soon drop below 5 percent; meanwhile, several U.S. corporations announced their intention to float new issues of 100-year debentures. In short, despite the sideshow inside the Beltway, it was business as usual (and then some) in the financial world.
Of course, Wall Street sentiment has never been an accurate barometer of the actual financial condition of borrowers (as long as the commissions roll in), and there are many reasons to believe that the federal government is not necessarily a good credit risk, especially in the long-term. However, the default issue is a political red herring. More significant, it is not the most important part of the story - the part that the popular media choose to ignore completely.
Longtime readers of American Institute for Economic Research publications know that for many decades we have chronicled the federal government's misfeasance in monetary affairs. Any reverses that the government's current creditors might suffer as a result of, say, a temporary default on T-bills, pale in comparison with the losses to investors and savers over the decades from such monetary mischief. It may be useful to re-count briefly some highlights (if they can be called that) of that record.
It Wouldn't Be the First Time
Even were the Treasury to default, it would be far from the "first time" that the federal government has reneged on its financial obligations - mainly by manipulating the currency in which its debts are denominated. For example, during the 19th century, at times of financial stress (usually wartime) the convertibility of the dollar into gold or other monetary metals was suspended or interrupted. As a consequence, the purchasing power of the currency invariably plummeted until convertibility was restored or, as in the 1870s, until the promise of resumption of specie payments for paper currency had been secured.
The passage of the Legal Tender Acts during the Civil War, which authorized the government for the first time to issue non-interest bearing legal-tender notes in which its own debt could be repaid, and which remains the hallmark legislation for today's fiat currency, was perhaps the most egregious manipulation of U.S. currency to that point. It halved the greenback's purchasing power - as well as the real return to holders of public debt - in a mater of months.
In view of the dollar's subsequent decline, however, the most significant monetary event in the Nation's history was the government's permanent abrogation of its domestic gold obligations in June 1933 - a massive default that virtually every politician today chooses to ignore. At the time, however, some saw it for what it was. When President Roosevelt asked then Oklahoma Senator Thomas P. Gore, a close student of monetary economics, his opinion of the matter, the Senator is reported to have replied; "Why, that's just plain stealing, isn't it, Mr. President?"
As the Roosevelt administration repudiated domestic monetary obligations, so the Nixon administration reneged on U.S. international monetary obligations by closing the "gold window" in 1971. With that action, the United States formally renounced any intention of honoring the obligations that for the previous two centuries had governed international financial settlements. In short. the U.S. government has a "rich" tradition of stifling its benefactors -- creditors and trading partners alike.
The $11 Trillion Theft
That unhappy tradition extends far beyond past and present holders of U.S. Government securities. Virtually all savers and investors who held dollar-denominated assets have suffered enormous losses due to the decreased purchasing power of the dollar. According to our most recent calculations the total of Americans' savings embezzled through the inflating process since 1939 amounts to almost $11 trillion in today's dollars.
In recent decades, even those who invested in "riskless" long-term U.S. Government securities sometimes received, in real terms, a negative after-tax return on their investments. Such was the situation with a 32-year U.S. government bond issued in February 1958, midway in the 1957-58 business contraction. That bond yielded nominal interest of 3.5 percent and matured in February 1990. But during the lifetime of the bond the dollar lost more than three-fourths of its purchasing power. At the marginal tax rate faced by individuals with taxable incomes of $75,000 in 1990 dollars, the total of all interest payments and return of principal to the holder of $10,000 of these bonds was roughly $6,600 in 1958 dollars, for an internal rate of return of -2.1 percent. Taxes and inflation absorbed an interest income and about one-third of the principal. In effect, such an "investor" paid the government for the privilege of lending it money. It is not without reason that the late Dr. Franz Pick termed long-term Government bonds "Certificates of Guaranteed Confiscation."
In any event, it seems clear that over the long run it is mainly monetary events that have generated credit problems for the U.S. Government. Interest rates usually have spiked upward at times when the dollar has been most vulnerable to losses in purchasing power and moderate with the return to convertibility. Since 1933, there has been no restoration of convertibility, and interest rates have remained far above their historical levels.
Who Comes First When the Money Gets Short?
Congress ultimately controls the purse strings of the federal government via the debt ceiling. The President is expected to live within the financial means so provided and, when the money gets short, to influence (via the veto and other executive powers) how available funds will be spent. Whatever the rhetoric, in practice it is precisely during such times of financial strain that any administrator reveals its genuine priorities - as the Clinton administration seems to have done in this latest budget impasse.
In raising the possibility of a default, the President in effect announced that when the money gets short those who lend money to the government stand last in line - behind the mohair and sugar subsidies, behind the public television and radio subsidies, behind the subsidies to art and culture, behind welfare and entitlement recipients, behind double-dipping civil service retirees and almost anyone else now on the receiving end of federal outlays.
When a private firm's management juggles the books or chooses to pay extravagant payrolls instead of its creditors, it quickly finds itself shut out of the credit markets (and perhaps shut into prison). Today the senior managers of the federal government may believe that the dollar's stamina against most other currencies has largely immunized them against that possibility. Presumably, however, even the most forgiving lenders will take only so much abuse; if the markets were suddenly to lose confidence in the dollar, the U.S. Government's ability to borrow even from its current creditors could vanish just as quickly as it has in other countries that reneged on their debts - or paid them in near-worthless currency.
Anti Shyster, Volume 6, No. 2
"The horrible secret of America's worst atrocity is out: our servicemen and women were exposed to deadly chemical and biological agents supplied to our enemies by our own government." -- Joyce Riley, Director, American Gulf War Veterans Association
"This disease could be a holocaust of monumental proportions as it has been genetically engineered." -Cell Microbiologist, Dr. Nancy L. Nicolson
A plague is breaking out in America, in England, in Europe, in the Middle East, and in 27 out of 28 countries which were involved in the Desert Storm War in 1990 and '91. Germ warfare was used by Saddam Hussein against the American and alliance troops in that brief war -- biologicals which were illegally manufactured in America and sold illegally to Iraq from 1985-'90 with the approval and blessings of the Reagan and Rush Administrations. These biologicals were then unleashed on American and alliance troops via Iraqi Scud missile attacks.
Some died quickly from intense exposure to chemical and biological weapons, but most received low level doses and returned home with the disease(s). It is now estimated by reliable sources that 100,000 to 200,000 of the 700,000 troops we sent to Desert Storm are now sick and/or dying with Gulf War Illness and that 15,000 of these young servicemen and women have died from the disease.
Furthermore, tens of thousands of wives, children and other family members are now contracting the moderately contagious, highly communicable disease from the veterans, and thousands of babies are being born to these veterans, deformed like the thalidomide babies of the 1950s. (See November 95 Life special; "The Tiny Victims of Desert Storm.")
Meanwhile, the U.S. government, which helped create the biologicals which Saddam used against our own troops, flatly denies that any chemical or biological agents were used in the Gulf War, flatly denies the existence Desert Storm (or Gulf War) Illness, and is flatly denied medical treatment to several hundred thousand sick or dying Desert Storm veterans, spouses or their children.
[ED. NOTE: Just as they denied the existence, or hideous legacy of Agent Orange for over 15 years after the end of the Vietnam War. It is said that nothing is totally confirmed until officially denied by our government.]
And Gulf War Illness (resulting from up to 15 separate biologicals which Saddam used) is only one of dozens a deadly new illnesses that are now emerging all over the world (Mad Cow disease in England, AIDS, Hanta-Virus Ebola Zaire, the flesh eating disease, and dozens more).
The Los Angeles Times (5/20/96) wrote in an article entitled: "Report Warns of Global Health Crisis" and subtitled: "Infectious Diseases: Despite Medical Advances Millions Are Dying" declaring a 'global crisis' and warning that 'no country is safe lom infectious diseases.' The World Health Organization says in a new report that diseases such as AIDS, Ebola, Hanta, Mad Cow, tuberculosis. etc. killed more than 17 million people worldwide last year, including 9 million children.
"Taken together, bacterial, viral and parasitic diseases remain the world's leading cause of premature death, accounting for one out of every three deaths, the report says. For instance, the No.1 infectious disease, tuberculosis, took 3.1 million lives last year, up 400,000 from WHO figures for 1993.
[Ed. Note; These numbers make gun and all other violent deaths appear to be a tempest in a teapot. It seems that maybe we should be more worried about these silent killers.]
"The report also suggests with uncommon starkness that in today's global community, populations mix with unprecedented ease, and disease organisms have the potential to spread among countries at jet speed. Among the reasons that many infectious diseases are spreading so rapidly, the WHO report says, are growing antibiotic resistance and heavy international air travel."
What is Gulf War Illness (GWI)?
GWI is a communicable, moderately contagious and potentially lethal disease, resulting from a laboratory modified germ warfare agent called Mycoplasma fermentans (incognitus). [ED. NOTE: There were actually up to 15 such agents used in Desert Storm by Iraq - only three have been identified at this writing: Mycoplasma fermentans (incognitus), Mycoplasma genetalian, and Brucella species.] Mycoplasma fermentans (incognitus) is a biological which contains most of the HIV envelope gene, which was most likely inserted into it in germ warfare laboratories.
GWI spreads far mare easily than AIDS, by sex, by casual contact, through perspiration, or by being close to someone who coughs. Your children can be infected at a playground or school. The Nicolsons, who have isolated the microorganism, say that it is airborne and moderately contagious.
To illustrate the moderately contagious nature of the biologicals Saddam used, Dr. Garth Nicolson cited the case of a young woman who served in a transportation squad who contracted GWI while assigned to a graves registration unit during the hostilities. She is currently the sole survivor of the 16 members of her unit.
GWI is the direct health consequence of prolonged exposure to low (non-lethal at the time of exposure) levels of chemical and biological agents released primarily by direct Iraqi attack via missiles, rockets, artillery, or aircraft munitions, and by fallout from allied bombings of Iraqi chemical warfare munitions facilities during the 38-day war.
The effects of these exposures were exacerbated by the harmful and synergistic side affects of unproven (untested) pyridostigimine bromide (PB) pills (nerve agent pre-treatment pills) forcibly administered to our troops, botulinum toxoid vaccines (also untested and experimental) forcibly administered to our troops, anthrax vaccines, and several other experimental vaccines, all forcibly administered to our troops like so many laboratory guinea pigs.
Estimates of the number of vets who are sick are just that - estimates. Over 160,000 sick Gulf War vets have reported to the Gulf War Registry (kept by the Department of Defense - which still maintains that the disease does not exist). This does not include wives, children or other family members, friends or associates (secondary infectees) who are sick, disabled, dying or dead.
By August 15, 1992, 17,000 out of the 100,000 reservists and National Guardsmen who served in the Gulf conflict had reported to the VA that they were ill. Four years later (in August '96) that number is likely to have tripled to 51,000, or over half of the total. Joyce Riley estimates that 1/2 of all Desert Stormers may now be positive for Mycoplasma fermentans (incognitus). Riley (and the Nicolsons) also estimate that a large percent of all GWI victims may ultimately die from the disease, or suicide.
On 7/31/96, Tony Flint, spokesperson for the British Gulf War Veterans Association, reported that the number of GW veterans deaths in U.K. is 1,233 out of 51,000 Brits who participated. Of these deaths, 13% or 162, were from suicide. These are huge numbers who took their lives due to their lack of treatment and incredible pain levels.
Whole families are now ill. Nor do the above numbers include babies which are being born dead or severely deformed like the thalidomide babies of the '50s. Some of the baby deformities are Goldenhar syndrome, wherein babies are born with one or more limbs missing, a missing eye, or other deformity. It is now estimated that a large percent of babies born to infected veterans are being born deformed or with birth problems.
The study done for former U.S. Senator Don Riegle (D-MI) concluded that 78% of wives of veterans who are sick are also likely to be sick, that 25% of their children born before the war are also likely to be sick, and that 65% of children born to sick Gulf War veterans after the war also are likely to be sick.
MIA, August 1996
Ms. Collett (see, I can be politically correct) then proceeded to discuss the meeting in Beijing, China, telling the people there how the UN was empowering the women of the world, after which she returned to the subject of the Michigan Militia. She said that Boutros Boutros-Ghali had warned her to watch out for black helicopters while she was in Michigan, much to the amusement of all. During this time, they were also watching protesters (Militia personnel) carrying the anti-UN flag back and forth in front of their windows.
The discussion then returned to the conference in China and the listeners were told that Hillary Clinton had promised that the U.S. would give $20 billion to the UN to be used for world education and that the money would be distributed by the UN. Somehow, the conversation always seemed to drift back to the Militia. These people were totally unaware that Tom Wayne, XO of Michigan Militia sate command, was present and he really had to bite his tongue.
After almost an hour of this, some of the people suggested that they bring the Militia (the protesters) in to listen to the speaker. According to Tom, Ms. Collett suggested that maybe they (the Militia) didn't have enough intelligence to understand. At that point, Tom seized his opportunity and stated that there was no need to interrupt the meeting because the Militia was represented. The room fell silent for a moment and then people began to gasp and all heads turned to the back of the room (where Tom was seated) and the people stared in disbelief.
He proceeded to tell the speaker that maybe she should reread her history book on the U.S. because we're a Republic, not a Democracy. He suggested that she deliver a message from him to Boutros Boutros-Ghali, that as went the League of Nations, so will go the UN. Tom said that he was impressed that the UN knew anything about the Michigan Militia and that they were concerned. Madame Speaker seemed to be somewhat rattled at the unexpected turn of events. Her last comment to Tom was that many countries wanted the U.S. out of the UN, at which point he realized that they had both hit common ground in a very short exchange of views.
Later, Tom commented to me that the one thing that really bothered him was that at this meeting, held in a Christian Church, there was no mention or God or Jesus.
We are still in desperate need of donations and volunteers if this is to be a success. If you would like to donate or volunteer time, contact Michigan Militia Corps state command at (616)788-4754.
It is earnestly recommended that everyone who was there last year be there again this year. They will have the opportunity to see if they were filmed (illegally) by the security cameras last year and those who can be identified on film can become parties to the class action law suit that will be filed on their behalf.