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Tapeworm Economy
Catherine Austin Fitts of Solari explains how the "tapeworm" economy bleeds us of our wealth.

This is an eye-opening interview about income taxes, political systems and the economy with the remarkable Ms. Fitts by the gentleman who runs the Moneychanger website

MONEYCHANGER What is the American Tapeworm" or the "negative return on investment economy"?

FITTS That's an economy with two classes of players, the insiders & the outsiders. The insiders are constantly subsidized at the expense of the outsiders, like a tapeworm, a parasite that eats through the body. The parasites engineer the economy to drain it for their benefit, consolidating wealth & economic power by liquidating wealth, people, environment, & economic productivity, all to fatten the Tapeworm.

MONEYCHANGER "Liquidate & transfer to others" isn't exactly "transferring assets," although that can happen as a privatization.

FITTS The thousands of recipes in the Joy of Cooking cookbook are all still recipes. The "Tapeworm" doesn't drain us by one recipe alone.

For example, government budgets are one primary mechanism, particularly the federal budget. The big drain comes not through appropriations, but credit policies like FHA & mortgage insurance. Let's say I tax everyone in your community a certain amount of money for some function. That tax goes to Washington & Washington hires a contractor who's a pal of Dick Cheney or Bill Clinton to do some function we could do ourselves. With overhead we end up paying $150-$250 an hour for a job some jobless neighbor in my community would love to do for $20 an hour.

But instead of this job he'll go down the road & start a meth lab. Next thing I know my kid's on meth & I have a mess. I have been drained paying Halliburton ten times to do something that my neighbor could have done.

Here's another example. I deposit my money in a bank because it's safe, right? Sounds sensible. The next thing you know my local bank (& a lot of others) get swept up by the big banks, who are borrowing my money at 2% & lending it back to the U.S. Treasury at 7%. In "The Myth of the Rule of Law," , I relate how one bank made $6 billion in one year at no risk, by just taking my money as a citizen & lending it back to me as a taxpayer.

With digital technology we don't need them. I can lend it to myself. Why do we need an intermediary to drain off $6 billion? Every neighborhood in America contains people who can't afford risks & are making only 2% on CDs. Others in the same neighborhood are making 5% in the stock market while taking higher risks. Meanwhile both of them suffer from a dropping dollar, while someone else in that neighborhood is paying 18-26% interest on credit card debt.

That cash flow is insane. We export huge interest, but if we financed ourselves inside our neighborhood, our wealth would be building instead of draining away.

Federal government credit is a major source of drains. When I was at HUD as Assistant Secretary of Housing [under Bush I], we regularly saw communities where we were spending $150,000 - 250,000 per unit to rehab public housing when $50,000 would have rehabbed a single family home in the very same five-block area.

To build housing here to net the highest return on investment to the taxpayer, you would shift government spending from public housing into single family rehab. When I (as assistant secretary) took this opportunity to the government, they weren't interested. In the Clinton administration I tried again, taking it to the head of public housing. She got furious: "If we did that," she said, "how would we generate fees for our friends?"

We were not generating the highest return on investment to the taxpayer, we were generating the highest return on investment to campaign contributors.

About five months ago there was a brou-ha-ha about the criminal investigation of Cheney's office for the Halliburton contracts in Iraq. I could easily explain it.

Revenue from contracts in Iraq -- allegedly steered to Halliburton by Cheney & his office -- were an anticipated $12 billion. The standard margin on a cost plus contract is 5-10%, say, $1.2 billion net to Halliburton, although rumors says the margins on these contracts are much higher.

I figured that Halliburton stock traded at a multiple of ten times, so $1.2 net creates $12 billion of stock market value for Halliburton's investors. I went to Halliburton's website. Lo & behold, Halliburton's entire stock market value is only $12 billion. So no Iraq, no Halliburton.

What is the number one source of contributions to the Bush campaign in 2000, & I assume, in 2004? Capital gains. I rig a contract to my pal, his stock rises, he contributes to my campaign, & I get control of the federal budget. Now I rig another contract for my pal, & round & round we go.

Sometimes we even need a war because there aren't enough contracts. The World Trade Center blows up & suddenly we can double the defense contracting budget. Policy is set to generate stock market profit for inside players.

Now take this a step further. The Gold Anti-Trust Action Committee  has been complaining that the New York Fed & US treasury have been using the Exchange Stabilization Fund to manipulate the gold market. We've been complaining that that is happening covertly. Social Security privatization means it can happen overtly. They borrow money at the U.S. Treasury using the federal credit & buy their pals' stocks. If you think the inside players have a low cost of capital now, wait till that horse really gets out of the barn.

MONEYCHANGER Although this friendship-favour-campaign contribution cycle has been obvious under Bush, not only Republicans do it. It's the standard way of doing business for Democrats & Republicans, & not new.

FITTS I thought it was bad during Bush I but Clinton took it to a whole new level. The Bush people were shocked because they were bested at this game. But these games are supposed to remain within certain limits. Certain laws apply to the appropriation & budgeting & management processes. What has been so frightening is that they have managed to blow by all internal controls & ignore them.

Since 1995 the Federal government has been required by law to produce audited financial statements. I belonged to a group who helped get the laws passed, yet to date the federal government has never once obeyed those laws. I co-authored an article about this called "Fascinating & lucrative patriotism, The negative return economy: a discourse on America's black budget".

Under The National Security Act of 1947 and the CIA Act of 1949, we have created a legal mechanism to borrow through the Treasury, combine that money with the proceeds of criminal activities, & use it for intelligence & military operations -- no oversight by Congress, no transparency to the American people.

The financial machinery is out of control.

Yet the U.S. government continues to borrow more & more money, no matter how they behave. They produce no audited financial statements, & comply with none of their own laws for appropriations & management. In spite of $4 trillion undocumented "adjustments" that we know of since fiscal 1998, the banks continue to transact & Congress continues to appropriate. There's no mechanism to shut off the money, & the creditors continue to loan.

What is the reality? The people charged with saying No! Stop! are making so much money, why should they stop anything? The ugly question is, What's next?

MONEYCHANGER Who would have to say stop? The banks or the politicians?

FITTS The creditors. The people buying Treasury securities, the people taking dollars, & the New York banks would all have to stop. The federal government & defense contractors who run the information & accounting systems for different agencies are violating financial management rules, while the New York banks are facilitating those violations. A partnership between the defense contractors & the banks has grown up over many decades.

MONEYCHANGER But the drug money is new.

FITTS Oh, I don't think so.

MONEYCHANGER By new, I mean in the last 30 years.

FITTS I think that U.S. covert operators probably started handling drug money at the end of WWII. I can find no information that it started before then.

MONEYCHANGER You mean the Office of Strategic Services (OSS)?

FITTS No, the Office of Naval Intelligence (ONI). The ONI went to Luciano & the Italian Mafia for an Italian partner to help the landings in Europe. Really everybody was involved. OSS later became the CIA. At the end of WWII with the National Security Act & the CIA Act a network already existed, secret societies finding ways for government to fund & work out their activities.

MONEYCHANGER That is so outlandish that most people can't even contemplate it, much less accept it. Put it in the perspective of the Iran Contra scandal. There Oliver North used money from clandestine arms deals to fund the Nicaraguan Contras. Congress objected because he was acting in the name of the US while congress had no control.

Catherine, you are alleging an ongoing partnership to launder & legitimize the profits of professional criminal organizations -- a partnership among organized crime, government, & big business.

FITTS Right. I am convinced that since WWII the American military & intelligence community have actively opened up U.S. communities to drugs. It was a policy from the top. It was a financial decision.

MONEYCHANGER It was made for financial reasons?

FITTS Yes, it was a financial decision & it was a highly centralized system. It absolutely was an intentional plan.

How did it work until Iran-Contra? One of the best case studies explaining that came from Al Carone. He was a CIA paymaster & on the payroll of the CIA, NYPD & the Army -- all while he was considered a "made man" for the mob. He co-ordinated money laundering for all four organizations & facilitated Northeast narcotics trafficking. His daughter & son-in-law did two video-taped depositions, the audio of which I arranged to have put up on the Web.

Whatever the rationale, Carone said that the system went out of control, & I've heard the same song from a lot of different parties. When Carone got offsides & refused to go along any more, they threatened his daughter. That's when he started to tell all.

I believe that the families involved in narcotics trafficking today are essentially the same "respectable" inter-generational pools of wealth that have been involved in narcotics trafficking since the early 19th century China opium.

What's the moral of the story? Crime pays. But how do you mix crime with the authority of the rule of law? I try to explain that in my article, "Narco-Dollars for Beginners".

Combine the high cash flow margins of organized crime (particularly financial fraud but also drugs) with political power & you've got real power. Combine the high margins from narcotics trafficking & financial fraud with Treasury securities in fiat currency that I get under the patina of government authority & stock market leverage -- you have the lowest cost of capital on the planet.

But there's a vulnerability in the system. If I must choose between higher margins & financial leverage, I'll take financial leverage. That's more powerful. The myth of the rule of law gives me the leverage, & I can't afford to lose that.

If those of us who are being drained by the Tapeworm can see the Tapeworm & how it operates, & most importantly, see this cost of capital discrepancy, then we have the power to reverse it. We illuminate the intersection between organized crime & all the benefits that the myth of the rule of law confers. If we can blow up the myth, we can make the shift.

MONEYCHANGER I'm not sure I understand what you mean, "illuminating the myth of the rule of law." Personally I am not laboring under any assumption that the rule of law exists any longer. The legal system is set up to protect large interests & the status quo, period. Big guys never wind up in court on criminal charges unless their greed goes way over the line.

FITTS As long as you're playing for the "team", it should be fun.

MONEYCHANGER But most American people believe this: "work hard, keep your nose clean, & you can become a millionaire." If you have a problem, you go into court & explain to judge & jury & everything will come out right. Well, it doesn't work that way.

FITTS I think most Americans know that something stinks, but here's the challenge. Remember the red button story?

In summer 2000 I was at the Spiritual Frontiers Foundation International, giving a speech entitled "How the Money Works in Organized Crime" about narcotics trafficking, etc. etc. The Department of Justice says that we -- Americans -- launder $500 billion to a trillion dollars a year. I asked the audience, "What would happen if America stopped being the world wide leader in global money laundering?" A hundred people (who go into the woods for three days once a year to help work on evolving our society spiritually) said that the stock market would go down & we would have trouble financing the government deficit & so our taxes would have to go up or our government checks might stop, because the $500 billion to a trillion would go to Switzerland and Singapore instead of here.

"Okay," I said, "imagine a big red button up here on the lectern. If you push this button, you can stop all hard narcotics trafficking in your neighborhood, your city, town, county, state & your country tomorrow. Who'll push the button?" Out of 100 people dedicated to evolving our society spiritually, guess how many would push the button? One!

I asked the other 99, "Why would you not push the button?"

They said, "We don't want our mutual funds to go down, & we don't want our government checks to stop, & we don't want our taxes to go up." Right then the CIA & Department of Justice had full "democratic" authority & popular support to facilitate narcotics trafficking.

Most people don't understand there is a way to push the red button that makes you money. I call it "turning the red button green." That's what the Solari model is about. It's turning the red button green, so that we can make money pushing the button.

In my experience, Franklin, the people running the system never say, "I want to go to Rome & how do I get to Rome?" Rather, they say, "I want to go to Rome: now how can I make money going to Rome?" That is always the operative design question.

We have to ask, "How do we make money pushing the red button?" There is a way to do it, but everyone is terrified because it seems overwhelming. Nobody wants to talk about it. You don't know whom you can trust. You don't understand how the system works so you just try to protect your kids & muddle through. The day that we understand that there is way to turn the red button green, we will find that the American people have more in them than we think.

MONEYCHANGER If somebody doesn't turn the red button green, then all the money, & everything we love along with it, will be sucked out of our lives.

FITTS It's worse than that. They are not just sucking all the money out of our lives. It's one thing to be poor. It's another thing to be poor & stoned on Prozac & Ritalin.

MONEYCHANGER And riddled with the diseases that the consumer society causes.

FITTS What better way to kill someone than to make money off of them killing themselves?

MONEYCHANGER But now it seems almost impossible for that not to happen. In small towns & rural areas, Wal-Mart comes in & sucks the money out (to capitalize the local cash flow & sell it as stock), so there are no small businesses left. Small farmers can barely make a living even with government subsidies, & a big part of the rest are on welfare because of high disability rates, & on & on.

How do you start to reverse that flow? How do you hit the green button?

FITTS The flow has to be reversed globally. The pro-centralization team is a global network. They are a "we" & they have a plan. The pro-decentralization team is not networked globally, is not a "we," & doesn't even have a map of this world, let alone a plan.

I would submit that God is in control & anything is possible. He parts the Red Sea & can do anything He wants. The question is, when will we all get out of the middle of the road? There are two teams, the demonic & the divine. Most Americans think they can stay in the middle of the road. They can't. They are on one team or the other. It will then be a global "We", are not merely an American team "Wee are facing a global group with a global plan.

We have to win in two places. First is our neighborhood, because the black budget finances one neighborhood take-over at a time. Then you've got to be networked so you can deal at the top. You've got to do both. They can divide & conquer in lots of different ways. Main Street in America is divided & conquered from Main Street in Peru & so the question is, can Main Street world-wide come together & act?

MONEYCHANGER The people on Main Street are alienated from each other, isolated without sensing any need to work together. People in families are isolated from each other. How do you begin to overcome that?

FITTS For nine years every time I look at this through logic, it looks hopeless. Then through prayer God says, just do what I tell you. All these things are not your problem, they are my problem.

When real solutions come together they have the power to grow virally & turn things around. All we need to do is vote with our prayers & our money. If we will all vote with our money & our self-interest, the red button turns green. If we don't do it, it's because we choose not to do it. We have the power. They are few & we are many. They are coming out of the closet & are a lot easier to see now.

MONEYCHANGER Vote with your money? Most people don't have that much money & can't risk losing it. They believe they need a certain return on their money, they've got to have their mutual funds.

FITTS You are putting your money in Citibank now & making 2% with risk. What if there is a way to make 4% with no risk, & at the same time stop feeding your enemy? If I feed the person who is killing me, then I am going to die.

MONEYCHANGER How do you stop feeding them?

FITTS Solari Investors Circles are a cross between an investment club & a French Resistance cell. I always tell people not to worry whether there is a conspiracy because if you are not in one, you need to start one. The key to who is in your circle is whom do you trust. It is a conspiracy, & everybody knows you don't let people into a conspiracy unless you trust them.

There are four fundamental principles of a sound, healthy economy:

    1. sound currency,

    2. transparency of shared, i.e., public, money and privacy of individual money,

    3. equity financing instead of debt. Debt equals war & equity equals peace.

    4. Vote with your money. Do not feed the people who are killing you or otherwise you will die.

What does a Solari Investor Circle do? Whatever that circle wants to do. No individual Circle is legally connected to any other Circle or my company or me. The word conspiracy is from the Latin, con-spiro, & it means to breathe together, so our connection is through the Spirit.

In each category of those four principles, there are two categories of things you can do. You can do transactions that (a) lower our costs of capital or actions or transactions that (b) raise their cost of capital. Think of it like a Chinese menu: your Circle is free to do anything in your self interest, using the knowledge of how they are draining us to reverse the drain.

Why would anybody do a Circle? First & foremost, to stop the drain from his own life. Circles reverse their own lives, but by reversing their own lives they help produce the greater transformation. The problem is not that our wealth is flowing to the centralization team, but that our wealth is shrinking. Every family on the pro-decentralization that grows in security & well being helps finance transformation.

As people do transactions to advantage themselves & stop dealing with the Tapeworm -- we call it "coming clean" -- they learn more & more about money. Many of the drains occur because people don't understand money. I was, stunned when I started to network & research. I had spent my whole life in the money world & served with money people & I had no idea how intentionally illiterate most of us were.

In the sound money category the first model transaction we are going to use is a savings plan, your Monthly Acquisition Plan. People say they have no money & they can't afford to be an investor. Well, no one can become an investor unless he intends to. When someone understands investment & thinks of himself as an investor, even if he has no money, he starts to accumulate. We want to teach people a savings mentality.

One person might not be able to join your savings plan, but ten people each with $10 can send you $100 to invest for them every month. As they start to acquire coins, that pool of coins can be used to do a variety of things. It can be used as a reserve fund to finance debt elimination or a community currency. Imagine if every community world-wide had their own quirky community currency but all had a common store of value in silver & gold.

At the end of the Depression there were about 3,000 community currencies. Wherever I go I find tremendous interest in community currencies among people who are financially illiterate, but they have no idea how to start. How do you start to lean? You start saving & acquiring precious metals.

Transparency. The Tapeworm has total transparency into what is supposed to be our private, individual financial data, while we have non-transparency into government data. A Circle with time & inclination can calculate sources & uses of taxes, appropriations, & federal credit in their locality. They can propose bottom-up re-engineering that could create serious jobs in that neighborhood. Suppose I walk into a local, state or federal office & say, "Look, you're paying a contractor $150 an hour to do data services related to this state & this county, & we have unemployed people here who would be delighted to do it for half price." There are laws that make it difficult for a government official to say, "No, I will continue to pay three times as much as I need for this function."

In lots of neighborhoods where HUD is managing the single-family foreclosed properties, there is real opportunity to re-engineer that money. In many neighborhoods the federal government was paying $55,000 for a woman & 1.8 kids to live in HUD housing with food stamps on welfare when $25,000 would teach her a job that she could do in the neighborhood & become a taxpayer. But those things can only happen where citizens get involved in transparency.

MONEYCHANGER The goal in a Solari Investor Circle is to make that money they are now sending away to work locally. Is that the idea?

FITTS Some could be circulating locally, but in all four categories we have to ask whether we are lowering our cost of capital or raising theirs. There is huge inefficiency in both governmental & private money. Once I identify that inefficiency I can use that knowledge to find ways of reversing it that make me money. I am going to study that inefficiency & rather than feel guilty about it or punish myself for it or do any Don Quixote thing, I will be wise as a serpent. I will use that knowledge to stop from being tricked. I will start to see the Tapeworm, & how it is draining me & reverse it in a way that makes me money.

MONEYCHANGER How does all this sort out when the pro-decentralization forces gather momentum?

FITTS It could be nice or rough.

MONEYCHANGER The Tapeworm has an upper limit? Finally it exhausts its host & consumes the host altogether?

FITTS There are so many things that people can do that are fun & safe that will help them financially. Just do with the Circles that which advantages yourself. Function in a state of enlightened self interest.

MONEYCHANGER You wrote a great article," Where Would Jesus Bank?" It contained a revolutionary idea. Why am I putting my money with Citibank when I could put it with my local credit union & the money stays here & I make a better return & it benefits my neighbors as well?

FITTS Right. Since 1998 I have been trying to vote with my money. I have discovered that the more I do it, the more something magical happens. It's as though our whole field knows that we are dirty & complicit. The more you come clean, the more the universe supports you. I can only explain by telling story after story. Something very freeing happens. Whenever I go into rooms with people who are high up in the "new world order", they seem so unhappy & I seem so happy.

MONEYCHANGER According to the Federal government's 2004 financial statement the government's liabilities have increased by $11 trillion in the last year.

FITTS I believe that after the election they moved onto the balance sheet & authenticated all the fraudulent securities that they used for a series of things, including stealing $4 trillion dollars since fiscal 1998.

In "The Myth of the Rule of Law" I discuss why there are so many fraudulent securities, mortgage backed securities, etc. outstanding. I found examples & have seen the documentation on private placements issued by Treasury to sop up the drug money. They weren't recorded on the books, I am told. So you have Treasury issuing securities that are not on the balance sheet.

MONEYCHANGER U.S. Treasury notes or bonds?

FITTS U.S. Treasury bonds. Private placements, according to the documentation that I was shown. They are bringing in the cash to finance the deficit & issuing securities off the books. I am convinced from everything I've seen & documented at HUD that they were issuing fraudulent securities off the books. So I think part or all of that $11 trillion consists of putting fraudulent securities onto the books.

MONEYCHANGER Economists & analysts look at the economy in terms of cycles in the stock market & the economy & so forth, but you are describing one corrupt fraud after another. It sounds like the Tapeworm is out of control & will grow until either it kills the host or the host kills it. Are we facing that kind of crisis in the American economy?

FITTS Yes, yes. The Tapeworm has done something very remarkable. It has created enough control through technology, digital systems, telecommunications & electromagnetic weaponry where markets don't adjust through price. When the stock market starts to drop, well, we just blow up the World Trade Center. We liquidate people & living things so we adjust our living equity as opposed to make our financial equity adjust to value.

MONEYCHANGER What kind of monsters would kill 3,000 of their fellow human beings to commit a fraud?

FITTS What are 281 million like who let them do it?

MONEYCHANGER In spite of all the inconsistencies, do you think that the American people could really believe that 9/11 was a fraud?

FITTS A lot of people understand something is not right, but it seems overwhelming & they don't know what to do. What you are looking at is a crisis of faith. It's a spiritual crisis, first & foremost.

MONEYCHANGER When an economy suffers this sort of drain don't the wheels come off it at some point?

FITTS To continue subsidizing the financial assets you must speed up liquidating the people. Different populations & cultures are being liquidated to feed this process. It's not how do you keep financial assets up in value, but how fast do you have to liquidate people & other stuff to do it.

MONEYCHANGER In the last three years the American dollar has lost 30% according to the dollar index.

FITTS Americans have no idea that they have a negative return on investment.

MONEYCHANGER But the Russian ploy took place through privatization, didn't it?

FITTS They're bringing this money back to privatize state & local assets, all the municipal assets. They haven't gotten into the water & the electric yet. You watch, they're coming after it.

MONEYCHANGER Oh, but that's just turning it over to the free market.

FITTS Whatever!

MONEYCHANGER That's the way it's sold: Won't these municipal socialist assets work better under a free market?

FITTS Okay, let's create a Solari Investor Circle & we'll buy it. We'll sell you non-voting B-shares to finance the purchase. We agree, free markets are great. Would you like to buy some non-voting shares?

MONEYCHANGER What I am saying is that privatization is not introducing free markets.

FITTS Privatization at below market prices is pirate-ization. (Laughter)

MONEYCHANGER Ask the people all around the globe in countries where that has already happened.

FITTS Have you ever read any of Greg Palast's work? He's an American but he worked with the BBC & documented the IMF, how they go into a country & force everybody to sell at 10 cents on the dollar. That's pirate-ization, & that's what they are planning to do here with the municipalities.

MONEYCHANGER Really then the only self defense is something like Solari in order to build a strong local economy.

FITTS We are the target of a conspiracy. It's mature & has gone on a long time. You've got to start one cell at a time creating a conspiracy that counteracts the conspiracy.

I came out of the Bush Administration saying they are going to kill us all. I was working 100 hours a week because I was in an emergency state. I was like a dog trying to find a bone. We had to come up with an investment model that would create far more wealth. In other words, these guys are basically getting the stock market to rise by driving the Popsicle Index down. The Popsicle Index measures how safe you feel to let you child walk out of the house to buy a popsicle, i.e., the safety of your neighborhood. It is the % of the people in a community who believe that a child can leave their home, go alone to the nearest place to buy a popsicle and come home alone safely. We have to get the Popsicle Index rising so that the stock market also rises. My dream is that all the activists come to the barricades at the World Trade Organization meetings with signs that say, "We can generate a higher rate of return than you can." Think about the power of that.

MONEYCHANGER We have to offer people something better than what they have now. You can't beat something with nothing. You can't go to people & say this evil conspiracy is eating us up, so get your money out, lower your standard of living, & hunker down on your pile of dried beans with your forty-five in your lap waiting for the end to come. That is not a plan. (Laughter)

FITTS No, you have to say we can produce a higher return on investment than they can.

When we were doing the simulations in 1998, & when I first saw the simulations of how much wealth was created, I had a team of quantitative analysts from MIT, brilliant guys. One of them brought me the numbers & I said, "This is impossible. Do it again, this can't be right". He brought it back. What I didn't understand was when you align financial stuff with people's basic dreams & hopes, society gets smarter & smarter & smarter.

MONEYCHANGER Every kind of capital compounds. I really appreciate your giving me time for this interview.

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