That’s the opinion of Carl Teichrib, Chief Editor of ‘Forcing Change’- written in October last year (back in the good old days?). It’s a lot longer than anything I’d usually blog – but we’re in extraordinary times and I think he makes some very interesting points.
Confusion reigns. Economic bewilderment appears to be the hallmark of 2008. Banks don’t seem to know what to do; politicians offer stimulus packages that don’t stimulate; and everywhere financial planners and advisors proclaim that “it will get better” while each passing week gets worse. And at the gut level everyone knows that if the markets completely unravel, if currencies shatter in the confusion, a brutal monster – Chaos – will appear from under the bed and run rampant while the financial house burns.
Watching the markets and thinking through the possibilities, two interlocking phrases immediately come to mind: Ordo ab Chaos, and Crisis Equals Opportunity. Ordo ab Chao is a Latin phrase and the motto of the Thirty-Third Degree of Freemasonry. It means, “Order out of Chaos.”
This expression portrays a simple message. Out of the chaos of extreme crisis comes a time when everything is re-made, and order is restored. But you must understand; just because order has been established, it doesn’t mean that the world is the same as it was before the catastrophe. It won’t be; it can’t be.
For those who have lost a home to fire, you know that eventually organization returns to your life. However, you also know that your world has been changed forever; it’s not as it was before that fateful day. Likewise, as our smoldering, global financial house catches flame (in my estimation it’s only in the beginning stages), a new edifice will be introduced after the conflagration is over. But it won’t be the same structure.
Something else must be considered: the house doesn’t have to be utterly razed. At some point during the fire, the house could be closed-up for a short time. Then, while the world waits with abated breath, a new building would be unveiled from behind the smoke. In our desire for safety the world would abandon the old house and flee to the new, safer looking structure.
Is this possible? Remember, Crisis Equals Opportunity, and Order will arise after Chaos.
Without doubt this economic crisis – and the chaos that follows – will present individuals and organizations opportunities that would never otherwise be pursued during times of normality. It’s hard to not to expect anything different. After all, the firemen who are now trying to douse the flames are the same people who started the fire.
The manipulation of calamities, be they natural or man-made, to re-make a society or nation isn’t new. Such actions can be traced back to Biblical times.
Before I go on, I would be remiss not to make note of the following: I recognize that for many, the Biblical character I will be using as an example has often been viewed as a person who did little wrong. Indeed, he has historically been acknowledged as a laudable figure, and to some, a foreshadow of the Messiah. But two facts need to be considered. First, the Bible doesn’t condone or condemn this individual’s tactics; it just describes the situation as it happened. Second, the individual in question was human in every way. That is, he did things in his life that were praiseworthy and profane, benevolent and dubious.
How do I know that, seeing that the Bible never directly mentions any of his failings? Simple; he was a man.
Joseph, the hero of the last section of Genesis, provides a remarkable example of the use of “crisis economics” to change an entire nation. Interestingly, Bible students have long overlooked his political tactics of currency leveraging – an instrument used to alter a culture while consolidating wealth into the hands of the ruling elite.
As this is the oldest example I have found regarding monetary manipulation for the gaining of power, I’ve dubbed this “The Joseph Principle.”
In Genesis 47, Joseph, second in command to Egypt’s Pharaoh and warned of a coming famine, had prepared stock piles of grain to aid the people through the crisis. When the famine hit the land, the people came to Joseph to buy food stock. A simple transaction was made; the citizens used the national currency to purchase grain.
In verses 14 and 15 we find an unusual development. After the grain was purchased, Joseph intentionally holds the money back, keeping it from being re-circulated into the local economy. The result is predictably catastrophic for the people: Economic crisis.
According to the King James Version, “the money failed” (vs.15), and in the New International Version it says that the “money is used up.” Egypt experienced intentional, government-sponsored deflation in the midst of a natural calamity. The money collapsed.
Needing to eat, what did the citizens do? They brought Joseph their livestock in exchange for grain (vs.16-17). As an agrarian society, livestock represented the industrial basis of the people. Hence, placing this power in the hands of the government, the people’s commercial activity was effectively abolished.
In relating this series of events to others, some have asked me; “Why didn’t the people just eat the animals instead of trading them for grain?”
Refrigeration didn’t exist. And while the people could have dried some of the meat for long-term use, grain would have been the most valuable and stable food source during a drought. Now the people had neither money nor livestock; and a year later they were out of food.
Returning to Joseph, who obviously was in charge of the storehouses, the people begged their leader to take their land and themselves in trade for food (vs.18-19). Property was therefore consolidated under the state, and the citizens literally became slaves in their own country (vs.20-21). In the King James Version the language goes even further: Joseph de-populates the rural areas and moves the people into the cities.
This is a masterful population control strategy.
Once the wealth of the nation had been consolidated under the Pharaoh’s banner via Joseph’s actions – monetary wealth, the industrial base, land and productivity, and the people as economic assets – then Joseph instituted a new farming and taxation system (vs.20-24). How did the people respond? They gladly relinquished control of their wealth, property, and themselves (gave up their freedom) for the promise of state-dictated security.
Keep in mind; all of this started through a debasing of the currency system. The manipulation of money is, arguably, the most potent method – outside of war – used to rearrange the fabric of society.
Am I suggesting that our current crisis will be used as leverage to re-structure our Western world? The odds are in favor of it. Consider what the father of modern economics, John Maynard Keynes, had to say in 1919.
“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.” – John Maynard Keynes, The Economic Consequences of the Peace, (1919), p.236.
Keynes economic model is what we have been using since the end of World War II. Roughly speaking, it’s the idea that governments can stimulate the economy through interest rate management – the heart of credit and debt – taxation programs, and other state-instituted incentive programs. Although the above quote was aimed primarily at inflationary actions, the same conclusion could be made regarding deflationary leveraging.
Three other quotes come to mind,
“The great struggle of history has been for the control over money. It is almost tautological to affirm that to control the production and distribution of money is to control the wealth, resources, and people of the world.” – Jack Weatherford, The History of Money (Crown Publishers, 1997), p.246.
“The control of money and credit strikes at the very heart of national sovereignty.” – A.W. Clausen [then president of Bank of America], in a 1979 interview with the Freeman Digest, “International Banking,” p.21.
“…new comprehensive politico-economic systems across peoples almost always arise of out conquest or common crisis…” – A.W. Clausen, Freeman Digest, “International Banking,” p.23.
The linkages between economic crisis and change cannot be ignored.
During the mid-1970s a “new international economic order” was proposed in light of growing energy costs, world currency imbalances, and other shake-ups in the global economy. The objective of this movement – which emanated from Algeria and found support through the Group of Non-Aligned Countries – was to change the capitalist/Western-oriented world financial system into a more socialist-styled model.
The Club of Rome, an elite group of eminent leaders, also supported this effort. In 1976 it fleshed out what this “new international economic order” would look like. According to the Club, the world’s social, political, cultural, and economic composition needed to be re-aligned under a sweeping system of international management. This included the promotion of regional monetary integration, the creation of a World Treasury agency, and international taxation powers – all with the aim of progressing “towards a world-wide monetary system.”
How would citizens come to accept such radical changes? The Club of Rome understood the historical mechanism needed: Crisis.
Although the “new international economic order” fell apart due to national infighting between agenda-supporting countries (among other factors), the principle of “economic crisis” and “change” never went away. Flash forward one year past the famous 1987 stock market crash.
On January 9, 1988, The Economist published a cover story about a proposed international currency called the Phoenix. Like the mythical firebird that arises out of the ashes of destruction, this international currency would likewise emerge from the chaos of crisis. As the article noted, it would take “several more big exchange-rate upsets, a few more stockmarket crashes and probably a slump or two” before politicians would accept the Phoenix and secede monetary power to a higher authority. The Economist even suggested a start-up date: 2018.
Looking to curb government-led monetary mismanagement, a problem that seems to plague every nation-state, the article suggested a radical re-arrangement: Country-level decision making, under the Phoenix, would disappear under a world central bank.
“There would be no such thing, for instance, as a national monetary policy. The world phoenix supply would be fixed by a new central bank, descended perhaps from the IMF. The world inflation rate – and hence, within narrow margins, each national inflation rate – would be in its charge. Each country could use taxes and public spending to offset temporary falls in demand, but it would have to borrow rather than print money to finance its budget deficit. With no recourse to the inflation tax, governments and their creditors would be forced to judge their borrowing and lending plans more carefully than they do today. This means a big loss of economic sovereignty, but the trends that make the phoenix so appealing are taking that sovereignty away in any case.”
More recently, Robert Mundell – the “father of the euro” – has been traveling around the world lecturing on the hoped-for creation of a new international currency called the DEY, a combination of the US dollar, euro, and yen. Crisis, Mundell realized, will open this door.
“International monetary reform usually becomes possible only in response to a felt need and the threat of a global crisis.”
This Nobel Prize winner also pointed his finger to the possible trigger event, saying that the “global crisis would have to involve the dollar,” and that a world currency should be viewed as “a contingency” to a global dollar disaster.
And Benn Steil, the Director of International Economics at the Council on Foreign Relations, suggested a re-making of the world’s financial system around three key currencies – the US dollar, euro, and a new Asian monetary unit. Steil implied that the hinge-point for this development would be a major shake-up involving the US dollar.
Crisis, in relation to regional and world currencies, have been highlighted in two previous issues of Forcing Change. But it needed to be reiterated here. Why? Because today, during every news hour, we hear more talk of the global financial emergency.
And crisis equals opportunity.
Beyond the obvious, that wealth will be lost and won on a daily basis during this calamity, some bigger picture aspects need to be briefly considered.
1. Watch as regional and world currency scenarios become increasingly acceptable. This will likely be more evident in academic and narrowly-focused financial circles. However, you may see these ideas surface in some newspaper editorials and other outlets. In fact, as we draw closer to 2010, watch as the business media starts to focus on the upcoming currency block now developing in the Persian Gulf region.
2. Suggestions to re-build the world’s financial house. Actually, this is already happening. Consider the following taken from a recent Bloomberg news release,
“Italian Prime Minister Silvio Berlusconi said governments may shut financial markets as the credit freeze pummels stocks and threatens a global recession.
“As equities suffered their worst week since the 1970s, Berlusconi said in Naples, Italy that markets may be shut while policy makers ’rewrite the rules of international finance.’
“The discussions were revealed as finance ministers and central bankers from the Group of Seven nations sought a united front aimed at thwarting the crisis. Among the options: Pumping taxpayer funds into loss-ridden banks and guaranteeing lending between them and their deposits.
“‘Doing nothing is not an option at this stage,’ Bundesbank President Axel Weber told reporters in Washington. French Finance Minister Christine Lagarde said ‘a coordinated basis is the only way to react to the situation.’
“Unprecedented interest-rate cuts and bank bailouts have failed to quell panic in markets, putting officials under pressure to pull even more policy levers today or risk exacerbating the financial and economic turmoil.
“‘The gravity of the current situation is sinking into officials’ mindsets,’ said Charles Diebel, head of European rates strategy at Nomura International Plc in London. ‘It’s time for the kitchen sink, as in throw everything there is at the problem, and on such a scale that the shock and awe will break the cycle of fear’.”
Keep your eyes on Asia, especially China and India, as well as South America and the Persian Gulf region. As wealth and economic clout dries up in the North American markets, other parts of the world with more vibrant populations will rise in power. FC
1. Albert G. Mackey, An Encyclopædia of Freemasonry, Volume 2, (Masonic History Company, 1917), p.537.
2. Philip C. Bom, The Coming Century of Commonism: The Beauty and the Beast of Global Governance (Policy Books, 1992), pp.27-53.
3. See, Reshaping the International Order: A Report to the Club of Rome (E.P. Dutton, 1976), p.4. The oil crisis and OPEC’s role in third-world
advocacy played a monumental part in setting the stage for this movement. For more on this development, see Jean-Jacques Servan-Schreiber,
The World Challenge (Simon and Schuster, 1980).
4. Ibid, pp.126-134.
5. Ibid, p.110.
6. Cover story, “Get Ready for the Phoenix,” The Economist, January 9, 1988.
8. Robert Mundell, “A Decade Later: Asia New Responsibilities in the International Monetary System,” presentation given in Seoul, South
Korea, May, 2-3, 2007.
10. Benn Steil, “The End of National Currency,” Foreign Affairs, May/June 2007.
11. “Berlusconi Says Markets May Be Shut; G-7 Seeks United Remedy,” Bloomberg.com, October 10, 2008.