Edited transcript of Catherine Austin Fitts speaking with Clayton Morris of Redacted News
Filler, advertisements, repetitions, and obvious transcription errors have been removed for readability. The views and factual claims below are those expressed by the speakers and have not been independently fact-checked.
Clayton Morris: Catherine Austin Fitts, founder of The Solari Report, we have wanted to have you on for years. The world has changed enormously over the past few years, so I want to start by giving you the floor.
When you look at the media and Alternative media, what are the biggest blind spots? What is the biggest story that no one is covering, or the area of greatest concern that you’re tracking in real time?
Catherine Austin Fitts: The biggest thing missing is that we are coming into the greatest opportunity we have ever had to transform our situation in a positive direction.
I’ll use what has been happening with food and health as an example. My own lane is money, particularly programmable money. We are publishing model legislation designed to put guardrails around programmable money.
But food and health are useful examples because everybody understands them.
At the beginning of the Trump administration there was enormous excitement about making changes to food and health. People wanted changes in food regulation, more local food and local farming, fewer harmful ingredients, and changes in pharmaceuticals.
A lot of people organized around what became known as MAHA.
I would say the effort has largely failed at changing Washington, but it has accomplished something important: it has demonstrated to many people that the political machinery in Washington is not going to provide the solution they hoped for.
That realization creates an opportunity.
A lot of talented people gave everything they had trying to reform the system. Now many are beginning to conclude that there are no solutions in the Washington “sausage factory.”
The time has come to move away from the diseased animal and start building real alternatives.
The people running centralized systems are relatively few. We are many. We do not necessarily need them.
What I’m seeing around the world is people saying, “I’ve had enough.”
A friend recently went back to the beach town where he grew up. Normally everyone would be scrolling on phones and tablets. This time he saw almost nobody doing that. People were reading physical books.
He asked someone what had happened.
The answer was essentially: people are tired of surveillance. They’re over it.
Clayton Morris: I’ve been talking with people about AI, and one of the things that gives me hope is what younger people are doing.
You see young people going to restaurants without phones. They bring board games or playing cards. They’re drinking less alcohol. They sit together for hours.
One of the unexpected effects of the AI explosion may be a renewed desire for actual human connection instead of artificial connections.
Catherine Austin Fitts: About six months ago I was in Salt Lake City near the state capitol. I went into a coffee shop and everyone there seemed to be under 30.
They had two turntables playing LPs.
I said, “This is great. You’re playing records.”
The person working there told me, “The sound is much better than digital.”
Clayton Morris: You’re seeing the same thing with physical media.
There have been stories about younger people going back to video stores, renting VHS tapes and DVDs, buying physical media, and becoming tired of having everything locked behind subscriptions.
They’re tired of not owning things.
They’re tired of surveillance.
They want authentic experiences.
Catherine Austin Fitts: Exactly.
And that desire to regain independence is showing up in many different parts of life.
Clayton Morris: You sound remarkably optimistic.
Catherine Austin Fitts: I am.
I walked out of Washington in 1998 because I concluded the model was not going to work.
I had been trying to find alternatives inside Washington, but eventually I realized that people centralizing power are never going to enthusiastically support systems that decentralize power.
I was trying to build things like venture pools and Stock Market for local communities so communities could finance themselves privately instead of depending so heavily on government money.
I left and went into the wilderness looking for alternatives.
For years, almost everybody I knew still wanted to reform Washington, work with Washington, work with Google, work with OpenAI, or somehow persuade the centralized institutions to fix things.
What I’m seeing for the first time is a growing realization that people can simply stop cooperating with systems they believe are harming them.
Look at a data-center protest. If you added up the IRAs, 401(k)s, and brokerage accounts of everybody at the protest, many of them are probably financing the companies building the thing they are protesting.
Where we work, where we bank, where we shop, where we invest — we are participating in the system.
That means we also have the ability to change our participation.
People are beginning to look at centralized systems and say, “There’s no productive conversation to be had here. I’m going somewhere else.”
That is powerful.
Clayton Morris: Where are the fracture points?
Take money. In parts of Europe, cash transactions over certain limits have increasingly been restricted or discouraged. More transactions are being tracked.
If money is one of the primary battlegrounds, how do people turn away from that system?
Catherine Austin Fitts: The first thing is to get out of the big banks.
Stop financing institutions you do not trust.
The United States is still blessed with many excellent community banks and credit unions.
You want a bank or credit union where you have actual relationships, where people know you, and where you are treated as a customer rather than a data point.
The last thing you want is to wake up one morning and discover that you or your business has been debanked because of something you said or did.
At Solari we have a four-part series on finding a good local bank and building a good relationship with it.
The second thing is to create independent income if you can.
Try to develop work that does not require you to remain inside an institution that forces you to do things you believe are harmful to yourself or contrary to your principles.
Develop skills that increase your independence.
Part of gaining independence is paying down debt.
Debt reduces your room to maneuver.
If you are heavily indebted, it becomes much easier for somebody else to put you in a corner.
The next thing is to examine your personal balance sheet and income statement and ask how much of your life depends on large corporations.
We published a piece called Coming Clean. It is about getting institutions you don’t trust out of your pocketbook, your mind, your body, and your house.
For decades Americans have shifted from doing many things for themselves to working for a paycheck and then paying corporations to provide nearly everything.
Those economics are beginning to change, partly because of technology.
I once had an investment client who constantly complained that the yields on her stocks were falling while her water bill was rising.
I told her, essentially: sell some stocks and build a well.
She lived in a rural area where that was possible.
Instead of owning securities that were producing less income while paying a utility company more every year, she could invest directly in reducing her dependence on the utility.
Obviously, everybody’s circumstances are different.
For one person the opportunity may be water.
For another it may be food.
If you have a good local food system, you may be able to purchase significantly more of your food from independent farmers and grocers.
In the Netherlands, for example, I use a service created by local farmers. The farmers aggregate their products through a website. Customers choose what they want, and the food is delivered in reusable crates.
You don’t have to visit twenty different farms.
The service coordinates the farmers and brings the food to you.
The same logic can apply to energy, shelter, food, banking, and other parts of life.
The question becomes: who are you depending on, and are they people and institutions you trust?
One of the biggest issues is retirement savings.
Many people have no idea what their retirement money is financing.
When I became an investment adviser, one thing that shocked me was how difficult it could be to determine what someone actually owned.
A client would show me a portfolio, and I would start clicking through the underlying investments.
There could be layer after layer after layer.
Where is the money really going?
The obfuscation can be tremendous.
If somebody who is not financially sophisticated tells me, “I have no idea where my money is,” I’m sympathetic. Sometimes it genuinely is difficult to find out.
One of the keys to financial agency is realizing that you have a right to know where your money is.
You have a right to understand what you own.
You have a right to ask whether it makes sense.
If a financial professional cannot explain an investment to you in plain English, that is a problem with the investment or the professional. It does not automatically mean there is something wrong with you.
When I lived in Washington, I was taking a Bible class at a church.
One of the teachers was a brilliant paralegal working for a large Washington law firm.
She came to me because nearly all of her savings outside her home were in the firm’s 401(k), and she could not understand one of the investment options.
She wanted to invest in a mortgage fund but could not figure out how it worked.
The administrator responsible for the plan made her feel stupid whenever she asked questions.
I told her to give me the prospectus.
At that point I had been on Wall Street for years. I had served as Assistant Secretary of Housing. My company had been a financial adviser to HUD. I had an MBA from Wharton.
I read the prospectus and could not understand it.
So we called the administrator.
She initially treated the paralegal as though the problem was her lack of understanding.
Eventually I explained my own background and said, “I cannot understand this prospectus either. If I cannot understand it, the problem is not simply the investor.”
The administrator finally admitted that she did not understand it either.
The three of us sat down for about an hour and eventually figured out how the investment worked.
That experience taught me something important about financial complexity.
Sometimes the complexity is not there because the underlying investment is inherently complicated. Sometimes complexity makes it harder for people to understand what is actually happening with their money.
Clayton Morris: Let’s move to housing.
We’re seeing strange conditions in the U.S. housing market: affordability problems, high borrowing costs, significant differences between new and existing home prices, and falling prices in some regions.
How do you assess homeownership and housing in America right now?
Catherine Austin Fitts: I describe much of the American economy as a negative-return-on-investment economy.
If you go into many American counties, a very large percentage of local income comes directly or indirectly from the Federal government.
We use federal credit, subsidies, grants, appropriations, and spending to centralize economic activity.
The more you centralize, the more you can drain productive capacity out of local economies.
Take the pandemic.
Small businesses were forced to shut down while many large businesses remained open.
What happens?
Market share moves from small businesses into large corporations.
Local employment disappears.
Family wealth disappears.
A few large institutions become wealthier, but the underlying productive economy can become weaker.
That is a plunder model.
Now connect that to housing.
Monetary inflation and government policy can drive up the cost of goods and assets at the same time that independent income and small-business activity are being weakened.
People become financially weaker while housing and other essential assets become more expensive.
That creates the affordability crisis.
At the beginning of the pandemic, the Federal Reserve injected trillions of dollars into the financial system.
At the same time, enormous portions of the small-business economy were shut down.
Think about the combination.
Large financial institutions gain access to enormous pools of capital while smaller businesses are under extraordinary financial pressure.
The institutions with capital can then purchase businesses, land, assets, and market share from people who are being squeezed.
That produces consolidation.
If you want to understand these dynamics, you need to understand how plunder works.
At Solari we have studied historical examples from multiple countries because once you recognize the model, you begin to see recurring patterns.
Clayton Morris: Now we’re watching the enormous AI buildout.
It seems like another wave of consolidation, this time with tremendous federal backing.
How do Data centers and AI fit into the model you’re describing?
Catherine Austin Fitts: We recently sponsored research on taxpayer money going into data centers.
Data centers are receiving substantial public support through different mechanisms.
When you dig into the private and corporate investment, some of that investment also ultimately traces back to government spending, subsidies, tax incentives, or contracts.
We are watching a tsunami of capital move into data-center Infrastructure.
The question is: what is the economic return supposed to be?
One possible answer is productivity.
Another is control.
If you build infrastructure capable of mediating enormous portions of economic and social activity, then that infrastructure can become a mechanism of control.
If you Compare countries, the two major AI powers are the United States and China.
My impression is that China has focused much more heavily on applying AI and Automation to manufacturing and productive services.
They are asking: how do we make something better, faster, and cheaper?
The United States is putting enormous resources into surveillance, financial infrastructure, and control systems.
China has serious economic problems of its own, and I don’t want to minimize them.
But in manufacturing, the gap is frightening.
Asia is developing technologies capable of producing enormous deflationary pressure by making goods dramatically cheaper.
Europe and the United States will have difficulty competing if they do not rebuild productive capacity.
Clayton Morris: It increasingly feels like the world is dividing around the United States and China.
The U.S. is now trying to force more robotics and technology components to be manufactured domestically rather than imported from China.
How do you see this conflict?
Catherine Austin Fitts: It is like Siamese twins having a fight.
They are punching each other, but they are still joined at the hip.
The United States and China remain deeply economically interconnected.
China has diversified its export markets substantially, so it is less dependent on the U.S. than it once was.
But the United States remains profoundly dependent on China.
If Chinese imports stopped flowing into many American states, large sections of the economy would grind to a halt.
And remember: American capital helped build modern China.
There was enormous U.S. investment into China.
There was also significant transfer of manufacturing knowledge, intellectual property, equipment, documentation, and expertise.
American financial institutions spent decades moving capital into Asia.
So when people describe the United States and China as completely separate economic systems, the reality is much more complicated.
Clayton Morris: What about the dollar?
We hear constantly about BRICS, gold, countries settling transactions outside the dollar, and governments moving away from U.S. Treasury securities.
Is the dollar really in danger?
Catherine Austin Fitts: The United States has serious problems.
But I still see the dollar system as extremely powerful.
It is changing.
Stablecoins, crypto infrastructure, and digital securities may actually be used to expand the dollar system.
The ambition is potentially enormous.
Imagine bringing billions of people around the world directly into dollar-denominated financial markets through their phones.
That could expand the reach of the dollar rather than shrink it.
Clayton Morris: Explain stablecoins for someone who does not understand them.
Catherine Austin Fitts: Think about a dollar stablecoin as something that can be backed by short-term U.S. Treasury securities.
A person puts a dollar into the system.
The issuer can use that dollar to purchase Treasury assets that collateralize the stablecoin.
In effect, the stablecoin system can create additional demand for U.S. government debt.
Now imagine someone living in a country where their local currency is rapidly losing value.
If they can easily move into dollar-denominated stablecoins, they may do it simply to protect their purchasing power.
That means people who previously lived largely outside the dollar system can be pulled into it.
The U.S. can potentially use stablecoins as a global distribution mechanism for dollars and Treasury demand.
Why would someone voluntarily do this?
Because the alternative could be watching their local Currency collapse.
If you live in a country experiencing extreme inflation or currency depreciation, the dollar may appear much safer.
That creates a powerful incentive to move into dollar-based stablecoins.
But there is another side to this.
Digital financial assets can also potentially be frozen, sanctioned, surveilled, or seized.
So the user receives monetary stability in exchange for entering infrastructure controlled by somebody else.
That is the tradeoff.
The stablecoin system is only one part of the picture.
Stocks and bonds can also be tokenized.
Imagine U.S. securities trading globally, twenty-four hours a day, seven days a week.
Now add enormous leverage.
Then connect the system to billions of people with smartphones.
You could create a financial market far larger and more speculative than what we have today.
I’ve lived through a lot of bubbles.
I have never seen such powerful tools assembled for potentially creating another one.
Institutions around the world have become less enthusiastic about buying long-duration U.S. Treasury securities.
One reason is performance.
Compare long-term Treasuries with assets such as gold or equities over recent years.
Treasuries have performed poorly.
Meanwhile, many stocks have been supported by government contracts, subsidies, tax incentives, and other public spending.
So institutions may say, “We don’t want the Treasury exposure.”
The response could be: go directly to retail.
Stablecoins and tokenized financial markets provide train tracks capable of reaching billions of ordinary people.
Instead of relying on foreign governments and major financial institutions to buy U.S. debt, portions of that debt can indirectly be distributed through products used by individuals around the world.
Clayton Morris: What about Japan?
Japan owns huge quantities of U.S. Treasuries, but it has also been selling them while defending the yen.
How does that work?
Catherine Austin Fitts: Japan is one of the largest foreign holders of Treasuries.
It has been under significant economic pressure, including pressure related to energy markets and its currency.
A country holds reserves partly so it can use them when it gets into trouble.
Japan may sell Treasuries because it needs liquidity or wants to intervene in its currency market.
The United States does not want massive quantities of Treasuries dumped onto the market because rising Treasury yields can create major problems.
One possible alternative is repo financing.
Instead of selling the Treasuries outright, Japan can post them as collateral and receive cash.
That allows Japan to access liquidity without creating the same direct selling pressure in the Treasury market.
The bond market is fundamental to American geopolitical power.
The United States can sustain extraordinarily expensive military operations partly because of its ability to finance itself through global capital markets.
The United States has historically combined military warfare with financial warfare.
The military side does not always need to produce an obvious battlefield victory.
If a conflict exhausts another country economically, opens markets, secures resources, or expands financial control, then institutions associated with the dollar system may still benefit.
That is why focusing only on who “won” the shooting war can be misleading.
You also have to ask who controls the banking system, energy revenues, financial settlement channels, resources, and trade after the war.
Clayton Morris: If the goal is to resist a completely digital financial system, what should people actually do?
Catherine Austin Fitts: First, keep cash alive.
The danger is not simply another speculative bubble.
The deeper danger is arriving at a completely digital financial system in which every transaction can potentially be surveilled, restricted, or programmed.
So cash matters.
Analog systems matter.
Clayton Morris: When you say analog, do you mean across life generally?
Physical movies, physical media, mechanical appliances?
Catherine Austin Fitts: Anytime you can remove unnecessary surveillance infrastructure from your life, that can be valuable.
In my kitchen, for example, I prefer mechanical equipment without unnecessary digital sensors.
It is simple.
It works.
It often lasts longer.
But the most important thing financially is keeping cash usable.
Clayton Morris: Several states have explored recognizing gold and silver as legal tender.
Catherine Austin Fitts: I like gold and silver.
But there is an important distinction between physical gold and digital claims on gold.
Digital gold can become another form of programmable money.
Physical coins can support local exchange without requiring the same digital infrastructure.
If a community wants to develop systems for exchanging physical gold and silver locally, that is interesting.
Gold and silver can be volatile, so people need to understand how prices move.
But physical precious metals can provide an alternative monetary rail.
The model legislation we are working on has three major components.
First is cash.
State and local governments should preserve the ability of people to transact using cash.
Second is the right to a non-digital life.
A citizen should be able to perform legally required interactions with government without being forced to own a smartphone, carry a digital ID, or participate in a proprietary digital financial platform.
If I need to pay state taxes or file required paperwork, there should be a nondigital path.
Third is guardrails on programmable money.
Financial technology should not be allowed to override basic constitutional or human rights merely because restrictions can be embedded in software.
States can address these questions through legislation and consumer-protection law.
The more states that establish such protections, the more difficult it becomes to impose a completely closed digital system.
Clayton Morris: Are you worried about Europe moving away from cash?
Catherine Austin Fitts: Interestingly, I have recently seen cash use increasing in parts of Europe.
During the pandemic, many small businesses moved strongly toward electronic payments because they were convenient.
Then people began understanding the surveillance and market-power implications.
Cash started becoming attractive again.
There is also a resilience argument.
After major natural disasters, some Scandinavian monetary authorities began publicly reconsidering the wisdom of moving toward a completely cashless society.
Electricity fails.
Networks fail.
Disasters happen.
If the electronic payment system goes down, cash still works.
That makes physical currency part of a resilient infrastructure.
Clayton Morris: I worry that governments will create digital-wallet systems and give people money to entice them onto the platform.
Imagine everyone receiving $2,000 in some government-approved stablecoin.
People join for the money.
Then everything increasingly moves onto those rails.
Is that too fearmongering?
Catherine Austin Fitts: Institutions will use whatever incentives they have available to move people into systems they control.
That may include convenience.
It may include subsidies.
It may include free money.
It may include requirements.
The important thing is to understand what channel you are entering and who controls it.
The fundamental question is whether you are willing to assert agency.
Clayton Morris: Before we finish, I want to ask about Iran.
When I look at conflict involving the United States, Israel, and Iran, I always want to look one layer deeper.
Who is financing it?
Who benefits?
Is this fundamentally about military conflict, or is there also a financial conflict over energy and the dollar system?
Catherine Austin Fitts: I see a broad strategy involving energy infrastructure, trade routes, and the dollar.
One goal is to maintain enough control over important energy resources and shipping routes to defend the dollar system.
U.S. LNG exports have grown dramatically.
Control over global energy infrastructure matters because energy and financial systems are deeply linked.
But there is another layer.
Countries such as Iran, China, and Russia may accept digital financial infrastructure while still wanting to control their own systems.
The conflict is partly about whose channel everyone is going to use.
Will a country operate through its own financial infrastructure?
Or through systems controlled by the Anglo-American financial establishment?
That same conflict appears domestically.
Many Americans also do not want their lives completely mediated through centralized digital systems.
The massive data-center buildout needs to be understood in that context.
People ask why so much computing infrastructure is being constructed.
Part of the answer is AI.
Part may be surveillance and spatial computing.
But if you are operating a global dollar system, the infrastructure is not merely serving Americans.
It potentially serves users around the planet.
Global financial networks require enormous data storage, processing, and communications capacity.
That includes undersea cables, satellite infrastructure, payment systems, markets, identity systems, and data centers.
There is a good book called Underground Empire about how global data flows through undersea cables and communications infrastructure.
Control over those physical networks matters.
If a country gains leverage over the cables passing through a strategic chokepoint, that can become part of a geopolitical conflict.
Financial systems may appear abstract, but underneath them are physical things: cables, satellites, data centers, servers, electricity generation, and communications infrastructure.
Modern Warfare increasingly combines financial infrastructure, communications infrastructure, surveillance, Artificial Intelligence, satellites, and physical weapons.
The ability to locate people through data and communications systems changes the nature of political and military power.
That realization is spreading among political leaders around the world.
It is another reason the debate about technology cannot be reduced simply to whether AI is good or bad.
The deeper question is: who controls the infrastructure, what is it optimized for, and what kind of society does it make possible?
Technology can be used to increase human productivity.
It can make goods cheaper.
It can automate manufacturing.
It can improve logistics.
It can help people produce more with less.
Or technology can primarily be used to monitor, manipulate, restrict, and control people.
Those are profoundly different development paths.
The challenge is not to stop technological development.
It is to make sure that technology increases human agency rather than eliminating it.
Clayton Morris: I’m naturally an optimistic person, so hearing you describe the present moment as an opportunity is encouraging.
I do think we’re seeing a shift.
People are increasingly concerned about surveillance.
They’re rediscovering analog life.
They’re questioning centralized systems.
Catherine Austin Fitts: What you’re seeing is productive, healthy people looking at centralized systems and saying:
“I want to get as far away from that as I can.”
That is the opportunity.
For decades, many people believed the only strategy was to persuade centralized institutions to reform themselves.
Now more people are asking a different question:
What can we build ourselves?
Where can we bank?
Who can we buy from?
What can we produce locally?
What can we own directly?
How can we reduce debt?
How can we protect cash?
How can we build technology that serves productive people instead of controlling them?
How do we find other people trying to do the same thing?
Those questions are much more powerful than simply asking centralized systems to change.
Before we finish, I want to give people one piece of homework.
On Solari we published an article on July 21 called How to Identify the Independent Pro-Decentralization Team and Keep Conflicts of Interest at Arm’s Length.
It originally began as an internal memo to our team.
The idea is simple.
If we are entering a period when more people want to become independent of centralized systems, then we need to learn how to identify one another.
We need to find the people building alternatives.
We need to understand conflicts of interest.
We need to network productive people together.
The centralized systems are extraordinarily powerful.
But they are not the only option.
There is an enormous opportunity to build something else.