This was a fundamental theme in the Old Testament. We are told that those who hold their position by means of political power and corruption always lose their position. They are always overthrown. They look unbeatable. They are always defeated. The prophets of Israel came before kings and commoners with this message. Isaiah 1 is a good example. Isaiah even identified a major technique of the power elite: inflation. "Thy silver has become dross, thy wine mixed with water" (Isa 1:22).
The more things change, the more they stay the same.
THE POWER ELITE
What do I mean by the power elite? The phrase was coined by Leftist sociologist C. Wright Mills in 1956. His book remains a classic. Its main chapter is here. Liberal columnist Richard Rovere in 1956 called it the American Establishment. Conservatives refer to it as the Insiders or the Conspiracy. David Rothkopf, writing from inside, calls them the superclass. Sometimes they are called the PTB: the Powers that Be. I think conservative journalist and historian Otto Scott said it best: the behind-the-scenes fellows who are too clever by half.
Who are they? They are men of influence and wealth who gain a lock on this wealth through political power. They use economic leverage -- debt -- recklessly because they can protect themselves from losses by means of political leverage: government bailouts. Some of them lose, but as a class they do not.
The key to their economic position is their unseen political manipulation. They are the masters of backroom politics. Theirs is not the backroom politics of the old big city political bosses, who were their class enemies, and whom they had generally replaced by the late 1950s. The novel The Last Hurrah (1956) describes this transfer of power, although it ignores the system that replaced the Catholic power base. The battle of the Boston Brahmins -- merchants and lawyers -- who had replaced the Boston Puritans by 1700, vs. Boston's Irish Catholics after 1870 is the archetype. The battle lasted for about 90 years. The triumph of Jack Kennedy, which seemed to be the triumph of the Irish Catholics of Boston, was in fact the victory of the Brahmins, by way of Harvard. His father got Jack into Harvard. Then he bought him the Presidency. "Honey Fitz" Fitzgerald's grandson was the symbol of this transfer of power.
The central battleground has always been the control of the faculty of Harvard, from 1636 until today. This includes the Harvard Business School and Harvard Law School. Harvard is both the symbol and the supreme leverage point. The other Ivy League schools are the second tier in this ring of power. So are the late-comers: Stanford University and the University of Chicago, which were created by two very rich capitalists in the late 19th century, who wanted into the circle of social influence, and who created universities to buy their way in. Leland Stanford never quite made it in. John D. Rockefeller, Sr.'s son did, by way of Brown University and the Rockefeller Foundation, which he took over in 1917.
New York City and Washington, D.C. -- Wall Street and the Beltway -- are where the anointed exercise their rule. This mirrors the circles of power in England: Oxford, Cambridge, and the City of London, a legally separate jurisdiction from the city of London.
Bankrolling the American power elite are fewer than a dozen large banks, mostly in New York City. They have an insurance company: the Federal Reserve System. Bankrolling the British power elite -- called the Old Boy Network -- is a similar system of banks. Their insurance company is the Bank of England, which is the model for the FED.
Note: the transfer of power began in 1660, with the restoration of Charles II to the British throne. Cromwell, the Lord Protector, had died in 1658. The Restoration displaced Cromwell's Puritans. But Cromwell had never consolidated his rule where it mattered: Oxford. He technically ruled over Oxford for almost a decade, but he never made any reforms. Next came the Glorious Revolution of 1688 and the creation of the Bank of England in 1694. This 34-year consolidation of social and economic power -- the displacement of Puritan rule -- was paralleled in Boston in these same years.
The power elite's members do not sit in the cigar smoke-filled rooms of the history textbooks. Most of them do not smoke these days. Indeed, their non-smoking status is one mark of their superior status. But, just like the old political bosses, they depend on politics for their position. That is their Achilles heel. By becoming dependent on politics to protect themselves from free market competition, they will eventually overplay their hand. They will bet the farm -- and ours -- on a busted flush. Imploding debt will remove them from the scene.
Why do I believe this?
To answer this, I begin with North's three laws of bureaucracy.
1. Some bureaucrat will inevitably enforce an official rule to the point of imbecility.2. To fix the mess which this causes, the bureaucracy will write at least two new rules.This is a convenient way to express the principle set forth by Ludwig von Mises in his essay, "Middle-of-the-Road Policy Leads to Socialism." Each attempt to fix the problems caused by a previous government intervention creates new problems.
3. Law #1 applies to each of the new rules.
Mises also argued that socialism is inherently irrational, because it destroys the market for capital goods. It destroys market pricing. He wrote that in 1920.
Conclusion: all socialist systems must collapse.
Semi-socialist systems move in the direction of bureaucracy. They fall under North's three laws.
Conclusion: The power elite will blow it. Give them time.
Their great temptation is private debt. Their salvation is the federal government. But the government depends on three things: low-interest debt, central banking, and bureaucracy. None of the three is trustworthy. The free market will displace them all. I call this event the Great Default.
THE ECONOMIC CRISIS OF 2008/9
Do you believe that the Insiders engineered the economic crisis of 2008 and 2009? If you believe this, then you are ignoring crucial facts about what happened -- well-known facts.
Also, if you believe this, how do you expect to see the replacement of the power elite? If they are that clever, their opponents -- you and I -- are doomed.
I argue the opposite. Keynesian economics is unsound, fiat money is unsound, massive federal debt is unsound, and there will be a day of reckoning. On that day, the existing establishments will go on the defensive. More than this: they are already on the defensive. This is something new. The crisis of 2008/9 was the tipping point.
I say this as a student of conspiracies in history. I wrote my first essay on this in 1958. In 1985, I wrote the Prologue and Epilogue to Larry Abraham's Call It Conspiracy, which was a revision of the book that he and Gary Allen wrote in 1971, None Dare Call It Conspiracy. I was a friend of Gary Allen. We worked together on a few projects.
I took my Prologue and Epilogue and produced a full-length book. You can read it for free here.
In short, I was not born yesterday. What I am about to tell you, you would be wise to take seriously if you regard yourself as a believer in conspiracies.
KEYNESIANISM PRODUCES DISASTERS
Those conspiracy theorists who think that the conspirators always engineer the economic crises are ignorant of economic theory. They also ignore the obvious. Let me give you an example. Lehman Brothers was a major player in the United States economy in the summer of 2008. That private investment bank had been in operation for over 150 years. It was gigantic. But in the September crisis, it went bankrupt. Why? Because Hank Paulson, who was Secretary of the Treasury, decided not to bail it out with government money or guarantees.
What if the Secretary of the Treasury in the fall of 2008 had been the ex-CEO of Lehman Brothers rather than the ex-CEO of Goldman Sachs? Do you think Lehman Brothers would have gone out of business? Or do you think Goldman Sachs might have gone out of business?
The idea that They, with a capital T, engineered the crisis of 2008 raises a question: Who were They? If They did not include Lehman Brothers, then I do not know who They were. The supposed fact that They controlled things, and They engineered things, did no good for Lehman Brothers. That was the largest bankruptcy in the history of finance. If They engineered the crisis, why wasn't Lehman's CEO Dick Fuld invited in on the planning sessions?
I hope you see my point. The idea that conspirators in the American banking world engineered the crisis of 2008, which took down one of their largest organizations, is ludicrous. It assumes that the Keynesians who are in control understand Austrian School economics. Nobody else was predicting a crisis in 2007 except the Austrians. The Austrians were predicting it because they had an analytical system that enabled them to make the forecast. I was one of them.
Austrians are a fringe group. Nobody paid any attention to them in 2008. We are pariahs in the academic community, and we are equally pariahs in the banking community. So, why does anyone believe that the people who were running the system, who were dedicated to the economics of Keynes, Paul Samuelson, and Paul Krugman, were able to figure out that they could precisely manipulate the world economy, taking it to the brink of failure, and then escape at the very end, coming out far wealthier? The suggestion is ludicrous. Yet it is widely believed among conspiracy theorists.
The person who says that the power elite created the crisis are of necessity saying that Keynesians used Austrian School theory to manipulate the economy into a crisis, and then carefully used a doubling of the monetary base in four months to save the system (minus Lehman Brothers). Yet no academic theory of economics prior to this had ever provided an analytical defense of a doubling the monetary base in four months. The decision was 100% ad hoc. There was no theory to justify it.
Then how should we explain what happened? By first abandoning that form on conspiracy theory that declares that nice guys finish last. I hold to the anti-Durocher view of long-term social causation: nice guys finish first. Eventually.
PREDESTINATION BY CONSPIRACY
For over 40 years I have been told by people who have a smattering of knowledge about conspiracies and conspiracy theory that the power elite has engineered every crisis in American history. They believe that the power elite is in fact the functional equivalent of God. They believe that the power elite predestinates the affairs of men.
I am not saying that every conspiracy theorist holds this, but a lot of them do, and I think the vast majority of their followers do. My father-in-law, R. J. Rushdoony, called these people gravediggers. He said that they believe that the conspiracy is the equivalent of God, and the conspiracy is inherently evil. Therefore, the conspiracy has the capability of keeping most people blinded most of the time. The conspiracy -- just one -- runs the show.
If this is true, then how can it be replaced? How can evil be overturned? Their typical answer is this: education. I ask: Of whom? By whom? At what price? By what means?
Back in the early days of the conservative movement, this answer was obviously hopeless. In 1954, there were only three tiny conservative book publishing firms: Regnery, Devin-Adair, and Caxton. Hardly anyone knew about them. There was no direct-mail system. That came only with Ricard Viguerie's efforts after the election of 1964: the Goldwater donors' list. There was no National Review. There was no Freeman.
In those days, there was no way that a rock-solid conspiracy theorist in the United States had any plausible plan for overturning the conspiracy. He had never heard of the Council on Foreign Relations. That revelation came with Dan Smoot's book, The Invisible Government (1960). What a conspiracy theorist knew was this: he surely had no influence. Nobody he had ever heard of did. Senator Bob Taft had died in July 1953. Also, no one in the conservative movement knew that Taft had been a member of Skull and Bones, just as his father President Taft had been, and his grandfather had been. His grandfather had co-founded it in 1833. No one in the general public in 1954 knew of Skull and Bones. That revelation awaited Ron Rosenbaum's September 1977 Esquire article. That was when I first learned of it. Antony Sutton's books came half a decade later.
Side note: there has never been a comparable exposé of the Harvard secret society that predates Skull and Bones by a generation: Porcellian. Teddy Roosevelt was a member. Franklin Roosevelt could not get in, which was his greatest disapointment in life, he later maintained.
Widespread education is never free of charge, and widespread education is controlled in every country by the government. If the conspiracies control all of the governments, then how can widespread education ever roll back the conspirators?
So, there are two views, sometimes held by the same people: (1) the power elite is collectively God walking on earth; (2) mass education can unseat the power elite, and then never let other evil insiders replace them. We are either to believe in the immovable object of conspiracy or the irresistible force of democracy.
I'm not buying it. I never have.
CONSPIRACIES NEED LEVERAGE TO MOVE THE MASSES
The main idea behind most conspiracy theories is this: the bad guys behind the scenes are fooling the masses, thwarting the good hearts of the masses.
This is an intensely anti-biblical view of social cause and effect. The biblical view is that people get what they deserve politically. Moses warned that evil hearts in the masses would bring corrupt rulers (Leviticus 26; Deuteronomy 28). This was the message of the prophets. In short, ethics has consequences.
So, what are we to make of the power of the conspirators? This: the conspirators share most of the beliefs of the masses. If this were not true, a conspiracy could never be successful.
A conspiracy that believed that space aliens control the Board of Governors of the Federal Reserve System would be nothing more than a crackput cult. Hardly anyone would take this group seriously. The group would have no influence. (Note: if space aliens are smart enough to travel through space and then control human minds, how is it that the best they can do is write Ben Bernanke's speeches?)
Conspirators invoke the language and the beliefs of the masses. They tell the masses what the masses want to hear. For instance, they say that the government will protect the people from an economic collapse. The government has the power to eliminate economic crises, we are told, if the politicians will pass new laws. The government will continue to fulfill its promises regarding Social Security and Medicare.
Do the conspirators believe this? Yes. Of the 6,600 richest or most influential people on earth, insider David Rothkopf writes in Superclass, something like 30% attended one of 20 universities (p. 290). The ideology of salvation through legislation is basic to the social science departments of all of those universities. The faculties are overwhelmingly Keynesian in outlook.
This information is nothing new. Bill Buckley made his reputation in 1951 with God and Man at Yale, Regnery's first best-seller. He wrote about Yale's Keynesianism. This has been a constant theme in the conservative movement ever since. The same is true of the libertarian movement. I have never heard a conspiracy theorist suggest otherwise.
If you believe that the power-brokers are Keynesians, you believe correctly. But if you believe this, please follow the logic of your position. The nation's rulers overwhelmingly believe that the central government can produce prosperity.
So do the voters.
Consent is basic to democracy. The masses consent to be ruled over by people they have elected. Their rulers tell them what they want to hear. The fact that an elite screens the two parties' candidates for President does not change the nature of consent by the masses.
The masses are deceived about the political process. This is not the same as saying that the masses are not in agreement with the outcome of this process.
Are the masses deceived about the process? Consider this. The Presidential election in 2004 was between a pair of Skull and Bones members. What are the odds against this in an open system of political screening? The masses have never heard of Skull and Bones.
Would the masses care if they knew? No. They just want their government-funded subsidies.
This is an American tradition. How was it that in 1860, the Presidency was going to be won either by Abraham Lincoln, a lawyer for the Illinois Central Railroad, or by Stephen A. Douglas, a lawyer for the Illinois Central Railroad? Nobody asked. The textbooks still do not ask. How was it that the election of 1864 would see either the election of lawyer Lincoln or his former boss at the Illinois Central Railroad, George McClellan? The voters did not ask in 1864. Neither do not the textbooks. It was just one of those things, just one of those crazy things.
Most historians do not not know or care. Why should the masses care?
THE COST OF EDUCATING THE MASSES
The cost of educating the masses to believe in even the rudiments of a conspiracy theory are vastly more than any private individual or group possesses. The vast majority of the American academic establishment in the social sciences and humanities are officially opposed to conspiracy theories, which is why they have become the pawns of the conspirators. It is a nice arrangement.
Then what can ever change the system? Simple: a change of heart among the masses. There has to be a rethinking of the fundamental presuppositions of the social order, especially the moral presuppositions. In other words, there has to be some kind of religious transformation. Under such conditions, people will re-think what they regard as morally legitimate. In that time of transition, it will be possible to undermine the existing institutional arrangements, because these institutional arrangements are built on the prevailing system of religion, ethics, and presuppositions. The economic doctrine of this religion is Keynesianism.
As long as things are muddling through, nothing fundamental is going to change. Why not? The economist will tell you: because it costs too much to change people's opinions about the present social order when the present social order seems to be delivering the goods. It is only in a time of widespread crisis, when the present social order fails to deliver the goods, that there is an outside possibility of changing the opinions of the public.
It took the Civil War to change the opinions of the voters on abolition, in both the north and south. It took the social upheaval of the 1960s to change white voters' opinions in the South regarding segregation. This is normal. People rarely change their minds after age 30. Neither do millions of people change their minds on a fundamental institution.
People will not change their minds regarding the conspiracy. They do not care. But in a crisis, they can change their minds on the legitimacy of salvation by legislation. They can abandon trust in the promises of politicians.
That will undermine the conspiracies that are dominant today.
Conclusion: don't spend much time exposing conspiracies. Spend time showing why the prevailing outlook favoring the savior state is wrong. The solution is not one more revelation about this or that conspiracy. The solution is to prepare an educational program for a breakdown in the establishment's cherished worldview. We must be able to show why this worldview priduced the disaster.
First things first.
The secret of success of any conspiracy is its ability to leverage the fundamental beliefs of the decision-makers in a society. They extend the influence of a worldview that is already operational. The conspiracy has power only because it is in fundamental agreement with the moral order that presently exists. When that moral order changes, in response to a monumental economic crisis, a different group of decision-makers will come into power, and there will be completely new terms of success for any conspiracy to gain control within this limited group of decision-makers.
DANIEL AND ESTHER
My favorite example of this system of social causation in the Bible is the book of Daniel. Daniel was called as an advisor in the final night of the Babylonian Empire. He wanted no power. He told the king that he had been weighed in the balance and had been found wanting (Daniel 5).
The next that we read about Daniel is that he is an advisor to the victor who overthrew Babylon. Daniel was the source of judicial continuity, and the new social order became favorable to the Jews. The Medo-Persian Empire let the Jews go back to Jerusalem. There was continuity, but it was not the continuity of a conspiracy. There was continuity of advice, but Daniel in no way was a member of a conspiracy. He was a member of a victimized group of the Babylonian conspiracy. He was the victim of a conspiracy: the famous story of the lion's den (Daniel 6).
The conspirators got eaten. This is one of my favorite Bible stories. Young children love it. They get the ethical picture. Bad guys finish last. I wish all conspiracy theorists believed this. Not many of them do.
The Jews were able to get better treatment under the Medo-Persians than under the Babylonians. That was because of a change of opinion at the top of the government regarding the safety of allowing Jews to return to Jerusalem. But it had nothing to do with conspiracy at the top. It had to do with a change of opinion regarding the victims of state power.
In the book of Esther, there was a conspiracy against the Jews, but there was a highly placed person in the government: Esther. She was in a position to overcome the conspiracy against the Jews. It always helps to have somebody with influence whispering in the ear of the decision-maker. We can call them "sweet somethings." Who would not like that? When you are about to be destroyed, you certainly do want that.
Haman ended up being very highly placed. Bad guys finish last.
KEYNESIAN ECONOMICS AND ITS BENEFICIARIES
The decision-makers at the top, as well as the conspirators or insiders who advise them, exercise their control in terms of an existing set of beliefs, institutions, and above all, money. Everything that they have rests on the existing social order.
In our case, influence exists in terms of a particular worldview, and that worldview is Keynesianism. The Keynesians believe that central banking, controlled by experts, and federal deficits, controlled by Congress, can be combined to keep depressions from taking place.
The centralized levers of federal government power over the economy offer tremendous opportunities for insiders to get very rich. They can extend their private power through government privilege. They can and do leverage the existing political and regulatory system, which is a centralized economic system, and in doing so, they maintain their positions.
But what if Keynesianism is theoretically inaccurate? Then the power elite has created an economic system which is like a kind of bomb with a lit fuse. If the Keynesian system is analytically accurate, the rigged game of wealth-redistribution to the largest banks can go on indefinitely. But the Keynesian system is inaccurate. There is going to be a day of reckoning. On that day of reckoning, the entire system of leverage that the conspirators have used to benefit themselves will be shaken to the core. I mean leverage in all senses: financial, intellectual, political, and institutional. It will be like the state dinner of the Babylonian rulers to which Daniel was invited. They will be weighed in the balance and found wanting.
This should be obvious to anyone who understands economic theory. But Conspiracy theorists have little understanding of economic theory. They also do not understand social theory: the theory of social change. They do not offer developed theories of institutional behavior: the transmission of power. They have almost no understanding of who the conspiracy members are or what they do. They do not know how to deal with the questions of economic cause-and-effect, social cause-and-effect, and institutional cause-and-effect.
Here is the choice: Either the Keynesians are in charge or they aren't. Either the Keynesians believe in Keynesian economics or they do not.
If they believe in Keynesian economics, and if they believe that this system will enable them to prosper, they are going to remain committed to it. They dare not believe that Keynesian economics is wrong. That would remove the lever that they have used to feather their nests, to mix metaphors, ever since the 1930s. In fact, if you look at this in terms of basic economic perspective, this battle has been going on since 1694, ever since the creation of the Bank of England. There are two rival views of money that underlie the debate over the issue of central banking. One of them is essentially a pro-gold standard position, and the other is essentially a fiat currency system. This intellectual battle has been going on in earnest for over two centuries, and there are traces of the debate even earlier. But certainly, ever since the early 1800s, the intellectual battle lines have been laid down. The institutional battle lines have reflected this.
Sometimes the bad guys lose. They lost in 1832, when they failed to get the government to re-charter the Second Bank of the United States. The textbooks universally disparage Andrew Jackson for his victory over the Bank. That is because the textbooks are written by Keynesians.
The people who are in control today defend the fiat money position of how prosperity is possible. Those of us who are on the side of the gold standard, especially the gold coin standard, argue that the fiat money position leads to booms and busts. The position of the fiat money people is that they can use fiat money to defer the day of reckoning. They believe that they can achieve something like a full-time economic boom by way of monetary expansion. The Austrian school opposes this.
A minority of people who are conspiracy theorists know a little about Austrian economics. They know that booms and busts take place in terms of fiat money policies. But they have a naïve view that Keynesians, who deny the truth of Austrian economics, have somehow used their understanding of Keynesian economics to deliberately create booms and busts, and to position themselves on the right side of the trade every time. Tell that to Dick Fuld.
I am not buying it. I have never bought it.
FAITH IN THE STATE
The conspirators are not God. They do not predestinate the world. They are temporary possessors of influence, power, and money because they have adopted a particular view of economic intervention which the general public also believes. They believe the state is the Savior in history. The state is the healer. They believe that the state is the closest thing there is to God walking on earth.
So do most of the voters. The voters also believe that the state can intervene to protect them. They are beginning to lose this faith, for good reason, but this is what they still believe. This is what they have been taught in public schools for over 100 years. Why should we expect and believe anything different?
The conspirators and the masses hold the same view of civil government. This view is incorrect. It is going to blow up in the conspirators' faces, and it is going to blow up in the masses' faces. It is a false religion, and it will ultimately produce enormous losses for those who believe in it.
This is why I completely reject the idea that the conspiracy is behind all of the economic slumps. The conspiracy loses money in the slumps, and in some cases, they lose all of their money. I do not mean little conspirators; I mean big boys. Dick Fuld was a big boy. He just was not as big a boy as Hank Paulson was.
I believe that if John Kerry had won the election of 2004, there would have been a different secretary of the treasury in power in 2008. If that been the case, Lehman Brothers probably would have weathered the storm. It makes a difference which Skull and Bones member is elected. It makes a difference which fractionally reserved mega-bank survives.
ENGINEER BEN
The conspirators are not God. They do not predestinate. They do not understand Austrian economics. They are committed to Keynesianism. They are riding on the back of the tiger. We are on the back of the tiger with them.
To shift metaphors, the economic train is racing towards a burning trestle. The conspirators did not start the fire on the trestle deliberately, but it was the inevitable outcome of the Keynesian economic policies which they have adopted. To think that they have engineered past economic crises is to think that they have engineered this one.
They have laid the foundations of this crisis. But they have done so in the Keynesian faith that there will be no crisis. The fact that they have caused past crises does not mean that they planned them.
The bearded engineer in the cab is not deliberately trying to run the train over the burning trestle. He does not believe that the trestle is on fire. When Austrian economists say that it is on fire, and ask the engineer to look at the smoke, he insists that the smoke is coming from a barbecue to which all the people in Trestle City have been invited. They are having a party, and everybody on the train gets to attend.
"Full speed ahead."
I hope you understand this. I fear that not many Tea Party supporters do.
CONCLUSION
Then what is to be done? Individuals must work to develop and master a comprehensive critique of the prevailing establishment's worldview: salvation by legislation.
The correct goal is to shrink the state to where it won't matter much who controls it.
Shrink the power of the power elite by shrinking the establishment's lever: the state. Any other program is a waste of effort. Any program to expose a conspiracy without a program to de-fund it only adds to the prestige of the conspiracy. It makes the conspiracy look smarter than it is.
Never forget this: a conspiracy is no smarter than the tenured bureaucrats who administer the government's legislation. In short, not all that smart.
Final note: If you remain skeptical, please read Numbers 14:1-25. There are always giants. They are always vulnerable.
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