The Road to Ruin

by James Rickards

  Agostini was never charged with a crime. But he was finally released, along with his fiancee and employee, was given his child back, and was about to win back his cash—that last only after months of fighting in court to prove he had rightfully earned it through his restaurant business.

  Agostini was one of the lucky ones. Victims of asset forfeitures often do not have the resources to establish innocent possession of seized property. They abandon it to the state.

  In an award-winning series called “Stop and Seize,” The Washington Post documented the widespread abuse of civil forfeiture to confiscate property from innocent citizens without due process and use the proceeds to finance state and city budgets and to buy new weaponry for militarized police departments. The practice is called “policing for profit.” The series documents how police departments went beyond random confiscations and used intelligence operations to target civilians deemed most likely to carry cash. Targeting was not limited to drug dealers. Instead police used data mining techniques to target innocent civilians, including poor whites in addition to the usual black targets.

  Asset seizure for profit has become so widespread that a private firm called the Black Asphalt Electronic Network & Notification System emerged to train police and provide technical assistance in confiscating cash and other property. Black Asphalt created a social network called the Brotherhood and sponsors annual contests for the police officer who can seize the most cash. The prizewinner is dubbed the Royal Knight. That reference to royalty is unintentionally revealing. The Royal Knight prize honors confiscatory tactics used by monarchs in the past—tactics the U.S. Constitution was intended to curtail. Black Asphalt’s services were used by local police, the U.S. Department of Homeland Security, and other federal agencies.

  Blurring of public and private police powers to profile and intimidate drivers is revealed in this Washington Post description of Desert Snow, a training firm affiliated with Black Asphalt:

  Desert Snow charges as little as $590 for an individual for its three- and four-day workshop of lectures and hands-on training in such subjects as “roadside conversational skills” and “when and how to seize currency.” The firm often sets up its training in hotel conference rooms. The firm’s three-day “Advanced Commercial Vehicle, Criminal & Terrorist Identification & Apprehension Workshop” cost 88 students a total of $145,000, according to a price list posted by the state of New Jersey.

  Cash confiscation became so pervasive that the Washington, D.C., police department “made plans for millions of dollars in anticipated proceeds from future civil seizures of cash and property, even though federal guidelines say ‘agencies may not commit’ to such spending in advance, . . .” according to The Washington Post.

  Seizure programs are justified in the name of the war on drugs or the war on terror. In fact, they are a war on citizens. Even as some of these tactics are reined in, the training, mind-set, and capacity remain ready for use when all cash is outlawed or in response to money riots.

  The final arrow in the quiver of the new praetorians and their political masters is digitization of surveillance. Lost privacy from the explosion of cloud storage and free media from Google and Facebook is accepted. A user’s intimate secrets are routinely data-mined by these companies. The fact that some privacy policies preclude disclosure to third parties does not mean companies do not use the data themselves or reveal it to the government. Google keeps a log of every website you have ever visited, regardless of whether you deleted it from your search history or not. Most Web users understand this.

  What is not widely understood is the nexus of government and private Web services and the application of massive processing power and big data algorithms to target citizens in real time. Claims by Google, Apple, and Facebook that personal privacy is protected are risible. The government has ample executive powers to require these companies to make data available in response to an emergency, including financial collapse. Emergency access to private data by government agents takes minutes.

  Digital facial recognition software is more reliable than outdated fingerprint techniques. Most citizens would object to being fingerprinted every time they walk outside, yet the digital equivalent happens when closed circuit video cameras capture your image at malls, banks, and supermarkets.

  Video scanners are located in buildings, along highways, and on city streets. These scanners capture facial images, license plate numbers, and auto types and makes. Drivers like the convenience of E-ZPass automated toll systems, but may not realize that every tollbooth is now a digital surveillance and interdiction point.

  E-ZPass surveillance uses radio frequency identification technology (RFID). Your E-ZPass tag has a transmitter that broadcasts information about you that is read by a scanner installed overhead at a tollbooth. Now governments are installing scanners and cameras on roads everywhere to collect the same information. The New York Civil Liberties Union recently discovered that New York City and State installed scanners in diverse locations to track the whereabouts of citizens. These scanners are not collecting tolls. They are the unacceptable face of the ubiquitous surveillance state.

  Continuous surveillance is not confined to video cameras and E-ZPass tags. Smartphones and credit cards use an RFID variant called near field communication (NFC) to broadcast your activities to scanners. Each time you use your credit card, a digital fingerprint of your location is recorded. Your smartphone GPS signals your whereabouts between points of purchase. This information is available to government using collection standards that do not adhere to Fourth Amendment requirements of reasonableness and probable cause.

  Next on the horizon is the driverless car championed by Google, Tesla, and Volkswagen among others. The driverless car is not driverless, it’s just that the driver is not human. The real driver is a network of algorithms, GPS location devices, and robotics. Driverless systems are subject to government supervision. In the future, governments will deliver political opponents to detention centers by commandeering the software, locking the car doors, and conveying the car’s occupant into custody.

  The poor suffer stop-and-frisk. The middle class suffers asset seizures. Antiregime elites suffer selective prosecution. No one is immune because all are felons in the regulatory state, all are targets in the surveillance state. The only issue is whether your time has come.

  Those who doubt that state power is used for political persecution need to consider IRS targeting of Tea Party activists by Lois Lerner after the 2010 U.S. midterm elections. Tea Party opponents who applaud these tactics should know that a different regime will target them in the fullness of time.

  Money has no ideology. When ice-nine freezes commence, left and right will be equally victimized. If organized resistance to ice-nine emerges, SWAT teams will be waiting. The new praetorians may be relied upon to take orders from the government that pays them, not the people they ostensibly serve.

  The New Fascism

  Fascism is not in our future, it is here now.

  Fascism, a dominant force in the twentieth century, remains one of the least understood and most ill-defined political “isms.” This is because fascism is not ideological like communism or socialism. Fascists espouse certain views at various times, yet their views are inconsistent, and often quickly discarded. What matters to fascists is continuous action and state control of civic life. The fascist state may allow private corporations and associations to exist, provided they operate in accordance with state goals and submit to state surveillance. Deviation from state goals results in termination or incapacitation of private deviants.

  The seminal definition of fascism comes from its intellectual father, Woodrow Wilson. In 1908 Wilson wrote:

  The President is at liberty, both in law and in conscience, to be as big a man as he can. His capacity will set the limit; and if Congress be overborne by him, it will be no fault of the makers of the Constitution . . . but only because the President has th
e nation behind him and Congress has not.

  Wilson’s book, The State, adds, “Government does now whatever experience permits or the times demand.” A fascist leader who applied Wilson’s writings was the Italian dictator Benito Mussolini. His motto was “Everything inside the state. Nothing outside the state.” Wilson and Mussolini created the template for the run of twentieth-century fascists including Adolf Hitler, Joseph Stalin, and Franklin Delano Roosevelt.

  Understanding fascism requires one to set aside distinctions like left-wing, right-wing, liberal, and conservative as applied by the media. Honest classical liberals and conservatives still exist, yet they are dying breeds. A better schema is to locate leaders on a spectrum that runs from fascism to liberty. Viewed in that light, one sees that “right-wing fascists” and “left-wing fascists” are mere fascists pursuing state action. Any ideological gloss of right and left is for show.

  Insight into fascism’s nonideological nature was detailed voluminously by author Jonah Goldberg in his 2008 book Liberal Fascism. Goldberg shows that fascist regimes may be quite unalike. Some are murderous such as those of Hitler and Stalin. Some are dictatorial such as those of Mussolini and Franco. Some operate within democratic frameworks such as those of Wilson and FDR. What unites them is a shared view that the state is the exclusive mediator of human activity, and ends justify means. Fascists call for continuous “action.” Action through state power leads the fascist to dismiss both parliamentary processes and conservative restraint.

  Woodrow Wilson is a case study of a democratically elected fascist. Wilson was the first U.S. president with a Ph.D., an achievement that fit well with the progressive movement of the early twentieth century. Progressives believed science and expertise could solve the problems of government and society. This age worshipped the “expert,” which diminished the legislature as a source of policy. In 1913, his administration’s first year, Wilson signed legislation to create the Federal Reserve System and the federal income tax, two pillars of state power ever since.

  The primary platform for implementation of Wilson’s program for top-down state control was the First World War. Wilson set up the War Industries Board (WIB), which effectively nationalized broad segments of the U.S. economy. WIB imposed wage and price controls and output quotas. WIB members included Wall Street financiers Bernard Baruch and Edward Stettinius Sr. of J. P. Morgan. Other members were Robert S. Lovett, head of the Union Pacific Railroad, and Hugh Frayne, head of the American Federation of Labor. Another WIB member was Eugene Meyer, who was later chairman of the Federal Reserve and president of the World Bank. The WIB was a perfect amalgam of big business, big labor, and Wall Street.

  Wilson signed the Espionage Act of 1917 and the Sedition Act of 1918 to suppress free speech and squash dissent. Wilson’s attorney general, A. Mitchell Palmer, conducted the infamous Palmer Raids targeting immigrants and using Red Scare fearmongering to bypass due process. Goldberg summarizes Wilson’s regime:

  Woodrow Wilson was the twentieth century’s first fascist dictator. This claim may sound outrageous on its face, but consider the evidence. More dissidents were arrested or jailed in a few years under Wilson than under Mussolini during the entire 1920s. . . . Wilson . . . unleashed literally hundreds of thousands of badge carrying goons on the American people and prosecuted a vicious campaign against the press. . . .

  Hitler and Mussolini referred to Wilson with approval in their own writings and adopted his repressive tactics as part of Italy’s fascist movement and Germany’s National Socialist movement.

  Wilson’s progressive-fascist legacy was on hold in the Roaring Twenties during the Harding-Coolidge administrations, 1921–29. Fascism reemerged during the Hoover-Roosevelt regimes, 1929–45.

  Herbert Hoover fit the mold of expert even better than Woodrow Wilson. He was a successful and wealthy mining engineer with a track record of solving hard logistical and economic problems long before he became president. Although a Republican, he worked for Wilson as head of the U.S. Food Administration, which operated by executive orders to manage food supplies during the First World War. Hoover advocated for what today are called public-private partnerships. He supported the Progressive Era practice of Taylorism, which promised improved government operations through engineering efficiencies. Hoover believed fervently that more government intervention was a solution, not a problem, a view consistent with Wilson’s.

  After the 1929 stock market crash and the start of the Great Depression, Hoover’s interventionist tendencies became frantic. Far from being laissez-faire Republican, Hoover’s policies were consistent with those later adopted by FDR including tax increases, creation of government agencies such as the Federal Home Loan Bank, and expanded price controls through the Federal Farm Board and other agencies. Hoover embraced the progressive label, the American fascist strain.

  Following Hoover, FDR continued government intervention in private spheres. Like Hoover, FDR had his first federal government position in the Wilson administration, as assistant secretary of the Navy from 1913 to 1920.

  FDR’s interventions into private business and civic life are well known. He used executive orders under the Trading with the Enemy Act of 1917 to confiscate gold from U.S. citizens. He created a Civilian Conservation Corps, which recruited millions of men, clothed them in military-style uniforms with military ranks, moved them on troop trains, and gathered them into camps. Private electricity transmission was partially nationalized under FDR’s Tennessee Valley Authority. The 1933 National Industrial Recovery Act established the National Recovery Administration (NRA), which required business to rig prices and subscribe to codes of conduct designed to eliminate competition. FDR’s first term was an effort toward a totally planned economy.

  Describing FDR as a fascist is not a revisionist meme; it was a widely held view in the 1930s. Writer and social critic Waldo Frank wrote in 1934, “The NRA is the beginning of American Fascism. . . . Fascism may be so gradual in the United States that most voters will not be aware of its existence. The true Fascist leaders will not be present imitators of the German Führer and Italian condottieri. . . . they will be judicious, black-frocked gentlemen; graduates of the best universities. . . .” Al Smith, the Democratic presidential candidate in 1928, compared FDR to Karl Marx and Vladimir Lenin. While Smith overstated the case, there is abundant evidence of Stalinist admirers in FDR’s administrations, including influential figure Rexford Guy Tugwell, who visited Moscow in 1927, organized government-planned cities, and established American agricultural resettlement camps.

  This fascist strain in American politics, planted by Wilson and nurtured by Hoover and FDR, has never gone away. It reemerged in full flower in the 1960s with Lyndon Johnson’s Great Society, and again in the 1970s with Richard Nixon’s wage and price controls. It exists today. Neofascism is visible in George W. Bush’s No Child Left Behind law, the community organizing perspective of Barack Obama, and Hillary Clinton’s “It Takes a Village” brand of politics. Despite electoral victory or loss, this tendency never fades entirely. The fact that Wilson, FDR, LBJ, and Obama were Democrats, while Hoover, Nixon, and Bush were Republicans, is ample testimony to the fact that fascism is not an ideology, it is a process of expanding the state into private realms. Fascism is above all belief in the state rather than God or the individual as a source of authority and normative conduct.

  The fascist project is ratchet-like; it does not always move, but when it does it cannot be reversed. There are long periods like the 1920s and 1980s when the progressive-neofascist project makes little headway. Still, when fascism breaks through as with the New Deal, the Great Society, and Obamacare, the changes are here to stay. Each breakthrough enhances state power at liberty’s expense. Dependency is increased at the expense of self-reliance. Americans barely notice.

  Fascism’s advance is often aided by a crisis; an application of shock doctrine. Wilson’s authoritarian tendencies were empowered by the First World War. H
oover’s and FDR’s programs were enabled by the Great Depression. LBJ’s ambitions were boosted by the twin traumas of the 1963 Kennedy assassination and 1965 Watts riots in Los Angeles. Obama’s health care, Dodd-Frank, and stimulus programs were capacitated by Democratic majorities following the Panic of 2008.

  Investors should anticipate that the authoritarian, neofascist project will be revived and reenergized in the next financial crisis. Ice-nine asset freezes and seizures will be the most immediate and visible aspects of this, but not the only ones. Once capital is frozen, capitalism itself is gone. A planned economy with wage and price controls, output goals, shared monopolies, guaranteed incomes, and government jobs is capitalism’s natural successor.

  Money Nexus

  Schumpeter’s prediction of capitalism’s decline was not based on its failure, but rather on its success. It was precisely because capitalism is so successful at creating wealth that Schumpeter saw it sows the seeds of its own demise.

  Schumpeter wrote that once the proletariat had been relieved from tedious labor, and elites were firmly in control of politics and finance, it would be possible to pursue alternatives to the capitalist system. In effect, capitalist countries could now afford a system other than capitalism; they could afford socialism.

  In Schumpeter’s view, socialism’s rise would not be a revolution from the bottom up, it would be an evolution from the top down. The prototype for this was Otto von Bismarck, the mid-nineteenth-century Prussian chancellor, who offered health care, old age insurance, and shorter working hours to German labor. His goal was not to undermine the monarchy, but to strengthen it. Once granted social benefits, labor had no reason to seek them by revolutionary means.

  Bismarck bought off dissent with social programs in order to enhance the power of his own elite cadre, which was monarchical and imperial. That process is being repeated today, with financial elites replacing royalty. The winners are workers and elites. The losers are free market capitalism and the bourgeoisie.