American Theocracy

I just finished reading American Theocracy: The Peril and Politics of Radical Religion, Oil and Borrowed Money in the 21st Century, by Kevin Phillips. I like Phillips. I liked his last book — American Dynasty.

Phillips writes that America is in a long term decline with three very tough challenges — fundamental religion which is increasingly dictating politics, peak oil and debt. His histories of these problems are very useful.

There is much in the book that I agree with and some I don’t. It’s on my recommended list. If you get it, here are some comments which can help you over a few blind spots.

A comment on religion in politics:

When I worked in the first Bush Administration I saw a lot of people in powerful positions who acted in unbalanced and/or highly ideological ways. After many personal experiences and run-ins with this kind of behavior, I discovered that the people REALLY in charge were quite capable and the crazies had been promoted into that position — and kept there — because they served a purpose. For example, their crazy theories or philosophies would justify going in a direction that the people in charge wanted to go for reasons that could not be admitted publicly. Or, they were incapable of understanding intellectually how government or their agency worked and so making them the head of this or that left the banks, defense contractors and long term career bureaucracy to run “the real deal.”

Sometime the folks spouting the crazy stuff knew better — they were doing it because it would get them more titles and money. Others were really just wacky and took their promotions as affirmation that what they were saying was true. That made them look even more ridiculous but for a time they got to laugh all the way to the bank.

So the next time you hear a Neo-con say something that is essentially nuts or a politician justify some move on religious grounds, assume that a likely explanation is that some highly competent guys are having these guys front for them. For example, if I am the President, I can’t say “Look, OPEC is losing control of the oil prices. I want to use the US military to invade Iraq so we can get oil prices way up and my family, our friends and the big oil companies and defense contractors can get very rich as our stock values skyrocket and we skim off the top and get kickbacks as well?” You can’t say that.

So it is always a mistake in politics to think the system is not working. It is working for the people in charge. Which is why it is important to understand that America’s decline is not a process that is emerging from incompetence of our leadership. It is a process that is emerging from the competence of our leadership.

Phillips explains it himself on P. 361:

“Investment data underscores the parallel. In 2004, for example, the total of US direct foreign investment (ownershp of plants and equipment, not local securities) was $3 trillion, roughly the size of foreign direct investment in the United States. The comparative returns, however, were a matter of night and day. Americans earned almost twice as much from their holdings, especially in Asia, as foreigners did from their US holdings.”

A comment on debt

On P. 358, Phillips writes:

“In 1997 net US international indebtedness rose to $360 billion, and in 1999, to a trillion dollars. The year of the attack on the World Trade Center saw US net international indebtedness reach $2.3 trillion. Thereafter, as we have seen, the total swelled in 2003 to $2.7 trillion, and ballooned to $3.3 trillion in 2004, with a 2005 figure in the $4 trillion range.”

It is quite interesting to compare these numbers to the $4 trillion that went missing from the federal government between fiscal 1998-2001. (see whereisthemoney.org, wordpressdevurl.com/wp-content/uploads/2008/articles_missingmoney.htm, and the missing money section at dunwalke.com/resources/events.htm)

During the same period that $4 trillion goes missing from our government, our debt goes up by $4 trillion.

Perhaps it would be interesting to ask the question, who stole the $4 trillion and who is lending it back. Phillips describes the extent to which foreign central banks are buying Treasury securities. However, the question needs to be asked whether those securities were legally authorized and issued. Another question needs to be asked. Are the central banks simply buying as cut outs for the people who stole the money — or the securities?

There are lots of unanswered questions that are part of the debt story. Phillips does not ask them. I consider these questions among the most important unanswered questions of our day.

Remember, anyone who can steal $4 trillion and get away with it can run the world — including what happens at your house.

You might want to make sure you understand/read the story I tell in my new on line case study, Dillon, Read & Co. Inc. and the Aristocracy of Prison Profits at dunwalke.com. In chapter 16:

“In April 1997, we had an advisory board meeting at Safeguard Scientifics where the board chair led a venture capital effort. I gave a presentation on the extraordinary waste in the federal budget. As an example, we demonstrated why we estimated that the prior year’s federal investment in the Philadelphia, Pennsylvania area had a negative return on investment. It was, however, possible to finance places with private equity and then reengineer the government investment to a positive return and, as a result, generate significant capital gains. Hence, it was possible to use U.S. pension funds to increase retirees’ retirement security significantly by investing in American communities, small business and farms — all in a manner that would reduce debt and improve skills and job creation. This was important as one of the chief financial concerns in America at that time was ensuring that our retirement plans performed financially to a standard that would meet the needs of beneficiaries and retirees. It was also critical to reduce debt and create new jobs as we continued to move manufacturing and other employment abroad. If not, we would be using our workforce’s retirement savings to finance moving their jobs and their children’s jobs abroad.

The response from the pension fund investors was quite positive until the President of the CalPers pension fund — the largest in the country — said, “You don’t understand. It’s too late. They have given up on the country. They are moving all the money out in the fall (of 1997). They are moving it to Asia.” He did not say who “they” were but did indicate that it was urgent that I see Nick Brady — as if our data that indicated that there was hope for the country might make a difference. I thought at the time that he meant that the pension funds and other institutional investors would be shifting a much higher portion of their investment portfolios to emerging markets. I was naive. He was referring to something much more significant.

The federal fiscal year starts on October 1st of each year. Typically the appropriation committees in the House and Senate vote out their recommendations during the summer. When they return from vacation after Labor Day, the various committees reconcile and a final bill is passed in September. Reconciling all the various issues is a bit like pushing a pig through a snake. Finalizing the budget each fall can make for a tense time. When the new bill goes into effect, new policies start to emerge as the money to back them starts to flow. October 1st is always a time of new shifts and beginnings. In October 1997, the federal fiscal year started. It was the beginning of at least $4 trillion going missing from federal government agency accounts between October 1997 and September 2001. The lion’s share of the missing money disappeared from the Department of Defense accounts. HUD also had significant amounts missing. According to HUD OIG reports, HUD had “undocumentable adjustments” of $17 billion in fiscal year 1998, and $59 billion in 1999. The HUD OIG refused to finalize audited financial statements in fiscal year 1999, refused to find out the basis of the undocumentable adjustments or to get the money back and refused to disclose the amount of undocumentable adjustments in subsequent fiscal years.”

Reference: Chapter 16 – Financial Coup D’Etat

A comment on dirty money and church endowments:

Phillips is silent on the role of churches and church endowments in money laundering and organized crime. There are many good reasons to be silent. It would be a very time consuming job to try to present a case — if one can be documented at all. Nevertheless, it is impossible to understand the role of religion in the US without understanding how religious institutions and their endowments intersect with organized crime, particularly narcotics trafficking.

As you read the section on religion, remember — if you were a pirate, where would you hide your money? If you were a mobster and wanted to control the US Treasury, what would you use as ideological air cover and an institutional front?

Bottom line: I think the folks who run things are more invisible and much smarter than Phillips appears to. Either way, he has done a terrific job of outlining the challenges before us. If you want an overview of America’s current decline, American Theocracy is recommended.