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THE GLOBAL FINANCIAL MELTDOWN
THE COLLAPSE OF THE TERRORIST DIALECTIC
Shaykh Dr. Abdalqadir as-Sufi
http://www.shaykhabdalqadir.com/content/...22010.html


Allah the Exalted declares in Ash-Shura (42:11-12):

What you call the mushrikun to follow
is very hard for them.
Allah chooses for Himself anyone He wills
and guides to Himself those who turn to Him.
They only split up after knowledge came to them,
tyrannising one another.

The present world situation is marked by the pessimistic unity of all its commentators who confirm that a whole system once seriously flawed has now collapsed utterly. The dual pillars that upheld world trade and political order have fallen in on each other. With the disintegration of the financial system, its instruments and institutions, has come the disgrace of the despised political class.

Hidden behind the false complexities of macro-economic models and modalities the political class, obedient to their remit, tried to conceal the reality that the system had collapsed. Their task was to assure the masses that it could be put together again. It took one simple financial event and person to expose to the public what had been so brilliantly veiled from them. One little criminal revealed the true nature of the global crime. When, overnight, the investment banker Bernie Madoff confessed that his 50 billion dollar investment company had collapsed, it suddenly became clear. Mr Madoff had not stolen the money. It was not hidden away. It had not been expropriated by other financial entities. It had disappeared. No, not even that, unless it is seen as a Houdini trick. It first is made to seem to be there. Then it is made to seem to disappear. It began to dawn on people. The ‘money’ had never been there in the first place.

It was the historical, demonstrated, end of a deception.

Money ex nihilo, the product of the usury principle. Capitalism.

It had now become necessary to take urgent and powerful actions to hold down the masses, lest post-Madoff, they finally become enraged at the democracy-system of finance and call for an end to it.

The system had only one set of cards left to play – to distract the awakening billions of the world’s poor. Terror. The terror-event as instrument of removing civic freedoms (which can lead to protest and change of regime) and of enslaving the masses in obedience to the State, not seen as tyranny, which it is, but as the necessary protection of the endangered civic arena.

Long after the one and only, properly speaking, terrorist act, the destruction of two New York skyscrapers, it had been necessary to posit the political theory that it was an on-going process requiring protective, socially inhibiting regulations.

First came the shoe-bomber. An idiot with explosives hidden in his shoes, utterly incapable of exploding it, the apparent world-terror-organisation had trained the youth to board the plane and immolate himself and a planeload of innocents.

No one pointed out that the so-called world-terror-organisation must in fact be inept, comic, and utterly, as was proved, ineffective.

Second, came the next competitor in keeping the whole world trembling in terror. This time it was the Nigerian lad with the exploding Y-fronts. He, like his shoe exploder before him, simply could not ignite his own underpants.

Now, body scanners at every airport.

Third, the code red alert technique. Britain was put on a ‘terrorist attack imminent’ warning. Nothing happened, of course. We have entered the age of State tyranny by cyclical false alarms.

Ron Paul, the politically sophisticated republican presidential candidate, openly declared that the U.S. stood in no danger from terrorist attack and the function of body-scans and name vetting is in order to create an utterly subservient populace too afraid to challenge the State.

In the same time-frame as the exploding underpant terror attack another incident took place in Pakistan. A young Jordanian had been recruited as an agent to be planted among radicals as an agent provocateur. The young man then declared himself a double-agent and ended his life killing several American operatives. Since this recruitment is a modus operandi of U.S. security personnel, may we not deduce that the two young men, shoes and underwear, were also planted, given enough explosive material for flash and bang without endangering the plane? Are we not now in the final classical terrorist stage as recorded by Dostoevsky in Czarist Russia in which the terrorist is now the police-programmed innocent or idiot?

The State’s intended result, intimidation of the masses to prevent civil unrest, is then assured by another raft of legislated social inhibitions.

In Ancient Rome Tacitus warned:

“Corruptissima re publica plurimae leges.”

When the Republic is at its most corrupt the laws are most numerous.In the 1945 post-War election, Churchill warned the electorate of the danger inherent in socialism. His criticism raised a cry of outrage from the exhausted nation. No one listened. The socialists swept to power. Half a century later Churchill’s warning proves to have been as prescient as his warning against fascism. He had said:

“No socialist government conducting the entire life and industry of the country could afford to allow free, sharp, or violently worded expressions of public discontent. They would have to fall back on some form of Gestapo, no doubt very humanely directed in the first instance. And this would nip opinion in the bud; it would stop criticism as it reared its head, and it would gather all the power to the supreme party and the party leaders, rising like stately pinnacles above their vast bureaucracies of civil servants, no longer servants and no longer civil.”

In 2010, after the evidence of Minister Claire Short to the Iraq Enquiry, who could argue with his words?

John Buchan wrote: “The Roman Empire fell in the end because of the pressure of the barbarians on its frontiers, and because of the ruin of the middle classes within by insensate burdens, and the degradation of the proletariat into a frivolous impoverished rabble.”

Let us apply this to today: pressure of the barbarians – the Chinese.

Ruin of the middle classes – the burdens of tax and anti-terrorist laws.

Degradation of the proletariat – vampire movies, football and de-valued currency.

It is time for the enslaved billions of our world today to fear no more the exploding shoes and underpants of the idiot agents of capitalism and to learn what Islam really is.
It has two parts encapsulated in our declaration of faith.

“I declare that there is no god but Allah (that is, the Creator of the Universe) and, I declare that our Master Muhammad is the Messenger of Allah.”

Thus, the first half of the religion is all the science of worshipping the Divine, by prostrations, an annual fast and payment out of one’s wealth, and Pilgrimage.

The second half of the religion is following the Messenger in all trade and contracts with honour and without usury or increase inside the exchange, along with real-value instruments of exchange like gold and silver.







Reply
THE "OTHER REASON" WHY THE U.S. IS NOT REGULATING WALL STREET
FINANCIAL GIANTS OVERSHADOW GOVERNMENTS


www.globalresearch.ca/index.php?context=va&aid=17467


Sure, American politicians have been bought and paid for by the Wall Street giants. See this, this and this. And everyone knows that the White House and Congress - while talking about cracking down on Wall Street with strict regulation - have actually watered down some of the most important protections that were in place.

For example, Senator Cantwell says that the new derivatives legislation is weaker than the old regulation. And leading credit default swap expert Satyajit Das says that the new credit default swap regulations not only won't help stabilize the economy, they might actually help to destabilize it. But the U.S. is not being sold out in a vacuum.

On March 1, 1999, countries accounting for more than 90 per cent of the global financial services market signed onto the World Trade Organization's Financial Services Agreement (FSA). By signing the FSA, they committed to deregulate their financial markets. For example, by signing the FSA, the U.S. agreed not to break up too big to fails. The U.S. also promised to repeal Glass-Steagall, and did so 8 months after signing the FSA.

Indeed, in signing the FSA and other WTO agreements, the U.S. has legally bound itself as follows:

     No new regulation: The United States agreed to a standstill provision that requires that we not create new regulations (or reverse liberalization) for the list of financial services bound to comply with WTO rules. Given that the United States has made broad WTO financial services commitments  and thus is forbidden by this provision from imposing new regulations in these many areas  this provision seriously limits the policy [options] available to address the current crisis.

     Removal of regulation: The United States even agreed to try to even eliminate domestic financial service regulatory policies that meet GATS [i.e. General Agreement on Trade in Services] rules, but that may still adversely affect the ability of financial service suppliers of any other (WTO) Member to operate, compete, or enter the market.

     No bans on new financial service products: The United States is also bound to ensure that foreign financial service suppliers are permitted to offer in its territory any new financial service, a direct conflict with the various proposals to limit various risky investment instruments, such as certain types of derivatives.

     Certain forms of regulation banned outright: The United States agreed that it would not set limits on the size, corporate form or other characteristics of foreign firms in the broad array of financial services it signed up to WTO strictures ...

     Treating foreign and domestic firms alike is not sufficient: The GATS market-access limits on U.S. domestic regulation apply in absolute terms; that is to say, even if a policy applies to domestic and foreign firms alike, if it goes beyond what WTO rules permit, it is forbidden. And, forms of regulation not outright banned by the market-access requirements must not inadvertently modify the conditions of competition in favor of services or service suppliers of the United States, even if they apply identically to foreign and domestic firms.

In other words, the problem isn't just that Congress and the White House have sold out to the Wall Street giants.

The problem is also that the U.S. has signed WTO agreements that have given the keys to the too big to fail, and have neutered their regulators. Even if some politicians tried to stand up to Wall Street - or even if we "through out all of the bums" currently in political roles - the U.S. would still be locked into the WTO's scheme for helping the financial giants to grow ever bigger and to take ever-bigger and ever-riskier gambles.

Indeed, the financial giants are pushing hard for further deregulation, demanding that the WTO's "Doha round" of agreements be signed.

On the other hand, if the American people stood up for our sovereignty and demanded that the financial giants be reined in, it would be easy to fix the WTO agreements which the U.S. has already signed. Public Citizen notes, "as a legal matter, these problems are easy to remedy ..."

Will the American people stand up and demand that the WTO deregulatory scheme be rolled back?

Or will we continue to let the financial giants destroy our country through buying and selling politicians (with the help of the Supreme Court) and forcing us into more and more draconian WTO treaties which destroy our sovereignty altogether?

Many people assume that they just have to hang in there until things improve. But the powers-that-be are grabbing more and more power and - unless we stand up to them - they will take it all.

As highly-regarded economist Michael Hudson, Distinguished Research Professor at the University of Missouri, Kansas City, who has advised the U.S., Canadian, Mexican and Latvian governments as well as the United Nations Institute for Training and Research, and who is a former Wall Street economist at Chase Manhattan Bank who helped establish the worlds first sovereign debt fund) said:

"You have to realize that what theyre trying to do is to roll back the Enlightenment, roll back the moral philosophy and social values of classical political economy and its culmination in Progressive Era legislation, as well as the New Deal institutions. Theyre not trying to make the economy more equal, and theyre not trying to share power. Their greed is (as Aristotle noted) infinite. So what you find to be a violation of traditional values is a re-assertion of pre-industrial, feudal values. The economy is being set back on the road to debt peonage. The Road to Serfdom is not government sponsorship of economic progress and rising living standards, its the dismantling of government, the dissolution of regulatory agencies, to create a new feudal-type elite."

And Foreign Policy magazine ran an article entitled "The Next Big Thing: Neomedievalism", arguing that the power of nations is declining, and being replaced by corporations, wealthy individuals, the sovereign wealth funds of monarchs, and city-regions. We either stand up, or we slip back into a darker age.

Reply
FOR CIVILISATION TO BE SAVED
http://www.larouchepub.com/other/editori...ilztn.html

People don't like to hear it, but it's true: Civilization is rapidly running out of time. Either existing trends are changed drastically, or we are looking at mass depopulation, and barbarism.

Fortunately, Lyndon LaRouche has presented a policy which can lead humanity out of the New Dark Age that the British Empire is intentionally unleashing. He will be outlining that policy, once again, on May 8 at his next international webcast, titled "What Has To Be Done If Civilization Is To Be Saved." The time available to act on that policy before irreversible disaster strikes is getting shorter and shorter.

The key to understanding and acting on what LaRouche has to say does not lie in detailed knowledge or experience in economics or strategic affairs. It lies instead in grasping the fact that man's future depends upon fostering the human being's unique nature as a creative mind, and that every system that has been erected to suppress that quality, is the enemy which must be destroyed. Financial systems, geopolitical systems, and mathematical-statistical systems are cases in point—and all derive directly from the British imperial system currently dominating world affairs.

Economic science, LaRouche's specialty, is the queen of all sciences, because it deals with how those creative powers of the human mind can, and must, create the conditions for mankind to achieve a more prosperous, a happier future. The requirement for increased potential population density, for higher energy-flux density of power sources, and for expanding man's frontier to the universe as a whole, all derive from the fact that the basic unit of value in an economy is the creative human mind. Americans, as part of a society built by a revolution against the oligarchy, still implicitly understand this fact—although the last 65 years have gone a long way toward wiping out any understanding of the American System of political economy.

From this standpoint, the crimes of the British Empire should come sharply into relief. This financial empire asserts its right to dictate what happens in people's lives by determining the value of money. Hiding behind so-called "economic laws," they exercise control through so-called market forces, which, far from being objective, are simply ways to hide methods of theft. While particular acts of criminality, such as that currently being exposed by the disgusting Goldman Sachs, are singled out, the fundamental reality is that the system is rigged to steal from the requirements to build a human society.

The current crisis of civilization reflects the fact that the Empire's theft has reached a plateau—and, to try to survive, it has to gouge deeper. If permitted, that gouging will lead to dictatorship, and genocide, globally.

So, the first step has to be to remove the Empire's power, by declaring it bankrupt, and dumping their money. That act of bankruptcy reorganization is what LaRouche has called for as a Global Glass-Steagall reform, which would clean out the waste paper, and restore the powers of national governments to control credit, and money. Another name for this reform is a New Bretton Woods, an arrangement for a new fixed-exchange-rate system, which must be initiated by the U.S., Russia, China, and India, in order to succeed.

President Obama, a British puppet, represents an obstacle to this policy to save civilization. Removing him thus becomes a priority. But that's only the first step to putting our planet back on course. What we are really fighting for is to reassert our human nature as creative beings, for the world and our posterity.
  
  
MORE HEARINGS, CALL FOR CRIMINAL INVESTIGATION ON HOW GOLDMAN SUCKS


April 21, 2010 (EIRNS)—Reports have it late on Wednesday that Sen. Carl Levin's Permanent Investigations Subcommittee will have both Goldman Sachs CEO Lloyd Blankfein, and its London derivatives trader and "VP," Fabrice Tourre, as witnesses in an April 27 hearing. The Subcommittee has just finished with a thorough expose of the vast "securitization" of the 90%-fraudulent mortgage loans by Washington Mutual Bank; Levin is clearly attempting to craft the "new Pecora hearings" which Obama and the Democratic leadership nixed last year. "How Goldman Sucks" could be, to these hearings, what the grilling of J.P. Morgan, Jr. was to Ferdinand Pecora's explosive 1933 hearings into Wall Street's "banksters."

Goldman's public "defense" against the charges that it committed securities fraud in 2007, and swindled investors to the profit of itself and its inner circle, appeared to change this morning. From dismissing the SEC's charges, Goldman's law firm Sullivan and Cromwell appeared to shift, to blaming any wrongdoing on the then-28-year old Tourre. This tactic has been been much used recently by banksters when caught, from Barings in 1995, to Societe Generale in 2008. But Levin's hearing could force Blankfein and Tourre to confront each other on the spot, making that tactic much more difficult.

Any number of other big financial institutions, in building up the super-leveraged global debt bubble which burst in 2007-08, pulled the same fraud against investors, smaller banks, etc. of which Goldman is accused. Deutschebank's lead mortgage securities trader was infamous for profiting from derivatives bets against the securities he sold. The giant UBS in Switzerland was sued in 2009 by German state bank HSH Nordbank for the same practice; Citibank, Merrill Lynch, JPMorgan Chase, and others all enjoyed fleecing sucker investors with so-called "synthetic mortgage derivatives" from 2007 on. They clearly knew their bubble was blowing up, and used "Venetian methods" to throw the disatrous costs onto private investors, and then onto government bail-outs.

But the Goldman Sucks case is sufficient to keep throwing out Lyndon LaRouche's challenge: "Should we be paying to bail out fraud?"

Today Rep. Marcy Kaptur (D-Ohio) and 17 other House members, in a letter to Attorney General Eric Holder, asked for a criminal investigation of Goldman Sachs to begin.
  
SMASH GOLDMAN SACHS

Implement the LaRouche Plan

April 21, 2010 (EIRNS)—The national election campaign being conducted by LaRouche Democratic leaders Rachel Brown (4th CD-Mass), Kesha Rogers (22nd CD-Tex), and Summer Shields (8th CD-Calif) launched a coordinated offensive today against the criminal financial practices which the current Goldman Sachs scandal merely typifies, and for immediate implementation of the LaRouche Plan for bankruptcy reorganization, which represents the only workable alternative.

In his statement, entitled "Why Goldman Sucks," which is being distributed in the financial district of San Francisco today, Shields, who is running for the Democratic Party nomination from House Speaker Nancy Pelosi's district, says:

The April 16 decision by the SEC, to investigate the fraudulent practices of Goldman Sachs, should not stop at the doorstep of only that institution, but must lead to an emergency bankruptcy reorganization of the international banking system.

In her statement, entitled "Why We Must Have a Global Glass-Steagall," Rachel Brown, who is challenging Barney Frank for the Democratic Party nomination, asked:

Are you surprised by the recent allegations that Goldman Sachs was involved in a financial swindle? This has been the character of the economy, as statesman Lyndon LaRouche has warned, since 1987. The real question is: Why haven't we put this dead system through bankruptcy? Goldman Sachs received billions of dollars in bail-outs as they carried on this swindle, as did every other financial institution in the world. No one can hide from this global collapse, no matter how much we throw endless amounts of money at this bankrupt system.

Only a Global Glass-Steagall bankruptcy reorganization will separate the worthless assets, from those tied to the real economy. All derivatives, and related financial trash, will be thrown out. Don't let the Harvard economists fool you: these gambling bets are not improving the economy. There is no way for the economy to be safer when it's based on a financial bubble.

Candidate Kesha Rogers, the official Democratic Party nominee against Republican Pete Olson in the November election, put it this way in her statement, entitled "Expose the Fraud of the System!":

The case of Goldman Sachs opens the door to a sweeping criminal investigation, through a new Pecora Commission, to expose the systemic fraud of the entire bankrupt financial system. This only proves what American statesman and physical economist Lyndon LaRouche has been saying since his historic and highly accurate webcast in July 2007: The entire financial system is bankrupt. There is no saving this bankrupt system. The entire British monetary system of globalization is a fake, and the longer it is bailed out, the worse things will get....

We must expose these Wall Street criminals in public hearings, opening their books before the world, to discover just how deep their fakery and corruption goes, as was done during the Pecora Commission hearings of 1932-1934. There must be a system-wide reorganization of the banking assets according to 1933 Glass-Steagall standards, where worthless derivatives and other speculative gambling debts are trashed and wiped off the books, while all the legitimate assets tied to real, physical debts like pensions, mortgages, and legitimate commercial accounts, are protected from further looting by these financial parasites. We must tie the value of our dollars to physical production again, using the Constitutional powers of Congress to issue public credit for investment in productive jobs in agriculture, industry, infrastructure, and scientific and technological progress, refusing to allow international banks to speculate upon its worth like a commodity. The United States must collaborate with other major world powers, specifically Russia, China, and India, and form an alliance of sovereign nations standing together against the British monetary empire.
  
    


    
Reply
THE ISSUE IS GLASS-STEAGALL
http://www.larouchepub.com/other/editori...agall.html

Back in 1932-33, the famous prosecutor Ferdinand Pecora both stunned and aroused the American people, with his hearings into the gory details of the fraud and corruption of Wall Street banking institutions. With the light of "pitiless publicity" focussed on arrogant bastards such as J.P. Morgan and Thomas Lamont, President Franklin Roosevelt was able to ram through the raft of banking regulation, led by the Glass-Steagall Act, which kept the U.S. banking system functioning for the next 50 years.

It's no surprise that many people are today comparing the relentless prosecution by Pecora, with the drive by the senior Senator from Michigan, Carl Levin, to get to the bottom of the criminality of Wall Street institutions such as Goldman Sachs, in creating the current financial breakdown crisis. Levin is systematically building his case against Goldman for its ripoffs of its clients, but it is crystal clear to everyone that the abuses he is discussing, riddle the deregulated financial system as a whole.

While it would be satisfying, and just, for individuals like Goldman Sachs CEO Lloyd "I'm doing God's work" Blankfein to go to jail for their crimes, the larger issue is whether Congress will finally get the guts to junk the system that created this mess, and go back to the Roosevelt regime which worked so well.

One major problem arises immediately: While Pecora had the blessing of FDR, Senator Levin has a President whose philosophy is the very antithesis of FDR's, the philosophy that the way to prosperity of Main Street leads through Wall Street. The American people see through such sophisms, but so far, the Congress has submitted shamelessly to a President who is owned lock, stock, and barrel by the British and their Wall Street tools (including Goldman Sachs).

One conclusion is inescapable, and that is that President Obama must be gotten out of office, by impeachment or resignation.

The next step is that the Administration, and the Congress, move immediately to put the financial system in order through a Glass-Steagall reform, of the form that Lyndon LaRouche has repeatedly outlined. Let us repeat the principles again:

First, there must be a sorting out of legitimate debt (related to the requirements of the physical economy's functioning), as against the hundreds of trillions of dollars in casino betting debts. The latter claims should be deemed illegitimate, and sent into the deep freeze, if not cancelled outright.
Second, the Glass-Steagall rule separating the operations of commercial banking (linked to the physical economy) from investment banking (speculation), must be put into effect, with protections from the Federal government reserved for transactions of the first type.

Third, the U.S. government must get together with the other three most powerful nation-states—Russia, China, and India—to cast off the entire British globalized financial system, and establish joint Glass Steagall-style rules for cooperation among them, including fixed currency exchange rates, and arrangements for long-term, low-interest investments in infrastructure development, in order to start a real industrial recovery. Nervous Nellies who have, up until now, been afraid to acknowledge that LaRouche's Glass-Steagall approach is right, are finally beginning to speak up. Now we have to take it the next step: Impeach Obama and ram through Glass-Steagall now.
  

GOLDMAN SACHS DEBACLE RAISES OVERDUE QUESTIONS ABOUT BRIC
Rachel Douglas and Dennis Small
http://www.larouchepub.com/other/2010/37..._bric.html

April 23—Current revelations about lurid, but typical, fraud on the part of investment bank Goldman Sachs, which stands accused of betting against the very derivatives it had marketed, are beginning to have potentially healthy repercussions in Russia and other parts of the world.

On April 19, the Russian-language official site of the Shanghai Cooperation Organization (SCO; it groups China, Russia, and Central Asian nations, with other Eurasian countries having observer status), published an article titled "It was economists who thought up the BRIC, as their own quartet." The "economists" involved were identified, in the body of the article, as officials of Goldman Sachs.

BRIC stands for Brazil-Russia-India-China, but Lyndon LaRouche has pressed the point: The "B" in BRIC is really for "British," because the Brazilian banking system is dominated by the Spanish Banco Santander, which is fused with the Royal Bank of Scotland as an integral component of the Rothschild-created Inter-Alpha Group. The function of Brazil within BRIC has been to divert the agenda onto slight modifications of a global financial system which in reality is utterly bankrupt, while boosting its own prowess in the speculative "carry trade" as exemplary of so-called emerging market growth. Russian officials nurturing fantasies about a huge pool of foreign capital just waiting to be invested in their country, such as those at the Moscow stock exchange who openly advertise Russia's own attractiveness for players in the carry trade, are supposed to take this bait and emulate Brazil in becoming a hub of international financial operations, within a doomed system.

Thus, the BRIC runs counter to the potential of an alliance of the four great powers—Russia, the U.S.A., China, and India—to initiate the replacement of the bankrupt British financial empire with a sovereign nation-based credit system for real economic development, which LaRouche has proposed as the sine qua non for averting a Dark Age.

Indeed, journalist Olga Kharolets wrote on the SCO's Infoshos.ru site, "For there to be a summit of the BRIC [in June 2009], all it took was for the airplane of the President of Brazil to land in Yekaterinburg." There was already a summit taking place there among the leading Eurasian nations Russia, China, and India at that time. Brazil was tacked on, a result for which Goldman Sachs had been lobbying over several years.

Infoshos.ru said that the very appearance of the BRIC on the world scene resulted from "a curious intrigue," for this was "the only alliance in the world, whose name emerged before the organization itself did." Kharolets quoted Brazilian Foreign Minister Celso Amorim, who boasted that the BRIC "existed first in the minds of analysts, and then turned into practical reality."

The Russian author then named the name: "It is believed that the father of the term 'BRIC' was Goldman Sachs analyst Jim O'Neill," in 2001.

'Markets,' Not Nations
O'Neill's role in promoting the creation of the BRIC, in fact, is no secret. Even Prime Minister of India Manmohan Singh, quoted by The Hindu during the mid-April BRIC summit in Brazil, noted that the project was an idea from Goldman Sachs, but "We are now trying to give it some shape, flesh it out." In 2007, still before the BRIC had been officially constituted, O'Neill put out a 272-page book on the need for it to exist. Goldman Sachs devotes a page on its website to "the BRICs," as it has dubbed these nations, featuring some 20 reports on the BRIC and videos in which O'Neill introduces himself, in his thick English accent: "I am Jim O'Neill. I am head of Global Economic Research for Goldman Sachs, and I am the creator of the acronym BRIC."

O'Neill, who hails from Manchester, England, joined Goldman Sachs in 1995 after stints at Bank of America, Marine Midland, and Swiss Bank Corporation. He has also positioned himself on the board of the U.K.-Indian Business Council, where he sits alongside Sir Evelyn Rothschild and other City of London figures.

Such functionaries of the London-centered financial oligarchy love to posture as visionaries of an era dominated by "emerging markets": not developing nations, but expressly—"markets." It is the old Venetian technique of making the victim think he is doing something bold and new, while in reality he is being manipulated and prevented from doing what would truly be in his own interest. Another notorious case is the hyperactive advocacy of "multiple reserve currencies" in state finances, on the part of Ashmore Investments, a London-based outfit which got its start in "emerging market debt trading" during the Mexico debt crisis on 1982. ("London Pushes Big Powers To Dump the Dollar," EIR, June 9, 2009.)

Still, it is striking, what scant attention Russian observers have paid to the the scandalous Goldman Sachs origin of the BRIC configuration, which is promoted heavily within Russia as representing a way for its members to be independent of the U.S. and European economies and finance. After all, Goldman Sachs is not exactly unknown in Russia, especially in connection with the looting of the Russian economy under the Yegor Gaidar-Anatoli Chubais government during the 1990s.

In his 1998 book Genocide (English edition, EIR, 1999), Russian Academician Sergei Glazyev gave some details, referring to the crash of the pyramid of Russian short-term government bonds (GKO) in the Summer of 1998. "As soon as the first signs appeared of an irreversible approaching crash, the firm of Goldman Sachs, which is close to the U.S. Treasury, secured the assistance of Mr. Chubais in organizing the conversion of its clients' devalued GKO ... into dollar-denominated Russian government bonds worth approximately $4 billion, which were subsequently exempted from the forced restructuring." At the time, the U.S. Treasury official dealing with Russia was Goldman Sachs man Larry Summers, who today heads Barack Obama's National Economic Council.

Chronology of Paternity
Not only did Goldman Sachs operatives create the term BRIC in 2001, but they fostered the establishment of the diplomatic grouping as such, and began to deploy it actively and heavily in direct opposition to Lyndon LaRouche's early 2007 proposal for a Four Power alliance to bring the world out of the economic breakdown crisis, which exploded, as LaRouche forecast it would, in mid-2007.

The contrast could not be clearer. LaRouche's designation of the Four Powers is based on their real stature. China and India have the largest populations and among the oldest cultures on the planet, while Russia and the United States are transcontinental nations, each with a history of acting independently as a global power, amplified in the U.S. case by our unique republican tradition. Key to joint action by the Four Powers are a U.S. resumption of its historical orientation toward a community of principle among sovereign nations, and the emergence of cooperation among Russia, China, and India as what former Russian Prime Minister Yevgeni Privakov named a "strategic triangle" in Eurasia. What unites the BRIC, on the other hand, is that Goldman Sachs identified its members as four markets where international speculators could make money.

Because of the thorough infection of the Brazilian economy by the Inter-Alpha Group, and its carry-trade fixation, the involvement of Brazil with the R-I-C strategic triangle countries is perfectly designed to disrupt the latter, and their potential joint action with the United States. At first, BRIC ministerial and summit meetings were held in conjunction with R-I-C meetings, but at the latest BRIC summit, this month, there was not even a separate triangular conference among the Eurasian powers.

Not only the acronym, but the entire concept and organization of the BRIC as a grouping came from Goldman Sachs and O'Neill, as did its policy direction, including the discussion of establishing regional currencies and/or replacing the dollar with a new international reserve currency. Its deeper policy origins go back to the 1971 creation of the Inter-Alpha Group by the British Empire's Rothschilds, including the establishment of the outrageously "profitable" Brazilian carry trade.

Consider the following brief chronology of the critical 2007-08 period:

March 7, 2007: LaRouche delivered an international webcast, in which he first publicly proposed the idea of a Four Power alliance of the United States, Russia, India, and China to destroy and replace the British Empire's dying system.

May 15, 2007: Visiting Moscow as an honored foreign guest at the celebration of Prof. Stanislav Menshikov's 80th birthday, LaRouche addressed the economic division of the Russian Academy of Sciences. Noting then-President Vladimir Putin's repeated invocation of the legacy of Franklin Roosevelt, LaRouche told them that the United States must approach Russia, India, and China with a Rooseveltian agenda for economic cooperation, subsequently bringing in smaller nations. LaRouche also set forth the Four Powers idea in Russian TV and Internet interviews.

July 25, 2007: LaRouche presented a webcast, forecasting the imminent explosion of the international financial crisis, which in fact followed only days later.

Nov. 23, 2007: Goldman Sachs's Jim O'Neill issued his book, The BRICs and Beyond.

March 10-11, 2008: BRIC held its first formal meeting as an organization, at the vice ministerial level, in Rio de Janeiro.

May 14, 2008: Yekaterinburg, Russia hosted a meeting of the foreign ministers of Russia, China, and India, which LaRouche welcomed as the emergence of what he had long anticipated—the strategic triangle as a Eurasian alliance, determined to defeat the attacks by the British Empire on its member nations. Tacked on was a separate meeting between these three representatives and their Brazilian counterpart.

July 9, 2008: BRIC heads of state and government met on the sidelines of the G-8 summit in Hokkaido, Japan.

September 2008: BRIC foreign ministers met in New York City.

Nov. 7, 2008: BRIC finance ministers met in São Paulo.

Over the course of 2008-09, as the battle over LaRouche's policy proposals was raging internationally, Goldman Sachs issued five additional studies on the BRIC, packed with their London-designed policy proposals, crafted to counter LaRouche's Four Powers plan.

To that same end, and in that time frame, two international conferences were held which prominently featured European and Brazilian renegades from the LaRouche movement, at which the BRIC policy-line was promoted, with special efforts to make it attractive to Russian participants. The first of these was held in Modena, Italy in July 2008; the second in Parana, Brazil in December 2008.

Baiting the Hook
The Goldman Sachs contraband of trying to jam Brazil into an existing strategic Russia-India-China relationship has pivoted on one central issue: the creation of the Brazilian carry trade by the London-run Inter-Alpha group of banks, in particular through the activities of its Spanish-based asset, Banco Santander (see "The 'Banco Santander Syndrome': City of London's Sucker Game," EIR, Feb. 19, 2010; and "London's Brazil Carry Trade: Smoke, Mirrors—and Genocide," EIR, March 5, 2010).

Going back to the early 1990s, London and Wall Street made Brazil a destination of substantial international speculative capital flows, coming from financial predators borrowing cheaply—first in Japan, today in the Eurozone and the U.S.—and placing those funds in highly lucrative Brazilian government treasury bonds, which pay the highest real interest rate in the world, and additionally offer the predators huge exchange-rate advantages. As Goldman Sachs put it in its December 2006 study, "The 'B' in BRICs: Unlocking Brazil's Growth Potential:"

[Brazil] will be an important destination for fixed income and equity inflows, given the high carry trade, the embedded growth option for equities and the reassurance of stable macro policies and sound external credit fundamentals.

The platform for the later carry trade was established by the 1994 Real Plan of the incoming Fernando Henrique Cardoso government, which set up a one-to-one parity between the real, the Brazilian currency, and the U.S. dollar, and began to issue Brazilian treasury bonds denominated in dollars, the infamous NTN-D series, which had first appeared in 1991. These bonds then grew dramatically in the 2000-02 period of the Cardoso Administration, rising to constitute 45% of total public debt by 2002, the year Luis Inácio Lula da Silva took office as President. EIR warned about this at the time, writing in its Oct. 18, 2002 issue:

Brazil, under pressure from the IMF and 'the markets,' began to issue domestic bonds denominated in dollars. This foolishness really took off over the last two years, in order to 'attract' foreign investors who were worried that a devaluation would catch them holding real-denominated bonds. So the proportion of Brazil's bonds that is dollarized has grown to over 45% today. That means that every time the real is devalued vis-à-vis the dollar, the government debt automatically rises—without borrowing a single additional penny....

Speculators have also driven up the interest rate they are demanding the Brazilian government pay on its new bonds.... Brazil must now pay 25% interest rates, or higher, on any new bonds it issues. But about 40% of its old bonds are also linked to market interest rates, which means that they too rise along with the 'country' risk and other usurious charlatanry.

In sum, 45% of Brazil's 700 billion real government debt is dollarized. Another 40% is interest-linked.

With such attractive looting conditions, Brazil became a prize destination of the international carry trade, and is prominently so today under Santander/Inter-Alpha group supervision.

The Goldman Sachs maneuvers in Russia in the Summer of 1998, involving the conversion of a portion of the GKO bonds into dollar-denominated instruments, took advantage of the Russian government's frantic fundraising efforts in the weeks before the Aug. 17, 1998 collapse of the GKO pyramid, when GKO yields were in triple digits. The scheme didn't have a chance to take hold at that time, only because the bubble popped, and the subsequent Primakov and Putin governments attempted to steer clear of such operations.

And then there is the classic case of the Mexico debt blowout of December 1994, triggered by the issuance of precisely such dollar-denominated public bonds—the first time that such a "globalization" measure was foisted on a developing country.

Under pressure of its international creditors—including the Fidelity Group and Goldman Sachs—the Mexican government of Carlos Salinas de Gortari carried out a gigantic switch out of peso-denominated Cetes bonds, and into dollar-denominated Tesobono bonds, beginning in April-May 2004. This "switcheo," as it came to be known in Mexico, created some $30 billion in additional foreign obligations within months. This led to the total blowout of the Mexican system in December, encouraged by a London and Wall Street-orchestrated run on the country.

Goldman Sachs played a leading role in this looting operation as well, first investing heavily in short-term dollar-denominated Mexican bonds during 1994; then participating in the organized run on the country; and finally ensuring that these bonds were fully repaid by the Mexican government, out of funds received from the 1995 "bailout" package arranged by the U.S. government and others.

At the time, EIR's Jan. 27 1995 issue covered the explosion of the Mexican debt bomb and how it would spread elsewhere, and even warned that Brazil had embarked on a similarly insane policy with its NTN-D's:

So far, the Cardoso government has pledged its allegiance to maintaining the speculative cancer. And they have already worsened matters by meeting bankers' demands to issue what are effectively dollar-denominate treasury bills, known as NTN-Ds. This is exactly what Mexico did beginning in the Spring of 1994 with their Tesobonos, which have now blown up in their faces.

As more and more of Goldman Sachs's corrupt dealings are revealed, the question will naturally be asked in Russia, China, and India: Was the BRIC invented as a way to loot us ... again?

GOLDMAN's COMPUTERISED FRONT RUNNING AND FINANCIAL FRAUD
How a Computer Program Designed to Save the Free Market Turned Into a Monster Ellen Brown
Global Research, April 23, 2010


While the SEC is busy investigating Goldman Sachs, it might want to
look into another Goldman-dominated fraud: computerized front running
using high-frequency trading programs. Market commentators are fond of talking about “free market capitalism,” but according to Wall Street commentator Max Keiser, it is no more. It has morphed into what his TV co-host Stacy Herbert calls “rigged market capitalism”: all markets today are subject to manipulation for private gain. Keiser isn’t just speculating about this. He claims to have invented one of the most widely used programs for doing the rigging. Not that that’s what he meant to invent. His patented program was designed to take the manipulation out of markets. It would do this by matching buyers with sellers automatically, eliminating “front running” – brokers buying or selling ahead of large orders coming in from their clients. The computer program was intended to remove the conflict of interest that exists when brokers who match buyers with sellers are also selling from their own accounts. But the program fell into the wrong hands and became the prototype for automated trading programs that actually facilitate front running.

Also called High Frequency Trading (HFT) or “black box trading,”
automated program trading uses high-speed computers governed by
complex algorithms (instructions to the computer) to analyze data and
transact orders in massive quantities at very high speeds. Like the
poker player peeking in a mirror to see his opponent’s cards, HFT
allows the program trader to peek at major incoming orders and jump in
front of them to skim profits off the top. Note that these large
institutional orders are our money -- our pension funds, mutual funds,
and 401Ks.
When “market making” (matching buyers with sellers) was done strictly
by human brokers on the floor of the stock exchange, manipulations and
front running were considered an acceptable (if morally dubious) price
to pay for continuously “liquid” markets. But front running by
computer, using complex trading programs, is an entirely different
species of fraud. A minor flaw in the system has morphed into a
monster. Keiser maintains that computerized front running with HFT
has become the principal business of Wall Street and the primary force
driving most of the volume on exchanges, contributing not only to a
large portion of trading profits but to the manipulation of markets
for economic and political ends.

The “Virtual Specialist”: the Prototype for High Frequency Trading
Until recently, most market making was done by brokers called
“specialists,” those people you see on the floor of the New York Stock
Exchange haggling over the price of stocks. The job of the specialist
originated over a century ago, when the need was recognized for a
system for continuous trading. That meant trading even when there was
no “real” buyer or seller waiting to take the other side of the
trade. The specialist is a broker who deals in a specific stock and remains
at one location on the floor holding an inventory of it. He posts the
“bid” and “ask” prices, manages “limit” orders, executes trades, and
is responsible for managing the uninterrupted flow of orders. If
there is a large shift in demand on the “buy” side or the “sell” side,
the specialist steps in and sells or buys out of his own inventory to
meet the demand, until the gap has narrowed. This gives him an opportunity to trade for himself, using his inside knowledge to book a profit. That practice is frowned on by the Securities Exchange Commission (SEC), but it has never been seriously regulated, because it has been considered necessary to keep markets “liquid.”
Keiser’s “Virtual Specialist Technology” (VST) was developed for the
Hollywood Stock Exchange (HSX), a web-based, multiplayer simulation in
which players use virtual money to buy and sell “shares” of actors,
directors, upcoming films, and film-related options. The program
determines the true market price automatically, by comparing “bids”
with “asks” and weighting the proportion of each. Keiser and HSX co-
founder Michael Burns applied for a patent for a “computer-implemented
securities trading system with a virtual specialist function” in 1996,
and U.S. patent no. 5960176 was awarded in 1999.
But things went awry after the dot.com crash, when Keiser’s company
HSX Holdings sold the VST patent to investment firm Cantor Fitzgerald,
over his objection. Cantor Fitzgerald then put the part of the
program that would have eliminated front-running on ice, just as drug
companies buy up competing patents in order to take them off the
market. Instead of preventing front-running, the program was altered
so that it actually enhanced that fraudulent practice. Keiser (who is
now based in Europe) notes that this sort of patent abuse is illegal
under European Intellectual Property law.
Meanwhile, the design of the VST program remained on display at the
patent office, giving other inventors ideas. To get a patent,
applicants must list “prior art” and then prove that their patent is
an improvement in some way. The listing for Keiser’s patent shows
that it has been referenced by 132 others involving automated program
trading or HFT.
HFT has quickly come to dominate the exchanges. High frequency
trading firms now account for 73% of all U.S. equity trades, although
they represent only 2% of the approximately 20,000 firms in
operation.
In 1998, the SEC allowed online electronic communication networks, or
alternative trading systems, to become full-fledged stock exchanges.
Alternative trading systems (ATS) are computer-automated order-
matching systems that offer exchange-like trading opportunities at
lower costs but are often subject to lower disclosure requirements and
different trading rules. Computer systems automatically match buy and
sell orders that were themselves submitted through computers. Market
making that was once done with a “specialist’s book” -- something that
could be examined and audited -- is now done by an unseen, unaudited
“black box.” For over a century, the stock market was a real market, with live traders hotly bidding against each other on the floor of the
exchange. In only a decade, floor trading has been eliminated in all
but the largest exchanges, such as the New York Stock Exchange (NYSE); and even in those markets, it now co-exists with electronic
trading. Alternative trading systems allow just about any sizable trader to place orders directly in the market, rather than routing them through
investment dealers on the NYSE. They also allow any sizable trader
with a sophisticated HFT program to front run trades.

Flash Trades: How the Game Is Rigged
An integral component of computerized front running is a dubious
practice called “flash trades.” Flash orders are permitted by a
regulatory loophole that allows exchanges to show orders to some
traders ahead of others for a fee. At one time, the NYSE allowed
specialists to benefit from an advance look at incoming orders; but it
has now replaced that practice with a “level playing field” policy
that gives all investors equal access to all price quotes. Some ATSs,
however, which are hotly competing with the established exchanges for
business, have adopted the use of flash trades to pull trading
business away from the exchanges. An incoming order is revealed (or
flashed) to a trader for a fraction of a second before being sent to
the national market system. If the trader can match the best bid or
offer in the system, he can then pick up that order before the rest of
the market sees it.
The flash peek reveals the trade coming in but not the limit price –
the maximum price at which the buyer or seller is willing to trade.
This is what the HFT program figures out, and it is what gives the
high-frequency trader the same sort of inside information available to
the traditional market maker: he now gets to peek at the other
player’s cards. That means high-frequency traders can do more than
just skim hefty profits from other investors. They can actually
manipulate markets.

How this is done was explained by Karl Denninger in an insightful post
on Seeking Alpha in July 2009: “Let’s say that there is a buyer willing to buy 100,000 shares of BRCM with a limit price of $26.40. That is, the buyer will accept any price up to $26.40. But the market at this particular moment in time is at $26.10, or thirty cents lower.
“So the computers, having detected via their ‘flash orders’ (which
ought to be illegal) that there is a desire for Broadcom shares, start
to issue tiny (typically 100 share lots) ‘immediate or cancel’ orders
- IOCs - to sell at $26.20. If that order is ‘eaten’ the computer
then issues an order at $26.25, then $26.30, then $26.35, then
$26.40. When it tries $26.45 it gets no bite and the order is
immediately canceled. “Now the flush of supply comes at, big coincidence, $26.39, and the claim is made that the market has become ‘more efficient.’ “Nonsense; there was no ‘real seller’ at any of these prices! This pattern of offering was intended to do one and only one thing -- manipulate the market by discovering what is supposed to be a hidden piece of information -- the other side’s limit price!
“With normal order queues and flows the person with the limit order
would see the offer at $26.20 and might drop his limit. But the
computers are so fast that unless you own one of the same speed you
have no chance to do this -- your order is immediately ‘raped’ at the
full limit price! . . . [Y]ou got screwed for 29 cents per share which
was quite literally stolen by the HFT firms that probed your book
before you could detect the activity, determined your maximum price,
and then sold to you as close to your maximum price as was possible.”
The ostensible justification for high-frequency programs is that they
“improve liquidity,” but Denninger says, “Hogwash. They have turned
the market into a rigged game where institutional orders (that’s you,
Mr. and Mrs. Joe Public, when you buy or sell mutual funds!) are
routinely screwed for the benefit of a few major international banks.”
In fact, high-frequency traders may be removing liquidity from the
market. So argues John Daly in the U.K. Globe and Mail, citing Thomas
Caldwell, CEO of Caldwell Securities Ltd.:
“Large institutional investors know that if they start trying to push
through a large block of shares at a certain price – even if the block
is broken into many small trades on several ATSs and markets -- they
can trigger a flood of high-frequency orders that immediately move
market prices to the institution’s disadvantage. . . . That’s why
institutions have flocked to so-called dark pools operated by ATSs
such as Instinet, and individual dealers like Goldman Sachs. The
pools allow traders to offer prices without publicly revealing their
identities and tipping their hand.”
Because these large, dark pools are opaque to other investors and to
regulators, they inhibit the free and fair trade that depends on open
and transparent auction markets to work.

The Notorious Market-Rigging Ringleader, Goldman Sachs
Tyler Durden, writing on Zero Hedge, notes that the HFT game is
dominated by Goldman Sachs, which he calls “a hedge fund in all but
FDIC backing.” Goldman was an investment bank until the fall of 2008,
when it became a commercial bank overnight in order to capitalize on
federal bailout benefits, including virtually interest-free money from
the Fed that it can use to speculate on the opaque ATS exchanges where markets are manipulated and controlled. Unlike the NYSE, which is open only from 10 am to 4 pm EST daily, ATSs trade around the clock; and they are particularly busy when the NYSE is closed, when stocks are thinly traded and easily manipulated. Tyler Durden writes:
“[A]s the market keeps going up day in and day out, regardless of the
deteriorating economic conditions, it is just these HFT’s that
determine the overall market direction, usually without fundamental or
technical reason. And based on a few lines of code, retail investors
get suckered into a rising market that has nothing to do with green
shoots or some Chinese firms buying a few hundred extra Intel servers:
HFTs are merely perpetuating the same ponzi market mythology last seen
in the Madoff case, but on a massively larger scale.”
HFT rigging helps explain how Goldman Sachs earned at least $100
million per day from its trading division, day after day, on 116 out
of 194 trading days through the end of September 2009. It’s like
taking candy from a baby, when you can see the other players’ cards.

Reviving the Free Market
So what can be done to restore free and fair markets? A step in the
right direction would be to prohibit flash trades. The SEC is
proposing such rules, but they haven’t been effected yet.
Another proposed check on HFT is a Tobin tax – a very small tax on
every financial trade. Proposals for the tax range from .005% to 1%,
so small that it would hardly be felt by legitimate “buy and hold”
investors, but high enough to kill HFT, which skims a very tiny profit
from a huge number of trades. That is what proponents contend, but a tiny tax might not actually be enough to kill HFT. Consider Denninger’s example, in which the high-frequency trader was making not just a few pennies but a full 29 cents per trade and had an opportunity to make this sum on 99,500 shares (100,000 shares less 5 100-lot trades at lesser sums). That’s a $28,855 profit on a $2.63 million trade, not bad for a few milliseconds of work. Imposing a .1% Tobin tax on the $2.63 million would reduce the profit to $26,225, but that’s still a nice return for a trade that takes less time than blinking. The ideal solution would fix the problem at its source -- the price- setting mechanism itself. Keiser says this could be done by banning HFT and installing his VST computer program in its original design in all the exchanges. The true market price would then be established automatically, foreclosing both human and electronic manipulation. He notes that the shareholders of his former firm have a good claim for voiding out the sale to Cantor Fitzgerald and retrieving the program, since the deal was never consummated and the investors in HSX Holdings have never received a penny for the sale.
There is just one problem with their legal claim: the paperwork
proving it was shipped to Cantor Fitzgerald’s offices in the World
Trade Center several months before September 2001. Like free market
capitalism itself, it seems, the evidence has gone up in smoke.

Ellen Brown developed her research skills as an attorney practicing
civil litigation in Los Angeles. In Web of Debt, her latest of eleven
books, she turns those skills to an analysis of the Federal Reserve
and “the money trust.” She shows how this private cartel has usurped
the power to create money from the people themselves, and how we the
people can get it back. Her websites are www.webofdebt.com, www.ellenbrown.com, and www.public-banking.com.


GET THE PASSENGERS OFF THE BOAT YOU CANNOT BAIL THIS THING OUT

http://www.larouchepub.com/pr_lar/2010/l...tdown.html

Panic spread across international financial markets as the Eurozone debt crisis escalated yesterday and today, with Spain joining Greece and Portugal on the list of countries whose sovereign debt has been downgraded by Standard & Poors, and some analysts asking the question, is Italy next?

When you add up the demanded bailouts of the bank creditors of these countries, Lyndon LaRouche commented today, you are talking about something in the range of $1 trillion dollars. If you consider the insane derivatives built on top of this quicksand—in typical Goldman Sachs style—you are in the range of a quarter quadrillion dollars, or higher. "You cannot bail this thing out," LaRouche asserted. You have to get the passengers off the boat, not try to bail out the Titanic—and hopefully there will be enough boats to do that.

The British Empire's media outlets and experts, looking at this situation, are urging an exactly contrary policy to LaRouche's: a second TARP-style mega-bailout. Barclays Capital economist Piero Ghezzi is cited in today's New York Times saying that, in order to satisfy "the markets"—i.e., the predator financial institutions that created the problem in the first place—"the number would be huge. Ninety billion euros for Greece, 40 billion for Portugal and 350 billion for Spain—now we are talking real money." The Times article then calls for a TARP-style bailout of Europe to be launched:

What a growing number of investors suggest is really needed is a 'shock and awe' figure... something similar to the Bush administration's decision to provide $700 billion to shore up America's financial institutions in the peak of the 2008 crisis.

Bloomberg.com concurred:

Europe may need to come up with a plan equivalent to the $700 billion Troubled Asset Relief Program deployed by the U.S. after the collapse of Lehman Brothers Holdings Inc.

The head of the notoriously anti-science Organization for Economic Co-operation and Development (OECD), Angel Gurria—in Berlin to survey the damage along with the top dogs of the International Monetary System, the World Bank, the European Central Bank, and the International Labor Organization—was openly hysterical:

It's not a question of the danger of contagion. Contagion has already happened. This is like Ebola. When you realize you have it, you have to cut your leg off in order to survive.

Prescribing self-dismemberment to a nation is coherent with the OECD's anti-nation state goals. The OECD is an international organisation which advises governments on how to tackle the economic, social and governance challenges of a globalized economy, in a way that won't challenge the British monetary system.
  



    
Reply
SEIZE AND LIQUIDATE GOLDMAN SACHS
Webster G. Tarpley
http://tarpley.net/2010/04/27/seize-and-...man-sachs/
April 27, 2010

Today’s Senate hearings, carried on CNBC, Bloomberg, and C-SPAN, represent the first major exposure of the American people to the scandalous frauds of the derivatives casino, including synthetic collateralized debt obligations (synthetic CDOs or CDO²). These are things most people have heard very little about. They begin to open up the shocking reality behind such shopworn euphemisms like “toxic assets,” “exotic instruments,” and “troubled assets.” Reactionaries in general and Republicans in particular have done everything possible to hide the role of derivatives, which must be considered the main cause of the financial panic of September 2008 which brought down Lehman Brothers, Merrill Lynch, and AIG, after felling Bear Stearns in March of the same year. The reactionary legend, repeated yesterday on the Senate floor by financier minion GOP Sen. Gregg of New Hampshire, is that the crisis was caused by poor people taking out subprime mortgages and then defaulting, bringing down the entire Anglo-American banking system and triggering the bailouts. Either that, or too much government spending was too blame.

A mass of kited derivatives blew up in September 2008
This Big Lie has come from such propaganda sources as the Limbaugh Institute of Retarded Reactionary Ranting. But the $1.5 trillion in subprime mortgages were dwarfed by the $15 trillion US residential real estate market, to say nothing of the $1.5 thousand trillion world derivatives bubble. But, starting with Bush-Goldman Sachs Treasury Secretary Henry Paulson, the talk has been of a “housing correction,” not a derivatives panic. It must be pointed out that derivatives are nothing but wagers, bets placed from a distance on securities which themselves are often not mortgages, but rather other derivatives. The bettor buying a synthetic CDO or CDO² does not own the underlying mortgages or mortgage-backed securities, any more than someone who bets on a racehorse owns part of the horse. Blankfein and others tried to portray derivatives as a service to hedgers and end-users, but it’s clear that the vast majority of derivatives involve neither hedgers nor users, but only bettors on both side of the transaction. It is in any case this mass of kited derivatives which blew up in 2008, bringing on the present world economic depression.

Goldman Sachs executives are babbling cretins
The mystique of Goldman Sachs is based in large part on their reputation as the smartest financiers on Wall Street. After today’s hearings, this mystique has permanently dissipated. The Goldman executives babbled. They sounded dumb. They stalled and stammered and went into contortions to avoid giving straight answers to simple questions. They were mendacious and evasive when they did speak. Financial powers around the world will note carefully the refusal of three out of four Goldman executives on one panel to state that they had a duty to defend the interests of their clients. Who will want to do business with such a gang? Goldman Sachs got $10 billion of taxpayer money in low-interest loans under the Bush-Paulson TARP. Part of that money went to pay for obscene bonuses for Goldman executives like the ones on display today. The argument for bonuses is that they must be paid to retain the highly talented personnel, virtual geniuses, who are indispensable for Wall Street speculative success. But these are no geniuses, they are imbeciles. No more bonuses should be paid by banks saved through public money.

Don’t buy any used cars from Lloyd Blankfein
Sleaziest of all was Goldman’s risk-monger in chief, Lloyd Blankfein, who pretended not to know that derivatives are often kept hidden off balance sheet. The morally insane Blankfein testified that his role was to provide the firm’s clients with “the risk they wanted.” Other GS witnesses represented the firm’s role as “distributing risk.” But it turned out that they were manufacturing risk through the very existence and activities of Goldman Sachs, which had the result of pyramiding the total risk of the US financial system into intergalactic space. It is time to regulate much of that unbearable risk out of existence with appropriate regulatory legislation. In the meantime, no sane person would buy a used car from Blankfein. Nor should they believe his assurance that the “recession” has ended.

But when at the end of the day Blankfein finally suggested to Sen. Tester that synthetic CDOs might be outlawed, we should accept his proposal immediately.

Today’s hearings reveal the Goldman Sachs gunslingers and whiz kids as ignorant gangsters and con artists, notable only for their ability to practice massive fraud with impudence. These sleazy mediocrities do not deserve bonuses paid for by taxpayers. Rather, it is time to shut them down and put them in the dock.

If Goldman Sachs had cared about is clients, it would have urgently warned them to unload their subprime risk by late 2006 or thereabouts. Instead, Goldman was busily increasing its clients’ risk by selling them more toxic CDOs out of its own inventory warehouse.

Goldman Sachs: bookies who stack the deck and fix the games
As the philandering Sen. Ensign pointed out, comparing Wall Street to Las Vegas is a slander on the croupiers of Las Vegas, where everyone knows or should know that the game is rigged so that the house always wins. To use the comparison introduced by Sen. McCaskill, Goldman Sachs was operating as the gambling house, or the bookie. At the same time, Goldman was betting for their own account. But much worse was the fact that Goldman was stacking the decks, loading the dice, fixing the games on which the bets were placed, and bribing the umpires.

As Ensign put it in a rare moment of lucidity, the subprime mortgage was bad. But the collapse of subprime would not have had anything like its actual destructive effect on the US economy if it had not been compounded by the mass of synthetic derivatives that were piled on top of subprime.

No national or social purpose served by Goldman Sachs and toxic derivatives bets
The broader issue raised by today’s hearing is: what human purpose is served by the existence of Goldman Sachs, which concocts toxic synthetic CDOs for the purpose of allowing speculators, who are often lied to and duped, to bet for or against them. Goldman Sachs can only be described as a speculative parasite which promotes the activities of other speculative parasites, such as the John Paulson hedge fund at the expense of the public and of its other clients. It was a crime to inject $10 billion of Treasury money into Goldman Sachs. It was another crime for the Fed to lend Goldman untold billions (just how many billions Bernanke still refuses to disclose) to keep them afloat and enable more predatory profits. These crimes must stop, and the public money must be clawed back. Most important, it is time to shut down the derivatives rackets.

Goldman got $12.5 billion from taxpayers for AIG credit default swaps
Useful questions from GOP Sen. Coburn pointed to another kind of derivative: the infamous credit default swap (CDS). These CDS are what brought down AIG, whose London hedge fund had issues $3 trillion in derivatives. When the government bailed out AIG, part of that $180 billion of taxpayer money was used for payouts to the CDS counterparties of AIG, biggest among them Goldman, which got $12.5 billion from the US taxpayer. That was 100 cents on the dollar on a mass of toxic CDS. Coburn wanted to know why Goldman got all their money back, while GM bondholders took a bath as GM went bankrupt. That was, of course, a matter of Goldman’s political clout through GS alum Henry Paulson and Obama Car Czar Steve “The Rat” Rattner, backed up by the historic preponderance of finance capital over industrial capital in this country since Andrew Carnegie sold out to JP Morgan over a century ago.

Derivatives and zombie banks: the toll
Thanks to Goldman Sachs, the other Wall Street zombie banks, and their derivatives, the financial panic of 2008 has turned into a world economic depression of unimaginable proportions. The unemployed and underemployed in the US alone are surely in excess of 20 million. Five to six million home foreclosures are already done or in the pipeline, throwing tens of millions of Americans out of their homes. World trade has been seriously impacted. The budgets of California, New York, Illinois, and many other states are in crisis, with massive layoffs of teachers and other state employees. An entire generation is being destroyed. Now, Greek bonds are trading at junk levels under the attack of speculative predators including Soros, Greenlight Capital, SAC, and the protagonists of today’s hearings – Paulson and Co and Goldman Sachs itself. The attack on Greece and the euro represents the leading edge of the second wave of the depression, which is now arriving in much the same way that the second wave of the 1930s depression was unleashed by the Vienna Kreditanstalt bankruptcy in May of 1931, about 79 years ago and just a year and a half into that depression.

The goal of the Republicans is to portray themselves as stern judges of Wall Street, even as they line up in a unanimous phalanx to protect the finance jackals from any meaningful regulation whatsoever — as seen in yesterday’s vote to block cloture on derivatives re-regulation and reform. The goal of the Democrats is to expose the sociopathic evil of Goldman Sachs and the rest of Wall Street while preening themselves as defenders of the public interest, without however banning credit default swaps, banning synthetic CDOs, and imposing a Wall Street sales tax on all remaining derivatives and asset transactions.

To this degree, today’s hearings are being conducted in bad faith by both major parties. However, the dynamic of the resulting spectacle has the result of educating and mobilizing public opinion against the predatory practices which are the essence of Wall Street, even a year and a half after the banking panic of September 2008 and the monster bailout of zombie banks which soon followed. What is required is a new edition of the anti-banker sentiment set off by the Senate Banking Committee hearings conducted from January 1933 to May 1934 by committee counsel Ferdinand Pecora, which unmasked the corruption of Wall Street. Persons of good will need to get active now to push this process as far as possible while these social dynamics are working. It is time to hit the zombie banks, the hedge funds, and their derivatives as hard as possible, before the second wave of the depression hits. The program necessary to fight the depression and break the strangle-hold of Wall Street on the US economy and political system is given on my web site.

Mitch McConnell on the bailout: “Harry, I think we need to do this, we should try to do this, and we can do this.”
During a break the senators filed out, and the GOP reactionary lockstep once again blocked cloture for a final debate on the Wall Street reform bill, weak as it is. Many activists of the Tea Party naively believe that they have been fighting for a year and a half that they have been fighting to take back the Republican Party. If that is what they believe, today’s second cloture vote proves that they have gotten nowhere in their efforts. Despite their charades, the GOP are the bodyguards of the Wall Street predators. Tea baggers who think they can break the Wall Street grip on the Republicans are pathetic dupes, and they need to wake up, pronto.

When Paulson went to the leaders of Congress to demand a $700 billion bailout for Goldman and his Wall Street cronies, GOP Senate majority leader Mitch McConnell was “deeply frightened” by the apocalyptic briefing delivered by Paulson and Bernanke. When Democratic Majority Leader Harry Reid started talking about how difficult it would be to get so much money in a hurry, McConnell urged an immediate bailout, saying: “Harry, I think we need to do this, we should try to do this, and we can do this.” (Andrew Ross Sorkin, Too Big to Fail [New York: Viking, 2009], p. 442) The GOP was the original party of the bailout, and they have not repented, as best seen through the continuance of McConnell, one of the key midwives of the bailout, as Republican Senate Majority Leader. This is the same McConnell who went to Wall Street recently to meet with zombie bankers and hedge fund hyenas, pledging to block derivatives reforms in exchange for big bucks contributed to the GOP’s campaign coffers. Tea baggers who think the GOP has changed or is moving to their side are sadly deluded.

Today, the market fetishism of the crackpot Austrian school has taken a severe blow. Now that Blankfein‘s public image has been soiled by Goldman’s scurrilous and scatological emails, the time is ripe for the radical reform of derivatives and the zombie banks. This is a matter of national survival.

Now that Goldman Sachs is masquerading as a bank holding company, it is subject to FDIC rules. If Goldman’s derivative hoard is marked to market, it is bankrupt. The FDIC should therefore seize Goldman and liquidate it under chapter 7 of the US Code. Sheila Bair should not wait for Friday.

BRING DOWN GOLDMAN SACHS AND EXPOSE THE FINANCIAL COUP
The Role of the SEC and the US Congress

David DeGraw
http://www.globalresearch.ca/index.php?context=va&aid=18903

Not only did Goldman Sachs profit on betting against CDOs they designed to fail; more importantly, they insured them through AIG which led to a $182 billion taxpayer bailout.

Have you heard the news? It’s everywhere! The SEC and Congress have all of a sudden sprung to life and are now “getting tough” on Goldman Sachs. Is this all the first phase of a long-awaited investigation that will reveal the causes of our current economic crisis, or is this just more show trials and psychological operations designed to manipulate public opinion and make the American people feel that our elected officials are finally standing up to their campaign funders on Wall Street?

First off, let’s address these SEC charges against Goldman Sachs. At first glance you might think, oh big deal, this is just a minor civil suit that only indicts a low-level Goldman employee. Goldman will just throw some money at it and it will most likely go away. After all, Wall Street firms have already thrown over $430 billion out to derail 1500 cases against them, so what will make this any different?

We are also left wondering, if the SEC was serious about this case, why aren’t they investigating and prosecuting John Paulson and top Goldman executives under the federal Racketeer Influenced and Corrupt Organizations Act (RICO) statutes? Even the NY Times reported that top executives were involved in the process. If you think Lloyd Blankfein wasn’t fully aware of this billion dollar deal involving John Paulson, you’re delusional. Blankfein became CEO of Goldman due to his outstanding expertise in this particular area, serving as Goldman’s head of the Fixed Income, Currency and Commodities Division (FICC) since its formation in 1997.

So unless this is just the first of many moves on the part of the SEC, this whole case amounts to a psychological operation designed to once again quell popular outrage. These indications lead me to believe that this is a classic “limited hang-out.” As Wikipedia explains it:

“A limited hangout is a form of deception, misdirection, or coverup often associated with intelligence agencies involving a release or ‘mea culpa’ type of confession of only part of a set of previously hidden sensitive information, that establishes credibility for the one releasing the information who by the very act of confession appears to be ‘coming clean’ and acting with integrity; but in actuality by withholding key facts is protecting a deeper crime and those who could be exposed if the whole truth came out. In effect, if an array of offenses or misdeeds is suspected, this confession admits to a lesser offense while covering up the greater ones.”

However, on the other hand, if you take a close look at this case, it shows you that the SEC and the recent Senate probe are on exactly the right trail to not only bring down Goldman and the major players who caused the economic crisis, but also to target the key aspects of the much bigger crime, or as I call it the financial coup that led to trillions of our tax dollars being handed over to the very people who caused the crisis.

So let’s look again at the specifics of the SEC case from this angle.

Congress and the SEC are making the case that Goldman Sachs and John Paulson put together CDOs that they knew would fail and then made huge profits shorting (betting against) them.

Although the SEC and Congress are focusing on Goldman Sachs and John Paulson shorting these CDOs they knew would fail, these CDOs are at the heart of the case I presented in my Financial Coup report. Not only did they create CDOs they knew would fail and bet against them, but they also, more importantly, insured these CDOs through AIG. This is the key point and exactly what led to US taxpayers being forced to bail AIG out at the extraordinary expense of $182 billion.

Hank Paulson’s Role

Here’s how a report on Zero Hedge put it: “They [Goldman] fabricated synthetic CDOs, such as Abacus 2007 AC-1. These toxic assets, invented out of thin air, made the meltdown worse than it otherwise would have been. How much worse? Consider the numbers: According to the New York Fed, about $1.275 trillion in subprime mortgage-backed bonds were issued between 2004 and 2006.”

Now, the quote above references some of the CDO time bombs that were created in the market that eventually blew up. Also, notice when the bulk of these CDOs were created - during Hank Paulson’s reign as CEO of Goldman. As I wrote in early February, “Paulson knew these CDOs would go bust because they were based on fraudulent activities…. So Paulson and Goldman Sachs covered their risk by insuring them through AIG, making it pivotal to save AIG….”

So after Hank Paulson and Goldman Sachs created a ticking time bomb in CDOs — Paulson personally made $700 million on these shady activities — they then insured them through AIG. Paulson then moved to the US Treasury where he was calling the shots once his time bomb went off. And once it went off, Paulson quickly made the decision that AIG was “too big too fail” and must be saved at all costs.

As bad as that sounds, this is just part of the story. Enter Edward Liddy, as I wrote:

“Another egregious unilateral move by Paulson was installing Edward Liddy, one of his former board members at Goldman Sachs, as CEO of AIG. Liddy was the Chairman of Goldman’s Audit Committee, making him the most knowledgeable person regarding Goldman’s collateralized debt obligations (CDOs)… making it pivotal to… have one of Paulson’s most trusted allies run the company. With Liddy in place, billions of taxpayer dollars were secretly funneled by the Geithner-led NY Federal Reserve through AIG to Goldman Sachs and several other Wall Street elite counterparties.”

Without the AIG bailout, Goldman Sachs would have collapsed as a result of its own scam. So Hank Paulson, not John Paulson, should be the ultimate target of this investigation.

Credit Ratings Agencies and Other Firms

Other key players in this scam/coup were the credit ratings agencies. Congress is pounding away on this front now as well. Goldman Sachs either duped the major ratings agencies or got them to play along - getting them to give fraudulent AAA ratings to the CDOs that were designed to fail, thus leading investors to believe that they were safe investments.

Now, to be clear, Goldman Sachs wasn’t the only firm to create these CDO bombs, as Pro Publica reported:

“Investment banks including JPMorgan Chase, Merrill Lynch (now part of Bank of America), Citigroup, Deutsche Bank and UBS also created CDOs that a hedge fund named Magnetar was both helping create and betting would fail. Those investment banks marketed and sold the CDOs to investors without disclosing Magnetar’s role or the hedge fund’s interests.

Here is a list of the banks that were involved in Magnetar deals, along with links to many of the prospectuses on the deals, which skip over Magnetar’s role. In all, investment banks created at least 30 CDOs with Magnetar, worth roughly $40 billion overall. Goldman’s 25 Abacus CDOs—one of which is the basis of the SEC’s lawsuit—amounted to $10.9 billion.”

The Federal Reserve’s Role

The investigations also need to target the fact that Hank Paulson and Ben Bernanke turned Goldman Sachs into a bank holding company overnight, which gave Goldman and a handful of other firms, chosen by Paulson and Bernanke, access to trillions in taxpayer backed zero interest loans. This allowed them to buy up assets and manipulate the market at a time when other firms, not blessed by the Fed, couldn’t compete. This is why we now see Goldman racking in record breaking profits. Even to this day, the Fed is fighting disclosure of information on these scandalous loans estimated to be worth a stunning $2 trillion. The Fed’s desire to conceal information regarding $2 trillion in taxpayer backed loans demonstrates a complete disregard for the American people.

And while Congress is at it, they need to hold accountable the people involved in the Maiden Lane II and III taxpayer money giveaways. In these deals, the Fed moved tens of billions of taxpayer dollars without Congressional approval prior to TARP and the bailout. This is a direct violation of the Constitution, not to mention completely illegal. The Fed cannot move a single tax dollar without Congressional approval, let alone tens of billions.

Yet another focus of the investigation needs to be the outright fraudulent accounting scams that were exposed in the Lehman Brothers bankruptcy report and have since been proven to be standard procedure among the 18 largest politically-connected firms. As Jennifer S. Taub revealed on Baseline Scenario: “…based on data from the Federal Reserve Bank of New York, eighteen banks ‘understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods.’ These banks include Goldman Sachs, Morgan Stanley, JP Morgan Chase, Bank of America and Citigroup.”

Once again, the Federal Reserve played a significant role in aiding and abetting these illegal accounting scams, which of course led to record breaking bonuses that are handed out based on false profits.

This is why we must aggressively pursue RICO charges, this is an organized criminal operation of the highest degree.

The bottom line is, these are the illegal activities that led to our current crisis and what amounts to trillions of dollars lost to theft and outright fraud.

There is no question that Congress and the SEC have been derelict in their duties thus far, and possibly criminally negligent, and this all could very well just be more show trials that are psychological operations to make the US public think that there is actually accountability and a rule of law. However, if Congress and the SEC can stay the course and follow this investigation through, it will lead them right into the heart of an intelligence operation designed to take down the US working class taxpayer and enrich the wealthiest people on the planet.

A bold claim, but if Congress and the SEC are actually concerned about the interests of 99% of the US population, their investigation will lead them down this path, which will eventually bring down Goldman Sachs and expose the Financial Coup.

The American public must demand that this investigation proceed along these lines. We are literally confronted with the greatest theft of wealth in history and the consequences of this are only just beginning to reap their toll.


THE STORY OF THE FINANCIAL DEBACLE: GOLDMAN PLAYS, WE PAY
Robert Scheer
http://www.globalresearch.ca/index.php?context=va&aid=18810

The story of the financial debacle will end the way it began, with the super-hustlers from Goldman Sachs at the center of the action and profiting wildly. Never in U.S. history has one company wielded such destructive power over our political economy, irrespective of whether a Republican or a Democrat happened to be president.

At least the robber barons of old built railroads and steel mills, whereas Goldman Sachs makes its money placing bets on people losing their homes. On Tuesday, Goldman announced a 91 percent jump in profit to $3.46 billion for the quarter, while the dreams of millions of families continue to be foreclosed and unemployment hovers at 10 percent because of a crisis that that very company did much to cause.

It was Goldman-Vice-Chairman-turned-Treasury-Secretary Robert Rubin who pushed through the radical financial deregulation during the Clinton presidency that made the derivatives madness possible. When Bill Clinton was asked on ABC’s Sunday show “This Week” if he now regretted the advice he received back then from Rubin and his protégé Lawrence Summers, now a top Obama adviser, he responded: “On derivatives, yeah, I think they were wrong and I was wrong to take it. …”

Thanks to that bad advice, Clinton signed off on the Commodity Futures Modernization Act, which categorically exempted those derivatives from any existing law or regulatory body. It was that exemption that freed Goldman Sachs and others on Wall Street to run wild in packaging collateralized debt obligations, and their attendant swaps, which turned people’s home into nothing more than gambling chips. The more suckers to be conned into those mortgage obligations, the better for the financial casino—until it had to be saved by taxpayers from spiraling completely out of control.

And it was Goldman-Chairman-turned-Treasury-Secretary Henry Paulson who engineered the Bush-era bailout that left Goldman holding the high cards. The corporation was allowed to suddenly become a bank holding company, a privilege denied Lehman Brothers, and hence eligible for TARP funding and a sharp discount in the cost of borrowing money. Treasury Secretary Timothy Geithner, then head of the New York Fed, worked with Paulson to give Goldman the federally protected status of a commercial bank and also worked on the deal that passed taxpayer money through AIG to Goldman.

It wasn’t surprising, then, that last week Geithner formally opposed the section of a bill by Sen. Blanche Lincoln that would ban banks from dealing in swaps and other derivatives. Now that it is a bank, Goldman would have to drop that lucrative business or give up its right as a bank to borrow from the Federal Reserve as well as the protection of federal deposit insurance.

The test for serious financial reform could well be that if it’s good for Goldman Sachs, it’s bad for the country. But with scores of Goldman alums as well placed in the Obama administration as they were under Clinton and George W. Bush, it is a test the government is likely to fail as far as taxpayers are concerned. Or should we simply trust Mark Patterson, who is chief of staff to Geithner and a Goldman lobbyist for three years before he entered the Obama administration, to do the right thing for the rest of us?

Maybe he will. After all, Gary Gensler, a former Goldman partner who now heads the critically important Commodity Futures Trading Commission, does seem to have had a change of heart from his days in the Clinton administration, when he thought that bringing “legal certainty” to the trade in what turned out to be “toxic derivatives” was a great thing. The SEC civil suit is also a sign of progress. There are other positive stirrings, as in President Barack Obama’s most recent speeches, but what is needed now is a profound populist commitment among those who elected Obama to demand he throw the money-changers out of the temple of democratic governance.

Instead they are crowding in. The New York Times reported: “With so much money at stake, it is not surprising that more than 1,500 lobbyists, executives, bankers and others have made their way to the Senate committee that on Wednesday will take up legislation to rein in derivatives.” That’s the committee that Sen. Lincoln heads, and she needs the president’s support rather than Geithner’s opposition to her plan to ban banks like Goldman from trading in derivatives.

It is insulting to the spirit of populist revolt, which has been fundamental to the success of America’s grand experiment in democracy, that a fat-cat Republican-funded tea party revolt is now the vessel of popular anti-Wall Street discontent. That vessel ought to be our president, who campaigned as a champion of the common people.
Reply
SEIZE AND LIQUIDATE GOLDMAN SACHS
Webster G. Tarpley
http://tarpley.net/2010/04/27/seize-and-...man-sachs/
April 27, 2010

Today’s Senate hearings, carried on CNBC, Bloomberg, and C-SPAN, represent the first major exposure of the American people to the scandalous frauds of the derivatives casino, including synthetic collateralized debt obligations (synthetic CDOs or CDO²). These are things most people have heard very little about. They begin to open up the shocking reality behind such shopworn euphemisms like “toxic assets,” “exotic instruments,” and “troubled assets.” Reactionaries in general and Republicans in particular have done everything possible to hide the role of derivatives, which must be considered the main cause of the financial panic of September 2008 which brought down Lehman Brothers, Merrill Lynch, and AIG, after felling Bear Stearns in March of the same year. The reactionary legend, repeated yesterday on the Senate floor by financier minion GOP Sen. Gregg of New Hampshire, is that the crisis was caused by poor people taking out subprime mortgages and then defaulting, bringing down the entire Anglo-American banking system and triggering the bailouts. Either that, or too much government spending was too blame.

A mass of kited derivatives blew up in September 2008
This Big Lie has come from such propaganda sources as the Limbaugh Institute of Retarded Reactionary Ranting. But the $1.5 trillion in subprime mortgages were dwarfed by the $15 trillion US residential real estate market, to say nothing of the $1.5 thousand trillion world derivatives bubble. But, starting with Bush-Goldman Sachs Treasury Secretary Henry Paulson, the talk has been of a “housing correction,” not a derivatives panic. It must be pointed out that derivatives are nothing but wagers, bets placed from a distance on securities which themselves are often not mortgages, but rather other derivatives. The bettor buying a synthetic CDO or CDO² does not own the underlying mortgages or mortgage-backed securities, any more than someone who bets on a racehorse owns part of the horse. Blankfein and others tried to portray derivatives as a service to hedgers and end-users, but it’s clear that the vast majority of derivatives involve neither hedgers nor users, but only bettors on both side of the transaction. It is in any case this mass of kited derivatives which blew up in 2008, bringing on the present world economic depression.

Goldman Sachs executives are babbling cretins
The mystique of Goldman Sachs is based in large part on their reputation as the smartest financiers on Wall Street. After today’s hearings, this mystique has permanently dissipated. The Goldman executives babbled. They sounded dumb. They stalled and stammered and went into contortions to avoid giving straight answers to simple questions. They were mendacious and evasive when they did speak. Financial powers around the world will note carefully the refusal of three out of four Goldman executives on one panel to state that they had a duty to defend the interests of their clients. Who will want to do business with such a gang? Goldman Sachs got $10 billion of taxpayer money in low-interest loans under the Bush-Paulson TARP. Part of that money went to pay for obscene bonuses for Goldman executives like the ones on display today. The argument for bonuses is that they must be paid to retain the highly talented personnel, virtual geniuses, who are indispensable for Wall Street speculative success. But these are no geniuses, they are imbeciles. No more bonuses should be paid by banks saved through public money.

Don’t buy any used cars from Lloyd Blankfein
Sleaziest of all was Goldman’s risk-monger in chief, Lloyd Blankfein, who pretended not to know that derivatives are often kept hidden off balance sheet. The morally insane Blankfein testified that his role was to provide the firm’s clients with “the risk they wanted.” Other GS witnesses represented the firm’s role as “distributing risk.” But it turned out that they were manufacturing risk through the very existence and activities of Goldman Sachs, which had the result of pyramiding the total risk of the US financial system into intergalactic space. It is time to regulate much of that unbearable risk out of existence with appropriate regulatory legislation. In the meantime, no sane person would buy a used car from Blankfein. Nor should they believe his assurance that the “recession” has ended.

But when at the end of the day Blankfein finally suggested to Sen. Tester that synthetic CDOs might be outlawed, we should accept his proposal immediately.

Today’s hearings reveal the Goldman Sachs gunslingers and whiz kids as ignorant gangsters and con artists, notable only for their ability to practice massive fraud with impudence. These sleazy mediocrities do not deserve bonuses paid for by taxpayers. Rather, it is time to shut them down and put them in the dock.

If Goldman Sachs had cared about is clients, it would have urgently warned them to unload their subprime risk by late 2006 or thereabouts. Instead, Goldman was busily increasing its clients’ risk by selling them more toxic CDOs out of its own inventory warehouse.

Goldman Sachs: bookies who stack the deck and fix the games
As the philandering Sen. Ensign pointed out, comparing Wall Street to Las Vegas is a slander on the croupiers of Las Vegas, where everyone knows or should know that the game is rigged so that the house always wins. To use the comparison introduced by Sen. McCaskill, Goldman Sachs was operating as the gambling house, or the bookie. At the same time, Goldman was betting for their own account. But much worse was the fact that Goldman was stacking the decks, loading the dice, fixing the games on which the bets were placed, and bribing the umpires.

As Ensign put it in a rare moment of lucidity, the subprime mortgage was bad. But the collapse of subprime would not have had anything like its actual destructive effect on the US economy if it had not been compounded by the mass of synthetic derivatives that were piled on top of subprime.

No national or social purpose served by Goldman Sachs and toxic derivatives bets. The broader issue raised by today’s hearing is: what human purpose is served by the existence of Goldman Sachs, which concocts toxic synthetic CDOs for the purpose of allowing speculators, who are often lied to and duped, to bet for or against them. Goldman Sachs can only be described as a speculative parasite which promotes the activities of other speculative parasites, such as the John Paulson hedge fund at the expense of the public and of its other clients. It was a crime to inject $10 billion of Treasury money into Goldman Sachs. It was another crime for the Fed to lend Goldman untold billions (just how many billions Bernanke still refuses to disclose) to keep them afloat and enable more predatory profits. These crimes must stop, and the public money must be clawed back. Most important, it is time to shut down the derivatives rackets.

Goldman got $12.5 billion from taxpayers for AIG credit default swaps
Useful questions from GOP Sen. Coburn pointed to another kind of derivative: the infamous credit default swap (CDS). These CDS are what brought down AIG, whose London hedge fund had issues $3 trillion in derivatives. When the government bailed out AIG, part of that $180 billion of taxpayer money was used for payouts to the CDS counterparties of AIG, biggest among them Goldman, which got $12.5 billion from the US taxpayer. That was 100 cents on the dollar on a mass of toxic CDS. Coburn wanted to know why Goldman got all their money back, while GM bondholders took a bath as GM went bankrupt. That was, of course, a matter of Goldman’s political clout through GS alum Henry Paulson and Obama Car Czar Steve “The Rat” Rattner, backed up by the historic preponderance of finance capital over industrial capital in this country since Andrew Carnegie sold out to JP Morgan over a century ago.

Derivatives and zombie banks: the toll
Thanks to Goldman Sachs, the other Wall Street zombie banks, and their derivatives, the financial panic of 2008 has turned into a world economic depression of unimaginable proportions. The unemployed and underemployed in the US alone are surely in excess of 20 million. Five to six million home foreclosures are already done or in the pipeline, throwing tens of millions of Americans out of their homes. World trade has been seriously impacted. The budgets of California, New York, Illinois, and many other states are in crisis, with massive layoffs of teachers and other state employees. An entire generation is being destroyed. Now, Greek bonds are trading at junk levels under the attack of speculative predators including Soros, Greenlight Capital, SAC, and the protagonists of today’s hearings – Paulson and Co and Goldman Sachs itself. The attack on Greece and the euro represents the leading edge of the second wave of the depression, which is now arriving in much the same way that the second wave of the 1930s depression was unleashed by the Vienna Kreditanstalt bankruptcy in May of 1931, about 79 years ago and just a year and a half into that depression.

The goal of the Republicans is to portray themselves as stern judges of Wall Street, even as they line up in a unanimous phalanx to protect the finance jackals from any meaningful regulation whatsoever — as seen in yesterday’s vote to block cloture on derivatives re-regulation and reform. The goal of the Democrats is to expose the sociopathic evil of Goldman Sachs and the rest of Wall Street while preening themselves as defenders of the public interest, without however banning credit default swaps, banning synthetic CDOs, and imposing a Wall Street sales tax on all remaining derivatives and asset transactions.

To this degree, today’s hearings are being conducted in bad faith by both major parties. However, the dynamic of the resulting spectacle has the result of educating and mobilizing public opinion against the predatory practices which are the essence of Wall Street, even a year and a half after the banking panic of September 2008 and the monster bailout of zombie banks which soon followed. What is required is a new edition of the anti-banker sentiment set off by the Senate Banking Committee hearings conducted from January 1933 to May 1934 by committee counsel Ferdinand Pecora, which unmasked the corruption of Wall Street. Persons of good will need to get active now to push this process as far as possible while these social dynamics are working. It is time to hit the zombie banks, the hedge funds, and their derivatives as hard as possible, before the second wave of the depression hits. The program necessary to fight the depression and break the strangle-hold of Wall Street on the US economy and political system is given on my web site.

Mitch McConnell on the bailout: “Harry, I think we need to do this, we should try to do this, and we can do this.”
During a break the senators filed out, and the GOP reactionary lockstep once again blocked cloture for a final debate on the Wall Street reform bill, weak as it is. Many activists of the Tea Party naively believe that they have been fighting for a year and a half that they have been fighting to take back the Republican Party. If that is what they believe, today’s second cloture vote proves that they have gotten nowhere in their efforts. Despite their charades, the GOP are the bodyguards of the Wall Street predators. Tea baggers who think they can break the Wall Street grip on the Republicans are pathetic dupes, and they need to wake up, pronto.

When Paulson went to the leaders of Congress to demand a $700 billion bailout for Goldman and his Wall Street cronies, GOP Senate majority leader Mitch McConnell was “deeply frightened” by the apocalyptic briefing delivered by Paulson and Bernanke. When Democratic Majority Leader Harry Reid started talking about how difficult it would be to get so much money in a hurry, McConnell urged an immediate bailout, saying: “Harry, I think we need to do this, we should try to do this, and we can do this.” (Andrew Ross Sorkin, Too Big to Fail [New York: Viking, 2009], p. 442) The GOP was the original party of the bailout, and they have not repented, as best seen through the continuance of McConnell, one of the key midwives of the bailout, as Republican Senate Majority Leader. This is the same McConnell who went to Wall Street recently to meet with zombie bankers and hedge fund hyenas, pledging to block derivatives reforms in exchange for big bucks contributed to the GOP’s campaign coffers. Tea baggers who think the GOP has changed or is moving to their side are sadly deluded.

Today, the market fetishism of the crackpot Austrian school has taken a severe blow. Now that Blankfein‘s public image has been soiled by Goldman’s scurrilous and scatological emails, the time is ripe for the radical reform of derivatives and the zombie banks. This is a matter of national survival.

Now that Goldman Sachs is masquerading as a bank holding company, it is subject to FDIC rules. If Goldman’s derivative hoard is marked to market, it is bankrupt. The FDIC should therefore seize Goldman and liquidate it under chapter 7 of the US Code. Sheila Bair should not wait for Friday.

BRING DOWN GOLDMAN SACHS AND EXPOSE THE FINANCIAL COUP
The Role of the SEC and the US Congress

David DeGraw
http://www.globalresearch.ca/index.php?context=va&aid=18903

Not only did Goldman Sachs profit on betting against CDOs they designed to fail; more importantly, they insured them through AIG which led to a $182 billion taxpayer bailout.

Have you heard the news? It’s everywhere! The SEC and Congress have all of a sudden sprung to life and are now “getting tough” on Goldman Sachs. Is this all the first phase of a long-awaited investigation that will reveal the causes of our current economic crisis, or is this just more show trials and psychological operations designed to manipulate public opinion and make the American people feel that our elected officials are finally standing up to their campaign funders on Wall Street?

First off, let’s address these SEC charges against Goldman Sachs. At first glance you might think, oh big deal, this is just a minor civil suit that only indicts a low-level Goldman employee. Goldman will just throw some money at it and it will most likely go away. After all, Wall Street firms have already thrown over $430 billion out to derail 1500 cases against them, so what will make this any different?

We are also left wondering, if the SEC was serious about this case, why aren’t they investigating and prosecuting John Paulson and top Goldman executives under the federal Racketeer Influenced and Corrupt Organizations Act (RICO) statutes? Even the NY Times reported that top executives were involved in the process. If you think Lloyd Blankfein wasn’t fully aware of this billion dollar deal involving John Paulson, you’re delusional. Blankfein became CEO of Goldman due to his outstanding expertise in this particular area, serving as Goldman’s head of the Fixed Income, Currency and Commodities Division (FICC) since its formation in 1997.

So unless this is just the first of many moves on the part of the SEC, this whole case amounts to a psychological operation designed to once again quell popular outrage. These indications lead me to believe that this is a classic “limited hang-out.” As Wikipedia explains it:

“A limited hangout is a form of deception, misdirection, or coverup often associated with intelligence agencies involving a release or ‘mea culpa’ type of confession of only part of a set of previously hidden sensitive information, that establishes credibility for the one releasing the information who by the very act of confession appears to be ‘coming clean’ and acting with integrity; but in actuality by withholding key facts is protecting a deeper crime and those who could be exposed if the whole truth came out. In effect, if an array of offenses or misdeeds is suspected, this confession admits to a lesser offense while covering up the greater ones.”

However, on the other hand, if you take a close look at this case, it shows you that the SEC and the recent Senate probe are on exactly the right trail to not only bring down Goldman and the major players who caused the economic crisis, but also to target the key aspects of the much bigger crime, or as I call it the financial coup that led to trillions of our tax dollars being handed over to the very people who caused the crisis.

So let’s look again at the specifics of the SEC case from this angle.

Congress and the SEC are making the case that Goldman Sachs and John Paulson put together CDOs that they knew would fail and then made huge profits shorting (betting against) them.

Although the SEC and Congress are focusing on Goldman Sachs and John Paulson shorting these CDOs they knew would fail, these CDOs are at the heart of the case I presented in my Financial Coup report. Not only did they create CDOs they knew would fail and bet against them, but they also, more importantly, insured these CDOs through AIG. This is the key point and exactly what led to US taxpayers being forced to bail AIG out at the extraordinary expense of $182 billion.

Hank Paulson’s Role

Here’s how a report on Zero Hedge put it: “They [Goldman] fabricated synthetic CDOs, such as Abacus 2007 AC-1. These toxic assets, invented out of thin air, made the meltdown worse than it otherwise would have been. How much worse? Consider the numbers: According to the New York Fed, about $1.275 trillion in subprime mortgage-backed bonds were issued between 2004 and 2006.”

Now, the quote above references some of the CDO time bombs that were created in the market that eventually blew up. Also, notice when the bulk of these CDOs were created - during Hank Paulson’s reign as CEO of Goldman. As I wrote in early February, “Paulson knew these CDOs would go bust because they were based on fraudulent activities…. So Paulson and Goldman Sachs covered their risk by insuring them through AIG, making it pivotal to save AIG….”

So after Hank Paulson and Goldman Sachs created a ticking time bomb in CDOs — Paulson personally made $700 million on these shady activities — they then insured them through AIG. Paulson then moved to the US Treasury where he was calling the shots once his time bomb went off. And once it went off, Paulson quickly made the decision that AIG was “too big too fail” and must be saved at all costs.

As bad as that sounds, this is just part of the story. Enter Edward Liddy, as I wrote:

“Another egregious unilateral move by Paulson was installing Edward Liddy, one of his former board members at Goldman Sachs, as CEO of AIG. Liddy was the Chairman of Goldman’s Audit Committee, making him the most knowledgeable person regarding Goldman’s collateralized debt obligations (CDOs)… making it pivotal to… have one of Paulson’s most trusted allies run the company. With Liddy in place, billions of taxpayer dollars were secretly funneled by the Geithner-led NY Federal Reserve through AIG to Goldman Sachs and several other Wall Street elite counterparties.”

Without the AIG bailout, Goldman Sachs would have collapsed as a result of its own scam. So Hank Paulson, not John Paulson, should be the ultimate target of this investigation.

Credit Ratings Agencies and Other Firms

Other key players in this scam/coup were the credit ratings agencies. Congress is pounding away on this front now as well. Goldman Sachs either duped the major ratings agencies or got them to play along - getting them to give fraudulent AAA ratings to the CDOs that were designed to fail, thus leading investors to believe that they were safe investments.

Now, to be clear, Goldman Sachs wasn’t the only firm to create these CDO bombs, as Pro Publica reported:

“Investment banks including JPMorgan Chase, Merrill Lynch (now part of Bank of America), Citigroup, Deutsche Bank and UBS also created CDOs that a hedge fund named Magnetar was both helping create and betting would fail. Those investment banks marketed and sold the CDOs to investors without disclosing Magnetar’s role or the hedge fund’s interests.

Here is a list of the banks that were involved in Magnetar deals, along with links to many of the prospectuses on the deals, which skip over Magnetar’s role. In all, investment banks created at least 30 CDOs with Magnetar, worth roughly $40 billion overall. Goldman’s 25 Abacus CDOs—one of which is the basis of the SEC’s lawsuit—amounted to $10.9 billion.”

The Federal Reserve’s Role

The investigations also need to target the fact that Hank Paulson and Ben Bernanke turned Goldman Sachs into a bank holding company overnight, which gave Goldman and a handful of other firms, chosen by Paulson and Bernanke, access to trillions in taxpayer backed zero interest loans. This allowed them to buy up assets and manipulate the market at a time when other firms, not blessed by the Fed, couldn’t compete. This is why we now see Goldman racking in record breaking profits. Even to this day, the Fed is fighting disclosure of information on these scandalous loans estimated to be worth a stunning $2 trillion. The Fed’s desire to conceal information regarding $2 trillion in taxpayer backed loans demonstrates a complete disregard for the American people.

And while Congress is at it, they need to hold accountable the people involved in the Maiden Lane II and III taxpayer money giveaways. In these deals, the Fed moved tens of billions of taxpayer dollars without Congressional approval prior to TARP and the bailout. This is a direct violation of the Constitution, not to mention completely illegal. The Fed cannot move a single tax dollar without Congressional approval, let alone tens of billions.

Yet another focus of the investigation needs to be the outright fraudulent accounting scams that were exposed in the Lehman Brothers bankruptcy report and have since been proven to be standard procedure among the 18 largest politically-connected firms. As Jennifer S. Taub revealed on Baseline Scenario: “…based on data from the Federal Reserve Bank of New York, eighteen banks ‘understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods.’ These banks include Goldman Sachs, Morgan Stanley, JP Morgan Chase, Bank of America and Citigroup.”

Once again, the Federal Reserve played a significant role in aiding and abetting these illegal accounting scams, which of course led to record breaking bonuses that are handed out based on false profits.

This is why we must aggressively pursue RICO charges, this is an organized criminal operation of the highest degree.

The bottom line is, these are the illegal activities that led to our current crisis and what amounts to trillions of dollars lost to theft and outright fraud.

There is no question that Congress and the SEC have been derelict in their duties thus far, and possibly criminally negligent, and this all could very well just be more show trials that are psychological operations to make the US public think that there is actually accountability and a rule of law. However, if Congress and the SEC can stay the course and follow this investigation through, it will lead them right into the heart of an intelligence operation designed to take down the US working class taxpayer and enrich the wealthiest people on the planet.

A bold claim, but if Congress and the SEC are actually concerned about the interests of 99% of the US population, their investigation will lead them down this path, which will eventually bring down Goldman Sachs and expose the Financial Coup.

The American public must demand that this investigation proceed along these lines. We are literally confronted with the greatest theft of wealth in history and the consequences of this are only just beginning to reap their toll.


David DeGraw is a frequent contributor to Global Research.  Global Research Articles by David DeGraw







THE STORY OF THE FINANCIAL DEBACLE: GOLDMAN PLAYS, WE PAY
Robert Scheer
http://www.globalresearch.ca/index.php?context=va&aid=18810

The story of the financial debacle will end the way it began, with the super-hustlers from Goldman Sachs at the center of the action and profiting wildly. Never in U.S. history has one company wielded such destructive power over our political economy, irrespective of whether a Republican or a Democrat happened to be president.

At least the robber barons of old built railroads and steel mills, whereas Goldman Sachs makes its money placing bets on people losing their homes. On Tuesday, Goldman announced a 91 percent jump in profit to $3.46 billion for the quarter, while the dreams of millions of families continue to be foreclosed and unemployment hovers at 10 percent because of a crisis that that very company did much to cause.

It was Goldman-Vice-Chairman-turned-Treasury-Secretary Robert Rubin who pushed through the radical financial deregulation during the Clinton presidency that made the derivatives madness possible. When Bill Clinton was asked on ABC’s Sunday show “This Week” if he now regretted the advice he received back then from Rubin and his protégé Lawrence Summers, now a top Obama adviser, he responded: “On derivatives, yeah, I think they were wrong and I was wrong to take it. …”

Thanks to that bad advice, Clinton signed off on the Commodity Futures Modernization Act, which categorically exempted those derivatives from any existing law or regulatory body. It was that exemption that freed Goldman Sachs and others on Wall Street to run wild in packaging collateralized debt obligations, and their attendant swaps, which turned people’s home into nothing more than gambling chips. The more suckers to be conned into those mortgage obligations, the better for the financial casino—until it had to be saved by taxpayers from spiraling completely out of control.

And it was Goldman-Chairman-turned-Treasury-Secretary Henry Paulson who engineered the Bush-era bailout that left Goldman holding the high cards. The corporation was allowed to suddenly become a bank holding company, a privilege denied Lehman Brothers, and hence eligible for TARP funding and a sharp discount in the cost of borrowing money. Treasury Secretary Timothy Geithner, then head of the New York Fed, worked with Paulson to give Goldman the federally protected status of a commercial bank and also worked on the deal that passed taxpayer money through AIG to Goldman.

It wasn’t surprising, then, that last week Geithner formally opposed the section of a bill by Sen. Blanche Lincoln that would ban banks from dealing in swaps and other derivatives. Now that it is a bank, Goldman would have to drop that lucrative business or give up its right as a bank to borrow from the Federal Reserve as well as the protection of federal deposit insurance.

The test for serious financial reform could well be that if it’s good for Goldman Sachs, it’s bad for the country. But with scores of Goldman alums as well placed in the Obama administration as they were under Clinton and George W. Bush, it is a test the government is likely to fail as far as taxpayers are concerned. Or should we simply trust Mark Patterson, who is chief of staff to Geithner and a Goldman lobbyist for three years before he entered the Obama administration, to do the right thing for the rest of us?

Maybe he will. After all, Gary Gensler, a former Goldman partner who now heads the critically important Commodity Futures Trading Commission, does seem to have had a change of heart from his days in the Clinton administration, when he thought that bringing “legal certainty” to the trade in what turned out to be “toxic derivatives” was a great thing. The SEC civil suit is also a sign of progress. There are other positive stirrings, as in President Barack Obama’s most recent speeches, but what is needed now is a profound populist commitment among those who elected Obama to demand he throw the money-changers out of the temple of democratic governance.

Instead they are crowding in. The New York Times reported: “With so much money at stake, it is not surprising that more than 1,500 lobbyists, executives, bankers and others have made their way to the Senate committee that on Wednesday will take up legislation to rein in derivatives.” That’s the committee that Sen. Lincoln heads, and she needs the president’s support rather than Geithner’s opposition to her plan to ban banks like Goldman from trading in derivatives.

It is insulting to the spirit of populist revolt, which has been fundamental to the success of America’s grand experiment in democracy, that a fat-cat Republican-funded tea party revolt is now the vessel of popular anti-Wall Street discontent. That vessel ought to be our president, who campaigned as a champion of the common people.
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STOCK MARKET COLLAPSE: MORE GOLDMAN MARKET RIGGING

Ellen Brown


Last week, Goldman Sachs was on the congressional hot seat, grilled for fraud in its sale of complicated financial products called “synthetic CDOs.”  This week the heat was off, as all eyes turned to the attack of the shorts on Greek sovereign debt and the dire threat of a sovereign Greek default.  By Thursday, Goldman’s fraud had slipped from the headlines and Congress had been cowed into throwing in the towel on its campaign to break up the too-big-to-fail banks.  On Friday, Goldman was in settlement talks with the SEC.  

Goldman and Wall Street reign.  Congress appears helpless to discipline the big banks, just as the European Central Bank appears helpless to prevent the collapse of the European Union. . . . Or are they?

Suspicious Market Maneuverings

The shorts circled like sharks in the Greek bond market, following a highly suspicious downgrade of Greek debt by Moody’s on Monday.  Ratings by private ratings agencies, long suspected of being in the pocket of Wall Street, often seem to be timed to cause stocks or bonds to jump or tumble, causing extreme reactions in the market.  The Greek downgrade was suspicious and unexpected because the European Central Bank and International Monetary Fund had just pledged 120 billion Euros to avoid a debt default in Greece.

Markets were roiled further on Thursday, when the U.S. stock market suddenly lost 999 points, and just as suddenly recovered two-thirds of that loss.  It appeared to be such a clear case of tampering that Maria Bartiromo blurted out on CNBC, “That is ridiculous.  This really sounds like market manipulation to me.”

Manipulation by whom?  Markets can be rigged with computers using high-frequency trading programs (HFT), which now compose 70% of market trading; and Goldman Sachs is the undisputed leader in this new gaming technique.  Matt Taibbi maintains that Goldman Sachs has been “engineering every market manipulation since the Great Depression.” When Goldman does not get its way, it is in a position to throw a tantrum and crash the market.  It can do this with automated market making technologies like the one invented by Max Keiser, which he claims is now being used to turbocharge market manipulation.  

Goldman was an investment firm until September 2008, when it became a “bank holding company” overnight in order to capitalize on the bank bailout, including borrowing virtually interest-free from the Federal Reserve and other banks.  In January, when President Obama backed Paul Volcker in his plan to reinstate a form of the Glass-Steagall Act that would separate investment banking from commercial banking, the market collapsed on cue, and the Volcker Rule faded from the headlines.

When Goldman got dragged before Congress and the SEC in April, the Greek crisis arose as a “counterpoint,” diverting attention to that growing conflagration.  Greece appears to be the sacrificial play in the EU just as Lehman Brothers was in the U.S., “the hostage the kidnappers shoot to prove they mean business.”

The Nuclear Option
It is still possible, however, for the European Central Bank to snatch Greece from the fire and rout the shorts.  It can do this with what has been called the nuclear option -- “monetizing” the debt of Greece and other debt-laden EU countries by effectively “printing money” (quantitative easing) and buying the debt itself at very low interest rates.  This is called the “nuclear option” because it would blow up the hedge funds and electronic sharks operated by Goldman and other Wall Street heavies, which specialize in bringing down corporations and whole countries for strategic and exploitative ends.

Will the ECB proceed with this plan?  Perhaps, say some experts.  It could just be waiting for the German election on Sunday, which the ECB does not want to appear to be influencing.


FRAUDS AND SCANDALS FOLLOW THE COLLAPSE OF THE FINANCIAL SYSTEM
Bob Chapman

As the world faces an ongoing sovereign debt debacle we see an attempt to defuse an oncoming scandal involving Goldman Sachs, Paulson and perhaps others.

The collapse of the fiat money system is underway and each day picks up momentum. The only question is how long it can survive? In the interim we are faced with inflation and perhaps hyperinflation as the privately owned Federal Reserve and other central banks add stimulus and money and credit into their financial systems.

America’s system of finance and economy has been deliberately destroyed via regulation, illegal immigration and free trade, globalization, offshoring and outsourcing. We wrote about these issues and tactics as long ago as 1967. Taxes on both individuals and corporations are still onerous, the exception being the rich who pay far less than their fair share. By the way taxes will increase in the future and government may in the future attempt to take away your retirement plans and replace them with guaranteed annuities. We ask how can a bankrupt government guarantee anything? America and the rest of the world are realizing that you cannot live beyond your means indefinitely. The resultant poverty that eventually results is accompanied by the theft of wealth by inflation, subtly and secretly.

We have witnessed over the past few years a long line of frauds that usually accompany the collapse of a system. They are accompanied by government malfeasance and the arrogance of those who defraud the system with impunity. How can any nation survive if their currency and their bonds are worthless?

Someone’s loss is someone else’s gain and in this turmoil you can do two things. One is to protect your assets and the other is to capitalize on your knowledge. Do not allow the elitists to take your hard earned savings. It is our belief that 60% of sovereign debt will never be repaid.

The government is injecting a minimum of $1.5 trillion into the economy each year, as the Fed is adding at least $1 trillion. We are facing an end to stimulus and further Fed injections. If that happens it will thrust the US economy into a great dark pit a year from now. Then the insolvency of banking, Wall Street and government will become very apparent. What government has done is lie about everything, especially the amount of money they have thrust into the economy, via bailouts of the entire financial sphere and the manipulation of markets. If they had not done what they did the system would have collapsed long ago. What they have done has only delayed the inevitable. As we look back 50 years all we have seen is one crisis after another. There has never really been a meaningful recovery. The result is that Keynesian economics has had American economy on a roller coaster going nowhere. We have wasted opportunities and have destroyed our financial and economic structure to provide for the enrichment of the elitists who from behind the scenes control our economy and the world economy. G-20 debt is staggering, never mind US debt and worse yet, it is unpayable. The so-called recovery we are having is a sad joke. We have just had an interlude in an inflationary depression. The next phase is higher taxation and even more government control. Need we remind you that fascism is government by regulation and this is what we have in America today. Its evolution is a subtle, secret, strangling process. If only people would read the history of Europe during the late 1920s and throughout the 1930s and 40s, you would truly understand what is in process. You must remember Hitler was created at Versailles. Illuminists in the US, UK and across Europe financed both Hitler and Mussolini. Both did not have a clue they were being set up. This is the same thing that is happening in America today and in other countries as well.

We face one round after another of creative destruction. That is why we have real unemployment of 22-1/8%, almost as bad as during the 1930s. Banks are only selectively lending, so as a result the economy cannot grow. Inflation is 8%; wages are static, so buying power has been crippled. This predicament should be called corporatist fascism or socialism for the elitists and as a result 92% of small business polled said they see no recovery for 14 to 18 months. How can those who hire 80% of workers create new jobs – they cannot and won’t. That means there can be no sustained recovery.

This leads us to the frauds on Wall Street and banking. We have pointed out for some time that Wall Street and banking had turned into a criminal enterprise. They always skated down the edge, but nothing like what we have seen over the past 20 years. Having been in the brokerage industry for 28 years and around it for 50 years we have been in a position to observe it closely. Today it’s massively rife with criminality. The exposure of Lehman’s crimes in hearings has been unprecedented. We wonder how many other firms did the same thing and their actions were covered up by the Fed and the SEC, as well as the CFTC? They are still underestimating debt levels by 40 to 50 percent, which means their focus reports are useless. The spirit of honesty and integrity still doesn’t exist. They are essentially keeping two sets of books and that makes their financial statements useless and fraudulent. That doesn’t bother the SEC, the BIS, the FASB, the Treasury or the Fed; they supervise the lawbreaking. Debt levels are massively understated by keeping two sets of books and by marking-to-model, fantasy, not to market. All of this is a result of the termination of the Glass Steagal Act. It is all fraud, even if the government sanctions it. They are all acting in concert to screw the investor and the public. These people are all criminals. The excuse is that they are too big to fail. It is all fraud no matter which way you cut it. This is a criminal syndicate that should legally be out of business – bankrupt. They are all being bailed out, but we do not see the public being bailed out. The bailout of banking, Wall Street and insurance is still in process and there is no end in sight. There are two sets of laws. One for the Illuminists/elitist and another for us. Congress won’t do anything about it because most of them have been paid off. That is what campaign contributions and lobbying are all about. We espoused these views in university almost 60 years ago, and the only reason our views were tolerated was that we had two uncles who were professors at the university.

Taxes will rise substantially this year and next year because your representatives and senators know the government is broke. Among other things the medical reform bill is a tax bill as well.

Government is the problem but they are really useful idiots. The real power lies with the Illuminist behind the scenes. The financial sector is broke and it is unfixable. They know that and they are trying to stretch out the problem as far as possible to pick the right date to pull the deflationary plug.

If all this weren’t bad enough the Dodd bill in the Senate would create a permanent bailout mechanism that would create more risky behavior that would lead to perpetual bailouts for the financial industries. This is not financial reform, it is more corporatist fascism. To show you how bought and paid for Senate Banking Committee members are, the bill was voted out in 22 minutes with no amendments and no debate allowed. That is not democracy in action. The bill will now be rushed to the floor and passed.

The bill would also create a $50 billion bailout slush fund controlled by the FDIC and a new FDIC tax would be implemented on banks, which, of course, would be passed onto the public in higher banking costs.

The bill would also bail out creditors of companies. The slush fund would cover that as well. They call this riskless investment for corporate America and any bills would be picked up by the banks and passed on to Americans. We will then have hundreds or thousands of AIGs and GM’s. You ask yourself where does this all end? Read the history of the late1920s and into the 1930s of Italy and Germany and you will find out.

As the Senate and the House do the work of the bankers the bond market is in the process of sinking as yields rise. Higher rates, which we predicted last November, will become reality by the end of the year. A move by the US 10-year note from 3.20% to 4.5% or 5% will be the kiss of death for the mortgage industry. The 10-year yields 3.79% and the 30-year fixed rate mortgage is 5.07%. If 10’s go to 4.5%, mortgages will rise to 5.80% and a 5% ten-year note would work out to a 6.3% 30-year.

An increase in rates from 5.07% to 6.07% would add 19% to the total cost of a home, which means that any long-term recovery in housing is out of the question and that residential values would have to fall further as fewer and fewer people could qualify for loans. In fact, all loans would become more expensive, such as for business, credit cards, auto loans, etc. That 1% will increase debt service for the government by about $150 billion a year. This frankly presents the best of all worlds. If foreigners, such as the Chinese, Japanese or Russians became aggressive US bond sellers rates would climb considerably higher, inflicting even more damage to the economy and to US debt.

Most of you do not remember but mortgage rates hit about 18% in 1981, as official inflation hit 14-1/2%. Gold peaked out at $850, some six months earlier. On today’s mortgages that would triple payments on new mortgages and resets. As happened in 1981 the real estate market came to a standstill. Such an event would come when existing household debt is considerably higher. Debt today is already near 90% of GDP. Government debt is colossal, growing every minute and it is unpayable.

The bond market is going down and yields are going up and that is not good. The rise in interest rates has historically brought about higher gold and silver prices, because higher rates bring higher inflation. As we have said over and over again the only safe and profitable place to be is in gold and silver related assets. The storm is now just getting underway.

The MBA Mortgage Purchase Applications Index is 10.1%. The refi index was up to 15.8% versus 9.0% the prior week. The 30-year fixed rate mortgage was 5.04% and the 15’s were 4.34%.

The Treasury will sell $128 billion in notes next week, which is unprecedented. Talk about crowding out.

Governments worldwide will probably issue $4.5 trillion in debt this year, which is triple the 5-year average for industrial nations. Forty-five percent of that debt will be issued by the US.

We are told Russia and China are selling Treasuries and buying gold.

The US commercial paper market rose $1.5 billion to about $1.076 trillion this week.

Our sources within the banking industry tell us that 3-5 bank, First Source, Horizon and several others are in trouble. These are banks that refused TARP money. They have been told to expect an audit and that no further support can ever be expected from the Fed again. Auditors have already hit some of these banks and threatened them. One bank was told they were under capitalized and they were not. They arranged an additional line of credit with another bank and the Fed backed off. This criminal extortion is part of the move to eventual bank nationalization. The industry is hanging by a thread, as huge interest rate increases loom. The system lives on virtual money and that can only end up in real trouble. Again, do not hold CDs, annuities or cash value life policies, especially large balances. Not only banks will go under, but also so will insurance companies.

McClatchy: While Goldman Sachs' lawyers negotiated with the Securities and Exchange Commission over potentially explosive civil fraud charges, Goldman's chief executive visited the White House at least four times.

White House logs show that Chief Executive Lloyd Blankfein traveled to Washington for at least two events with President Barack Obama, whose 2008 presidential campaign received $994,795 in donations from Goldman's political action committee, its employees and their relatives. He also met twice with Obama's top economic adviser, Larry Summers.

Lawrence Jacobs, a University of Minnesota political scientist, said that "almost everything that the White House has done has been haunted by the personnel and the money of Goldman. as well as the suspicion that the White House, particularly early on, was pulling its punches out of deference to Goldman and its war chest.

"There's now kind of a magnifying glass on the administration for any sign of interference or conversations with the regulators and the judiciary," Jacobs said.

http://www.mcclatchydc.com/2010/04/21/92...white.html

Goldman Sachs was both an underwriter and an investor in Lloyds Banking Group’s vast refinancing deal late last year, the FT has learned, highlighting the potential conflicts of interest at the heart of the investment bank’s business model.

According to four people involved in the capital raising, Goldman – a dealer manager on the debt portion of the £23.5bn transaction – demanded last-minute changes to the structure of a deal it was underwriting. This had the effect of benefiting its position as a bond investor.

A Goldman director tipped off Galleon's Raj Rajaratnam about a $5 billion investment in Goldman by Berkshire Hathaway before a public announcement.

The revelation marks a significant turn in the government's case against Rajaratnam, the hedge-fund titan at the center of the largest insider-trading case in a generation.

After the SEC tagged Goldman, we opined that Bubblevision, or for that many virtually all pundits and media types, did not mention Buffett’s association with Goldman or how Buffett demanded and got heads after the Salomon-Treasury Auction rigging scandal. Maybe now someone will ask Warren about Goldie.

Buffett spokesman, Thomas Murphy surfaced last night, to say Buffett has ‘great confidence’ in Goldie.

U.S. mortgage applications bounced from three-month lows last week as potential buyers locked in lower borrowing costs before the federal tax credit expires, the Mortgage Bankers Association said on Wednesday.

Thirty-year mortgage rates dropped to hover around 5 percent, stoking home loan demand after applications slid for two straight weeks.

Refinancing picked up by 15.8 percent to represent 60 percent of all applications last week. Demand for loans to buy a home increased 10.1 percent to send the industry group's total applications index up 13.6 percent on a seasonally adjusted basis.

"Purchase applications continued to increase coming out of the Easter holiday, as we approach the end of the homebuyer tax credit, and are up modestly over last month," said Michael Fratantoni, MBA's vice president of research and economics.

Falling Treasury yields, used as a peg for mortgage rates, helped reduce the average 30-year loan rate by 0.13 percentage point to 5.04 percent.

The rate was up to 5.31 percent two weeks earlier, the highest since August 2009, and remains above the record low of 4.61 percent set in March of last year.

Harsh winter weather sapped housing demand in the first months of the year. The initial wave of the homebuyer tax credit, extended and broadened late last year, were seen having robbed some of this year's demand.

But some signs have emerged that buyers are surfacing to lock in the credit while they can. If they qualify for the incentives of up to $8,000, they need to have home contracts signed by the end of April and close loans by June 30.

Permits to build houses, for example, in April shot up to the highest level since October 2008. To read more, see [ID:nN16220782].

At best, though, housing is widely seen hovering around current weak levels at least through the year. The market still needs to work through a record stockpile of foreclosed properties, which RealtyTrac forecasts could drag into 2013. Read more at [ID:nNYS007912].

Jack Pritchard, Charlotte, North Carolina-based co-founder of Refinance.com, sees rising mortgage rates later this year and the expiration of the tax credits cutting into home sales and refinancing.

"The spring housing season, even with the tax credit, would be considered stable -- but stable at the bottom," he said.

"You've got a consumer trying to time the ultimate bottom in real estate prices and you still have extremely tight credit standards for consumers to qualify," Pritchard added.

FOX Business Network has expanded its quest for documents from the Federal Reserve in order to shed light on which financial firms borrowed funds during the financial crisis.

The network filed its new suit this afternoon in New York requesting documents from the Federal Reserve Board of Governors that will name each financial institution that borrowed from the various emergency lending facilities from November 1, 2008 through March 1, 2010. FOX Business originally sued the Fed for those documents but for a time period that ended on November 1, 2008.

The network scored a major victory in the original suit when the second circuit court of appeals ruled that the Fed had to turn over the requested documents. The Federal Reserve is expected to ask the court to reconsider the case and has said it is willing to take the case to the Supreme Court if necessary to protect the identity of the firms which received billions in taxpayer-backed guarantees.

The new suit expands the date through 2010 to learn which firms continued to seek emergency lending after the initial crisis had passed. FOX Business is also attempting to learn how much each individual institution received.

The U.S. Federal Reserve said on Wednesday it transferred a record $47.4 billion to the U.S. Treasury in 2009 as a result of its programs to help the economy and financial firms during the financial crisis.

The increase in income was primarily due to interest earnings on mortgage-backed securities issued by government supported mortgage finance agencies, the Fed said.

Some of the data in the Fed's 2009 annual financial statement revises estimates released in January.

The 12 Fed regional banks are required to transfer their profits to the Treasury after paying dividends to member banks and retaining some of their surplus.

Fed officials said the U.S. central bank's payment to the Treasury in 2009 was a $15.7 billion, or 50 percent, increase over 2008. The previous record was $34.6 billion in 2007, and the pre-crisis level was around $20 billion, Fed officials told reporters.

The Fed took unprecedented actions to prop up the economy during the storm but has been under fire from lawmakers on Capitol Hill over financial firm bailouts and regulatory lapses.

The credit risk on the Fed's balance sheet is down sharply as its loans have decreased and Treasury and government-sponsored mortgage finance agency securities make up a larger share of the central bank's assets, a Fed official said.

Financial reforms are a top priority for President Barack Obama, and news that the U.S. central bank has been profitable for taxpayers may strengthen the Fed's hand as lawmakers decide whether to enhance its powers over banks.

A Senate committee on Wednesday approved a bill aimed at reforming the derivatives market, moving the Senate one step closer to passing sweeping regulation over the $450 trillion derivatives market.

The Senate Agriculture Committee approved the legislation by a vote of 13 to 8, with one Republican, Charles Grassley, breaking ranks to vote with Democrats.

The measure, part of the Democrats push to crack down on Wall Street, is expected to be merged into a broader bill from the Senate Banking Committee. A full Senate debate is expected by next week.

Its passage through the committee was a first test of how strongly Democrats are willing to push reform and how easily Republicans may be prepared to play ball.

Regulators charged a Miami Beach, Florida, philanthropist with fraud for allegedly running a $900 million Ponzi scheme, the Securities and Exchange Commission said on Wednesday.

Nevin K. Shapiro, a major donor to the University of Miami's sports program, sold investors securities that he claimed would fund his Capitol Investments firm's grocery business and touted returns as high as 26 percent annually, the SEC said.

Instead, Shapiro repurposed funds, making extravagant donations to charities and running a Ponzi scheme where he used funds from new investors to pay the principal and interest to earlier investors, the SEC said.

The 41-year-old Shapiro surrendered to authorities Wednesday morning in New Jersey, his lawyer said.

According to the SEC, Shapiro used at least $38 million of investor funds to finance other business activities and a lavish lifestyle, including a $5 million home in Miami Beach, expensive clothes and season tickets to sporting events.

To raise funds, Shapiro attracted investors through word of mouth from friends and business associates, and reassured investors by boasting of his wealth, the SEC said.

When investors questioned Shapiro, he showed them fabricated invoices and purchase orders for nonexistent sales, the SEC said.

Existing home sales increased by 6.8%, good for a total of 5.35 million units, in March, thereby reversing three months of declining sales. This growth beats market forecasts of a more modest 5.6% increase. 

In related data, the US housing price index fell 0.2% in February. This marks the third consecutive month of falling home prices.

The Producer Price Index for the US grew 0.7% in March, beating forecasts of a 0.5% rise over February's 0.6% decline. 

Year-over-year, the PPI increased 6.0% in March compared to February's annual 4.4% boost. This growth is in line with expectations. 

The PPI excluding food and energy prices rose an expected 0.1% in March, thereby matching February's rate. 

Year-over-year, the PPI excluding food and energy increased as forecast by 0.9% in March, slightly down from February's 1.0% growth.

February Housing Price Index declines 0.2% MoM in March vs a 0.6% decline in February

The number of Americans filing claims for unemployment benefits fell last week as the rebounding economy prompted companies to make fewer job cuts.

Initial jobless applications dropped by 24,000 to 456,000 in the week ended April 17, the Labor Department said today in Washington. The number of people receiving unemployment insurance and those getting extended benefits also fell.

Employers enjoying improved sales and profits may be gaining confidence in the economy and retaining staff. A transition from less firing to consistent job growth will ensure the recovery from the deepest recession since the 1930s is sustained.

“The state of the job market is firming,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston, who forecast claims would fall to 458,000. Companies are “actually retaining headcount and growing.”

Economists anticipated claims would fall to 450,000 from a previously reported 484,000 the prior week, according to the median of 47 projections in a Bloomberg News survey. Estimates ranged from 430,000 to 480,000.

Sales of U.S. previously owned homes rose in March for the first time in four months as buyers took advantage of a government tax credit and the weather improved. Purchases climbed 6.8 percent to a 5.35 million annual rate, exceeding the median forecast of economists surveyed by Bloomberg News, data from the National Association of Realtors showed today in Washington. New applications for jobless benefits declined and producer prices rose, Labor Department reports showed.

A homebuyer incentive worth as much as $8,000 for contracts closed by the end of June may provide a short-term boost to the industry that helped trigger the worst recession since the 1930s. Housing’s outlook for the second half of the year will be linked to a rebound in hiring, indicating a recovery will probably take years to develop as foreclosures climb.


CAPITALISM WITHOUT CAPITAL                                    

Mike Whitney
http://www.informationclearinghouse.info...e25431.htm

Volatility is back and stocks have started zigzagging wildly again. This time it's Greece in the hotseat, but tomorrow it could be someone else. The real problem is there's too much leverage in the system,  so crises keep popping up one after another.  For a long time,  leverage wasn't an issue, because there was enough liquidity to keep things bobbing-along smoothly.  But that changed when Lehman Bros. collapsed and non-bank funding began to shut down. When the so-called "shadow banking" system crashed, liquidity dried up and the markets went into a nosedive.  That's why Fed Chair Ben Bernanke stepped in and provided short-term loans to under-capitalized financial institutions. Bernanke's rescue operation revived the system, but it also transferred $1.7 trillion of illiquid assets and non-performing loans onto the Fed's balance sheet. So the problem really wasn't fixed at all; the debts were just moved from one balance sheet to another.

Last Thursday,  troubles in Greece triggered a major selloff on all the main indexes. At one point, shares on the Dow plunged 998 points before clawing back 600 points by the end of the day. Some of losses were due to High-Frequency Trading (HFT), which is computer-driven program-trading that executes millions of buy and sell orders in the blink of an eye. HFT now accounts for more than 60 percent of all trading activity on the NYSE. Paul Kedrosky explains what happened in greater detail in his article, "The Run on the Shadow Liquidity System". Here's an excerpt:

  "As most will know, liquidity is, like so many things in financial life, something you can choke on as long as you don't want any....Liquidity is a function of various things working fairly smoothly together, including other investors, market-makers, and, yes, technical algorithms scraping fractions of pennies as things change hands. Together, all these actors create that liquidity that everyone wants, and, for the most part, that everyone takes for granted.....

  Largely unnoticed, however, at least among non-professional investors, the provision of liquidity has changed immensely in recent years. It is more fickle, less predictable, and more prone to disappearing suddenly, like snow sublimating straight to vapor during a spring heat wave. Why? Because traditional providers of liquidity, market-makers and other participants, are not standing so ready to make the other side of the market. There are fewer traders prepared to make a market for the sake of market health.....

   For the first time we have large providers of this shadow liquidity, algorithms and high-frequency sorts, that individually account for large percentages of daily trading activity, and, at the same time, that can be turned off with a switch, or at an algorithmic w him. As a result, in market crises, when liquidity was always hardest to find, it now doesn't just become hard to find, it disappears altogether, like water rushing out sight via a trapdoor to hell. Old-style market-makers are standing aside as panicky orders pour in, and they look straight at shadow liquidity providers and say, "No thanks." (Paul Kedrosky, "The Run on the Shadow Liquidity System" Infectious Greed)

  The fact that the SEC can't figure out what happened, has been a bigger blow to investor confidence than the erratic behavior of the markets themselves. It shows that regulators really don't have a handle on the technology that's driving the markets. That just reinforces the perception that trading is a crap-shoot and the market is a casino.  

     Deregulation has also eroded confidence in the markets. Since Glass Steagall was repealed in 1999, the financial markets have been completely overhauled. Unfortunately, the new architecture is riddled with flaws.  The main levers of credit creation are now in the hands of privately-owned shadow banks instead of highly-regulated "depository" institutions. That's a problem, because the hedge funds, insurers, brokerage houses, SIVs and off-balance sheet operations are mostly unsupervised, so they can ignore capitalization requirements and traditional lending standards. Even worse, they can  crank out as much credit as they want via the repo market or by using financial instruments (like MBS, CDS, CDO)  Here's how economist James Hamilton explains it in a recent post titled "Follow The Money". Here's an excerpt:

  "If you buy a mortgage-backed security (or collateralized debt obligation constructed from assorted MBS), you could then issue commercial paper against it to get most of your money back, essentially making the purchase self-financing. This was the idea behind the notorious off-balance sheet structured investment vehicles or conduits, which basically used money borrowed on the commercial paper market to buy various pieces of the mortgage securities created by the loan aggregators. The dollar value of outstanding asset-backed commercial paper nearly doubled between 2004 and 2007.

Yale Professor Gary Gorton has also emphasized the importance of repo operations involving mortgage-related securities. If I buy a security, I can then pledge it as collateral to obtain a repo loan, again getting most of my money back and allowing the purchase to be mostly self-financing as long as I keep rolling over repos. Although I have not been able to find numbers on the volume of such transactions, it appears to have been quite substantial.

The question of how the house price run-up was funded thus has a pretty clear answer: Other People's Money. Because of so much money pouring into house purchases, the price was driven up." ("Follow The Money", James Hamilton, Econbrowser)

This is how Wall Street pumped up leverage to ungodly levels and steered the financial system off the cliff. The debt-instruments and repo market were used to create a ginormous debt pyramid balanced precariously atop a few crumbs of capital. The system was bound to crash.


Naturally, the people who benefit from credit default swaps (CDS) and other derivatives, continue to sing their praises, but their numbers grow smaller and smaller all the time. Many people now understand the role that derivatives played in crashing the system and are demanding change.  But Wall Street doesn't care about public opinion. The big banks have already deployed their army of lobbyists to Capital Hill to make sure that the new reform legislation doesn't restrict their use of hybrid derivatives which have become their biggest profit-makers. Considering the amount of money they've spread around,  it would be a miracle if they didn't get their way.    

    
LOW INTEREST RATES DIDN'T CAUSE  THE CRISIS

Last week,  economists Edward L. Glaeser, Joshua Gottlieb and Joseph Gyourko published a research paper and presented their findings to the Federal Reserve Bank of Boston. Here's what they said:

"It isn't that low interest rates don't boost housing prices. They do. It isn't that higher mortgage approval rates aren't associated with rising home values. They are. But the impact of these variables, as predicted by economic theory and as estimated empirically over many years, is too small to explain much of the housing market event that we have just experienced."

Glaeser, Gottlieb and Gyourko say those factors can explain only about a 10 percent increase in home prices between 2000 and 2006. That's only one-third of the 30 percent increase in prices (adjusted for inflation) during that period, as measured by the Federal Housing Finance Agency, or the 74 percent increase measured by the Case-Shiller/Standard and Poor's index of prices in 20 large metro areas.


So what is to blame for the bubble? Well, they're not sure. "Using the standard toolkit of the empirical economist, we are unable to offer much of an explanation for what happened," they write." ("Low interest rates didn't cause the bubble economists say", Elizabeth Razzi, Washington Post)

The crisis was not sparked by interest rates or lax lending standards, but by leverage. In fact, the repo market, securitization and the vast array of debt-instruments are all designed with one purpose in mind; to conceal the amount of leverage in the system. It's capitalism without capital.

The $1.5 trillion in subprime mortgages wasn't nearly enough to bring down the entire financial system. But the losses on trillions of dollars of derivatives that were balanced on top of these mortgages, certainly was. So, what really happened? Here's a summary of the meltdown by economist Henry Liu:

"...the current financial crisis that began in mid-2007 was caused not by bank runs from depositors, but by a melt down of the wholesale credit market when risk-averse sophisticated institutional investors of short-term debt instruments shied away en mass.

The wholesale credit market failure left banks in a precarious state of being unable to roll over their short-term debt to support their long-term loans. Even though the market meltdown had a liquidity dimension, the real cause of system-wide counterparty default was imminent insolvency resulting from banks holding collateral whose values fell below liability levels in a matter of days. For many large, public-listed banks, proprietary trading losses also reduced their capital to insolvency levels, causing sharp falls in their share prices." ("Two Different Banking Crisis--1929 and 2007" Henry Liu)

  The banks don't fund themselves by taking deposits and then using them to lend out money at higher rates.  What they do is buy long-term illiquid assets (mortgage-backed securities, asset-backed securities) and  exchange them in the repo market for short-term loans.  It's like going to a pawn shop and borrowing money by posting collateral, except --in this case--a financial institution (counterparty) takes the other side of the deal.

   When the subprimes started blowing up, the institutions that had been taking the other side of the deals, (the counterparties) got nervous, because they thought the subprime-backed collateral might be worth less than the money they were providing in loans.  So they demanded more collateral from the banks which forced the banks to sell more assets to raise money to cover their losses. This pushed prices down, sparked a flurry of firesales, and drove the weaker institutions into bankruptcy.

The amount of leverage built up in these derivatives was mind-boggling. Take a look at this article from the Wall Street Journal:
"Documents released by Senate investigators last week provide clues as to why the losses were so severe. The documents show how Wall Street banks packaged and repackaged the same risky bonds into securities that ultimately helped magnify the impact of defaulting subprime mortgages on the financial system.

In one case, a $38 million subprime-mortgage bond created in June 2006 ended up in more than 30 debt pools and ultimately caused roughly $280 million in losses to investors by the time the bond's principal was wiped out in 2008, according to data reviewed by The Wall Street Journal.....("Senate's Goldman Probe Shows Toxic Magnification", Carrick Mollenkamp and Serena Ng, Wall Street Journal)

So it wasn't the subprime mortgages that caused most of the damage, but the amount of leverage bundled into the  derivatives and the repo market. Congress needs to focus their attention on the particular instruments and processes (derivatives, repo and securitization) that are used to maximize leverage and inflate bubbles.  That's where the problem lies.

Nomi Prins explains it a bit differently in this month's The American Prospect.  Here's an excerpt from her article "Shadow Banking":

"Between 2002 and early 2008, roughly $1.4 trillion worth of sub-prime loans were originated by now-fallen lenders like New Century Financial. If such loans were our only problem, the theoretical solution would have involved the government subsidizing these mortgages for the maximum cost of $1.4 trillion. However, according to Thomson Reuters, nearly $14 trillion worth of complex-securitized products were created, predominantly on top of them, precisely because leveraged funds abetted every step of their production and dispersion. Thus, at the height of federal payouts in July 2009, the government had put up $17.5 trillion to support Wall Street's pyramid Ponzi system, not $1.4 trillion. The destruction in the commercial lending market could spur the next implosion." ("Shadow Banking", Nomi Prins, The American Prospect)

  This is a point that bears repeating:  "...nearly $14 trillion worth of complex-securitized products were created" on top of just "$1.4 trillion" of subprime loans." No doubt, the investment bankers and hedge fund managers who inflated  these monster balloons, knew that they were doomed from the get-go, but then, they must have also known that  "I.B.G.-Y.B.G.", which in Wall Street parlance means, "I'll Be Gone and You'll Be Gone."

For a long time, Wall Street concealed its bubblemaking and racketeering behind theories that glorified the wisdom and flexibility of unregulated markets. Government intervention was disparaged as an unnecessary intrusion into a divinely-harmonized system. Now the curtain has been drawn and the sham exposed. The state has a clear interest in making sure that credit-generating institutions are adequately capitalized, that lending standards are strictly upheld, and that reasonable limits are put on the amount of leverage that financial institutions are allowed to use. That's the only way the public can be protected.
  



Reply
PROGNOSIS 2012: TOWARDS A NEW WORLD SOCIAL ORDER
Richard K. Moore

When the Industrial Revolution began in Britain, in the late 1700s, there was lots of money to be made by investing in factories and mills, by opening up new markets, and by gaining control of sources of raw materials. The folks who had the most money to invest, however, were not so much in Britain but more in Holland. Holland was the leading Western power in the 1600s, and its bankers were the leading capitalists. In pursuit of profit, Dutch capital flowed to the British stock market, and thus the Dutch funded the rise of Britain, who subsequently eclipsed Holland both economically and geopolitically.

In this way British industrialism came to be dominated by wealthy investors, and capitalism became the dominant economic system. This led to a major social transformation. Britain had been essentially an aristocratic society, dominated by landholding families. As capitalism became dominant economically, capitalists became dominant politically. Tax structures and import-export policies were gradually changed to favor investors over landowners.



It was no longer economically viable to simply maintain an estate in the countryside: one needed to develop it, turn it to more productive use. Victorian dramas are filled with stories of aristocratic families who fall on hard times, and are forced to sell off their properties. For dramatic purposes, this decline is typically attributed to a failure in some character, a weak eldest son perhaps. But in fact the decline of aristocracy was part of a larger social transformation brought on by the rise of capitalism.



The business of the capitalist is the management of capital, and this management is generally handled through the mediation of banks and brokerage houses. It should not be surprising that investment bankers came to occupy the top of the hierarchy of capitalist wealth and power. And in fact, there are a handful of banking families, including the Rothschilds and the Rockefellers, who have come to dominate economic and political affairs in the Western world.



Unlike aristocrats, capitalists are not tied to a place, or to the maintenance of a place. Capital is disloyal and mobile – it flows to where the most growth can be found, as it flowed from Holland to Britain, then from Britain to the USA, and most recently from everywhere to China. Just as a copper mine might be exploited and then abandoned, so under capitalism a whole nation can be exploited and then abandoned, as we see in the rusting industrial areas of America and Britain.



This detachment from place leads to a different kind of geopolitics under capitalism, as compared to aristocracy. A king goes to war when he sees an advantage to his nation in doing so. Historians can 'explain' the wars of pre-capitalist days, in terms of the aggrandizement of monarchs and nations.


A capitalist stirs up a war in order to make profits, and in fact our elite banking families have financed both sides of most military conflicts since at least World War 1. Hence historians have a hard time 'explaining' World War 1 in terms of national motivations and objectives.


In pre-capitalist days warfare was like chess, each side trying to win. Under capitalism warfare is more like a casino, where the players battle it out as long as they can get credit for more chips, and the real winner always turns out to be the house – the bankers who finance the war and decide who will be the last man standing. Not only are wars the most profitable of all capitalist ventures, but by choosing the winners, and managing the reconstruction, the elite banking families are able, over time, to tune the geopolitical configuration to suit their own interests.


Nations and populations are but pawns in their games. Millions die in wars, infrastructures are destroyed, and while the world mourns, the bankers are counting their winnings and making plans for their postwar reconstruction investments.



From their position of power, as the financiers of governments, the banking elite have over time perfected their methods of control. Staying always behind the scenes, they pull the strings controlling the media, the political parties, the intelligence agencies, the stock markets, and the offices of government. And perhaps their greatest lever of power is their control over currencies. By means of their central-bank scam, they engineer boom and bust cycles, and they print money from nothing and then loan it at interest to governments. The power of the banking elites is both absolute and subtle...


"Some of the biggest men in the United

States are afraid of something. They

know there is a power somewhere, so

organised, so subtle, so watchful, so

interlocked, so complete, so pervasive

that they had better not speak above

their breath when they speak in

condemnation of it."

President Woodrow Wilson


The end of growth – capitalists vs. capitalism

It was always inevitable, on a finite planet, that there would be a limit to economic growth. Industrialization has enabled us to rush headlong toward that limit over the past two centuries. Production has become ever more efficient, markets have become ever more global, and finally we have reached the point where the paradigm of perpetual growth can no longer be maintained.

Indeed, that point was actually reached by about 1970. Since then capital has not so much sought growth through increased production, but rather by extracting greater returns from relatively flat production levels.  Hence globalization, which moved production to low-waged areas, providing greater profit margins. Hence privatization, which transfers revenue streams to investors that formerly went to national treasuries. Hence derivative and currency markets, which create the electronic illusion of economic growth, without actually producing anything in the real world.

If one studies the collapse of civilizations, one learns that failure-to-adapt is fatal. Continuing on the path of pursuing growth would be such a failure to adapt. And if one reads the financial pages these days, one finds that it is full of doomsayers. We read that the Eurozone is doomed, and Greece is just the first casualty. We read that stimulus packages are not working, unemployment is increasing, the dollar is in deep trouble, growth continues to stagnate, business real estate will be the next bubble to burst, etc. It is easy to get the impression that capitalism is failing to adapt, and that our societies are in danger of collapsing into chaos.

Such an impression would be partly right and partly wrong. In order to understand the real situation we need to make a clear distinction between the capitalist elite and capitalism itself. Capitalism is an economic system driven by growth; the capitalist elite are the folks who have managed to gain control of the Western world while capitalism has operated over the past two centuries. The capitalist system is past its sell-by date, the banking elite are well aware of that fact – and they are adapting.

Capitalism is a vehicle that helped bring the bankers to absolute power, but they have no more loyalty to that system than they have to place, or to anything or anyone else. As mentioned earlier, they think on a global scale, with nations and populations as pawns. They define what money is and they issue it, just like the banker in a game of Monopoly. They can also make up a new game with a new kind of money. They have long outgrown any need to rely on any particular economic system in order to maintain their power. Capitalism was handy in an era of rapid growth. For an era of non-growth, a different game is being prepared.

Thus, capitalism has not been allowed to die a natural death. First it was put on a life-support system, as mentioned above, with globalization, privatization, derivative markets, etc. Then it was injected with a euthanasia death-drug, in the form of toxic derivatives. And when the planned collapse occurred, rather than industrial capitalism being bailed out, the elite bankers were bailed out. It's not that the banks were too big to fail, rather the bankers were too politically powerful to fail. They made governments an offer they couldn't refuse.

The outcome of the trillion-dollar bailouts was easily predictable, although you wouldn't know that from reading the financial pages. National budgets were already stretched, and they certainly did not have reserves available to service the bailouts. Thus the bailouts amounted to nothing more than the taking on of immense new debts by governments. In order to fulfill the bailout commitments, the money would need to be borrowed from the same financial institutions that were being bailed out.

With the bailouts, Western governments delivered their nations in hock to the bankers. The governments are now in perpetual debt bondage to the bankers. Rather than the banks going into receivership, governments are now in receivership. Obama's cabinet and advisors are nearly all from Wall Street; they are in the White House so they can keep close watch over their new acquisition, the once sovereign USA. Perhaps they will soon be presiding over its liquidation.

The bankers are now in control of national budgets. They say what can be funded and what can't. When it comes to financing their wars and weapons production, no limits are set. When it comes to public services, then we are told deficits must be held in check. The situation was expressed very well by Brian Cowan, Ireland's government chief. In the very same week that Ireland pledged 200 billion Euro to bailout the banks, he was being asked why he was cutting a few million Euro off of critical service budgets. He replied, "I'm sorry, but the funds just aren't there". Of course they're not there! The treasury was given away. The cupboard is bare.

As we might expect, the highest priority for budgets is servicing the debt to the banks. Just as most of the third world is in debt slavery to the IMF, so the whole West is now in debt slavery to its own central banks. Greece is the harbinger of what is to happen everywhere.

The carbon economy – controlling consumption

In a non-growth economy, the mechanisms of production will become relatively static. Instead of corporations competing to innovate, we'll have production bureaucracies. They'll be semi-state, semi-private bureaucracies, concerned about budgets and quotas rather than growth, somewhat along the lines of the Soviet model. Such an environment is not driven by a need for growth capital, and it does not enable a profitable game of Monopoly.

We can already see steps being taken to shift the corporate model towards the bureaucratic model, through increased government intervention in economic affairs. With the Wall Street bailouts, the forced restructuring of General Motors, the call for centralized micromanagement of banking and industry, and the mandating of health insurance coverage, the government is saying that the market is to superseded by government directives. Not that we should bemoan the demise of exploitive capitalism, but before celebrating we need to understand what it is being replaced with.

In an era of capitalism and growth, the focus of the game has been on the production side of the economy. The game was aimed at controlling the means of growth: access to capital.  The growth-engine of capitalism created the demand for capital; the bankers controlled the supply. Taxes were mostly based on income, again related to the production side of the economy.

In an era of non-growth, the focus of the game will be on the consumption side of the economy. The game will be aimed at controlling the necessities of life: access to food and energy. Population creates the demand for the necessities of life; the bankers intend to control the supply. Taxes will be mostly based on consumption, particularly of energy. That's what the global warming scare is all about, with its carbon taxes and carbon credits.

Already in Britain there is talk of carbon quotas, like gasoline rationing in wartime. It's not just that you'll pay taxes on energy, but the amount of energy you can consume will be determined by government directive. Carbon credits will be issued to you, which you can use for driving, for heating, or on rare occasions for air travel. Also in Britain, the highways are being wired so that they can track how many miles you drive, tax you accordingly, and penalize you if you travel over your limit. We can expect these kinds of things to spread throughout the West, as it's the same international bankers who are in charge everywhere.

In terms of propaganda, this control over consumption is being sold as a solution to global warming and peak oil. The propaganda campaign has been very successful, and the whole environmental movement has been captured by it. In Copenhagen, demonstrators confronted the police, carrying signs in support of carbon taxes and carbon credits. But in fact the carbon regime has nothing to do with climate or with sustainability. It is all about micromanaging every aspect of our lives, as well as every aspect of the economy.

If the folks who are running things actually cared about sustainability, they'd be investing in efficient mass transit, and they'd be shifting agriculture from petroleum-intensive, water-intensive methods to sustainable methods. Instead they are mandating biofuels and selling us electric cars, which are no more sustainable or carbon-efficient than standard cars. Indeed, the real purpose behind biofuels is genocide. With food prices linked to energy prices, and agriculture land being converted from food production to fuel production, the result can only be a massive increase in third-world starvation. Depopulation has long been a stated goal in elite circles, and the Rockefeller dynasty has frequently been involved in eugenics projects of various kinds.

'The War on Terrorism' – preparing the way for the transition

The so-called War on Terrorism has two parts. The first part is a pretext for arbitrary abuse of citizen's rights, whenever Homeland Security claims the action is necessary for security reasons. The second part is a pretext for US military aggression anywhere in the world, whenever the White House claims that Al Qaeda is active there.

I emphasized the word 'claims' above, because the terrorism pretext is being used to justify arbitrary powers, both domestically and globally. No hard evidence need be presented to Congress, the UN, or anyone else, before some nation is invaded, someone is kidnapped and tortured as a 'terrorist suspect', or some new invasive security measure is implemented. When powers are arbitrary, then we are no longer living under the rule of law, neither domestically nor internationally. We are living under the rule of men, as you would expect in a dictatorship, or in an old-fashioned kingdom or empire.

Part 1: Preparing the way for a new social order

In a very real sense, the terrorism pretext is being used to undo everything that The Enlightenment and the republication revolutions achieved two centuries ago. The very heart of the Bill of Rights – due process – has been abandoned. The gulag, the concentration camp, and the secret arrest in the night – these we have always associated with fascist and communist dictatorships – and now they are not only functioning under US jurisdiction, but being justified publicly by the President himself.

Is there really a terrorist threat to the homeland, and would these measures be a sensible response to such a threat? People sre strongly divided in their answers to these questions. Quite a bit of hard forensic evidence has come to light, including links to intelligence agencies, and my own view is that most of the dramatic 'terrorist' events in the US, UK, and Europe have been covert false-flag operations.

From an historical perspective this would not be at all surprising. Such operations have been standard practice – modus operandi – in many nations, though we usually don't get proof until years later. For example, every war the US has been involved in has had its own phony Gulf of Tonkin Incident, or its Weapons of Mass Destruction scam, in one form or another. It's a formula that works. Instant mobilization of public opinion, prompt passage without debate of enabling resolutions and legislation. Why would the War on Terrorism be any different?

As regards motive: while Muslims have only suffered as a result of these dramatic events, our elite bankers have been able to create a police-state infrastructure that can be used to deal with any foreseeable popular resistance or civic chaos that might emerge as they prepare the way for their post-capitalist future.

With the collapse, the bailouts, and the total failure to pursue any kind of effective recovery strategy, the signals are very clear: the system will be allowed to collapse totally, thus clearing the ground for a pre-architected 'solution'. Ground Zero can be seen as a metaphor, with the capitalist economy as the Twin Towers. And the toxic derivatives illustrate the fact that the collapse is actually a controlled demolition.

It seems to me inevitable, given the many signals, that martial law will be part of the transition process, allegedly to deal with the problems of economic collapse. Perhaps a collapse in the food-supply chain, due to a collapse in the energy-supply chain. The US emergency responses in New Orleans and again in Haiti give us more signals, actual test trials, of what kind of 'emergency response' we can expect.

First and foremost comes the security of the occupation forces. Those suffering in the emergency are treated more like insurgents than victims in need of help. In the case of Haiti, the US response can only be described as an intentional genocide project. When people are pinned under rubble in an earthquake, the first 48 hours, and 72 hours, are absolutely critical points, as regards survival rates. When the US military systematically blocked incoming aid for those critical hours, turning back doctors and emergency teams, they sealed the fate of many thousands who could have been saved.

One can imagine many nightmare scenarios, given these various signals, these ominous signs. World Wars 1 and 2 were nightmares that really happened, with millions dying, and these same banking dynasties orchestrated those scenarios and then covered their tracks. We must also keep in mind the  Shock Doctrine, where catastrophe is seen as opportunity – when 'things can be done that otherwise could not be accomplished'. We are still being impacted by the shock waves that were sent out on 9/11, and again when the financial system collapsed. And the the really big shock, the general collapse of society, is yet to come. The ultimate version of the Shock Doctrine: 'If the collapse is total, we can accomplish any damned thing we want to accomplish'.

I won't venture a guess about how this transition process will play out, but I do expect that it will be a nightmare of one description or another. Already the growing homeless population is suffering a nightmare, by any civilized standards. One day you're living in a home whose value is going up, commuting to a good job, and the next thing you know your family is out on the streets. That's a nightmare. The transition time will be a difficult time, but it will be a transition, it will be temporary, like a war. And like a war, it will enable social and economic reconstruction in the aftermath.

Consider how Japan and Germany were socially and politically transformed by the postwar reconstruction process. Those were exercises in social engineering, as were the preceding transformations under Mussolini and Hitler. Although the outcomes were quite different, in each case a total collapse / defeat was the preamble to reconstruction. A total collapse of the capitalist economy is simply the application of a proven formula. The second part of the formula will be some new social order, or perhaps some old social order, or some mixture. Something appropriate to a non-growth, command economy.

That's part 1 of the War on Terrorism: it has enabled the creation of the police-state infrastructures required to to deal with the collapse of society, and to provide security for the reconstruction process.

Part 2: Preparing the way for global domination

Part 2 of the War on Terrorism is about the geopolitical dimensions of a non-growth-based global economy. Earlier I suggested that geopolitics was different under capitalism, than it was under sovereign monarchs. The whole dynamic was different, and outcomes were weighed on a different scale. Similarly, many things will change in a shift from chaotic, growth-oriented capitalism, to a centralized, micromanaged, economic regime.

Consider, for example, the significance of control over oil reserves. In a growth economy, profits were the prize, and controlling the markets and the distribution channels amounted to holding a winning hand in the game. The local dictators could manage things as they pleased, and take their cut of oil revenues, as long as they honored their contracts with the oil majors, who were happy to sell to the highest bidders.

In a non-growth economy, where the focus is on direct control over the supply and distributions of resources, it becomes necessary to secure, in the military sense, the sources of petroleum, and the routes for its distribution. It is no longer sufficient to merely profit from unbridled operations. Securing of the sources, and directly allocating the distribution, is the foundation for micromanaging the non-growth economy. This applies to other critical resources as well, such as uranium, and the rare minerals needed by the 'defense' and electronics industries.

In fact we are in the midst of a resource-grab war, with China and Russia making long-term energy deals with Iran and Venezuela, China buying up agricultural land in Africa, Washington making long-term deals for Brazilian biofuels, and there are many other examples. In many ways imperialism is reverting to colonial days, when direct administration was the model, rather than the capitalist model: profiting from corporate investments under dictators who suppress their populations.

There is a natural reversion to the dynamics of the 'good old days of empire' when the Great Powers of Europe focused their economic activity within their individual spheres of influence. Everyone knows that global resource limits are being reached, partly from population pressures, and partly from resource-exploitation practices. For this reason alone, we have the peaceful part of the resource-grab war.

In Iraq, Afghanistan, and now in Pakistan and Yemen, the US, with NATO support, is playing a very non-peaceful hand in the resource-grab game. It's the hand of a bully, 'I have the biggest gun, so I'll take what I want'. These aggressive actions are very provocative to Russia and China, and threatening to their vital economic interests. An attack on Iran would be more than a provocation, it would be a direct slap in the face, a challenge: 'Fight now or resign yourself to being subdued piecemeal'.

In addition to all this petroleum grabbing, the US has been surrounding Russia and China with military bases, and has recently accelerated the installations of anti-missile systems on their borders, over the strong objections of Russia and China. The US is being intentionally provocative, and it is threatening vital interests of these potential adversaries.

Alliances are being formed in response, on a bilateral basis, and in the form of the SCO. China and Russia are very close in their military cooperation, and technology sharing. Their strategic planning is based on the expectation of a US attack, and their strategic response is based on the principle of asymmetric warfare. For example, a million dollar missile capable of taking out a multi-billion dollar aircraft carrier. Or perhaps a handful of missiles capable of disabling the Pentagon's command-and-control satellite systems.

Meanwhile the US is spending astronomical sums developing a first-strike capability, with space-based weapons systems, control-of-theater capability, forward-based 'tactical' nukes, etc. The new anti-missile systems are an important part of a first-strike strategy, reducing the ability of Russia or China to retaliate. These systems are more than just provocative. They are the modern equivalent of marching your armies up to your adversary's border.

If there is a nuclear exchange between the major powers, historians will cite all of these things I've mentioned as 'obvious signs' that war was coming. Parallels would be drawn to the pre-World War 1 scenario, when Germany was eclipsing Britain economically, as China is eclipsing the US now. In both cases a 'desperate attempt to maintain hegemony' would be seen as the cause of the war.

There may or may not be a World War 3, but all of these preparations make it clear that our banking elite intend to preside over a global system, by hook or by crook. If they wanted a peaceful arrangement, a splitting of the third-world pie, so to speak, it could be easily arranged at any time, along with substantial nuclear disarmament. China and Russia would like to see a stable, multi-polar world; it is only our elite bankers who are obsessed with world domination.

It is possible that nuclear war is a 'desired outcome', accomplishing depopulation, and making the collapse even more total. Or perhaps China and Russia will be given an offer they can't refuse: 'Surrender your economic sovereignty to our global system, or face the consequences'.

One way or another, the elite bankers, the masters of the universe, intend to preside over a micromanaged global system. The collapse project is now well underway, and the 'surround your enemy' project seems to be more or less completed. From a strategic perspective, there will be some trigger point, some stage in the economic collapse scenario, when geopolitical confrontation is judged to be most advantageous. It's a multi-dimensional chess board, and with the stakes so high, you can rest assured that the timing of the various moves will be carefully coordinated. And from the overall shape of the board, we seem to be nearing the endgame.

Prognosis 2012 – a Neo Dark Age

2012 might not be the exact year, but it's difficult to see the endgame lasting much beyond that, and the masters of the universe love symbolism, as with 911 (both in Chile and in Manhattan), KLA 007, and others. 2012 is loaded with symbolism, eg. the Mayan Calendar, and the Internet is buzzing with various 2012-related prophecies, survival strategies, anticipated alien interventions, alignments with galactic radiation fields, etc. And then there is the Hollywood film, 2012, which explicitly portrays the demise of most of humanity, and the pre-planned salvation of a select few. One never knows with Hollywood productions, what is escapist fantasy, and what is aimed at preparing the public mind symbolically for what is to come.

Whatever the exact date, all the threads will come together, geopolitically and domestically, and the world will change. It will be a new era, just as capitalism was a new era after aristocracy, and the Dark Ages followed the era of the Roman Empire. Each era has its own structure, its own economics, its own social forms, and its own mythology. These things must relate to one another coherently, and their nature follows from the fundamental power relationships and economic circumstances of the system.

In our post-2012 world, we have for the first time one centralized global government, and one ruling elite clique, a kind of extended royal family, the lords of finance. As we can see with the IMF, WHO, and the WTO, and the other pieces of the embryonic world government, the institutions of governance will make no pretensions about popular representation or democratic responsiveness. Rule will be by means of autocratic global bureaucracies, who take their marching orders from the royal family. This model has already been operating for some time, within its various spheres of influence, as with the restructuring programs forced on the third world, as a condition for getting financing.

Whenever there is a change of era, the previous era is always demonized in mythology. In the Garden of Eden story the serpent is demonized – a revered symbol in paganism, the predecessor to Christianity. When republics came along, the demonization of monarchs  was an important part of the process. In the post-2012 world, democracy and national sovereignty will be demonized. This will be very important, in getting people to accept totalitarian rule, and the mythology will contain much that is true...

In those terrible dark days, before the blessed unification of humanity, anarchy reigned in the world. One nation would attack another, no better than predators in the wild. Nations had no coherent policies; voters would swing from one party to another, keeping governments always in transition and confusion. How did they ever think that masses of semi-educated people could govern themselves, and run a complex society? Democracy was an ill-conceived experiment that led only to corruption and chaotic governance. How lucky we are to be in this well-ordered world, where humanity has finally grown up, and those with the best expertise make the decisions.

The economics of non-growth are radically different than capitalist economics. The unit of exchange is likely to be a carbon credit, entitling you to consume the equivalent of one kilogram of fuel. Everything will have a carbon value, allegedly based on how much energy it took to produce it and transport it to market. 'Green consciousness' will be a primary ethic, conditioned early into children. Getting by with less is a virtue; using energy is anti-social; austerity is a responsible and necessary condition.

As with every currency, the bankers will want to manage the scarcity of carbon credits, and that's where global warming alarmism becomes important. Regardless of the availability of resources, carbon credits can be kept arbitrarily scarce simply by setting carbon budgets, based on directives from the IPCC, another of our emerging units of global bureaucratic governance. Such IPCC directives will be the equivalent of the Federal Reserve announcing a change in interest rates. Those budgets set the scale of economic activity.

Presumably nations will continue to exist, as official units of governance. However security and policing will be largely centralized and privatized. Like the Roman Legions, the security apparatus will be loyal to the center of empire, not to the place where someone happens to be stationed. We have seen this trend already in the US, as mercenaries have become big business, and police forces are increasingly federalized, militarized, and alienated from the general public.

Just as airports have now been federalized, all transport systems will be under the jurisdiction of the security apparatus. Terrorism will continue as an ongoing bogey-man, justifying whatever security procedures are deemed desirable for social-control purposes. The whole security apparatus will have a monolithic quality to it, a similarity of character regardless of the specific security tasks or location. Everyone dressed in the same Evil Empire black outfits, with big florescent letters on the back of their flack jackets. In essence, the security apparatus will be an occupying army, the emperor's garrison in the provinces.

On a daily basis, you will need to go through checkpoints of various kinds, with varying levels of security requirements. This is where biometrics becomes important. If people can be implanted with chips, then much of the security can be automated, and everyone can be tracked at at all times, and their past activity retrieved. The chip links into your credit balance, so you've got all your currency always with you, along with your medical records and lots else that you don't know about.

There is very little left as regards national sovereignty. Nothing much in the way of foreign policy will have any meaning. With security marching to its own law and its distant drummer, the main role of so-called 'government' will be to allocate and administer the carbon-credit budget that it receives from the IPCC. The IPCC decides how much wealth a nation will receive in a given year, and the government then decides how to distribute that wealth in the form of public services and entitlements. Wealth being measured by the entitlement to expend energy.

In a fundamental sense, this is how things already are, following the collapse and the bailouts. Because governments are so deeply in debt, the bankers are able to dictate the terms of national budgets, as a condition of keeping credit lines open. The carbon economy, with its centrally determined budgets, provides a much simpler and more direct way of micromanaging economic activity and resource distribution throughout the globe.

In order to clear the way for the carbon-credit economy, it will be necessary for Western currencies to collapse, to become worthless, as nations become increasingly insolvent, and the global financial system continues to be systematically dismantled. The carbon currency will be introduced as an enlightened, progressive 'solution' to the crisis, a currency linked to something real, and to sustainability. The old monetary system will be demonized, and again the mythology will contain much that is true...

The pursuit of money is the root of all evil, and the capitalist system was inherently evil. It encouraged greed, and consumption, and it cared nothing about wasting resources. People thought the more money they had, the better off they were. How much wiser we are now, to live within our means, and to understand that a credit is a token of stewardship.

Culturally, the post-capitalist era will be a bit like the medieval era, with aristocrats and lords on top, and the rest peasants and serfs. A definite upper class and lower class. Just as only the old upper class had horses and carriages, only the new upper class will be entitled to access substantial carbon credits. Wealth will be measured by entitlements, more than by acquisitions or earnings. Those outside the bureaucratic hierarchies are the serfs, with subsistence entitlements. Within the bureaucracies, entitlements are related to rank in the hierarchy. Those who operate in the central global institutions are lords of empire, with unlimited access to credits.

But there is no sequestering of wealth, or building of economic empires, outside the structures of the designated bureaucracies. Entitlements are about access to resources and facilities, to be used or not used, but not to be saved and used as capital. The flow of entitlements comes downward, micromanaged from the top. It's a dole economy, at all levels, for people and governments alike – the global regimentation of consumption. As regards regimentation, the post-capitalist culture will also be a bit like the Soviet system. Here's your entitlement card, here's your job assignment, and here's where you'll be living.

With the pervasive security apparatus, and the micromanagement of economic activity, the scenario is clearly about fine-grained social control, according to centralized guidelines and directives. Presumably media will be carefully programmed, with escapist trivia, and a sophisticated version of 1984-style groupthink propaganda pseudo-news, which is pretty much what we already have today. The non-commercial Internet, if there is one, will be limited to monitored, officially-designated chat sites, and other kinds of sanitized forums.

With such a focus on social micromanagement, I do not expect the family unit to survive in the new era, and I expect child-abuse alarmism will be the lever used to destabilize the family. The stage has been set with all the revelations about church and institutional child sexual abuse. Such revelations could have been uncovered any time in the past century, but they came out at a certain time, just as all these other transitional things have been happening. People are now aware that widespread child abuse happens, and they have been conditioned to support strong measures to prevent it.

Whenever I turn on the TV, I see at least one public-service ad, with shocking images, about children who are physically or sexually abused, or criminally neglected, in their homes, and there's a hotline phone number that children can call. It is easy to see how the category of abuse can be expanded, to include parents who don't follow vaccination schedules, whose purchase records don't indicate healthy diets, who have dubious psychological profiles, etc. The state of poverty could be deemed abusive neglect.

With the right media presentation, abuse alarmism would be easy to stir up. Ultimately, a 'child rights' movement becomes an anti-family movement. The state must directly protect the child from birth. The family is demonized...

How scary were the old days, when unlicensed, untrained couples had total control over vulnerable children, behind closed doors, with whatever neuroses, addictions, or perversions the parents happened to possess. How did this vestige of patriarchal slavery, this safe-house den of abuse, continue so long to exist, and not be recognized for what it was? How much better off we are now, with children being raised scientifically, by trained staff, where they are taught healthy values.

Ever since public education was introduced, the state and the family have competed to control childhood conditioning. In religious families, the church has made its own contribution to conditioning. In the micromanaged post-capitalist future, with its Shock Doctrine birth scenario, it would make good sense to take that opportunity to implement the 'final solution' of social control, which is for the state to monopolize child raising. This would eliminate from society the parent-child bond, and hence family-related bonds in general. No longer is there a concept of relatives. There's just worker bees, security bees, and queen bees, who dole out the honey.


Postscript
This has been an extensive and somewhat detailed prognosis, regarding the architecture of the post-capitalist regime, and the transition process required to bring it about. The term 'new world order' is too weak a term to characterize the radical nature of the social transformation anticipated in the prognosis. A more apt characterization would be a 'quantum leap in the domestication of the human species'. Micromanaged lives and microprogrammed beliefs and thoughts. A once wild primate species transformed into something resembling more a bee or ant culture. Needless to say, regular use of psychotropic drugs would be mandated, so that people could cope emotionally with such a sterile, inhuman environment.

For such a profound transformation to be possible, it is easy to see that a very great shock is required, on the scale of collapse and social chaos, and possibly on the scale of a nuclear exchange. There needs to be an implicit mandate to 'do whatever is necessary to get society running again'. The shock needs to leave people in a condition of total helplessness comparable to the survivors in the bombed-out rubble of Germany and Japan after World War 2. Nothing less will do.

The accuracy of the prognosis, as prediction, is of course impossible to know in advance. However each part of the prognosis has been based on precedents that have been set, modus operandi that has been observed, trends that have been initiated, sentiments that have been expressed, signals that have been given, and actions that have been taken whose consequences can be confidently predicted.

In addition, in looking at all of these indicators together, one sees a certain mindset, an absolutist determination to implement the 'ideal solution', without compromise, using extreme means, and with unbridled audacity. World wars have been rehearsals for this historic moment. The police state infrastructure is in place and has been tested. The economy is in the process of collapse. The enemy is surrounded with missiles. Arbitrary powers have been assumed. If not now, the ultimate prize, then when will there be a better opportunity?

Our elite planners are backed up by competent think tanks, and they know that the new society must have coherence of various kinds. They've had quite a bit of experience with social engineering, nurturing the rise of fascism, and then engineering the postwar regimes. They understand the importance of mythology.

For example there is the mythology of the holocaust, where the story is all about extermination per se, and the story is not told of the primary mission of the concentration camps, which was to provide slave labor for war production. And some of the companies using the slave labor were American owned, and were supplying the German war machine. Thus does mythology, though containing truth, succeed in hiding the tracks and the crimes of elite perps, leaving others to carry the whole burden of historical demonization.

So I think there is a sound basis for anticipating the kinds of mythology that would be designed for leaving behind and rejecting the old ways, and seeing the new as a salvation. There is a long historical precedent of era changes linked with mythology changes, often expressed in religious terms. There will be a familiar ring to the new mythology, a remixing and re-prioritizing of familiar values and assumptions, so as to resonate with the dynamics of the new regime.

The nature of the carbon economy has been somewhat clearly signaled. Carbon budgets, and carbon credits, are clearly destined to become primary components of the economy. As we've seen with the elite and grassroots supported global warming movement, the arbitrary scarcity of carbon credits can be easily regulated on the pretext of environmentalism. And peak oil alarmism is always available as a backup. As elite spokespeople have often expressed, when the time comes, the masses will demand the new world order.

The focus on control over consumption, resources, and distribution is implicit in the emphasis on energy limits, is latent in the geopolitical situation, as regards depletion of global resources, and is indicated by the need for a new unifying paradigm, as the growth paradigm is no longer viable.

The nature of the security apparatus has been clearly signaled by the responses to demonstrations ever since 1998 in Seattle, by the increased use of hardened-killer mercenaries at home and abroad, by excessive and abusive police behavior, by airport security procedures, by Guantanamo and renditions, by the creation of a domestic branch of the army, dedicated to responding to civil emergencies, and by the way Katrina and Haiti have been handled.

It would be a major mistake to think of those last two as bungled operations. They were exercises in collapse management of a certain kind, to be applied to certain populations, where the training and equipment appropriate for combat in Afghanistan is seen as being appropriate for administering aid to civilian disaster victims. These selected disaster victims will be seen primarily as threats to civil order, or perhaps undesirables to be incarcerated or eliminated. They will be demonized as rioters and looters. Assistance will comes later, if at all. And it can all be broadcast on TV, and somehow be seen as the way things have to be. These two exercises were not bungled at all. They were alarmingly successful, most notably in the case of the realtime PR mythology.

The limited role of national governments, being primarily allocators of mandated budgets, has been clearly signaled by long-standing IMF policies in the third world, and by the way the bankers have been dictating to governments, in the wake of the over-extended bailout commitments. The carbon entitlement budgeting paradigm accomplishes the same micromanagement in a much more direct way, and is the natural outcome of the push toward hard carbon limits.

Reply
IMAGINE YOU WAKE UP ... AND THE GLOBAL FINANCIAL SYSTEM IS GONE
Helga Zepp-LaRouche
http://www.larouchepub.com/hzl/2010/3721..._gone.html

That is just what could happen, since neither the U.S. Senate, nor the German Bundestag, nor the G20 countries, have yet done anything to prevent it. On the contrary: The financial reform bill just passed by the U.S. Senate, which left the fattest loopholes for speculators, has increased the instability enormously. And the Bundestag's rubber-stamping of the €750 billion "rescue package" for Greece has accelerated the dynamic of disintegration of the global financial system—whether by a chain-reaction domino effect, or by global hyperinflation.

A taste of what could happen at any time, on a much larger scale, was shown by the collapse of the Dow Jones on May 6, when it fell by 10% in 16 minutes, wiping out $700 billion, with the automatic trading systems apparently on autopilot. The quick and partial rebound that occurred then, might not the next time, and the whole world financial system could actually disintegrate overnight. All it would take is another grave mistake, somewhere on the globe, and the world could plunge into chaos.

Only hours after the Senate passed the version of the financial reform bill demanded by the White House and top executives of Wall Street, a Newsweek blog compared the law to a doughnut, with a huge hole in the middle, "that is so critical to the success or failure of the bill that it becomes the legislation's defining characteristic"!

Newsweek's comment refers particularly to the fact that the amendment on controlling derivatives trading that Sen. Maria Cantwell (D-Wash.) had tried to bring to a vote, was blocked by Senate Majority Leader Harry Reid, as was the amendment that would have reintroduced the Glass-Steagall standard. Newsweek quoted a source who said that, in Cantwell's view, "the bill is a joke," because "the clearing of derivatives and exchange trading is the heart of the whole bill." And that's precisely what is missing.

As the result of this vote, the derivatives trade, which the American people rightly blame for the crisis, is not only not restricted, but the U.S. Senate has destroyed its credibility in this matter, once and for all. For in the preceding debate, many Senate Democrats, such as Byron Dorgan (N.D.), Jeff Merkley (Ore.), Barbara Mikulski (Md.), Tom Harkin (Iowa), among others, gave fiery speeches promising to support the amendments of Cantwell, McCain, and Feingold, for reintroduction of a split banking system,[1] and of Blanche Lincoln (D-Ark.), for control of derivatives.

But the leading Wall Street banks' top lobbyists, who have decades of expertise in the manipulation of Congress, made sure, together with the White House, that those same Senators, who pledged support for the amendments, turned out to be full of hot air, voting on the first ballot to end debate, and then voting for the bill without the changes that would have ensured that the high-risk speculation would have been eliminated. Not even the watered-down "Volcker Rule" was voted up. Even the new Republican Senator from Massachusetts, Scott Brown, who was elected to office with support of the Tea Party movement, evidently had all the fight taken out of him. Washington sources report that there have never been such massive threats, manipulation, and money transfers, as in the days leading up to the vote.

What this means is that the credibility and influence of Lyndon LaRouche and his Political Action Committee have never been greater; they are seen as the only force that is not discredited, because before the vote, they launched a nationwide mobilization for restoring the Glass-Steagall Act and replacing the casino economy with a credit system. This mobilization will now continue, given the deplorable behavior of the Senate; Members of Congress, will face, what promises to be for them, the very unpleasant task of explaining to their angry constituents, during the upcoming Memorial Day holiday, why they capitulated to Wall Street, once again.

Merkel Breaks the Mold
However, certain relevant Washington circles responded respectfully to the German government of Chancellor Angela Merkel and the BaFin's[2] banning of naked short sales of stocks and government bonds, as well as unsecured credit default swaps. The news of this action sent some hard-nosed bankers into a state of shock, since they never would have thought that Germany, of all countries, would act unilaterally—at least on this point—to prevent the German taxpayer from having to pay the consequences of these short sales. Meanwhile, in Austria, Belgium, Holland, Switzerland, and the Czech Republic, there are signs that they may be ready to follow suit.

Obviously, the German government, by adopting this measure, was taking revenge for the massive pressure that President Obama, British Prime Minister Gordon Brown, French President Nicolas Sarkozy, and EU Commission president José Manuel Barroso, had applied to Chancellor Merkel, who agreed to the EU750 billion rescue package, after long resisting it. The above-mentioned gentlemen were treading in the footsteps of Margaret Thatcher, François Mitterrand, and George H.W. Bush, who once pressured Chancellor Helmut Kohl, against his better judgment, to agree to the European Monetary Union—the euro-as the price for their acceptance of German reunification.

The Austrian daily Die Presse (May 15) spoke of a "monetary coup d'état," in which the European heads of state and finance ministers had decided on nothing less than a "genuine currency reform," which changed the euro into an inflation-prone soft currency, and made all EU members collectively responsible. By purchasing government bonds of bankrupt states, the European Central Bank (ECB) has lost all credibility, the article said.

The same can be confidently said about the German Bundestag and the Bundesrat, which gave the go-ahead on Friday, May 21, for the German share of the bailout package—around €150 billion—although the euro, completely unimpressed by the mega-package, had slipped from Monday through Thursday from 1.30, to sometimes as low as 1.22, against the dollar. The combination of the mega-bailout package, the ECB's massive easing of monetary policy, brutal austerity, and the European debt brake, means a disastrous combination of hyperinflation in the tradition of 1923 Weimar, plus Chancellor Heinrich Brüning's austerity policy of the beginning of the 1930s.

"Tagesthemen" TV news then reported on who was really profiting from the (probably unconstitutional) package—not the Greek population, which is going to have to tighten its belts, but, among others, Greece's richest banker, Spiro Latsis, whose Eurobank holds €12 billion in Greek government bonds, and aboard whose luxury yacht EU Commission president Barroso has spent his vacation several times.

Thus, we have the same problem as in previous votes, whether on the health reform (as leading Christian Democratic parliamentarian Friedrich Merz himself said), or on the Lisbon Treaty, which the Members of Parliament had obviously not read: that the parliamentarians have almost no idea about what they are voting on. At least Chancellor Merkel admitted that for her, and for politicians in general, it is difficult to figure out the complex processes in the financial markets, and disinterested advisors are hard to find in the financial sector. To say it a bit more clearly: The representatives of the financial interests lie through their teeth.

They depend upon people's short memories, just like Obama's economic advisor Larry Summers, who verbally welcomed the Wall Street-approved version of the U.S. financial reform, saying that if this law had been in effect, the crisis would never have occurred! Summers of all people, who was one of the key people responsible for abolishing Glass-Steagall in 1999! The hyperventilated speeches of the Greens and the Social Democratic Party in the Bundestag, however, were just as duplicitous; what the stony-faced Sigmar Gabriel (SPD) has apparently forgotten, is that it was the Red-Green coalition[3] that introduced deregulation of the financial markets and True Sale International[4] to Germany in 2004.

A Global Glass-Steagall Needed
Neither the €750 billion package nor the austerity and budget control measures designed by the European Union will stop the escalation of the systemic crisis; on the contrary, they are making the situation worse. Only a real reorganization of the world financial system, dealing with the problem at its root, will make it possible to overcome the systemic crisis.

The only real way out is the immediate introduction of a split global banking system—a global Glass-Steagall—protecting the commercial banks, and making loans available for industry, agriculture, and trade, while protecting the people's life savings. Anyone who wants to continue with high-risk gambling will do so at his own risk, and will no longer be able to count on the taxpayers' money to bail him out.

The "creative financial instruments" introduced by U.S. Federal Reserve Chairman Alan Greenspan in 1987—i.e., derivatives and securitization—are as little needed for a well-financed real economy as is currency speculation, which must be prohibited by fixed exchange rates. The current hopelessly bankrupt monetary system must be replaced by a credit system, in which long-term multilateral agreements are concluded among sovereign states, over two or more generations, investing in such future-oriented projects as infrastructure, the inherently safe high-temperature nuclear reactor, thermonuclear fusion, manned space flight, and other revolutionary technologies, to increase the productivity of the economy and lead to full, productive employment.

For the parties that are represented in the Bundestag, the current economic crisis is evidently too complex, since not one has rejected the EU package on a principled basis. Support the BüSo, the only party which has long predicted the crisis, which knows today how to overcome it, and which has the courage to call a spade a spade.

THE GREATEST CRISIS IN MODERN HISTORY
Lyndon LaRouche
http://www.larouchepub.com/lar/2010/webc...pener.html

Debra Freeman: Good afternoon, everyone.

There was no way we possibly could have known when we scheduled this event, that it would come at such an incredible moment in time, when the crises that we have been discussing, the crises that Mr. LaRouche forecast, would all come to a head, in what seems to be a single moment. And in that single moment, it is also the case, and it is increasingly clear, to people in the United States, and, indeed, all over the world, that the only functioning economist, who has an overview of what caused this crisis, and of how to fix it, is Lyndon LaRouche.

Lyndon LaRouche: There are two topics which I shall address today, apart from what I shall treat, as questions come in, as I respond to those questions. The first will be on the immediate crisis. The second will be on what we do, if we succeed in installing the policy which is needed to deal with this crisis. The first part is elementary, and the second part is scientific.

Now, we have a piece of legislation, in the form of an amendment, and there's some other legislation around it, in the Congress. It's legislation sponsored by a group of leading Republicans and Democrats, who are determined that this policy of Obama's shall not go through: that the legislation, as Obama intends, will be blocked, and he will fail. And this may probably be the actual approach to the end of his run as President.

Now, what has happened is not a domestic U.S. affair—it is a domestic U.S. affair, but it's not, in nature, a domestic U.S. affair. What has happened is, the entire British system—the British system is not the British monarchy, though the British monarchy itself is a part of that system; it's the international financial system, which is under the leadership of Jacob Rothschild as an agent of the British monarchy. The core of this thing is called the Inter-Alpha Group.

Now, the Inter-Alpha Group's chief victim, officially, is the euro: All the nations which are part of the euro, are the first target of disaster. However, the controlling feature of this euro system has been, since the end of 1989, the British system. The euro system is a puppet of the British Empire. The most powerful influence in the British Empire, financially, has been centered in the group called the Inter-Alpha Group, with many different kinds of extensions, whose power is located largely among the pirates of the Caribbean.

For example, the people who own Russia today, financially, have their headquarters in the Caribbean—and they are pirates. Their offices are there. And the Russian economy is presently controlled by pirates of the Caribbean, some of whom speak Russian—for example, in Antigua, you can't get a hotel room if you don't have a Russian accent. So, that's the nature of the situation.

The Greek Bailout Has Backfired
What has happened is this: The attempt to pull a swindle—which apparently is successful, in one sense, using a bailout of Greece, to try to wreck the nations of the continent of Europe, the euro group—has backfired, and has struck at the heart of the system, the euro system, which is controlled by the British monarchy, the British Empire group. What happened on Thursday [May 6], for example, in the United States, was a reflection of this. We are approaching a point, which is coinciding with the Greek bailout issue, which is a fake: Greece should not have been bailed out. They should have, as a sovereign nation, gone through a reorganization of their finances, under sovereign direction. Trying to pull all Europe, into support of a Greek bailout, is the intention to ruin all of Europe, simultaneously.

Now we did what we could to cause that to backfire. And it did backfire. It's backfired. And there was a mood shift in Europe, including in the German election campaign in North Rhine-Westphalia, during the past two weeks; a sudden shift in the mood, expressed in the population, which is a reflection of this process.

What happened is, the gambling on Wall Street, was intermingled with a superior force which controls Wall Street. Wall Street is controlled by the British Empire; it is not an American possession. So now, what you're seeing as a U.S. crisis, is really the British crisis, because the British system is about to blow! It has reached the point of blowing.

So what happened was, essentially, the Obama Administration—Obama himself is a British puppet, he's not really an American. He may be an American by birth—that's a highly debated subject, but nonetheless, he's nominally American. But he's not American in spirit, or in direction, or ownership. He's owned by the British Empire, via the rotten British extension into Chicago. He's a puppet.

So this puppet is going to be ordered to assist the British, at the expense of the United States in this process. Not everybody in the United States is either stupid or a traitor. There are some people here, in politics, who are not traitors. And this happens to include a couple of people, such as Sen. John McCain, and Sen. Maria Cantwell, and others—Feingold and others—and they are not going to sit by and see the United States destroyed. So they have moved to jam up the so-called Dodd bill. The end of the Dodd bill, the change in the Dodd bill is already stuck in there, in another piece of legislation, inside the Senate proceedings. But, you have a determined group of people who know that the British system is about to collapse. And know that if the United States does not take appropriate action to defend the United States against a collapse of the British system, we go down!

So therefore, the people behind McCain-Cantwell and so forth, are acting not as factitious politicians, they're acting as patriots. And the guys who oppose them are not acting as patriots! Because, if the British system goes down, the euro system goes down—as it will go down—one way or the other, it's doomed! This system is finished, and nobody can save it. The question is, are we going to go down with it? And those on Wall Street who support the President's policy in this, are the traitors. Because they're willing to sacrifice the United States, for the interests of Britain.

So, you have some patriots in the United States: John McCain. What is John McCain? He's a Republican; but that isn't what's important about him. He's a soldier, or a sailor. He comes from several generations of leading figures in the U.S. Naval tradition. He's a patriot. What he's reacting to is a not a question of factitious advantage for one political party or interest or another; he's reacting as a patriot! So is Maria Cantwell, and so are others, Feingold and so forth, involved in this: They're acting as patriots! To mobilize a defense of the United States, against the oncoming total collapse of the international financial-monetary system in its present form. Because if we defend the United States system, against our incumbent President, among others, and Europe goes down, we in the United States can launch the recovery of Europe; by extending the Glass-Steagall system, which we intend to reimpose here, now, into Europe, we can cause a recovery of Europe.

Monopoly Money or Glass Steagall
What's the situation here? Most of what people consider financial assets, are totally worthless. They're derivatives. They're gambling—they're side-bets on gambling for side-bets. They do not represent real, physical-economic assets. They're frauds. We're talking about hundreds, or maybe quadrillions of nominal dollars out there, as the world's financial assets in debt—which ain't worth nuthin'! And it's gambling. It's as if you took the game of Monopoly, and you brought the game of Monopoly into Wall Street, and now you play with Monopoly money. And you declare you have a great victory. And then somebody comes, and asks you to pay the bill for whatever they're serving that night, and they don't have any real money, they have only Monopoly money. What happens? The game is over. And that's what we're dealing with. You're dealing with a system which is based on Monopoly money. All these financial derivatives, this vast amount of money, all this bailout is all fake and fraudulent!

So, what do we do, using the Glass-Steagall approach? We take the entire system, reestablish Glass-Steagall, and under Glass-Steagall, we cancel all the Monopoly money. And we defend the integrity of legitimate obligations, of the type we have in regular banks.

Now, what's happened since 2007, especially since 2008, we have destroyed the integrity of the banking system. It was done deliberately, by a crazy gentleman from up near Cape Cod, in Massachusetts, who is not very sane, and he's not very intelligible, but he's a stinking nuisance, nonetheless. So, we have destroyed what we could have saved: In other words, in the Summer of 2007, I specified this: We could have then acted, without any great crisis, to stabilize the U.S. economy. We didn't do it! Because of Barney Frank and what he represented, what was behind him.

So, we didn't do what we should have done. This rolled over, with the beginning of a series of swindles, into what happened in 2008. That was under Bush. Then we went, in order to cover the crimes we had committed, we went to bailout! And now, we have a hungry and desperate U.S. population, by and large. They're on the verge of mass starvation, literally, a total breakdown. And the question is: Who do we support? Do we support the people of the United States? Do we support essential industries? Do we support municipalities and their functioning? Do we support the nation itself? Or, do we support foreigners, the bailout monsters, typified by the British Empire? We make that choice: We say: "Well, we don't owe you guys a thing. We have a Constitution, and what's been happening to us, is a violation of our Constitution."

If we do as Franklin Roosevelt did, when Roosevelt saved the United States from a correspondingly similar catastrophe, in 1933, by Glass-Steagall. Glass-Steagall is not some wild innovation; it's simply the principle of the U.S. Federal Constitution. But it needed a specific law, addressed to a specific situation, to defend our nation against this threat. And that's Glass-Steagall.

Now, Larry Summers, who is a mental case, got in there, with a morals case, called Geithner, and that didn't help anything at all.

So now, we've reached the point where we're part of a British system—the whole international system! You don't know who owns what. It's like a vast game, at electronic speed—and very complicated games, where people were hedging against other people, then trying to come up with a hedge, against a hedge, against a hedge, against a hedge!

So, what happened on Thursday, as the intensity of trying to cover their butt against the British collapse, occurred, it blew out! The whole thing blew out, because it was no longer controllable! An incalculable development occurred—but it was pre-calculable that it would occur! When you take into account the insanity of the people who have been running the banking system and the financial system in the United States, and the insanity of the current President. There was no provision to avoid this.

So, we had a total collapse, in the stock markets on Thursday. What caused it? The British crisis! The British crisis.

An Avalanche: The Patriotic Majority
What do you get as a reaction? As I said, I made certain remarks about John McCain, and Maria Cantwell. Take McCain in particular. So, he's a patriot. What is emerging now, is a split and reorganization of the two leading parties. And who knows what other complications may occur, as well. What you have, now, is you have a Republican-Democratic faction, typified by McCain and Cantwell, but only typified by that. And this is a rapidly growing movement among leading politicians inside the United States, on both sides of the aisle. The leadership that is opposing the Obama plan, and the British, is, admittedly, still a nominal minority. But with the backing of the American people, it is no longer a minority.

Now, what's the backing of the American people? All those people you saw in August of 2009, out there saying, "We want to kill you," to the politicians they had elected. "You betrayed us. We want to kill you, over health care." So now, you've got a situation, in which, the population will not sustain the nominal majority for Obama, in the Congress. The population itself will not sustain or support that. They will capitulate to it, or not! And when they're clear, that they have a target, by means of which they can challenge this, they will do it.

What they want, is for well-known, leading political figures, or similar figures, of the United States, to step forward as a group, and say, "We think the time has come, to stop this nonsense." Then the majority of the people of the United States, right now, are ready to support any political leadership, which they consider credible, which is willing to do that.

And therefore, John McCain and Maria Cantwell, the Senators, with their associates, are now, like an avalanche rolling down the side of a mountain, and picking up material, steam, and numbers, as it goes.

They are now determined to put a block, on any effort to thrust through a Dodd bill, without the Glass-Steagall in it. They will jam up the works, and they have the ability to do so. And we're also in the process, where, behind them, is the sight, clearly more visible, roaring more loudly, of the avalanche, sliding down the mountain slope. It's a matter of timing. There'll be an overwhelming majority, in the United States, a patriotic majority, which is spreading rapidly—it's spreading like wildfire right now, implicitly unstoppable—which is going to be behind the McCain-Cantwell-led opposition.

We will probably have a Glass-Steagall vote soon, in the political process, or the equivalent of a Glass-Steagall vote.

We will also have alarmed the British, by what we're doing. The British will know, we have sent them to Hell! Where they will be warmly received! And that's where we stand.

Two Factors in History
We're now in the position to change history. This is the way it happens. You have two factors in history: You have the so-called objective factor: the way things are moving, the perception of interest, the fears, the hopes of people. And you would say, "Well, why don't these things control politics at all times?" Well, it doesn't. You come to a change in a general mood—it was the kind of thing that Shelley refers to in the close of his A Defence of Poetry. People at large are gripped by something they do not always understand. But it compels them to act in a certain way, perceived in their own interest. And generally, often, it represents a nobler quality, aroused in that people, than they had represented before.

The American Revolution is typical of that. It happened here. It was an isolated situation; we weren't in Europe. And the Americans, here, realized they had to defend what they had established in North America, and they did it. They had support from people in Russia, France, Spain, and elsewhere—and we won our freedom. We won our republic.

We won also, the fight against the British in the Civil War. We won the fight against slavery. We won the fight against backwardness in general. We won the fight to develop the Western lands. We won the fight to unify the nation, as a transcontinental nation, from the Atlantic shore to the Pacific shore. We did that as a people, in this way. We suffered long periods of suffering, while we waited for this reform to take place. But the power of the reform, like a tidal movement, came upon us, and we were mobilized; when we found suitable leaders, we responded to them, and they saved us.

What you see in the McCain-Cantwell initiative is a timely response, the instinctive reaction of the American process, to a threat to our existence. Admittedly, most citizens don't understand fully what this is about. But they know the effects. They smell the doom coming down upon them. They know something needs to be done. And when someone says, like John McCain, or Senator Cantwell, and others, when they say, "We are mobilizing to defend this nation, from this awful thing, from this breakdown crisis that threatens us all—and you all know, your jobs are lost, your cities are hopeless, your water systems are breaking down—everything is going to Hell! You can not sit there. You've got to do something to change the situation. You can not let this continue the way it's going!"

And thus, you find a point—some politicians, some leading figures—that usually happens in anything like this: Some leading figures step forward. They talk to each other. They explore. They're cautious at first. Then they begin to discover they're attracting more members around them, into the same cause. They smell the acquisition of power, political power and influence. Now, they say: "We can jam the works up. We can jam the works up with a Glass-Steagall action." And Glass-Steagall action is now the thing that's on the agenda! The other things are waning! This is it! You're either with Glass-Steagall, or you're not in the real world. That's the situation.

Do we have the power, at this moment, to ram this through? Not quite yet! Not quite yet. But after my remarks today, which will be heard and will be discussed by relevant people—I'm not actually directly conspiring with them, but they know what I'm doing and I know what they're doing, and we don't really disagree very much! Because the thing that unites us, even though we come from different backgrounds, is, we're all patriots. That's the difference. And those who oppose us, are not really patriots, and that's the difference. When the American people are aroused, and have a clear cause and clear leadership, they will respond accordingly. And they're beginning to respond, right now.

And what's going to happen in Europe, in the coming days, is going to shape this thing, because the European system is now coming down! The enactment of the Greek bailout, has implications which mean, the present European monetary-financial system is now doomed! It has no life-expectancy. It's going to disintegrate. The British Empire is going to disintegrate. The British Empire is going to make threats against the United States, because of this Glass-Steagall reform. And it's only the British that are sympathetic to the opposition to Glass-Steagall now; or people who are duped by British influences of one kind or another. And Europe will go down.

Glass-Steagall: How It Will Work
But! If the United States is organized around a Glass-Steagall reform, what will happen? We will take—and most of this money that Wall Street claimed to own, and similar kinds of people, will vanish! Fwhpp! Gone! We discover, it's Monopoly money! We don't have to honor it! It's gone!

Well, that means that a lot of banks are going to go. Not all of them, because we can also rescue some banks. What we do, is, we walk into a bank with a Glass-Steagall writ in our hands, and we say, "We're going to sort out your accounts." Now, some of this—this big bucket over here, that's the wastebasket, and most of your financial claims are going to vanish from here as they go into that wastebasket. Now, you have a small amount over here, that is, the wastebasket is full of quadrillions of dollars, of worthless dollars, and what you will salvage is a modest part of the total, monstrous mass.

What will we do? Well, the United States has now rid itself of these debts to these swindlers from London, and from New York, and from Chicago, too—we're not going to honor them. Their money is now declared worthless. Their assets are declared worthless, are declared to be bunk. What happens? Well, if we have the right leadership in the United States government, everybody will join, or nearly everybody will—some will complain, but they will join. Why will they join? They want to survive. They need to be tapped into whoever has got the real money—and they will go along with that, especially if it's a fair deal.

And therefore, we're going to create a mass of loans, of Federal loans, on Federal credit. We're going to utter it under a Glass-Steagall standard, and we're going to start funding the banks that we save. We're going to take the parts of the banks that are worthless, that are parasitical, we're going to throw it away! It's gone! It's Monopoly money! We don't want Monopoly money any more here, not in the banking community! You try to play it—you're out.

All right, so now we've got a much more modest banking system, rid of all these parasites. And what do we do? Well, the Federal government can now utter money, utter credit, in the Congressional way. It goes into what? Into legitimate banks, mercantile banks or similar kinds of banks, to save savings banks and mercantile banks generally. And the other kind of thing—they are gone sooner rather than later.

So therefore, what do we do? Well, we don't have much in the way of building an economy any more. We pretty much destroyed it, especially in the past three years, under the succession of George the Turd and Obama. But, what we've got, is a shambles of what we once had, in terms of industries and infrastructure.

Like the water systems in the United States: The time has past—the time has past since 1966-68. In 1966-68, we reached a zero point, and started going down in basic economic infrastructure, as smart guys did what they did: You used to have a municipal water system, and the municipality as a corporation would own the water system. And the water system would have employees, who performed all the essential functions, including clean water, that sort of thing, repairing the pipes, maintaining the system.

But then, they decided that they could save money by farming it out to private interests. And the private interests would not maintain the full repair of the water systems. So therefore, you have in the cities and towns of the United States, many of them have lost their water systems. The water system is 60 or 100 years old; it has never been repaired. And we have a catastrophic rate of breakdown of municipal water systems. Because we employ cheap labor, with no pension guarantees, with none of these things that we used to give to public corporations which would serve the community, for water systems, for example. We have similar processes with power systems. All the kinds of things we used to get from municipalities and state organizations are gone! They're broken down.

So, what will we do? We will take two categories of infrastructure, and this money we issue, through this new act, under the authority of a new Glass-Steagall Act, the Federal government will now utter credit, which it will distribute in various ways, either directly in some cases; or, where it's an investment, we will often prefer to loan it to cities, municipalities, or to private corporations, for their investment. If we think the investment is a sound one, it's productive, it's creative, we'll do that.

Infrastructure To Rebuild a Ruined Economy
Now, the major part is going to be on infrastructure, because we don't have industry any more. We don't have really independent agriculture, any more. It's controlled by international agriculture, like Monsanto—which claims that it invented life! I don't know where they got that patent from, what screwball passed that thing through. But, we've got a lot of unemployed people. We've got to put them back to useful work, we've got to care for them; we've got to bail out the communities which are threatened with jeopardy, like these water crises, which all up and down the traditional cities and towns in the United States, are now in jeopardy in water supply!

And that's really a serious problem: Health-care problems! We've ruined the health-care system under the Nixon Administration, going to the HMO system, even before this mass-murderous system voted in by fools under Obama.

So, our population is threatened, by the stupidity of governments, from the time that somebody assassinated John Kennedy, to prevent him from opposing going into a war in Indo-China. And he was murdered to clear the way for a war in Indo-China, that the British wanted us to have. And since that time, we've been going downhill.

So, we've got a ruined economy. But we have American people, and we have an American tradition. We have a knowledge of what we used to do. We have an understanding of science, and I'll get into that, in the second part of what I'm going to say today. We have the options: So, we'll invest in infrastructure. But, in addition to going back to fixing up the possibility of living in communities, which no longer are just breaking down, where the water systems are being repaired; where transportation systems, educational systems, health-care systems, are being restored again, we're going to do some major things: We're going to build a worldwide, international, railway, magnetic-levitation transportation system. Every continent, except Australia, will be united and connected, and in depth, by an international rail system, or in the form of a magnetic-levitation system.

Actually, it is much cheaper, and more efficient, in many ways, to transport goods by rail than by shipping. Shipping is less efficient, more costly, than high-speed rail and magnetic levitation. We're going to connect the continents, from the Bering Strait (I understand Walter Hickel died, the former governor of Alaska, who was an active supporter of the Bering Strait bridge). So, we will connect all of Eurasia—Africa, fully, by rail systems and power systems, and health-care systems, that sort of thing. A system of infrastructure. We will reach from the Alaska straits, down to the tip of South America. The whole area will become one area of development, continuing the intention of the Lincoln Administration in installing the Transcontinental Railway. We're going to build a world system, among nation-states, sovereign nation-states, which is capable of being the vehicle for the recovery of the world economy.

We are also going to have to, of course, develop new industries. We're going to change the character of the U.S. economy. For example, we have destroyed much of the development which existed in the central and western lands of the United States. We destroyed it! We built super-congestion, around Washington, D.C., for example, which is insane! You used to have industrial development, or municipal development, of a finite size, and a finite area. Then you would have an area between that and the next city, which was generally toward rural, and involved agriculture.

The idea, in the old days, was to have townships and cities built where you could commute to work in less than half an hour each way, each day—preferably 15 minutes. And to provide mass-transit systems for people to be able to do that, in a short period of time. Today, we have people commuting, around Washington, for an hour and a half to two hours each way, each day. What does that do to family life? What does that do to the culture of the society? Similar kinds of things. The schools are a mess.

So, our infrastructure of the nation, and among nations is wrong! We have to build that infrastructure. It's high-speed, it's a big investment, it's a long-term investment—we have to do it. Ah! But that long-term investment, in water systems, transportation systems, power systems, so forth, and in space systems—I'll get to that later—these investments will be the driver for distributing credit into the new industries, which will spring up, as a result of this reform.

In other words, what's the market for industry, and for the products of industry? The market lies largely in the Federal government's role in organizing credit for basic economic infrastructure. The jobs you create in infrastructure become the echo and the stimulant for the jobs you create in industries, which supply support for the undertaking of building the infrastructure. Like the Tennessee Valley Authority under Roosevelt, a perfect example of what I mean. We can do TVA type approaches throughout the world. These are not some kind of trick, these are essential.

Therefore, if the Federal government, through the mercantile banking system, now under a Glass-Steagall system, can supply credit, we will deliver credit; under the old Roosevelt-style precautions, we'll deliver that credit through banking institutions, in order to fund investments in necessary production in private industry. And that's the way we'll build the economy.

Bring Back the CCCs
We have a population which has been ruined over the recent 20 to 30 years. It's no longer productive. We have a whole layer of youth, who are absolutely unqualified for employment in anything! Except masturbation. [laughter] And therefore, we've got to do something with them, and you have to go back to the example of what Roosevelt did in the 1930s, typified by the CCC [Civilian Conservation Corps]. You've got to take these young people, who have no qualifications for honest work, get them off dope, get them to live a normal life, and start to organize a normal life. We did that with the CCCs: We took these young people, and we put them in camps, where they would do useful work, as in forestry, for example.

Now, we got, for example, a famous military division out of Michigan, on the basis of this program in Michigan alone. And these fellows did a fair job in fighting in World War II in Europe. So then, they became a part of the essential basis for our industrial potential in that part of the world, when they returned. Of those that did return.

So that's the way we do it. We invest in things, and we get social programs of investment which will channel people from uselessness, into initial skills and then into the ability to have a full spectrum of productive capabilities. And enough of that, so the entire population is in it. We're going to eliminate a lot of so-called social work and other kinds of entertainment, because you get a higher ratio of actually physically productive work; and that's what we have to do.

So, that approach will work.

And what we're forced to do, as McCain and Cantwell and others are doing, in this initiative they've launched now—you're going to find this spreading, very, very rapidly, throughout the entire political system. The system is not going to look the same a week from now, as it does today. It's going to change. And the Obama Administration is doomed—one way or the other. Either the United States doesn't do this and we go to Hell, and then he's gone that way. Or, we decide to become sensible, and he's gone that way. He's out. We'll find someplace where he can be kept as a museum piece, well-fed, nourished, but away from people. That's the way we treat our mental cases, we try to protect them, take care of them, be humane, provide a safe place where they are not going to be harmful to other people. And that's the way you have to do with him.

So, it'll be changed one of these two ways, and the change is coming on now.

What will happen? Well, you're going to find that the Republican and Democratic parties are going to all re-assort themselves. They'll re-assort themselves, according to national interest. You see it now, right now, with this coalition around McCain and Cantwell. The party lines are being crossed. Why? Because the party lines are no longer relevant to the people, to the citizens. So those who will stand up on one side, may be not new parties, but will be a coalition. A coalition of people who stand for one set of principles, as opposed to those who oppose it. And that is going to happen very rapidly, if we are to survive!

'The Basement'
Now, what is the long-term view of this thing? Well, I'm having a lot of fun: I have a number of young people associated with me, who represent a very significant quality of talent. And we have a thing we call "The Basement," which is only a name for a part of the whole operation, and we are in the process—this Basement operation is a scientific operation, which services and intersects a lot of our youth work and other work.

But we recently decided, we're in a position to go further, and it's quite relevant to all of this, because—and I've said this on several occasions before; I'll say it again right now: People live and die. And as they're still living and about to die, or think they might be about to die, they think about burial, or something tantamount to burial. They think about being tucked away as a dead person, someplace where their memory, the memory of their existence, as typified by tombstones and cemeteries, will suggest to them that there was a purpose in their having lived, a purpose in life. And if you take that away from people, if they don't have a sense of a purpose in having lived, once they face the reality of death, at which point they have only one thing: The sense of an importance of purpose in their having lived. They're not monkeys, they're not animals: They're people, they're thinking people, creative people. And therefore, this is the thing that really gives the glue to society, and its future: Does my life, is this whole story about resurrection, merely a story to quiet us down? Or is there something in which we participate, during our lifetimes, which will mean something for humanity into the indefinite future of mankind?

The problem is, that we have so many attempts to deal with that requirement—because most people, who are decent people do, always, think in those terms; they think in terms of grandchildren and great-grandchildren. That's one way of expressing it. They remember in their family circles, and otherwise in their communities, the people who are deceased, what they did, what they contributed, and we honor them, and we hope that our passing will build a score for us, that we, too, are honorable in the future of humanity, after we've passed on.

Can we say, though, that mankind is really going to pass on, successfully, in this way? Is there really a meaningful connection between our living now, and our descendants and the communities we live in? Are we really doing something of which mankind can be proud, indefinitely, to all future generations? Can we say mankind—whatever happens to the universe—mankind will remain a useful, powerful force for good, in the universe? And do we actually think about that in a way, which corresponds to scientific reality?

Well, since a very elementary thing is that our Solar System is a fairly young system in our galaxy, and the Sun is a young sun; you can call it a sun of this, or sun of that, but it's a young Sun. And the planetary system which it has, is something that it spun off and developed when it was young. And you have these planets. But you know, also: It's not going to stay this way forever.

We look at the history of galaxies, for example. Planets come and go, suns come and go! And we're stuck on Earth, with this Sun? We're gambling the future of all humanity on the assumption that this Sun is not going to blow up on us, which it will do, eventually anyway, unless we find some way to control it. And the Earth is going to become uninhabitable long before that time! So where is the future of humanity? Where can a human being, who's conscious of what it is to be a human being, find the succor of certainty that humanity is going to exist? And animals don't have that, only human beings do.

And if we don't have that assurance, then what happens to our morality? Then it becomes whatever we choose, as a fantasy, to replace the lack of certainty.

The main function of society has to be recognized now, especially in this present time of crisis: That we have to give mankind a credible assurance, that we, the existing population today, as well as those who came before us, will find a meaning in their having lived, in the future of mankind throughout the existence of this universe to come! Until we do that, we have not really given a rational response to the desire of any sensible person, to hope that the outcome of their life is meaningful for humanity.

Now, in the United States, in its creation, there's a very strong element of that, of that belief and that commitment. In the recent generations, we have lost that. That was lost when we decided to go "green." I guess that's what happens to your body, when you go dead, it turns green.

So, we've gone green: We no longer think in terms of "What if...?" "What if the Sun is going to blow up?" Are we taking steps to prepare for dealing with that eventuality, to maintain humanity, despite that threat? Are we developing scientific knowledge and capabilities which lead in that direction? Are we learning how to go to different planets, for a temporary stopping place on our way out to some distant part of the galaxy, or some new galaxy? Are we thinking in those directions? I am. Why shouldn't you?

Now, I've got some young fellows here, and they are willing to do that. That's our Basement program. We are now dealing with the practical program of how we can work out—and it's not that easy; it's no simple thing. It's going to take a lot of work: How can we put mankind, or some people, safely on the planet Mars? How can we safely transport them to the planet Mars, now that we know some of the problems of long-distance flight in space travel, the biological problems. We think these problems are soluble. We're working on it. And we're looking, harking back to a current in modern science which was thinking in that direction, the current in modern science, which gave us the original initiative for space travel.

The other thing we have, from what we know of space science, in terms of, for example, the Kennedy thrust, for reactivating space science. At the beginning of the 1970s, our assessment of the space program was, that our investment in the science of the space program, gave us 10 cents of productive potential, for every penny we spent on the actual program. The science program was the most beneficial program we had, with the highest rate of return to pure scientific development. And what happened: We were shutting it down, from the middle of the 1960s on. What we launched in the Moon landing and so forth, was a product of what had already been previously accomplished in scientific terms. We began to lose that capability that we'd been given, even while we were doing the initial space explorations!

So there we have, now, a history of where the world was going, with space science, which is in this relevant direction. If we can say that we are prepared, if necessary—in some future time, when necessary—to transport humanity to safe places away from a dangerous Sun, and a dangerous condition on Earth, if we can say that, then we have a moral authority for the organization of society around a sense of purpose. And we don't have to have fake explanations of this.

That's our destiny: We are a very peculiar species. No other species is like us. And we want to save that species. We're going to assure that, if you do something good in your lifetime, that the benefit that you generate, will be preserved to the advantage of future generations. And that's humanity: You're tied, morally, spiritually, to the people of the future, and the people of the past. You feel like a real human being, a human being which has a purpose for existing in this universe.

So, we are concentrating on something which will become successful, particularly if we get this thing going in solving the problem immediately before us.

The Fakery of Money
Because, the great fakery that we have to deal with today, is: Money is fake. The conception of money is fake. Money is not a measure of value. Money was a vehicle, which we used, as in the Massachusetts Bay Colony, and in other good cases—we used money as a system of credit, which was necessary to organize society for certain kinds of projects which are physically beneficial to society, and to its well-being, health, and so forth; and freedom. So, that is the real meaning of economy: Is the contributions to the future of humanity, through a commitment to discovering new ways of solving old and new problems. This is physical. It is not monetary.

The monetary system is a convenient way of organizing exchanges, and, in the Massachusetts Bay Colony, before the Andros takeover, that system was already working. That is a peculiar American System. And the foundations of the American System were laid there, in Massachusetts, during that period in that time. And our design of economy was always based on that, in all good times.

So, let's go back to that. And say, let's look not at money economy, let's look at physical economy, and let's say that money is necessary, as currency, in an economy, but it's not the purpose of the economy. It's a means of organizing the efforts of economy. The value of what is produced lies in the value for humanity, not in a money value. The money value is simply a way of organizing production, production and distribution. So, let's look at things in that way for a change.

What is physical economy? That's the real economy. How do you increase the productive powers of labor? What do you need to produce to solve these challenges for humanity? What is the physical science you need to master, to understand how you could increase the power of a person productively, per capita? Even under conditions in which the richness of resources is being lessened, relatively, by depletion of the most rich resources, like iron ore, other things. How do we do that? Well, we get new technologies, we go to higher energy-flux-densities of production, all these kinds of things that are all physical.

Well, you go back; where did the solution to this thing come from? You have a gentleman, who was important, even during the beginning of the last century, Max Planck, who founded a branch of science, which was called "physical economy"; or actually, "physical chemistry," as such, but physical economy, as well. And his work led to the work of such geniuses, and other followers of Bernhard Riemann, as Albert Einstein, for example; as William Draper Harkins; as Vladimir Vernadsky, and others.

And these people, who were followers of the school of science of Bernhard Riemann, made a revolution, during the course, from the time of Planck's early discoveries, up until the recent time. And these discoveries give us access to understanding some of the primitive problems which face us in space travel. If we want to send people into space, we've got problems we have to solve. And it's only by thinking in terms of a physical science, and defined in these terms, of physical chemistry, that we have been able to crack this.

Cosmic Radiation: Space Is Not Empty
We also have the fact that space is not empty. We've got a program on this one, too, that's going on in the Basement. It's only in the primitive stages, but it's going to be very important. There is no empty space; between Earth orbit and Mars orbit, there's no empty space. You may not see it, because you don't have the sense-organs to sense it as a sensory experience directly. But it's out there. It's all kinds of cosmic radiation—thick with it! If you want to go to Mars on an accelerated scale—which you have to do, because 300 days in space travel at a lateral speed, is not very good for your health. You might arrive as a piece of blubber. So you need some special conditions and you have to do it fairly expeditiously, to take this trip. And we have to plow through that, that area—and there many other implications.

So we are actually pulling together, odds and ends of people who have contributions to make to this area of science. And the importance, the moral importance of this, for this occasion here, this subject here, is, we need to give young people, who are totally demoralized, and others, who have become demoralized, we need to give them a clear sense that there's a road we're going to travel, which is going to lead in the direction of certain kinds of things which must occur. And this includes this area of the development of this department of physical science, which involves some very important changes. We only have, now, we only have a preliminary sketch of what the nature of the problem is. A great amount of research is going to be required; it will take several generations to do the kinds of things we're talking about, even under optimal conditions. But we have to give mankind a new moral perspective, more durable than the fragile ones we have had before.

And we should go into this crisis, because when you walk out on the streets from here, and you say, "Well, the Glass-Steagall revival has occurred," you're still going to see destitution. You're going to see mass unemployment, crummy conditions. How do you say, you can walk out to that with optimism, if you do not have a clear sense of building the future? And therefore, you need to have a sense, a teaching of physical science, for example, which is consistent with that moral concern, not that you're going to go to another galaxy now, in your lifetime. I certainly am not! So I don't have any illusions about that! But I do have a concern about what comes after me, which is the normal thing for any healthy human being. And I have to think about what I'm contributing to what comes after me. And I have to think in terms of a satisfactory answer to those questions! Can I say that what I think is coming after me, in some sense, is valid? And that's a matter of science.

And what we have to do, is to shift the teaching of science and teaching of economics, away from what we've been conventionally concerned with: Money! Who's got the money? Who's got the money? And you see how worthless money is today, since Greenspan came in.

So therefore, we have to have a more durable conception of the value of man, of the value of our work, and the value of the future we hope we are creating. And let's take this occasion—it's the only thing that's important right now, because it's going to determine the course of future history: Is the Glass-Steagall reform, which is now on the table, going to be immediately implemented, to prevent the United States from joining the British in going to Hell? Because, if not, we don't have a future, at least, not for a long time to come. If we do, then there is a future.

And then, once we decide we're going to do that, how do we maintain the morale, the moral character of our populations? We do that, by providing them the assurance, of a knowable, understandable science education and practice, where they can understand, in their own terms of reference, at least in good approximation, that mankind has a future! And that we must organize our policy, not simply for our comfort—we must do that; but we must organize our policy, with a view to what is going to happen to future generations of humanity. We have to earn the respect of future humanity! That we are not only providing the solutions for these problems, or the seed for the solutions, but we are creating a system, of commitment, which will ensure that we will continue to progress in that direction, indefinitely; and will give people some sense, of what the practical measures are, which can lead to that result.

The Choice: Hell or Heaven
So, let's take the issue: The issue of the collapse of society, the collapse of the present world system, which is now ongoing, which exploded in your face on Thursday, in the stock market, and which is going to explode in a higher form this coming week, because it's already exploding. Are you going to respond to this, with this change, which I indicate—the Glass-Steagall reform? Otherwise, if you're not going to respond to the Glass-Steagall reform now, you're wasting your time by being alive! It's true. This is the only thing that's morally significant: Are we willing to commit ourselves to this Glass-Steagall perspective now?! Now, that leading political forces have put the thing on the table? It's the only thing that'll save us, and there's nothing else worth doing. Anything else is a damned waste of time! Just babble.

So let's take the position: Understand the crisis; we can solve it. We have a core of recognized American leaders, who are now leading an effort which will grow very rapidly, not only in the United States, but will grow also, by reputation, in Europe and elsewhere. Let us assume that we are going to win! Because there's no time worth spending on the alternative: You're looking at Hell or Heaven. And once you've made the choice, then you'd better start exploring Heaven. Not going there faster—that may happen, but in terms of: You are committed to ensure, that our victory, over the enemy, our victory through initiation of a Glass-Steagall reform, will empower actions, which will lead to the salvation of mankind, from the kind of threat that's immediate.

And once we do that, we have to think seriously about what are the characteristics of the moral standard by which society should make policies? And I suggest, that we have to think in terms of the new physics, the new form of the physics, of physical chemistry, typified by the gentleman I've named, and use that as a standard of challenge, for the missions of mankind. Every generation and every group of generations, must have a mission: For example, some of you in this room are in your 20s, some are in their 30s; some are somewhat older, like me.

So therefore, what are we going to contribute to the future of mankind? What's our ability, what's the roadmap we have to work out, for the future of mankind? That's what's needed.

So, we will now have some questions thrown at me. And you can observe the spectacle.
  
  
    


Reply
EUROPE’s FISCAL DYSTOPIA: THE “NEW AUSTERITY” ROAD TO FINANCIAL SERFDOM

Massive Cutbacks in Public Spending

By Prof. Michael Hudson

URL of this article: www.globalresearch.ca/index.php?context=va&aid=19904
Global Research, June 25, 2010

    
Europe is committing fiscal suicide – and will have little trouble finding allies at this weekend’s G-20 meetings in Toronto. Despite the deepening Great Recession threatening to bring on outright depression, European Central Bank (ECB) president Jean-Claude Trichet and prime ministers from Britain’s David Cameron to Greece’s George Papandreou (president of the Socialist International) and Canada’s host, Conservative Premier Stephen Harper, are calling for cutbacks in public spending.

          
The United States is playing an ambiguous role. The Obama Administration is all for slashing Social Security and pensions, euphemized as “balancing the budget.” Wall Street is demanding “realistic” write-downs of state and local pensions in keeping with the “ability to pay” (that is, to pay without taxing real estate, finance or the upper income brackets). These local have been left unfunded so that communities can cut real estate taxes, enabling site-rental values to be pledged to the banks of interest. Without a debt write-down (by mortgage bankers or bondholders), there is no way that any mathematical model can come up with a means of paying these pensions. To enable workers to live “freely” after their working days are over would require either (1) that bondholders not be paid (“unthinkable”) or (2) that property taxes be raised, forcing even more homes into negative equity and leading to even more walkaways and bank losses on their junk mortgages. Given the fact that the banks are writing national economic policy these days, it doesn’t look good for people expecting a leisure society to materialize any time soon.

          
The problem for U.S. officials is that Europe’s sudden passion for slashing public pensions and other social spending will shrink European economies, slowing U.S. export growth. U.S. officials are urging Europe not to wage its fiscal war against labor quite yet. Best to coordinate with the United States after a modicum of recovery.

          
Saturday and Sunday will see the six-month mark in a carefully orchestrated financial war against the “real” economy. The buildup began here in the United States. On February 18, President Obama stacked his White House Deficit Commission (formally the National Commission on Fiscal Responsibility and Reform) with the same brand of neoliberal ideologues who comprised the notorious 1982 Greenspan Commission on Social Security “reform.”

          
The pro-financial, anti-labor and anti-government restructurings since 1980 have given the word “reform” a bad name. The commission is headed by former Republican Wyoming Senator Alan Simpson (who explained derisively that Social Security is for the “lesser people”) and Clinton neoliberal Erskine Bowles, who led the fight for the Balanced Budget Act of 1997. Also on the committee are bluedog Democrat Max Baucus of Montana (the pro-Wall Street Finance Committee chairman). The result is an Obama anti-change dream: bipartisan advocacy for balanced budgets, which means in practice to stop running budget deficits – the deficits that Keynes explained were necessary to fuel economic recovery by providing liquidity and purchasing power.

          
A balanced budget in an economic downturn means shrinkage for the private sector. Coming as the Western economies move into a debt deflation, the policy means shrinking markets for goods and services – all to support banking claims on the “real” economy.

          
The exercise in managing public perceptions to imagine that all this is a good thing was escalated in April with the manufactured Greek crisis. Newspapers throughout the world breathlessly discovered that Greece was not taxing the wealthy classes. They joined in a chorus to demand that workers be taxed more to make up for the tax shift off wealth. It was their version of the Obama Plan (that is, old-time Rubinomics).

          
On June 3, the World Bank reiterated the New Austerity doctrine, as if it were a new discovery: The way to prosperity is via austerity. “Rich counties can help developing economies grow faster by rapidly cutting government spending or raising taxes.”[1] The New Fiscal Conservatism aims to corral all countries to scale back social spending in order to “stabilize” economies by a balanced budget. This is to be achieved by impoverishing labor, slashing wages, reducing social spending and rolling back the clock to the good old class war as it flourished before the Progressive Era.

          
The rationale is the discredited “crowding out” theory: Budget deficits mean more borrowing, which bids up interest rates. And this is supposed to help countries – or would, if borrowing was for productive capital formation. But this is not how financial markets operate in today’s world. Lower interest rates simply make it cheaper and easier for corporate raiders or speculators to capitalize a given flow of earnings at a higher multiple, loading the economy down with even more debt!

          
Alan Greenspan parroted the World Bank announcement almost word for word in a June 18 Wall Street Journal op-ed. Running deficits is supposed to increase interest rates. It looks like the stage is being set for a bit interest-rate jump – and corresponding stock and bond market crash as the “sucker’s rally” comes to an abrupt end in months to come.

          
The idea is to create an artificial financial crisis, to come in and “save” it by imposing on Europe and North America a “Greek-style” cutbacks in social security and pensions. For the United States, state and local pensions in particular are to be cut back by “emergency” measures to “free” government budgets.

          
All this is quite an inversion of the social philosophy that most voters hold. This is the political problem inherent in the neoliberal worldview. It is diametrically opposed to the original liberalism of Adam Smith and his successors. The idea of a free market in the 19th century was one free from predatory rentier financial and property claims. Today, a “free market” Alan Greenspan and Ayn Rand style is a market free for predators. The world is being treated to a travesty of liberalism and free markets.

          
This shows the usual ignorance of how interest really are set – a blind spot which is a precondition for being approved for the post of central banker these days. Ignored is the fact that central banks determine interest rates by creating credit. Under the ECB rules, central banks cannot do this. Yet that is precisely what central banks were created to do. European governments are obliged to borrow from commercial banks.

          
This financial stranglehold threatens either to break up Europe or to plunge it into the same kind of poverty that the EU is imposing on the Baltics. Latvia is the prime example. Despite a plunge of over 20% in its GDP, its central bankers are running a budget surplus, in the hope of lowering wage rates. Public-sector wages have been driven down by over 30%, and the government expresses the hope for yet further cuts – spreading to the private sector. Spending on hospitals, ambulance care and schooling has been drastically cut back.

          
What is missing from this argument? The cost of labor can be lowered by a classical restoration of progressive taxes and a tax shift back onto property – land and rentier income. Instead, the cost of living is to be raised, by shifting the tax burden further onto labor and off real estate and finance. The idea is for the economic surplus to be pledged for debt service.

          
In England, Ambrose Evans-Pritchard has described a “euro mutiny” against regressive fiscal policy.[2] But is more than that. Beyond merely shrinking the economy, the neoliberal aim is to change the shape of the trajectory along which Western civilization has been moving for the past two centuries. It is nothing less than to roll back Social Security and pensions for labor, health care, education and other public spending, to dismantle the social welfare state, the Progressive Era and even classical liberalism.

          
So we are witnessing a policy long in the planning, now being unleashed in a full-court press. The rentier interests, the vested interests that a century of Progressive Era, New Deal and kindred reforms sought to subordinate to the economy at large, are fighting back. And they are in control, with their own representatives in power – ironically, as Social Democrats and Labour party leaders, from President Obama here to President Papandreou in Greece and President Jose Luis Rodriguez Zapatero in Spain.

          
Having bided their time for the past few years the global predatory class is now making its move to “free” economies from the social philosophy long thought to have been built into the economic system irreversibly: Social Security and old-age pensions so that labor didn’t have to be paid higher wages to save for its own retirement; public education and health care to raise labor productivity; basic infrastructure spending to lower the costs of doing business; anti-monopoly price regulation to prevent prices from rising above the necessary costs of production; and central banking to stabilize economies by monetizing government deficits rather than forcing the economy to rely on commercial bank credit under conditions where property and income are collateralized to pay the interest-bearing debts culminating in forfeitures as the logical culmination of the Miracle of Compound Interest.

          
This is the Junk Economics that financial lobbyists are trying to sell to voters: “Prosperity requires austerity.” “An independent central bank is the hallmark of democracy.” “Governments are just like families: they have to balance the budget.” “It is all the result of aging populations, not debt overload.” These are the oxymorons to which the world will be treated during the coming week in Toronto.

          
It is the rhetoric of fiscal and financial class war. The problem is that there is not enough economic surplus available to pay the financial sector on its bad loans while also paying pensions and social security. Something has to give. The commission is to provide a cover story for a revived Rubinomics, this time aimed not at the former Soviet Union but here at home. Its aim is to scale back Social Security while reviving George Bush’s aborted privatization plan to send FICA paycheck withholding into the stock market – that is, into the hands of money managers to stick into an array of junk financial packages designed to skim off labor’s savings.

          
So Mr. Obama is hypocritical in warning Europe not to go too far too fast to shrink its economy and squeeze out a rising army of the unemployed. His idea at home is to do the same thing. The strategy is to panic voters about the federal debt – panic them enough to oppose spending on the social programs designed to help them. The fiscal crisis is being blamed on demographic mathematics of an aging population – not on the exponentially soaring debt overhead, junk loans and massive financial fraud that the government is bailing out.

          
What really is causing the financial and fiscal squeeze, of course, is the fact that that government funding is now needed to compensate the financial sector for what promises to be year after year of losses as loans go bad in economies that are all loaned up and sinking into negative equity.

          
When politicians let the financial sector run the show, their natural preference is to turn the economy into a grab bag. And they usually come out ahead. That’s what the words “foreclosure,” “forfeiture” and “liquidate” mean – along with “sound money,” “business confidence” and the usual consequences, “debt deflation” and “debt peonage.”

          
Somebody must take a loss on the economy’s bad loans – and bankers want the economy to take the loss, to “save the financial system.” From the financial sector’s vantage point, the economy is to be managed to preserve bank liquidity, rather than the financial system run to serve the economy. Government social spending (on everything apart from bank bailouts and financial subsidies), disposable personal income are to be cut back to keep the debt overhead from being written down. Corporate cash flow is to be used to pay creditors, not employ more labor and make long-term capital investment.

          
The economy is to be sacrificed to subsidize the fantasy that debts can be paid, if only banks can be “made whole” to begin lending again – that is, to resume loading the economy down with even more debt, causing yet more intrusive debt deflation.

          
This is not the familiar old 19th-century class war of industrial employers against labor, although that is part of what is happening. It is above all a war of the financial sector against the “real” economy: industry as well as labor.

          
The underlying reality is indeed that pensions cannot be paid – at least, not paid out of financial gains. For the past fifty years the Western economies have indulged the fantasy of paying retirees out of purely financial gains (M-M’ as Marxists would put it), not out of an expanding economy (M-C-M’, employing labor to produce more output). The myth was that finance would take the form of productive loans to increase capital formation and hiring. The reality is that finance takes the form of debt – and gambling. Its gains therefore were made from the economy at large. They were extractive, not productive. Wealth at the rentier top of the economic pyramid shrank the base below. So something has to give. The question is, what form will the “give” take? And who will do the giving – and be the recipients?

          
The Greek government has been unwilling to tax the rich. So labor must make up the fiscal gap, by permitting its socialist government to cut back pensions, health care, education and other social spending – all to bail out the financial sector from an exponential growth that is impossible to realize in practice. The economy is being sacrificed to an impossible dream. Yet instead of blaming the problem on the exponential growth in bank claims that cannot be paid, bank lobbyists – and the G-20 politicians dependent on their campaign funding – are promoting the myth that the problem is demographic: an aging population expecting Social Security and employer pensions. Instead of paying these, governments are being told to use their taxing and credit-creating power to bail out the financial sector’s claims for payment.

          
Latvia has been held out as the poster child for what the EU is recommending for Greece and the other PIIGS: Slashing public spending on education and health has reduced public-sector wages by 30 percent, and they are still falling. Property prices have fallen by 70 percent – and homeowners and their extended family of co-signers are liable for the negative equity, plunging them into a life of debt peonage if they do not take the hint and emigrate.

          
The bizarre pretense for government budget cutbacks in the face of a post-bubble economic downturn is that aims to rebuild “confidence.” It is as if fiscal self-destruction can instill confidence rather than prompting investors to flee the euro. The logic seems to be the familiar old class war, rolling back the clock to the hard-line tax philosophy of a bygone era – rolling back Social Security and public pensions, rolling back public spending on education and other basic needs, and above all, increasing unemployment to drive down wage levels. This was made explicit by Latvia’s central bank – which EU central bankers hold up as a “model” of economic shrinkage for other countries to follow.

          
It is a self-destructive logic. Exacerbating the economic downturn will reduce tax revenues, making budget deficits even worse in a declining spiral. Latvia’s experience shows that the response to economic shrinkage is emigration of skilled labor and capital flight. Europe’s policy of planned economic shrinkage in fact controverts the prime assumption of political and economic textbooks: the axiom that voters act in their self-interest, and that economies choose to grow, not to destroy themselves. Today, European democracies – and even the Social Democratic, Socialist and labour Parties – are running for office on a fiscal and financial policy platform that opposes the interests of most voters, and even industry.

          
The explanation, of course, is that today’s economic planning is not being done by elected representatives. Planning authority has been relinquished to the hands of “independent” central banks, which in turn act as the lobbyists for commercial banks selling their product – debt. From the central bank’s vantage point, the “economic problem” is how to keep commercial banks and other financial institutions solvent in a post-bubble economy. How can they get paid for debts that are beyond the ability of many people to pay, in an environment of rising defaults?

          
The answer is that creditors can get paid only at the economy’s expense. The remaining economic surplus must go to them, not to capital investment, employment or social spending.

          
This is the problem with the financial view. It is short-term – and predatory. Given a choice between operating the banks to promote the economy, or running the economy to benefit the banks, bankers always will choose the latter alternative. And so will the politicians they support.

          
Governments need huge sums to bail out the banks from their bad loans. But they cannot borrow more, because of the debt squeeze. So the bad-debt loss must be passed onto labor and industry. The cover story is that government bailouts will permit the banks to start lending again, to reflate the Bubble Economy’s Ponzi-borrowing. But there is already too much negative equity and there is no leeway left to restart the bubble. Economies are all “loaned up.” Real estate rents, corporate cash flow and public taxing power cannot support further borrowing – no matter how wealth the government gives to banks. Asset prices have plunged into negative equity territory. Debt deflation is shrinking markets, corporate profits and cash flow. The Miracle of Compound Interest dynamic has culminated in defaults, reflecting the inability of debtors to sustain the exponential rise in carrying charges that “financial solvency” requires.

          
If the financial sector can be rescued only by cutting back social spending on Social Security, health care and education, bolstered by more privatization sell-offs, is it worth the price? To sacrifice the economy in this way would violate most peoples’ social values of equity and fairness rooted deep in Enlightenment philosophy.

          
That is the political problem: How can bankers persuade voters to approve this under a democratic system? It is necessary to orchestrate and manage their perceptions. Their poverty must be portrayed as desirable – as a step toward future prosperity.

          
A half-century of failed IMF austerity plans imposed on hapless Third World debtors should have dispelled forever the idea that the way to prosperity is via austerity. The ground has been paved for this attitude by a generation of purging the academic curriculum of knowledge that there ever was an alternative economic philosophy to that sponsored by the rentier Counter-Enlightenment. Classical value and price theory reflected John Locke’s labor theory of property: A person’s wealth should be what he or she creates with their own labor and enterprise, not by insider dealing or special privilege.

          
This is why I say that Europe is dying. If its trajectory is not changed, the EU must succumb to a financial coup d’êtat rolling back the past three centuries of Enlightenment social philosophy. The question is whether a break-up is now the only way to recover its social democratic ideals from the banks that have taken over its central planning organs.


THE BATTLE AGAINST NEOLIBERALISM: MASSIVE POPULAR UPRISING IN GREECE
Yorgos Mitralias
http://www.contra-xreos.gr
http://www.cadtm.org

Hundreds of thousands of Greek ‘Indignés’ (‘Outraged’) walk out to wage war against their neoliberal persecutors

Two weeks after it started the Greek movement of ‘outraged’ people has the main squares in all cities overflowing with crowds that shout their anger, and makes the Papandreou government and its local and international supporters tremble. It is now more than just a protest movement or even a massive mobilization against austerity measures. It has turned into a genuine popular uprising that is sweeping over the country. An uprising that makes it know at large its refusal to pay for ‘their crisis’ or ‘their debt’ while vomiting the two big neoliberal parties, if not the whole political world in complete disarray.

How many were there on Syntagma square (Constitution square) in the centre of Athens, just in front of the Parliament building on Sunday 5 June 2011? Difficult to say since one of the characteristic features of such popular gatherings is that there is no key event (speech or concert) and that people come and go. But according to people in charge of the Athens underground, who know how to assess the numbers of passengers, there were at least 250,000 people converging on Syntagma on that memorable night! Actually several hundreds of thousands of people if we add the ‘historic’ gatherings that took place on the main squares of other Greek cities (see map).

At this juncture we should however raise the question: how can such a mass movement that is shaking the Greek government (in which the EU has a particular interest) not be mentioned at all in Western medias? For these first twelve days there was virtually not a word, not an image of those unprecedented crowds shouting their anger against the IMF, the European Commission, the ‘Troika’ (IMF, European Commission, and European Central Bank), and against Frau Merkel and the international neoliberal leaders. Nothing. Except occasionally a few lines about ‘hundreds of demonstrators’ in the streets of Athens, after a call by the Greek trade unions. This testifies to a strange predilection for scrawny demos of TU bureaucrats while a few hundred yards further huge crowds were demonstrating late into the night for days and weeks on end.

This is indeed a new form of censorship. A well-organized political censorship motivated by the fear this Greek movement might contaminate the rest of Europe! Confronted as we are with this new weapon used by the Holy Alliance of modern times, we have to respond together both to expose this scandal and to find ways of circumventing such prohibition to inform public opinions, through developing communication among social movements throughout Europe and at once creating and reinforcing our own alternative media…

Going back to the Greek ‘Outraged’, or ‘Indignés’ or Aganaktismeni, we have to note that the movement is getting more and more rooted among lower classes against a Greek society that has been shaped by 25 years of an absolute domination of a cynic, nationalist, racist and individualist neoliberal ideology that turned everything into commodities. This is why the resulting image is often contradictory, mixing as it does the best and the worst among ideas and actions! For instance when the same person displays a Greek nationalism verging on racism while waving a Tunisian (or Spanish, Egyptian, Portuguese, Irish, Argentinian) flag to show his internationalist solidarity with those peoples.

Should we therefore conclude that those demonstrators are schizophrenic? Of course not. As there are no miracles, or politically ‘pure’ social uprisings, the movement is becoming gradually more radical while still branded by those 25 years of moral and social disaster. But mind: all its ‘shortcomings’ are subsume into its main feature, namely its radical rejection of the Memorandum, of the Troika, the public debt, the government, austerity, corruption, a fictional parliamentary democracy, the European Commission, in short of the whole system!

It is surely not by chance if for the past two weeks demonstrators shout such phrases as ‘We owe nothing, we sell nothing, we pay nothing’, ‘We do not sell or sell ourselves’, ‘Let them all go, Memorandum, Troika, government and debt’ or ‘We’ll stay until they go’. Such catchwords do unite all demonstrators as indeed all that is related to their refusal to pay for the public debt.[2] This is why the campaign for an audit Commission of the public debt is a great success throughout the country. Its stall in the middle of Syntagma square is constantly besieged by a crowd of people eager to sign the call or to offer their services as voluntary helpers…[3]

While they were first completely disorganized the Syntagma Aganaktismeni have gradually developed an organization that culminates in the popular Assembly held every night at 9 and drawing several hundreds speakers in front of an attentive audience of thousands. Debates are often of really great quality (for instance on the public debt), actually much better than anything that can be seen on the major television channels. This in spite of the surrounding noise (we stand in the middle of a city with 4 million inhabitants), dozens of thousands of people constantly moving, and particularly the very diverse composition of those huge audiences in the midst of a permanent encampment that looks at times like some Tower of Babel.

All the qualities of direct democracy as experimented day after day on Syntagma should not blind us to its weaknesses, its ambiguities or indeed its defects as its initial allergy to anything that might remind of a political party or a trade union or an established collectivity. While it has to be acknowledged that such rejection is a dominant feature among the Aganaktismeni, who tend to reject the political world as a whole, we should note the dramatic development of the Popular Assembly, both in Athens and in Thessaloniki, that shifted from a rejection of trade unions to the invitation that they should come and demonstrate with them on Syntagma.

Obviously, as days went by, the political landscape on Syntagma square clarified, with the popular right and far right located in the higher section, in front of Parliament, and the anarchist and radical left on the square itself, with control on the popular assembly and the permanent encampment. Of course, though the radical left is dominant and tinges with deep red all events and demonstrations on Syntagma, this does not mean that the various components of the right, from populist, to nationalist, to racist and even neonazi, do not further attempt to highjack this massive popular movement. They will endure and it will very much depend on the ability of the movement’s avant-garde to root it properly in neighbourhoods, workplaces and schools while defining clear goals that throw bridges between huge immediate needs and a vindictive outrage against the system.

While fairly different from the similar movement in Spain through its dimensions, its social composition, its radical nature and its political heterogeneity, the movement on Syntagma shares with Tahrir square in Cairo and Puerta del Sol in Madrid the same hatred against the economic and political elite that has grabbed and emptied of any significance bourgeois parliamentary democracy in times of arrogant and inhuman neoliberalism. The movement is stirred by the same non violent democratic and participative urge that is to be found in all popular uprisings in the early 21st century.

Our conclusion can only provisional: whatever is to come (and the consequences may be cataclysmic), the current Greek movement will have marked a turning point in the history of the country. From now on everything is possible and nothing will ever be the same again.

Translated by Christine Pagnoulle

Yorgos Mitralias is founding member of the Greek Committee Against the Debt, which is affiliated to the international network of CADTM

http://www.contra-xreos.gr
http://www.cadtm.org

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