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RE: The Global Financial Meltdown - Admin - 02-13-2012 A DOOMSDAY VIEW OF 2012 Introduction: The economic, political and social outlook for 2012 is profoundly negative. The almost universal consensus, even among mainstream orthodox economists is pessimistic regarding the world economy. Though even here their predictions understate the scope and depth of the crises. There are powerful reasons to believe that beginning in 2012, we are heading toward a steeper decline than what was experienced during the Great Recession of 2008 – 2009. With fewer resources, greater debt and increasing popular resistance to shouldering the burden of saving the capitalist system, the governments cannot bail out the system. Many of the major institutions and economic relations which were cause and consequence of world and regional capitalist expansion over the past three decades are in the process of disintegration and disarray. The previous economic engines of global expansion, the US and the European Union, have exhausted their potentialities and are in open decline. The new centers of growth, China, India, Brazil, Russia, which for a ‘short decade’ provided a new impetus for world growth have run their course and are de-accelerating rapidly and will continue to do so throughout the new year. The Collapse of the European Union Specifically, the crises wracked European Union will break up and the de facto multi-tiered structure will turn into a series of bilateral/multi-lateral trade and investment agreements. Germany,France , the Low and Nordic countries will attempt to weather the downturn. England, namely the City of London, in splendid isolation, will sink into negative growth, its financiers scrambling to find new speculative opportunities among the Gulf petrol-states and other ‘niches’. Eastern and Central Europe, particularly Poland and the Czech Republic, will deepen their ties to Germany but will suffer the consequences of the general decline of world markets. Southern Europe (Greece, Spain, Portugal and Italy) will enter into a deep depression as the massive debt payments fueled by savage assaults on wages and social benefits will severely reduce consumer demand. Depression level unemployment and under-employment running to one-third of the labor force will detonate year-long social conflicts, intensifying into popular uprisings. Eventually a break-up of the European Union is almost inevitable. The euro as a currency of choice will be replaced by or return to national issues accompanied by devaluations and protectionism. Nationalism will be the order of the day. Banks in Germany, France and Switzerland will suffer huge losses on their loans to the South. Major bailouts will become necessary, polarizing German and French societies,between taxpaying majorities and the bankers. Trade union militancy and rightwing pseudo ‘populism’ (neo-fascism) will intensify the class and national struggles A depressed, fragmented and polarized Europe will be less likely to join in any Zionist inspired US-Israeli military adventure against Iran (or even Syria). Crises ridden Europe will oppose Washington’s confrontationalist approach to Russia and China. The US: The Recession Returns with a Vengeance The US economy will suffer the consequences of its ballooning fiscal deficit and will not be able to spend its way out of the world recession of 2012. Nor can it count on ‘exporting’ its way out of negative growth by turning to previously dynamic Asia, as China, India and the rest of Asia are losing economic steam. China will grow far below its 9% moving average. India will decline from 8% to 5% or lower. Moreover, the Obama regime’s military policy of ‘encirclement’, its economic policy of exclusion and protectionism will preclude any new stimulus from China. Militarism Exacerbates the Economic Downturn The US and England will be the biggest losers from the Iraqi post war economic reconstruction. Of $186 billion dollars in infrastructure projects, US and UK corporations will gain less than 5% (Financial Times, 12/16/11, p 1 and 3). A similar outcome is likely in Libya and elsewhere. US imperial militarism destroys an adversary, plunging into debt to do so, and non-belligerents reap the lucrative post-war economic reconstruction contracts. The US economy will fall into recession in 2012 and the “jobless recovery of 2011” will be replaced by a steep increase of unemployment in 2012. In fact, the entire labor force will shrink as people losing their unemployment benefits will fail to register. Labor exploitation (“productivity”) will intensify as capitalists force workers to produce more, for less pay, thus widening the income gap between wages and profits. The economic downturn and growth of unemployment will be accompanied by savage cuts in social programs to subsidize financially troubled banks and industries. The debates among the parties will be over how large the cuts to workers and retirees will be to secure the ‘confidence’ of the bondholders. Faced with equally limited political choices, the electorate will react by voting out incumbents, abstaining and via spontaneous and organized mass movements, such as the “occupy Wall Street” protest. Disatisfaction, hostility and frustration will pervade the culture. Democratic demagogues will scapegoat China ,the Republican demagogues will blame the immigrants.Both will fulminate against “the islamo-fascists” and especially Iran.. New Wars in the Midst of Crises: Zionists Pull the Trigger The 52 Presidents of the Major American Jewish Organizations and their “Israel First” followers in Congress, State, Treasury and the Pentagon will push for war with Iran. If they are successful it will result in a regional conflagration and world depression. Given the extremist Israeli regimes’ success in securing blind obedience to its war policies from the US Congress and White House, any doubts about the real possibility of a major catastrophic outcome can be excluded. China: Compensatory Mechanisms in 2012 China will face the global recession of 2012 with several possibilities of ameliorating its impact. Beijing can shift toward producing goods and services for the 700 million domestic consumers currently out of the economic loop. By increasing wages, social services and environmental safety, China can compensate for the loss of overseas markets. China’s economic growth which is largely dependent on real estate speculation will be adversely affected when the bubble is burst .A sharp downturn will result.. This will lead to job losses, municipal bankruptcies and increased social and class conflicts. This can result in either greater repression or gradual democratization. The outcome will profoundly affect China’s market - state relations. The economic crises will likely strengthen state control over the market. Russia Faces the Crises Russia’s election of President Putin will lead to less collaboration in backing US promoted uprisings and sanctions against Russian allies and trading partners. Putin will turn toward greater ties with China and will benefit from the break-up of the EU and the weakening of NATO. The western media backed opposition will use its financial clout to erode Putin’s image and encourage investment boycotts though they will lose the Presidential elections by a big margin. The world recession will weaken the Russian economy and will force it to choose between greater public ownership or greater dependency on state funds to bail out prominent oligarchs. The Transition 2011 – 2012: From Regional Stagnation and Recession to World Crises The year 2011 laid the groundwork for the breakdown of the European Union. The crises began with the demise of the euro, stagnation in the US and the outbreak of mass protests against the obscene inequalities on a world scale. The events of 2011 were a dress rehearsal for a new year of full scale trade wars between major powers, sharpening inter-imperialist struggles and the likelihood of popular rebellions turning into revolutions. Moreover, the escalation of Zionist orchestrated war fever against Iran in 2011 promises the biggest regional war since the US-Indo-Chinese conflict. The electoral campaigns and outcomes of Presidential elections in the US, Russia and France will deepen the global conflicts and economic crises. During 2011 the Obama regime announced a policy of military confrontation with Russia and China and policies designed to undermine and degrade China’s rise as a world economic power. In the face of a deepening economic recession and with the decline of overseas markets, especially in Europe, a major trade war will unfold. Washington will aggressively pursue policies limiting Chinese exports and investments. The White House will escalate its efforts to disrupt China’s trade and investments in Asia, Africa and elsewhere. We can expect greater US efforts to exploit China’s internal ethnic and popular conflicts and to increase its military presence off China’s coastline. A major provocation or fabricated incident in this context is not to be excluded. The result in 2012 could lead to rabid chauvinist calls for a new costly ‘Cold War’. Obama has provided the framework and justification for a large scale long-term confrontation with China. This will be seen as a desperate effort to prop up US influence and strategic positions in Asia. The US military “quadrangle of power” – US-Japan-Australia-South Korea – with satellite support from the Philippines, will pit China’s market ties against Washington’s military build-up. Europe: Deeper Austerity and Intensified Class Struggle The austerity programs imposed in Europe, from England to Latvia to southern Europe will really take hold in 2012. Massive public sector firings and reduced private sector salaries and hiring’s will lead to a year of permanent class warfare and regime challenges. The ‘austerity policies’ in the South, will be accompanied by debt defaults which will result in bank failures in France and Germany.. England’s financial ruling class, isolated in Europe but dominant in England, will insist that the Conservatives ‘repress’ labor and popular unrest. A new tough neo-Thatcherite style of autocratic rule will emerge ; the Labor-trade union opposition will issue empty protests and tighten the leash on the rebellious populace. In a word, the regressive socio-economic policies put in place in 2011 set the stage for new police-state regimes and more acute and possibly bloody confrontations with workers and unemployed youth with no future. The Coming Wars that Ends America “As We Know It” Within the US, Obama has laid the groundwork for a new and bigger war in the Middle East by relocating troops from Iraq and Afghanistan and concentrating them facing Iran. To undermine Iran, Washington is expanding clandestine military and civilian operations against Iranian allies in Syria, Pakistan, Venezuela and China. The key to the US and Israeli bellicose strategy toward Iran is a series of wars in neighboring states, world- wide economic sanctions , cyber-attacks aimed at disabling vital industries and clandestine terrorist assassinations of scientists and military officials. The entire push, planning and execution of the US policies leading up to war with Iran can be empirically attributed to the Zionist power configuration occupying strategic positions in government, mass media and ‘civil society’. A systematic analysis of policymakers designing and implementing economic sanctions policy in Congress finds prominent roles for mega-Zionists like Ileana Ros-Lehtinen and Howard Berman; in the White House, Dennis Ross and Jeffrey Feltman in State; Stuart Levy and his replacement David Cohen in Treasury. The White House is totally beholden to Zionist fund raisers and takes its cue from the ‘52’ Presidents of the Major American Jewish Organizations. The Israeli-Zionist strategy is to encircle Iran, weaken it economically and attack its military. The Iraq invasion was the US’s first war for Israel; the Libyan war the second; the current proxy war against Syria is the third. These wars have destroyed Israel’s adversaries or are in the process of doing so. During 2011, economic sanctions, which were designed to create domestic discontent in Iran were the principle weapon of choice. The global sanctions campaign engaged the entire energies of the major Jewish-Zionist lobbies. They also faced no opposition in the mass media, Congress or the White Office. The Zionist power configuration(ZPC) faced virtually no criticism from any of the progressive, leftist and socialist journals, movements or grouplets – with a few notable exceptions. The past year’s relocation of troops from Iraq to the borders of Iran, the sanctions and the rising Big Push from Israel’s fifth column in the US means War in the Middle East. This likely means a “surprise” aerial and maritime missile attack by US forces. This will be based on a concocted pretext of an “imminent nuclear attack” cooked up by Mossad and transmitted by the ZPC to the Congress and White House for consumption and transmission to the world. It will be a destructive, bloody, prolonged war for Israel. The US will bear the direct military cost by itself but the rest of the world will pay a dear economic price. The Zionist promoted US war will convert the recession of early 2012 into a major depression by the end of the year and probably provoke mass upheavals. Conclusion All indications point to 2012 being a turning point year of unrelenting economic crises spreading outward from Europe and the US to Asia and its dependencies in Africa and Latin America. The crises will be truly global. Inter-imperial confrontations and colonial wars will undermine any efforts to ameliorate this crisis. In response mass movements will emerge which will move over time from protests and rebellions, hopefully to social revolutions and political power. RE: The Global Financial Meltdown - Admin - 02-20-2012 THE “GLOBAL CRISES OF CAPITALISM”; WHOSE CRISES, WHO PROFITS? James Petras http://www.informationclearinghouse.info/article30588.htm From the Financial Times to the far left, tons of ink has been spilt writing about some variant of the “Crises of Global Capitalism”. While writers differ in the causes, consequences and cures, according to their ideological lights, there is a common agreement that “the crises” threatens to end the capitalist system as we know it. There is no doubt that, between 2008-2009, the capitalist system in Europe and the United States suffered a severe shock that shook the foundations of its financial system and threatened to bankrupt its ‘leading sectors’. However, I will argue the ‘crises of capitalism’ was turned into a ‘crises of labor’. Finance capital, the principle detonator of the crash and crises, recovered, the capitalist class as a whole was strengthened, and most important of all, it utilized the political, social, ideological conditions created as a result of “the crises” to further consolidate their dominance and exploitation over the rest of society. In other words, the ‘crises of capital’ has been converted into a strategic advantage for furthering the most fundamental interests of capital: the enlargement of profits, the consolidation of capitalist rule, the greater concentration of ownership, the deepening of inequalities between capital and labor and the creation of huge reserves of labor to further augment their profits. Furthermore, the notion of a homogeneous global crisis of capitalism overlooks profound differences in performance and conditions, between countries, classes, and age cohorts. The Global Crises Thesis:The Economic and Social Argument The advocates of global crises argue that beginning in 2007 and continuing to the present, the world capitalist system has collapsed and recovery is a mirage. They cite stagnation and continuing recession in North America and the Eurozone. They offer GDP data hovering between negative to zero growth. Their argument is backed by data citing double digit unemployment in both regions. They frequently correct the official data which understates the percentage unemployed by excluding part-time, long-term unemployed workers and others. The ‘crises’ argument is strengthened by citing the millions of homeowners who have been evicted by the banks, the sharp increase in poverty and destitution accompanying job loses, wage reductions and the elimination or reduction of social services. “”Crises” is also associated with the massive increase in bankruptcies of mostly small and medium size businesses and regional banks. The Global Crises: The Loss of Legitimacy Critics, especially in the financial press, write of a “legitimacy crises of capitalism” citing polls showing substantial majorities questioning the injustices of the capitalist system, the vast and growing inequalities and the rigged rules by which banks exploit their size (“too big to fail”) to raid the Treasury at the expense of social programs. In summary the advocates of the thesis of a “Global Crises of Capitalism” make a strong case, demonstrating the profound and pervasive destructive effects of the capitalist system on the lives of the great majority of humanity. The problem is that a ‘crises of humanity’ (more specifically of salary ad wage workers) is not the same as a crisis of the capitalist system. In fact as we shall argue below growing social adversity, declining income and employment has been a major factor facilitating the rapid and massive recovery of the profit margins of most large scale corporations. Moreover, the thesis of a‘global’ crises of capitalism amalgamates disparate economies, countries, classes and age cohorts with sharply divergent performances at different historical moments. Global Crises or Uneven and Unequal Development? It is utterly foolish to argue for a “global crises” when several of the major economies in the world economy did not suffer a major downturn and others recovered and expanded rapidly. China and India did not suffer even a recession. Even during the worst years of the Euro-US decline,the asian giants grew on average about 8%. Latin America’s economies especially the major agro-mineral export countries (Brazil, Argentina, Chile, ) with diversified markets, especially in Asia, paused briefly (in 2009) before assuming moderate to rapid growth (between 3% to 7%) from 2010-2012. By aggregating economic data from the Euro-zone as a whole the advocates of global crises, overlooked the enormous disparities in performance within the zone. While Southern Europe wallows in a deep sustained depression,by any measure, from 2008 to the foreseeable future, German exports, in 2011, set a record of a trillion euros; its trade surplus reached 158 billion euros, after a155 billion euro surpluses in 2010. (BBC News, Feb. 8 2012). While aggregate Eurozone unemployment reaches 10.4%, the internal differences defy any notion of a “general crises”. Unemployment in Holland is 4.9%, Austria 4.1% and Germany 5.5% with employer claims of widespread skilled labor shortages in key growth sectors. On the other hand in exploited southern Europe unemployment runs to depression levels, Greece 21%, Spain 22.9%, Ireland 14.5%, and Portugal 13.6% (FT 1/19/12, p.7). In other words, “the crises” does not adversely affect some economies, that in fact profit from their market dominance and techno-financial strength over dependent, debtor and backward economies. To speak of a ‘global crises’ obscures the fundamental dominant and exploitative relations that facilitate ‘recovery’ and growth of the elite economies over and against their competitors and client states. In addition global crises theorists wrongly amalgamated crises ridden, financial-speculative economies (US, England) with dynamic productive export economies (Germany, China). The second problem with the thesis of a “global crises” is that it overlooks profound internal differences between age cohorts. In several European countries youth unemployment (16-25) runs between 30 to 50% (Spain 48.7%, Greece 47.2%, Slovakia 35.6%, Italy 31%, Portugal 30.8% and Ireland 29%) while in Germany, Austria and Holland youth unemployment runs to Germany 7.8%, Austria 8.2% and Netherlands 8.6% (Financial Times (FT) 2/1/12, p2). These differences underlie the reason why there is not a ‘global youth movement’ of “indignant” and “occupiers” .Five-fold differences between unemployed youth is not conducive to ‘international’ solidarity. The concentration of high youth unemployment figures explains the uneven development of mass- street protests especially centered in Southern Europe. It also explains why the northern Euro-American “anti-globalization” movement is largely a lifeless forum which attracts academic pontification on the “global capitalist crises” and the impotence of the “Social Forums” are unable to attract millions of unemployed youth from Southern Europe .They are more attracted to direct action. Globalist theorists overlook the specific way in which the mass of unemployed young workers are exploited in their dependent debt ridden countries. They ignore the specific way they are ruled and repressed by center-left and rightist capitalist parties. The contrast is most evident in the winter of 2012. Greek workers are pressured to accept a 20% cut in minimum wages while in Germany workers are demanding a 6% increase. If the ‘crises’ of capitalism is manifested in specific regions, so too does it affect different age/racial sectors of the wage and salaries classes. The unemployment rates of youth to older workers varies enormously: in Italy it is 3.5/1, Greece 2.5/1, Portugal 2.3/1, Spain 2.1/1 and Belgium 2.9/1. In Germany it is 1.5/1 (FT 2/1/12). In other words because of the higher levels of unemployment among youth they have a greater propensity for direct action ‘against the system’; while older workers with higher levels of employment (and unemployment benefits) have shown a greater propensity to rely on the ballot box and engage in limited strikes over job and pay related issues. The vast concentration of unemployed among young workers means they form the ‘available core’ for sustained action; but it also means that they can only achieve limited unity of action with the older working class experiencing single digit unemployment. However, it is also true that the great mass of unemployment youth provides a formidable weapon, in the hands of employers to threaten to replace employed older workers. Today, capitalists constantly resort to using the unemployed to lower wages and benefits and to intensify exploitation(dubbed to “increase productivity”) to increase profit margins. Far from being simply an indicater of ‘capitalist crises’, high levels of unemployment have served along with other factors’ to increase the rate of profit, accumulate income, widen income inequalities which augments the consumption of luxury goods for the capitalist class:the sales of luxury cars and watches is booming. Class Crises: The Counter-Thesis Contrary to the “global capitalist crises” theorists, a substantial amount of data has surfaced which refutes its assumptions. A recent study reports “US corporate profits are higher as a share of gross domestic product than at any time since 1950” (FT 1/30/12). US companies cash balances have never been greater, thanks to intensified exploitation of workers, and a multi-tiered wage systems in which new hires work for a fraction of what older workers receive (thanks to agreements signed by ‘door mat’ labor bosses). The “crises of capitalism” ideologues have ignored the financial reports of the major US corporations.According to General Motors 2011 report to its stockholders,they celebrated the greatest profit ever,turning a profit of $7.6 billion, surpassing the previous record of $6.7 billion in 1997.A large part of these profits results from the freezing of its underfunded US pension funds and extracting greater productivity from fewer workers-in other words intensified exploitation-and cutting hourly wages of new hires by half.(Earthlink News 2/16/12) Moreover the increased importance of imperialist exploitation is evident as the share of US corporate profits extracted overseas keeps rising at the expense of employee income growth.In 2011, the US economy grew by 1.7%,but median wages fell by 2.7%.Accordingto the financial press”the profit margens of the S and P 500 leapt from 6% to 9% of the GDP in the past three years,a share last achieved three generations ago.At roughly a third, the foreign share of these profits has more than doubled since 2000”(FT 2/13/12 P9.If this is a “capitalist crises”then who needs a capitalist boom ? Surveys of top corporations reveal that US companies are holding 1.73 trillion in cash, “the fruits of record high profit margins” (FT 1/30/12 p.6). These record profit margins result from mass firings which have led to intensifying exploitation of the remaining workers. Also negligible federal interest rates and easy access to credit allow capitalists to exploit vast differentials between borrowing and lending and investing. Lower taxes and cuts in social programs result in a growing cash pile for corporations. Within the corporate structure, income goes to the top where senior executives pay themselves huge bonuses. Among the leading S and P 500 corporations the proportion of income that goes to dividends for stockholders is the lowest since 1900 (FT 1/30/12, p.6). A real capitalist crisis would adversely affect profit margins, gross earnings and the accumulation of “cash piles”. Rising profits are being horded because as capitalists profit from intense exploitation , mass consumption stagnates. Crises theorists confuse what is clearly the degrading of labor, the savaging of living and working conditions and even the stagnation of the economy, with a ‘crises’ of capital: when the capitalist class increases its profit margins, hoards trillions, it is not in crises. The key point is that the ‘crises of labor’ is a major stimulus for the recovery of capitalist profits. We cannot generalize from one to the other. No doubt there was a moment of capitalist crises (2008-2009) but thanks to the capitalist state’s unprecedented massive transfer of wealth from the public treasury to the capitalist class – Wall Street banks in the first instance – the corporate sector recovered, while the workers and the rest of the economy remained in crises, went bankrupt and out of work. From Crises to Recovery of Profits: 2008/9 to 2012 The key to the ‘recovery’ of corporate profits had little to do with the business cycle and all to do with Wall Street’s large scale takeover and pillage of the US Treasury. Between 2009-2012 hundreds of former Wall Street executives, managers and investment advisers seized all the major decision-making positions in the Treasury Department and channeled trillions of dollars into leading financial and corporate coffers. They intervened financially troubled corporations,like General Motors, imposing major wage cuts and dismissals of thousands of workers. Wall Streeters in Treasury elaborated the doctrine of “Too Big to Fail” to justify the massive transfer of wealth. The entire speculative edifice built in part by a 234 fold rise in foreign exchange trading volume between 1977-2010 was restored (FT 1/10/12, p.7). The new doctrine argued that the state’s first and principle priority is to return the financial system to profitability at any and all cost to society, citizens, taxpayers and workers. “Too Big to Fail” is a complete repudiation of the most basic principle of the “free market” capitalist system: the idea that those capitalists who lose bear the consequences; that each investor or CEO, is responsible for their action. Financial capitalists no longer needed to justify their activity in terms of any contribution to the growth of the economy or “social utility”. According to the current rulers Wall Street must be saved because it is Wall Street, even if the rest of the economy and people sink (FT 1/20/12, p.11). State bailouts and financing are complemented by hundreds of billions in tax concessions, leading to unprecedented fiscal deficits and the growth of massive social inequalities. The pay of CEO’s as a multiple of the average worker went from 24 to 1 in 1965 to 325 in 2010 (FT 1/9/12, p.5). The ruling class flaunts their wealth and power aided and abetted by the White House and Treasury. In the face of popular hostility to Wall Street pillage of Treasury, Obama went through the sham of asking Treasury to impose a cap on the multi-million dollar bonuses that the CEO’s running bailed out banks awarded themselves. Wall Streeters in Treasury refused to enforce the executive order, the CEO’s got billions in bonuses in 2011 . President Obama went along, thinking he conned the US public with his phony gesture,while he reaped millions in campaign funds from Wall Street! The reason Treasury has been taken over by Wall Street is that in the 1990’s and 2000’s, banks became a leading force in Western economies. Their share of the GDP rose sharply (from 2% in the 1950’s to 8% in 2010” (FT 1/10/12, p.7). Today it is “normal operating procedure” for President’s to appoint Wall Streeter’s to all key economic positions; and it is ‘normal’ for these same officials to pursue policies that maximize Wall Street profits and eliminate any risk of failure no matter how risky and corrupt their practioners. The Revolving Door: From Wall Street to Treasury and Return Effectively the relation between Wall Street and Treasury has become a “revolving door”: from Wall Street to the Treasury Department to Wall Street. Private bankers take appointments in Treasury (or are recruited) to ensure that all resources and policies Wall Street needs are granted with maximum effort, with the least hindrance from citizens, workers or taxpayers. Wall Streeters in Treasury give highest priority to Wall Street survival, recovery and expansion of profits. They block any regulations or restrictions on bonuses or a repeat of past swindles. Wall Streeters ‘make a reputation’ in Treasury and then return to the private sector in higher positions, as senior advisers and partners. A Treasury appointment is a ladder up the Wall Street hierarchy. Treasury is a filling station to the Wall Street Limousine: ex Wall Streeters fill up the tank, check the oil and then jump in the front seat and zoom to a lucrative job and let the filling station (public) pay the bill. Approximately 774 officials (and counting) departed from Treasury between January 2009 and August 2011 (FT 2/6/12, p. 7). All provided lucrative “services” to their future Wall Street bosses finding it a great way to re-enter private finance at a higher more lucrative position. A report in the Financial Times Feb. 6, 2012 (p. 7) entitled appropriately Manhattan Transfer” provides typical illustrations of the Treasury-Wall Street “revolving door”. Ron Bloom went from a junior banker at Lazard to Treasury, helping to engineer the trillion dollar bailout of Wall Street and returned to Lazard as a senior adviser. Jake Siewert went from Wall Street to becoming a top aide to Treasury Secretary Tim Geithner and then graduated to Goldman Sachs, having served to undercut any cap on Wall Street bonuses. Michael Mundaca, the most senior tax official in the Obama regime came from the Street and then went on to a highly lucrative post in Ernst and Young a corporate accounting firm, having help write down corporate taxes during his stint in “public office”. Eric Solomon, a senior tax official in the infamous corporate tax free Bush Administration made the same switch. Jeffrey Goldstein who Obama put in charge of financial regulation and succeeded in undercutting popular demands, returned to his previous employer Hellman and Friedman with the appropriate promotion for services rendered. Stuart Levey who ran AIPAC sanctions against Iran policies out if Treasury’s so-called “anti- terrorist agency” was hired as general counsel by HSBC to defend it from investigations for money laundering (FT 2/6/12, p. 7). In this case Levey moved from promoting Israels’ war aims to defending an international bank accused of laundering billions in Mexican cartel money. Levey, by the way spent so much time pursuing Israels’ Iran agenda that he totally ignored the Mexican drug cartels’ billion dollar money laundering cross-border operations for the better part of a decade. Lew Alexander a senior advisor to Geithner in designing the trillion dollar bail out is now a senior official in Nomura, the Japanese bank. Lee Sachs went from Treasury to Bank Alliance, (his own “lending platform”). James Millstein went from Lazard to Treasury bailed out AIG insurance run into the ground by Greenberg and then established his own private investment firm taking a cluster of well-connected Treasury officials with him. The Goldman-Sachs-Treasury “revolving door” continues today. In addition to past and current Treasury heads Paulson and Geithner, former Goldman partner Mark Patterson was recently appointed Geithner’s “chief of staff”. Tim Bowler former Goldman managing director was appointed by Obama to head up the capital markets division. It should be abundantly clear that elections, parties and the billion dollar electoral campaigns have little to do with “democracy” and more to do with selecting the President and legislators who will appoint non-elected Wall Streeters to make all the strategic economic decisions for the 99% of Americans. The policy results of the Wall Street-Treasury revolving door are clear and provide us with a framework for understanding why the “profit crises” has vanished and the crises of labor has deepened. The “Policy Achievements” of the Revolving Door The Wall Street-Treasury conundrum (WSTC) has performed herculean and audacious labor for finance and corporate capital. In the face of universal condemnation of Wall Street by the vast majority of the public for its swindles, bankruptcies, job losses and mortgage foreclosures, the WSTC publically backed the swindlers with a trillion dollar bailout. A daring move on the face of it; that is if majorities and elections counted for anything. Equally important the WSTC dumped the entire “free market” ideology that justified capitalist profits based on its “risks”, by imposing the new dogma of “too big to fail” in which the state treasury guarantees profits even when capitalists face bankruptcy, providing they are billion dollar firms. The WSTC dumped the capitalist principle of “fiscal responsibility” in favor of hundreds of billions of dollars in tax cuts for the corporate-financial ruling class, running up record peace time budget deficits and then having the audacity to blame the social programs supported by popular majorities. (Is it any wonder these ex-Treasury officials get such lucrative offers in the private sector when they leave public office?) Thirdly, Treasury and the Central Bank (Federal Reserve) provide near zero interest loans that guarantees big profits to private financial institution which borrow low from the Fed and lend high, (including back to the Government!) especially in purchasing overseas Government and corporate bonds. They receive anywhere from four to ten times the interest rates they pay. In other words the taxpayers provide a monstrous subsidy for Wall Street speculation. With the added proviso, that today these speculative activities are now insured by the Federal government, under the “Too Big to Fail” doctrine. Under the ideology of “regaining competitiveness” the Obama economic team (from Treasury, the Federal Reserve, Commerce, Labor) has encouraged employers to engage in the most aggressive shedding of workers in modern history. Increased productivity and profitability is not the result of “innovation” as Obama, Geithner and Bernache claim; it is a product of a state labor policy which deepens inequality by holding down wages and raising profit margins. Fewer workers producing more commodities. Cheap credit and bailouts for the billion dollar banks and no refinancing for households and small and medium size firms leading to bankruptcies, buyouts and ‘consolidation’ namely, greater concentration of ownership. As a result the mass market stagnates but corporate and bank profits reach record levels. According to financial experts under the WSTC “new order” “bankers are a protected class who enjoy bonuses regardless of performance, while relying on the taxpayer to socialize their losses” (FT 1/9/12, p.5). In contrast labor, under Obama’s economic team, faces the greatest insecurity and most threatening situation in recent history: “in what is unquestionably novel is the ferocity with which US business sheds labor now that executive pay and incentive schemes are linked to short term performance targets” (FT 1/9/2012, p. 5). Economic Consequences of State Policies Because of the Wall Street “ takeover” of strategic economic policy positions in Government we can now understand the paradox of record profit margins in the midst of economic stagnation. We can comprehend why the capitalist crises has, at least temporarily, been replaced by a profound crises of labor. Within the power matrix of Wall Street-Treasury Dept. all the old corrupt and exploitative practices that led up to the 2008-2009 crash have returned: multi-billion dollar bonuses for investment bankers who led the economy into the crash; banks “snapping up billions of dollars of bundled mortgage products that resemble the sliced and diced debt some (sic) blame for the financial crises” (FT 2/8/12, p.1). The difference today is that these speculative instruments are now backed by the taxpayer (Treasury). The supremacy of the financial structure of the pre-crises US economy is in place and thriving … “only” the US labor force has sunk into greater unemployment, declining living standards, widespread insecurity and profound discontent. Conclusion: The Case Against Capitalism and for Socialism The profound crises of 2008-2009 provoked a spate of questioning of the capitalist system, even among many of its most ardent advocates (FT 1/8/12 to 1/30/12) criticism abounded. ‘Reform, regulation and redistribution’ were the fare of financial columnists. Yet the ruling economic and governing class took no heed. The workers are controlled by door mat union leaders and lack a political instrument. The rightwing pseudo populists embrace an even more virulent pro capitalist agenda, calling for across the board elimination of social programs and corporate taxes. Inside the state a major transformation has taken place which effectively smashed any link between capitalism and social welfare, between government decision-making and the electorate. Democracy has been relaced by a corporate state, founded on the revolving door between Treasury and Wall Street, which funnels public wealth to private financial coffers. The breach between the welfare of society and the operations of the financial architecture is definitive. The activity of Wall Street has no social utility, its practioners enrich themselves with no redeeming activity. Capitalism has demonstrated conclusively, that it thrives through the degradation of tens of millions of workers and rejects the endless pleas for reform and regulation. Real existing capitalism cannot be harnessed to raising living standards or ensuring employment free of fear of large scale, sudden and brutal firings. Capitalism, as we experience it over the past decade and for the foreseeable future, is in polar opposition to social equality, democratic decision-making and collective welfare. Record capitalist profits are accrued by pillaging the public treasury, denying pensions and prolonging ‘work till you die’, bankrupting most families with exorbitant private corporate medical and educational costs. More than ever in recent history, record majorities reject the rule by and for the bankers and the corporate ruling class (FT 2/6/12, p. 6). Inequalities between the top 1% and the bottom 99% have reached record proportions. CEO’s earn 325 times that of an average worker (FT 1/9/12, p.5). Since the state has become the ‘foundation’ of the economy of the Wall Street predators, and since ‘reform’ and regulation has dismally failed , it is time to consider a fundamental systemic transformation that begins via a political revolution which forcibly ousts the non-elected financial and corporate elites running the state for their own exclusive interests. The entire political process,including elections, are profoundly corrupt: each level of office has its own inflated price tag.The current Presidential contest will cost $2 to $3 billion dollars to determine which of the servants of Wall Street will preside over the revolving door. Socialism is no longer the scare word of the past. Socialism involves the large-scale reorganization of the economy, the transfer of trillions from the coffers of predator classes’ of no social utility to the public welfare. This change can finance a productive and innovative economy based on work and leisure, study and sport. Socialism replaces the everyday terror of dismissal with the security that brings confidence, assurance and respect to the workplace. Workplace democracy is at the heart of the vision of 21st century socialism. We begin by nationalizing the banks and eliminating Wall Street. Financial institutions are redesigned to create productive employment, to serve social welfare and to preserve the environment. Socialism would begin the transition, from a capitalist economy directed by predators and swindlers and a state at their command, toward an economy of public ownership under democratic control. James Petras has a long history of commitment to social justice, working in particular with the Brazilian Landless Workers Movement for 11 years. In 1973-76 he was a member of the Bertrand Russell Tribunal on Repression in Latin America. He writes a monthly column for the Mexican newspaper, La Jornada, and previously, for the Spanish daily, El Mundo. He received his B.A. from Boston University and Ph.D. from the University of California at Berkeley. His most recent book is” The Arab Revolt and the Imperialist Counter Attack” (Clarity Press 2012) 2nd edition. The Global Financial Meltdown - Admin - 02-20-2012 HOW GREECE COULD TAKE DOWN WALL STREET Ellen Brown www.webofdebt.com/articles/greece.php In an article titled “Still No End to ‘Too Big to Fail,’” William Greider wrote in The Nation on February 15th: Financial market cynics have assumed all along that Dodd-Frank did not end “too big to fail” but instead created a charmed circle of protected banks labeled “systemically important” that will not be allowed to fail, no matter how badly they behave. That may be, but there is one bit of bad behavior that Uncle Sam himself does not have the funds to underwrite: the $32 trillion market in credit default swaps (CDS). Thirty-two trillion dollars is more than twice the U.S. GDP and more than twice the national debt. CDS are a form of derivative taken out by investors as insurance against default. According to the Comptroller of the Currency, nearly 95% of the banking industry’s total exposure to derivatives contracts is held by the nation’s five largest banks: JPMorgan Chase, Citigroup, Bank of America, HSBC, and Goldman Sachs. The CDS market is unregulated, and there is no requirement that the “insurer” actually have the funds to pay up. CDS are more like bets, and a massive loss at the casino could bring the house down. It could, at least, unless the casino is rigged. Whether a “credit event” is a “default” triggering a payout is determined by the International Swaps and Derivatives Association (ISDA), and it seems that the ISDA is owned by the world’s largest banks and hedge funds. That means the house determines whether the house has to pay. The Houses of Morgan, Goldman and the other Big Five are justifiably worried right now, because an “event of default” declared on European sovereign debt could jeopardize their $32 trillion derivatives scheme. According to Rudy Avizius in an article on The Market Oracle (UK) on February 15th, that explains what happened at MF Global, and why the 50% Greek bond write-down was not declared an event of default. If you paid only 50% of your mortgage every month, these same banks would quickly declare you in default. But the rules are quite different when the banks are the insurers underwriting the deal. MF Global: Canary in the Coal Mine? MF Global was a major global financial derivatives broker until it met its unseemly demise on October 30, 2011, when it filed the eighth-largest U.S. bankruptcy after reporting a “material shortfall” of hundreds of millions of dollars in segregated customer funds. The brokerage used a large number of complex and controversial repurchase agreements, or “repos,” for funding and for leveraging profit. Among its losing bets was something described as a wrong-way $6.3 billion trade the brokerage made on its own behalf on bonds of some of Europe’s most indebted nations. Avizius writes: [A]n agreement was reached in Europe that investors would have to take a write-down of 50% on Greek Bond debt. Now MF Global was leveraged anywhere from 40 to 1, to 80 to 1 depending on whose figures you believe. Let’s assume that MF Global was leveraged 40 to 1, this means that they could not even absorb a small 3% loss, so when the “haircut” of 50% was agreed to, MF Global was finished. It tried to stem its losses by criminally dipping into segregated client accounts, and we all know how that ended with clients losing their money. . . . However, MF Global thought that they had risk-free speculation because they had bought these CDS from these big banks to protect themselves in case their bets on European Debt went bad. MF Global should have been protected by its CDS, but since the ISDA would not declare the Greek “credit event” to be a default, MF Global could not cover its losses, causing its collapse. The house won because it was able to define what “ winning” was. But what happens when Greece or another country simply walks away and refuses to pay? That is hardly a “haircut.” It is a decapitation. The asset is in rigor mortis. By no dictionary definition could it not qualify as a “default.” That sort of definitive Greek default is thought by some analysts to be quite likely, and to be coming soon. Dr. Irwin Stelzer, a senior fellow and director of Hudson Institute’s economic policy studies group, was quoted in Saturday’s Yorkshire Post (UK) as saying: It’s only a matter of time before they go bankrupt. They are bankrupt now, it’s only a question of how you recognise it and what you call it. Certainly they will default . . . maybe as early as March. If I were them I’d get out [of the euro]. The Midas Touch Gone Bad In an article in The Observer (UK) on February 11th titled “The Mathematical Equation That Caused the Banks to Crash,” Ian Stewart wrote of the Black-Scholes equation that opened up the world of derivatives: The financial sector called it the Midas Formula and saw it as a recipe for making everything turn to gold. But the markets forgot how the story of King Midas ended. As Aristotle told this ancient Greek tale, Midas died of hunger as a result of his vain prayer for the golden touch. Today, the Greek people are going hungry to protect a rigged $32 trillion Wall Street casino. Avizius writes: The money made by selling these derivatives is directly responsible for the huge profits and bonuses we now see on Wall Street. The money masters have reaped obscene profits from this scheme, but now they live in fear that it will all unravel and the gravy train will end. What these banks have done is to leverage the system to such an extreme, that the entire house of cards is threatened by a small country of only 11 million people. Greece could bring the entire world economy down. If a default was declared, the resulting payouts would start a chain reaction that would cause widespread worldwide bank failures, making the Lehman collapse look small by comparison. Some observers question whether a Greek default would be that bad. According to a comment on Forbes on October 10, 2011: [T]he gross notional value of Greek CDS contracts as of last week was €54.34 billion, according to the latest report from data repository Depository Trust & Clearing Corporation (DTCC). DTCC is able to undertake internal netting analysis due to having data on essentially all of the CDS market. And it reported that the net losses would be an order of magnitude lower, with the maximum amount of funds that would move from one bank to another in connection with the settlement of CDS claims in a default being just €2.68 billion, total. If DTCC’s analysis is correct, the CDS market for Greek debt would not much magnify the consequences of a Greek default—unless it stimulated contagion that affected other European countries. It is the “contagion,” however, that seems to be the concern. Players who have hedged their bets by betting both ways cannot collect on their winning bets; and that means they cannot afford to pay their losing bets, causing other players to also default on their bets. The dominos go down in a cascade of cross-defaults that infects the whole banking industry and jeopardizes the global pyramid scheme. The potential for this sort of nuclear reaction was what prompted billionaire investor Warren Buffett to call derivatives “weapons of financial mass destruction.” It is also why the banking system cannot let a major derivatives player—such as Bear Stearns or Lehman Brothers—go down. What is in jeopardy is the derivatives scheme itself. According to an article in The Wall Street Journal on January 20th: Hanging in the balance is the reputation of CDS as an instrument for hedgers and speculators—a $32.4 trillion market as of June last year; the value that may be assigned to sovereign debt, and $2.9 trillion of sovereign CDS, if the protection isn’t seen as reliable in eliciting payouts; as well as the impact a messy Greek default could have on the global banking system. Players in the future may simply refuse to play. When the house is so obviously rigged, the legitimacy of the whole CDS scheme is called into question. As MF Global found out the hard way, there is no such thing as “risk-free speculation” protected with derivatives. ARGENTINE ADVICE FOR GREECE : DEFAULT NOW http://rt.com/news/argentina-advice-greece-default-033/print/ Here in Argentina, when we watch the terrible things that are happening today in Greece, we can only exclaim, “Hey!! That’s exactly what happened in Argentina in 2001 and 2002…!” A decade ago, Argentina too went through a systemic Sovereign Public Debt collapse resulting in social turmoil, worker hardship, rioting and street fights with the police. Some months before Argentina exploded, then-President Fernando de la Rúa – forced to resign at the height of the 2001 crisis – had called back as finance minister the notorious pro-banker, Trilateral Commission member and Rockefeller/Soros/Rhodes protégée Domingo Cavallo. Cavallo was the gruesome architect of Argentina’s political and economic capitulation to the US and UK when he was President Carlos Menem’s foreign minister and economy minister in the ’90s. Menem and Cavallo are primarily responsible for Argentina’s signing of a formal Treaty of Capitulation with the UK/US after the 1982 Falklands War, opening up our economy to unrestricted privatization, deregulation and grossly excessive US Dollar-indebtedness, almost tripling our sovereign debt in a few short years (see my February 11, 2012 article British Laughter in the Falklands). The Plan? Prepare Argentina for planned weakening, bankster take-over and collapse, so that a new weakening-takeover-collapse cycle could begin. In 2001, Cavallo was back to finish his work… During that very hot summer in December 2001, true to its Latin temperament, Argentina even had four (yes, 4!) presidents in just one week. One of them, Adolfo Rodriguez Sáa, who only lasted three days, at least did one thing right, even if he did it the wrong way: he declared Argentina’s default on its sovereign debt. All hell broke loose! The international bankers and IMF did everything they could to break Argentina’s back; global media pundits predicted all kinds of impending catastrophes. Debt default meant Argentina would have to weather the pain and agony alone, being cast out by the “international financial community”. ‘You’re not the boss of me!’ But no matter how bad it got, it would always be better to do that without the bankers, without the IMF’s, European Central Bank’s, US Fed’s and US Treasury’s “help”. Better to sort out your mess on your own, than to have parasitic banker vultures carving out their pound of flesh from your nation’s decaying social and economic body. And how bad did it get in 2002? A 40 per cent drop in GDP; 30 per cent unemployment; 50 per cent of the population fell below the poverty line; dramatic, almost overnight, devaluation against the US Dollar from 1 peso per dollar to 4 pesos per dollar (then it tapered down to 3 pesos per dollar); if you had a US dollar Bank account, the government forced you to change it into pesos at the rate of 1.40 pesos per dollar. What did Argentina’s government do wrong? In the months leading to collapse it bowed to all the bankers and IMF-mandated measures and “recipes”, which were actually the very cause of collapse: Argentina was loaned far more than it could pay back…. And the banker knew it! This was described in our December 19, 2011 article, Argentina: Tango Lessons. Successive governments since then have continued to be functional to banker interests by rolling over debt 30 to 40 years, aggregating huge interest and in 2006 paying the full debt to the IMF – almost US$10 billion in full, cash and in US dollars (sole entity given most-favoured creditor status). Same vultures circling Greece Today, Greece is confronted with a similarly tough decision. Either it keeps its sovereignty, or it capitulates to the “Vulture Troika” – the European Central Bank, European Commission and International Monetary Fund – who work for the Bankers, not the People. Not surprisingly, today we find that Greece too has a Trilateral Commission Rockefeller/Rothschild man at the helm: Lucas Papademos who is doing the same things Argentina did in 2001/2. Argentina not only suffered Cavallo, but President De la Rúa himself was co-founder of the local Global Power Masters lobby, CARI – Argentine International Relations Council – local branch of the New York-based Council on Foreign Relations, networking with the Trilateral Commission / Bilderberg mafia. Greece today should do what Argentina did a decade ago: better to endure pain and hardship, and sort out the mess made by your politicians in connivance with international bankers on your own, wielding whatever shred of sovereignty you still have than allowing the Banker Vultures sitting in Frankfurt, New York and London decide your future. It’s the Neocolonial Private Power Domination Model, stupid! Or do you think it’s just bad luck, bad judgment and coincidence that countries – Greece, Argentina, Spain, Italy, Portugal, Brazil, Mexico, Iceland, Ireland, Russia, Malaysia, Ukraine, Indonesia, South Korea, Thailand, France, even the US and UK – always borrow too much from the bankers and then “discover” that they cannot pay it back and that, symmetrically, the same bankers – CitiCorp, HSBC, Deutsche, Commerz, BNP, Goldman Sachs, Bank of America, JPMorganChase, BBVA lend too much to countries and then “discover” they cannot collect? No! That is the very yellow-brick road that leads to the Emerald City of “debt restructuring”, “debt refinancing”, and “sovereign debt bond mega-swaps” that snowball sovereign debt, spreading it over 20, 40 or more years into the future. That guarantees unimaginably colossal interest profits for the Mega-Bankers and for all those nice politicians, media players, traders and brokers, without whom that would not be possible. This is a Model. It must keep rolling and rolling and rolling… As this Monster Machine steams forwards, it completely tramples on, overruns, destroys, flattens and obliterates people, jobs, workers, health services, pensions, education, national security and just about everything human on its path. Run by parasitic usurer technocrats, it does not care what it destroys because it has no ethics; no Christian, Muslim or Buddhist morals. It only worships a greedy golden idol of money, money and more money. This is 21st-century Money Power Slavery. Three generations of Argentines saw hopes dashed and dreams thwarted by this Monster Machine, suffering the hardship, woes and humiliations that come when countries give up sovereignty. Bring back the drach! So, Greece: Just default on your “sovereign debt”! Just revert to the drachma! Just say “No, thanks!” to the German bankers and the Troika Vultures. Please, Greece: just say “No!” to your Trilateral Commission president! You will be setting a strong precedent for your European neighbours. Like Spain, which is hurting so badly right now for similar reasons. Like Italy, with its Trilateral Commission Prime Minister Mario Monti (also Trilateral’s European Chairman!). Greece, the Cradle of Democracy, can teach the world a lesson in True Democracy by kicking these parasites out of the country, which will hopefully trigger kicking them out of Europe and one day, kicking them out of the global economy. Because what Greece and Argentina and Italy and Spain suffer today is not True Democracy, but rather a distorted bastard imitation that systematically yields control to the Global Power Masters at the Trilateral Commission, Bilderberg and Mega-Banking Overworld. They run the whole “democracy show”, whereby all countries end up having “the best democracy that money can buy”… which is no democracy at all… The Money Power juggernaut is steaming full speed towards us all. If Greece falls, who’ll be next? Spain? Italy? Portugal? Argentina (yet again!!!)? So what if Greece’s reverting to the drachma marks the beginning of the end for the euro? Let Italy revert to the lira, Spain to the peseta, Portugal to the escudo…! A National Currency is a key National Sovereignty factor. All governments should understand that you either govern for the people and against the bankers; or you govern for the bankers and against the people. GREECE SHOWS US HOW TO PROTEST AGAINST A FAILED SYSTEM John Holloway http://www.guardian.co.uk/commentisfree/2012/feb/17/greece-protest-failed-system I do not like violence. I do not think that very much is gained by burning banks and smashing windows. And yet I feel a surge of pleasure when I see the reaction in Athens and the other cities in Greece to the acceptance by the Greek parliament of the measures imposed by the European Union. More: if there had not been an explosion of anger, I would have felt adrift in a sea of depression. The joy is the joy of seeing the much-trodden worm turn and roar. The joy of seeing those whose cheeks have been slapped a thousand times slapping back. How can we ask of people that they accept meekly the ferocious cuts in living standards that the austerity measures imply? Do we want them to just agree that the massive creative potential of so many young people should be just eliminated, their talents trapped in a life of long-term unemployment? All that just so that the banks can be repaid, the rich made richer? All that, just to maintain a capitalist system that has long since passed its sell-by date, that now offers the world nothing but destruction. For the Greeks to accept the measures meekly would be to multiply depression by depression, the depression of a failed system compounded by the depression of lost dignity. The violence of the reaction in Greece is a cry that goes out to the world. How long will we sit still and see the world torn apart by these barbarians, the rich, the banks? How long will we stand by and watch the injustices increase, see the health service dismantled, education reduced to uncritical nonsense, the water resources of the world privatised, communities wiped out and the earth torn up for the profits of mining companies? The attack that is so acute in Greece is taking place all over the world. Everywhere money is subjecting human and non-human life to its logic, the logic of profit. This is not new, but the intensity and breadth of the attack is new, and new too is the general awareness that the current dynamic is a dynamic of death, that it is likely that we are all heading towards the annihilation of human life on earth. When the learned commentators explain the details of the latest negotiations between the governments on the future of the eurozone, they forget to mention that what is being negotiated so blithely is the future of humanity. We are all Greeks. We are all subjects whose subjectivity is simply being flattened by the steamroller of a history determined by the movement of the money markets. Or so it seems and so they would have it. Millions of Italians protested over and over again against Silvio Berlusconi but it was the money markets that brought him down. The same in Greece: demonstration after demonstration against George Papandreou, but in the end it was the money markets that dismissed him. In both cases, loyal and proven servants of money were appointed to take the place of the fallen politicians, without even a pretence of popular consultation. This is not even history made by the rich and powerful, though certainly they profit from it: it is history made by a dynamic that nobody controls, a dynamic that is destroying the world, if we let it. The flames in Athens are flames of rage, and we rejoice in them. And yet, rage is dangerous. If it is personalised or turned against particular groups of people (the Germans, in this case), it can so easily become purely destructive. It is no coincidence that the first minister to resign in protest against the latest round of austerity measures in Greece was a leader of the extreme right party, Laos. Rage can so easily become a nationalist, even fascist rage; a rage that does nothing to make the world better. It is important, then, to be clear that our rage is not a rage against the Germans, not even a rage against Angela Merkel or David Cameron or Nicolas Sarkozy. These politicians are just arrogant and pitiful symbols of the real object of our rage – the rule of money, the subjection of all life to the logic of profit. Love and rage, rage and love. Love has been an important theme in the struggles that have redefined the meaning of politics over the last year, a constant theme of the Occupy movements, a profound feeling even at the heart of the violent clashes in many parts of the world. Yet love walks hand in hand with rage, the rage of "how dare they take our lives away from us, how dare they treat us like objects". The rage of a different world forcing its way through the obscenity of the world that surrounds us. Perhaps. That pushing through of a different world is not just a question of rage, although rage is part of it. It necessarily involves the patient construction of a different way of doing things, the creation of different forms of social cohesion and mutual support. Behind the spectacle of the burning banks in Greece lies a deeper process, a quieter movement of people refusing to pay bus fares, electricity bills, motorway tolls, bank debts; a movement, born of necessity and conviction, of people organising their lives in a different way, creating communities of mutual support and food networks, squatting empty buildings and land, creating community gardens, returning to the countryside, turning their backs on the politicians (who are now afraid to show themselves in the streets) and creating directly democratic forms of taking social decisions. Still insufficient perhaps, still experimental, but crucial. Behind the spectacular flames, it is this searching for and creation of a different way of living that will determine the future of Greece, and of the world. For this coming Saturday action throughout the world has been called for in support of the revolt in Greece. We are all Greeks. RE: The Global Financial Meltdown - Admin - 02-26-2012 GLOBAL SYSTEMIC CRISIS EUROLAND 2012-2016 PERPETUATION OF A NEW GLOBAL POWER ON CONDITION OF DEMOCRATIZATION http://www.leap2020.eu/GEAB-N-62-is-available-Global-Systemic-Crisis-Euroland-2012-2016-Perpetuation-of-a-new-global-power-on-condition-of_a9183.html As anticipated by LEAP/E2020, the fear largely fed by the City of London and Wall Street of a Eurozone break-up over the Greek debt crisis proved unfounded. Euroland has come out of this violently conflictual episode with its "natural allies" much reinforced. According to our team, 2012 will mark the starting point for the perpetuation of a new global power, Euroland. However, this development remains conditional on the question of democratization that we analyze in this issue, through the three sequences of Euroland’s evolution 2012-2016. These five years will lead Europeans to profoundly influence a global geopolitical rebalancing whilst domestically a radical new phase of European integration is opening up in the coming months. Moreover, this GEAB issue anticipates the US Dollar’s progress as a dominant currency for global commercial transactions. The 2012 to 2013 period will in fact bring great changes in this area directly affecting global trade as the relative power of the currencies involved. In addition recommendations on currencies, gold, Greece, Russia, the US economy and stock markets, LEAP/E2020 offers a preview in this issue of the next book to be published in March 2012 by Anticipolis Editions entitled "2015 - The Great fall of Western real estate" by Sylvain Périfel and Philippe Schneider. For this press release, LEAP/E2020 has chosen to present its anticipations on the first of the three Euroland sequences 2012-2016. As previously announced, LEAP/E2020 is presenting its anticipations for Europe over the 2012-2016 period in this issue. In the context of a global systemic crisis, two strategic trends will mark these five years for Europeans: on the one hand the stabilization of Euroland as a new full global power (1); and, on the other, the absolute requirement for the European elite to raise the democratic freeze which now weighs heavily on the process of European integration. In this issue our team analyzes why, starting from the second half of 2012, conditions will be at their best for Euroland to take on these two trends fully (2). Of course, numerous economic, financial, strategic and political challenges remain for Europeans; but, with the global systemic crisis entering its phase of reconstituting world geopolitical balances, with Euroland, they have a “new sovereign” able to positively influence the course of events (3). Of course, this capacity is conditional upon the democratic legitimization of the whole of Euroland governance. From 2012 to 2016, three major sequences will characterize Euroland’s stabilization as a full sovereign and the lifting of the democratic freeze. Before going into the European case in detail, our team would like to remind readers that the big difference today between the anticipation of the United States’ development and Europe’s is due to the fact that the United States has a completely paralysed antiquated politico-institutional system, whereas European integration has a strong dynamic associated with great institutional flexibility. The absence of major reform in the United States since the beginning of the crisis in 2008 compared with the impressive series of European institutional leaps and bounds since mid-2010 (developments considered impossible by many just two years ago) offers a striking illustration. In the American case, the question of anticipation of events thus forces to be able to identify the points of rupture of a sclerotic system. In the European case, it’s a question on the other hand of targeting the course of events and evaluating their pace of development (4). Which is much simpler in fact when, like LEAP/E2020, one has a good understanding of how Europe functions institutionally, and has a good sense for public opinion in the various Member States (5). The last point of this preamble, the European decision-making process will considerably improve for Euroland since, from now on, only the countries using the Euro will take the decisions. Moreover, it’s a feature of these years of crisis to have finally clarified an absurd situation which saw countries outside the Eurozone, even anti-Euro (like the United Kingdom), take part in decisions on the Euro. But nevertheless, the very nature of the European decision-making process, implying negotiations and compromises, will continue to show it as being chaotic and slow, as opposed to national decision making. It will be much less than before, but still there all the same because it’s the very characteristic of the functioning of European integration; ultimately it is also one of its conditions of effectiveness, in order that each State really applies what has been decided. Now, let’s move on to the analysis of the three major sequences which will characterise the 2012-2016 period. These three sequences have been presented out of sequence to make them clearer; but it’s obvious of course that they all overlap. 1st Sequence - 2012-2013: End of Euroland’s consolidation of its budget-finance operations / Launching of the first pro-active common socio-economic policies / Acceleration of the distinction between Euroland-EU By mid-2012, as we have already indicated in preceding GEAB issues, Euroland will be endowed with a whole set of new national leaders (Spain, Italy, Greece, France, Slovenia, Belgium,…) and the following months there will be elections in Germany. Euroland will thus be led by men and women who, for the most part, came to power after the start of the crisis. Until the end of 2011 it wasn’t the case; quite the contrary, most Eurozone leaders were electoral products of the world before the crisis. The fact that these leaders, mediocre politicians in the main, and completely unprepared for the collapse of the values/beliefs which they held until 2008, were nevertheless able to face relatively well the global crisis, then the Greek crisis and its effects, against the background of a violent attack on the European single currency by City of London and Wall Street, was proof of the dynamics of European integration at work within Euroland. In fact, our team considers that they were the generation of politicians the least prepared to “save European integration” since they were generally not very interested in Europe and often under the control of the banks and Washington. To pick up from an analysis of Franck Biancheri’s going back to 1989, “the babyboomer politicians are likely to break the European project of which they understand nothing, prior to the “Erasmus” generations entering the fray”. It will never be known what would have happened if the global systemic crisis had exploded five years later, but what is certain is that they will have managed to avoid “breaking Europe”. Even Nicolas Sarkozy, who we consider has been the worst French president of the Fifth Republic for France and Europe, as our readers know, deserves credit on this subject for having had the savvy to push ahead on the need for summits for Euroland leaders only. What this episode teaches us is that if even unprepared and unreliable leaders knew how to find the answers allowing the building of the bases for Euroland in the middle of an historical crisis, it’s reasonable to believe that more inspired and better prepared leaders (at least due to the fact that they will have lived through this crisis before coming to power) will be able to fare at least as well, if not better (6). This analysis is reinforced by another determining factor of the European decision-making process: in the absence of the system’s democratization, the technocrats are the real masters of the game on the EU circuit including Frankfurt, Brussels,… and national capitals (7). They, since the creation of ECSC in 1951, wove the fabric of European integration. They, who offered our disorientated leaders the solutions of these last two years. They, who are already preparing the initiatives for the next few years. But to be able to take the leap of European integration, they need the politicians. And the politicians are only ready to take risks in two cases: when they are afraid and when they are visionaries (8). Fear was the incentive in 2010/2011. The vision of the future will be that in 2012/2016. Two elements determine this swing from reaction to project, because it’s indeed that: fear involves only reactions; the vision of the future is typified by projects. On one side, after the “bolt tightening” episode, quite rightly demanded by the countries in surplus (Germany, Netherlands, Finland,…) (9), we saw the idea developing everywhere amongst the Euroland elite that it was also necessary to project oneself positively in the future (recovery, common investments, Eurobonds,…). Transition by the austerity phase was inevitable, as we had anticipated since 2008/2009, because Euroland integration requires common rules, actually applied, and to stop the policies of collective over-indebtedness promoted these last decades by the bankers and the financial centres of the City and Wall Street. Greece is a textbook case. We comment further in our recommendations in this issue but we are very clear in this issue: to overcome the Greek problem, it’s necessary to break the parasitic ruling class which led this country to ruin. However, Euroland hasn’t really the means to do it to date, apart from really showing the Greeks that nobody trusts their leaders any more. It’s also dissuasive as regards other countries’ leaders, trying to keep power by debt. Thus 2012 and 2013 will see the finalization of the new rules for common budget, tax and economic governance in Euroland. Common budgets control, progress towards fiscal harmonization (10), repatriation of the Euro financial markets to Euroland (11), reinforced financial regulation, a European credit rating agency, a financial transactions tax, Eurobonds, introduction of a maximum limit of exposure of government debt to non-Euroland financial markets,… For the teams coming to power in Euroland, these developments are obvious; whereas they were revolutionary for their predecessors. But, on these bases, the two years to come will also see the launching of several major common initiatives intended to build the future: a common program of public investment (common infrastructures in the fields of transport, education (12), training, health, science and technology,…). Their financing will start one of the big debates of these next two years because it will be impossible, according to our team, to avoid recourse to direct borrowing from citizens, thus short-circuiting the banks and financing on the financial markets. For an amount equivalent to that of the MES, 500 billion Euros, half will cut government debt dependence on the international financial markets (via Eurobonds) and half will finance major future projects. If the MES is an embryo of European Monetary Fund, this major loan will be the bedrock of a European Treasury. And it will belong to the panoply of trans-European social solidarity tools which will emerge by 2014, for gradually replacing the numerous traditional EU structural funds (13). Moreover, from the second half of 2012, Euroland will see the French’s constructive return to the European project. It’s a reality forgotten by many since it’s been 17 years since it disappeared from the European decision-making process. Whether it be Jacques Chirac or Nicolas Sarkozy, none of the French presidents since 1995 had a European streak (unlike their predecessors - De Gaulle, Giscard and Mitterrand). Jacques Chirac at least had the Gaullist backbone of the refusal to be subservient, which enabled him to resist the general recruitment for the invasion of Iraq, in partnership with the German chancellor Gerhard Schröder and Russian president Vladimir Putin. Nicolas Sarkozy himself hasn’t had any backbone, national or European. He will have done nothing, only cross the political landscape (14) driven by interests foreign to the common good of the French and Europeans. These declining or anecdotal trends have, of course, been reinforced by the Anglo-Saxon domination of the European agenda, pushing expansion and the European Market to the detriment of integration and European power. In the end, that’s 17 years that France has ceased making its intellectual contribution to the advance of European integration (15). This “French absence” at European level was only the reflection of a growing disconnect between Parisian power and the true country (16); a situation which, according to LEAP/E2020, is approaching its denouement with the overwhelming rejection of the current president by the French. Without too much of a wait, the next election of François Hollande at France’s helm will allow the bond between the true country (17) and French leaders to be rebuilt, at least for a year or two; sufficient time to revitalize the French contribution at European level. The socialist candidate’s personality also works in favour of this development. He’s a politician for whom Europe is a key component of his commitment, along Mitterrand-Delors lines; and he has the right profile for future Euroland leaders over this 2012-2016 period: they will have to be good team players because managing Euroland will be a team business and not one for individuals. These five years will more resemble an in-house stowing of a space station’s various pieces of equipment than a cavalry charge. Each epoch needs a certain kind of leader: the Euroland of the next few years needs European team members, reliable and inventive, knowing where they want to go and aware that they can’t get there on their own. Beyond any partisan considerations, in his course and the conduct of his campaign, our team thinks that François Hollande has shown that he has these qualities (18). In this context, he has to urgently reposition his campaign speeches on the renegotiation of the current European treaty into promising to negotiate additions to it. It’s necessary to reassure the German and Dutch partners in particular; and it’s useful for Angela Merkel to avoid making the major strategic error of entering the campaign at Nicolas Sarkozy’s side (19). For, on the one hand, this does nothing to avoid the defeat of the latter (and even the opposite); and, on the other, that will make the first months of Franco-German co-operation after the 6th May 2012 more difficult, even if it’s urgent to open the driving core of Euroland to other countries (Netherlands, Spain, Italy,…). At the same time these two years will see the acceleration of the difference between Euroland and the EU. It is a phenomenon which will in fact characterize the whole of the decade. Euroland which functions to a large extent in the form of informal networks will gradually have to equip itself with some institutional bases. They will be modest because nobody wants a repeat of the bureaucracy which definitively ossified Brussels; but modelled on the ECB, the MES, a secretariat of Euroland governance will prove to be necessary very quickly, then certain specific institutions as well as a specific Euroland component within the European Parliament (meetings reserved for the European representatives of the Euroland countries to discuss specific Euroland questions, modelled on the Euroland summits). This development will be all the more strong and rapid that the United Kingdom will try to slow down or block Euroland actions. There was such an example of the counter-productive effect of the British veto last December; it quite simply obliged the others to move on without London. In general, Eurolanders will seek to use the existing EU institutions but distancing non-Eurolanders from the decision-making processes. Each time it’s impossible or too complicated, a new institutional base will be created. This development will be all the easier as all the EU countries, except for the United Kingdom, have a rationale for adhesion to the Euro in fact (20). Most EU countries know that they will be in Euroland by 2017; which greatly facilitates Euroland progress for the years to come. Thus, after about fifteen years of mistakes under British and US influence, during which Europeans were misled on enlargement projects without a future (Turkey, Ukraine,…) (21) and illusory economic-financial strategies (Lisbon treaty strategy,…), the next few years will bear the mark of the return to political and economic integration, as was the case at the time of the first EU renaissance in 1984-1992. According To LEAP/E2020, 2012/2013 will thus mark the beginning of the second EU renaissance. Notes: (1) That’s to say being able to call up all a “sovereign’s” attributes: currency, budget, economy, international policy and defence. (2) By the way, we point out that LEAP/E2020’s anticipations since 2006 /2007 on Euroland’s emergence due to the global systemic crisis proved to be right; just like our warnings against the forecasts of those who saw, still only a few months ago, the Eurozone breaking up and the Euro disappearing. Remember that on this subject our anticipations have always been founded on rational and objective analyses, respecting the principles of political anticipation methodology, whatever the personal opinions of our team members. It’s that, and only that, which has enabled us, since 2006, to calmly face the dominant thinking or the periods of mass hysteria which always feels outraged by refusals to think like everyone else. In a crisis period, lucidity is essential to try to understand events and their consequences. Yet lucidity is incompatible with “ready to think”, whether dictated by power or fear. By way of an anecdote, CNBC ’s headline on 15/2/2012 on a better Euroland economic performance than forecast by the Anglo-Saxon “experts” was very revealing: “Euroland GNP better than hoped for. What does that mean?”. On the one hand, one can legitimately wonder whether the first part of the title shouldn’t have said “ Euroland GNP “not as bad as hoped” to reflect these “experts’” real state of mind ? And, on the other hand, the question in the second part of the headline sounds like a kind of confession: “and if one had taken our desires for realities?”. (3) This trend is reinforced by the massive arrival during this decade of the generations born after the signature of the Treaty of Rome, the first generations for which Europe is a natural socio-political area… unlike the babyboomer generation, privileged pool of the Eurosceptics. (4) Of which the Anglo-Saxon media which nourish the world media goldfish bowl are incapable, in particular because they generally look through the British prism which is ideologically unable to understand the continental process of European integration as other than a threat to avert or scorn. Two attitudes which aren’t very favourable for generating lucidity over events. (5) For information, nearly a year before the French and Dutch referenda on the European Constitution, in the context of the splitting of responsibilities between national and European institutions, we anticipated that the “No” votes would carry the day in the two countries (when all the surveys gave victory to the “Yes” votes). (6) In previous GEAB issues we have already evoked the comparison with the Euro-missile crisis, which in less than three years led the European Community, after a change of leaders, from an existential crisis to the first renaissance of the Community project (1984-1992). (7) It is so true that they are able to replace failing politicians in government posts like Mario Monti in Italy or Lucas Papademos in Greece… and with an unquestionable success for the moment in the case of Mario Monti. This situation thus leads citizens to cast a very critical eye over their national political classes, pushing them to reform themselves in the next few years. Source: Independent, 15/02/2012 (8) The two cases are exclusive since a visionary politician has little chance of letting himself be trapped in a frightening situation; whereas the frightened politician is the one who has exactly no idea how to get out of a trap. (9) Countries which Nicolas Sarkozy’s France clung to, so as not to appear as belonging to the other camp (10) Once the Greek situation has been stabilized, Ireland and its tax dumping will be the centre of Euroland’s attention. (11) The City has led a two year “blitzkrieg” in vain to try and break the Eurozone. From now on Euroland will increase the pressure each year to reduce the already declining power of the City. And David Cameron, like the British Eurosceptics financed by the hedge funds, won’t be able to do much by the way, whatever they think only 34 kilometres separate Dover from Calais. (12) In particular, a vast programme, successor to Erasmus, simultaneously training the European elite, of a sufficient number and quality; and to offer the European dimension to hundreds of thousands of young people each year, is a very practical form of democratizing access to Europe. (13) A few years ago our team ironically explained to the high level officials in Brussels that if they didn’t set up trans-Euroland solidarity policies to face asymmetrical shocks, then it would be necessary for them to invest heavily in European riot police to control citizens’ anger. (14) We remind that we have been anticipating since November 2010, in GEAB N°49, that Nicolas Sarkozy wouldn’t be reelected in 2012. (15) The episodes of the poor European constitution project and the adoption of the Treaty of Lisbon without a referendum are two other illustrations. (16) A president re-elected by default in 2002 when Jacques Chirac faced with Jean-Marie le Pen; and deception over the “goods”, identified too late after his election, with Nicolas Sarkozy in 2007. (17) One of the axes of his policy exactly aims at decentralizing, “de-parisianising” French power. Source: Débats 2012, 27/01/2012 (18) He will have five years to prove that he can be François EurHollande. (19) An error largely interpreted as such in Germany. (20) Including Denmark which is waiting for the right moment for a referendum on the subject (source: Euronews, 23/01/2012). The Czech case is very simple: with Vaclav Klaus no longer president, the Czech Republic will join the remainder of the European countries to prepare for Euro entry. It will be a phenomenon similar to the 2007 replacement of the Polish Kaczynski twins, pro-American and anti-European, by current the Prime Minister Donald Tusk, leading to a 180° turn in European policy. A final remark on the Klaus case: his party like his re-election to the presidency in 2008, via the vote of members of the Czech parliament, faced multiple accusations of corruption. Its “representativeness” of Czech public opinion is measured with these kind of “details”. In 2013, the president will finally be elected by universal suffrage. Source: Rue89, 09/02/2011 (21) This drift of the original European project prevented citizens from concentrating on the question of the governance/democratization tandem since Europe was always a movable feast. Thus, even at young generation level, the official promotion of this Europe without borders prevented the emergence of new initiatives to try and influence their future. Our team can note that currently, and at very high speed, this situation is changing radically. RE: The Global Financial Meltdown - Admin - 03-25-2012 FEDERAL RESERVE IS A CACHE OF STOLEN ASSETS http://www.batr.org/totalitariancollectivism/100911.html The American "TC" Saga - Part 1 - INTRODUCTION The American "TC" Saga - Part 2 - STATE The American "TC" Saga - Part 3 - CHURCH The American "TC" Saga - Part 4 - FAMILY The American "TC" Saga - Part 5 - ECONOMY The American "TC" Saga - Part 6 - SCHOOL The American "TC" Saga - Part 7 - MEDIA The American "TC" Saga - Part 8 - CORPORATIONS and LAW The American "TC" Saga - Part 9 - CORPORATE STATE The American "TC" Saga - Part 10 - GLOBAL CONTROLLERS BREAKING ALL THE RULES BREAKING ALL THE RULES Forum Totalitarian Collectivism Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of sovereignty of Parliament and of democracy is idle and futile... Once a nation parts with control of its credit, it matters not who makes the nation’s laws... Usury once in control will wreck any nation. William Lyon Mackenzie King Federal Reserve is a Cache of Stolen Assets The American Revolution, in no small part, was a repudiation of the central banking tyranny exported to the New World by the Bank of England. Few legacies have grown more despotic than the consequences of living under the rule of fractional reserve banking. Many good willed conservatives understand that the system is imploding. Some envision a second American Revolution that expels the remnant Tories that have hijacked our Federalism separation of powers form of government. Woefully, the prospects for a States Rights revolt are slim. However, the scenario of a domestic French Revolution style carnage is brewing with every escalation of the pompous arrogance worthy of a Jean-Joseph, marquis de Laborde or the manipulative usury of the House of Rothschild. The eruption of populist outrage is long overdue. The lack of objective mainstream media coverage is expected. Their attempt to spin the natural disguise for a corrupt establishment in the hearts of sincere and persecuted citizens is typical. The elite’s message is that they will either control the movement, or at the very least, strip it from any positive synergism. Send in the clowns, like Michael Moore. Wall Street Capitalism: A Love Affair explains the hideous agenda of the clueless socialists that condemn all things Wall Street, while advancing the ultimate goals of the New World Order globalists. Street theater no longer is enough. The peasants are rallying their pitchforks, as they storm the Bastille; however, they got their GPS coordinates wrong. The correct address is 33 Liberty Street, New York, NY. That is the location of the dominate Federal Reserve temple. When the public finally comes to grips with the real cause of the unsustainable debt, they will understand that the private central banking system bears the ultimate redress for their sins against America and all humanity. A Privatised Money Supply, presents an informative analysis. Assuming a reserve ratio of 1:10 the table below shows how $100 of interest-free government created money (GCM), i.e. cash, is used by the banking system to create $900 of interest-bearing bank-created money (BCM) in the form of loans. The reserve ratio is the ratio of cash reserves (GCM) to deposits (mostly BCM). In our example the banking system consists of 50 banks, but the money creation process would be essentially the same for any number of banks from one to infinity. Modern accounting uses double entry book keeping where liabilities and assets are kept exactly equal. A bank’s liabilities are its deposits. Its assets are its loans (including bonds which are loans to government) and its cash reserves. Here is how the banking system creates money. In column 1 $100 of cash is deposited in Bank 1. Bank 1 creates a $90 loan in the form of a deposit as shown in column 2. This deposit is pure BCM and, because it must be paid back with interest, is an asset. With a reserve ratio of 1:10 the bank puts aside $10 in cash (column 3) to meet cash demands from the person who deposited the $100. The remaining $90 in cash covers the $90 loan. The borrower proceeds to write cheques on his $90 deposit and these cheques get deposited in Bank 2. For these cheques Bank 2 demands and gets cash from Bank 1 until eventually all $90 ends up in Bank 2. (Naturally in real life more than two banks are involved. Thus the transactions are not so simple and orderly as they must be here for explanatory purposes, but everything comes out in the wash to give exactly the same result.) However the original $100 deposit still stands to the credit of the depositor (a liability for Bank 1) even though $90 of it has moved on to Bank 2. And the $90 loan Bank 1 created when it first received the original $100 deposit also stands (an asset for Bank 1). Banks 2, 3, 4, etc. then repeat this process eventually creating $900 of BCM in the form of loans (as shown in column 2) and dispersing the original $100 as cash reserves throughout the banking system (as shown in column 3). Note that $900 of the $1000 of deposits in column 1 is BCM, i.e. credit created by the banks in the form of loans. (Banks make loans by "depositing money" in your account which you must pay back with interest. Thus they are loan/deposits.) Only the original $100 cash deposit is GCM. One other point. As a loan/deposit gets spent, a deposit in some other bank grows in inverse proportion. Thus the banks have increased the money supply by $900 and not by $1800. That would be double counting. The important points, however, are as follows: this ingenious system is called fractional reserve banking; it creates debt for the sole purpose of enriching the banking class; it is a subtle form of theft; historically it was condemned as a form of usury. Column 1 Column 2 Column 3 LIABILITIES ASSETS ASSETS Deposits (90% BCM) = Loan/Deposits (100% BCM) + Cash Reserves (100% GCM) Bank 1 Bank 2 Bank 3 . . . Bank 49 Bank 50 Totals $100.00 90.00 81.00 . . . 0.64 0.57 $994.85 $90.00 81.00 72.90 . . . 0.57 0.52 $895.36 $10.00 9.00 8.10 . . . 0.6 0.6 $99.43 Max Amount $1000.00 = $900.00 + $100.00 This method of theft operates as the normal course of business. What the banksters do with the money they obtain from debt created money is even more repulsive. All the financial speculative instruments of leveraged trading just compound the heist. So what do these outlaws do with all the money? The end net result is that they buy, especially at rock bottom prices, all the real assets that the filthy money can purchase. When you think of Wall Street greed, go beyond the usual suspects and focus on the controllers of the assets that are under the hegemony of the central bank. Here lies the reason why the rebellion must remove the engine of enslavement from the landscape for any future financial system of commerce. Think about who really owns the land, the buildings and the resources in our country. In order to really understand the scope and extent of the economy, the differential between actual Main Street enterprise, that feeds, clothes and shelters the population, is minuscule when compared to the financial assets, both liquid and real property, that is under the command and control of the central bank. Most individuals do not own property encumbrance free. Most debt is owed to the banksters. The middle class is in a tailspin because the Fed has a zero interest rate policy that effectively diminished your return on capital of your savings to nothing. The same is not true for the banks. The fact that they have in excess of a 2 Trillion Dollars cash hoard on their balance sheets and refuse to lend out money to the general public, demonstrates that the inside money is waiting to pick up even more real assets, when the signal comes for the total collapse. TARP, QE2 and the Twist are all ploys to enrich the selective banks that are part of the orthodox Fed fraternity. Technically all federal charted banks have an ownership interest in the Fed. Who among us are so naive to think that every bank is equal to the sacredly held corporate interlocking directorates that make and direct monetary policy? Only when the middle class takes to the streets with a spontaneous civil disobedience commitment that dwarfs the Tea Party movement, will the central banking tyranny be eliminated. All the fraudulent debt that funded the asset acquisitions of crooks must be clawed back. As long as the banksters hide behind the shield of corporation personhood, LLC liability exemption and government guaranteed loans, the ordinary family will continue to be reduced to perpetual and permanent poverty. What kind of revolution is coming to America? The lesson of the French élan of bloodletting to remove an aristocratic class is not pretty. However, a national discussion needs to concentrate on: 1) Methods of eliminating the Federal Reserve fraud and restoring an honest money system for commerce 2) Repudiation of the corporatist "Free Trade" global business model and a return to a merchant class free enterprise independent domestic economy 3) Confiscation of assets and wealth acquired through illegal systematic RICO style schemes that demand treble damages from their ill-gotten gain Americans deserve property right protections from the criminal extortion and the cold-blooded offenses that the banksters used, to steal the national wealth. The expanding protest must result in a true restoration of a traditional upwardly mobile society, not an expanded nanny state. The suffocating debt and the profane system that spawned it must end. The term "Citizen" does not apply to elitist plutocrats. If Americans want to stave off a 21st century version, of the Committee of Public Safety, get behind the "Revolt against the Fed". Tear down the House of Rothschild. This is one time the concept of "Reparations" has standing in a legitimate court of law. SARTRE – October 9, 2011 ? Banking was conceived in iniquity and born in sin... Bankers own the earth. Take it away from them but leave them the power to create money, and, with a flick of the pen, they will create enough money to buy it back again... Take this great power away from them and all the great fortunes like mine will disappear and they ought to disappear, for then this would be a better and happier world to live in... But, if you want to be the slaves of the bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit. Sir Josiah Stamp (attributed) (A director of the Bank of England in the 1920s) The Global Financial Meltdown - Admin - 03-25-2012 WHY I AM LEAVING GOLDMAN SACHS Greg Smith http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it. To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for. It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief. But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied. I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work. When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival. Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave. How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence. What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym. Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all. It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact. It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are. These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen. When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there. My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore. I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients - for very much longer. The Global Financial Meltdown - Admin - 03-26-2012 WALL STREET CONFIDENCE TRICK: HOW "INTEREST RATE SWAPS" ARE BANKRUPTING LOCAL GOVERNMENTS Ellen Brown http://www.globalresearch.ca/index.php?context=va&aid=29907 Far from reducing risk, derivatives increase risk, often with catastrophic results. — Derivatives expert Satyajit Das, Extreme Money (2011) The “toxic culture of greed” on Wall Street was highlighted again last week, when Greg Smith went public with his resignation from Goldman Sachs in a scathing oped published in the New York Times. In other recent eyebrow-raisers, LIBOR rates—the benchmark interest rates involved in interest rate swaps—were shown to be manipulated by the banks that would have to pay up; and the objectivity of the ISDA (International Swaps and Derivatives Association) was called into question, when a 50% haircut for creditors was not declared a “default” requiring counterparties to pay on credit default swaps on Greek sovereign debt. Interest rate swaps are less often in the news than credit default swaps, but they are far more important in terms of revenue, composing fully 82% of the derivatives trade. In February, JP Morgan Chase revealed that it had cleared $1.4 billion in revenue on trading interest rate swaps in 2011, making them one of the bank’s biggest sources of profit. According to the Bank for International Settlements: [I]nterest rate swaps are the largest component of the global OTC derivative market. The notional amount outstanding as of June 2009 in OTC interest rate swaps was $342 trillion, up from $310 trillion in Dec 2007. The gross market value was $13.9 trillion in June 2009, up from $6.2 trillion in Dec 2007. For more than a decade, banks and insurance companies convinced local governments, hospitals, universities and other non-profits that interest rate swaps would lower interest rates on bonds sold for public projects such as roads, bridges and schools. The swaps were entered into to insure against a rise in interest rates; but instead, interest rates fell to historically low levels. This was not a flood, earthquake, or other insurable risk due to environmental unknowns or “acts of God.” It was a deliberate, manipulated move by the Fed, acting to save the banks from their own folly in precipitating the credit crisis of 2008. The banks got in trouble, and the Federal Reserve and federal government rushed in to bail them out, rewarding them for their misdeeds at the expense of the taxpayers. How the swaps were supposed to work was explained by Michael McDonald in a November 2010 Bloomberg article titled “Wall Street Collects $4 Billion From Taxpayers as Swaps Backfire”: In an interest-rate swap, two parties exchange payments on an agreed-upon amount of principal. Most of the swaps Wall Street sold in the municipal market required borrowers to issue long-term securities with interest rates that changed every week or month. The borrowers would then exchange payments, leaving them paying a fixed-rate to a bank or insurance company and receiving a variable rate in return. Sometimes borrowers got lump sums for entering agreements. Banks and borrowers were supposed to be paying equal rates: the fat years would balance out the lean. But the Fed artificially manipulated the rates to the save the banks. After the credit crisis broke out, borrowers had to continue selling adjustable-rate securities at auction under the deals. Auction interest rates soared when bond insurers’ ratings were downgraded because of subprime mortgage losses; but the periodic payments that banks made to borrowers as part of the swaps plunged, because they were linked to benchmarks such as Federal Reserve lending rates, which were slashed to almost zero. In a February 2010 article titled “How Big Banks' Interest-Rate Schemes Bankrupt States,” Mike Elk compared the swaps to payday loans. They were bad deals, but municipal council members had no other way of getting the money. He quoted economist Susan Ozawa of the New School: The markets were pricing in serious falls in the prime interest rate. . . . So it would have been clear that this was not going to be a good deal over the life of the contracts. So the states and municipalities were entering into these long maturity swaps out of necessity. They were desperate, if not naive, and couldn't look to the Federal Government or Congress and had to turn themselves over to the banks. Elk wrote: As almost all reasoned economists had predicted in the wake of a deepening recession, the federal government aggressively drove down interest rates to save the big banks. This created opportunity for banks – whose variable payments on the derivative deals were tied to interest rates set largely by the Federal Reserve and Government – to profit excessively at the expense of state and local governments. While banks are still collecting fixed rates of from 4 percent to 6 percent, they are now regularly paying state and local governments as little as a tenth of one percent on the outstanding bonds – with no end to the low rates in sight. . . . [W]ith the fed lowering interest rates, which was anticipated, now states and local governments are paying about 50 times what the banks are paying. Talk about a windfall profit the banks are making off of the suffering of local economies. To make matters worse, these state and local governments have no way of getting out of these deals. Banks are demanding that state and local governments pay tens or hundreds of millions of dollars in fees to exit these deals. In some cases, banks are forcing termination of the deals against the will of state and local governments, using obscure contract provisions written in the fine print. By the end of 2010, according to Michael McDonald, borrowers had paid over $4 billion just to get out of the swap deals. Among other disasters, he lists these: California’s water resources department . . . spent $305 million unwinding interest-rate bets that backfired, handing over the money to banks led by New York-based Morgan Stanley. North Carolina paid $59.8 million in August, enough to cover the annual salaries of about 1,400 full-time state employees. Reading, Pennsylvania, which sought protection in the state’s fiscally distressed communities program, got caught on the wrong end of the deals, costing it $21 million, equal to more than a year’s worth of real-estate taxes. In a March 15th article on Counterpunch titled “An Inside Glimpse Into the Nefarious Operations of Goldman Sachs: A Toxic System,” Darwin Bond-Graham adds these cases from California: The most obvious example is the city of Oakland where a chronic budget crisis has led to the shuttering of schools and cuts to elder services, housing, and public safety. Oakland signed an interest rate swap with Goldman in 1997. . . . Across the Bay, Goldman Sachs signed an interest rate swap agreement with the San Francisco International Airport in 2007 to hedge $143 million in debt. Today this agreement has a negative value to the Airport of about $22 million, even though its terms were much better than those Oakland agreed to. Greg Smith wrote that at Goldman Sachs, the gullible bureaucrats on the other side of these deals were called “muppets.” But even sophisticated players could have found themselves on the wrong side of this sort of manipulated bet. Satyajit Das gives the example of Harvard University’s bad swap deals under the presidency of Larry Summers, who had fought against derivatives regulation as Treasury Secretary in 1999. There could hardly be more sophisticated players than Summers and Harvard University. But then who could have anticipated, when the Fed funds rate was at 5%, that the Fed would push it nearly to zero? When the game is rigged, even the most experienced gamblers can lose their shirts. Courts have dismissed complaints from aggrieved borrowers alleging securities fraud, ruling that interest-rate swaps are privately negotiated contracts, not securities; and “a deal is a deal.” So says contract law, strictly construed; but municipal governments and the taxpayers supporting them clearly have a claim in equity. The banks have made outrageous profits by capitalizing on their own misdeeds. They have already been paid several times over: first with taxpayer bailout money; then with nearly free loans from the Fed; then with fees, penalties and exaggerated losses imposed on municipalities and other counterparties under the interest rate swaps themselves. Bond-Graham writes: The windfall of revenue accruing to JP Morgan, Goldman Sachs, and their peers from interest rate swap derivatives is due to nothing other than political decisions that have been made at the federal level to allow these deals to run their course, even while benchmark interest rates, influenced by the Federal Reserve’s rate setting, and determined by many of these same banks (the London Interbank Offered Rate, LIBOR) linger close to zero. These political decisions have determined that virtually all interest rate swaps between local and state governments and the largest banks have turned into perverse contracts whereby cities, counties, school districts, water agencies, airports, transit authorities, and hospitals pay millions yearly to the few elite banks that run the global financial system, for nothing meaningful in return. Why are these swaps so popular, if they can be such a bad deal for borrowers? Bond-Graham maintains that capitalism as it functions today is completely dependent upon derivatives. We live in a global sea of variable interest rates, exchange rates, and default rates. There is no stable ground on which to anchor the economic ship, so financial products for “hedging against risk” have been sold to governments and corporations as essentials of business and trade. But this “financial engineering” is sold, not by disinterested third parties, but by the very sharks who stand to profit from their counterparties’ loss. Fairness is thrown out in favor of gaming the system. Deals tend to be rigged and contracts to be misleading. How could local governments reduce their borrowing costs and insure against interest rate volatility without putting themselves at the mercy of this Wall Street culture of greed? One possibility is for them to own some banks. State and municipal governments could put their revenues in their own publicly-owned banks; leverage this money into credit as all banks are entitled to do; and use that credit either to fund their own projects or to buy municipal bonds at the market rate, hedging the interest rates on their own bonds. The creation of credit has too long been delegated to a cadre of private middlemen who have flagrantly abused the privilege. We can avoid the derivatives trap by cutting out the middlemen and creating our own credit, following the precedent of the Bank of North Dakota and many other public banks abroad. The Global Financial Meltdown - Admin - 04-22-2012 THE EUROPEAN STABILIZATION MECHANISM OR HOW GOLDMAN SACHS CAPTURED EUROPE Ellen Brown http://www.globalresearch.ca/index.php?context=va&aid=30403 Web of Debt The Goldman Sachs coup that failed in America has nearly succeeded in Europe—a permanent, irrevocable, unchallengeable bailout for the banks underwritten by the taxpayers. In September 2008, Henry Paulson, former CEO of Goldman Sachs, managed to extort a $700 billion bank bailout from Congress. But to pull it off, he had to fall on his knees and threaten the collapse of the entire global financial system and the imposition of martial law; and the bailout was a one-time affair. Paulson’s plea for a permanent bailout fund—the Troubled Asset Relief Program or TARP—was opposed by Congress and ultimately rejected. By December 2011, European Central Bank president Mario Draghi, former vice president of Goldman Sachs Europe, was able to approve a 500 billion Euro bailout for European banks without asking anyone’s permission. And in January 2012, a permanent rescue funding program called the European Stability Mechanism (ESM) was passed in the dead of night with barely even a mention in the press. The ESM imposes an open-ended debt on EU member governments, putting taxpayers on the hook for whatever the ESM’s Eurocrat overseers demand. The bankers’ coup has triumphed in Europe seemingly without a fight. The ESM is cheered by Eurozone governments, their creditors, and “the market” alike, because it means investors will keep buying sovereign debt. All is sacrificed to the demands of the creditors, because where else can the money be had to float the crippling debts of the Eurozone governments? There is another alternative to debt slavery to the banks. But first, a closer look at the nefarious underbelly of the ESM and Goldman’s silent takeover of the ECB . . . . The Dark Side of the ESM The ESM is a permanent rescue facility slated to replace the temporary European Financial Stability Facility and European Financial Stabilization Mechanism as soon as Member States representing 90% of the capital commitments have ratified it, something that is expected to happen in July 2012. A December 2011 youtube video titled “The shocking truth of the pending EU collapse!”, originally posted in German, gives such a revealing look at the ESM that it is worth quoting here at length. It states: The EU is planning a new treaty called the European Stability Mechanism, or ESM: a treaty of debt. . . . The authorized capital stock shall be 700 billion euros. Question: why 700 billion? [Probable answer: it simply mimicked the $700 billion the U.S. Congress bought into in 2008.] . . . . [Article 9]: “. . . ESM Members hereby irrevocably and unconditionally undertake to pay on demand any capital call made on them . . . within seven days of receipt of such demand.” . . . If the ESM needs money, we have seven days to pay. . . . But what does “irrevocably and unconditionally” mean? What if we have a new parliament, one that does not want to transfer money to the ESM? . . . . [Article 10]: “The Board of Governors may decide to change the authorized capital and amend Article 8 . . . accordingly.” Question: . . . 700 billion is just the beginning? The ESM can stock up the fund as much as it wants to, any time it wants to? And we would then be required under Article 9 to irrevocably and unconditionally pay up? [Article 27, lines 2-3]: “The ESM, its property, funding, and assets . . . shall enjoy immunity from every form of judicial process . . . .” Question: So the ESM program can sue us, but we can’t challenge it in court? [Article 27, line 4]: “The property, funding and assets of the ESM shall . . . be immune from search, requisition, confiscation, expropriation, or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.” Question: . . . [T]his means that neither our governments, nor our legislatures, nor any of our democratic laws have any effect on the ESM organization? That’s a pretty powerful treaty! [Article 30]: “Governors, alternate Governors, Directors, alternate Directors, the Managing Director and staff members shall be immune from legal process with respect to acts performed by them . . . and shall enjoy inviolability in respect of their official papers and documents.” Question: So anyone involved in the ESM is off the hook? They can’t be held accountable for anything? . . . The treaty establishes a new intergovernmental organization to which we are required to transfer unlimited assets within seven days if it so requests, an organization that can sue us but is immune from all forms of prosecution and whose managers enjoy the same immunity. There are no independent reviewers and no existing laws apply? Governments cannot take action against it? Europe’s national budgets in the hands of one single unelected intergovernmental organization? Is that the future of Europe? Is that the new EU – a Europe devoid of sovereign democracies? The Goldman Squid Captures the ECB Last November, without fanfare and barely noticed in the press, former Goldman exec Mario Draghi replaced Jean-Claude Trichet as head of the ECB. Draghi wasted no time doing for the banks what the ECB has refused to do for its member governments—lavish money on them at very cheap rates. French blogger Simon Thorpe reports: On the 21st of December, the ECB “lent” 489 billion euros to European Banks at the extremely generous rate of just 1% over 3 years. I say “lent”, but in reality, they just ran the printing presses. The ECB doesn’t have the money to lend. It’s Quantitative Easing again. The money was gobbled up virtually instantaneously by a total of 523 banks. It’s complete madness. The ECB hopes that the banks will do something useful with it – like lending the money to the Greeks, who are currently paying 18% to the bond markets to get money. But there are absolutely no strings attached. If the banks decide to pay bonuses with the money, that’s fine. Or they might just shift all the money to tax havens. At 18% interest, debt doubles in just four years. It is this onerous interest burden, not the debt itself, that is crippling Greece and other debtor nations. Thorpe proposes the obvious solution: Why not lend the money to the Greek government directly? Or to the Portuguese government, currently having to borrow money at 11.9%? Or the Hungarian government, currently paying 8.53%. Or the Irish government, currently paying 8.51%? Or the Italian government, who are having to pay 7.06%? The stock objection to that alternative is that Article 123 of the Lisbon Treaty prevents the ECB from lending to governments. But Thorpe reasons: My understanding is that Article 123 is there to prevent elected governments from abusing Central Banks by ordering them to print money to finance excessive spending. That, we are told, is why the ECB has to be independent from governments. OK. But what we have now is a million times worse. The ECB is now completely in the hands of the banking sector. “We want half a billion of really cheap money!!” they say. OK, no problem. Mario is here to fix that. And no need to consult anyone. By the time the ECB makes the announcement, the money has already disappeared. At least if the ECB was working under the supervision of elected governments, we would have some influence when we elect those governments. But the bunch that now has their grubby hands on the instruments of power are now totally out of control. Goldman Sachs and the financial technocrats have taken over the European ship. Democracy has gone out the window, all in the name of keeping the central bank independent from the “abuses” of government. Yet the government is the people—or it should be. A democratically elected government represents the people. Europeans are being hoodwinked into relinquishing their cherished democracy to a rogue band of financial pirates, and the rest of the world is not far behind. Rather than ratifying the draconian ESM treaty, Europeans would be better advised to reverse article 123 of the Lisbon treaty. Then the ECB could issue credit directly to its member governments. Alternatively, Eurozone governments could re-establish their economic sovereignty by reviving their publicly-owned central banks and using them to issue the credit of the nation for the benefit of the nation, effectively interest-free. This is not a new idea but has been used historically to very good effect, e.g. in Australia through the Commonwealth Bank of Australia and in Canada through the Bank of Canada. Today the issuance of money and credit has become the private right of vampire rentiers, who are using it to squeeze the lifeblood out of economies. This right needs to be returned to sovereign governments. Credit should be a public utility, dispensed and managed for the benefit of the people. RE: The Global Financial Meltdown - Admin - 05-05-2012 DEMOCRACIES CAN STOP PREDATORY FINANCIERS -ARGENTINA AND BOLIVIA ARE SHOWING HOW Richard Drayton - guardian.co.uk, Wednesday 2 May 2012 Kirchner's and Morales's renationalisation of energy companies has been seen as mere populist demagoguery. But it was a response to toxic speculation While Europe forces yet more privatisation on Greece and Spain under the Orwellian name of "liberalisation", Latin America in 2012 is challenging the orthodox view that private always is better than public. On 1 May Bolivia seized the Spanish company that controlled its electricity grid, just after Argentina, on 14 April, effectively renationalised YPF, its main oil company, expropriating 51% owned by Spanish firm Repsol. Both critics and supporters have understood Cristina Fernández Kirchner's and Evo Morales's actions in terms of energy nationalism and populist demagoguery. But we should see both instead as responses to the failures of privatisation and its toxic connection to complex forms of financial speculation. Bolivia and Argentina have both shown that private firms were investing less, not more, than their public predecessors were. Morales noted that only $81m had been invested in Bolivia's electricity grid since privatisation in 1997. YPF in the 1990s drilled three times as many exploratory wells in Argentina as it did in the 2000s under Repsol. Argentina's oil and gas output was falling, and new reserves were not being found to replace exploited deposits. In both cases Spanish multinationals had prioritised the repatriation of dividends over investment. This indirect form of asset stripping was driven by the priorities of bankers in London and New York. Behind the Repsol-YPF affair, in particular, was something very close to the sick capitalism that caused the 2008 crisis: high-yield, high-risk assets, sliced and diced via complex derivatives. Repsol, like all oil companies, has a double life. On one hand it makes money through producing, transporting, refining, and marketing oil and gas. On the other, it is a proxy for gambling on oil as a commodity and, through derivatives, for speculating on that speculation. Investment banks are similarly divided in their priorities. Sometimes they invest, though more usually they get rich by carrying money they borrow at low interest to places where they get higher yields. While high yields almost always mean higher risks, there is a fiction of control over these risks through derivatives – in particular insurance contracts called "swaps". In the murky world of derivatives, however, the same bank group may indirectly be guaranteeing its own risks, and the trade in risks becomes bigger than the real investment. The whole pyramid stands so long as there is some real-world thing that pays, in theory, a high and steady yield – whether it is subprime mortgages, or a high rent from an oil asset. Spain privatised Repsol between 1989 and 1997, just at the time when "deregulation" in the US and Britain turned banks from investors into high-rolling gamblers. Repsol grew from a tiny Spanish refining and marketing "downstream" company into the world's 15th largest petroleum company, with operations on every continent. It specialised in deals where Anglo-American companies fear to tread, such as Iran, offshore gas in Venezuela under Chávez, and offshore oil in Cuba, enjoying bumps in its share price and valuation as it nominally acquired access to reserves. In 1999, Repsol bought its most important international asset, YPF. Over the past decade the main value of YPF as far as Repsol was concerned was not the oil or gas it produced and sold, but its value as collateral on the basis of which debt could be contracted. YPF, under Repsol, paid extraordinarily high dividends to its foreign owners – some 9% in 2011 – which it paid for by borrowing. So while YPF debts soared and Argentina's oil went undrilled, Repsol both banked profits and "invested" Argentinian capital elsewhere in its corporate structure. As the rating agency Standard & Poor's commented on 19 April: "Repsol does not guarantee any of the debt at YPF." Madrid got the juice, but the liabilities all fell on Buenos Aires. High dividends allowed Repsol also to cash out of 25% of its YPF holding by selling it on to the Eshkenazi family, with the capital coming from Credit Suisse, Goldman Sachs, BNP Paribas, Standard Chartered and Citibank, with banks then making money buying and selling derivative contracts on Repsol and YPF debt. Spain has threatened Argentina with retaliation, quickly followed by the EU, Britain, and the US. The anger in Madrid and in Brussels is of an old-fashioned kind – Argentina is both refusing to hand over its present and future pocket money to Spain and reducing Europe's global assets. But the fury on the pages of the Financial Times and the Wall Street Journal is not ultimately about oil or profits, nor even about the bad precedent it might set for future expropriations elsewhere. Rather, it is provoked by Argentina having interrupted a chain of securitisation anchored in the real world by its oil at one end, but with investment banks in London and New York, the holders of swap and other derivative liabilities on Repsol and YPF debt, at the other. In nationalising, Argentina showed that a democratic government can stop predatory financiers. And it has not scared away new investors: already Talisman, ConocoPhillips, Chevron, and Chinese companies are seeking access to Argentina's shale oil reserves, the third largest in the world. The Global Financial Meltdown - Admin - 05-13-2012 PREDATORY CAPITALISM FAILED Stephen Lendman http://www.globalresearch.ca/index.php?context=va&aid=30763 Independent observers knew it long ago. Today's global economic crisis provides added confirmation. In 2008, a staunch champion of the system expressed second thoughts. More on him below. An ideology based on inequality, injustice, exploitation, militarism, and imperial wars eventually self-destructs or gets pushed. Growing evidence in America and Europe show systemic unaddressed problems too grave to ignore. They remain so despite millions without jobs, savings, homes or futures. Imagine nations governed by leaders letting crisis conditions fester. Imagine voters reelecting them despite demanding change. OWS aside, one day perhaps rage will replace apathy in America. The latest jobs report alone provides incentive enough to try and then some. On May 4, the Labor Department reported 115,000 new jobs. It way overstated the true number. Official figures belie the dire state of things. At most, two-thirds the headline total were created. Even that's in doubt. Most were low-pay, part-time, or temp positions with few or no benefits. Decades ago, workers would have avoided them. Today, there's no choice. The report also showed economic decline. Expect much worse ahead. In 2008, Main Street Americans experienced Depression. It rages today. Poverty's at record levels. Real unemployment approaches 1930s numbers. Dire conditions are worsening. Announced job cuts are increasing. Hiring plans are down. Compared to year ago levels, they're off 80%. Income is stagnant for those lucky to have work. The private diffusion index measuring growth fell sharply month-over-month. The unemployment rate decline reflects discouraged workers dropping out. They want jobs but can't find them. The Labor Department considers them non-persons. They're not counted to make official figures look better. Moreover, the broad based Household Survey showed employment dropping 169,000. It was the second consecutive monthly decline. The Labor Department uses a "population and payroll concept adjusted" calculation. Doing so tries to compare monthly payroll and household figures. The measure plunged 495,000 in April after dropping 418,000 in March. The calculation represented the largest back-to-back decline since late 2009. At 63.6%, America's labor force hit its lowest level since September 1981. Since then, population totals grew from 229 million to about 312 million today. The state of the nation today reflects lots of people facing few jobs, and no policy to create them. The employment/population ratio stands at 58.4%. Alone, it represents a shocking testimony to failure. So do other data. Long-term unemployment remains near record levels. Credit deleveraging continues. Housing's in its worst ever depression. Prices keep falling. Inventories of unsold homes are huge. Foreclosures are at epidemic levels. State and local downsizing continues. Personal income suffers. Conditions are bad and worsening. On May 4, Pimco's Mohamed El-Erian headlined his Financial Times article "Confirmed: America's jobs crisis," saying: "Friday’s US jobs data sound a warning that should be heard well beyond economists and market watchers." Americans with jobs have poor ones. Wage growth is stagnant. Purchasing power can't keep up with inflation. For ordinary Americans, secular income headwinds blow at gale force strength. Crisis conditions today make "a mockery of the published unemployment rate of 8.1 per cent....The economic implications are clear." At a time, Europe's recession deepens, America's declining. Risks are increasing. A "potential (austerity caused) year-end 'fiscal cliff' (may) suck out some 4 per cent of GDP in purchasing power, and do so in a disorderly fashion." Instead of addressing crisis conditions responsibly, political Washington campaigns for reelection, and plans huge domestic budget cuts when stimulus help is needed. Main Street Americans are pushed to the edge. Potential "social consequences" suggest "the possibility....of a lost generation." Unemployed teenagers "face the risk of going from being unemployed to becoming unemployable." Today's reality is bleak. It reflects "a multi-faceted unemployment crisis that politicians, both in America and Europe, are failing to comprehend, unite around, and respond to." "I worry greatly that facts on the ground will unfortunately warrant future analyses to be even more disheartening." Alan Greenspan's Too Late to Matter Mea Culpa As Fed chairman for nearly two decades (1987 - 2006), he engineered today's crisis. Some call him the Maestro of Misery for good reason. Those benefitting most sing his praises. In 2008, he had second thoughts. A longtime Ayn Rand disciple, he strayed noticeably in October 2008 House testimony. Her libertarian views influenced his. She championed regulatory free markets. So did Greenspan. He practiced what she preached. Perhaps House Oversight and Government Reform Committee members couldn't believe their ears. He acknowledged his worldview failure, saying: "You know, that's precisely the reason I was shocked, because I have been going for 40 yeas or more with very considerable evidence that it was working exceptionally well." While trying to have it both ways, he admitted his faith in regulatory free markets was shaken, saying: "I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms." "The Federal Reserve had as good an economic organization as exists. If all those extraordinarily capable people were unable to foresee the development of this critical problem...we have to ask ourselves: Why is that? And the answer is that we're not smart enough as people. We just cannot see events that far in advance." In his book "Secrets of the Temple: How the Federal Reserve Runs the Country" William Grieder called Greenspan one of "the most duplicitous figures to serve in modern American government." He used "his exalted status as economic wizard (to) regularly corrupt the political dialogue by sowing outrageously false impressions among gullible members of Congress and adoring financial reporters." His ideology was hokum. Somehow he managed a Columbia doctorate without its dissertation requirement. His economic consulting firm flopped. It faced liquidation. He closed shop to join the Fed after serving earlier in the Reagan, Nixon and Ford administrations. His background in government got him his job. His inability to forecast made him a perfect Fed choice. So did his reliability to serve monied interests over populist ones. Saying he got it wrong after the fact hardly matters. Where was he when it counted. In 2006, Bernanke replaced him. He made a bad situation worse. Since 2008, he more than tripled the Fed's balance sheet from about 6% of GDP to 20%. His day of reckoning approaches. Perhaps in future congressional testimony, he'll address his own shortcomings. Doing it when it counts matters. After the fact turns memoirs into best-sellers. His cross to bear and Greenspan's could fill volumes. Millions their policies harmed won't line up to buy them. How can they? They're broke, on their own, out of luck, and unreceptive to hear defrocked Fed chairmen say they're sorry. If so, they'd have done it right in the first place. |