The Illuminati were amateurs. The second huge financial scandal of the year reveals the real international conspiracy: There’s no price the big banks can’t fix

by MATT TAIBBI
[SUGGESTED TO TGP BY DIANE GEE | REPRODUCED AS INFORMATION OF COMPELLING NATIONAL INTEREST]

Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world’s largest banks may be fixing the prices of, well, just about everything.

You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that’s trillion, with a “t”) worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it “dwarfs by orders of magnitude any financial scam in the history of markets.”

That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world’s largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world’s largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.

Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It’s about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.

It should surprise no one that among the players implicated in this scheme to fix the prices of interest-rate swaps are the same megabanks – including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland – that serve on the Libor panel that sets global interest rates. In fact, in recent years many of these banks have already paid multimillion-dollar settlements for anti-competitive manipulation of one form or another (in addition to Libor, some were caught up in an anti-competitive scheme, detailed in Rolling Stone last year, to rig municipal-debt service auctions). Though the jumble of financial acronyms sounds like gibberish to the layperson, the fact that there may now be price-fixing scandals involving both Libor and ISDAfix suggests a single, giant mushrooming conspiracy of collusion and price-fixing hovering under the ostensibly competitive veneer of Wall Street culture.

The Scam Wall Street Learned From the Mafia

Why? Because Libor already affects the prices of interest-rate swaps, making this a manipulation-on-manipulation situation. If the allegations prove to be right, that will mean that swap customers have been paying for two different layers of price-fixing corruption. If you can imagine paying 20 bucks for a crappy PB&J because some evil cabal of agribusiness companies colluded to fix the prices of both peanuts and peanut butter, you come close to grasping the lunacy of financial markets where both interest rates and interest-rate swaps are being manipulated at the same time, often by the same banks.

“It’s a double conspiracy,” says an amazed Michael Greenberger, a former director of the trading and markets division at the Commodity Futures Trading Commission and now a professor at the University of Maryland. “It’s the height of criminality.”

The bad news didn’t stop with swaps and interest rates. In March, it also came out that two regulators – the CFTC here in the U.S. and the Madrid-based International Organization of Securities Commissions – were spurred by the Libor revelations to investigate the possibility of collusive manipulation of gold and silver prices. “Given the clubby manipulation efforts we saw in Libor benchmarks, I assume other benchmarks – many other benchmarks – are legit areas of inquiry,” CFTC Commissioner Bart Chilton said.

But the biggest shock came out of a federal courtroom at the end of March – though if you follow these matters closely, it may not have been so shocking at all – when a landmark class-action civil lawsuit against the banks for Libor-related offenses was dismissed. In that case, a federal judge accepted the banker-defendants’ incredible argument: If cities and towns and other investors lost money because of Libor manipulation, that was their own fault for ever thinking the banks were competing in the first place.

“A farce,” was one antitrust lawyer’s response to the eyebrow-raising dismissal.

“Incredible,” says Sylvia Sokol, an attorney for Constantine Cannon, a firm that specializes in antitrust cases.

All of these stories collectively pointed to the same thing: These banks, which already possess enormous power just by virtue of their financial holdings – in the United States, the top six banks, many of them the same names you see on the Libor and ISDAfix panels, own assets equivalent to 60 percent of the nation’s GDP – are beginning to realize the awesome possibilities for increased profit and political might that would come with colluding instead of competing. Moreover, it’s increasingly clear that both the criminal justice system and the civil courts may be impotent to stop them, even when they do get caught working together to game the system.

If true, that would leave us living in an era of undisguised, real-world conspiracy, in which the prices of currencies, commodities like gold and silver, even interest rates and the value of money itself, can be and may already have been dictated from above. And those who are doing it can get away with it. Forget the Illuminati – this is the real thing, and it’s no secret. You can stare right at it, anytime you want.

The banks found a loophole, a basic flaw in the machine. Across the financial system, there are places where prices or official indices are set based upon unverified data sent in by private banks and financial companies. In other words, we gave the players with incentives to game the system institutional roles in the economic infrastructure.

Libor, which measures the prices banks charge one another to borrow money, is a perfect example, not only of this basic flaw in the price-setting system but of the weakness in the regulatory framework supposedly policing it. Couple a voluntary reporting scheme with too-big-to-fail status and a revolving-door legal system, and what you get is unstoppable corruption.

Every morning, 18 of the world’s biggest banks submit data to an office in London about how much they believe they would have to pay to borrow from other banks. The 18 banks together are called the “Libor panel,” and when all of these data from all 18 panelist banks are collected, the numbers are averaged out. What emerges, every morning at 11:30 London time, are the daily Libor figures.

Banks submit numbers about borrowing in 10 different currencies across 15 different time periods, e.g., loans as short as one day and as long as one year. This mountain of bank-submitted data is used every day to create benchmark rates that affect the prices of everything from credit cards to mortgages to currencies to commercial loans (both short- and long-term) to swaps.

Gangster Bankers Broke Every Law in the Book

Dating back perhaps as far as the early Nineties, traders and others inside these banks were sometimes calling up the company geeks responsible for submitting the daily Libor numbers (the “Libor submitters”) and asking them to fudge the numbers. Usually, the gimmick was the trader had made a bet on something – a swap, currencies, something – and he wanted the Libor submitter to make the numbers look lower (or, occasionally, higher) to help his bet pay off.

Famously, one Barclays trader monkeyed with Libor submissions in exchange for a bottle of Bollinger champagne, but in some cases, it was even lamer than that. This is from an exchange between a trader and a Libor submitter at the Royal Bank of Scotland:

PRIMARY SUBMITTER: Whats it worth
PRIMARY SUBMITTER: ok low 6m, just for u
SWISS FRANC TRADER: wooooooohooooooo. . . thatd be awesome

Screwing around with world interest rates that affect billions of people in exchange for day-old sushi – it’s hard to imagine an image that better captures the moral insanity of the modern financial-services sector.

Hundreds of similar exchanges were uncovered when regulators like Britain’s Financial Services Authority and the U.S. Justice Department started burrowing into the befouled entrails of Libor. The documentary evidence of anti-competitive manipulation they found was so overwhelming that, to read it, one almost becomes embarrassed for the banks. “It’s just amazing how Libor fixing can make you that much money,” chirped one yen trader. “Pure manipulation going on,” wrote another.

Yet despite so many instances of at least attempted manipulation, the banks mostly skated. Barclays got off with a relatively minor fine in the $450 million range, UBS was stuck with $1.5 billion in penalties, and RBS was forced to give up $615 million. Apart from a few low-level flunkies overseas, no individual involved in this scam that impacted nearly everyone in the industrialized world was even threatened with criminal prosecution.

Two of America’s top law-enforcement officials, Attorney General Eric Holder and former Justice Department Criminal Division chief Lanny Breuer, confessed that it’s dangerous to prosecute offending banks because they are simply too big. Making arrests, they say, might lead to “collateral consequences” in the economy.

The relatively small sums of money extracted in these settlements did not go toward reparations for the cities, towns and other victims who lost money due to Libor manipulation. Instead, it flowed mindlessly into government coffers. So it was left to towns and cities like Baltimore (which lost money due to fluctuations in their municipal investments caused by Libor movements), pensions like the New Britain, Connecticut, Firefighters’ and Police Benefit Fund, and other foundations – and even individuals (billionaire real-estate developer Sheldon Solow, who filed his own suit in February, claims that his company lost $450 million because of Libor manipulation) – to sue the banks for damages.

One of the biggest Libor suits was proceeding on schedule when, early in March, an army of superstar lawyers working on behalf of the banks descended upon federal judge Naomi Buchwald in the Southern District of New York to argue an extraordinary motion to dismiss. The banks’ legal dream team drew from heavyweight Beltway-connected firms like Boies Schiller (you remember David Boies represented Al Gore), Davis Polk (home of top ex-regulators like former SEC enforcement chief Linda Thomsen) and Covington & Burling, the onetime private-practice home of both Holder and Breuer.

The presence of Covington & Burling in the suit – representing, of all companies, Citigroup, the former employer of current Treasury Secretary Jack Lew – was particularly galling. Right as the Libor case was being dismissed, the firm had hired none other than Lanny Breuer, the same Lanny Breuer who, just a few months before, was the assistant attorney general who had balked at criminally prosecuting UBS over Libor because, he said, “Our goal here is not to destroy a major financial institution.”

In any case, this all-star squad of white-shoe lawyers came before Buchwald and made the mother of all audacious arguments. Robert Wise of Davis Polk, representing Bank of America, told Buchwald that the banks could not possibly be guilty of anti- competitive collusion because nobody ever said that the creation of Libor was competitive. “It is essential to our argument that this is not a competitive process,” he said. “The banks do not compete with one another in the submission of Libor.”

If you squint incredibly hard and look at the issue through a mirror, maybe while standing on your head, you can sort of see what Wise is saying. In a very theoretical, technical sense, the actual process by which banks submit Libor data – 18 geeks sending numbers to the British Bankers’ Association offices in London once every morning – is not competitive per se.

But these numbers are supposed to reflect interbank-loan prices derived in a real, competitive market. Saying the Libor submission process is not competitive is sort of like pointing out that bank robbers obeyed the speed limit on the way to the heist. It’s the silliest kind of legal sophistry.

But Wise eventually outdid even that argument, essentially saying that while the banks may have lied to or cheated their customers, they weren’t guilty of the particular crime of antitrust collusion. This is like the old joke about the lawyer who gets up in court and claims his client had to be innocent, because his client was committing a crime in a different state at the time of the offense.

“The plaintiffs, I believe, are confusing a claim of being perhaps deceived,” he said, “with a claim for harm to competition.”

Judge Buchwald swallowed this lunatic argument whole and dismissed most of the case. Libor, she said, was a “cooperative endeavor” that was “never intended to be competitive.” Her decision “does not reflect the reality of this business, where all of these banks were acting as competitors throughout the process,” said the antitrust lawyer Sokol. Buchwald made this ruling despite the fact that both the U.S. and British governments had already settled with three banks for billions of dollars for improper manipulation, manipulation that these companies admitted to in their settlements.

Michael Hausfeld of Hausfeld LLP, one of the lead lawyers for the plaintiffs in this Libor suit, declined to comment specifically on the dismissal. But he did talk about the significance of the Libor case and other manipulation cases now in the pipeline.

“It’s now evident that there is a ubiquitous culture among the banks to collude and cheat their customers as many times as they can in as many forms as they can conceive,” he said. “And that’s not just surmising. This is just based upon what they’ve been caught at.”

Greenberger says the lack of serious consequences for the Libor scandal has only made other kinds of manipulation more inevitable. “There’s no therapy like sending those who are used to wearing Gucci shoes to jail,” he says. “But when the attorney general says, ‘I don’t want to indict people,’ it’s the Wild West. There’s no law.”

The problem is, a number of markets feature the same infrastructural weakness that failed in the Libor mess. In the case of interest-rate swaps and the ISDAfix benchmark, the system is very similar to Libor, although the investigation into these markets reportedly focuses on some different types of improprieties.

Though interest-rate swaps are not widely understood outside the finance world, the root concept actually isn’t that hard. If you can imagine taking out a variable-rate mortgage and then paying a bank to make your loan payments fixed, you’ve got the basic idea of an interest-rate swap.

In practice, it might be a country like Greece or a regional government like Jefferson County, Alabama, that borrows money at a variable rate of interest, then later goes to a bank to “swap” that loan to a more predictable fixed rate. In its simplest form, the customer in a swap deal is usually paying a premium for the safety and security of fixed interest rates, while the firm selling the swap is usually betting that it knows more about future movements in interest rates than its customers.

Prices for interest-rate swaps are often based on ISDAfix, which, like Libor, is yet another of these privately calculated benchmarks. ISDAfix’s U.S. dollar rates are published every day, at 11:30 a.m. and 3:30 p.m., after a gang of the same usual-suspect megabanks (Bank of America, RBS, Deutsche, JPMorgan Chase, Barclays, etc.) submits information about bids and offers for swaps.

And here’s what we know so far: The CFTC has sent subpoenas to ICAP and to as many as 15 of those member banks, and plans to interview about a dozen ICAP employees from the company’s office in Jersey City, New Jersey. Moreover, the International Swaps and Derivatives Association, or ISDA, which works together with ICAP (for U.S. dollar transactions) and Thomson Reuters to compute the ISDAfix benchmark, has hired the consulting firm Oliver Wyman to review the process by which ISDAfix is calculated. Oliver Wyman is the same company that the British Bankers’ Association hired to review the Libor submission process after that scandal broke last year. The upshot of all of this is that it looks very much like ISDAfix could be Libor all over again.

“It’s obviously reminiscent of the Libor manipulation issue,” Darrell Duffie, a finance professor at Stanford University, told reporters. “People may have been naive that simply reporting these rates was enough to avoid manipulation.”

And just like in Libor, the potential losers in an interest-rate-swap manipulation scandal would be the same sad-sack collection of cities, towns, companies and other nonbank entities that have no way of knowing if they’re paying the real price for swaps or a price being manipulated by bank insiders for profit. Moreover, ISDAfix is not only used to calculate prices for interest-rate swaps, it’s also used to set values for about $550 billion worth of bonds tied to commercial real estate, and also affects the payouts on some state-pension annuities.

So although it’s not quite as widespread as Libor, ISDAfix is sufficiently power-jammed into the world financial infrastructure that any manipulation of the rate would be catastrophic – and a huge class of victims that could include everyone from state pensioners to big cities to wealthy investors in structured notes would have no idea they were being robbed.

“How is some municipality in Cleveland or wherever going to know if it’s getting ripped off?” asks Michael Masters of Masters Capital Management, a fund manager who has long been an advocate of greater transparency in the derivatives world. “The answer is, they won’t know.”

Worse still, the CFTC investigation apparently isn’t limited to possible manipulation of swap prices by monkeying around with ISDAfix. According to reports, the commission is also looking at whether or not employees at ICAP may have intentionally delayed publication of swap prices, which in theory could give someone (bankers,cough, cough) a chance to trade ahead of the information.

Swap prices are published when ICAP employees manually enter the data on a computer screen called “19901.” Some 6,000 customers subscribe to a service that allows them to access the data appearing on the 19901 screen.

The key here is that unlike a more transparent, regulated market like the New York Stock Exchange, where the results of stock trades are computed more or less instantly and everyone in theory can immediately see the impact of trading on the prices of stocks, in the swap market the whole world is dependent upon a handful of brokers quickly and honestly entering data about trades by hand into a computer terminal.

Any delay in entering price data would provide the banks involved in the transactions with a rare opportunity to trade ahead of the information. One way to imagine it would be to picture a racetrack where a giant curtain is pulled over the track as the horses come down the stretch – and the gallery is only told two minutes later which horse actually won. Anyone on the right side of the curtain could make a lot of smart bets before the audience saw the results of the race.

At ICAP, the interest-rate swap desk, and the 19901 screen, were reportedly controlled by a small group of 20 or so brokers, some of whom were making millions of dollars. These brokers made so much money for themselves the unit was nicknamed “Treasure Island.”

Already, there are some reports that brokers of Treasure Island did create such intentional delays. Bloomberg interviewed a former broker who claims that he watched ICAP brokers delay the reporting of swap prices. “That allows dealers to tell the brokers to delay putting trades into the system instead of in real time,” Bloomberg wrote, noting the former broker had “witnessed such activity firsthand.” An ICAP spokesman has no comment on the story, though the company has released a statement saying that it is “cooperating” with the CFTC’s inquiry and that it “maintains policies that prohibit” the improper behavior alleged in news reports.

The idea that prices in a $379 trillion market could be dependent on a desk of about 20 guys in New Jersey should tell you a lot about the absurdity of our financial infrastructure. The whole thing, in fact, has a darkly comic element to it. “It’s almost hilarious in the irony,” says David Frenk, director of research for Better Markets, a financial-reform advocacy group, “that they called it ISDAfix.”

After scandals involving libor and, perhaps, ISDAfix, the question that should have everyone freaked out is this: What other markets out there carry the same potential for manipulation? The answer to that question is far from reassuring, because the potential is almost everywhere. From gold to gas to swaps to interest rates, prices all over the world are dependent upon little private cabals of cigar-chomping insiders we’re forced to trust.

“In all the over-the-counter markets, you don’t really have pricing except by a bunch of guys getting together,” Masters notes glumly.

That includes the markets for gold (where prices are set by five banks in a Libor-ish teleconferencing process that, ironically, was created in part by N M Rothschild & Sons) and silver (whose price is set by just three banks), as well as benchmark rates in numerous other commodities – jet fuel, diesel, electric power, coal, you name it. The problem in each of these markets is the same: We all have to rely upon the honesty of companies like Barclays (already caught and fined $453 million for rigging Libor) or JPMorgan Chase (paid a $228 million settlement for rigging municipal-bond auctions) or UBS (fined a collective $1.66 billion for both muni-bond rigging and Libor manipulation) to faithfully report the real prices of things like interest rates, swaps, currencies and commodities.

All of these benchmarks based on voluntary reporting are now being looked at by regulators around the world, and God knows what they’ll find. The European Federation of Financial Services Users wrote in an official EU survey last summer that all of these systems are ripe targets for manipulation. “In general,” it wrote, “those markets which are based on non-attested, voluntary submission of data from agents whose benefits depend on such benchmarks are especially vulnerable of market abuse and distortion.”

Translation: When prices are set by companies that can profit by manipulating them, we’re fucked.

“You name it,” says Frenk. “Any of these benchmarks is a possibility for corruption.”

The only reason this problem has not received the attention it deserves is because the scale of it is so enormous that ordinary people simply cannot see it. It’s not just stealing by reaching a hand into your pocket and taking out money, but stealing in which banks can hit a few keystrokes and magically make whatever’s in your pocket worth less. This is corruption at the molecular level of the economy, Space Age stealing – and it’s only just coming into view.

This story is from the May 9th, 2013 issue of Rolling Stone.
_____________

Matt Taibbi is a contributing editor for

Rolling Stone

. He’s the author of five books and a winner of the National Magazine Award for commentary. Please direct all media requests to

taibbimedia@yahoo.com

http://www.rollingstone.com/politics/news/everything-is-rigged-the-biggest-financial-scandal-yet-20130425

by Stephen Lendman

Obama plans lots more death and destruction. Current multiple direct and proxy wars aren’t enough. His appetite for more is insatiable.  A previous article discussed spurious allegations of Syrian chemical weapons use. Obama calls using them a “game changer.” He also said their use crosses a “red line.”

Syrian officials categorically deny using them. According to Information Minister Omran al-Zoabi:

“Even if Syria does have chemical weapons, our leadership and our military will not use them either against Syrians or against Israelis, above all for moral reasons and secondarily on legal and political grounds.”

On April 24, The New York Times headlined “US Says It Suspects Assad Used Chemical Weapons,” saying:

“….American intelligence agencies now assess, with ‘varying degrees of confidence,’ that the Syrian government has used chemical weapons, but it said it needed conclusive proof before President Obama would take action.”

On April 25, the White House Office of Legislative Affairs director Miguel Rodriguez addressed Syria. His letter to Senators John McCain (R. AZ) ad Carl Levin (D. MI) said:

“At the president’s direction, the United States government has been closely monitoring the potential use of chemical weapons within Syria…We have kept the relevant committees of Congress fully informed of our assessments on this issue, consistent with our statutory obligations.”

“Our intelligence community does assess with varying degrees of confidence that the Syrian regime has used chemical weapons on a small scale in Syria, specifically the chemical agent sarin. This assessment is based in part on physiological samples.”

“Our standard of evidence must build on these intelligence assessments as we seek to establish credible and corroborated facts. For example, the chain of custody is not clear, so we cannot confirm how the exposure occurred and under what conditions. We do believe that any use of chemical weapons in Syria would very likely have originated with the Assad regime. Thus far, we believe that the Assad regime maintains custody of these weapons and has demonstrated a willingness to escalate its horrific use of violence against the Syrian people.”

“Because of our concern about the deteriorating situation in Syria, the president has made it clear that the use of chemical weapons – or transfer of chemical weapons to terrorist groups – is a red line for the United States of America.”

“Given the stakes involved, and what we have learned from our own recent experience, intelligence assessments alone are not sufficient – only credible and corroborated facts that provide us with some degree of certainty will guide our decision-making….”

“In the interim, the administration is prepared for all contingencies so that we can respond appropriately to any confirmed use of chemical weapons, consistent with our national interests.”

“The United States and the international community have a number of potential responses available, and no option is off the table.”

Britain’s Foreign Office claims “limited but persuasive information from various sources showing chemical weapons use in Syria, including Sarin.”

Days earlier, Israeli General Itai Brun claimed Syria used chemical weapons “on a number of occasions.” He cited unspecified photo evidence. He called the weapon used sarin-based. Former US ambassador to Israel Martin Indyk said Obama’s “red line appears to have been crossed. The administration has to take some time to decide what to do about it.”

“But if they end up leaving the impression that the president is not willing to enforce his red line, that will have consequences in the region, particularly when it comes to Iran’s nuclear program, as well as for our ability to deter Assad’s use of chemical weapons in Syria.”

An unnamed Israeli official told the New York Times:

“Every intelligence branch can submit its own assessment. The issue of chemical weapons is being examined by Israel and the United States at the most senior levels, and is still being discussed.”

The Times added:

“Administration officials said that the Pentagon had prepared a menu of military options for Mr. Obama if he concluded that there was incontrovertible evidence that chemical weapons had been used.”

“Those options, one official said, could include missile strikes on Syrian aircraft from American ships in the Mediterranean or commando raids.”  Days earlier in Brussels, Secretary of State John Kerry said NATO should plan for a possible Syrian chemical weapons attack. He stopped short of calling for NATO’s intervention.

Separately, Mossad-connected DEBKAfile (DF) said Israeli warplanes downed a Hezbollah drone eight kilometers “out at sea” from Haifa. It flew south from Lebanon.

An IDF spokesman said:

“An attempt by an unmanned aerial vehicle to enter Israel’s air space was thwarted. The UAV was identified flying from the north past the coast of southern Lebanon and continuing south.”

“It was tracked continuously until it was downed by Israeli fighter planes and attack helicopters.”

“They went into action after the drone was identified as not coming from a friendly source. The Air Force gave the order to shoot it down.”

Netanyahu said:

“We take an extremely grave view of this attempt to violate our borders and will continue to guard them and keep our citizens safe.  We are watching events in Syria and Lebanon with extreme concern. Syria is breaking up and Lebanon is unstable.”

“Both places pose not inconsiderable perils to Israel – two emanating directly from Syria.”

“The first is the possible transfer of sophisticated weaponry to terrorist organizations and the second, attempts by terrorists to break through our borders and attack our towns and villages.”

“Israel stands ready to counteract any threats from Syria or Lebanon by sea, air and land.”

DF claims “there are plans afoot to spread (Syria’s) violence into Israel.” It cites Hezbollah’s UAV incident and violent incidents on the Israeli/Israel border. On April 23 (updated on April 25), Washington Post editors headlined “Honoring a ‘red line in Syria over chemical weapons,” saying:

“THREE MAJOR US allies – Britain, France and Israel – have now concluded that the Syrian regime of Bashar al-Assad has very likely used chemical weapons, not once but on multiple occasions.”

“This would cross a ‘red line’ drawn by President Obama.” He’s been very clear saying America “will not tolerate the use of chemical weapons against the Syrian people.”

So far he stopped short of intervening. “If there is no response, Damascus may decide that it is free to use its chemicals on a larger scale.”

At the same time, “Obama has been inching toward more decisive action.”

“If (he) waffles or retreats on the one clear red line he drew, US credibility across the region will be severely damaged.”

These type reports bear watching. Their significance remains to be seen. They may be prelude to direct US intervention. Stay tuned. More reports will follow.

ABOUT THE AUTHOR

Stephen Lendman lives in Chicago. He can be reached atlendmanstephen@sbcglobal.net. His new book is titled “Banker Occupation: Waging Financial War on Humanity.” 

http://www.claritypress.com/LendmanII.html 

Visit his blog site at sjlendman.blogspot.com. 

Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network. It airs Fridays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.

http://www.progressiveradionetwork.com/the-progressive-news-hour

Enough With the (Poisonous) Bullshit

Editor’s Note:(1)

In the essay we reproduce below, Bob Avakian and the revolutionary educators of the RCP, brilliantly dispose of all the ways in which belief in the Illuminati is a dangerous thing for individuals or groups seeking authentic paths to liberation.  The Illuminati is claptrap, insidious claptrap at that,  and it should be treated as such.—PG

The “Illuminati” Is a Myth!

By Bob Avakian, REVCOM.US

Why do we live in such a fucked-up world? Why are decisions so clearly out of the hands of the masses of people? And why do these decisions always run so sharply against the interests of these masses? Why do a few people control enormous amounts of wealth… while many more swim frantically to keep their heads above water… and the vast majority are ground down and chained to a life of misery, no matter what they do? And why are we lied to about all this?

People seek answers to these questions. Urgently. One of the biggest, most widespread answers out there pins all this on a shadowy group called the “Illuminati.” This small but virtually all-powerful group, we are told, is bent on world domination. They have supposedly manipulated and rigged every war, every revolution, every economic or political crisis in accord with a master plan for world domination. There are 57 varieties of this explanation to be found on the Internet, differing in this or that detail and degree, but this is the basic framework you get from them all. (See sidebar for the actual history of the Illuminati.)

These “Illuminati theorists” focus a great deal on manipulation of the banking system. They do not really talk about any problems with the capitalist system apart from that. Almost all of them are either openly or just-below-the-surface anti-Semitic—that is, they focus people’s hatred against what they portray as a cabal of Jewish financial families. They do not talk about the capitalist class as a whole. They string together a lot of facts, pseudo-facts, and lies that they claim to be grounded in deep research—while in reality, these are marshaled to serve a thoroughly unscientific and, indeed,anti-scientific theory. Many connect this to the biblical Book of Revelation, with its lurid visions of apocalypse and mumbo-jumbo talk of Antichrists, to say that this is Satan’s plan; and there are other equally mystical and anti-rational theories advanced in other variants of the theory.

There is only one word to describe these theories: wrong. Actually, there’s another word, too: poisonous. Totally poisonous. These Illuminati theorists point to the wrong problem and the wrong solution. To them, the problem is not capitalism; it is a small group of people who are supposedly controlling and perverting capitalism. To them, the solution is not revolution; it is returning to the “purity” of capitalism (a “purity” which never existed and never can exist and wouldn’t be any good even if it could!). In actual fact, these theories have served as the foundations for reactionary, fascist, and racist movements for over a century.

These theories are not “a little bit right.” Yes, they take advantage of people’s correct sense that the answers to the questions we started this article with are hidden. But that’s just the point—they “take advantage.” They exploit the sense that people have of being lied to and use that to train people in reactionary, backward thinking and mislead them into acting against their own interests. They are no more neutral or harmless than a quack doctor who gives you arsenic for a highly contagious, fatal disease.

Why Do Things Happen?

According to the Illuminati theorists, there is no real logic to history other than these quasi-Satanic forces trying to get domination. Everything you can name—the U.S. Civil War, the Russian Revolution—happened because the Illuminati manipulated it.

Do powerful forces attempt to control events? Yes, they do. But these forces, in this day and age, are political representatives of a class—the capitalist-imperialist class. And they do not have total control. First off, the power of these capitalist-imperialists does not come from Satan—who doesn’t exist in the first place! Nor does it come from “secret knowledge,” numerology, aliens, etc. No, these capitalist-imperialists derive their power from something much more everyday. They own the vast material forces that create wealth in this society—the factories and mines, the agriculture, the means of transportation and communication, the banks and other instruments of finance, and so on. This ownership enables the capitalists to amass wealth through exploiting the labor of those who possess no means of creating wealth—the proletariat—which today numbers billions of people around the world. Exploitation means that the capitalists take what these billions create each day through their labor and pay them in return enough to survive (and sometimes barely that). This exploitation is where they get their profit.

And this capitalist class is the embodiment of the capitalist SYSTEM. As Bob Avakian breaks down in the Revolution Talk,¹ a system is like a game with certain rules. So think of capitalism as a game with three rules:

1. profit comes from exploiting people’s labor—therefore you must exploit to the maximum;
2. if you are a capitalist and you don’t grow bigger, then your competitor will and drive you under—therefore, you must expand or die; and
3. profit over everything—therefore you must plunder the earth and all its inhabitants and subordinate everything to the pursuit of profit.

On the basis of the wealth that they have amassed from exploitation, the capitalist class shapes and controls the official use of force in society (armies, police, prisons, courts) and decision-making (mainly through the executive branch of government, like the presidency). They wield this machinery—the state—to defend and enforce their interests. But because different capitalists have conflicting interests (see rule 2, above), they fight each other for control and advantage—even as they collaborate to keep down the masses.

In today’s world, where capitalism has developed into a global system of imperialism, this takes place on an international scale. They are like gangsters in a turf war, though the scale of their viciousness and destruction far exceeds what any gangster even dreams of. All this—thissystem—leads to horrific, widespread, and totally unnecessary suffering for billions of people. But all this is driven forward by the rules at the heart of the system that demand that the capitalists, in order to survive, exploit the vast majority of people ever more extremely as part of their cutthroat competition with other capitalists.

So what is the root of the problem? Not a tiny band of superhumanly evil beings. Not a small group of Jewish financiers. But a system in which a class of capitalists 1) controls the means of production and exploits the labor of many, 2) on that basis wields tremendous military force to dominate people, and 3) also uses that power to control and shape the media, education systems, etc. to influence and dominate the ways that people think. So long as this is the system, we will face the problems—exploitation of the billions, plunder of the environment, oppressive institutions, and ways that keep that exploitation going—that we face today.

Superhuman Masterminds—Or an Enemy That Is Powerful, but Riddled with Contradiction?

In the Illuminati version of the world, you have masterminds in near-total control of events. In the real world, the one in which we actually live, no one group of capitalists has total control; they fight with each other, and they also fight with the masses, trying to keep them suppressed and, when those masses rebel, trying to put them back into chains. Horrific, destructive wars go on as the concentration of all this. And sometimes, against tremendous odds, the masses break through the madness and make revolution.

No single capitalist or group of capitalists can predict the course of events; they cannot even predict whether this or that business will succeed. They try to, but they face a world of antagonistic forces and unintended consequences. The capitalist-imperialists fight for one reason: to defend, extend and expand their ability to accumulate capital in a world full of uncertainty and chaos. And they MUST fight—they are driven to do so by the “rules of the game.”

This gives rise to huge crises in society, where things seem to unravel. These crises can mean great and even deeper horrors… but they can also contain the openings, if there is leadership and a revolutionary people, to make huge, positive changes—to make revolution.

What Is Really Behind the Lies and Hidden Agendas?

Do these powerful forces—these capitalists—try to hide their real motives and their real interests? Yes… because their interests are against those of the masses of people. Let’s take war. The imperialists will never say that their wars are in the interests of defending and extending an empire which they control. Remember the U.S. war against Iraq? Hundreds of thousands died as a result of that war, and millions of people were violently uprooted. That war was labeled “Operation Iraqi Freedom,” not “Operation Extend and Deepen U.S. Imperial Domination of the Middle East in Order to Edge Out Rivals and Keep the Masses Suppressed.” The capitalist-imperialists will always invent pretexts or excuses for going to war, sometimes with absolutely no basis in reality—and this is true of Iraq, Vietnam, and almost every war you can name—because if they came out with the real reasons, it would incur much more opposition from the masses of people.

People sense this—but here come the Illuminati theorists and their ilk to say that the real motives of these wars were to further enrich “Jewish financial interests,” or to cement control of the so-called “Bilderberg group,” or to bring in one-world government under the United Nations.² No! The real reasons for the wars mentioned above were 1) to impose U.S. domination over rival imperialists (or to risk being edged out or even subordinated by those imperialists)… or 2) to crush liberation struggles of the people in the nations which they have been oppressing, as was the case in Vietnam, or 3) some combination of the first two. But if the imperialists just came out and said that, people would be far less likely to go along with these wars. And if the Illuminati theorists just said that, it would imply that there is something wrong with the system of capitalismand not just the behavior of this or that capitalist or group of capitalists. So think about it—why do the Illuminati theorists invent all kinds of explanations which lead you awayfrom looking at the forces within the system’s functioning? And remember—the “normal” functioning of the capitalist system must mean the untold suffering of billions, and this has been true since its earliest days.

Are we taught the real motive forces of history? No, we are not. We are taught in school that “Abraham Lincoln fought the U.S. Civil War to free the slaves and to realize the true promise of America.” We sense there is more to it than that. So here come the Illuminati theorists once more to say that the Civil War happened as a result of the Rothschilds—again, a family of Jewish bankers in Europe—egging both sides on against each other so that they could take over the U.S. financial system. Oooh, sounds heavy… sounds deep.

Just one problem: this is totally wrong… and dangerously misleading. The Civil War, in fact, arose out of deep contradictions at the very heart and foundation of the capitalist system as it developed in the U.S., namely the enslavement of millions of Africans. The northern capitalists and southern slaveholders waged an extremely bitter and bloody struggle. Why? Because as the northern capitalists grew in strength over the first decades of this country, they increasingly ran up against constraints imposed on their expansion by the southern slave system. They needed to control the whole economy and nation in order to fully consolidate capitalism. The southern slaveholders needed to dig in and not just consolidate slavery but expand its reach and power. All this is shown in some depth in our current series on the U.S. Constitution,³ as well as in Communism and Jeffersonian Democracy⁴ by Bob Avakian and “The Oppression of Black People, the Crimes of This System and the Revolution We Need.”⁵Those two antagonistic claims could finally only be settled by war.

Now, did a lot of capitalists—including banker-capitalists—make huge fortunes, and extend their individual power and influence off the Civil War? Of course! But to claim that was thecause of the Civil War is like saying that umbrella salesmen are the cause of the rain because they make extra money during downpours.

But there’s actually more that this Illuminati theory hides. The northern capitalists, who eventually triumphed, quickly decided NOT to grant the newly free slaves the rights that they had fought for. Instead, they decided that it was more in their class interests to bring back the former slaveholders as “junior partners” and to put the African-American people into a new set of chains as sharecroppers tied to plantations (and convict-laborers—slavery in a new name—to build roads and industry in the South). This fit in with their interests—to politically “stabilize the home base” and extract super-profits from sharecropping agriculture, while they conquered the remaining Native American peoples in the West and prepared to contend as a world power.

This oppression of African-Americans, though going through many changes, has been the red thread running through the whole history of the U.S. and the colonies before it. It continues to be at the heart of U.S. society today. And the further development of this contradiction at the heart of America could still lead to, or certainly be a big part of, a major crisis in U.S. society, on the order of the Civil War, or the 1960s… or even beyond those earth-shaking days of change.

That fact has tremendous implications. It shows the depth of the oppression of the African-American people in this society. It shows the critical importance of the struggle against this oppression in a revolution to actually get free of this capitalist-imperialist madness. It shows how the capitalist-imperialist class in the U.S. has continually been driven to restore and rebuild institutions of white supremacy, even as these institutions go through changes. Understanding the true causes of the Civil War lets people see how there are times when these contradictions can come to a head in such a way so as to plunge all of society into crisis… and open up opportunities for huge and even truly revolutionary change.

But Illuminati theory covers up that understanding. It opposes that understanding. It leads people away from that understanding. According to it, the problem is not the deep-seated white supremacy built into the very heart of this system, which periodically leads to crisis and conflict and, yes, opportunity for radical and even revolutionary change; it is some comic book demon who “just happens” to have a Jewish name. Why do you suppose the Illuminati theorists want people to believe that the whole thing could have been settled were it not for the Jews (or in more “polite versions” some nameless financial capitalists)—instead of showing people the real reasons that go to the roots of the matter, with all the implications for the present and future that we just laid out?

Imperialism and Illuminati Theory… and Why Illuminati Theory HATES Revolution

Some people get taken in because these theorists talk about “big financial groups” and “hidden agendas.” But where do those big financial groups come from and what drives their agendas? Their agendas are nothing but the expansion and extension of their particular bloc of capital or, on the international plane, their home nation. And why did these blocs of finance capital arise? This was actually explained by Lenin, in his analysis of imperialism.

Now this leads to another question: who is Lenin? V.I. Lenin was the person who carried on and carried further Marx’s great insights into the workings of capitalism and the need for revolution. On the basis of these further advances in theory, Lenin led the first great revolution against capitalism in 1917. Lenin led this revolution against tremendous opposition and tremendous odds.

You wanna talk about conspiracies? Okay, how about this one: 14 capitalist powers all banded together to send their armies to crush this revolution. But the masses of people, in a terrible war that cost millions of lives, defeated this counter-revolution and went on to build socialism for four decades. This was a tremendous victory, unparalleled in human history up to that point. There was nothing pre-determined or neat about it.

But not if you listen to the Illuminati-types. According to them, Lenin—who led this incredible and heroic achievement of the masses—was nothing but a tool of… you guessed it… the Jewish financiers, once again… who were supposedly using him to implant total domination by the Illuminati.

Sorry, Illuminati theorists, you’re wrong again—Lenin was a great revolutionary, a great champion for humanity, someone who gave us insight into how the modern world works and what it takes to fundamentally change it, for real. Lenin should be cherished and learned from by everyone who really wants to understand the world and change the world for the better. (And to those of you taken in by this other, lying shit, including those of you in the world of hip-hop who don’t want to go along with the system: maybe you should ask yourselves whatclass interests are served by getting people who are searching for change to hate or at least have a totally false understanding of Lenin… and wake up to the fact that you are being played for something really vile and that your influence is being used to mislead others.⁶ )

To return to the point we started with—what is imperialism—before Lenin led the revolution, he developed a theory that explained several big changes in how capitalism functioned. First, the small, individual capitalists of prior times, through the process of relentless competition that is built into capitalism and “makes it run,” so to speak, had been mainly wiped out. Big monopolies—one or a few capitalists, or blocs of capital, controlling huge industries—arose in their place. Second, banking and industrial capital had merged into “finance capital.” The capitals of what had been different and smaller capitalists were now pooled into huge blocs which shifted capital in and out of different industries, different regions, etc. Third, capital itself began to be exported to the oppressed regions of Asia, Africa, and Latin America. The capitalist states of Europe, North America and Japan began to militarily occupy these countries and fight with each other over “spheres of influence,” to defend the interests of the capitalist-imperialists of their respective countries. This in turn led to wars on a scale never before seen: wars between the imperialists as well as wars of liberation and revolution waged by the oppressed masses. All this meant that capitalism had emerged into a new stage: imperialism.

In addition to the effects briefly outlined above, imperialism also means that the huge blocs of finance capital exert power over the smaller capitalists. Imperialist capital controls credit, they make large decisions about economic priorities and practices that affect these smaller capitalists, etc. These smaller capitalists feed off the imperialist system for their very existence but are also extremely vulnerable to getting wiped out, and resent all this. At the same time, their class interests and position can set them in opposition to the people on the bottom of society—the proletariat, who in many cases they exploit. They can feel “caught in the middle.”⁷

Illuminati theory reflects the position of this class of small capitalists. And this theory can also take root among others “in the middle”—including small business people who employ a few people, professionals and managers, self-employed, etc. This is NOT to say that every person in this class position thinks this way—many do not and many can be and have been won to be allies and partisans of the revolution. But this theory crystallizes and represents the fantasies and aspirations that spontaneously arise out of the social conditions of this class. As a class it can not envision and lead the way to a world without exploitation; it can only dream of a “more level playing field” in which to carry out that exploitation.

There Are No “Good Old Days”—Either We Make a Whole New World or Humanity Remains Stuck in a World of Horrors

The Illuminati theorists want to bring back the “good old days” of early capitalism. Now, you remember the “good old days,” don’t you? The days of slavery… the days of the extermination of the Indians…the days when women had no rights whatsoever… the days of… well, you get the picture. The “good old days of America” were no fucking good in the first place! Yet these are what these people want to bring back! This is why so many of these theoreticians are fixated on the founding of the Federal Reserve Bank in 1913, which was put into place in order to facilitate the abilities of finance capital. These Illuminati theorists are not against capitalism. They’re against the ways that other capitalists—in this case, certain financial interests—hamper them and hold them back, or at least seem to hamper them.

But even if these theories ultimately reflect the position and aspirations of the petty-capitalist class, their influence goes broader into society. And in recent years these kinds of explanations have gained a hearing among the oppressed. Why is this so? For a long time now, a lot of people have been discouraged about the prospects of revolution in the U.S. The defeat of the first socialist revolutions—with counter-revolutions taking place in the Soviet Union in the mid-’50s, and then in China in 1976—has enabled the ruling class to wildly distort and suppress history, to slander revolution, and to proclaim themselves to be all-powerful. The defeat of the heroic struggles of the 1960s within the U.S. has also had a huge effect. In particular, there is the fact that African-Americans were lied to, and lied about. They, along with Latinos, have been targeted by a “war on drugs” that has served as a pretext to institute a new form of Jim Crow, mass incarceration—while all around the official line was that “racism is over, if you can’t make it now it’s because of your own bad choices.” People often feel hopeless—and helpless—in the face of all this.

Illuminati theory reflects part of this reality—the part about people being lied to, about hidden forces with hidden agendas determining the real shape of people’s lives. At the same time, Illuminati theory also represents going along with and reinforcing this ideological offensive against the people. It is NOT in any way, shape or form a way out of it. It slanders and lies about revolution. It spreads contempt for the masses and their ability to change history, especially through revolution. It directs people’s anger against other ethnic groups that have supposedly “made it,” while at the same time accepting that “making it” under capitalism should be people’s highest goal. It spreads lies about and antagonism against communism and science, while it promotes mysticism and religion. How is ANY of that any good? It is NOT—it is poison.

Illuminati theory can seem to reflect a part of reality, but it does so like the fun-house mirrors in a carnival, giving you a distorted view. It does so in the service of a very unreal, very false and extremely reactionary explanation. The ruling class is powerful, but it is not all-powerful; as Bob Avakian (BA) recently has pointed out, “they are powerful, but their system is riddled with contradictions.”⁸ History is not the plaything of a handful of men with secret knowledge; most of all, it is the struggle between contending classes, representing different ways to organize the production of what humans need to live, and different social and political and cultural lives that correspond to those different ways. There never was a golden age to go back to. Humanity will either remain locked in the endless horrors of capitalism-imperialism or go forward to something far better… communism, a society in which people carry out their lives without exploitation or oppression or antagonistic social conflict, a society in which people can rise to their full heights.

So how about instead of trying to go back to “good old days” that never existed and that we should certainly never go back to… how about we go forward? How about we quit getting taken in, or letting others get taken in, by people who worship capitalism and whose ultimate agenda is fascist and white supremacist? How about we call out the bullshit fantasy theories and worse that get people to focus on something other than the REAL source of the problem: capitalism? How about we eliminate the REAL source of the problem, capitalism, and bring in the REAL solution: socialism, as a transition to communism? And how about we promote and build a movement for revolution to bring in that new society, whenever the conditions emerge?

And how about, as a big step toward doing all that, we get with and deeply check out someone who actually has gone deeply into the problem, with REAL science… someone who has put forward a visionary and viable solution… who’s developed a strategy to get there… and who leads a party that is bound and determined to lead millions on that road?

How about we get with BA?

NOTES

1. Revolution: Why It’s Necessary, Why It’s Possible, What It’s All About, a film of a talk by Bob Avakian, revolutiontalk.net. [back]

2. Many also say that the war was waged at the behest of Israel. While Israel certainly supported the war and in some ways benefited from it, they were not the motive force in it. For more on the relation between Israel and the world imperialist system, see the box on anti-Semitism. [back]

3. “The U.S. Constitution and the Constitution for the New Socialist Republic in North America (Draft Proposal): Two Constitutions, Two Different Systems, Two Different Futures for African-American People.” “Part 1: A Slaveholders’ Union,”Revolution #270, May 27, 2012; Part 2: “Reconstruction, and the First Great Betrayal, 1867-1896,” Revolution #271, June 10, 2012; and Part 3: “Battleground Over Segregated Education in the 1950s and 1960s,” Revolution #272, June 17, 2012. [back]

4. Communism and Jeffersonian Democracy, Bob Avakian, RCP Publications, 2008. Also available at revcom.us. [back]

5. The Oppression of Black People, the Crimes of This System and the Revolution We Need,” Revolution #144, October 5, 2008. [back]

6. To learn the true history of the 20th century’s socialist revolutions, see thisiscommunism.org. [back]

7. This used to get expressed when such theorists would say that “there is an international conspiracy of finance capital and communists working together to rule the world.” Despite the fact that imperialism and the communist movement are actually deadly antagonists, from the narrow view of the representative of the small capitalist (who has contradictions with both of these classes, but for diametrically opposed reasons) they seem to be in alliance—against him. [back]

8. “What Humanity Needs: Revolution, and the New Synthesis of Communism,” an interview with Bob Avakian, revcom.us. [back]

9. Special Issue on Israel: “Bastion of Enlightenment… or Enforcer for Imperialism: The Case of ISRAEL,” Revolution #213, October 10, 2010. [back]

Source: Revolution #272, June 17, 2012
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^₍₁₎ See God’s Illuminati