note: the series was first edited and published at narconews.com

Narcodollars for Beginners
How the Money Works
in the Illicit Drug Trade

Part 3- Drugs as Currency

Click Here to Read Part I

Click Here to Read Part II

by Catherine Austin Fitts

Special to the Narco News Bulletin

Narco News Publisher's Note: Catherine 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

 

"Who can compete with the government?"

- John Gotti, Jr.

The Hickory Valley-Philadelphia
Fastfood Franchise Pop

Two 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 retail business.

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 follow them.

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.

Enforcement:
At the Heart of the Double Bind

I 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 and clear.

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 franchise controlled.

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

One 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 and profits.

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 trade.

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

It's 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 to Dave.

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

The 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 why.

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

Here 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

The 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 ones.

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 making way.

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 catherine@solari.com

Bibliography

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.

Books:

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 Morris

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, 2000

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.

Articles:

"Albert Vincent Carone: The Missing Link Between Iran-Contra Cocaine Operations and Organized Crime", Mike Ruppert. From the Wilderness Publications, 1994. www.copvcia.com.

A Collection of Articles and Essays, Catherine Austin Fitts,
http://www.solari.com/gideon/articles/index.html

A Collection of Articles re: the Targeting of Catherine Austin Fitts:
http://www.solari.com/media/articles%20on%20gideon.htm

William Chambliss, Various articles on piracy and smuggling, www.wu.edu/~chamblis/vitae/top.html

Disinfo.com on Drugs, all articles by Preston Peet,
http://www.disinfo.com/pages/list/Drugs/by_author/

Has Dirty Money Polluted Bank of New York? Kelly O'Meara,
http://www.insightmag.com/archive/200105071.shtml

Mena, Arkansas: Various articles:

The Boys on the Track, various articles by Mara Leveritt,
http://www.maraleveritt.com/

Gray Money, by Mark Swaney,
http://www.whatreallyhappened.com/ RANCHO/POLITICS/MENA/gray_money.html
Murder, Mayhem and Mystery in Mena, Preston Peet,
http://www.disinfo.com/pages/dossier/id329/pg1/

The Mystery of the "Lost" Mena Report; Gray Money: the Continued
Cover-Up, by Mark Swaney
http://www.etherzone.com/swan080301.shtml

What Really Happened, Mena Archives:
http://www.whatreallyhappened.com/ RANCHO/POLITICS/MENA/mena.html

The Crimes of Mena, by Roger Morris and Sally Denton,
http://www.whatreallyhappened.com/ RANCHO/POLITICS/MENA/crimes_of_mena.html

Sam Smith's Progressive Review, The Clinton Scandals (see Mena sections):
http://prorev.com/wwindex.htm

Narco News, www.narconews.com, Al Giordano, Publisher

The Spooky-Minded Professor: CIA Cover Up Meister Gets Princeton Job, by Uri Dowbenko,
http://www.etherzone.com/dowb020101.shtml

Up Against the Beast: High Level Drug Running, by Uri Dowbenko,
http://www.nexusmagazine.com/beast2.html

Catherine Austin Fitts:

Articles About:

http://www.solari.com/media/articles%20on%20gideon.htm

Articles By:

http://www.solari.com/gideon/articles/index.html

Videos:

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 Lee Remick

Wag the Dog, Dustin Hoffman