The US Presidential Election: The Productivity Backlash

“Because the part of America that grows your food, produces your energy and fights your wars believes the country needs a course correction.” ~Jim Barnacle, Harrisburg Pa, on why he voted for Trump

“There is a huge fight happening inside the United States right now between two factions. One faction wants to sacrifice the US for the sake of the empire, and the second faction wants to sacrifice the empire for the sake of the United States.” ~The Saker, “3rd Quarter Emerging Multipolar World,” Solari Report

By Catherine Austin Fitts

Last Saturday morning I enjoyed a long Irish breakast in a hotel in Dublin reading global commentary about the US presidential election. The discussion in both North America and Europe missed any appreciation of the economics at work, including three trends that we have covered in depth this year on the Solari Report:

  • The shift to a multipolar world
  • The end of the debt-financed growth model
  • The importance of productivity growth

If the Trump election reflected a backlash, it was the backlash of the productive against the subsidized, particularly the richly subsidized.


If you look at a US county map of the election, you will note that the areas that voted for Clinton (in blue) represent the largest urban areas, enjoying the highest benefits from the centralization of the economy through government spending, programs, heavy regulation, invasion of privacy and monetary and market interventions – much of it supporting a global empire. This includes Wall Street, Washington, DC, Hollywood and Silicon Valley.


The New York Post described it aptly in “Trump’s voters were ‘hidden’ in plain sight”

“Voters are rejecting big government, big banks, big corporations and big technology. They said no to establishment Republican primary candidates and Wall Street, and they hid from the political statheads trying to track their mood… Republican media strategist Bruce Haynes challenges his Republican and Democratic DC-based peers who are knee-deep in their drinks over Trump’s win to take a step back and look at the map of what Clinton won Tuesday night. “She won the biggest metropolitan areas in the country and a couple of Southwestern states that have seen a huge influx of Mexican immigrants,” he said. “And that is all she won and not a damn thing else.” That is, she won the top 10 populations centers where most of the wealth, commerce and power is located — and lost the bulk of America… “Look, elites don’t understand why America needs to be great again because for them America is great,” said Haynes. Their economy is strong, their lifestyle is comfortable and the communities they live in, in and around New York and Washington, are the wealthiest and most influential in the country…”

The Mises Institute demonstrated this dynamic looking at incomes.


The Mises Instituted noted that, “none of this matters for a media and investors who only pay attention to data in the form of huge national aggregates. After all, the national data shows the economy is growing. So everything must be fine. For millions of people outside the coastal cities where powerful investors and media figures live, however, things are not fine.”

If the Democratic party had wanted to win the election, it would have nominated Bernie Sanders. However, the goal was not for the Democratic Party to win. The goal was for Wall Street, Washington, Hollywood and Silicon Valley to win. The “soft revolution” or “color revolution” was merely a front. This is one reason why so many people in the Republican establishment also supported Clinton.

A deputy assistant secretary in the Clinton administration once told me, “Black people are hopeless. We are moving them out, and moving the Hispanics in.” The Democratic strategy in this election reflected that immigration strategy. Overlays of the “sanctuary cities” with the blue dots in the red areas, show a strategy by which the rich attempt to control the political machinery with engineered immigration targeted for strategic locations. As Ann Coulter pointed out, make 30 million immigrants legal and you are talking about the end of the system as we know it.

This is also one of the reasons why the leadership of Wall Street, Washington, Hollywood and Silicon Valley have so vigorously opposed efforts to publish the US budget and financial statements by Congressional district. Doing so would only document the rich subsidy flowing centrally and the extent to which it is shrinking total national wealth.


There are serious problems with leaving the current crew of richly subsidized in control. Their attempts to cover their overhead and engorge their coffers by extending centralization globally for a few more years are putting the entire world at risk. We have discussed this on the Solari Report this year in our series with the Saker, “The Emerging Mulitpolar World”: February, April, June, September.

Clinton strength was on the financial side of the “central banking-warfare model.” This strength included the Neocons who promote a vision that the United States must maintain a global empire – the unipolar vision. The result has been exploding expenses for foreign wars, a military stretched globally, an explosion of dead and wounded and a European continent now being overrun by refugees from an imploding Middle East, as one civil infrastructure after another is destroyed. With this crime, we have fed the military industrial complex, a global arms industry and a mercenary capacity that has created an ever more powerful constituency for war.

This war-making edifice is expensive. It needs rich subsidy to keep it funded. Wars are funded with pubic dollars generating private profit. The public cost for each dollar of profit keeps rising. And it does not leave the US military in good shape.

One of the signature military affairs promoted by Hillary Clinton as Secretary of State was the invasion and destruction of Libya. Libya went from being the richest country in Africa to a country where one out of three people lives in poverty. We are all still trying to figure out where Libya’s 143 tons of gold went, let alone how much is related to contributions to the Clinton Foundation and campaign.


In the NY Times, Tom Friedman wrote of the refugees pouring into Europe, “The lucky few find ways to get smuggled into Spain or Germany, via Libya. Libya was like a cork on Africa, and when the U.S. and NATO toppled the Libyan dictator — but did not put troops on the ground to help secure a new order — they essentially uncorked Africa, creating a massive funnel through chaotic Libya to the Mediterranean coast.”

So we have trillions of dollars lost or missing in Mideast wars that explode American government debt, destroy numerous countries and overrun Europe with refugees. Yet, it was expected that Clinton would give us more of the same, including war with Russia.

The Trump campaign represented many on the side of the house that must implement and fight wars both foreign and domestic – the generals, the intelligence agencies and the enforcement arm. It also included the states that send the most young people into the military and receive back the most caskets and wounded warriors.

A growing number of these professionals understand that the unipolar vision has reached its limits and that the United States must draw back behind the Atlantic and Pacific oceans and become more economically self sufficient. This pullback is part of the rebalancing of our economic relationship with China at the center of the shift to the multipolar world. This is part of the effort to create a new grand strategy.

Call it “Fortress America” if you like. The move to repatriate corporate cash and offshore funds into North America, to continue to develop energy independence and to rebuild our infrastructure and core military capability represents such an adjustment.

The military-intelligence side of the central banking warfare model wants to regather its energy. It does not want to engage in wars it might not win. Not to mention that, with lead responsibilities to maintain the US dollar as reserve currency and events in the South China Sea, the US Navy has better things to do in a dangerous world than transgender training.


For decades, we have financed global growth with exploding levels of public and private debt. We covered this trend in our 1st Quarter 2015 Wrap Up Planet Debt.

Planet Debt

The Clintons rose to personal wealth and power swimming upon a sea of expanding debt that funded the centralization of ownership and control, including the Neoliberal vision of maintaining and extending a unipolar world. When the Bill and Hillary came to Washington our official national debt stood at $4 trillion. After the financial coup d’etat of trillions of dollars in bailouts and missing money, the official national debt now approaches $20 trillion. Underfunded retirement obligations and contingent liabilities will take it much higher.

National Debt

The debt grew with globalization, which meant that the American middle class lost jobs and income. That did not have to happen. There were ways of addressing the needs of the middle class that could have resulted in a very different outcome. (See my online book Dillon Read & Co. Inc and the Aristocracy of Stock Profits and Sir James Goldsmith’s Globalization Warning) That middle class loss of status and economic strength is clearly seen in the debt that American children incur to finance a college education.

Growth in Student Loans

Many of the adjustments to lending laws and student loan laws which allow predatory practices were made during the Clinton administration. See my piece on the Financial Hit Man of Student Loans.

High level student debt appears to be one of the reasons why the next generation of Americans is delaying homeownership. This is one of the reasons that the US homeownership rate has fallen to its lowest levels since 1965.


Another factor in the fall in homeownership rates is the devastation caused by the housing bubble first engineered by the Clinton administration. This bubble included massive foreclosures, resulting from unaffordable levels of mortgage debt, and a cost of trillions of dollars in taxpayer funded bailouts.


One of the ways in which sovereign governments have serviced increasing debt loads has been by engineering interest rates to record lows, particularly with the use of derivatives and significant central banking intervention. This drop in interest rates represents a significant transfer of wealth from savers and retirement accounts to governments and large borrowers – one of the reasons why pension fund and retirement underfunding will become one of the most pressing issues in both North America and Europe.


I have written a great deal about where this historical gush of government credit and spending: See my articles: Financial Coup D’Etat, The Myth of the Rule of Law, Coming Clean Beyond the Fiscal Cliff.

This coverage shows what is now over $50 trillion missing from the US government in bailouts and “undocumentable adjustments.” The US Department of Defense reported $9.3 trillion in undocumentable adjustments in fiscal 2015 alone – approximately $30,000 for every person in America . See my commentary: “Criminal vs. Crazy Man: Cut and Run, Monica Lewinsky II and Real Trouble Ahead”

This extraordinary commitment of resources has funded extraordinary and uneconomic centralization in a manner which has harmed the general economy, the environment and productivity – a significant expenditure of government money has had a “negative return on investment.” This is why I believe that the #1 fiscal priority of every American should be to bring transparency to the federal budget, including where the missing money has gone and how we can get it or the related assets back.

This discovery starts with transparency for the federal budget and financial statements for our individual Congressional District.

Our ability to finance with debt has depended on the willingness of the world to hold US dollars and US treasury securities and corporate debt. In part, the push to extend the unipolar vision is a push to ensure that governments around the world continue to do so. The shift to a multipolar vision means that our capacity to print infinite amounts of paper in exchange for valuable natural resources has reached its limits.

This is why all year I continue to quote the German finance minister Wolfgang Schäuble who stated at the G20 meeting in Shanghai, “The debt-financed growth model has reached its limits… There are no shortcuts that aren’t reforms.

The debt party is over. If anything the Trump victory represented the people in the military and intelligence community who know better than to try to extend it with more war. The shift to the multipolar world is upon us. A growing number of people responsible for managing the central banking-warfare model want to draw resources back to North America and rebuild the center.

This means that the negotiations over the US federal budget are going to be significant in the first year of a new administration. The budget is where most of the real policy changes will play out.


As described above, a Deputy Assistant Secretary of HUD in the Clinton administration told me in 1994, “Black people are hopeless. We are moving them out and moving Hispanics in.”

Black people were indeed “moved out” with predatory lending – they lost their homes – and with incarceration as the Clinton administration support for the war on drugs, expanded prison sentences and contracts to private prisons exploded. I have described the growth of the private prison complex during the Clinton administration in my online book Dillon Read & Co Inc and the Aristocracy of Stock Profits.

The result was the growth of a significant prison industrial complex in the United States. The US now boasts the highest incarceration rate in the world.


One reason why the Clintons were successful building this machinery is due to the largesse they showered on minority elites to help them accomplish it. This success is one of the reasons we are hearing screams about “whitelash.” The last thing that folks who helped round up and gentrify their poorer brethren for a profit want is to do is look in the mirror. See my commentary — “Trump & the African-American Elite Gravy Train: The Party’s Over”

While poor minorities were rounded up into prisons, poorer Caucasians were not faring well either. They were also losing their homes in record numbers as predatory loans and foreclosures swept through their communities, businesses and farms. In fact, the life expectancy of white women without a high school diploma, dropped by 5 years between 1990 and 2008. By 2008, life expectancy for black women without a high school diploma had surpassed that of white women of the same education level. The same study showed that life expectancy of white men without a high school diploma dropped by three years.

If you review life expectancy statistics in the United States. Hillary Clinton tended to carry the areas with the higher life expectancy, whereas Donald Trump carried the areas with lower life expectancy. Another way to explain these facts is that the people whose life force was being drained while government was engineering rich subsidies to Wall Street, Washington, Hollywood and Silicon Valley were looking for a way to stop that drain. They were, in fact, trying to stay alive.


This brings us to the importance of productivity growth, which was discussed in depth in our 2nd Quarter Wrap Up: Productivity, Prosperity & the Popsicle Index.


Meeting retirement goals and other financial obligations requires continued productivity growth. The problem is that productivity is not growing. In my discussion of productivity in the 2nd Quarter Wrap Up, I divided productivity between labor productivity (workplace) and human productivity (outside the workplace). In summary my thesis is that recent increases in labor productivity have been achieved at great cost to human productivity. Moreover the benefits of increased labor productivity are not shared. While labor productivity has grown steadily, hourly compensation has flatlined.

Growth of Real Hourly Compensation for Production and Nonsupervisory Workers Versus Productivity (1948–2011)


One of the hopes for increased productivity is the reengineering of government, education and health care – three areas that have maintained high levels of employment while private corporations were downsizing. This generally means that (i) the tax burden to Americans has been heavy as their incomes flatlined, and (ii) the return on their savings fell as expenses steadily inflated. I often refer to this steady squeeze of the average person and family as the slow burn.


Although there is potential to reengineer government, education and health care, as we described in the 2nd Quarter Wrap Up, the approach by the Obama Administration was seriously flawed. Obamacare, policies regarding health care records and Common Core were among the leading policy reasons for the Democratic defeat in the 2016 elections — and with very good reason. We need to get these changes right to generate productivity for Americans, not simply more invasive intelligence and profits for Silicon Valley. Let Silicon Valley be held to the standard of creating increased labor and human productivity as opposed to engineering surveillance capitalism that will turn Americans into prey.


If you live and work in the heartland of America as I do you spend a lot more time among people who are required to run family budgets, small businesses and farms. They tend to do more concrete functions, such as plumbing, construction, trucking, farming, and manufacturing. They’ve spent a lifetime mastering the art of covering their costs. They understand that you have to “sell something for more than it costs you to make it.” They are not central bankers or presidents, they can not create money out of thin air. Their financial world is accountable. Even state and local governments are required to balance budgets.

A former CIA officer schooled in covert operations once told me that my problem was that I did not appreciate that the average IQ in America was 103. My response is that a person with an IQ of 103 who has spent a life time balancing budgets scrambling to generate income in a world that only writes a check for real value-added is a lot smarter in a world without debt growth than a person with an IQ of 150 who graduated from Harvard or Yale and has been floating on richly subsidized operations in large urban centers ever since. The first person understands that “you have to sell it for more than it costs you to make it.” The second person is floating in a mystical bubble of inflated prices that depend on debt growth to finance activities that promote and justify central control – activities that do not add fundamental value to the economy.

Another thing that first person understands is that one of the keys to productivity is that men and women must give each other energy. Divide and conquer politics are hugely destructive to labor and human productivity. Another issue is meritocracy – “may the best man win.” Affirmative action is too expense and too complex. It is fascism with a progressive front. And a exploding number of rules and regulation are destroying productivity across Americans.

Increasing US productivity is essential and the people who understand how to increase productivity growth are pushing back. They want leadership that can lead us back to fundamental productivity growth. We can no longer afford people who are good at manufacturing more rules, blowing debt bubbles and engineering financial fraud. The long-term bull in the bond market is over.



Hillary Clinton lost the 2016 election. While I believe that there were significant shenanigans and vote rigging on both sides of the aisle, I believe Clinton lost the popular vote and the electoral vote (despite any news reports to the contrary). Let’s look at some of the reasons why.

Hillary Clinton has been getting steadily richer while many of the productive people in America have been getting steadily poorer.


It is worth comparing Clinton’s profits on speeches at Goldman Sachs (who benefited richly on the end of Glass-Steagall during the Clinton administration and bailouts during Obama/Clinton, among many other policies ) to what professionals in American earn:


While millions of people were losing their homes and funding bailouts, Hillary Clinton was buying and living in multimillion-dollar mansions in Washington and New York.


After Libya, one of the worst examples of Clinton-style disaster capitalism was Haiti, which we discussed with Dr. Dady Chery in our Solari Report, Haiti & Disaster Capitalism.

Following the Haiti earthquake in January 2010, Bill Clinton as Special UN Ambassador and Hillary Clinton as Secretary of State literally took control of Haiti. The Clinton Foundations raised enormous sums of money, which never reached the Haitian people. To this day, the many questions about where the money went continue to go unanswered.

Chelsea Clinton was married six months after the US invasion of Haiti. There are now allegations that Clinton Foundation funds helped pay for her wedding, which is estimated to have cost $3-5 million.

One wedding website described Chelsea’s wedding cake as follows

“We talked to Chelsea’s cake baker from La Tulipe Desserts for a few of the details. The nine-tiered cake was 500 pounds and four feet tall, and price estimates fall in the $10,000 to $12,000 range. The cake was mostly white with silver accents and 1,000 edible white sugar flowers, all delicately brushed to give a pearlescent sheen. The gluten-free (Chelsea’s allergic to gluten) vanilla wedding cake with dark chocolate mousse filling was made out of local and mostly organic ingredients.”

Note: This sketch is similar to Chelsea’s cake, created by Sweet Element Bake Shop.

Imagine how many Haitians would be alive today if the Clintons had allowed $3 million more of the money they raised for the Haitians to actually go to the Haitian people.

Imagine why someone planning on running for President would spend $10,000 or more on a wedding cake while the Haitian people were dying for lack of shelter and safe drinking water or innocent Americans were working in private prisons as slave labor to make uniforms for the military.

Of course, we all know what happened to the woman who said “Let them eat cake.”

Americans are a remarkably generous people. They have no problem with wealthy people who earn money in the markets through hard work, innovation or good luck. They do have a problem with politicians and political appointees who make money by selling influence and using the taxpayer credit to engineer private benefits – including for themselves – that shrink the pie. The average American knows that, in the long run, you have to make money by baking pies instead of stealing other people’s pies.

As allegations poured out from Wikileaks regarding the Clinton campaign and the Clinton Foundation, Americans got a taste of how “pay to play” really works, how manipulation of classified information is used to create private fortunes, and even how treason possibly occurred.

Hillary Clinton is part of a syndicate that has grown in wealth and power by centralizing control in the US in a manner that has drained the productive people who create much of the economic wealth that financed it. There were many people who voted for Trump in the 2016 election who voted for Obama in 2008. The productive wanted change eight years ago. What they got was a transfer of $27 trillion in bailouts – more than all the retirement savings in the country – to the large banks and private interests.

With the debt financed growth coming to an end, the productive were not prepared to tolerate the continued drain.

Clinton was shrinking the pie of the productive people, who do not want to be liquidated to keep the empire going. This was not about race, sex or any of the divide-and-conquer, politically correct waste-of-time air cover used to stalk the general population in support of empire building.

Clinton lost because of a productivity backlash.


So what happens now? Will President-elect Trump be able to lead the US towards lasting change?

Rejecting Clinton and the Necons is the first step. Once inaugurated, however, President Trump and Vice President Pence will assume leadership of a complex machinery that is deeply dependent on harvesting global and domestic subsidy. Turning that machine around is easier said than done. Yes, the productive people want change. However, that change will require a broad-based commitment to shift the fundamental dependency of the US establishment and general population away from the “central banking-warfare model.” The richly subsidized, in particular, are in no hurry to convert to becoming fundamentally productive. Do we see Hillary Clinton embracing the opportunity to learn how to drive her own car or to clean her multiple homes? In my experience, there is no one meaner than the richly privileged when they are suddenly required to earn their keep.

Here is what Colonel Lawrence Wilkerson said regarding the challenge that lies before all of us:

“The two candidates that we have just had offered to us in this election, both of them made comments and one of them had a profession that dictated this…that they were going to continue to play by that playbook. Now one wonders what one of them is going to do because he [Trump] is bouncing all over the place. Is he going to rewrite the playbook? Is he going to play by the playbook? Is he going to throw it out the door? What’s going to happen?”

“That uncertainty certainly unnerved the markets initially, they recovered today. And they will continue to recover as long as he remains somewhat conciliatory and doesn’t look like he is going to throw the playbook out. Just imagine if he suddenly decided that he would and it might be beneficial to the country that he did.”

“Then you see what I am talking about now because the markets will go all over the place again. Because the markets are part of this state. The markets are part of waging war. They are part of the warfare state. Our entire financial system now is geared to this warfare state. It has an umbilical cord extending from it. That’s how it survives. That’s how it makes a lot of its profits …directly or indirectly.”

“Not for nothing was HSBC found out for laundering drugs. You know where a lot of those drugs were coming from?…Afghanistan. This is a vicious many-headed animal that we have allowed to grow up – as Eisenhower predicted – and if we are not careful it is going to eat all of our lunches before it is through with us.”

The task before the new administration is much greater than most people appreciate. Since the election, millions of dollars have flowed to engineer protests and a vindictive corporate media are doing their best to sabotage the transition. The political establishment is trying to build political toll booths at every turn. This change will not be decided by an election. This is trench warfare, involving all of us.

What can we do? Peggy Noonan addressed it in her latest column in the WSJ, “What Comes After the Uprising.” She closed with some exceptionally sound advice:

The next president needs you. This is our country. Help him.

Give thanks that Hillary Clinton is not going to be the President of the United States. As Winston Churchill once said, “Nothing in life is so exhilarating as to be shot at without result.” We have missed a very big bullet – one that could have destroyed America. Then go to work, each in our own way. If the productive want a country where we are once again free to be productive, if we want America to be great again, it is going to take all of us pulling in that direction every day for the next four years.