Surviving the Cataclysm.pdf

TABLE OF CONTENTS

PREFACE

CHAPTER 1: THE ONCOMING CATACLYSM

CHAPTER 2: DERIVATIVE MADNESS

CHAPTER 3: THE $5 TRILLION MUTUAL FUND GAMBLE

CHAPTER 4: THE DESCENT INTO THE MÆLSTROM

CHAPTER 5: THE IMMISERATION OF AMERICA

CHAPTER 6: MODELS OF COLLAPSE

CHAPTER 7: MODELS OF DISINTEGRATION

CHAPTER 8: USURY AND NATURAL LAW

CHAPTER 9: THE AGE OF OLIGARCHY

CHAPTER 10: THE AMERICAN SYSTEM

CHAPTER 11: SELF DEFENSE IN THE CRISIS

CHAPTER 12: WORLD ECONOMIC RECOVERY

APPENDIX: SHADOWS OF THINGS THAT MIGHT BE

BIBLIOGRAPHY

TO THE READER

. . .I have not found among my belongings anything as dear to me or

that I value as much as my understanding of the deeds of great men,

won by me from a long acquaintance with contemporary affairs and a

continuous study of the ancient world; these matters I have very

diligently analyzed and pondered for a long time, and now, having

summarized them in a little book, I am sending them to Your

Magnificence. -- Machiavelli, The Prince .

This book has been written in the shadow of the greatest financial crash of all human history. The

idea of writing it came to me when I was speaking at a conference in Melbourne, Australia in July

1995, when I heard the news that Japan's Cosmo Credit Union had gone bankrupt. "That is the

beginning of the end," I told my very kind Australian host when we heard this news on television.

That event could already have triggered an immediate world-wide banking panic, and it prompted me

to consider what I could do to issue a warning to persons of good will. The text was well advanced by

October 1997, when the wave of panic from Hong Kong virus was hitting the American and

European markets. The last phases were completed in August-October 1998, against the background

of the Russian, Brazilian, and Long Term Capital Management debacles, and on the eve of the

sinister false dawn of the euro.

It has been my aim to offer an overview of the collapse and disintegration of the world financial

system before the breakdown had been completed. My goal was to provide something more than an

instant book which appears shortly after the fact. I wanted if possible to write a pre-emptive book, a

forecast that would help people to survive as individuals, and which, more importantly, would give

them the concepts needed for the United States and the other modern nations to withstand the crisis.

By the time you read this, the central political issue of the day may well be whether the International

Monetary Fund will put the United States into receivership, or whether the United States should put

the IMF into bankruptcy liquidation. In my view, it is the IMF, along with the entire globaloney

system of world finance, which has to go.

I considered it important to present this analysis in the form of a book. Newspaper and magazine

articles are valuable, but ephemeral. Because they are written for the moment, they always tend to

express the political or financial hopes and fears of the moment. In other words, their common failing

is that they can easily become propaganda. Anyone who believes as I do that the world financial

system is indeed well advanced on the path leading to collapse and disintegration has the

responsibility of making the case for that view in the systematic, inclusive and permanent form which

a book-length study affords. Anyone who declines to assemble in book form an overview of the

disintegration, while offering piecemeal a program of measures to deal with it, hardly lay claim to the

mantle of historical or economic prescience. Agencies with far greater manpower and resources than

I possess could have produced a book of this type, but have not done so. I therefore offer my own

work to fulfill a vital need emerging in the world.

But why should anybody care about the opinions of Webster G. Tarpley about the world economy?

The comprehensive answer is represented by this book as a whole. But in terms of an immediate and

ponderable credential, I offer the following. This analysis was written for a private client in one of the

three top Swiss banks, and was issued on November 15, 1993.

IS THE DERIVATIVES CRASH AT HAND?

It has of course become a commonplace in the world financial press that the very

possible defeat of NAFTA on Nov. 17 could collapse the Mexican and other third world

stock exchanges, thus precipitating a world-wide financial and banking panic that could

bring down the US dollar and the American banking system. This "NAFTA 1929"

scenario is eminently plausible, especially because possible warning tremors of the

long-awaited derivatives panic have already been observed.

The Dow Jones Industrial Average continues to trade near its record highs in the

neighborhood of 3700. But during the first two weeks of October, an alarming decline

has taken place in the Dow Jones Utilities Average, and this appears to be associated

with a reversal in the overall direction of the market for long term US Treasury bonds.

On October 29, the Dow Jones Utilities closed at 240.18. On Monday, November 15,

the Dow Jones Utilities closed at 222.52. This represents a decline of more than seven

per cent during a relatively short period, a significant correction in a sector of the market

that is likely to be easily upset by volatility. Utility companies include electric power

companies and similar firms that tend to appeal to conservative investors who are averse

to risk but want stable prices and safe returns. Wall Street observers stress that the

utilities average is prediscounting a rise in the rate of inflation that is now widely

reputed to be on the horizon, including such basic sectors as food.

The decline in utilities was then quickly reflected in the prices of long-term US

Treasury bonds. Interest rates on the 30-year reached their lowest point on October 15,

with yields hovering around 5.75%. This corresponded to the highest price on these

bonds in recent history. By Friday, October 29, the last trading day in the month, the

interest rate on 30-year bonds had backed up to 5.96. During the following week the

interest rate on these long bonds rose a startling one quarter of one per cent, bringing the

yield up to 6.20%. This was accompanied by a downward slide in prices and above all

by markedly increased volatility, with the long bond price jumping around from hour to

hour like the quotation of a highly speculative stock. The New York Times noted on

November 5 that the selloff was a "little like the fires in California. Selling has swept

the market like wind-driven flames while traders and investors watched, stunned and

unable to stop it." On Nov. 15, with long bond yields only slightly better at about

6.15%, the same paper discussed the skittishness of the bond market under the headline

"Signs of Investor Nervousness Grow." Many of the Wall Street crowd now think that

the long rally in bonds, which had its beginnings back in 1991, is now definitively over.

If so, the resulting instabilities could prove profoundly unsettling to the world of

finance.

This turned out to be a highly accurate forecast. The bond rally was indeed over, and interest rates

were turning sharply upward. What followed was the great bond market crisis of 1994, the worst

since the period after World War I. This was the turning point which Soros, Orange County, Barings,

Goldman Sachs, and other powers of the financial world guessed wrong. By their miscalculation,

they variously incurred bankruptcy, liquidation, default, grievous loss, and personal ruin. Based on

this track record, it is worth reading this book, even if its analysis contradicts the allegedly

authoritative insider opinion being offered by brokers, bankers, and economics professors. If Robert

Citron and Nick Leeson -- to name just two -- had heeded my advice at the end of 1993, they would

have avoided the kind of notoriety which they achieved in 1994 and 1995.

It is the author's hope that the programmatic ideas in this book may be used to facilitate the immense

task of world economic recovery and reconstruction in a post-oligarchical twenty-first century.

Ideally, it might be employed as a sourcebook by candidates preparing to run for office in the

aftermath of the cataclysm, or by government officials around the world. The basic ideas of

economics are universals, and their essence does not vary much from place to place.

Today, some economic authorities deny that there is any crisis, and thus maintain that nothing needs

to be done about it. Others admit that there is a crisis, but deny that anything can be done -- this is a

group which is destined to grow. Some others have been predicting the crisis for a long time, and

claim that only they know how it can be solved. The author indignantly rejects the idea that economic

recovery is some kind of book sealed with seven seals, which only a certain individual or party has

been mysteriously empowered to open. No mortal human being, or group of them, has any monopoly

on the ideas and programs which can produce economic recovery. The notion that they do represents

an obscurantism worthy of Simon Magus, the founder of gnosticism. There is nothing esoteric,

nothing secret at all about economic recovery. There is only the blindness generated by vast and

stubborn ignorance, hardened by greed, pride, envy, and the other cardinal sins. Valid economic

theory has developed historically over many centuries, and it is no one's private property.

The author's hope is that the considerations contained here may contribute to the rise of a new school

of thought in economics, history, philosophy, sociology, and other areas of inquiry. This might be

called the anti-oligarchical school, and the contention here is that it is the typically American outlook.

Oligarchy is the social reality behind globalization and usury. An anti-oligarchical current in modern

thought would provide the needed antidote to the oligarchical assumptions which now pervade the

Zeitgeist , and which make the task of dealing with the looming breakdown crisis of world civilization

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