As one who loves history and has read hundreds of histories and biographies, I must agree with the late George Santayana’s sentiment carved into the wall of the National Archives in Washington, D.C. – “Those who cannot remember the past are condemned to repeat it.” Of course, as with many memorable aphorisms, William Shakespeare got there first with: “What is past is prologue.”
Some time ago I recommended for your reading Professor Niall Ferguson's impressive book, Empire (2002 Basic Books), which details the rise and fall of the British colonial empire. The parallels with present day America are there to see, enough to make a thoughtful reader more than uneasy.
Financial Collapse
But aside from the moral objections to abusing military power to achieve laudable colonial ends, Professor Ferguson points to the real reason the British Empire fell.
It wasn’t just the loss of colonies in India and Africa that killed the Empire. The British Empire rapidly disintegrated after World War II because the U.K.’s financial and material resources were depleted by its war against Germany. The country was worn out by massive borrowing and expenditures the U.K. couldn’t afford. It was this financial and economic over extension that drained the imperial lifeblood and caused a rapid global demise.
Does that description suggest perhaps the current situation of these United States of America?
Advice From Beyond the Grave
This is not the first time that America's economy has collapsed into recession or even a major depression. (Read "Rainbow's End: the Crash of 1929" by Maury Klein (Oxford Univ. Press, 2001) . And in many respects, the causes now and then have too many frightening parallels.
Benjamin Strong, Jr. (Dec 22, 1872 – Oct. 16, 1928) was an American economist and vice president of Banker’s Trust of New York. He was one of the founders of the Federal Reserve System and served as the first Governor of the Federal Reserve Bank of New York for 14 years until his death. Strong exerted great influence over the policy and actions of the entire Federal Reserve System.
Born in Secrecy
Strong was J.P. Morgan's emissary to the secret Jekyll Island, Georgia, gathering in November 1910 -- one of the selected members who stayed at the luxurious Jekyll Island Hunt Club retreat for a private ten-day conference that included some of America's wealthiest men, many of them bankers, led by Senator Nelson Aldrich (R-RI), maternal grandfather of the late New York governor and U.S. vice president, Nelson Rockefeller.
Out of this meeting eventually came the Federal Reserve system created by the Glass-Owens Act and signed into law by President Woodrow Wilson in 1913, after a conference between the president and the New York financier, Bernard Baruch, one of Wilson's largest campaign donors and a leader of the Democratic Party.
A Matter of Psychology
Benjamin Strong was one of the strongest a leaders of the Federal Reserve System at a critical time. His policy of maintaining price levels during the 1920s through the open market purchase of securities, and his willingness to maintain the liquidity of banks during panics 
gained many supporters, as well as critics such as President Herbert Hoover, elected in 1928, blamed Strong for the easy money policy that he said fueled the stock market rise, leading to the Crash of 1929.
But Strong had a clearer sense than most of what was happening. In one of his last letters he summarized the dilemma:
"I do not think the problem is necessarily one of security prices or of available volume of credit, or even of discount rates. It is really a problem of psychology. The country's state of mind has been highly speculative, advancing prices have been based upon a realization of wealth and prosperity ... consequently speculative tendencies are all the more difficult to deal with .... The problem now is so to shape our policy as to avoid a calamitous break in the stock market, a panickyfeeling about money, a setback to business because of the change in psychology."
House of Cards May Come Crashing Down
Last January, (under the above heading), I asked my readers to "consider the current depressing economic statistics in the United States. As 2007 came to a close, the estimated national debt of the United States was about US$9.2 trillion. With a population of 304 million, that averages out to each citizen’s share of debt at US$30,000 plus.
"Then there is the continuing massive trade deficit. Since 2001, the trade deficit has doubled to more than US$700 billion. At best, these deficits will gradually harm all Americans’ future incomes. At worst, they could trigger a national fiscal crisis, which could accelerate and increase the economic damage.
"Since President Bush’s first presidential term began in January 2001, the dollar has also dropped over 36%. Meanwhile the housing market is in the doldrums, mortgage foreclosures are in the millions and rampant federal deficit spending continues unabated."
We Warned You
Of course you've read similar warnings from me and my colleagues at the Sovereign Society for a 
good part of the last decade. It wasn't that we were mystic soothsayers endowed with great powers of divination. It was because we know history -- and we can count. And to this day we continue to give you good advice, even in a time of great economic suffering.
Five years ago I noted in this column: "My checkbook balance tells me I can't spend what I don't have. In fact, writing bad checks is a crime in every state. And if a collective national confidence in the economy is a key to prosperity, what happens when Americans finally wake up and discover the financial cupboard is bare?"
The Last Resort
The stark contradiction in all these extant and proposed U.S. government bailout and stimulus billions, (nay trillions if President-elect Obama has his way), is that the American people and the world have finally reached the point that a dying Benjamin Strong spoke of in 1928 -- the change in mass psychology has occurred.
People now are asking the pertinent question: How can a government that is bankrupt possibly act as lender and guarantor of last resort?
The answer is that it cannot -- and so we will all be paying, for years to come, in taxes, in inflation, in lost freedom, the horrible price for our government's and our leaders' all too obvious failures.
“Those who cannot remember the past are condemned to repeat it.”
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