Don Bell Reports

DON BELL REPORTS

A WEEKLY COMMENTARY

Year Twenty-Nine ... Number Thirty-Five ... September 10, 1982

IS THE MEGABANKER CRISIS FOR REAL?

"They took away our gold, they took away our silver, now they're taking away our last hard money - the copper cent," said the rare coin dealer who usually thinks of coins far more valuable than the popular Lincoln cent. And he was disturbed because "they're doing it in the sneakiest way imaginable. In 1965 silver was removed from our coinage without any attempt at deception. But in 1982 things are different. The 1982 cent is not 88% to 100% copper as all cents have been (with the exception of the war-year 1943) since 1793! The 1982 cent is copper-plated zinc. I see the 1982 zinc cent as a symbol of all that is wrong with our fiat money system. Perhaps we'll see a balanced budget amendment. Perhaps we'll go back on the gold standard. Perhapss we'll see a true fixed-rate income tax system that doesn't penalize the productive members of our society. Perhaps the size of the bureacratic monster will decrease. This is my hope. But investment decisions should not be based on hope. Realistically, what we are witnessing is the destruction of our currency and the possible death of the American Dream" (David Hall's "Inside View", August, 1982).

Here is a kind of paradox: If the International Bankers, the IMF and its auxillaries and the supporting governments had been making their deals in real, honest money, they all would have become bankrupt years and years ago. However, since they are not dealing in honest money but in unbacked paper money that can be created in any given quantity simply by making a computer input and starting a printing press, this economic world that, like Humpty Dumpty, should fall completely to pieces, never seems to do anything except make the very wealthy elitist few very much wealthier, make the ever growing poor welfare recipients, and the ever-dwindling middle class the suckers who pay the bills. These money manipulators have worked out a scheme whereby everybody seems to get along except the productive citizen -- until the final collapse, that is.

Some insist that there was a chance that this Great American March into Economic Chaos might have been stopped, or at least slowed down, with what came to be called Reaganomics. But we can only guess because the experiment was never completed. Reagan did a complete about face and still is trying to prove that he didn't do so. Gary North, in his Remnant Review of Sept. 3, refers to the "new, improved Reaganomics." He comments: "Reaganomics is dead, long live Reaganomics! ... The fact is, the Republicans have adopted the Dole mentality. It's a replay of 1930 and 1953; hike taxes during a recession. Balance the budget. But the game is far different today. The mentality of the public has shifted dramatically in the last five years. The tax revolt is more open today."

Howevermuch Reagan may have had to do with it, the fact remains that the late summer of 1982 was filled with some strange contradictions. None of the alleged experts seemed to know exactly what was happening. Corporate and private bankruptcies continued occuring at a dangerous pace. More workers were being laid off. Suddenly interest rates began dropping. The stock market exploded. Gold and silver suddenly became more precious in the eyes of the paper-holders. But the economy continued to slip downward. Then came the biggest tax increase in our history. Here are a few of the figures that were released by the government. Business failures had been running at a weekly rate of 572 by late August. This meant 50 failures for every 10,000 companies. Johns-Manville was one of the biggest. Among the failures were more and more banks. All in all, the situation in the United States was bad, and was getting worse. Meanwhile, some bad news was being spread by the International Banking sources. Example:

POLAND owes $27 billion to 503 Western banks, of which $7 billion in principle and $3 in interest are due this month. These debts can't be paid, must be rescheduled. Poland is demanding major concessions from the bankers; otherwise it has threatened to default. If that happened, we are told that an avalanche will follow.
ROMANIA owes $10.2 billion to the West, about half due or overdue this year, and Romania is now demanding that 80% of its 1981-82 debt be stretched out for another 6 1/2 years, with no payments due for the next three years.
HUNGARY owes $7.8 billion and is asking for massive new and the rescheduling of its existing debts.
YUGOSLAVIA has $4.2 billion in interest and principle due this year and, instead of paying is demanding rescheduling of old debts and more loans. All of the foregoing are Soviet Sallelite countries that keep getting more loans even when they can't, or won't pay the old loans.

Now the megabankers have new troubles in Latin America:

MEXICO has the world's largest debt: $80 billion. It owes $22 billion to 56 U.S. banks and $12 billion of that is owed to the biggest megabankers: Chase Manhattan, Manufacturers Hanover, Citibank, Morgan Guaranty Trust, Banker's Trust and Chemical Bank. After Mexico was about to default, representatives of 100 international banks held an emergency meeting in New York. They agreed to delay Mexico's debt payments, to reschedule $10 billion in loans due this year, and loan Mexico another $1 billion. In addition, the U.S. Government will give Mexico $4 billion. Mexico needs even more than that to stay afloat, and even more dangerous: this current economic crisis could easily lead to a Marxist revolution and takeover within the next few months.
ARGENTINA was in real trouble before its war over the Falklands. Has a foreign debt of nearly $40 billion; owes U.S. banks $9 billion and the bankers are arranging to provide another $17 billion this year.
BRAZIL has a total foreign debt of almost $80 billion, and is seeking new loans.

All of the above does not include the loans that have been made, and may never be repaid by the third world nations. As for our own domestic banking system, The McAlvany Intelligence Adviser has published the following information:

PENN SQUARE was the biggest bank failure since the Depression. It cost Continental Illinois $1 billion, Chase Manhattan $212 million, Seattle First $400 million, etc.
CITIBANK has loaned to 3rd world nations 200% more than its reserves, or enough to wipe out its entire shareholder's equity twice.
CHASE MANHATTAN is in deep trouble but we have no accurate estimate. In addition to these, in the first three quarters of 1982, 27 banks have failed, 24 mergers of failing S&Ls have been arranged by the government, the Comptroller of the Currency says there are 277 "problem banks" and the FDIC hasn't enough to protect depositors. So the domestic situation caused by the Megabankers' overindulgence to other countries and their bureaucratic dictators could become serious indeed.

Meanwhile, to find a solution to their international problems the representatives of the 146 member nations of the IMF have been holding a conference in Toronto. Latest available information comes from AP, which says the United States is the "lone holdout" among the 146 nations on how to avoid an international credit crisis. The other nations, especially those that have no money and already owe the IMF on loans they'll never repay, want the wealthier nations to pour billions upon billions into the IMF vaults so more loans can be stretched or even defaulted. Donald Regan, the U.S. Treasury Secretary, wants to go slow with more money for the IMF. In the lexicon of the financial chieftains, says AP, "the United States has shifted gradually from favoring a 'small' increase and now an 'adequate' increase. It must still move up to a 'significant' increase before it gets to 'substantial'." Regan has told the group that "in previous times of prosperity, we could afford to be generous. But now we don't have as much available and naturally, the rest of the world is dismayed." In this instance at least, most Americans will side with Regan. Ever since the days of Lend-Lease and the Marhsall Plan, the United States has been financing the world, with special emphasis on the USSR and its satellites, and on Israel. Now that the other "Trilateral" Nations are doing as well or better than we are, surely they can spend more if they insist on feeding foreign bureaucrats and oligarchs. Foreign aid seldom helps the people of a country, only those at the top. So, why not let the United States think of its own first for a change?

In an excellent summary of the overall situation, Donald McAlvany gives this conclusion, and we quote him directly:

"The cracks are beginning to spread throughout the international and domestic (US) banking system. The speculation, greed and outright incompetence that characterized the Penn Square collapse and the incredible loans bought by Continental Illinois, Chase Manhattan and Seattle First, is a tiny illustration of the modus operandi of the international banking system. But instead of speculative loans to risky oil and gas operators, the U.S. money center banks, their foreign branches and other foreign international banks have loaned hundreds of billions to Third World or Soviet Block basketcases or criminal borrowers, many of whom don't have the slightest intention (or capacity) of paying off these loans. According to the Federal Reserve figures, the nine largest U.S. banks have a debt exposure to developing countries and Eastern Europe equal to 227% of their capital. With defaults and bankruptcies multiplying both in this country and abroad, confidence in the banking system is beginning to erode. It is unlikely that a wholesale collapse of U.S. banks, such as in the 1930s, will take place. The Fed would simply resort to the printing press as it has already done with Penn Square, Drysdale and other recent failures. However, if the international financial dominoes begin to tumble, the Fed and its sister central banks could have a difficult time containing the avalanche (Quoted from The McAlvancy Intelligence Advisor, September, 1982. Monthly, $75 per year. Subscription office: P.O. Box 39810, Phoenix, AZ, 85069)

If the International Bankers are in something of a self-created muddle, it must follow that any number of Multinational Corporations are also "biting the bullet" and looking for ways to keep from going broke. And this situation seems to have brought about a most extraordinary development. A selected team of Trilateral Commissioners has formed a kind of rescue squad for beleaguered Multinationals. Headed by none other than Henry Kissinger, this bids to be a mower powerful group in the developing of the New World Order. Perhaps you've seen the article, but we feel it must be published anyway. So, here is the article as it appeared in the August 24th issue of The Wasington Post:

KISSINGER FORMS GOLD-PLATED CONSULTING FIRM

by Don Oberdorfer

The Washington Post

Washington - Former Secretary of State Henry A. Kissinger has lined up a team of diplomatic and economic superstars, including former British Foreign Secretary Lord Carrington, to support "Kissinger Associates Inc." an international consulting firm that is offering its services to blue-chip clients. The Kissinger firm, for a retainer reported in economic circles to be $250,000 per client, plans to provide 'strategic planning' advice to a small number of large clients in the corporate world. Kissinger is chairman of the new firm, which was formed last month. Its president is Gen. Brent Scowcroft, who succeeded Kissinger in November 1975 as White House national security adviser to President Ford. Scowcroft said Monday that the firm plans to supply expert advice on making international business decisions. He said it expects to work more closely with its clients than risk assessment groups, which advise firms on the political and financial policies of foreign nations. Some clients have already been signed up for the service, according to Scowcroft, but he declined to name them or to disclose the fees being charged. Among the members of the board of directors signed up for Kissinger Associates, according to Scowcroft:

Lord Carrington, who resigned as Britain's foreign secretary in April, taking responsibility for the Argentine invasion of the Falkland Islands.
Robert O. Anderson, chairman of Atlantic Richfield, Co.
Per Gyllenhammer, president of Volvo, the Swedish automobile manufacturing firm.
William D. Rogers, who served as assistant secretary of state for Latin American affairs and undersecretary of state for economic affairs while Kissinger was secretary of state. Rogers is now an attorney in Washington.

Scowcroft and Kissinger Associates, with offices in New York and Washington, will have a small staff of about eight persons. Jess Cunningham, formerly with a Chase Manhattan Bank-affiliated firm in the Eurocurrency market, is said to be its secretary, according to Scowcroft. Kissinger, since leaving office as secretary of state in early 1977, has served on the international advisory committee of Chase and of Goldman Sachs, a New York investment firm, as well as associating himself with other business ventures. He has also been affiliated with Georgetown University's Center of Strategic and International Studies and has written two lengthy volumes of his memoirs in government service.

Kissinger was among the first persons to be consulted by George P. Shultz after Shultz was named secretary of state by President Reagan in late June. Kissinger was called in to advise Shultz on the Middle East and subsequently joined Shultz, West German Chancellor Helmut Schmidt and Singapore Prime Minister Lee Kwan Yew at Schultz's California home.

At his news conference last Friday, Shultz, answering a question, called Kissinger "a wonderful person and a great friend (with) tremendous comprehension of what is going on." He said he expects to 'continue to benefit from his (Kissinger's) advice'."

These New World Order elitists are specialists, each in his own field. Kissinger acts as secretary of state to David Rockefeller, in the last year has been to South America, Asia, the Middle East, Europe, plans trips to Southern Africa and China. Robert Anderson is a Chase Manhattan director, heads the important Aspen Institute, hopes to make "Rational Humanism" the one world religion. William Rogers is a top-notch international lawyer, Cunningham a specialist in world economies, Carrington is prominent in European politics, Gyllenhammer is a financial expert. The purpose of Kissinger Associates is to provide "strategic planning" for multinationals. Here is an outfit as dangerous as the Trilateral Commission itself.

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