Well here is the story; forgot to send:
The Coming Collapse of the New World Order
Preface:
Commentary by Ru Mills, Editor of Rumor Mill News on the attached
article by Orlin Grabbe:
I have been writing about a secret gold transfer for many years now. No
one ever seems to want to know more about it, but I have been telling
people that the enemies of the New World Order
planned to use this gold to destroy the New World Order.
How would they do it? Through leveraged buyouts and other financial
world shenanigans that mere mortals can never comprehend.
I wrote about the collapse of Barings Bank, Warburg Bank in England, The
Rothschild Holding Company in France, as well as Lloyds of London,
Credit Lyonnais in Paris, and other signs of the
coming collapse of the New World Order.
Now Orlin Grabbe uses his sources and his personal knowledge to piece
together an article that points to what I have been saying for years.
The New World Order Will Collapse
And it will collapse before it has a chance to force its global
slavery upon us all.
This is not to say that we won't go through hard times. There is the
very real possibility of a 30's style depression hanging over our heads.
And we the year 2000 bug facing us.
Plus we have a president who needs a war to keep from being
impeached.
But in my humble opinion, we no longer have to fear being the slaves
of the New World Order.... at least not the one that was being created
by the CFR, Rockefeller, Rothschild group.
I am hoping that the group that worked over one hundred years to
defeat the New World Order crowd, is a kinder gentler bunch of folks.
But just between you and me... we are just going to have to wait
and see. Because they are still in hiding. We won't know who they are
and what they have in mind for us because they won't show themselves
until the economic collapse comes and destroys the New World Order boys
and runs them out of town and into their under ground bunkers.
Underground bunkers....That's not a bad idea. We have a rough ride
in store for us in the coming years. Batten down the hatches and
prepare for it.
But make sure you prepare for all possibilities. What if you
prepare for the end of the world and it doesn't happen?
What if you sink all of your money into food and silver, and the
economy never collapses so badly that you lose access to money and food?
What if the collapse is only for a few weeks or for a few months?
What if our economy survives because our President starts a war?
If you have put all your eggs in one basket, then you have to make
sure that one basket is the one that survives.
Wouldn't it be better to prepare for all possible outcomes?
And if you don't have the money or the time to do this. Then just
prepare yourself mentally and emotionally. The times are a changin' and
if you can't learn to go with the flow, life will be very
unpleasant.
For myself and my family. We have been getting our physical bodies in
order. Teeth that have needed fixing are getting fixed. Fat and flabby
bodies are being toned up. (Just in case we have
to take those forced marches.)
We are studying nutrition and supplementing ourselves with vitamins and
minerals. We have bought a colloidal silver generator to ward off
bacterias and viruses. We have put aside a little food, silver and
water. We have bought cooking stoves and porta potties. We also have
bought
seeds for quick growing vegetables.
We planted fruit trees years ago, (we live in an apartment, so if we
can do it you can too). We have seven avocado trees, three citrus trees
and a strawberry patch. It is all in an area that is no more than 20 by
20. Any one with a tiny back yard can do this much.
We are also planning for the future. We have become brokers for a
prepaid legal services plan, started a publishing company, and will soon
have our website up. So, if the world holds together, we will make a
nice living, and be able to continue to publish Rumor Mill News
articles.
Let's hope that the Admirals who used to come sit at my table and have
coffee with me were right. They told me years ago that they were going
to collapse the market, return the world to the Ozzie and Harriet world
of the fifties, and everyone was going to live happily ever after.
Of course, the world of the fifties would return after the inner city
riots and round ups of undesirables. I know...who are the undesirables?
The Admirals told me that if they are successful, and he never had any
doubt they would be, they undesirables would be the dope dealers, career
criminals, twisted perverts, gang members
and other anti social types.
If the New World Order wins, you and I are the ones that will end up
in the work camps, prisons or crematoriums.
Isn't it wonderful that Orlin Grabbe is giving us this wonderful
article right now? Look what we have to look forward to?
A worldwide economic collapse with no one at the helm.
What a great time to be alive!
Commentary from Ru Mills. Editor of Rumor Mill News Back issues
of Rumor Mills News available from:
RMNews
P.O. Box 1784
Aptos, CA 94003
e-mail us for a list of what we have for sale
* * * * *
_____________________________________________________
The Collapse of the New World Order
by J. Orlin Grabbe
The public media has always been ahistorical, rushing toward the nearest
flame like a moth oblivious to the surrounding darkness. So it was when
the TV networks pointed their cameras at the mesmerizing spectacle of
President Bill Clinton perfecting his grovel and mounting a contrition
offensive against the threat of impeachment in the wake of the Starr
Report. Silently, in the background, momentous changes worthy of vastly
more attention were occurring around
the globe.
It was written of the Emperor Nero that he fiddled while Rome burned.
It will be remembered of Clinton, provided he is remembered at all,
that he diddled an intern with a cigar while world events accelerated
down a treacherous path of deflation of stock and asset prices,
devaluation of
political reputation, and destruction of the New World Order.
There is something deliciously ironic in watching the collapse of a
regime whose reputation has been largely a set of media props, camera
tricks, and Hollywood illusions. For in this case the special effects
crew seem as mystified as everyone else as to what has gone wrong. The
President had surrounded himself with a slew of financial stars,
academic luminaries, and national security jujuists whose basic
incompetence was exceeded only by their arrogance, and whose sycophantic
loyalties were secured by the unifying notion that they themselves
constituted the heirs and standard bearers of a new vision, a bridge to
the 21st century, a New World Order. The only tasks of the cognoscenti
were to party, to get rich, and to whip the renegades into line
around the world.
The End of History
The basic vision is described in Francis Fukuyama's The End of History
and the Last Man (1992). After the collapse of the Soviet Union and the
fall of communism in Eastern Europe, the argument went, the struggle for
freedom had been won in both the political and economic spheres. There
was now philosophical unity. All civilized people had accepted the idea
of the
twin pillars of liberal democracy and the market economy.
Fukuyama, a student of the Deconstructionist Jacques Derrida, is a
Hegelian. And, like Hegel,
Fukuyama wondered if history were at an end because it had reached its
logical conclusion. After all, the struggle for freedom and recognition
had been won, at least in principle, he noted. The international elites
associated with the Trilateral Commission, the Council on Foreign
Relations, and the annual Bilderberg conferences broadly concurred.
Fundamental disagreement among nations with respect to political
ideology and economic organization had disappeared. All civilized people
wanted peace, prosperity, and economic growth. And now they could have
these, the vision said, as long as there was international stability.
Stability meant that civilized nations would join together to contain
rogue states like Serbia, Iraq, and North Korea. (George Bush's
invocation of the "New World Order" in the crusade against Saddam
Hussein prior to the 1991 Gulf War was an example of the emerging view.)
International terrorism would likewise be thwarted by international
police surveillance mechanisms, which would raise population monitoring
to a fine art. With broad agreement on the outline, the principal task
was filling in the economic boxes, it was thought.
This meant working with the international economic organizations such as
the IMF and the World Bank to bring the former communist countries and
the peons of the Third World into the prosperity orbit, so they would
count their blessings, shut up, and cease causing trouble. Important for
accomplishing this economic growth would be international capital flows
from the center to the periphery. These would, of course, occur
naturally as the market economy
spread throughout the earth.
The vision was quite analogous to elite conceptions of macroeconomics
in the 1960s. The broad outline of the science of economics has all been
worked out, MIT economist Robert Solow told his students, back then. Now
it was only a matter of filling in the boxes, he claimed. But then came
the 1970s, and a US Presidential crisis, along with a drop in the stock
market to nearly one-half its previous value over 1973- 74. There was a
worldwide "inflationary recession," along with a crisis in economic
theory, and political upheaval as leaders of major nations were replaced
one by one over a short period of time (Kohoutek was responsible, the
astrologers said), and, not least, the proclamation of a "New
International Economic Order" at the 1976 IMF
annual meeting.
Today we are viewing a similar confluence of events, but--I would
argue--on a much greater scale. Within little more than a year, in
countries as diverse as Russia and Thailand, the middle classes and
their moderating political influence have been financially destroyed
through banking crisis, currency devaluation, and recession. Indonesia's
economy is expected to contract 15
percent this year, while that of South Korea and Thailand will be down
5 to 7 percent.
Economic crisis has driven from office Hashimoto in Japan and Suharto in
Indonesia, as well as lesser figures such as Anwar Ibrahim in Malaysia.
Elections have brought about new governments in South Korea and
Thailand. In Russia the puppet-figure Yeltsin barely holds on, while the
oligarchs have replaced Prime Minister Chernomyrdin with Kiriyenko, then
Kiriyenko with Primakov, all within the space of a few months. In the
U.S. the Dow Jones has plunged 17 percent from its peak in the course
of a few weeks, and Clinton suddenly finds himself (at the time of
writing) still clinging to his office only through a barrage of
crocodile tears.
Meanwhile, those financial pundits in the US who thought they could
solve the Social Security crisis by investing retirement funds in the
stock market, are already having second thoughts. As nuclear India faces
nuclear Pakistan, Iranian troops gather at the Afghan border, and Turkey
threatens the whole stability of the Middle East because of Russian
missiles being delivered to Cyprus, the very notion of a harmonious "New
World Order" has likewise come under attack. It's
deja vu all over again.
Now, all this doesn't mean it is necessary to head for the hills, to
run screaming off into the night like the worst of the
"post-tribulation" millennialists and the Year 2000 kooks. While some
self-defense is in order, it is important to keep in mind that an
apocalypse now and then is good for us, however uncomfortable it might
be in the interim. For the alternative is a universally-imposed gray
global bureaucracy that relentless squeezes the last iota of individual
initiative and freedom out of the system.
But the apocalypse that is now underway cannot be managed and contained
and driven away by collectivist voodoo, for it represents precisely a
collectivist breakdown. That's good news for those who value individual
sovereignty, but bad news for the New World Order.
The Image of the Future
The coincidence of economic, political, and social deflation should
come as no surprise once you consider the unifying roots. Neither the
economic nor the political nor the social crisis is really the "cause"
of the other two, but rather all stem from something else. Most human
actions, and human decisions, are molded by an over-arching image of the
future. The economist
Kenneth Boulding described the process this way:
"A decision is essentially a choice among competing images of
the future, . . . and with the development of complex
images of the future, decisions become an increasingly important element
in the dynamics of the individual human being and his society. .
. . The human race is not merely pushed by past events
or present circumstances, but it is also pulled by its own images of the
future into a future, which may not be the same--and in fact is not
likely to be the same--as its images of it, but which is nevertheless
powerfully affected by those images"
(Ecodynamics: A New Theory of Societal Evolution, 1978).
It has always been thus in recent millennia, as far as we can tell. Such
future images do not have to be true in order to be powerfully
influential. One prominent example is noted in the handbook of Western
Civilization, the Bible, and occurred during the 1st century AD. In the
Olivet prophecy of Matthew 24, Jesus relates to his disciples the signs
of his "coming and the close of the age": false messiahs, wars, famine,
pestilence, the abomination of desolation, and so on. He is asserted to
have said, "Truly, I say to you, this generation will not pass away
until
all these things take place."
Jesus is thus quoted as saying he would return within the lifetime of
those hearing his words that particular day. "The normal meaning of this
generation would be `men of our time,� and the words would refer to a
period of 20-30 years" (footnote in The New Oxford Annotated Bible).
This image lead Jesus' disciples to evangelize the surrounding nations
after his death, in the expectation of his imminent return. "Jesus did
not teach His disciples to pray, `Thy Kingdom come,' in references to a
far-off ultimate event. It had the implications of a total reversal soon
to be revealed" (Fred Polak, The Image of the Future, 1973, p. 199).
Jesus may have been wrong about his return, but the impact of his
vision was unmistakable. People do not behave differently today. The
post- Soviet image of a New World Order was a catalyst for the global
adoption of a vision of the "market economy". There is, of course, often
a divergence between what people preach and what they practice, between
the teachings of the
prophets and the interpretations of the audience.
And the economic message that seems to have accompanied the diffusion of
the New World Order throughout the electronic village was the notion of
a Global Free Lunch: We are all investment bankers now. Prepare yourself
for quick riches via financial sleights-of-hand. Free lunch strategies
have a habit of self- destructing. The Swiss economist Eugene Boehler
had the context of such false and unsustainable images in mind when he
noted that the "modern economy is as much a dream factory as Hollywood."
It is based only a small part on real needs, and for the greatest part
on fantasy and myth, he claimed. The stock exchange, far from ruling
economic life, is at the mercy of tides of collective make-believe.
Depressions come about when there is a loss of economic myth (Eugene
Boehler, "Der Mythus in der Wirtschaft," Industrielle
Organization, XXXI, 1962.)
Bill Clinton, with his "policy team" intervening to buy up Dow Jones and
S&P futures in an attempt to maintain a pumped-up pre-election stock
market, understands what Boehler was saying perfectly. So do Hong Kong,
and Malaysia, and all the other places where the disease of stock market
manipulation--once unthinkable--has now become rampant. That such
efforts are doomed to ultimate failure does not prevent their earnest
practice. Yet nothing about the Hollywood dream factory could have been
any more hokey than the popular interpretations of
"market economy" that accompanied the spread of NWO ideas.
Let's see some examples.
The Asian Flu
China had not yet adopted the New World Order's liberal democracy, but
the Chinese wanted a market economy and a booming business sector just
like everyone else. That was obvious, right? So in nearby Hong Kong
there was a clear appetite for red chips. "Red chips" were stocks
issued by mainland Chinese companies in the Hong Kong stock market.
Everyone wanted red chips in May 1997, shortly before the transfer of
Hong Kong from Britain to China. There was red chip mania, especially
for a company called Beijing Enterprises. Chinese companies like it were
considered a sure bet, as they had political connections to the
Communist Party hierarchy
in Beijing. The Beijing bureacrats would look after the
company's welfare and would protect its share price, investors were
saying. It would look bad if stock prices fell after the Chinese
take-over of
Hong Kong, the same investors whispered. Buying shares in
Chinese companies was not only a good investment, it was good insurance.
Everyone knew that.
There is nothing quite like the sight of Capitalists
exercising their faith in Communism. For Beijing Enterprises was only
three months old. It was the investment arm of the Beijing municipal
government. And it owned, well, some McDonald's restaurants
in Beijing. But never mind all that: the not-yet-issued shares had been
oversubscribed by a factor of 1200. In fact, the issue attracted
investment capital of about HK 200 billion, or about twice the Hong Kong
money supply. People withdrew so much cash as a consequence of
the issue, that Hong Kong banks asked Beijing Enterprises
not to cash the checks it received--at least not until the banks can
deal with their shortage of vault cash. That presumably would happen
when
1199 of each 1200 would-be investors, who were not lucky
enough to be awarded shares, redeposited the money in their Hong Kong
bank accounts, and disappointedly awaited the arrival of the next new
red
chip.
What could be more Capitalist, more consonant with the New
World Order, than buying stock in China? Get a piece of the world's
largest consumer market! The road to riches was paved with stock
certificates. And the shares of Beijing Enterprises
performed as required: the price quadrupled in just the first day of
dealing. But stocks that can quadruple in a day can also plunge to a
quarter their previous valuation. If we jump ahead just five months, to
Black Thursday, October 23, 1997, we find Hong Kong's Hang Seng index
falling over 1200 points in a single day, plunging below 10,000. That
was the largest point drop in the index's short 14-year
history. The red chips were down 50 percent for the month. A
new red chip, China Telecom, making its public debut on Black Thursday,
failed to meet its issue price. There was no free lunch, it seemed,
after all. This realization arrived as a gruesome shock to many. Space
does not permit, but similar stories can be told for Thailand,
Indonesia, and South Korea. Today, less than a year and a
half later, the economic crisis has generated widespread political and
social unrest in Southeast Asia. Stock markets have declined between
70 and 90 percent in US dollar terms, while GDPs on the same
basis are down 50 percent (80 percent in the case of Indonesia).
Starvation has emerged in parts of the Philippines and Indonesia.
War in the region, unthinkable a year ago, has now become
thinkable. The main question is political risk, according to Hung Tran,
the chief economist of Rabobank International. Governments have a huge
problem, and their reactive instinct is political repression,
including the imposed social regimentation that a war
footing allows. Another Asian expert, Jean-Pierre Lehmann of the Swiss
Asia Foundation in Lausanne, notes, "You're talking about haystacks
which
could go up in flames at any time" (Financial Times, Sept.
7, 1998).
Japan is the economic key to the region, of course. The New
World Order calculations had considered what was occurring in Japan as
temporary. In 1989 the Nikkei 225 had reached 39,000. At that time, the
Tokyo stock market was valued at more than Yen 500 trillion
($3.6 trillion), or about 30 percent higher than the listed
value of all U.S. companies. From that peak, it fell 64 percent by
mid-1992. Each dollar invested had turned into thirty-six cents. (An
equivalent fall in today's Dow Jones Industrial Average, say from its
July 17, 1998, peak of 9338, would leave it around 3362. The
carnage on Wall Street would be something to behold.) But
everyone expected Japan to quickly recover. They didn't envision a
recession continuing on and on for eight years, and worsening all along
the
way. That was only supposed to happen in the uncivilized
peripheral economies of the Third World and the former Soviet Union.
Today it is clear there is nothing that can be done about Japan,
from a New World Order standpoint. For eight full years,
there has been continual "reform" and continual Western advice-giving,
and essentially nothing has happened, despite all the gimmickry of
macroeconomic policy fixes. Japanese assets, institutions,
and habits are being relentlessly ground down to their barest essentials
of default, reorganization, and change. The most recent pathetic
gesture was the Bank of Japan's cutting its discount rate
from .5% to .25%. Where next? Zero?
At some point the Japanese will make all the necessary
decisions that bedrock reality forces them to make. What these will be,
I don't know. But I suspect they will restructure their society, and
in the process separate themselves politically and
militarily from the US. The recent North Korean missile test (satellite
launch) over
Japanese territory comes at a fertile moment.
Meanwhile, as a side blessing, those of us in the US will no
longer have to endure the sight of Deputy Treasury Secretary and
international-finance illiterate Larry Summers lecturing Japan on
the value of the yen, for he will likely be at home
explaining why his own house is in such a mess.
Russia: All This Calm Reasonableness
In the New World Order scenario, since we all agreed on
basic premises, and since the US had emerged as the only superpower, it
followed that everyone would be happy with US leadership, including
Russia. Russia, like everyone else, would warmly welcome US
political input, as well as economic advice from the likes of the US
Treasury, Credit Suisse First Boston, Goldman Sachs, MIT, and
Harvard. Sure, Russia was a problem child in the emerging
order. But it was too big and too nuclear to fail.
The architects of the New World Order apparently never read
Fyodor Dostoyevsky. More than a hundred years ago the Russian novelist
had one of his his characters describes a new (rational) economic world
order:
'Then,' (this is all of you speaking), 'a new political
economy will come into existence, all complete, and also calculated with
mathematical accuracy, so that all problems will vanish in the twinkling
of an eye, simply because all possible answers to them will have been
supplied. Then the Palace of Crystal will arise.
Then [blah, blah, blah] . . . '
Well . . . why shouldn't we get rid of all this calm
reasonableness with one kick, just so as to send all
these logarithms to the devil and be able to live our own lives at our
own sweet will? . . . One's own free and unfettered
volition, one's own caprice, however wild, one's own fancy, inflamed
sometimes to the point of madness_that is the one best and
greatest good, which is never taken into consideration
because it will not fit into any classification, and the omission of
which always sends all systems and theories to the devil. (Notes
from Underground, 1864.)
Russia started out its NWO economic reform by turning state
assets over to the Russian "oligarchs" or "tycoonocrats". From the
beginning "market economy" largely meant enrichment for a few of
those same oligarchs. Capital--whether from the IMF or from
international investors--does not become productive when most of it is
stolen, and the rest is employed inefficiently. Hard currency loans to
Russia, to the extent one can tell, have been largely recycled by the
oligarchs into their personal accounts in
international banks outside Russia. Within the country
itself, ordinary business commerce is hardly possible because there is
no
contract enforcement.
All this did not prevent Goldman Sachs telling investors
they should gather round and partake of the free borscht. It sold them
Russian bonds with attractive interest rates. Government securities at
times bore yields of 100 percent, even 200 percent. Since the Russian
economy was not growing at 100 percent per year, nor government
revenues doubling at an annual rate, how the government
would pay back these loans wasn't clear. But such lending was patriotic:
Russia was an essential part of the NWO strategy.
The IMF arrived in July 1998 with a rescue loan of $22.3
billion. This would give them "breathing room," declared Stanley
Fischer, First Deputy Managing Director of the IMF. But the first
allotment
of IMF cash was quickly exhausted in foreign exchange
intervention to shore up the ruble's fixed exchange rate. "The ruble
will not be devalued," Boris Yeltsin declared. But almost immediately it
was, and his Prime Minister was also sacked. Tellingly, the orders came
from the French Riviera, where Boris Berezovsky was
vacationing. (Berezovsky, executive secretary of the Commonwealth of
Independent States, and holder of extensive oil, airline, auto and media
interests, generally serves as oligarch-in-chief.) The government also
effectively defaulted on $33 billion in short-term debt. Now
there is a new Prime Minister, Primokov, who was trained as
an Oriental scholar by the KGB. The Goldman Sachs bonds trade at a
steep discount.
The coming Russian fascism is visible. Recent weeks have
seen a resurgence of the Communists, the largest party in the Duma, and
calls for the return of state planning and wage and price
controls. The non- Communist General Lebed, while saying
"forget Moscow", is implementing
exactly the same policies in his own territory. One doubts that there
will be, or can be, a return to the old-style Stalinism of the past.
But out of the melting pot of Communists, nationalists like
Zhirinovsky, and oligarchs protecting their monopoly theft rights,
surely something equally odious is in the offing. Where are the New
World Order's logarithms now?
US Stocks
For a number of years, as analysts have sought to justify
the mysterious rise in US stock prices, the "globalization of capital"
has been brought forth as one of the most frequent explanations. But
now, after the Asian crisis, and after the Russian crisis, and in the
midst of a Latin American crisis--well, talk of global capital
interconnectedness has disappeared. Suddenly, all these problems are
said to be isolated occurrences with local causes. Surely what's
happening in the NWO periphery will not feed back to the center. Yet, in
the background, one keeps hearing the same whisper. The dreaded D word:
Deflation. Deflation is the ultimate subversive force, because if there
is one thing the New World Order is supposed to know how to do, it is
how to pump up demand. "This expansion will run forever," wrote MIT
economist Rudi
Dornbusch in the July 30, 1998, Wall Street Journal. Why? Why won't
there be a recession for years to come? Because, he says: "We don't
want one, we don't need one, and, as we have the tools to keep the
current expansion going, we won't have one." During the US Depression of
the 1930s, wholesale prices fell 32 percent. The current fear, for
those who do not share Dornbusch's arrogant feelings of omnipotence, is
that a deflationary spiral may have already begun, and is gathering
momentum. In a deflationary spiral, falling demand causes prices and
sales to drop, which causes profits to fall and business inventories to
pile up. This, in turn, leads companies to cut back on investment and
employees, which causes demand to fall further. Back in 1931, John
Maynard Keynes wrote that in "the fall
of investment . . . I find--and I find without any doubt or reserves
whatsoever--the whole of the explanation of the present state of
affairs" ("An Economic Analysis of Unemployment," 1931).
Whatever the economic consequences of deflation may be (and
sources as various as the Wall Street Journal and Business Week have
assured us it's no problem--"we're all non-Keynesians now"), the world
in 1998 is clearly on a deflationary course. This is evidenced by
simultaneously falling wholesale prices, commodity prices, stock prices,
and interest rates. Gold has fallen from $383 an ounce in late 1996 to
around $275 now. In August 1998 US wholesale prices dropped 0.4 percent
as measured by the Producer Price Index. Over in China, retail prices
have fallen more than 20 percent in six months. An ultimate drop in the
US retail
price level, while hard to imagine, is not unthinkable. The loss of
confidence in one's image of the future can bring about sudden dramatic
effects. What was once believed to be obviously true (steady or
increasing real growth rates of GNP, record corporate earnings, low
inflation, steady commodity prices, stable and sound financial
institutions, and widespread peace under the New World Order) is
suddenly viewed as obviously false in light of the "facts" (declining
real GNP, falling corporate earnings, inflation in some sectors
accompanied by deflation in others, wildly gyrating commodity prices,
extended problems in the banking and insurance sectors, and "old world
chaos" in Southeast Asia, the area of the former Soviet Union, and the
Middle East). Not because reality has necessarily changed that much,
but because perceptions of what is happening are suddenly radically
different. Just for fun, consider the stock market declines of 1929-1932
and 1973-1974. On September 3, 1929, the closing high on the Dow Jones
Industrial average was 381.17. Three years later, on July 8, 1932, it
reached a low of 41.22, or 10.81 percent of its previous level. In
January 1973, the Dow Industrials reached a closing high of 1061.14.
Less than two years later it closed at 572.20, or 53.92 percent of its
previous level. Using a July 17, 1998, closing figure of 9338 for the
Dow Jones Industrials, these same percentage drops imply Dow Industrial
levels of 1009 by analogy with 1929, or 5035 by analogy with 1973. The
first would imply a total drop of over 8329 Dow points, while the second
would only imply a drop of 4303 points.
Either would be serious.
A 90 percent drop in the Dow Jones? While we would all
prefer to believe such an occurance is impossible, and to rule it out
a priori, such 90 percent drops have taken place in Russia and in some
countries of Southeast Asia with ferocious rapidity. Namely, within the
span of a year. That, too, was considered impossible. Such a view of the
stock market is, of course, at variance with the prevailing doctrine of
"rational expectations." Rational expectations began as an extremely
useful view of price equilibrium created by John Muth ("Rational
Expectations and the Theory of Price Movements," Econometrica, July
1961). But it grew into a cult view that all economic and financial
decisions were "rational" in a quite different sense than originally
proposed by Muth. Ultimately "rational expectations" turned into the
mystical belief that images of the future were always formed in a
particularly mechanistic way. he essence of rational expectations can be
grasped by imagining a long line of cars waiting for a traffic signal to
turn green. When the light turns green, the entire line begins moving at
once, uniformly accelerating through the intersection. And why not?
After all, each person waiting in the line knows the light is about to
change from red to green. Each person knows that each other person in
the line knows this also. And they all know they will get through the
intersection faster if they all move together. So each expects the other
to rationally act as he himself does, and they all make it through the
light before it turns red again. People with these expectations are
called "rational" in economics. In real life, they are known as
"fender-benders". Because in real life, traffic doesn't behave this way,
and neither do people. There will always be the curmudgeon who has just
broken up with his girlfriend and is staring out the side window at the
marquee of a topless bar, oblivious to the horns blowing behind him.
Current stock prices, which (except for a severe downturn in the first
half of 1994) have been rising ever since the Gulf War, have ridden the
vision of the American-led New World Order, of America's resurgence as
the world's policeman, putting down the evil Saddam Hussein, and
bringing lasting peace to Bosnia. With the demise of the Soviet Union,
the vision saw the U.S. leading an enlightened United Nations to a
political solution of all the world's ills. But this has only been an
idea, a voluntary con, much like the precepts that led to the mania for
red chips in the Hong Kong stock market. In the U.S., the recent rise
in stock prices has been fueled by a shifting of household assets into
stocks and stock mutual funds. The average household exposure to stocks
is the largest it has been in U.S. history--larger than before the 1929
crash. Clearly the stakes in the New World Order vision are high.
"Speculative excess, referred to concisely as a mania, and revulsion
from such excess in the form of a crisis, crash, or panic can be shown
to be, if not inevitable, at least historically common" (Charles P.
Kindleberger, Manias, Panics, and Crashes: a History of Financial
Crises, 1989). But Kindleberger has been considered old hat in the New
World Order scheme of things. Things like he wrote about only happened
back then, before history reached its logical conclusion. So maybe
Dornbusch is right. Maybe this expansion will last forever.But I
wouldn't count on it, any more than I would count on Bill Clinton being
around to lead us out of Egypt,
and across the 21st century bridge into the Promised Land.
-30-
September 13, 1998
Web Page: http://www.aci.net/kalliste/
This article appeared in Liberty, Vol. 12, No. 2, November 1998.
Like this story and hope it comes true; a return to the fifties would be
nice.....hope the Admirals are alive and well.....and the plan goes into
operation.
Colleen
