A great piece here from Alex Krainer!!
Two systems are before the world, part 2 of 3
We’re experiencing the conflict between two systems of governance. Understanding what that means could be the most important knowledge we need today.
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Yes an excellent series, explains a fundamental political division in banking and finance that is key to understanding world politics. Free Trade (capitalism) vs production and development (of the country) or something like that. Thanks for posting this @Rich
Part I (might not be all of it) is posted underneath. It refers to this April 2025 article.
ED
Trump vs. the bankers: is the struggle for real?
Key Markets report for Wednesday, 23 April 2025
Apr 23, 2025
Paid [Don’t know if this is the full report. ED]
In last Thursday’s report I referenced Regan Boychuk’s article in which he made a credible case about the way $9 trillion in Alberta oil resources were turned into legal collateral for US banks and used that collateral to conjure $5 trillion in mortgage debt and inflate the 2000s housing bubble. The bursting of that bubble precipitated the 2008 Global Financial Crisis and unprecedented bank bailouts for a group of Global Systemically Important Banks, while plunging 8 million American families into foreclosure.
On Monday, I published a more thorough report about this on my personal Substack, titled “Gods of finance and dogs of war,” along with a 19-min. video, which is also available on YouTube. One of the reasons why I believe this story is so relevant is because it strongly suggest an element of criminal conspiracies at the heart of our financial systems, which seem to employ credit to inflate financial bubbles, then collapses them, producing the familiar sequence of booms and busts and the seemingly chronic state of financial crises
Japan’s 1980s everything bubble
In his masterful book “Princes of the Yen,” economist Richard Werner detailed how and to what end Japan’s 1980s asset bubble was deliberately inflated by the banking interests, and how it was then deliberately collapsed, leaving the Bank of Japan in full control of Japan’s economy. Having interviewed many bankers, Dr. Werner concluded that, the BOJ “forced the banks to increase lending” in the 1980s by as much as 15% per annum, knowing full well that to reach that quota, they had to increase non-productive loans (the word subprime was not yet in vogue).
The bursting of the Japan bubble in 1990 took a heavy human toll afflicting ordinary people and businesses. In the immediate aftermath of the stock market crash, more than 5 million Japanese lost their jobs and could not find employment elsewhere. Suicide became the leading cause of death for men aged between 20 and 44. From 1990 to 2003, more than 212,000 Japanese firms went bankrupt and land prices in major cities declined by as much as 84%. But again, the bankers did well for themselves. The BOJ won more than independence: it set itself above the law and took sovereign control over Japan’s economy.
Fast forward to 2019, when we could better appreciate the ultimate fruits of BOJ’s labours: at the end of March 2019, the BOJ was among the top 10 shareholders of nearly half of all companies listed on the Tokyo Stock Exchange, representing 4.7% of the total capitalization of the first section of Tokyo Stock Exchange. It also held 75% of all exchange-traded funds and 43% of all Japanese Government Bonds representing over 100% of the country’s GDP. Thus, the BOJ has appropriated and is continuing to appropriate large segments of Japanese economy with money drawn from its own printing presses, all behind the smokescreen of crises, stabilizations, rescues, stimuli, quantitative easings, etc. Like with Alberta oil, the process ultimately amounts to nothing but plunder on a colossal scale.
The scramble for Ukraine
Today we are witnessing a scramble for Ukraine’s resources, which I covered in an earlier report. Presumably, these are coveted by Western banking interests for similar ends, except that since Trump’s inauguration this scramble seems to be at the center of a growing hostility between the United States and her European “allies,” led by Great Britain. These struggles are happening behind the scenes so they are difficult to discern from media reports and the pronouncements and speeches by public leaders.
However, something odd clearly is going on and the result is that the US is drifting away from its postwar alliances and closer to Russia. This could have a massive impact on both US and European economies, but we’ll be obliged to interpret events by reading between the lines. I listen to multiple podcasts by many different analysts and even where they have a certain access to high-level decision makers, like Col. Lawrence Wilkerson or Professor Jeffrey Sachs, educated guesswork seems to be the rule. We simply can’t be sure what’s really going on, let alone how it might end.
Two systems are before the world
I suspect that Trump’s ultimate agenda could be aimed at returning the United States to Alexander Hamilton’s American System of political economy and away from the British free trade system. The difference is that the American System allocates credit for industrialization and productive ends while the British free trade system credits nonproductive uses aimed at inflating, then bursting asset bubbles. Abraham Lincoln’s chief economic advisor Henry C. Carey contrasted the two systems in his 1851 work, “The Harmony of Interests.” Carey wrote as follows:
"Two systems are before the world; the one looks to increasing the proportion of persons and of capital engaged in trade and transportation, and therefore to diminishing the proportion engaged in producing commodities with which to trade, with necessarily diminished return to the labour of all; while the other looks to increasing the proportion engaged in the work of production, and diminishing that engaged in trade and transportation, with increased return to all, giving the labourer good wages, and to the owner of capital good profits.
One looks to increasing the quantity of raw materials to be exported, and diminishing the inducements to imports of men, thus impoverishing both farmer and planter by throwing on them the burden of freight; while the other looks to increasing the import of men and diminishing the export of raw materials, thereby enriching both planter and farmer by relieving them from payment of freight.
One looks to giving the [products] of millions of acres of land and of the labour of millions of men for the [services] of hundreds of thousands of distant men; the other to bringing the distant men to consume on the land the products of the land, exchanging day’s labour for day’s labour.
One looks to compelling the farmers and planters of the Union to continue their contributions for the support of the fleets and the armies, the paupers, the nobles and the sovereigns of Europe; the other to enabling ourselves to apply the same means to the moral and intellectual improvement of the sovereigns of America.
One looks to the continuance of that freedom of trade which denies the principle of protection, yet doles it out as revenue duties; the other by extending the area of legitimate free trade by the establishment of perfect protection, followed by the annexation of individuals and communities, and ultimately by the abolition of customs-houses.
One looks to exporting men to occupy desert tracts, the sovereignty of which is obtained by aid of diplomacy or war; the other to increasing the value of an immense extent of vacant land by importing men by millions for their occupation.
One looks to the centralization of wealth and power in a great commercial city that shall rival the great cities of modern times which have been and are being supported by aid of contributions which have exhausted every nation subjected to them; the other to concentration, by aid of which a market shall be made upon the land for the products of the land, and the farmer and planter be enriched.
One looks to increasing the necessity of commerce; the other to increasing the power to maintain it.
One looks to underworking the Hindoo, and sinking the rest of the world to his level; the other to raising the standard of man throughout the world to our level.
One looks towards universal war; the other towards universal peace.
One is the English system; the other we may be proud to call the American system, for it is the only one ever devised the tendency of which was that of elevating while equalizing the condition of man throughout the world."
The American System turned the United States from a patchwork of disjointed British colonies into the world’s most prosperous and most powerful nation. It is possible that in his effort to “Make America Great Again,” Trump wants to return it to that system. However, he obviously can’t come out and state this openly: all eight U.S. presidents who have either been assassinated or “mysteriously died” in office were promoters of Hamilton’s American System. Those presidents were William Henry Harrison (9th, 1941), Zachary Taylor (12th, 1850), Abraham Lincoln (16th, 1865), James Garfield (20th, 1881), William McKinley (25th, 1901), Warren G. Harding (29th, 1923), Franklin D. Roosevelt (32nd, 1945), and John F. Kennedy (35th, 1963).
I know, someone will object: waitjustaminute, FDR died of polio, everyone knows that! Sure, but that might have been fake news. In his memoirs, FDR’s son Elliott Roosevelt revealed what he learned when he met with Joseph Stalin in 1946. Below is an excerpt from Parade magazine published on 9 February, 1986:
{Stalin/Elliott anecdote, Repeated in Sep 2026 article}
Whatever the case, there have already been two assassination attempts at Trump and understandably, his administration must tread carefully, or advance their agenda in an utterly unpredictable fashion. The consequences is that economic uncertainty exploded to the highest level since the Covid 19 pandemic in 2020: {link show a graph}
That’s not positive for the economy, but hopefully, as the chart above suggests, the uncertainty will subside as rapidly as it has exploded, and in the not too distant future we’ll know much more about the future trajectory of global developments. In the meantime, I trust that trends will tell us what we need to know, at least so far as navigating the markets is concerned.
This is Krainer’s Part 1. The post above is referred to, probably worth reading first.
Looking forward to Part 3 (China)
ED
24/9/25 Two systems are before the world
Key Markets report for Wednesday, 24 September 2025
In our times, understanding the clash between two systems of governance could be more relevant to the future development of humanity than ever before. Unfortunately, that understanding is hard to come by as it has been deliberately obscured. Today, certain Western leaders speak of the conflict of political systems of governance: between open societies vs. closed societies, or between democratic vs. authoritarian systems. But any debate about alternative economic systems of governance is almost entirely absent in Western discourse.
Economic governance matters
I touched upon this subject in this newsletter on a few occasions, most recently in April this year. {above} We could call the two opposed economic systems of governance as *the British system of free trade vs. the American system of political economy, strongly advocated by leaders like Alexander Hamilton and Abraham Lincoln‘s chief economic advisor Henry C. Carey. In his 1851 work, “The Harmony of Interests,” Carey contrasted the two systems in a rather lengthy passage starting with the words, “Two systems are before the world…” Carey’s prose could be summarized as follows:
Trade vs. production: one system directs capital and draws labor (the productive potential of a people) toward trade and speculation, which depress wages and erode prosperity. The other system fosters production of goods, services and infrastructure. It leads to higher wages and rising standards of living.
Raw materials vs. finished goods: one system favors mass production of raw materials and cash crops for trade; it systematically impoverishes farmers and reduces their employment. Carey writes about farmers bearing most of the burden of freight in wholesale trade. The other system favors production of more refined quality products, enriching the producers.
Exporting produce vs. enjoying it at home: one system sends mass produced bulk abroad, frequently causing famines, while the other absorbs labor to produce diverse, quality products at home.
Concentration vs. dispersion of wealth: one system concentrates wealth and power in great commercial cities while depleting and impoverishing the rest of the nation; the other enriches those engaged in production and disperses wealth more broadly.
War vs. moral and intellectual growth: one system compels the productive sector to fund fleets and armies; the other directs the same means for moral and intellectual growth of the people in their own nations.
Stable communities vs. population replacement: one system requires a large, low-skilled labor force that accepts work with low wages. It predictably resorts to mass influx of migrants. The other system raises the standards of living, prosperity and security of native labor force.
Universal war vs. universal peace: one system gives rise to universal forever wars; the other preserves peace.
The “American system” did not originate in the United States; it was first explicitly elaborated by the German economist Friedrich List. But the system may have earned the label, “American” because it was practiced in the United States for some 150 years, elevating the nation to unprecedented levels of wealth and prosperity. During this time, the U.S. used tariffs, state subsidies and other barriers to trade to nurture domestic industries and to protect high-paying jobs. But in the post-war period, the U.S. reoriented its economic policy, progressively leaning in favor of the British system of free trade.
Slipping in the British system under Truman
In the wake of the creation of Bretton Woods monetary system, British influence pushed the U.S. to adopt the system of free trade. To that end, it planned to create the International Trade Organization (ITO). However, when the ITO charter was sent to the Senate for ratification as a formal treaty, it was shot down because it would cede key aspects of U.S. sovereignty to an international body and subject U.S. economic policy to ITO rules.
Given the strong opposition in the U.S. Congress, the ITO treaty was facing certain failure. To overcome this opposition, rather than resubmitting the treaty to Congress, Truman’s administration opted for the Protocol of Provisional Application and on 30 October 1947, Truman signed the General Agreement on Tariffs and Trade (GATT) as an executive agreement.
The GATT implemented tariff concessions envisioned under the ITO, and entered into force on 1 January 1948, enabling the Government to adopt GATT trade rules without legislative ratification. This was made possible by the Reciprocal Trade Agreements Act of 1934, which gave the executive the power to negotiate reciprocal tariff-cutting agreements with other countries.
*Thus began the American pivot to the British free trade system. GATT was implemented on a provisional basis for decades until the “Uruguay Round” of trade negotiations (1986-1994). In December 1994, U.S. Congress voted in favor of the “Uruguay Round Agreements Act,” which included the agreement to create the World Trade Organization as a replacement for the “provisional” GATT system.
Along with these changes, the evolution of the U.S. economic development largely followed the predictable changes described in 1851 by Henry C. Carey. Over that time however, the academia largely scrubbed all mentions of the “American System,” Henry Carrey or of Friedrich List from the economics curriculum. Having taken many economics courses in university, I can attest to this: I’ve never heard of any of this until the blessing that is the Internet brought them back from Orwell’s memory hole and revived their teachings.
Perhaps the best real world case study of the two economic systems of governance is also the contrast between the British and German economic development in the last three decades of the 19th century, as we’ll explore in tomorrow’s report.
Thanks Evvy, also looking fwd to P3!
Hi Evvy,
I think I just found the original Part 1 of 3. (And then remembered I’d read if about 6 weeks ago!)
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Yeah it’s more the sort of length you’d expect, thanks.
Voila!
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