note: the series was first edited and published at
Narcodollars for Beginners
How the Money Works
in the Illicit Drug Trade
Part 3- Drugs as Currency
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by Catherine Austin Fitts
Special to the Narco
Narco News Publisher's Note:
Austin Fitts is a former
managing director and member of the board of directors of Dillon Read
& Co, Inc, a former Assistant Secretary of Housing-Federal Housing
Commissioner in the first Bush Administration, and the former President
of The Hamilton Securities Group, Inc. She is the President of Solari,
Inc, an investment advisory firm. Solari provides risk management
services to investors through Sanders Research Associates in London.
Part 3: Drugs as Currency
compete with the government?"
John Gotti, Jr.
The Hickory Valley-Philadelphia
Fastfood Franchise Pop
things helped me understand money laundering
in America. First, as I drove from Hickory Valley to Philadelphia once
a month and drove around the country with my dog Forest all sorts of
people started to teach me about how the money worked - truckers and
the ladies who run the brand-name motels and the folks who work the
late shifts at the gas station food marts. Second, I read "Black
Money", a mystery novel by Michael Thomas, a former partner of
the Wall Street firm, Lehman Brothers.
In "Black Money" a government investigator
investigating S&L fraud starts to look into the revenues and expenses
of a fast food chain, which is experiencing far more deposits from sales
than it is selling pizzas. As Thomas walks you through a handful of
the near infinite number of possible money laundering schemes known
to mankind, you start to get a sense for some of the economics of fast
food franchises that have nothing to do with feeding people.
After I finished "Black Money" I started
to pay attention to "how the money works" at the fast food
and motel franchises at every interstate exit between Tennessee and
Philadelphia. What I noticed about them was that no matter when I drove
by - day or night, weekday or weekend - some of them were suprisingly
empty. Indeed, one or two name brands were defined by their perpetual
emptiness. Conversations every time I stopped filled in a lot here and
there about how much cash was coming in and going out on the food and
Some quick estimation on what was being spent per
interstate exit to start up and operate all the retail establishments
versus what was coming in the door in terms of legitimate business said
that some businesses had to be an excuse - an excuse to generate stock
market capital gains by combining laundered money or phony profits with
retail franchises - or both.
The problems this presents to people trying to
run an honest business are numerous. The problems it creates for our
work ethic and culture are numerous too. It increasingly puts the low
performance people in charge, and everyone starts to behave like and
For example, I drove ten miles to Bolivar, our
county seat, one night to go through the car wash at the local big chain
publicly traded gas station. I tried to pay for a three-dollar car wash
with quarters. I was told they would not take coins. It was a policy.
Counting coins was too much work, the person at the register and then
the manager said as they sat and gossiped with their friends, no other
customers in sight. So I got back in my car and drove ten miles home
and washed the car with a hose and some paper towels, the symbolic economy
being too busy to care about steady customers or to do the real work
in the concrete world.
If you are feeling energetic, go drive around to
a few areas with a heavy concentration of retail fast food and motel
franchises. Try estimating out the numbers. See how they work for you
in your place. Are your local businesses in the retail business or the
money laundromat business or both?
Another quick and dirty estimation technique for
your neighborhood is to take the Department of Justice's figure of $500
billion- $1 trillion and divide by 281 million Americans for a "per
American" estimate of money laundering market share. Now multiply
that times the number of people in your area. Now divide by the number
of local banks. What do the numbers say to you?
The next time you are out on the streets, see if
you can guess where the money is. It's bound to be there someplace.
At the Heart of the Double Bind
tend not to get bogged down in discussions
about how the various police, enforcement and prosecution industries
relate to narco dollars.
Here is my bottom line on how the money works on
enforcement and the war on drugs.
Every year since I was a child the
Solari Index goes down and the budgets that I pay for as a taxpayer
to fund more enforcement, prosecution and incarceration go up. If you
look at what taxpayers are paying, you would think we were picking up
all the narco dollar industry's expenses.
The more we pay for enforcement, the more the Solari
Index goes down and drug profits go up. The more we pay for national
security, the more thousands of boat loads of white agricultural products
seem to have no problem moving back and forth across the borders.
After fifty years, the correlation is documented
What is also clear is that the person who has inside
help from the national security, intelligence, enforcement and prosecution
bureaucracies will have the biggest BIG PERCENTAGE cash margin (see
Parts I & II
for background on BIG vs. SLIM PERCENTAGE).
John Gotti, Jr, not a reliable source, when asked
by a reporter whether or not the New York Gotti family was dealing in
narcotics said, "No, who can compete with the government?"
The CIA, also not a reliable source, backs up Mr.
Gotti's postion. According to the CIA's own Inspector General, the government
has been facilitating drug trafficking. Indeed, according to the CIA
and DOJ (Dept. of Justice), the CIA and DOJ created a memorandum of
understanding that permitted the CIA to help its allies and assets to
traffic in drugs and not have to report it.
Where I come from powerful people pay for performance.
I can only presume that the narco dollars are getting the performance
they want from the expenditure of our tax dollars for more and more
enforcement. After all, enforcement keeps profit margins up and the
The best example I know is my own case. My estimate
is that the federal enforcement establishment may have spent more to
target me over the last six years then they spent to get Bin Laden before
September 11. They clearly were not hampered in my case by having to
respect the spirit or the letter of the law. I deduce from that only
that the Solari model is not as good for the narco dollar and money
laundering businesses as Bin Laden was - at least until recently.
Drugs As Currency
of challenges of doing the numbers on the
narcotics business is that narcotics are not always a commodity -- sometimes
narcotics are a currency used to pay for other things.
The arms industry sometimes markets to third world
countries, or groups such as terrorists, who cannot pay with cash, but
can pay with drugs. So, for example, it is not unusual to see arms-drugs
transshipment operations, in which payment for arms is taken with drugs
and then the drugs retailed in the US to facilitate the arms trading
A case in point is the Iran-Contra operation at
Mena, Arkansas. It has been alleged that Oliver North and the White
House (National Security Council) were dealing drugs through Mena not
to make money, but to facilitate arms shipments. Mena has received attention
as a result of its alleged financial contribution to Bill and Hillary
Clinton's rise to national prominence.
You also see the arms-drugs relationship as you
estimate how the money works on the private profits from various taxpayer
funded wars. Vietnam, Kosovo, Plan Colombia, Afghanistan, what do they
all have in common? Drugs, oil and gas, arms. Add gold, currency and
bank market share and you have the top of my checklist for understanding
how the money works on any war or "low intensity conflict"
around the globe.
Many of the members of our global leadership were
trained in wartime narcotics trafficking in Asia during WWII. George
H. W. Bush and his generation watched our ally Chang Kai Shek finance
his army and covert operations with opium. I am told that the Flying
Tigers were the model that taught Air America how to fly dope.
If you trace back the history of the family and
family networks of America's leaders and numerous other leaders around
the world, what you will find is that narcotics and arms trafficking
are a multigenerational theme that has criss-crossed through Asia, North
America, Europe, Latin America and Eurasia and back through the City
of London and Wall Street to the great pools of financial capital. Many
a great American and British fortune got going in the Chinese opium
One of the benefits of learning how narco dollars
work is that it will help you sort through the money laundering and
insider trading news on the War on Terrorism. Terrorism and narcotics
trafficking often get linked through narcotics as currency. Terrorists
need guns. Narco dollars need private protection and covert operations.
In Defense of the American Drug Lords
1947. You want to make sure that America wins
in the great game of globalization. The winner will be the country that
accumulates the largest pool of capital to finance its corporations
and investment in new technology. That is a problem because Americans
vote for leaders who help them spend, not save. No matter how hard Sam
the sugar man works and no matter how much he saves, how much capital
can be pooled at SLIM PERCENTAGE? It is fair to say it is not enough
to beat the investment network that can pool capital at BIG PRECENTAGE
growth rates. (See Part I for the story of Sam and Dave).
Indeed, what a history of narcotics trafficking
and piracy and various other forms of organized crime over the last
five hundred years show is that our leaders have been in a double bind
for centuries. The only thing more dangerous than getting caught doing
organized crime, is not being in control of the reinvested cash flows
from it. This is why monarchs played footsie with pirates in Elizabethan
times and no doubt have been doing so ever since.
After taxation, organized crime is a society's
way of forming lots of pools of low cost cash capital. Organized crime
is a banking and venture capital business.
So the reality is that if you want to control the
cash flow and capital that controls the overworld, you've got to control
the cash flows getting generated by the underworld. Indeed, you've got
to have an underworld. If it does not exist, you need to outlaw some
things to get one going.
Here is the bottom line on how the money works
on narco dollars. Unless Sam switches to dope, Dave will win his wife,
his mistress, his banker, buy his company, buy his Congressman and be
the star at the local charities. Everyone will admire and pay attention
It's the power of compound interest.
It's 1947. If you don't do it, you will be the
loser. What would you do?
The Pogo Problem:
We Have Met the Enemy and He is Us
Sam and Dave dilemma of "to deal or not
to deal" is made worse by the power of popular opinion.
Last summer, I made a presentation called "How
the Money Works on Organized Crime" to a wonderful group of about
100 people at an annual conference for a spiritually focused foundation
in Philadelphia. This is a group of people who are committed to contributing
to the spiritual evolution of our culture.
After walking through the various Sam and Dave
dilemmas with Sam's SLIM PERCENTAGE profits sugar business and Dave's
BIG PERCENTAGE profits drug business, as well as the intersection between
the stock market and campaign fundraising and narco dollars for about
an hour, I asked the group what would happen to the stock market if
we decriminalized or legalized drugs?
The stock market would crash, they said.
What would happen to financing the government deficit
if we enforced all money-laundering laws? Since most of the bank wire
transfers are batched and run through the New York Federal Reserve Bank,
this should not really be that hard, right?
Their taxes might go up. Worse, yet, their government
checks might stop, they said.
I then asked them to imagine a big red button at
the front of the lectern. By the power of our imaginations, if they
pushed that button they could decriminalize narcotics trafficking and
stop all money laundering in the United States.
Who would push the button?
It turns out that in an audience of approximately
100 people committed to spiritually evolve our society that only one
person would push the button. Upon reflection, 99 would not. I asked
They said that if they pushed the button, their
mutual funds would go down and their government checks might stop.
I commented that what they were proposing is that
an entire infrastructure of people continue to market narcotics to their
children and grandchildren to ensure that their mutual and pension funds
stay high in value.
They said, yes, that's right.
Which is why I say that America is not addicted
to narcotics as much as it is addicted to narco dollars.
The National Security Council's Double Bind in 1996
is the acid test.
It's August 1996. Gary Webb has just broken the
story in the San Jose Mercury News about the CIA helping to deal drugs
into South Central LA. He has put the legal documents up on their website.
The proof is hard. The government is dealing drugs.
Catherine Austin Fitts's company is publishing
a tool on the web called Community Wizard that shows maps with Geographic
Information Systems software that include patterns of defaults on HUD
mortgages in the areas of LA with the heaviest concentration of CIA
supported Iran Contra drug trafficking.
The patterns between HUD defaulted mortgages and
narco dollars are much too close for comfort.
What would you do if you were Bob Rubin (Secretary
of Treasury, now Co-Chairman of Citicorp), Larry Summers (Deputy Secretary
of Treasury, now President of Harvard), John Hawke (Undersecretary of
the Treasury; now Comptroller of the Currency), Al Gore (Vice President,
now teaching) and John Deutch (Director of the CIA, now teaching) sitting
on the national security council or the related narco dollars task force?
Would you target Webb and get him fired and the
story discredited or would you let the story grow and flourish?
Would you target Fitts and have her business and
her software tools and databases destroyed or would you let her business
flourish, allowing every community to see and track the narco dollars
that were helping to drive their Solari Index to 0% while driving the
Dow Jones Index higher?
Which will it be in an election year? Will you
do everything you can do to attract the reinvestment of the narco dollars
into your campaign and into the stock market or will you let Fitts and
Webb continue to illuminate "how the money works" on narco
dollars in a way that might crash the stock market and make it harder
and more expensive for the government to finance the deficit?
Before you answer, let me tell you one more story.
In 1999, I was at a revival for Christian women.
One of the presidential candidates made a guest appearance. A friend
of mine, an Afro-American minister, who used to work for the Drug Enforcement
Agency (DEA), leapt to her feet to applaud him with tremendous enthusiasm.
I was surprised at her response given that she understood his success
in attracting narco dollars - not to mention his and his colleague's
silence on Gary Webb's Dark Alliance reports and the subsequent CIA
admission of drug dealing by the government.
She looked at me and said, "He is going to
be the winner." So I said, "You mean, I am a loser because
I tried to stop the corruption and he is a winner because he profited
from it and helped it grow. So you will clap for him and not for me."
She replied, "That's right. You are a loser. He is a winner"
Not such an easy decision to vote for the "rule
of law" is it?
Indeed, Webb got fired and Fitts' was targeted
and, after spending $6 million on legal and related expenses, my fortune
sank down to the same 0% as the Solari Index.
But whatever I do, I can't blame it just on the
top guys. Whatever they did, whoever it was, they were doing what it
took to please and win the crowd.
Americans love a winner.
Solari Index Up, Dow Up, Debt Down
good news on all of this is that there are
solutions. New technology blesses us with the potential tools we can
use to radically increase productivity in a way that can "jump
the curve" on our narco dollar addiction.
Will it happen? I don't know.
My pastor says, "If we can face it, God can
fix it." The question is can we face our addiction to narco dollars?
Can we do it in a way that entrepreneurs like me can build successful
businesses and transactions that profit from getting the Solari Index
and the Dow Jones Index to go up together?
Sound impossible? Far from it. It's quite possible.
Add up all the current income generated by small businesses in America.
It is currently valued at a multiple of 1-5 times because it is private-not
publicly traded in a liquid stock market. Investors have no way to invest
in a liquid publicly traded stock.
The creation of a solari, a local knowledge manager/databank
that publishes neighborhood financial statements and information and
tracks the Solari Index in your place, can make it possible for your
neighborhood to create a mutual fund that could channel capital to the
profitable small businesses in your neighborhood so that participating
small business income could start to trade at a multiple of 10 times
- even 20 times or 30 times eventually. The potential capital gains
are in the trillions of dollars.
That is a lot of low cost capital that local entrepreneurs
can use to create jobs and to build their businesses - even start new
Better yet, while your doing that how about reengineering
billions of federal, state and local government investment that has
a negative return on investment to both taxpayers and communities to
a positive return on investment. More big capital gains that can be
securitized and traded in a liquid stock market---again the potential
profits are in the trillions.
Finally, add up the value of all the homes and
real estate in your community. OK, what would happen to the value of
that equity if the Solari Index went back up to 100 percent? Real estate
financed through a local trust or REIT or mutual fund that could be
traded in the stock market would create a way for investors to start
to "trade places." That means they would profit from the Solari
Index going up along with local real estate owners, homeowners and small
business folks. Add some more trillions to the potential capital gains.
Helping the Solari Index
rise back to 100% is the biggest capital gains opportunity in America,
particularly when combined with reengineering government investment
and pooling small business equity in a manner that provides competitive
access to the stock market. Generations of accumulated narco dollars
could do very well investing successfully in such a capital gains opportunity.
A trillion here, a trillion there---pretty soon
you are talking about a lot of "pop."
It can only happen if we can look into the face
of our addiction and start having a conversation about how we move out
of our current financial incentives that keep the Solari Index down
to a more positive, sustainable and wealthy future for our children
and grandchildren. For example, think about what would happen if every
government worker in America had their annual salary fluctuate based
on the performance of the Solari Index in their jurisdiction? I bet
it would take about three years to get the Solari Index back to 100%.
That is why all the yah-yah in Washington about
new stricter money laundering laws to deal with terrorism won't work.
If government officials and bankers can keep making money when the Solari
Index is at 0%, it will not rise no matter how many people - innocent
or guilty - we put in jail. The day we decide that government officials
only make money for performance and all the companies that get money
from government - whether contractors or banks that use taxpayers credit
- only get money if we are better off and the Solari Index is rising,
is when we will start to face and solve the real problems in a money
It's time to face our addiction to narco dollars
and to grapple with how to reverse our incentive systems. It is time
to figure out how publicly traded companies and our banks and insurance
companies can make more money from our kids succeeding then from them
failing. Indeed, it can be done.
So here is my last message on how the money works
on narco dollars. Now that we have run the Solari Index down to near
0% while fueling the rise of the Dow Jones about 20X since I was a kid,
the new opportunity is going to be the fortunes to be made on businesses
and investment vehicles that fuel the Solari Index rising.
Wouldn't you pay for streets to be sweet for your
child once again? Especially if it made you a whole bunch of money on
an IPO of your neighborhood mutual or venture fund in the stock market?
I want to make money on kids succeeding. I want
to teach Dave a way to make more money by getting out of narco dollars
and backing Sam starting a solari and "trading places."
My money is on Solari rising.
For more on starting a solari
for your neighborhood, see www.solari.com, or contact
Catherine at firstname.lastname@example.org
After three years of plowing
through hundreds of books, videos and articles, here are the sources
that I found most useful to helping me understand "how the money
works" in the drug trade.
Assuming that you are a busy
person who knows nothing about narco dollars and does not want to
become an expert----you just want to have a good map of "how
the money works" in your world----I have put an (*) next to my
top four book and one video recommendations. These are the ones that
will be the most useful to help you understand the drug trade and
what it means to you, your family, your business and the Solari Index
in your neighborhood.
Black Money, Michael Thomas (*)
Blowback: America's Recruitment
of Nazis and Its Effects on the Cold
War, Christopher Simpson
The Boys on the Tracks, Mara
Leveritt. St. Martin's Press, 1999.
Cocaine Politics: Drugs, Armies,
and the CIA in Central America, Peter Dale Scott & Jonathan Marshall.
Berkeley: University of California Press, 1998.
The Collected Works of Col. L.
Fletcher Prouty, including, The Secret Team: The CIA and Its Allies
in Control of the United States and the World, Col. L. Fletcher Prouty
(Ret.), CD-Rom, available from The Center for the Preservation of
Modern History, http://www.prevailingwinds.org
CRA$HMAKER: A Federal Affaire,
a novel of love, death and the Federal Reserve, Victor Sperandeo &
Alvaro Almeida, http://www.crashmaker.com/
Dark Alliance, Gary Webb. New York: St. Martin's Press, 1998. (*)
Deep Politics and the Death of
JFK, Peter Dale Scott. Berkley: University of California Press, 1996.
Dope, Inc.: Britains Opium War
Against the United States, Konstandinos Kalimtgis.
Double Cross: The Explosive Inside
Story of the Mobster Who Controlled America, Sam & Chuck Giancana.
New York: Warner Books, 1998
False Profits: The Inside Story
of BCCI, the World's Most Corrupt Financial Empire, Peter Truell &
Larry Gurwin. Boston: Houghton Mifflin Company, 1992.
Hot Money and the Politics of
Debt, R. T. Naylor. Montreal: Black Rose Books, 1994. (*)
The Money and the Power: The
Making of Las Vegas and Its Hold on America, Sally Denton and Roger
The Mafia, CIA and George Bush,
Pete Brewton. New York: S.P.I., 1992.
Opium, Empire and the Global
Political Economy, Carl A Trocki. Routledge: Taylor & Francis
Group, 1999. (*)
The Politics of Heroin: CIA Complicity
in the Global Drug Trade, Alfred W. McCoy Lawrence Hill Books, 1991.
Powderburns : Cocaine, Contras
& the Drug War, Celerino Castillo, Dave Harmon
Red Mafiya : How the Russian
Mob Has Invaded America, Robert I. Friedman, Little Brown & Company,
Rulers of Evil: Useful Knowledge
about Governing Bodies, F. Tupper Saussy HarperCollins, 2001
WhiteOut: The CIA, Drugs, and the Press, Alexander Cockburn and Jeffrey
St. Clair. Verso, London:1998.
"Albert Vincent Carone:
The Missing Link Between Iran-Contra Cocaine Operations and Organized
Crime", Mike Ruppert. From the Wilderness Publications, 1994.
Mena, Arkansas: Various articles:
The Boys on the Track, various
articles by Mara Leveritt,
The Mystery of the "Lost"
Mena Report; Gray Money: the Continued
Cover-Up, by Mark Swaney
Sam Smith's Progressive Review,
The Clinton Scandals (see Mena sections):
Narco News, www.narconews.com,
Al Giordano, Publisher
The Spooky-Minded Professor:
CIA Cover Up Meister Gets Princeton Job, by Uri Dowbenko,
Catherine Austin Fitts:
Air America, Mel Gibson
Bullworth, Warren Beatty
CIA Director John Deutch in Watts
Video: Special Town Hall Meeting with John Deutch & Juanita McDonald,
October 15, 1996 http://www.copvcia.com (*)
Enemy of the State, Will Smith
& Gene Hackman
Mike Ruppert on CIA & Drugs: The Confession & The Impeachment,
From The Wilderness. Video, 1999. http://www.copvcia.com
The Salon At Fraser Court, Mike
Ruppert, From the Wilderness Video, 1999. http://www.copvcia.com
Telefon, Charles Bronson and
Wag the Dog, Dustin Hoffman