Is Afghanistan the First Domino to Fall?

War and Conflict — Strategic Culture

August 22, 2021

Tim Kirby

It certainly looks like a domino that has been put in position poised to fall waiting for others to take their places in the line.

With America withdrawing from Afghanistan abruptly after some 20 years, one big question is being discussed throughout the strategic sphere by those both in big institutions and laying on their couches – is the American loss in Afghanistan the first domino to fall in the eventual collapse of the Global Hegemon? After all, Afghanistan is the “graveyard of empires” probably because it is an expression that sounds nice and because the Soviets fell apart a few years after losing to the locals. So this must be the “beginning of the end” right?

Well, we should never be so quick as to jump onto narrow narratives without looking at the big picture. Side-by-side images of the Americans and their allies fleeing Vietnam and Afghanistan by helicopter are flooding Facebook, posted by those in the Alternative Media who take great joy in any loss by the 21st century’s “Evil Empire” but they seem to forget that just a few decades after losing in Vietnam the United States won the Cold War and took dominance over the planet.

Image: Strategic meme-of-the-year material for 2021.

No single event no matter how photogenic it is, is not going to be a sign of the grand demise of the “Sole Hyperpower”. It really took from the beginning of WWI till the end of WWII for the British to truly fall apart as a geopolitical force. The Soviet Union fell much quicker, but it is very widely believed that Perestroika (or the The Reykjavik Summit) was the real first white flag that devolved into the breakup of the union years later. The Roman Empire was a vastly slower burn than either of these two modern behemoths.

This means we should not be debating if Afghanistan is the first “domino” to fall, but instead we should really take a look at what the rest of the dominos falling would look like. At this point we can surely put together a rough picture of what the next tiles to fall would look like, i.e. what other major failures/events would really be signs of the Monopolar World meeting its demise? The following are a few humble offerings as to what these dominos could be…

Abandoning the Maidan Regime in the Ukraine

The unexpected surrender and soon to be total fall of Kabul has certainly resonated in another city that starts with the letter K. If Washington is finding it necessary to abandon a twenty-year Nation-Building project that they have invested vast sums of money and manpower into, that means that back-burner Kiev could be cut loose in the near future, putting the fate of the region in the hands of the Russians.

Image: We all know who secures Ukrainian “independence”.

The Maidan has been a major roadblock for Russia. As Brzeziński wrote, “It cannot be stressed enough that without Ukraine, Russia ceases to be an empire, but with Ukraine suborned and then subordinated, Russia automatically becomes an empire” and Washington has done an absolutely fantastic job of turning the region into an “anti-Russia” as Putin recently called it.

If the Maidan project were to be abandoned, it would become another quite massive domino. Washington giving up on Kiev, resulting in that current political entity probably being divided up, mostly going to Moscow, would symbolize either the USA’s inability to stop the rise of the Russians or their begrudging acceptance of it.

Taiwan, Hong Kong and/or South Korea

The Trump-era State Department Democracy storm that was inflicted on Hong Kong has seemed to fade away, but a total abandonment of the thorns in the side of the Chinese Dragon would also result in another domino being placed into position.

Image: Not State Department = No Professional Protest Organizers in China.

Bailing on Hong Kong activists or failing to maintain Taiwan’s independence would certainly present a strong sign of weakness and inability from the standpoint of Washington. Furthermore, although China has never had a passionate love for the North Koreans, having South Korea as essentially an American beachhead right next door has been a cause of concern for decades for Beijing. The South Korean economy on paper looks amazing and their cities dazzle with progress but what would be the effects of Ameria giving up on them? Is South Korea able to stand as a great nation, or is it really only successful thanks to the American umbrella? The answer to that would reveal itself within two weeks of an America-free Korean Peninsula.

Simply put, if Washington gives up on Hong Kong, Taiwan and/or South Korea it is another sign of the end for sure as China would be more or less rid of these weak points that have been exploited against it for decades.

A Loss of Control Over the “Bigs”

Big Tech, Big Pharma, Big Agro and so on, have dutifully served Washington’s interests despite their theoretically international nature. But we should never forget that large for-profit entities are quite “whoreish” and will serve whichever master they need to. If Washington cannot control the Bigs as it used to, this would be another domino.

To a small extent this is happening in Hollywood where the Chinese market’s (and its official and unofficial) demands are having a major impact. But if it comes to a point that Hollywood is only making a chunk of the world’s blockbusters rather than nearly all of them it would be the end of the total unobstructed Soft Power dominance of this American institution. Or even worse, if Hollywood can be bought out from under America then a new global narrative could be spun quite quickly.

If the Hegemon fades, the leadership of the Bigs will feel increasing pressure from the Russians, Chinese and Arabs to give up the whole “gay thing” and portray these societies in a positive light whether through bribery or threats of force. Apple may be “designed in California” but if need be they would surely bail for greener pastures rather than living a life of poverty loyal to a failed America.

Mexico, Lakotastan and African-America

The United States has done a fantastic job of fostering independence movements within its rivals while making diverse masses “American” at home. However, as with the Soviets and the British, waves of breakaway republics and successful secessionist movements would be a very big domino indeed.

The Soviets tried to create an African workers uprising in America in the 60’s and failed miserably, but BLM could get out of control, or in the case of a dying USA, could become used by foreign powers. An Afro-American Maidan would certainly be another sign of doom.

The rise of an independent Native-American state like the Lakota Indians’ lands would be yet another tile being stood into place, opening the door for further break-away attempts.

When the Mexicans lost the Mexican-American war they lost the chance to become the dominant power on the continent. Few remember, but the destiny of this New World was not just given to the Americans wrapped in a box. If the Mexicans had won the war they would be the ones with access to the Atlantic (via the Gulf of Mexico) and the Pacific simultaneously, not Washington. It would have been very possible for them to secure the entire West Coast. A Mexico that would begin to take action as an independent actor would certainly be another sign of serious trouble for Washington. Thus far, on the North American continent “there can be only one” but perhaps that isn’t necessarily going to always remain the same “one”.

The death of the Dollar or collapse of the Federal Reserve

If the dollar were to collapse, or there were serious problems at the Federal Reserve, as have been predicted for many years due to insane national debt, this would of course be the biggest domino of all. The West has been able to accumulate bafflingly massive debt with no consequences because of the dominance of Washington. It is very hard to call in a debt from the toughest kid school surrounded by his henchmen. But when the big bully stops growing, and loses his buddies, all of a sudden getting your $5 back with a few whacks from a baseball bat becomes viable.

Image: If you are powerful enough no one can call in your debts.

No one can call in the debt of a Global Hegemon, but Regional Powers have to balance their checkbook. A decrease in power could lead to the national debt prophecy coming true in our lifetimes which would be probably the largest domino of all.

In conclusion

Is Afghanistan “the first domino to fall” in the death of the American Empire? This cannot be proven, but it certainly looks like a domino that has been put in position poised to fall waiting for others to take their places in the line. Other major defeats would be required to say for sure that this “New American Century” is over, not even making it to the one-fourth mark. It is really the other potential signs of the end that are of most concern not squabbling over Afghanistan’s domino status. So the big question is, if Washington is losing its Monopolar World Order, then where will be the next grand retreats?

China’s Communist Party – A 100-Year Legacy of Success and a Forward Vision

June 30, 2021

China’s Communist Party – A 100-Year Legacy of Success and a Forward Vision

By Peter Koenig with permission and written for China’s Chongyang Institute of the Renmin University in Beijing – for the 100 Anniversary – 1 July 2021 – of China’s Communist Party.

The legendary Chinese success story goes hand-in-hand with the evolution of the Communist Party of China (CPC) and China’s Communist Revolution that began in 1945. The foundation of the CPC on 1 July 1921 signaled the end of some 200 years of China’s oppression by foreign powers, to western invasions and exploitation, grabbing China’s territories and especially her rich natural resources – and to gain trading advantages, including from the riches of China’s resources and crafts.

Background and History
About two centuries ago, foreign interferences were dominated by illegal Opium Trade that eventually culminated in two Opium WarsIn the 18th and 19th centuries Western countries, mostly Great Britain, exported opium grown in India to China. In turn, the Brits used the profits from opium sales largely to buy Chinese luxury goods, like porcelain, silk, and tea. These goods were in high demand in the west.

Much of this opium export was illegitimate and created widespread addiction throughout China, causing serious social and economic calamities. The wars were triggered by China’s attempting to suppress the trade, that grew tremendously from about 1820 onwards. In early 1839 the Chinese government confiscated and destroyed more than 20,000 chests of opium (chest = about 63.5 kg) — some 1,400 tons of the drug—that were warehoused at Canton, Guangzhou Province by British merchants. By 1838 imports had grown to some 40,000 chests annually.

In July 1839, British sailors killed a Chinese villager. The British government refused to turn the accused over to be judged in Chinese courts. The Brits did not wish its subjects to be tried in the Chinese legal system, and refused to turn the accused men over to the Chinese courts.

This conflict prompted the first Opium War (1839 – 1842), fought between the UK and the Qing dynasty (1644 to 1912), with the British objective to legalize the opium trade. This did not happen, which led to the Second Opium war (1856 – 1860), also called the Anglo-French war. But China did not win the wars and the nefarious addiction-causing trade continued for several more decades.

China’s British-forced war-concession to the winner, was to hand over the island of Hong Kong to British administration. In addition, China had to legalize the opium trade and concede a number of trading ports to the Brits, as well as opening travel for foreigners into China and granting residencies for Wester envoys to China. And an important concession for a predominantly Buddhist country was that China had to grant freedom of movement to Christian missionaries throughout China.

The wars and the resulting multiple concession of China, prompted an era of unequal treaties between China and foreign imperialist powers, aka, the UK, France, Germany, the United States, Russia and Japan. China was forced to concede many of her territorial and sovereignty rights. These encroachments on Chinese sovereignty weakened and eventually brought down the Qing dynasty, leading to a revolution on October 10, 1911, bringing the Kuomintang (KMT) to power. They are also referred to as the Chinese National Party and founded the Republic of China on 1 January 1912. 

The founder of the KMT and initial ruler of China after the 1911 revolution, Sun Yat-sen attempted to modernize China along western lines and values – which was not accepted by the Chinese people. The next couple of decades of KMT rule were rather chaotic times, during which Sun Tat-sen was unable to control China which fractured into many regions controlled by warlords. To strengthen its position and to gain back control of the country, the KMT was seeking alliance with the new fledgling Communist Party, forging the first United Front, but was still unable to control all of China. After Sun Yat-sen died in 1925, Chiang Kai-shek (1887–1975) took over and became the KMT strong man.

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The creation of the Communist Party of China on 1 July 1921, was deeply marked by the preceding history. One of the CPC’s key objective was that China would never again be dominated by wester colonial powers. The CPC became a force to be reckoned with, as it grew stronger by increased solidarity forged throughout communities and regions of China which all pursued the same goal – independence from foreign colonization and exploitation and the creation of a sovereign communist China, with a sovereign socialist economy.

With the support of the west, notably the UK and the United States, the KMT-led government of the Republic of China (ROC) entered in 1927 into a civil war with the forces of the CPC. The war was intermittent, but basically played out in two major phases, until 1949. The first phase can be described as a war of attrition. It lasted until 1937, when due to the Japanese invasion of China, KMT-CPC hostilities were put on hold. Instead, a KMT-CPC alliance fought and defeated the Japanese. This was also called the War of Resistance against Japanese Aggression(1937–1945).

The KMT – CPC civil war resumed with the victory over the Japanese forces, and entered its second, but most violent and decisive final phase from 1945 to 1949. This phase is also called the beginning of the Chinese Communist Revolution, during which the CPC gained the upper hand and finally defeated the Kuomintang on the Chinese mainland.

The leader of KMT (1928 – 1975), Chiang Kai-shek, fled the mainland and established himself and the KMT in what was originally called by her Portuguese discoverers in 1542, Ilha Formosa (“beautiful island”), located north of the Philippines and the South China Sea, some 180 km off the Southeastern coast of China.

In 1895 Formosa became “Taiwan” meaning “foreigners” referring to the early Chinese settlers on the island. Today Taiwan is again integral part of China, since the Treaty of San Francisco (WWII Allied Forces Peace Agreement with Japan, signed on 8 September 1951), when Japan ceased its occupation of Taiwan, returning the island back to China.

Though an integral part of China, Taiwan is still occupied by the KMT Regime, calling it the Republic of China or ROC, the name taken over from KMT’s reign over mainland China until their defeat by the CPC in 1949, which also marked the beginning of the new communist People’s Republic of China (PRC).

This internationally illegal control of Taiwan by the KMT has been going on since 1949, but especially for the last 50 years, when on 25 October 1971, the United Nations General Assembly recognized the PRC, led by the CPC, as “the only legitimate representative of China to the United Nations” and removed the representatives of the Chiang Kai-shek ROC regime of Taiwan from the United Nations. Nevertheless, today still 15 nations, including the Vatican, of the 193 UN member nations recognize Taiwan as the official China. Many of them would like to switch to the officially recognized CPC-led mainland China, but are coerced, predominantly by the US and the UK, not to do so.

Over the past several decades, the United States, the UK and other western allies have continually sought to destabilize China by interfering in Taiwan, meaning in China’s internal affairs. The latest such events include the US weapons sale for US$ 5 billion to Taiwan in December 2020, and earlier this year, the U.S. Ambassador to the Pacific Island of Palau (Palau being one of the states recognizing Taiwan), became the first US envoy to travel to Taiwan in an official capacity, since Washington cut formal ties with Taipei in favor of Beijing in 1979.

In addition, the US is promoting closer relations with Taiwan through the so-called Taipei Act, signed in April 2020, calling for strengthening trade relations and diplomatic ties between the US and Taiwan to bring Taiwan closer into “international space”, meaning politically distancing the island territory from the mainland.

This and other interferences of the US in China’s internal affairs, are attempts at disrupting peaceful co-existence with China. They include the US-provoked trade war with Beijing, during the last almost 4 years; the stationing of about 60% of the American Navy in the South China Sea; the Washington orchestrated interference in Honk Kong, seeking independence from Beijing; and wildly falsified accusation of Human Rights abuses of the Uyghurs in the officially known as the Xinjiang Uyghur Autonomous Region, in Northwestern China; as well as similar claims in Tibet. 

Thanks to the steadfast leadership of President Xi Jinping of the People’s Republic of China and of the Communist Party of China, these interferences are being dealt with carefully by Beijing, always trying to find diplomatic and non-belligerent solutions. China is a master in following the paths of non-aggression, while constantly creating and moving peacefully forward – always with the goal of achieving a multipolar world, where people of different nations, regions, races, roots, cultures and believes can prosper peacefully together.
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Present – and Vision for the Future
Since the foundation of the Communist Party on 1 July 1921, China strove for total independence, and never surrendered to foreign invasions or attempts to influence China’s internal, as well as foreign relations policies. What the CPC has attained over the past 100 years is truly remarkable. It comprises not only maintaining internal solidarity, but also and foremost, people’s trust in the government, moving peacefully forward, becoming food, health and education-wise autonomous and self-sufficient and, not least, lifting 800 million people out of poverty. No other nation in the world has achieved such extraordinary objectives for their people’s well-being.

The CPC has today 91 million members. It is by far the largest single party in the world. In addition, thanks to her leadership, starting with Mao Tse Tung in 1949 and today by President Xi Jinping, China, with a population of 1.4 billion people, has become the second largest economy in the world in absolute terms, and since 2017 already the largest, assessed by the only real measure – the Purchasing Power Parity (PPP). This is an indicator of how much people can buy for their money. Within a few years, China is expected to surpass the currently largest economy, the United States, also in absolute terms.

This is, of course, representing a threat for the country that has declared itself as THE Empire of the world, controlling all vital essentials, like energy, food supply and the international monetary system – though faltering, but still dominated by the US-dollar. The self-styled empire is already crumbling. And Washington knows it. Its strongest asset, the US-dollar, is gradually being dismantled. The US-currency has been widely used throughout the world, almost exclusively, to buy vital goods and services, like energy, food and communication services, as well as for other international trade, but it is losing its weight in the international arena.

The reasons for this are both political and economic. On the economic front, the US have created by their 1913 Federal Reserve Act, a fiat currency without any backing, a currency of which the flow and money mass can be expanded at will. This allowed and still allows Washington to “print” money as per necessities, i.e. to finance extensive wars and conflicts around the globe and to accumulate debts that the US Treasury and Federal Reserve (the totally privately owned US Central Bank), will never be able to pay back.

The US-dollar has absolutely no backing whatsoever. When Washington abandoned in 1971 their self-designed so-called gold-standard (Bretton Woods Conference, 1944), the US-dollar became de facto the “new gold standard”, since the gold standard was based on the value of the US-dollar (US$35 / troy ounce, about 31 grams), instead of on a basket of currencies. Since everybody needed US dollars for their reserves, this gave the US Treasury free range to increase its money supply almost infinitely.

When the US, also at the beginning of the 1970s, negotiated with Saudi Arabia, head of OPEC (Organization of Petroleum Exporting Countries), that all hydrocarbons, petrol gas and coal, should be traded in US-dollars, it gave the US another dollar boost – printing freely dollars in abundance, because the entire world needed US-dollars to buy hydrocarbon energy. Even today about 84% of all energy consumed worldwide consists of hydrocarbons (2019 Forbes).

As a counter-measure, the US promised the House of Saud to always protect Saudi Arabia, and proceeded almost immediately building numerous military bases in Saudi Arabia, from which they are now waging different wars in the Middle East.

Due to this phenomenon of freely generating new US-dollars, creating new debt, the US is by far the most indebted country in the world, with currently US$ 49.8 trillion debt, compared with a 2020 GDP of about US$ 21 trillion (Debt – GDP ratio 2.3 = 237% debt over GDP).

There is another important component of US debt, called by the General Accounting Office (GAO), “Unfunded Liabilities”, US$ 213 trillion (all figures 16 April 2021: US Debt Clock – https://www.usdebtclock.org/current-rates.html). These exceptionally high ratios have undoubtedly also to do with incurred covid-debt.

Unfunded liabilities are debt obligations that do not have sufficient funds or assets set aside to pay them. These liabilities generally refer to the U.S. government’s debt-service (unpaid interest on debt), or pension plans and their impact on savings and investment securities, as well as  health-insurance and social support coverage for soldiers returning from wars.

These astronomical debt figures and an unbacked fiat currency are even further reducing worldwide confidence in the US-dollar. It is clear, the US debt will never be paid-off. The Federal Reserve Chair, Allan Greenspan (1987 – 2006), once answered to a journalist’s question, when will the US pay back her debt: Never. We just print new money. So, spoken, so it was and so it is.
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Today and for the last about 10 years the US-dollar has no longer a hydrocarbon trade monopoly, nor are other international contracts primarily established in US-dollars as used to be the case a couple of decades ago. China, Russia, Iran, Venezuela and others have stopped using the US-dollar and are trading in local currencies and increasingly in Chinese yuan.

Why? – Countries’ treasurers around the world started realizing that the dollar is a highly volatile fiat currency, based on nothing, as shown by the above figures. Equally important for the loss of trust in the US-currency is that dollar-denominated international assets and the US banking system are frequently used by Washington to impose draconian, illegal economic sanction on countries that do not follow Washington’s dictate, including blocking countries’ foreign placed reserve assets. These economic and political realities are signaling the end of the US-dollar hegemony.

The trend of diminishing trust in the US-dollar may increase when China rolls out her digital Renminbi (RMB = people’s money) or international Yuan (the terms RMB and Yuan are used interchangeably) which may be used for international trade without touching the international US-dominated SWIFT transfer and US banking system. The Chinese currency being backed by a strong and solid Chinese economy, confidence in the Chinese currency is growing rapidly. Already today, the Chinese currency’s use as an international reserve asset is increasing quickly.

While the US Federal Reserve (FED) is also contemplating a new digital currency, it is not clear to what extent it can be detached from the current dollar and its debt burden. In any case, with US international trade waning, and Chinese trade rapidly increasing, it will be very difficult, if not impossible, for a declining empire to catch up with China.

For example, in the first quarter of 2021, Chinas foreign trade (exports and imports) soared by 29.2%, with Exports jumping 38.7% from the year before, while imports climbed 19.3 percent in yuan terms, according to the General Administration of Customs (GAC).

If anything, these developments – plus the fact that China has been highly successful in overcoming the covid-crisis – within less than 6 months – and putting her industrial apparatus back on line, are testimony for a solid CPC leadership, a sound Chinese economy and fiscal policy. China is the world’s only major economy reporting economic growth in 2020, amounting to 2.3% according to the Wall Street Journal. It is what China calls “Socialism with Chinese Characteristics” – a feature demonstrating a spirit of constant creation and evolution of the CPC.
These facts will further enhance international trust in the Chinese economy, as well as in the Chinese way of seeking a more equal, more egalitarian and more just multipolar world, where nations may keep their national sovereignty over their internal and external political inclinations, their culture, national resources, monetary policies and foreign relations – and live peacefully together.
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CPC and the Chinese Vision

The New Silk Road, or Belt and Road Initiative (BRI), is President Xi Jinping’s brilliant brainchild. It’s based on the same ancient principles as was the original Silk Road, adjusted to the 21st Century, building bridges between peoples, exchanging goods and services, research, education, knowledge, cultural wisdom, peacefully, harmoniously and ‘win-win’ style. On 7 September 2013, President Xi presented BRI at Kazakhstan’s Nazarbayev University. He spoke about “People-to-People Friendship and Creating a better Future”. He referred to the Ancient Silk Road of more than 2,100 years ago, that flourished during China’s Western Han Dynasty (206 BC to 24 AD).

Referring to this epoch of more than two millenniums back, President Xi pointed to the history of exchanges under the Ancient Silk Road, saying, “they had proven that countries with differences in race, belief and cultural background can absolutely share peace and development as long as they persist in unity and mutual trust, equality and mutual benefit, mutual tolerance and learning from each other, as well as cooperation and win-win outcomes.”

President Xi’s vision may be shaping the world of the 21st Century. The Belt and Road Initiative is designed and modeled loosely according to the Ancient Silk Road. President Xi launched this ground-breaking project soon after assuming the Presidency in 2013. The endeavor’s idea is to connect the world with transport routes, infrastructure, industrial joint ventures, teaching and research institutions, cultural exchange and much more. Since 2017, enshrined in China’s Constitution, BRI has become the flagship for China’s foreign policy.

BRI is literally building bridges and connecting people of different continents and nations. The purpose of the New Silk Road is “to construct a unified large market and make full use of both international and domestic markets, through cultural exchange and integration, to enhance mutual understanding and trust of member nations, ending up in an innovative pattern with capital inflows, talent pool, and technology database”.

BRI is a global development strategy adopted by the Chinese Government. Already today BRI has investments involving more than 150 countries and international organizations – and growing – in Asia, Africa, Europe, the Middle East and the Americas. Since the onset of BRI in 2013, BRI investments have exceeded US$ 5 trillion equivalent.

BRI is a long-term multi-trillion investment scheme for transport routes on land and sea, as well as construction of industrial and energy infrastructure and energy exploration – as well as trade among connected countries. Unlike WTO (World Trade Organization), BRI is encouraging nations to benefit from their comparative advantages, creating win-win situations. In essence, BRI is to develop mutual understanding and trust among member nations, allowing for free capital flows, a pool of experts and access to a BRI-based technology data base.  At present, BRI’s closing date is foreseen for 2049 which coincides with the People’s Republic of China’s 100th Anniversary. The size and likely success of the program indicates, however, already today that it will most probably be extended way beyond that date. It is worth noting, though, that only in 2019, six years after its inception, BRI has become a news item in the West. Remarkably, for six years, the west was in denial of BRI, in the hope it may go away. But away it didn’t go. To the contrary, many European Union members have already subscribed to BRI, including Greece, Italy, France, Portugal – and more will follow, as the temptation to participate in this projected socioeconomic boom is overwhelming.

The BRI, also called Belt and Road, or One Belt One Road, is not the only initiative that will enhance China’s economy and standing in the world.

After decades of western aggressions, denigrations and belligerence towards China, in a precautionary detachment from western dependence, China is focusing trade development and cooperation on her ASEAN partners. In November 2020, after 8 years of negotiations, China signed a free trade agreement with the ten ASEAN nations, plus Japan, South Korea, Australia and New Zealand, altogether 15 countries, including China.

The so-called Regional Comprehensive Economic Partnership, or RCEP, covers some 2.2 billion people, commanding some 30% of the world’s GDP. This is a never before reached agreement in size, value and tenor.

The RCEP’s trade deals will be carried out in local currencies and in yuan – no US dollars. The RCEP is, therefore, also an instrument for dedollarizing, primarily in the Asia-Pacific Region, and gradually moving across the globe. Moving away from the dollar-based economies may be an effective way to stem against the western “sanctions culture”. China is soon rolling-out her new digital Renminbi (RMB) or yuan, internationally, as legal tender for inter-country payments and transfers. The digital RMB is primed to become also an international reserve currency, thereby further reducing demand for the US-dollar.

Orientation towards China’s internal economic development – so-called horizontal instead of vertical growth – is a strategy to develop local Chinese internal production and infrastructure to build up and enhance Chinese internal capacities and markets and bringing about wellbeing and a better equilibrium between China’s vast hinterland and China’s prosperous eastern coastal areas.

The future belongs to China
After two thousand years of western “white supremacy”, relentless exploitation, colonization, discrimination and outright enslavement of other colored people, other cultures, throughout the world, the time has come to turn the wheel – and to veer the future of mankind into a more peaceful, more just and more egalitarian world.

During the next hundred years and under the leadership of the Chinese Communist Party – China will guide the East into the era of the Rising Sun – prosperity and good health for all.

This new epoch will strive for a multi-polar world, with win-win trade relations, and bringing about new environmental, social and technological challenges, but also a new awakening for a social consciousness and solidarity. A key instrument for achieving major goals for human wellbeing is the Belt and Road Initiative, providing a steady flow of new ideas, creations, cultural exchange and mutual learning. The future focus may be on:

  • Renewable sources of energy, based mainly on hydro- and solar power, developed with cutting edge technologies, i.e. capturing solar power with a process of photosynthesis, producing high efficiency energy yields;
  • Increasing green areas in urban centers to bring about a balance of natural CO2 absorption and Oxygen production, aiming at zero pollution;
  • Protecting the world’s rain forests and water resources;
  • Keeping natural resources and public services – health, education, food supply, water and sanitation services, electricity, and public transport – in the public domain;
  • Promoting biological and multi-crop agriculture;
  • Developing Artificial Intelligence (AI) to help increase production and transport efficiency and to serve humanity; and
  • Adopting public banking as the primary means of socioeconomic development funding, Leading humanity to building a community with a shared future for mankind.

—–

Peter Koenig is a geopolitical analyst and a former Senior Economist at the World Bank and the World Health Organization (WHO), where he has worked for over 30 years on water and environment around the world. He lectures at universities in the US, Europe and South America. He writes regularly for online journals. He is also the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed; and  co-author of Cynthia McKinney’s book “When China Sneezes: From the Coronavirus Lockdown to the Global Politico-Economic Crisis” (Clarity Press – November 1, 2020).

Peter Koenig is a Research Associate of the Centre for Research on Globalization and a Non-resident senior fellow of Chongyang Institute for Financial Studies at Renmin University of China

皮特·凯尼格(Peter Koenig),世界银行前高级经济学家、中国人民大学重阳金融研究院外籍高级研究员(瑞士)

What Wall Street fears

January 30, 2021

What Wall Street fears

By The Ister for the Saker Blog

The origin of modern banking can be found in the early days of the gold trade. In the Middle Ages, goldsmiths accepted deposits of gold in return for paper notes, which could be exchanged for the deposits at a later date. Because these paper notes were more convenient for commercial use than physical metal, they were usually not redeemed for gold right away. The goldsmiths noticed their customers’ deposits could be used in the meantime to generate interest and began surreptitiously lending out the savings of their depositors. Over time fractional reserve banking developed from this tendency of lending out money in excess of the actual reserves being held.

Goldsmith became banker, and from this early monetary system, banking families emerged. Prior to the existence of modern financial institutions, these houses were the entities which could be relied upon for large amounts of credit. A reputable surname gave confidence to depositors that their gold was in good hands, and from the intergenerational accumulation of wealth grew large pools of loanable capital. As nobles required weapons and pay for their armies, the conflicts of medieval Europe were fueled by families such as the Medici, Fuggers, and Welsers. Today, it is the Federal Reserve which finances America’s enormous military and conquests abroad.

To truly understand banking, the concept of free markets must be cast aside. Just as oil is a strategic resource for the real economy capitalist, gold and silver are strategic resources for the financial capitalist. Physical bullion is the basis from which all other lines of credit extend; we know this because the same central banks which publicly proclaim gold to be a barbarous relic still feel the need to maintain enormous hordes in their vaults.

As in oil markets, pricing is not influenced primarily by a large number of producers and buyers but by concentrated cartel dynamics. So while we witness yet another energy battle between OPEC and Russia unfold, it should be understood that similar dynamics are at play in the upper echelons of the monetary world as bankers seek to fix prices and control physical bullion flows in a manner which is beneficial to their interests.

A key difference from oil is that while the pump leads to the refinery and the refinery to the end-user, bankers do not generally like to part with their gold. Accordingly, markets have been designed so that prices are determined not by physical delivery but by the trading of unbacked or fractionally backed “claims” on the underlying metal: certificates, ETFs, and futures. We can be certain that there is not enough physical bullion to cover all these paper metal claims, just like the medieval goldsmith did not hold his deposits in full.

These paper markets set the price, although bars rarely leave the vault

Where is the vault? While Fort Knox claims the largest holdings, the price is set by the London Bullion Market Association and CME Group which together account for around 70% and 20% of global trading volume respectively. The London Bullion Market began in 1850, when N. M. Rothschild and Sons and several other banking families created a cartel to oversee the operations of the global gold market, including the establishment of the “London good delivery” list which created trading standards for size, dimensions, shape and fineness of bullion; today trading on London markets requires a high purity and being between 350-450 ounces.

This domination of the world’s gold market was not achieved through peaceful means: look into the forces behind the conquest of Transvaal’s gold mines, for it bears a direct parallel to America’s invasions of oil-rich nations today. Another similarity with oil markets is that military interventions have a habit of “liberating” the target nation of their gold: just ask Muammar Gaddafi.

The price of such a strategic resource could not be determined by an open market, thus alongside good delivery standards the “gold fix” was established in 1919 and was held in the offices of New Court until 2004, when its operations were passed on to a cartel of bullion banks such JP Morgan and HSBC. Ever since, these banks have been investigated and convicted countless times of manipulating and spoofing the prices.

How do we know that there isn’t enough gold to cover physical deliveries? Back in the 1970s the dollar was under a lot of pressure and Western banks maintained secret gentlemen’s agreements not to request delivery of bullion. In 1971 Dutch central bank chief Jelle Zjilstra ignored these formalities and planned to convert $600 million of the Dutch dollar reserves to gold, prompting Federal Reserve chair Paul Volcker to fly out to the Netherlands and warn him: “you’re rocking the boat.” Shortly after Zijlstra refused Volcker’s pressure and continued with the purchase, the US decoupled from the gold standard.

Abandonment of the gold standard risked a reduction in dollar demand, so Nixon enlisted Wall Street scion Gerry Parsky to negotiate with oil exporting Arab nations. After discussion, the Saudi state agreed to sell oil priced exclusively in dollars and to invest the proceeds of oil sales in America.

To those who say dismissively that the dollar is now backed by “nothing,” I say it is backed by oil and the threat of the US military.

Look at the somber fates of those that tried to ditch the dollar for gold or the Euro: Libya in a state of permanent civil war; starving Syrians picking through landfills in search of food only miles from occupied wheat fields.

So maintaining confidence in our reserve currency requires the undermining of confidence in gold, as its reemergence would unnecessarily democratize the international monetary order. Confidence is undermined first by price suppression, which is accomplished by the manipulation of precious metals futures markets. While it would be hugely wasteful for a private individual or consortium to manipulate such a market with their own money, that is where the unlimited fiat available at central bank trading desks come in: and we know central banks are secretly trading precious metals futures due to leaked documents from CME Group.

Leo Melamed, chairman of CME Group and the putative father of modern commodity futures markets noted in his book Escape to the Futures that CME’s Globex system was inspired by the original London gold fix:

Sandner, Kilcollin and I were in London with the chairman of the Rothschild Bank seeking his advice on how to bring the “gold fix” to Chicago. From the heated debate that followed one would have concluded that Kilcollin knew more about the subject than the legendary Rothschilds, the people who had founded the concept ages before.

What we can see from this is that strategic commodities such as gold and oil are far from a free market: recall my previous article The Empire is Losing the Energy War which described how the Saudi state functions as a price-suppression weapon against Russia’s oil exports. This global commodity suppression schema allows the importation of the planet’s finite resources at a fraction of the true cost in return for theoretically unlimited currency. Recall Fed governor Kevin Warsh’s comments in December of 2011 when gold hit an all time high that banks were:

“finding it tempting to pursue financial repression- suppressing market prices that they don’t like”

There are signs, however, that the thin pool of physical bullion which exists to maintain confidence in paper markets is drying up. In March of 2020, CME Group had to relax its own requirement of 100oz bars to allow 400oz London good delivery bars to be shipped from overseas and used for trade settlement. Some would say: if price suppression exists then why has the gold price gone up over the last few years?

The middle ground between setting the price to very low or very high levels, say, $100 or $10,000, is that the prices are set high enough to minimize outflows from vaults, while at the same time using futures to hammer down the prices at psychologically important levels and initiating margin calls on those who are long gold using leverage. Those who have watched gold for a long time can attest to the sudden and inexplicable drops which originate in the futures market and which occur every time the gold price appears *just* ready to break out.

It’s a very complicated charade for the bullion bank cartel. Allow the price per ounce to go too low and you risk running out of the gold necessary to facilitate markets. At the same time, if the price rises too high it attracts international attention and risks gold reemerging in monetary policy. Notice how as soon as the supply shortages became apparent in March 2020 the bankers were forced to reset gold from $1230 to over $2000 in order to stem the outflows of physical delivery.

Putin is intentionally exacerbating this drought of physical gold in Western banks by expanding the Russian central bank’s purchases of gold. For the past few years Russia has been the number one global purchaser of bullion, having spent over $40 billion to bring Moscow’s reserves to the highest level in history: a sum close to the annual military budget because it is a strategic asset.

Just last week, Russia’s gold reserves passed its dollar reserves for the first time reaching a sum of $583 billion, highlighted by the central bank as part of Putin’s de-dollarization agenda. Given that purchases have grown at roughly 15% per year we can predict that even if the price does not rise, the value of these holdings will be around $1 trillion in three years. Read the anxious commentary about these purchases in Bloomberg and Forbes, and remember the nervousness in the business press when Germany demanded its gold back in 2013, which would only exist if behind-the-scenes physical gold flows were disjointed and there was internal muttering in the financial world as to whether the demand could be fulfilled.

To any who doubt that this is an overt move, in the pre-WW2 monetary system the mass accumulation of gold was well understood among central bankers as an aggressive act intended to starve competitor states of their ability to create credit. For example, French and American hoarding resulted in hyperinflation for Germany and forced Britain’s pound sterling off the gold standard.

Russia’s acquisition of precious metal is a direct threat to the financial system. How funny that the system is so fraudulent that it is an act of aggression to simply demand in physical form what one has paid for in full on an open market; an act which the designers of the system cannot protest lest they reveal their own bankruptcy. Just as it did in the 1920s, the hoarding of gold in the East will eventually limit the West’s ability to extend credit, it is simply unfolding on a longer time frame.

So why is a tiny stock like GameStop causing billionaire Leon Cooperman to cry on CNBC, and why is the SEC threatening small-time investors?

Simply, the financial markets are being revealed as a highly illiquid house of cards. Retail investors from Reddit began trolling short-sellers by rapidly buying small stocks and causing hedge funds to blow up from expensive margin calls. The losses are now estimated at around $70 billion, and as these small-time investors funnel their unemployment and stimulus checks into their aggressive trades they have fought wealthy investors in a more effective way than Occupy Wall Street ever did. They have now turned their eyes to the small and illiquid silver market…

Look at the fate of the Hunt brothers fortune: they were oil billionaires who tried to exercise their legal right to take physical delivery of a large volume of silver futures contracts and had CME pull the rug out from under them before it could be achieved. CME Group defeated the Hunt brothers by instituting Silver Rule 7 which limited the dollar amount of physical silver that an individual investor could buy. But how will that stop the hordes of young low net worth traders who are now telling one another to purchase physical bullion and intentionally strain the rigged silver market?

This arcane financial system is doomed to fail because it is based on ever-higher and more unstable abstractions of underlying wealth: CDOs squared and cubed, dark pool derivatives markets totaling trillions of dollars, and so on: all of which depends on the financial sector sucking as much money as possible out of a shrinking global economy through securitization. Now that people are demanding the underlying assets themselves, change is beginning.

What an interesting timeline: where Russia and unemployed youths have come to the same conclusion for how to defeat the banks.


The Ister is a researcher of financial markets and geopolitics. Author of The Ister: Escape America

US economic decline and global instability

US economic decline and global instability

January 19, 2021

by Phillyguy for The Saker Blog

Summary

The US emerged from WWII as the world’s preeminent economic and military power. Seven decades later, American power is in decline, a direct consequence of decades of neoliberal economic policies, spending large amounts of public money on the military and attainment of economic/military parity by Russia and China. These policies have eroded US economic strength and are undermining the role of the dollar as the world’s reserve currency, key pillars of US global power. In this essay, we highlight how this situation evolved and its implications for US foreign policy and international relations.

Foundations of American Global Hegemony

The US emerged from WWII as the world’s leading military and economic power. This power was further solidified at the United Nations Monetary and Financial Conference, held in Bretton Woods, New Hampshire in 1944, which came to be known as the ‘Bretton Woods Agreement’. This agreement: 1) pegged the value of member country’s currencies to the US dollar, which was pegged to the price of gold, and 2) created the International Monetary Fund (IMF) and International Bank for Reconstruction and Development, later known as the World Bank. The purported goals of the Bretton Woods system were to ‘stabilize currencies and promote international economic growth’. This conference also recognized the US dollar as the world’s reserve currency. 12

International economic relations started to change in the mid-1970s as US corporate profits began to stagnate/decline, a direct consequence of spending lots of taxpayer money on wars in Korea and Vietnam and increased competition from rebuilt economies in Europe, primarily Germany (Marshall Plan) and Asia- Japan, South Korea (Korean and Vietnam wars) and more recently China. US policy makers responded to these economic challenges in several ways. 1) Recognizing that the government had insufficient gold reserves to cover all of the dollars in circulation, in 1971 President Richard Nixon was forced to suspend convertibility of the dollar into gold, effectively devaluing the US dollar and making it a fiat currency. 3 2) In the early 1980s, US policy makers began instituting neoliberal economic policies. Neoliberalism can be broadly defined as policies promoting free-market capitalism, deregulation, and a reduction in government spending and was widely promoted in the US by President Ronald Reagan (1981-1989) and in the UK by Prime Minister Margaret Thatcher (1975-1990). 4 These policies included multiple tax cuts for the wealthy, financial deregulation, attacks on labor and poor, job outsourcing and spending $ trillions of taxpayer money on the military. 5 A short description of these policies and their impact on US society follows.

Tax Cuts

Beginning with the Reagan Administration, a number of tax cuts were enacted which reduced and/or eliminated top tax rates, corporate taxes and inheritance taxes (aka ‘death tax’; see Table 1). It should be noted that to market this legislation and ‘sell’ it to a generally uninformed American public, these bills frequently contain words or phrases in their titles which convey a positive and progressive message, such as ‘Economic Recovery’, ‘Tax Reform’, ‘Economic Growth and Tax Relief’, ‘Jobs and Growth’ and ‘Jobs Act’. After all, who is against ‘Economic Recovery’ and ‘Growth’ or a ‘Jobs Act’? However, to quote Phaedrus (Greek; circa 444 – 393 BC) ‘things are not always what they seem’. Each of these pieces of legislation was the result of massive lobbying campaigns by large financial interests- banks and corporations, with the goal of rolling back ‘New Deal’ tax and economic legislation enacted by President Franklin D. Roosevelt during the depths of the Great Depression (1933-1939) 67 and ‘open up’ the economy to unregulated and risky financial schemes, which under the right circumstances can yield substantial profits, but when things do not proceed as planned, can lead to large losses, as observed during the 2008 financial collapse. An analysis by the Institute on Taxation and Economic Policy (ITEP) concluded that between 2001-2018, 65% of the benefit from these tax cuts went to the wealthiest (top 20%) households, while federal tax revenues declined $5.1 Trillion and federal deficits grew $5.9 Trillion. 8 As a result of the COVID19 pandemic, federal deficits are now hemorrhaging.

Attacks on Labor and Poor

In 1981, members of the Professional Air Traffic Controllers Organization (PATCO) went on strike. President Reagan declared the strike a threat to ‘national safety’ and ordered all workers back to work, under the Taft-Hartley Act (1947). Of the circa 13,000 striking air traffic controllers, only 1,300 returned to work; Reagan fired the remaining 11,345 air traffic controllers who were still out. 9 The decline in labor solidarity was readily apparent as there was little support for striking PATCO workers from other unions. As a result, this began a frontal assault on union workers and labor.

During the 1992 presidential campaign, Bill Clinton vowed to ‘end welfare as we have come to know it’ 10 and in 1996, signed the Personal Responsibility and Work Opportunity Reconciliation Act, creating the Temporary Assistance for Needy Families (aka TANF) program 11, which changed the financing and benefit structure of cash assistance to poor people, Predictably, these changes did not ‘end welfare’ but increased poverty. Not surprisingly, Conservatives in Congress want to use the TANF model to ‘reform’ other federal programs such as Medicaid.

Job Outsourcing

The North American Free Trade Agreement (NAFTA), enacted Jan, 1994, created a ‘free trade’ agreement between Canada, Mexico, and US. While not fully appreciated at the time, this trade agreement would have a major impact on US industrial policy and jobs. NAFTA enabled large American corporations such as auto makers- Ford, General Motors, etc., to build manufacturing plants in Mexico taking advantage of lower wage rates and import the finished products back into the country duty free. The savings in labor costs is significant- the 2020 manufacturing wage in the US- $23/hr 12 vs $2.50/hr in Mexico 13 (90% lower) and not surprisingly, decreased labor costs boost corporate profits. On the negative side, NAFTA has: 1) led to the loss 4.5 million manufacturing jobs, with many of these displaced workers were forced to take lower paying jobs, 2) reduced growth in the export of manufactured products and services, 3) increased trade deficits with Canada and Mexico 14.

Job outsourcing has acquired the acronym ‘Globalization’ implying that it is a natural form of economic evolution, enabling large corporations to make their operations more cost-effective and efficient. Not surprisingly, the reality is somewhat different. Since passage of NAFTA, large corporations from the US and other countries have moved their manufacturing to Mexico, China, India, and other low-wage platforms to reduce labor costs, take advantage of lax environmental regulation and more favorable tax policies which increase corporate profits. It should be stressed that these polices have been voluntarily enacted by large financial interests in the US and other countries based on economic decisions and the relentless drive of capitalism to maximize corporate profits. During his 2016 ‘Make America Great Again’ campaign, presidential candidate Donald Trump repeatedly stated that China has ‘stolen’ American jobs and been involved in massive ‘theft’ of intellectual property 15 . Indeed, China has aggressively pursued economic development and has clearly taken advantage of technology transfer by multinational corporations 16. However, China is certainly not unique as these practices are frequently used by other developing countries. For example, during the Industrial Revolution (circa 1760-1840), the developing US manufacturing base relied largely on knowledge and technologies that had been developed in Europe, primarily the UK. No doubt, some of this technology was acquired by unscrupulous methods. Thus, while Trump was correct in pointing out that many American jobs had indeed moved to China, he has repeatedly failed to acknowledge that these jobs were deliberately moved by American corporations because it is more profitable. Trump’s allegations also beg the obvious question, if large US corporations and their functionaries in government were concerned about technology transfer to China, they should not have moved their production and associated ‘sensitive’ technology out of the US in the first place. Following his electoral victory in 2016, Trump attempted to force corporations to repatriate outsourced jobs. While some US-based firms left China, little of this production was moved back to the US; the vast majority were relocated to Vietnam, Thailand, India, Mexico and other low-wage platforms 17. A fundamental axiom of Capitalism is that business enterprises always seek the highest rate of return on their capital investments. Further, US CEO compensation is typically tied to stock price. Given this reality, large US corporations have curtailed domestic business spending (i.e., investing in new plants and equipment) and instead have allocated large amounts of money for stock buybacks. The reason for this behavior is clear- investments in new plants and equipment have payback periods ranging from years-decades, while spending money on share buybacks and stock futures results in near instantaneous increase of equity prices and higher financial compensation for corporate management. No one forced the CEOs of Apple, Nike, Levis, GM, etc. to move their RD/production facilities to China or other countries. Rather, this was done deliberately to maximize corporate profits. Unfortunately, the proverbial ‘chickens are coming home to roost’. The US is lagging behind China in 5G technology because corporate CEOs have been more interested in boosting stock price and their financial compensation, rather than investing in new plants and equipment to compete with China in this technology.

Financial Deregulation

The Glass-Steagall Act was part of the Banking Act of 1933, and established a barrier or ‘firewall’ between commercial banks, which accept deposits from working people and issue loans and investment banks that sell investment products, such as stocks and bonds. 7 Not surprisingly the financial industry lobbied heavily to repeal the Glass-Steagall Act; in 1999, this lobbying paid off as Bill Clinton enacted the Gramm–Leach–Bliley Act (GLBA; aka the Financial Services Modernization Act), which repealed the depression era Glass-Steagall Act thus loosening regulations on banking. Prior to leaving office, Clinton also signed The Commodity Futures Modernization Act of 2000 (CFMA) into law, which exempted over-the-counter (OTC) derivatives from regulation.

A derivative is defined as a financial security whose value is based or ‘derived’ from an underlying asset- bonds, commodities, currencies, interest rates, stocks and market indexes. 18 Not surprisingly, derivatives can potentially yield a large financial reward to savvy investors. On the down side, derivatives carry significant ‘market risk’ and lead to financial losses, which can rapidly accelerate during periods of collapsing equity prices. Warren Buffett has described the $ multi-quadrillion derivatives market as “financial weapons of mass destruction. 19 As Pepe Escobar has pointed out, ‘If Tehran were totally cornered by Washington, with no way out, the de facto nuclear option of shutting down the Strait of Hormuz would instantly cut off 25 percent of the global oil supply. Oil prices could rise to over $500 a barrel or more even $1000 a barrel. The 2.5 quadrillion of derivatives would start a chain reaction of destruction.’ 20

Financial deregulation enacted during the Clinton Administration (see Table 1) have been considered a major cause of the 2007-2008 GFC. 21 As pointed out by Pam Martins-

‘The Glass-Steagall Act had kept the U.S. financial system safe for 66 years. It took just nine years after its repeal by Clinton for Wall Street to enrich its own pockets to the tune of billions of dollars, blow up the U.S. economy, and then collect an astounding and secret $29 trillion in below-market-rate loans from the Federal Reserve to bail itself out.’ 22

Unfortunately, none of the structural economic problems giving rise to the 2008 crisis were resolved and as we are now seeing, have returned with a vengeance from the COVID19 pandemic. As a result, American Capitalism confronts the deepest crisis since the Great Depression, plagued by excess capacity and slack demand, high unemployment, with millions of families facing eviction from their homes, food insecurity, loss of medical insurance and financial ruin. Debt levels have exploded- projected US government debt for 2020- $3.1 Trillion (CBO estimate), while total debt levels are projected to reach $80 trillion, up from $71 trillion at the end of last year. 23 A further indication of the severe structural economic problems confronting American capitalism is that the financial industry has been unable to recover from the Global Financial crisis of 2008 and is still dependent on taxpayer support to function. Indeed, since April, the FED has pumped circa $ 7 Trillion of taxpayer-backed funds to Wall St for share buybacks and to purchase toxic corporate debt and mortgage-backed securities. 24 Without this support, many corporations and banks will collapse. 25

Enduring Economic Power

Despite continuing economic decline, the US still wields considerable global economic power, which stems from several factors.

1) Dollar- The US dollar is the world’s reserve currency, and as of 2019, comprises 60% of central bank foreign exchange reserves; circa 90% of forex trading involves the U.S. dollar. 2627 The dollar (i.e., ‘Petrodollar’) is used for purchase of crude oil. 28

2) FED– The US Federal Reserve System was set up following the 1910 secret meeting of executives from large banks- J.P. Morgan, Rockefeller, and Kuhn, Loeb & Co. for ten days on Jekyll Island, Georgia, which was followed by Congress passing the Federal Reserve Act (Dec, 1913), which established the Federal Reserve System as the central bank of the United States. The Chairman, currently Jerome Powell, and FED Governors are appointed by the US President. Thus, the ‘FED’ was set up by private bankers to support the interests of large banks and has effectively no public control over its actions. 29 Of the 12 Reserve banks in the Federal Reserve System, the New York FED (NY FED) wields the most power. 30 The NY FED directs monetary policy through open market operations, emergency lending facilities, quantitative easing, and foreign exchange transactions. It also stores gold on behalf of the U.S. and foreign governments, other nation’s central banks, and international organizations. FED policies, such as setting interest rates and money supply are closely followed by the European Central Bank (ECB), Bank of England, Bank of Japan (BOJ) and other central banks.

3) SWIFT– The Society for Worldwide Interbank Financial Telecommunications (SWIFT) system is used to conduct financial transactions between 11,000 SWIFT member institutions and is the largest financial network in the world. 31 SWIFT is described as a ‘cooperative society’ under Belgian law, owned by its member financial institutions and headquartered in La Hulpe, Belgium. Due to its dominant global economic position, the US has been able to exert a strong influence on SWIFT policies, such as enforcing unilateral US economic sanctions (effectively a form of financial warfare) on the Islamic Republic of Iran, Russia, Venezuela, Cuba, North Korea and other countries deemed an obstacle to US global hegemony. 32

WWII and subsequent events shaping US foreign policy

Nuclear Attacks on Japan

The twentieth century was marked by turbulence, economic depression, war and economic prosperity. Eclipsing all prior conflicts, WWII was the deadliest conflict in human history, resulting in circa 75 million fatalities, with approximately twice as many civilian vs military casualties. During the war, the Soviet Union, much of Europe and Japan experienced high casualties and physical destruction. At the end of the war, the US dropped ‘Little Boy’ an enriched uranium gun-type fission device on Hiroshima, Japan on Aug 6, 1945, followed 3 days later, with ‘Fat Man’, a plutonium implosion-type nuclear weapon dropped on Nagasaki, resulting in circa 250,000 casualties. 33

While much has been written about the decision by the US to attack Japan, when the outcome of the war was all but certain, several things stand out.

1) The Soviet Union suffered the most physical destruction and casualties in WWII, a minimum of 25 million. In comparison, the US experienced circa 400,000 casualties.

2) During the war, the Soviet Union was an ally of the US/allied forces. As the war began winding down, this relationship rapidly changed, as the ruling elite, led by President Harry Truman were positioning the US as the world’s leading military power and viewed the USSR as a threat to American global hegemony. Thus, by dropping atomic bombs on Japan, the US was: i) sending an unmistakable message to the global community of US military might, and ii) also sending a warning to Stalin and the Soviet Union to not interfere with US global policies.

3) As pointed out by Prof Michel Chossudovsky, Center for Research on Globalization, as early as 1945 “the Pentagon had envisaged blowing up the Soviet Union with a coordinated nuclear attack directed against major urban areas. The Pentagon estimated that a total of 204 atomic bombs would be required to Wipe the Soviet Union off the Map”. 34

Iron Curtain & Truman Doctrine

On March 5, 1946 former British PM Winston Churchill delivered a speech at Westminster College, Fulton, MO, dubbed the ‘Iron Curtain speech’, stating

‘From Stettin in the Baltic to Trieste in the Adriatic an ‘iron curtain’ has descended across the Continent. Behind that line lie all the capitals of the ancient states of Central and Eastern Europe. Warsaw, Berlin, Prague, Vienna, Budapest, Belgrade, Bucharest and Sofia, all these famous cities and the populations around them lie in what I must call the Soviet sphere, and all are subject in one form or another, not only to Soviet influence but to a very high and, in some cases, increasing measure of control from Moscow.’ 35 In his speech, Churchill stressed the need for the US and UK to work together, acting as ‘guardians of peace and stability’ against the menace of Soviet communism. As a representative of the [former] British Empire, Churchill was signaling that the UK would willingly serve as a junior partner to American imperialism.

In a speech to Congress March 12, 1947, President Harry Truman laid out the ‘Truman Doctrine’, whose primary goal was to ‘contain Soviet geopolitical expansion’ and more broadly, implied American support for other countries ‘threatened’ by Soviet communism. The Truman Doctrine became the bedrock of post-WWII US foreign policy and in 1949, led to establishment of North Atlantic Treaty Organization (NATO). Truman’s speech is considered by many to be the start of the ‘Cold War’.

Demise of Soviet Union

Between 1988–1991 the Soviet Union experienced a process of internal disintegration which began with growing unrest in its various constituent republics are subsequent political and legislative conflicts between the republics and the central government. This is not surprising considering that the country was the largest country in the world, covering a vast land mass of 22,400,000 square km2 with a diverse population of circa 290 million consisting of 100 distinct nationalities. In addition, the USSR faced near continuous hostility from the US, UK and other imperialist powers since its very inception. The collapse of the Soviet Union and ‘end’ of the Cold War was interpreted by some in the US, notably Charles Krauthammer as the beginning of a US-directed ‘unipolar’ movement and a ‘new world order’ by President GW Bush. As is usually the case in global affairs, things did not go exactly as planned- the cold war never ‘ended’ and a ‘multipolar’ world emerged.

Project for the New American Century (PNAC)

The PNAC was founded by William Kristol and Robert Kagan in the Spring of 1997 as ‘a non-profit, educational organization’ that had a neo-conservative philosophy with close ties to the American Enterprise Institute (AEI) and endorsed strong American global leadership. 36 The PNAC had a particular focus on Iraq, predating the Bush Presidency and in Jan, 1998, sent a letter to then President Bill Clinton stating:

‘We are writing you because we are convinced that current American policy toward Iraq is not succeeding……We urge you to seize that opportunity, and to enunciate a new strategy that would secure the interests of the U.S……That strategy should aim, above all, at the removal of Saddam Hussein’s regime from power’. 37

In Sept 2000, ironically a year prior to 911, the PNAC would publish an influential policy document “Rebuilding America’s Defenses” that would serve as a blueprint for US foreign policy in the 21st century. Summarized in its Statement of Principles:

‘As the 20th century draws to a close, the United States stands as the world’s most preeminent power. Having led the West to victory in the Cold War, America faces an opportunity and a challenge: Does the United States have the vision to build upon the achievement of past decades? Does the United States have the resolve to shape a new century favorable to American principles and interests?’

‘[What we require is] a military that is strong and ready to meet both present and future challenges; a foreign policy that boldly and purposefully promotes American principles abroad; and national leadership that accepts the United States’ global responsibilities.’

‘Of course, the United States must be prudent in how it exercises its power. But we cannot safely avoid the responsibilities of global leadership of the costs that are associated with its exercise. America has a vital role in maintaining peace and security in Europe, Asia, and the Middle East. If we shirk our responsibilities, we invite challenges to our fundamental interests. The history of the 20th century should have taught us that it is important to shape circumstances before crises emerge, and to meet threats before they become dire. The history of the past century should have taught us to embrace the cause of American leadership.” 38

The PNAC advocated: 1) increased ‘defense’ spending to ‘carry out our global responsibilities today and modernize our armed forces for the future’, 2) ‘strengthen our ties to democratic allies and to challenge regimes hostile to our interests and values’, 3) ‘promote the cause of political and economic freedom abroad’, and 4) ‘accept responsibility for America’s unique role in preserving and extending an international order friendly to our security, our prosperity, and our principles’.

Many PNAC members would go on to hold high level positions in the GW Bush administration, including: Elliott Abrams, Richard Armitage, John Bolton, Dick Cheney (Vice President), Eliot Cohen, Paula Dobriansky, Aaron Friedberg, Francis Fukuyama, Zalmay Khalilzad, Lewis “Scooter” Libby, Richard Perle, Peter Rodman, Donald Rumsfeld, Paul Wolfowitz, Robert Zoellick, William Schneider and James Woolsey. 39 Not surprisingly, these individuals would play a major role in shaping post-911 US foreign policy.

911 and Eruption of US Military Activity

On the morning of Tuesday, Sept 11, 2001 the US experienced the deadliest attack in its history. According to the ‘official’ narrative, nineteen people affiliated with al-Qaeda, a radical Islamic group, hijacked 4 jet aircraft- 2 from Boson, 1 from Newark and 1 from Washington Dulles. Two of these aircraft subsequently crashed into the World Trade Center (WTC) in NYC resulting in the collapse of building 1 (WTC1) and building 2 (WTC2), one hit the Pentagon and the fourth crashed into an empty field in Shanksville, PA. 40 Two decades later, there are still multiple outstanding questions about 911, including what did the intelligence community- FBI, CIA know about the hijackers prior to 911, why didn’t the Pentagon immediately scramble fighter jets to intercept the hijacked aircraft, and why did steel framed buildings that had been ostensibly engineered to survive an impact from an airplane, rapidly collapse? 41

As it turned out, 911 would be a ‘watershed’ event, showcased in President George W. Bush’s 2002 State of the Union address where he delivered his [in]famous ‘axis of evil’ speech, designating three countries- North Korea, Iran and Iraq- as rogue states that he claimed ‘harbored, financed and aided terrorists’. 42 Indeed, 911 would set the stage for US military engagements, currently stretching from the Levant, to Caspian Basin, Persian Gulf, South-Central Asia, China Sea, Indian Ocean, Horn of Africa, the Maghreb, to Eastern Europe and Russian border (Figure 1). 4344. These conflicts and conflict zones are summarized in Table 2.

Invasion of Afghanistan

The Pentagon has had a longstanding interest in Afghanistan, due to its strategic location in southern Asia- sharing borders with Tajikistan, Uzbekistan, and Turkmenistan to the north, Iran to the west, and Pakistan to the south and east. During the Soviet–Afghan War (1979-1989), the Mujahideen, headed by Osama Bin Laden fought a nine-year guerrilla war against the Soviet Army and Afghanistan government, receiving material and financial support from the US, Pakistan, Iran, Saudi Arabia, and other countries and has been described as a ‘Cold War-era proxy war’, pitting the US against the USSR. In October 2001, immediately following 911, the U.S. launched its invasion of Afghanistan, rapidly ‘defeating’ the Taliban, and soon thereafter, installing a new government headed by Hamid Karzai in Kabul, and declaring the country ‘liberated’. 45. It soon became obvious that this rapid ‘success’ would be short lived. Despite spending over $1 trillion of US taxpayer money and deploying more than 100K troops, the conflict in Afghanistan continues and is the longest war in US history. The Taliban currently control >50% of Afghan territory and Afghanistan has the dubious distinction of supplying >90% of the world’s heroin 46

War on Iraq

Following defeat of the Central Powers in WWI, the Paris Peace Conference (1919-1920) assembled diplomats from 32 countries, resulting in the creation of the League of Nations, denounced by Lenin as a “thieves’ kitchen” and the ‘awarding’ of German and Ottoman overseas possessions as “mandates,” primarily to Britain and France. 47 Well aware of Iraq’s large energy reserves and strategic importance, Winston Churchill managed to cobble together Basra, Bagdad and Mosul into the ‘state’ of Iraq, while at the same time, carve out the state of Kuwait, which has 499 km of Coastline on the Persian Gulf, compared with Iraq, which has 58 km. 4849 This was likely done to limit Iraqi coast line and access to the Gulf.

The collapse of the Soviet Union and 911 attacks provided the directors of US foreign policy considerable latitude to pursue a more aggressive foreign policy. As described above, the PNAC laid out their perspective in their 2000 policy manifesto ‘Rebuilding America’s Defenses’. The Bush Administration was literally infiltrated with PNAC members, led by Vice President Dick Chaney and Defense Secretary Don Rumsfeld who were well aware of Iraq’s large energy reserves and was ‘ripe’ for the picking. All that was missing was a ‘marketing’ strategy, using 911 as a rationale for initially invading Iraq and then attempting to widen US control of other countries in the Middle East, with the goal of governing the regions vast energy reserves and selling this to a skeptical American public. This was accomplished using corporate media and testimony by Colin Powell, a respected former four-star Army General and 12th Chairman of the Joint Chiefs of Staff. The stage would be set by a 2002 piece by Michael Gordon and Judith Miller in the paper of record (NYT), alleging that Iraqi leader Saddam Hussein was secretly building ‘weapons of mass destruction’ (WMD). 50 This piece would form the basis of Collin Powell’s Feb 5, 2003 Speech before the UN, setting up a casus belli (Latin, ‘occasion for war’) for the 2003 invasion and occupation of Iraq. 51 As is now well known, the piece by Gordon and Miller was essentially fabricated as was much of Powell’s UN speech. 52 As preparations for Invading Iraq were being formulated, President Bush, Vice President Dick Cheney, Defense Secretary Donald Rumsfeld and others estimated the costs of the conflict to be below $100 billion and ‘reassuring’ nervous Americans that Iraq’s oil ‘would cover’ the cost of the war. 53 As is now readily apparent, the Iraq war which is still ongoing, has been a strategic disaster, resulting in thousands of American casualties, killing or displacing circa 25% of the Iraq population, led to the creation of ISIS and has cost US taxpayers circa $ 5 Trillion. The extent of this disaster was pointed out in vivid detail by Thomas Ricks, former US military reporter for the Washington Post, in his 2006 book- ‘Fiasco: The American Military Adventure in Iraq, 2003 to 2005. As pointed out by General Wesley Clark in his 2007 interview with Amy Goodman, US plans to invade Iraq were formulated within days after 911. In addition, these plans also included strategies for ‘taking out’ six other countries in 5 years, including Syria, Lebanon, Libya, Somalia, Sudan and Iran.” 43

Libya, Syria and Yemen

On Mar 19, 2011 a multi-state NATO-led coalition began a military intervention in Libya, to implement UNSC Resolution 1973, which ‘demanded’ an immediate ceasefire in Libya, including an end to the current attacks against civilians and imposed a no-fly zone and new sanctions on the Qadhafi regime and its supporters. This resolution would be used by US/NATO to overthrow the Libyan government and kill Libyan leader Muammar Gaddafi. Secretary of State Hillary Clinton would later ‘joke’ about Qaddafi’s death, commenting ‘We came, we saw, he died’. 54 In a 2016 interview with the BBC, President Barack Obama stated- failing to prepare for the aftermath of the ousting of Libyan leader Col Muammar Gaddafi was the ‘worst mistake’ of his presidency’. 55 Gaddafi’s removal plunged the country into chaos and became an international arms bazaar for radical Islamic groups, as he predicted. 56 Since 2014, the country has fractured- split between forces loyal to the Tripoli-based Government of National Accord (GNA), supported by Turkey and Qatar and the Libyan National Army (LNA) led by Benghazi-based Field Marshal Khalifa Haftar and supported by Egypt, United Arab Emirates (UAE) and Russia.

The US has been intent on ‘regime change’ in Syria since at least 2007. 43 Syria occupies a strategic position in Western Asia, sharing borders with Israel, Lebanon, Turkey, Iraq and Jordan (see Figure 1). Direct US involvement in the war on Syria began in 2014, with the support of US vassals- Bahrain, Jordan, Qatar, Saudi Arabia, UAE and Israel, with the goal of removing President Bashar al-Assad from power, a policy which remains in effect today. Due to the loyalty of the Syrian Arab Army (SAA) along with support from Hezbollah, the Islamic Republic or Iran and Russian Air Force and advisors, Syrian forces have fortified control over much of the country and Bashar al-Assad remains in power.

Yemen occupies a strategic position on the Arabian Peninsula, abutting the Bab-el-Mandeb strait, which connects the Arabian Sea to the Red Sea and the Mediterranean. Thus, the Bab-el-Mandeb Strait is considered a strategic ‘chokepoint’ that can be closed during a military crisis and thus, of interest to major global powers. 57 In 2015, the Houthi Ansarullah movement overthrew the Yemeni government, led by Abdrabbuh Mansur Hadi, forcing him to flee to neighboring KSA. In response, Mohammed bin Salman (aka MBS), Crown Prince of Saudi Arabia, formed a ‘coalition’ consisting of circa 10 countries, including Gulf Cooperation Council (GCC)- the United Arab Emirates (UAE), Bahrain, Kuwait, Qatar, along with Egypt, Jordan, Sudan and Morocco. While not directly involved in the Yemen conflict, the US, UK and other imperialist countries have provided the Saudi coalition with intelligence, logistical and material support. 58 As pointed out by HRW and others, the war on Yemen has been a humanitarian disaster, leading to massive cholera epidemics, poverty, starvation and physical destruction of the country’s infrastructure. 5759

2021 and Beyond

The US emerged from WWII as the world’s dominant economic and military power. This power has been facilitated by the dollar’s privileged status as the world’s reserve currency, giving Washington the ability to print money and effectively ‘weaponize’ the dollar. Since the mid-1970s, US global power has been systematically undermined from decades of neoliberal economic policies and costly wars. Since 2001, the US has been involved in conflicts in Afghanistan (longest war in US history), Iraq, Libya, Syria and Yemen. These conflicts have been humanitarian disasters, resulting in the injury or death of thousands of American soldiers, while displacing/killing an estimated 37 million people in the affected countries. The ongoing refugee ‘crisis’ in Europe is a direct consequence of these wars, with millions of people escaping the chaos, violence and poverty that US/NATO wars have created. 60

The costs of these wars to American taxpayers have been staggering. In addition to spending circa $14 trillion on the Pentagon (2001-2020) 61, post-911 conflicts have cost taxpayers circa $6.4 trillion. 60 Despite expending astronomical amounts of financial and human capital on these wars, the American empire has been unable to extract significant imperial rent from these countries. Unfortunately, the Pentagon is incapable of extricating itself from these conflicts as doing so is an admission of failure and by extension military/geopolitical weakness. No amount of jingoistic and bellicose rhetoric from politicians in Washington or talking heads on corporate media changes this reality.

The Trump administration has accelerated US global isolation by exiting or contemplating leaving: Paris Climate Accord, Trans-Pacific Partnership (TTP), Joint Comprehensive Plan of Action (JCPOA; Iran Nuclear deal), Intermediate-Range Nuclear Forces (INF) Treaty, Open Skies Treaty, UN Human Rights council, World Trade Organization (WTO) and several other agreements. 62 At the same time, China has been actively negotiating multiple trade agreements, including: $400 billion comprehensive energy and security agreement with Iran 63; Regional Comprehensive Economic Partnership (RCEP) with 15 Asian countries including Japan, South Korea, New Zealand and Australia and is the largest trade deal in history 64; EU-China Comprehensive Agreement on Investment 65. Significantly, the US is not a party to any of these agreements and trade will be conducted using regional currencies, excluding the dollar. Not surprisingly, these trade deals are exacerbating tensions between the US, China and other countries. 66 US economic decline has now progressed to the point where the very survival of the American Empire depends on continued money printing to prop up Wall St and large banks, subsidize the military and war. This was recently summarized by economist Richard Wolff- “The Federal Reserve is sustaining US capitalism — directly by loaning to corporations and indirectly by loaning to the federal government — to run a huge deficit, excess of trillion dollars… The federal government is not an intrusion; the federal government is the only thing that keeps private capitalism from a complete bust… And what do we know about this way that the Federal Reserve is keeping capitalism going? It’s funding the most extreme inequality in a century of American history.” 25

Thus, the US is stuck between the proverbial ‘rock and a hard place’. The very functioning of the American state- keeping Wall St. and large banks solvent and funding the Pentagon and ongoing wars, requires continued public support- i.e., providing unlimited amounts of ultra-cheap money from the Treasury, as laid out in a recent presentation by FED chair Jerome Powell. 67 Indeed, anytime there is so much as a hint that interest rates are going up, equity markets fall. These policies have become so ingrained and accepted as the ‘normal’ functioning of the state, that they were not addressed by Donald Trump or Joe Biden, during the 2020 campaign. The problem is that this is further undermining the strength of the dollar and jeopardizing its role as the world’s reserve currency 68, readily seen from the rising price of gold, which increased 25% last year. History tells us that over the last 700 years, world reserve currencies maintain their position on average 100 years. 69 At this point, the dollar has been the reserve currency for 77 years. 70 As the global economic vise continues to tighten, American foreign policy is becoming increasingly reckless and bellicose, while debt levels continue rising, putting increasing downward pressure on the dollar. When the dollar crashes the American Empire will crash with it. The American ruling elite are courting a rendezvous with disaster.

Notes

1. Bretton Woods Agreement and System by James Chen Apr 30, 2020; Link:

https://www.investopedia.com/terms/b/brettonwoodsagreement.asp

2. Launch of the Bretton Woods System- The international currency system became operational in 1958 with the elimination of exchange controls for current-account transactions By Robert L. Hetzel Federal Reserve History; Link: https://www.federalreservehistory.org/essays/bretton_woods_launched

3. Nixon Ends Convertibility of US Dollars to Gold and Announces Wage/Price Controls- With inflation on the rise and a gold run looming, President Richard Nixon’s team enacted a plan that ended dollar convertibility to gold and implemented wage and price controls, which soon brought an end to the Bretton Woods System. By Sandra Kollen Ghizoni, Federal Reserve Bank of Atlanta Aug 1971; Link: https://www.federalreservehistory.org/essays/gold-convertibility-ends

4. The Politics of Privatization: How Neoliberalism Took Over US Politics By Brett Heinz; Sept 8, 2017; Link: http://www.faireconomy.org/the_politics_of_privatization

5. Neoliberalism – the ideology at the root of all our problems- Financial meltdown, environmental disaster and even the rise of Donald Trump – neoliberalism has played its part in them all. Why has the left failed to come up with an alternative? By George Monbiot Apr 15, 2016; Link: https://www.theguardian.com/books/2016/apr/15/neoliberalism-ideology-problem-george-monbiot

6. New Deal by History.com Editors Nov 27, 2019; Link: https://www.history.com/topics/great-depression/new-deal

7. Glass-Steagall Act by History.com Editors Aug 21, 2018; Link: https://www.history.com/topics/great-depression/glass-steagall-act

8. Federal Tax Cuts in the Bush, Obama, and Trump Years Report July 11, 2018 Institute on Taxation and Economic Policy; Link: https://itep.org/federal-tax-cuts-in-the-bush-obama-and-trump-years/

9. Labor Day: Ronald Reagan and the PATCO Strike by David Macaray HuffPost Aug 20, 2017; Link: https://www.huffpost.com/entry/labor-day-ronald-reagan-and-the-patco-strike_b_59a6d604e4b05fa16286beb1

10. How Bill Clinton’s Welfare Reform Changed America- Bill Clinton’s 1992 presidential campaign placed welfare reform at its center, claiming that his proposal would “end welfare as we have come to know it.” By Mary Pilon Aug 29, 2018; Link: https://www.history.com/news/clinton-1990s-welfare-reform-facts

11. The Real Lessons from Bill Clinton’s Welfare Reform- The 1996 creation of the Temporary Assistance for Needy Families program effectively killed cash assistance. Now, Republicans want to use it as a model for the rest of the social safety net. By Vann R. Newkirk II Feb 5, 2018; Link:

https://www.theatlantic.com/politics/archive/2018/02/welfare-reform-tanf-medicaid-food-stamps/552299/

12. United States Average Hourly Wages in Manufacturing-1950-2020 Data; Link: https://tradingeconomics.com/united-states/wages-in-manufacturing

13. Mexico Nominal Hourly Wages in Manufacturing- 2007-2020 Data; Link: https://tradingeconomics.com/mexico/wages-in-manufacturing

14. NAFTA’s Legacy: Lost Jobs, Lower Wages, Increased Inequality; Link: https://www.citizen.org/wp-content/uploads/nafta_factsheet_deficit_jobs_wages_feb_2018_final.pdf

15. The White House is only telling you half of the sad story of what happened to American jobs by Linette Lopez Jul 25, 2017; Link: https://www.businessinsider.com/what-happened-to-american-jobs-in-the-80s-2017-7

16. China, Saudi Arabia and the US: Shake Up and Shake Down. By Prof. James Petras Global Research, Dec 04, 2017; Link: http://www.globalresearch.ca/china-saudi-arabia-and-the-us-shake-up-and-shake-down/5621487

17. Why bringing manufacturing jobs to the U.S. from China is “highly unlikely” by Victoria Craig Marketplace Morning Report Aug 27, 2020; Link: https://www.marketplace.org/2020/08/27/trump-manufacturing-jobs-china-trade-war-deal/

18. Derivative By Jason Fernando Dec 5, 2020; Link: https://www.investopedia.com/terms/d/derivative.asp

19. What are the Main Risks Associated with Trading Derivatives? By J.B. Maverick Apr 3, 2020; Link: https://www.investopedia.com/ask/answers/070815/what-are-main-risks-associated-trading-derivatives.asp

20. War on Iran & Calling America’s Bluff by Pepe Escobar April 24, 2019; Link: https://consortiumnews.com/2019/04/24/pepe-escobar-war-on-iran-calling-americas-bluff/

21. Bill Clinton – 25 People to Blame for the Financial Crisis – TIME; Link:

http://content.time.com/time/specials/packages/article/0,28804,1877351_1877350_1877322,00.html

22. The Bizarre Action in U.S. Treasuries Is Linked to the U.S. National Debt and the Repeal of the Glass-Steagall Act By Pam Martens and Russ Martens: Aug 29, 2019; Link: https://wallstreetonparade.com/2019/08/the-bizarre-action-in-u-s-treasuries-is-linked-to-the-u-s-national-debt-and-the-repeal-of-the-glass-steagall-act/

23. World economy engulfed by “debt tsunami” by Nick Beams Nov 20, 2020; Link: https://www.wsws.org/en/articles/2020/11/21/debt-n21.html

24. The Fed Man Song (to the music of Beatles ‘The Taxman’) by Jack Rrasmus Nov 16, 2020; Link:

The Fed Man Song (to the music of Beatles ‘The Taxman’)

25. Capitalism is on life support by Richard Wolff Democracy at Work Jan 4, 2021; Link: https://www.youtube.com/watch?v=jYrgFU-P63g

26. IMF Currency Composition of Official Foreign Exchange Reserves (COFER); Link:

https://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A4

27. Why the US Dollar Is the Global Currency By Kimberly Amadeo July 23, 2020; Link: https://www.thebalance.com/world-currency-3305931

28. The Rise of the Petrodollar System: “Dollars for Oil” By Jerry Robins Thu, Feb 23, 2012; Link: https://www.financialsense.com/contributors/jerry-robinson/the-rise-of-the-petrodollar-system-dollars-for-oil

29. Federal Reserve Act; Link: https://www.federalreserve.gov/aboutthefed/fract.htm

30. Federal Reserve Bank of New York By Investopedia Staff Dec 18, 2020; Link: https://www.investopedia.com/terms/f/federal-reserve-bank-of-new-york.asp

31. SWIFT; Link: https://www.swift.com

32. SWIFT and the Weaponization of the U.S. Dollar- The U.S. has used the system as a stick before. Continuing down this path could trigger de-dollarization and an ensuing currency crisis. Saturday, Oct 6, 2018; Link: https://fee.org/articles/swift-and-the-weaponization-of-the-us-dollar/

33. The Atomic Bombings of Hiroshima and Nagasaki; Link:

https://www.atomicarchive.com/resources/documents/med/med_chp10.html

34. “Wipe the Soviet Union Off the Map”, 204 Atomic Bombs against 66 Major Cities, US Nuclear Attack against USSR Planned During World War II When America and the Soviet Union Were Allies. By Prof Michel Chossudovsky Global Research, Oct 27, 2018; Link: http://www.globalresearch.ca/wipe-the-ussr-off-the-map-204-atomic-bombs-against-major-cities-us-nuclear-attack-against-soviet-union-planned-prior-to-end-of-world-war-ii/5616601

35. The Sinews of Peace (‘Iron Curtain Speech’) Mar 5, 1946; Link: https://winstonchurchill.org/resources/speeches/1946-1963-elder-statesman/the-sinews-of-peace/

36. Project for the New American Century Oct 16, 2019; Link: https://militarist-monitor.org/profile/project_for_the_new_american_century/

37. 1998 PNAC Letter to President Clinton on Iraq Jan 26, 1998; Link: https://zfacts.com/zfacts.com/metaPage/lib/98-Rumsfeld-Iraq.pdf

38. Rebuilding America’s Defenses- Strategy, Forces and Resources for a New Century. A Report of The Project for the New American Century By Donald Kagan, and Thomas Donnelly Sept, 2000; Link: https://cryptome.org/rad.htm; https://archive.org/details/RebuildingAmericasDefenses

39. List of PNAC Members associated with the Administration of George W. Bush; Link: https://gyaanipedia.fandom.com/wiki/List_of_PNAC_Members_associated_with_the_Administration_of_George_W._Bush

40. The 9/11 Commission Report- Final Report of the National Commission on Terrorist Attacks Upon the United States; Link: https://govinfo.library.unt.edu/911/report/911Report_Exec.pdf

41. Architects & Engineers for 9/11 Truth; Link: www.ae911truth.org

42. President Bush cites ‘axis of evil,’ Jan. 29, 2002 By Andrew Glass Politico Jan 29, 2019; Link: https://www.politico.com/story/2019/01/29/bush-axis-of-evil-2002-1127725

43. “We’re going to take out 7 countries in 5 years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan & Iran.” Interview with General Wesley Clark Global Research, Feb 06, 2018; Link: https://www.globalresearch.ca/we-re-going-to-take-out-7-countries-in-5-years-iraq-syria-lebanon-libya-somalia-sudan-iran/5166

44. A Timeline of the U.S.-Led War on Terror- In the wake of the attacks of 9/11, President George W. Bush called for a global “War on Terror,” launching an ongoing effort to thwart terrorists before they act. By History.com Editors May 5, 2020; Link: https://www.history.com/topics/21st-century/war-on-terror-timeline

45. A timeline of U.S. troop levels in Afghanistan since 2001 AP July 6, 2016; Link:

https://www.militarytimes.com/news/your-military/2016/07/06/a-timeline-of-u-s-troop-levels-in-afghanistan-since-2001/

46. Washington’s Twenty-First-Century Opium Wars: How a Pink Flower Defeated the World’s Sole Superpower- America’s Opium War in Afghanistan by Alfred McCoy Tom Dispatch Feb 21, 2016; Link: https://tomdispatch.com/alfred-mccoy-washington-s-twenty-first-century-opium-wars

47. The First World War – A Marxist Analysis of the Great Slaughter by Alan Woods June 2, 2019; Link: https://www.marxist.com/first-world-war-a-marxist-analysis-of-the-great-slaughter/16.-the-treaty-of-versailles-the-peace-to-end-all-peace.htm

48. Paris 1919: How the Peace Conference Shaped the Middle East; Link:

https://www.arcgis.com/apps/MapJournal/index.html?appid=afb36eefd9184d99afb1d654dc987767

49. The Impact of Western Imperialism in Iraq, 1798-1963 By Geoff Simons Dec, 2002; Link: https://www.globalpolicy.org/component/content/article/169-history/36399.html

50. Threats and Responses: The Iraqis; U.S. Says Hussein Intensifies Quest for A-Bomb Parts By Michael R. Gordon and Judith Miller NYT Sept. 8, 2002; Link:

https://www.nytimes.com/svc/oembed/html/?url=https%3A%2F%2Fwww.nytimes.com%2F2002%2F09%2F08%2Fworld%2Fthreats-responses-iraqis-us-says-hussein-intensifies-quest-for-bomb-parts.html#?secret=uidQmCNcdY

51. Colin Powell Still Wants Answers- In 2003, he made the case for invading Iraq to halt its weapons programs. The analysts who provided the intelligence now say it was doubted inside the C.I.A. at the time. By Robert Draper NYT Jan. 11, 2021; Link: https://www.nytimes.com/2020/07/16/magazine/colin-powell-iraq-war.html

52. Lie After Lie: What Colin Powell Knew About Iraq 15 Years Ago and What He Told the U.N.- The evidence is irrefutable: Powell consciously deceived the world in his 2003 presentation making the case for war with Saddam Hussein. By Jon Schwarz

Jon Schwarz The Intercept Feb 6, 2018; Link:

https://theintercept.com/2018/02/06/lie-after-lie-what-colin-powell-knew-about-iraq-fifteen-years-ago-and-what-he-told-the-un/

53. The cost of the Iraq war Mar 19, 2013; Link: https://www.registerguard.com/article/20130319/OPINION/303199842

54. The Libya Gamble- A New Libya, with ‘Very Little Time Left’. The fall of Col. Muammar el-Qaddafi seemed to vindicate Hillary Clinton. Then militias refused to disarm, neighbors fanned a civil war, and the Islamic State found refuge. By Scott Shane and Jo Becker NYT Feb. 27, 2016; Link: https://www.nytimes.com/2016/02/28/us/politics/libya-isis-hillary-clinton.html

55. President Obama: Libya aftermath ‘worst mistake’ of presidency BBC April 11, 2016; Link: https://www.bbc.com/news/world-us-canada-36013703

56. Coups and terror are the fruit of Nato’s war in Libya- The dire consequences of the west’s intervention are being felt today in Tripoli and across Africa, from Mali to Nigeria by Seumas Milne The Guardian May 22, 2014; Link: https://www.theguardian.com/commentisfree/2014/may/22/coups-terror-nato-war-in-libya-west-intervention-boko-haram-nigeria

57. Strategic Importance of the Indian Ocean, Yemen and Bab-el-Mandeb Strait by Phillyguy for The Saker Blog Aug 5, 2020; Link: https://thesaker.is/strategic-importance-of-the-indian-ocean-yemen-and-bab-el-mandeb-strait/

58. Ending the Yemen war is both a strategic and humanitarian imperative by John R. Allen and Bruce Riedel Brookings Monday, Nov 16, 2020;

https://www.brookings.edu/blog/order-from-chaos/2020/11/16/ending-the-yemen-war-is-both-a-strategic-and-humanitarian-imperative/embed/#?secret=48yOxEXf85

59. U.S. War Crimes in Yemen: Stop Looking the Other Way- The State Department warned for years that the U.S. was complicit in war crimes in Yemen. No one put a stop to it. Foreign Policy in Focus by Andrea Prasow Sept 21, 2020; Link:

https://www.hrw.org/news/2020/09/21/us-war-crimes-yemen-stop-looking-other-way

60. Costs of War Brown University; Link: https://watson.brown.edu/costsofwar

61. U.S. military spending from 2000 to 2019; Link: https://www.statista.com/statistics/272473/us-military-spending-from-2000-to-2012/

62. Here are all the treaties and agreements Trump has abandoned By Zachary B. Wolf and JoElla Carman, CNN Fri, Feb 1, 2019; Link: https://www.cnn.com/2019/02/01/politics/nuclear-treaty-trump/index.html

63. A China-Iran bilateral deal: Costs all around- Beijing sees an opportunity in Tehran’s international isolation – but may not realise the tangle it is entering. By Jeffrey Payne Sept 2, 2020; Link: https://www.lowyinstitute.org/the-interpreter/china-iran-bilateral-deal-costs-all-around

64. China signs huge Asia Pacific trade deal with 14 countries By Jill Disis and Laura He, CNN Business Tue Nov 17, 2020; https://www.cnn.com/2020/11/16/economy/rcep-trade-agreement-intl-hnk/index.html

65. The Strategic Implications of the China-EU Investment Deal- The EU-China Comprehensive Agreement on Investment is a win for China, and a blow to transatlantic relations. By Theresa Fallon Jan 4, 2021; Link: https://thediplomat.com/2021/01/the-strategic-implications-of-the-china-eu-investment-deal/

66. EU–US tensions mount after EU signs trade deal with China by Alex Lantier Jan 4, 2021; Link: https://www.wsws.org/en/articles/2021/01/05/euch-j05.html

67. Fed chief pledges massive support for Wall Street will not cease by Nick Beams Jan 16, 2021; Link: https://www.wsws.org/en/articles/2021/01/16/powl-j16.html

68. Is the US Dollar’s Role as the World’s Reserve Currency Under Threat? International Banker. Sept 30, 2020; Link: https://internationalbanker.com/finance/is-the-us-dollars-role-as-the-worlds-reserve-currency-under-threat/

69. 3 Major Signs That Precede the Fall of World Reserve Currencies- Economics by Graham Smith Oct 24, 2019; Link: https://news.bitcoin.com/3-major-signs-that-precede-the-fall-of-world-reserve-currencies/

70. 75 Years ago the U.S. Dollar Became the World’s Currency. Will that last? By Greg Rosalsky Jul 30, 2019; Link:

https://knpr.org/npr/2019-07/75-years-ago-us-dollar-became-worlds-currency-will-last

Figure 1 and Tables 1, 2

Figure 1. Map of Western Asia and Middle East. Source: https://ian.macky.net/pat/map/easa/easa.html

Table 1. Major economic legislation since the election of Ronald Reagan in 1980.

DateTitleAdministration
1981Economic Recovery Tax ActReagan
1986Tax Reform Act of 1986Reagan
2001Economic Growth and Tax Relief Reconciliation Act (EGTRRA)GW Bush
2003Jobs and Growth Tax Relief Reconciliation Act (JGTRRA)GW Bush
2010Tax Relief, Unemployment Insurance Reauthorization, and Job Creation ActBush/Obama
2012American Taxpayer Relief ActBush/Obama
2017Tax Cuts and Jobs Act (TCJA)Trump
1993North American Free Trade Agreement (NAFTA)Clinton
1996Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA)Clinton
1999Gramm–Leach–Bliley Act (GLBA; Financial Services Modernization Act)Clinton
2000Commodity Futures Modernization Act (CFMA)Clinton

Table 2. US involvement in conflicts and conflict zones since 911.

ConflictAdministrationDate
AfghanistanGW Bush2001-present
IraqGW Bush2003-present
LibyaObama2011- present
UkraineObama2014-present
SyriaObama2014-present
YemenObama2014-present
Eastern Europe/Russian BorderClinton- Trump1997-Present
China Sea/Western PacificObama/Trump2011-present
Persian GulfBush/Obama/Trump2003-present

Days of the Future Passed: A Syncretic Look at the Problems of Empire – Book Excerpt

December 10, 2020

‘Days of the Future Passed’ by Jim Miles. (Photo: Book Cover)

By Jim Miles

(Days of the Future Passed – Point of No Return, Jim Miles. Kindle Edition. 2020)

By Introduction

The United States has throughout its existence demonstrated all the features of ‘empire’, from the original settlers using the Papal Doctrine of Discovery (1542)  through to the current propaganda of the global war and terror, now changing to defense doctrines against Russia and China.  My new work, “Days of the Future Passed – Point of No Return” presents the broad outlines of what this represents to the international scene from inception through to today’s ongoing empirical adventures.

The two main constants have been economic influence and military influence.  The two are highly integrated and always have been even from before Independence, through the conquest of much of North America, where sometimes the soldiers led the way, and sometimes the settlers led the way, but neither being far apart from the other.  Today the economy of the US empire is highly dependent on the military mindset of the US supporting its economic adventures overseas, the bottom line being support for the global reserve currency, the fiat ‘petrodollar.’

Three other ideas enter into this picture.  An additional military factor is the threat of nuclear war, an event only a hair trigger action away from ultimately ending all of our problems.  The current increase in propaganda rhetoric against Russia and China makes a nuclear scenario unfortunately all too realistic.  Added to this, climate change is affecting our chances at long term safety and overall survival, much of it caused by our consumer oriented economy based on fossil fuels – control of the latter being of paramount importance for the US dollar and thus the US military.  Add to all that the current Covid-19 pandemic, and the empire appears to be slowly losing its grip on its desired hegemony, but not without threatening much of the rest of the world.

Days of the Future Passed – Point of No Return” argues that we have passed some tipping points for which there will be no return to normal, within economics, the environment, and the military industrial complex.  Ideas for solutions are easy, their implementation is not as the inertia of empire is not easily restrained or controlled.

Excerpt

2020 – Tipping Points

It may not be evident yet, but in another ten or twenty years, the year 2020 may also be looked on as a pivotal year in global interactions – geopolitical, environmental, and financial – all of which are highly interrelated.

Imagine the lowly teeter-totter, a playground piece not as common as it used to be.  The teeter-totter is aptly named as many a child, and many an adult has stood above the bar that makes the plank teeter and totter, trying to maintain balance but also testing how far they can go before touching down on one side or the other.   Now imagine that teeter-totter is poised on the edge of a cliff, where one side can touch down and avoid the unknown drop, and the other side obviously is the drop from which there is no recovery to equilibrium.

It is a simple metaphor, but it illustrates for several sectors of our lives, we have allowed ourselves to drop into the unknown.

The unknown is simply the future.  This future is to be determined by a declining global economy becoming saturated with massive US money printing to prop up the banksters and corporate CEOs.  It will be determined by the disregard domestically and in foreign affairs for the supposed ‘rule of law’ but more importantly international law and true justice for all people. The changes to our environment are at the moment relatively slow but are becoming irreversible under current trends.   Finally, the massive military investments on a global scale for both nuclear and conventional weaponry threatens everyone with a very delicate balance of power.

….Under the Trump presidency, combined with the economic impact of the virus and actions to contain it (for better or worse, not a point of discussion here), the US has assuredly reached a point where its huge national debt can never be repaid.   Combine this with the main source of income and wealth in the US no longer being production, but financialized services simply creating money at the stroke of a keyboard and the economy is surviving precariously on the whim of people servicing the US$.

Put simply, the US survives on the Federal Reserve Bank (a consortium of private banks) pumping money into the economy.   With much of the economy based on debt, and interest rates kept necessarily low in order to service the debt, the strength of the US$  as a global reserve currency – the petrodollar – is jeopardized.

….This year there have been several accounts of how the climate/environment is showing signs of tipping into conditions where there can be no reversals to ‘normal’ without serious changes to our atmospheric inputs:  Greenland’s ice sheet melts more than it accumulates in snowfall each year by a significant amount; the Amazon has reached the status where it can no longer regenerate itself after a series of droughts; the forest fires in Siberia, Australia, and California demonstrate the overall pattern of global warming; each succeeding month has set record new global highs.

….The main feature here is that the combination of China and Russia have created a multi-polar world whether the US is willing to admit it or not.  Russian resources, defensive military achievements, and a renewed domestic scene under the direction of the much-vilified Vladimir Putin have combined with China’s increasing defensive measures in the Western Pacific, its Belt and Road initiative throughout Asia and extending elsewhere, and the economic power that China has achieved as the largest economy in the world (on purchasing power and domestic market basis).

Above all, both China and Russia have stated they no longer support the hegemony of the US$ as the global reserve currency.  They cannot replace it themselves, but they can operate outside of it, and they can support alternate global systems such as a ‘basket’ of reserve currencies, and their own digital exchange systems.   That is what truly scares the US as it sees its own debt problems trap it into hyperinflation while other countries start to shift away from supporting the US$.   That could mean war, hybrid for sure, but it could also go kinetic.

– Jim Miles is a Canadian educator and analyst who examines the world through a syncretic lens.  His analysis of international and domestic geopolitical ideas and actions incorporates a lifetime of interest in current events, a desire to preserve and conserve our natural environment and stop the commodification of the environment.  He has been active as a critical writer in opposition to the US empire and its militarization of most aspects of domestic and international affairs. Miles’ work has been published globally and has appeared on a variety of websites including Palestine Chronicle, Axis of Logic, Countercurrents, and Global Research.  He has appeared on RT News and The Tyee concerning events in Palestine/Israel.  This is his first book and effectively summarizes many years, indeed a lifetime, of interest in international geopolitical and environmental affairs. He contributed this article to the Palestine Chronicle. 

One Last Chance to Revive America’s Forgotten Constitutional Traditions and Avoid WWIII

One Last Chance to Revive America’s Forgotten Constitutional Traditions and Avoid WWIII

October 26, 2020

By Matthew Ehret for the Saker Blog

As I laid out in my last article published on the Saker, false solutions to a crisis of global proportions are being promoted in the form of a “Great Global Reset” which aims at creating a new economic order under the fog of COVID. This emerging “new order”, as it is being promoted by Mark Carney, George Soros, Bill Gates and other minions of the City of London is shaped by a devout commitment to depopulation, world government and master-slave systems of social control.

By attempting to tie the new system of “value” to economic practices which are designed to crush humanity’s ability to sustain itself in the form of “reducing carbon footprints”, “sustainable green energy”, cap and trade, carbon taxes and green infrastructure bonds, humanity is being set up to accept a system of governance onto our children and grandchildren which will subject them to a dystopic world of fascism the likes of which even Hitler could not have dreamed.

The misanthropic philosophy underlying the Great Reset is not new but go back thousands of years and although this fact of world history has been intentionally obscured, the revolution that established a new nation in 1776 represented a total rejection of this system.

The Dual Nature of the USA as a Force in World History

While many people find it easy to dismiss the USA as an intrinsically evil empire which always strove to replace the British Empire as the hegemon of the earth, there is a much richer historic fight at play which America’s emergence as a new nation in 1776 exemplified and which I recently outlined in the lecture below.

As I will demonstrate in this essay, the revolution of 1776 was never about tea parties, taxes or the “right to defend property” as may revisionist historians have lyingly written over many generations.

It was rather an international affair that gave rise to a system of political economy which placed value NOT upon the worshiping money but rather upon the inherent powers of creative reason located in the minds of all citizens. This potentially infinite resource (or “the resource that creates all other resources”) is only expressed IF a nation’s citizens are given the opportunities, means, hope and inspiration to express them. Abraham Lincoln stated this principle beautifully when he said:

“All creation is a mine, and every man, a miner. The whole earth, and all within it, upon it, and round about it, including himself, in his physical, moral, and intellectual nature, and his susceptibilities, are the infinitely various “leads” from which, man, from the first, was to dig out his destiny… Man is not the only animal who labors; but he is the only one who improves his workmanship. This improvement, he effects by Discoveries, and Inventions.”

The means developed by leading figures of the revolution, to be used by government with the aim of actualizing those powers of mind included practices of national banking, public credit, selective protectionism and increasing the productive powers of labor via investments into internal improvements, infrastructure and scientific progress.

This is the system which the ruling oligarchy is currently frightened may be brought back online under the conditions of a breakdown crisis should Trump maintain his position as President, and due to the fact that it has been so entirely obscured from history books, some words are worth devoting to its existence now.

The Origins of the American System

During the crisis of 1783-1791, The newly established American republic was an agrarian economy in financial ruins with no means to pay off its debts or even the soldiers who fought for years in the revolutionary war. It was only a matter of time before the fragile new nation would come undone and be reabsorbed back into the fold of the British Empire.

The solution to this unsolvable crisis was unveiled by Washington’s former Aide de Camp and now Treasury Secretary Alexander Hamilton (1755-1804) who studied the works of the great dirigiste economists like France’s Finance Minister Jean-Baptiste Colbert, and introduced a four-fold solution:

  1. Consolidate all unpayable state debts into a singular federal debt secured by the issuance of new bonds. This was done via his 1790 Report on Public Credit.
  2. Tie these new bonds to internal improvements like roads, canals, academies and industrial growth which would create a qualitatively new form of debt that would permit the nation to produce its way out of poverty which would lead to “the augmentation of the active or productive capital of a country”. In this sense Hamilton distinguished bad debt from good debt using the important guiding principle that the “creation of debt should always be accompanied with the means of extinguishment.” [to illustrate this more clearly: think of a farmer taking on a debt in order to feed a gambling addiction vs investing his loan into new farm supplies and a tractor.] The thrust of this conception was found in his Report on the Subject of Manufactures of 1791.
  3. Guide that new national power over finance by a system of national banks subservient to the Constitution and the General Welfare (instead of a system of central banks under the British model that ensured nation states would forever be subservient to the laws of usurious finance). This was illustrated in Hamilton’s 1790 Report on a National Bank and his 1791 On the Constitutionality of a National Bank.
  4. Use protective measures where necessary to block foreign dumping of cheap goods into the nation from abroad which essentially makes it more profitable to purchase industrial goods and farm products locally rather than from abroad. Hamilton also promoted federal incentives/bounties to encourage private enterprises to build things that would be in alignment with the national interests.

The Matter of Mind over Money

Hamilton’s idea for the national bank was premised on the unification of private profit with the wellbeing of the whole nation in order to overcome the dichotomy of state vs individual rights which has plagued so much of philosophy and human history.

In opposition to the Jeffersonian crowd promoting British Free Trade which presumed that manufacturing and a strong federal government were evils to be avoided, Hamilton wrote that there is “a general principle inherent in the very definition of Government and essential to every step of the progress to be made by that of the United States; namely—that every power vested in a Government is in its nature sovereign, and includes by force of the term, a right to employ all the means requisite, and fairly applicable to the attainment of the ends of such power; and which are not precluded by restrictions & exceptions specified in the constitution; or not immoral, or not contrary to the essential ends of political society.”

Hamilton added that this power must exist “to give encouragement to the enterprise of our own merchants, and to advance our navigation and manufactures.”

Throughout all of his works, Hamilton is clear that value is not located in land, gold, money, or any arbitrary value favored by followers of the British School like Adam Smith, Bentham, or Mill. In defending the growth of manufactures and internal improvements, Hamilton states that “to cherish and stimulate the activity of the human mind, by multiplying the objects of enterprise, is not among the least considerable of the expedients, by which the wealth of a nation may be promoted.”

The Overthrow of the American System

Although City of London-affiliated traitors in America like Aaron Burr established the speculative Bank of Manhattan which started Wall Street, killed Alexander Hamilton in 1804, and derailed many of Hamilton’s grand designs, the system was never completely destroyed despite the decades of attempts to do so.

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In 1824, the great German economist Frederick List came to America with the last surviving leader of 1776 Marquis Lafayette as part of an international effort to revive the sabotaged plans to create a world of sovereign republics modelled on the American experience of 1776.

While this effort failed with Lafayette’s supplication to the scheme of re-instating a French King in 1830 rather than declare himself the President (as I outlined in my recent paper on the Congress of Vienna), List studied Hamilton’s system and was the first to codify it as the American System of Political Economy (1827). This was the system which List transported to Germany by driving rail development, industrial growth, protectionism under the German Zollverein which finally blossomed under the rule of Chancellor Otto von Bismarck. List’s system was also studied, translated and applied in Russia by many “American System economists” with the greatest being the Transport Minister and Prime Minister Sergei Witte who oversaw the trans Siberian railway’s completion and envisioned a line eventually connecting the Americas to Russia via the Bering Straits.

In America, the clash between American vs British Systems defined all major conflicts from 1836 when a racist tool named Andrew Jackson killed the 2nd National Bank (along with thousands of Cherokee) and brought the nation under the heal of British Free Trade, speculation, and cotton plantation economics. Following the IMF’s protocols that would be imposed onto victim nations 150 years later, Jackson cancelled all internal improvements in order to “pay the debt” and deregulated the banking system which resulted in the growth of over 7000 separate currencies issued by an array of state banks rendering the economy chaotic, bankrupt and prone to mass counterfeiting.

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The defenders of the American System during this period (led by Whigs such as John Quincy Adams, Matthew Carey and Henry Clay) played a rear-guard action hoping for an opening to occur at some point. When that opening finally arrived with the victory of Whig President William Harrison in 1840 a glimmer of hope was felt. Harrison swept to power with a mandate to “revive the national bank” and enact Clay’s American System of internal improvements but sadly the new leader found himself dead in a matter of only 3 months with legislation for the 3rd national bank sitting unsigned on his desk. Over his dead body (and that of another Whig president only 10 years later), the slave power grew in influence enormously.

It wasn’t until 1861 that a new president arose who successfully avoided assassination attempts long enough to revive Hamilton’s American System during a period of existential crisis of economic bankruptcy and foreign sponsored civil war. Unlike the British system of free trade which forced its adherents to worship money, the American system of Franklin and Hamilton always placed value on the creative powers of reason of the citizens which distinguished our species as unique among all creation.

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What did Lincoln Actually Face?

Beyond the dangers of secession, Lincoln had to contend with the Wall Street financiers, international bankers and Anglo Canadian operatives who worked tirelessly to sabotage the president’s ability to acquire the funds necessary to execute the war.

To make matters worse, the state of economic affairs was impossibly unmanageable with thousands of recognized bank notes in the USA and over 1496 banks each issuing multiple notes. Under this highly de-regulated system made possible by the 1836 killing of the national bank and the passage of the 1846 Independent Treasury Act which prevented the government from influencing economic affairs, every private bank could issue currencies with no federal authority. With such a breakdown of finances, no national projects were possible, international investments were scarce and free market money worshipping ran rampant. Manufacturing collapsed, speculation took over and the slavocracy grew in influence between the 1837’s bank panic and 1860.

The City of London was obviously not interested in allowing the USA to get out from under water, and with the gold-backed pound sterling, ensured the manipulation of gold prices and orchestrated the buyout of US gold reserves. When Lincoln sought loans to execute the war, whether from Wall Street or International banking houses, the loans were granted only at excessive interest rates of 20-25%.

Russian Ambassador to London de Brunow reported to Moscow of England’s desire to break the Union writing in January 1861:

“The English government, at the bottom of its heart, desired the separation of North America into two republics, which will watch each other jealously and counterbalance one the other. Then England, on terms of peace and commerce with both, would have nothing to fear from either; for she would dominate them, restraining them by their rival ambitions.”

Historian Robert Ingraham described this impossible situation in 2002:

“In January 1862, Gallatin [head of the NY Associated Banks] presented the bankers’ ultimatum to the Treasury: 1) pay for the war effort through a massive increase of direct taxation of the population; 2) deposit all U.S. government gold in the private New York banks and make those banks the sole (monopoly) agent for the marketing of U.S. government debt (primarily bonds sold in London); 3) suspend the “sub-treasury laws” (government regulation of banks); and 4) withdraw all government-issued paper currency so that only gold and private bank notes would circulate as currency.”

Although 150 years of revisionist historians have obscured the real Lincoln and the true nature of the Civil War, the martyred president was always an opponent to slavery and always situated himself in the traditions of the American System of Hamilton describing in 1832 a policy which he later enacted 30 years later: “My politics are short and sweet, like the old woman’s dance. I am in favor of a national bank. I am in favor of the internal improvement system, and a high protective tariff. These are my sentiments and political principles.”

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From this period in the Congress where he became a leading ally of John Quincy Adams, and played a leading role in opposition to the unjust US-Mexican War, Lincoln committed himself consistently to ending not only systems of slavery but also all hereditary power structures internationally which he understood were inextricably connected saying during an 1858 debate with the slavocracy’s Judge Douglas:

“That is the issue that will continue in this country when these poor tongues of Judge Douglas and myself shall be silent. It is the eternal struggle between these two principles – right and wrong – throughout the world. They are the two principles that have stood face to face from the beginning of time, and will ever continue to struggle. The one is the common right of humanity and the other the divine right of kings.“

The means needed to break both systems of empire and slavery were located in the American System of political economy.

Lincoln Revives the American System

Putting this economic policy into action during the height of the war occurred in a 3-step operation which began with Banking and Currency Acts in 1862 and 1863. These acts established placed the thousands of local state banks under a federal charter with federal supervision for the first time in decades. By imposing a 10% tax on state bank notes, private independent state banks shrank from 1466 in 1861 to only 297 by 1865 and over 1630 national banks took their place.

The Bank Act of 1863 established reserve requirements for the first time, and also capped the interest rates in order to destroy usury within the nation itself. In order to eliminate international interference and manipulation from Wall Street financiers, the Bank Act also forced 75% of all bank directors to reside in the state in which the bank was located and all directors had to be American citizens.

The most important step in this fight was the sovereign control of credit issuance which according to Article 1 section 8 of the US constitution can only be affected through the US treasury (an important lesson for anyone serious about ending the privately run Federal Reserve controls over national finance today). Following this constitutional principle, Lincoln issued a new form of currency called Greenbacks which could only be issued against US government bonds. These began being issued with the 1862 Legal Tender Act.

Nationally-chartered banks were now obliged to deposit into the federal treasury totalling at least one third of their capital in exchange for government notes issued by the Mint and Treasury (in order to qualify for federal charters needed to avoid the tax on state bank activities, banks found themselves lending to the government which gave Lincoln an ability to avoid the usurious loans from London and Wall Street.)

New bonds were issued under this scheme called 5:20 bonds (due to their 5-20 year maturation), which citizens purchased as investments into their nations’ survival. These bonds which united “personal self interest” with the general welfare of the nation provided loans to manufacturing as well as served as the basis for the issuance of more Greenbacks. Organized by Lincoln’s ally Jay Cooke (a patriotic Philadelphia banker), the 5-20 bonds were sold in small denominations to average citizens who then had a vested interest in directly participating in saving their nation. Between 1862-1865 these bonds accounted for $1.3 billion. Lincoln described the success of this new approach to finance saying:

“The patriotism of the people has placed at the disposal of the government the large means demanded by the public exigencies. Much of the national loan has been taken by citizens of the industrial classes, whose confidence in their country’s faith and zeal for their country’s deliverance from present peril has induced them to contribute to the support of the government the whole of their limited acquisitions. This fact imposes peculiar obligations to economy in disbursement and energy in action.”

These measures were accompanied by a strong protective tariff to grow American industries as well.

By the beginning of 1865, $450 million in Greenbacks were issued making up over half of all currency in circulation. Greenbacks and 5-20 bonds financed not only the arming, feeding and payments to soldiers, but also the often-overlooked large scale industrial and rail programs begun during the peak of the war itself… namely the trans continental railway (started in 1863 and completed in 1869 linking for the first time in history a continent from east to west). This was financed through grants and subsidies made possible by the greenbacks which increased government spending power by 300%!

In his 1865 essay How to Outdo England Without Fighting Her, Lincoln’s economic advisor Henry C Carey stated: “The ‘greenback’ has fallen on the country as the dew falls, bringing with it good to all and doing injury to none.”

Unfortunately, the subversion of Lincoln’s American System began quickly with Lincoln’s murder. Rather than impose full reconstruction of the defeated south after the war as Lincoln planned, a new war was waged against Greenbacks led by the City of London and its American agents in Wall Street which ultimately subverted American productive credit with the 1875 Specie Resumption Act. This act killed the greenbacks and tied the republic’s currency to gold submitting the nation to London’s speculative controls while contracting the means of credit from large-scale long-term infrastructure projects.

Some Uncomfortable Questions Regarding Lincoln’s Murder

The story has been told of Lincoln’s murder in tens of thousands of books and yet more often than not the narrative of a “single lone gunman” is imposed onto the story by researchers who are either too lazy or too corrupt to look for the evidence of a larger plot.

How many of those popular narratives infused into the western zeitgeist over the decades even acknowledge the simple fact that John Wilkes Boothe was carrying a $500 bank draft signed by Ontario Bank of Montreal President Henry Starnes (later to become Montreal Mayor from 1866-1868) when he was shot dead at Garrett Farm on April 26, 1865?

How many people have been exposed to the vast Southern Confederacy secret service operations active throughout the civil war in Montreal, Toronto and Halifax which was under the firm control of Confederate Secretary of State Judah Benjamin and his handlers in British intelligence?

How many people know that Boothe spent at least 5 weeks in the fall of 1864 in Montreal associating closely with the highest echelons of British and Southern intelligence including Starnes, and confederate spy leaders Jacob Thompson and George Sanders?

Demonstrating his total ignorance of the process that controlled him, Booth wrote to a friend on October 28, 1864: “I have been in Montreal for the last 3 or 4 weeks and no one (not even myself) knew when I would return”.

Exposing the 19th Century Deep State

After Lincoln was murdered, a manhunt to track down the intelligence networks behind the assassination was underway that eventually led to the hanging of four low level co-conspirators who history has shown were just as much patsies as John Wilkes Boothe.

Days later, President Johnson issued a proclamation saying“It appears from evidence in the Bureau of Military Justice that the … murder of … Abraham Lincoln … [was] incited, concerted, and procured by and between Jefferson Davis, late of Richmond, Va., and Jacob Thompson, Clement C. Clay, [Nathaniel] Beverly Tucker, George N. Sanders, William C. Cleary, and other rebels and traitors against the government of the United States harbored in Canada.”

Two days before Booth was shot, Secretary of War Edwin Stanton wrote: “This Department has information that the President’s murder was organized in Canada and approved at Richmond.”

Knowledge of Canada’s confederate operations was well known to the federal authorities in those days even though the majority among leading historians today are totally ignorant of this fact.

George Sanders remains one of the most interesting figures among Booth’s handlers in Canada. As a former Ambassador to England under the presidency of Franklin Pierce (1853-1857), Sanders was a close friend of international anarchist Giuseppe Mazzini- the founder of the Young Europe movement. Sanders who wrote “Mazzini and Young Europe” in 1852, had the honor of being a leading member of the southern branch of the Young America Movement (while Ralph Waldo Emerson was a self-proclaimed leader of the northern branch of Young America). Jacob Thompson, who was named in the Johnson dispatch above, was a former Secretary of the Interior under President Pierce, handler of Booth and acted as the top controller of the Confederacy secret service in Montreal.

As the book Montreal City of Secrets (2017), author Barry Sheehy proves that not only was Canada the core of Confederate Secret Services, but also coordinated a multi pronged war from the emerging “northern confederacy” onto Lincoln’s defense of the union alongside Wall Street bankers while the president was fighting militarily to stop the southern secession. Sheehy writes: “By 1863, the Confederate Secret Service was well entrenched in Canada. Funding came from Richmond via couriers and was supplemented by profits from blockade running.”

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The Many Shapes of War from the North

Although not having devolved to direct military engagement, the Anglo-Canadian war on the Union involved several components:

Financial warfare: The major Canadian banks dominant in the 19th century were used not only by the confederacy to pay British operations in the construction of war ships, but also to receive much needed infusions of cash from British Financiers throughout the war. A financial war on Lincoln’s greenback was waged under the control of Montreal based confederate bankers John Porterfield and George Payne and also JP Morgan to “short” the greenback.

By 1864, the subversive traitor Salmon Chase had managed to tie the greenback to a (London controlled) gold standard thus making its value hinge upon gold speculation. During a vital moment of the war, these financiers coordinated a mass “sell off” of gold to London driving up the price of gold and collapsing the value of the US dollar crippling Lincoln’s ability to fund the war effort.

Direct Military intervention Thwarted: As early as 1861, the Trent Crisis nearly induced a hot war with Britain when a union ship intervened onto a British ship in international waters and arrested two high level confederate agents en route to London. Knowing that a two-fold war at this early stage was unwinnable, Lincoln pushed back against hot heads within his own cabinet who argued for a second front saying “one war at a time”. Despite this near miss, London wasted no time deploying over 10 000 soldiers to Canada for the duration of the war ready to strike down upon the Union at a moment’s notice and kept at bay in large measure due to the bold intervention of the Russian fleet to both Atlantic and Pacific coasts of the USA. This was a clear message to both England and to Napoleon III’s France (who were stationed across the Mexican border) to stay out of America’s war.

Despite Russia’s intervention, Britain continued to build warships for the Confederacy which devastated the Union navy during the war and which England had to pay $15.5 million to the USA in 1872 under the Alabama Claims.

Terrorism: It is less well known today than it was during the 19th century that confederate terror operations onto the north occurred throughout the civil war with raids on Union POW camps, efforts to burn popular New York hotels, blowing up ships on the Mississippi, and the infamous St Albans raid of October 1964 on Vermont and attacks on Buffalo, Chicago, Sandusky, Ohio, Detroit, and Pennsylvania. While the St Albans raiders were momentarily arrested in Montreal, they were soon released under the logic that they represented a “sovereign state” at conflict with another “sovereign state” with no connection with Canada (perhaps a lesson can be learned here for Meng Wanzhou’s lawyers?).

Assassination: I already mentioned that a $550 note was found on Boothe’s body with the signature of Ontario Bank president Henry Starnes which the failed actor would have received during his October 1864 stay in Montreal. What I did not mention is that Booth stayed at the St Lawrence Hall Hotel which served as primary headquarters for the Confederacy from 1863-65. Describing the collusion of Northern Copperheads, anti-Lincoln republicans, and Wall Street agents, Sheehy writes: “All of these powerful northerners were at St. Lawrence Hall rubbing elbows with the Confederates who used the hotel as an unofficial Headquarters. This was the universe in which John Wilkes Booth circulated in Canada.”

In a 2014 expose, historian Anton Chaitkin, points out that the money used by Boothe came directly from a $31,507.97 transfer from London arranged by the head of European confederate secret service chief James D. Bulloch. It is no coincidence that Bulloch happens to also be the beloved uncle and mentor of the same Teddy Roosevelt who became the president over the dead body of Lincoln-follower William McKinley (assassinated in 1901).

In his expose, Chaitkin wrote:

“James D. Bulloch was the maternal uncle, model and strategy-teacher to future U.S. President Theodore Roosevelt. He emerged from the shadows of the Civil War when his nephew Teddy helped him to organize his papers and to publish a sanitized version of events in his 1883 memoir, The Secret Service of the Confederate States in Europe. Under the protection of imperial oligarchs such as Lord Salisbury and other Cecil family members, working in tandem with Britain’s military occupation of its then-colony Canada, Bulloch arranged English construction and crewing for Confederate warships that notoriously preyed upon American commerce.”

The Truth is Buried Under the Sands of History

While four low level members of Booth’s cell were hanged on July 7, 1865 after a four month show trial[1], the actual orchestrators of Lincoln’s assassination were never brought to justice with nearly every leading member of the confederate leadership having escaped to England in the wake of Lincoln’s murder. Even John Surrat (who was among the eight who faced trial) avoided hanging when his case was dropped, and his $25 000 bail was mysteriously paid by an anonymous benefactor unknown to this day. After this, Surrat escaped to London where the US Consuls demands for his arrest were ignored by British authorities.

Confederate spymaster Judah Benjamin escaped arrest and lived out his days as a Barrister in England, and Confederate President Jefferson Davies speaking to adoring fans in Quebec in June 1867 encouraged the people to reject the spread of republicanism and instead embrace the new British Confederation scheme that would soon be imposed weeks later. Davies spoke to the Canadian band performing Dixie at the Royal Theater: “I hope that you will hold fast to their British principles and that you may ever strive to cultivate close and affectionate connections with the mother country”.

With the loss of Lincoln, and the 1868 death of Thaddeus Stevens, Confederate General Albert Pike established restoration of the southern oligarchy and sabotage of Lincoln’s restoration with the rise of the KKK, and renewal of Southern Rite Freemasonry. Over the ensuing years, an all out assault was launched on Lincoln’s Greenbacks culminating in the Specie Resumption Act of 1875 tying the US financial system to British “hard money” monetarism and paving the way for the later financial coup known as the Federal Reserve Act of 1913[2].

While the Southern Confederacy plot ultimately failed, Britain’s “other confederacy operation launched in 1864 was successfully consolidated with the British North America Act of July 1, 1867. The hoped-for extension of trans continental rail lines through British Columbia and into Alaska and Russia were sabotaged as told in the Real Story Behind the Alaska Purchase of 1867.

Instead of witnessing a new world system of sovereign nation states under a multipolar order of collaboration driven by international infrastructure projects as Lincoln’s followers like William Seward, Ulysses Grant, William Gilpin and President McKinley envisioned, a new age of war and empire re-asserted itself throughout the 20th century.

It was this same trifold Deep State that contended with Franklin Roosevelt and his patriotic Vice President Henry Wallace for power during the course of WWII, and it was this same beast that ran the assassination of President Kennedy in 1963. As New Orleans District Attorney Jim Garrison demonstrated in his book On the Trail of the Assassins (1991), Kennedy’s murder was arranged by a complex assassination network that brought into play Southern secret intelligence assets in Louisiana, and Texas, Wall Street financiers, and a strange assassination bureau based in Montreal named Permindex under the leadership of Maj. Gen. Louis Mortimer Bloomfield. This was the same intelligence operation that grew out of MI6’s Camp X in Ottawa during WWII and changed its name but not its functions during the Cold War. This is the same British Imperial complex that has been attempting to undo the watershed moment of 1776 for over 240 years.

It is this same tumor in the heart of the USA that has invested everything in a gamble to put their senile tool Joe Biden into the seat of the Presidency and oust the first genuinely nationalist American president the world has seen in nearly 60 years.

The Case of Trump and the Potential Return of the American System

Like Lincoln, President Trump faces many threats today both within his own neocon-infested administration as well as within the British run deep state that has taken over the Democratic party since the 1963 murder of JFK.

But in spite of these problems, he is undeniably the first president to publicly invoke the American System of Lincoln by name since the assassinated President McKinley in 1901. His recent Republican party convention speech of August 27 repeatedly invoked Lincoln’s name while calling for a newly reconstituted party without the Bush dynasty poison (the Bush family completely boycotted the convention). During the speech Trump stated:

“The Republican Party, the party of Abraham Lincoln, goes forward united, determined and ready to welcome millions of Democrats, independents and anyone who believes in the greatness of America and the righteous heart of the American people.”

In an earlier 2017 Kentucky speech Trump invoked the “American model” and said “this is the system our Founders wanted. Our greatest American leaders — including George Washington, Hamilton, Jackson, Lincoln — they all agreed that for America to be a strong nation it must also be a great manufacturing nation.”

A Parting Thought From Lincoln

Contemplating the international scope of the Civil War which has more relevance for today’s imperilled age than anyone may have expected 160 years ago, Lincoln stated in 1862:

“Fellow citizens, we cannot escape history. We of this Congress, and this administration, will be remembered in spite of ourselves. No personal significance, or insignificance, can spare one or another of us. The fiery trial through which we pass, will light us down, in honor or dishonor, to the last generation. We say we are for the Union. The world will not forget that we say this. We know how to save the Union. The world knows we know how to save it. We even here–hold the power and bear the responsibility. In giving freedom to the slave, we assure freedom to the free–honorable alike in what we give and what we preserve. We shall nobly save, or meanly lose, the last, best hope of earth. Other means may succeed–this could not fail. The way is plain, peaceful, generous and just–a way which, if followed, the world will forever applaud and God must forever bless… If we do this we shall not only have saved the Union, but we shall have so saved it, as to make, and to keep it forever worthy of the saving. We shall have so saved it, that the succeeding millions of free happy people the world over shall rise up and call us blessed, to the latest generations.”

Matthew Ehret is the Editor-in-Chief of the Canadian Patriot Review , a BRI Expert on Tactical talk, and has authored 3 volumes of ‘Untold History of Canada’ book series. In 2019 he co-founded the Montreal-based Rising Tide FoundationHe can be reached at matt.ehret@tutamail.com

  1. The four conspirators that faced the gallows included Mary Surratt, Lewis Powerll, George Atzerodt, and David Herold. 
  2. The entire principle of the American Credit System as embodied by Lincoln’s Greenback, is that it is driven not by the highly volatile prices of gold or silver but rather to the powers of productivity of the nation as a whole (see: ongoing scientific and technological rates of progress that render debt’s incurred by a national bank self-extinguishing). For more on this system, read the writings of Alexander Hamilton located here. 

When Wall Street flies with Icarus’ wings

When Wall Street flies with Icarus’ wings

October 08, 2020

by Jean-Luc Baslé for The Saker Blog

Wall Street is forever rising. The S&P500 index rose to 3,581 on September 2nd, 2020 – the highest level it has ever reached since its creation. This makes no sense. Wall Street is a reflection of the state of the economy which is in recession since February[1], the worst recession since 1929. How can share prices rise when the economy is falling? To answer this question, let’s analyse the economic policy of the United States these past few years, taking Federal Reserve Chair Jerome Powell’s speech of August 27th, 2020 as our starting point. Going back in time, we see that American leaders ignored the fundamental laws of economics. We note that foreign leaders, such as the European Central Bank governors, followed the same path. We conclude that stock prices do not reach the sky, and that the United States is caught in a bind from which the only way it can extricate itself is through a dollar depreciation. This bodes ill for the American Empire. The dollar is one of its main pillars.

Jerome Powell questions the validity of quantitative easing

Depending on their editorial stand, the media understood Powell’s speech as a return to inflation, giving greater attention to unemployment. But this summary ignores the essence of the message which questions the validity of quantitative easing – a policy followed by the Federal Reserve since November 2008. This is what Powell said: “With interest rates generally running closer to their effective lower bound even in good times, the Fed has less scope to support the economy during an economic downturn by simply cutting the federal funds rate.” In short: pushed to its limit, quantitative easing loses its capacity to alter employment and inflation. Quite logically, Jerome Powell and the Federal Open Market Policy (FOMC) call for a softening of the rules governing inflation and employment: “appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time”, and “a strong labor market, particularly for many in low-and moderate-income communities”.[2] This was understood as a return to inflation which it is not. It is an attempt to rescue quantitative easing while waiting for a return to more traditional economic policies.

By dropping surreptitiously quantitative easing, Jerome Powell is sending a message to Congress: economic policy cannot rest solely on monetary policy. Congress has at its disposal another tool: the budget. Over the past thirty years, priority has been given to monetary policy for several reasons. For conveniency reasons: monetary policy is essentially defined by one man, the Federal Reserve Chairman with the FOMC congruence. Budgetary policy, on the other hand, is defined by Congress and the President. It takes time for the two to agree, especially if Congress is split between a Democrat and a Republican majority. For efficiency reasons: changes in monetary policy are felt quite rapidly in the economy: six months to a year. It takes a lot longer (one to two years) for changes in the budget to be felt. For practicality reasons: budgetary measures imply taxation or indebtedness. Taxation is not very unpopular with the electorate, and indebtedness, if overused, leads to higher interest rates and slower economic growth. For all these reasons and the more theoretical ones set out by Milton Friedman and the monetarists, monetary policy became the policy of choice for the last thirty years, with quantitative easing being its most advanced form.

Priority being given to monetary policy with the budget playing second fiddle, the budget deficit should have come down and, with time, turned into a surplus. It did not happen. Worse, it has grown over the last twenty years to reach -4.6% in 2019. The initial figure expected for 2020 (-4.6%) will be substantially larger due to the Covid-19 virus. The $2,200 billion CARES Act approved by Congress in March to provide much needed relief to individuals, families and businesses, will translate into a much higher deficit, and a much higher level of debt.

Quantitative easing and the economy

Excessive money creation by central banks is anathema to financial markets since it is synonymous to inflation, higher interest rates, slower growth and the collapse of the stock market. It must be prohibited at all cost. Yet, that’s what quantitative easing is all about, and quantitative easing saved Wall Street and the economy after the 2008 subprime crisis. How can this be? In the fall of 2008, banks’ balance sheets were loaded with corporate bonds whose market value were well below their face value. To avoid a collapse of the market, the Federal Reserve bought the bonds, in effect replacing junk bonds with cash on banks’ balance sheets. The Fed’s bailout commitment totaled $29 trillion.[3] In view of this amount, it is no wonder that the program worked… to Wall Street’s satisfaction. Trust returned, the economy took off, and shares regained and exceeded their previous values. All is well and good, except the Federal Reserve exceeded its mandate. Its job is to provide the liquidity the economy needs to grow and achieve full employment without generating inflation. Under normal circumstances, the banks whose equity was washed out by bad investments, due to senior management’s poor decisions, should have been allowed to fail. To avoid a collapse of the economy, the government would have bought the banks’ shares at their market value, fired the management, and re-introduced the banks on the stock market once their business was back to normal. But these were no “normal circumstances”. Neither Congress which oversees the Federal Reserve policy, nor Barack Obama who was anxious to move past the crisis, blamed the Federal Reserve for outstepping its legal framework. As for Wall Street, it had every reason to rejoice. Not only was it saved from total collapse, but within five years the market value of its stocks, as measured by the S&P500, exceeded its pre-crisis value. It has more than doubled (graph 1).

The Federal Reserve’s quantitative easing did not result in a depreciation of the dollar, as could have been expected. In fact, the subprime crisis strengthened its value somewhat, as it was perceived by foreign investors as a safe haven to protect their wealth in a tumultuous environment. This strength of the dollar and the relative stability of foreign exchange market is also due to the interconnexion of world’s economies. The subprime crisis first emerged in the United States but spread rapidly around the world. Faced with a potentially damaging economic crisis, world leaders of the largest twenty economies – the G20 – met in Washington DC on November 14-15, 2008, i.e. only two months after Lehman Brothers’ bankruptcy. Asian and European central banks agreed to espouse the Federal Reserve’s quantitative easing policy. Money creation around the world being essentially the same in relative terms, currencies retain their value in relation to each other, as shown by graph 2 (note: exchange rates are expressed as an index, and the value of the pound sterling and the euro have been inversed to make them comparable to the yen and yuan).

Money creation saved Wall Street without depreciating the dollar, but what about employment? The United States’ performance is excellent. The December 2019 unemployment rate is 3.5% – a rate lower than all other advanced economies with the exception of Germany and Japan. The picture is less rosy if one looks at it from a different angle: the length of time it takes to return to full employment. It took 15 months after the 1973 recession, 30 months after 1990, 46 after 2001 and 75 months after 2008, i.e. over six years (graph 3). Quantitative easing which served Wall Street so well, did little for Main Street. Of course, as noted by Jerome Powell, there are other factors to be considered besides monetary policy when studying labor issues. Nonetheless, the conclusion is inescapable: quantitative easing worked better for Wall Street than it did for Main Street.

What about inflation? Ever since Federal Reserve Chairman Paul Volcker put a brutal end to stagflation[4] in letting the overnight rate go over 21% in June 1981, inflation has been subdued. Quantitative easing which is an inordinate increase of money in the economy should have, according to the quantity of money theory, led to inflation. It did not. The large quantity of money injected in the economy by the Federal Reserve had no impact on the price level. Graph 4 compares the velocity of money[5] with the Consumer Price Index – the velocity (blue line) is inversed to underline its exceptional rise in the last few years. Full employment did not lead to higher prices either. Jerome Powell observes that “the historically strong labor market did not trigger a significant rise in inflation”, as the Phillips Curve[6] would predict. He then notes that “inflation that is persistently too low can pose serious risks to the economy”. Clearly, the United States is in a peculiar situation where neither money creation nor full employment translates into higher prices, as economic theories tell us. Several hypotheses may explain this abnormality.

The fairly rapid opening up of the American market[7] in the early 1990s, followed by the creation of the World Trade Organization in 1994, shaped a new environment in which the procurement of a given product was no longer restricted to the home country. Bilateral trade relations among advanced nations became global to include developing nations, such as China which joined the WTO in 2001. Competition among manufacturers became global, pushing prices down. Corporations offshored their production to take advantage of lower wages in developing nations. This weakened the negotiating power of trade unions who were faced with an unpalatable deal: accept lower wages or lose jobs to the Chinese. The digital revolution also played a role in bringing costs down with many firms “rightsizing” their labor force thanks to the adoption of the personal computer. Finally, Ronald Reagan’s decision to fire 11,000 air controllers in 1981 had a tremendous impact on middle income employees who realized status did not protect them anymore: they could lose their jobs as easily as manual workers could. These events put an end to what was known as cost-push inflation – an overall increase in prices due to higher labor and raw material costs.

Increased energy efficiency, as measured by the ratio of oil consumption to GDP[8], also helped contain inflation. The ratio doubled over the last twenty years. While a barrel of oil produced $450,000 of economic wealth in 2000, it produced $920,000 in 2019. This is why the rapid rise in oil prices over the last fifteen years had little if any impact on the state of the world economy, as opposed to shocks inflicted by the 1973 and 1979 price hikes.

In summary, inflation remained subdued due to globalization, the Reagan and digital revolutions, and energy saving. These watershed events spare the United States a rise in price levels that quantitative easing would normally have brought up. Quantitative easing is not inflation-free, it benefited from exceptional conditions. With respect to employment, the Federal Reserve’s performance is dismal when compared to previous periods. But Wall Street has every reason to be satisfied with it.

The Federal Reserve’s monetary policy in the recent past.

The decoupling of quantitative easing and inflation partially explains why Jerome Powell is distancing himself from this much vaunted but, in truth, inefficient policy. Besides the dual, yet incompatible inflation-employment objective Congress assigned to Federal Reserve, he must also watch over the largest banks’ financial health to make sure it remains strong. In fact, this was the main role the Federal Reserve Act assigned to the Federal Reserve in 1913. This duty is crucial. Economic crises often arise from a bank failure, as was the case with Lehman Bros.’ bankruptcy in September 2008. From this standpoint, Jerome Powell deserves our praise for he averted two crises in the recent past even though one may argue about the reasons they were conducted.

The first rescue took place in September 2019. Without warning, interest rates on the “repo” market shot up to 10% in mid-day on September 17th., 2019.[9] This market is a corner stone in Wall Street’s architecture. If it fails, the whole structure crumbles. The Federal Reserve had to act promptly to calm the market down. This is what it did in injecting $41 billion into the market that very day. Interest rates plummeted. On September 18th, they had returned to their September 16th level. The cause of this ephemeral panic remains a mystery. But the fact that the Federal Reserve had to keep intervening for several months, leads one to conclude that structural causes might have been at work.

This incident was the prelude of a much worse crisis which was averted thanks to the combined effort of the Federal Reserve and Congress. On February 19, the S&P500 reached a new high: 3,386, then dropped abruptly reaching its lowest level in the year: 2,237 on March 23, i.e. a 30% fall in 36 days. This time, the Federal Reserve was slower in reacting. It’s only on March 11th, nearly a month after the stock market began to tumble, that it began injecting liquidity into the economy, propping up the stock market (graph 5). On March 13th, two Congressmen from the Democratic Party offered to help people who lost their job due to the pandemic. It took the form of The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act for short, which was unanimously approved by the Senate on March 25th and signed by Donald Trump on the 27th. It took only 15 days to ratify a law granting $2,200 billion, or about 10% of the gross domestic product – the largest amount ever approved in the history of the United States – to dodge an economic crisis in the making. Considering that by March 11, only 37 people had died from the virus while the S&P500 had already lost 19% of its value, one may question the politicians’ motivation. Was it the Covid-19 or was it Wall Street which led them to act decisively? Generous as it is to the unemployed, the CARES Act is equally generous to corporations which already benefited from the Federal Reserve’s action. Wall Street resumed its rise.

May the stock market rise to the sky? One is tempted to believe it when considering its performance. Could investors be the victim of an “irrational exuberance”? Not so, say some analysts who attribute the market rise to the “big tech” corporations (Google, Amazon, Facebook, Apple, Microsoft), also known under the acronym GAFAM. They account for about 20% of the market value and they are pooling up the market. But, excluding them from the S&P500 would mean excluding them – as well as other outperformers such as Tesla, Netflix, Nvidia, or Salesforce – from the American gross domestic product. One cannot dissect the market according to one’s view. The market is a reflection of the economy at large: the more profitable the corporations, the higher the value of their shares. Right? Wrong. Over the last few years, the stock market is disconnected from the economy. Net income has been flat since 2017 while share values gained 43% (graph 6). This makes no sense. The market is acting irrationally. It’s a matter of time before it corrects itself.

Returning to orthodoxy

In the 50’s and 60’s, the American government was a paragon of virtue. The budget was in quasi-equilibrium. There was little debt, no inflation, and the workforce was fully employed. Things have changed since then. The deficit is rising, the debt is growing ever-larger, and employment is not what it is purported to be. In the trio it makes up with the Federal Reserve and Wall Street, the federal government is the most important element for it defines the economic policy.

This brings us back to Jerome Powell’s speech. A lesser importance granted to monetary policy, as he posits, means a great one given to budgetary policy, assuming of course that the government has the latitude necessary to do so. This is not the case. The deficit is on a downward slope ever since the late 1960s, with the exception of a four-year gap from 1999 till 2002[10]. The federal debt rose from 40% of GDP in the early 1980s to 107% in December 2019. The combined Federal Reserve/CARES Act rescue package pushed it up to 137% as of June 30th – a level higher than at the end of World War II (119%). Giving a greater role to budgetary policy means either higher taxes or more debt, or both. Taxes have never been very popular with the electorate, and the federal debt reached a level beyond which the United States’ credit rating may fall and the value of the dollar may drop. Authorities are caught between a rock and a hard place: monetary policy lost its effectiveness at a time the budget deficit should be reined in.

With 29.7 million unemployed (including the 13.6 million “gig” workers with no insurance coverage), the situation could quickly become worrisome, politically and socially. Aware of the danger, members of Congress had hoped to prolong the CARES Act for the unemployed, but electoral rivalry with the upcoming presidential election quickly set in and any attempt to maintain some of the benefits of the CARES Act were doomed to failure. On August 8th, Donald Trump signed an Executive Order granting $300 a week to unemployed people – humanitarian and electoral reasons no doubt explain his decision. The Center for Control Disease and Prevention declared a moratorium forbidding tenant evictions until the end of the year, bringing some relief to the most vulnerable families. Praiseworthy as the decision might be, it carries a risk: bankruptcy for real estate owners who, deprived from rental revenues, may not be able to reimburse their bank loans. In turn, this may weaken the banks’ financial health and be the cause of a crisis.

The situation is becoming inextricable. The on-going deterioration of the economy increases the budget deficit and the public debt beyond reasonable levels while monetary policy has lost its effectiveness. The government’s two main levers to direct the country’s economic policy have become ineffectual. Due to the presidential election, no new measures are likely to be implemented between now and February or March – a time lapse during which the economy is likely to deteriorate further.

To prevent such an unwelcome development, Ms. Loretta Master, president of the Federal Reserve Bank of Cleveland suggested on September 23rd to credit every American’s bank account with “digital dollar” directly from the Federal Reserve. Her proposal was well received. Market analyst Wolf Richter calculates that a $3 trillion transfer would translate into a $28000 sum for a household of two adults. This would prop up consumer spending and pull the American economy out of recession. But it would also create inflation and depreciate the dollar. A digital dollar is a dollar. Ms. Master’s proposal is another form of money creation. The total of the Federal Reserve’s balance sheet which amounted to 40% of the gross domestic product in the 1960s, rose to 100% in December 2012. It now stands at 125%. Is the United States on its way to repeating the Wehrmacht Republic’s mistakes of the 1920s? What will happen to the dollar, if the Federal Reserve pursues its money creation policy? And what will happen to the United States’ credit rating?

Icarus’s wax is melting

Whatever measures are eventually agreed upon the public debt will rise. Who will finance it? About 70% of it is presently financed by the American public, federal agencies and the Federal Reserve. The remaining 30% is financed by foreigners. The percentage is dropping. In the summer of 2012, foreign investors held 34% of the public debt. The trend is likely to continue if we use gold prices. Gold is a yardstick of investors’ confidence. For several years, worried investors have been exchanging their dollar-denominated U.S. Treasury holdings for gold, pushing up its price. Graph 7 is most interesting in that it shows the investors’ change of mood. Following the 2008 subprime crisis, they put their financial assets into dollar and gold. Today, they are moving out of the dollar into gold. This is not a good sign for the dollar.

Meanwhile, the stock market is fumbling. After reaching its highest value ever on September 2nd (3,581), it is falling. Share values, like Icarus, do not rise to the sky. If the stock market fall continues which is most likely due to the state of the economy, the American recession will translate into a world recession, since the U.S. economy accounts for 15% of the world economy. In turn, the world recession will aggravate the American recession in a vicious circle analogous of the Great Depression. This could mean the demise of the American Empire.

Jean-Luc Baslé is a former Citigroup (New York) Vice President, Columbia University graduate, Princeton University graduate, 20 years in the United States, author of “The International Monetary System: Challenges and Perspectives” (1982), “L’euro survivra-t-il ?” (2016).

  1. National Bureau of Economic Research. 
  2. “New Economic Challenges and the Fed’s Monetary Policy Review”, Jerome H. Powell – August 27, 2020. 
  3. $29,000,000,000,000: a detailed look at the Fed’s bailout by funding facility and recipient. James Felkerson, Dec. 2001. 
  4. Stagflation is an unusual combination of inflation and recession (unemployment). 
  5. The velocity of money is the ratio of money to the gross domestic product. 
  6. Higher level of employment leads to higher wages and higher inflation. 
  7. In the 1960s, U.S. imports amounted to 5% of gross domestic product. They averaged 16.5% in the last decade. 
  8. Gross domestic product 
  9. A repurchase agreement “repo” is a short-term secured loan: one party (usually a financial institution) sells securities to another and agrees to repurchase them within a short period of time. 
  10. This was due to the “peace dividend”. 

Hyperinflation, Fascism and War: How the New World Order May Be Defeated Once More

Source

Hyperinflation, Fascism and War: How the New World Order May Be Defeated Once More

September 19, 2020

By Matthew Ehret for the Saker Blog

While the world’s attention is absorbed by tectonic shifts unfolding across America as “a perfect storm of civil war, and military coup threatens to undo both the elections and the very foundations of the republic itself, something very ominous has appeared “off of the radar” of most onlookers. This something is a financial collapse of the trans-Atlantic banks that threatens to unleash chaos upon the world. It is this collapse that underlies the desperate efforts being made by the neo-con drive for total war with Russia, China and other members of the growing Mutlipolar Alliance today.

In recent articles, I have mentioned that the Bank of England-led “solution” to this oncoming financial blowout of the $1.5 quadrillion derivatives bubble is being pushed under the cover of a “Great Global Reset” which is an ugly and desperate effort to use COVID-19 as a cover for the imposition of a new post-covid world order operating system. Since the new “rules” of this new system are very similar to the 1923 Bank of England “solution” to Germany’s economic chaos which eventually required a fascist governance mechanism to impose it onto the masses, I wish to take a deeper look at the causes and effects of Weimar Germany’s completely un-necessary collapse into hyperinflation and chaos during the period of 1919-1923.

In this essay, I will go further to examine how those same architects of hyperfinflation came close to establishing a global bankers’ dictatorship in 1933 and how that early attempt at a New World Order was fortunately derailed through a bold fight which has been written out of popular history books.

We will investigate in depth how a major war broke out within America led by anti-imperial patriots in opposition to the forces of Wall Street and London’s Deep State and we will examine how this clash of paradigms came to a head in 1943-1945.

This historical study is not being conducted for entertainment, nor should this be seen as a purely academic exercise, but is being created for the simple fact that the world is coming to a total systemic meltdown and unless certain suppressed facts of 20th century history are brought to light, then those forces who have destroyed our collective memory of what we once were will remain in the drivers seat as society is carried into a new age of fascism and world war.

Versailles and the Destruction of Germany

Britain had been the leading hand behind the orchestration of WWI and the destruction of the potential German-Russian-American-Ottoman alliance that had begun to take form by the late 19th century as foolish Kaiser Wilhelm discovered (though sadly too late) when he said: “the world will be engulfed in the most terrible of wars, the ultimate aim of which is the ruin of Germany. England, France and Russia have conspired for our annihilation… that is the naked truth of the situation which was slowly but surely created by Edward VII”.

Just as the British oligarchy managed the war, so too did they organize the reparations conference in France which, among other things, imposed impossible debt repayments upon a defeated Germany and created the League of Nations which was meant to become the instrument for a “post-nation state world order”. Lloyd George led the British delegation alongside his assistant Philip Kerr (Lord Lothian), Leo Amery, Lord Robert Cecil and Lord John Maynard Keynes who have a long term agenda to bring about a global dictatorship. All of these figures were members of the newly emerging Round Table Movement, that had taken full control of Britain by ousting Asquith in 1916, and which is at the heart of today’s “deep state”.

After the 1918 Armistice dismantled Germany’s army and navy, the once powerful nation was now forced to pay the impossible sum of 132 billion gold marks to the victors and had to give up territories representing 10% of its population (Alsace-Loraine, Ruhr, and North Silesia) which made up 15% of its arable land, 12% of its livestock, 74% of its iron ore, 63% of its zinc production, and 26% of its coal. Germany also had to give up 8000 locomotives, 225 000 railcars and all of its colonies. It was a field day of modern pillage.

Germany was left with very few options. Taxes were increased and imports were cut entirely while exports were increased. This policy (reminiscent of the IMF austerity techniques in use today) failed entirely as both fell 60%. Germany gave up half of its gold supply and still barely a dent was made in the debt payments. By June 1920 the decision was made to begin a new strategy: increase the printing press. Rather than the “miracle cure” which desperate monetarists foolishly believed it would be, this solution resulted in an asymptotic devaluation of the currency into hyperinflation. From June 1920 to October 1923 the money supply in circulation skyrocketed from 68.1 gold marks to 496.6 quintillion gold marks. In June 1922, 300 marks exchanged $1 US and in November 1923, it took 42 trillion marks to get $1 US! Images are still available of Germans pushing wheelbarrows of cash down the street, just to buy a stick of butter and bread (1Kg of Bread sold for $428 billion marks in 1923).

With the currency’s loss of value, industrial output fell by 50%, unemployment rose to over 30% and food intake collapsed by over half of pre-war levels. German director Fritz Lang’s 1922 film Dr. Mabuse (The Gambler) exposed the insanity of German population’s collapse into speculative insanity as those who had the means began betting against the German mark in order to protect themselves thus only helping to collapse the mark from within. This is very reminiscent of those Americans today short selling the US dollar rather than fighting for a systemic solution.

There was resistance.

The dark effects of Versailles were not unknown and Germany’s Nazi-stained destiny was anything but pre-determined. It is a provable fact often left out of history books that patriotic forces from Russia, America and Germany attempted courageously to change the tragic trajectory of hyperinflation and fascism which WOULD HAVE prevented the rise of Hitler and WWII had their efforts not been sabotaged.

From America itself, a new Presidential team under the leadership of William Harding quickly reversed the pro-League of Nations agenda of the rabidly anglophile President Woodrow Wilson. A leading US industrialist named Washington Baker Vanderclip who had led in the world’s largest trade agreement in history with Russia to the tune of $3 billion in 1920 had called Wilson “an autocrat at the inspiration of the British government.” Unlike Wilson, President Harding both supported the US-Russia trade deal and undermined the League of Nations by re-enforcing America’s sovereignty, declaring bi-lateral treaties with Russia, Hungary and Austria outside of the league’s control in 1921. The newly-formed British Roundtable Movement in America (set up as the Council on Foreign Relations) were not pleased.

Just as Harding was maneuvering to recognize the Soviet Union and establish an entente with Lenin, the great president ate some “bad oysters” and died on August 2, 1923. While no autopsy was ever conducted, his death brought a decade of Anglophile Wall Street control into America and ended all opposition to World Government from the Presidency. This period resulted in the speculation-driven bubble of the roaring 20s whose crash on black Friday in 1929 nearly unleashed a fascist hell in America.

The Russia-Germany Rapallo Treaty is De-Railed

After months of organizing, leading representatives of Russia and Germany agreed to an alternative solution to the Versailles Treaty which would have given new life to Germany’s patriots and established a powerful Russia-German friendship in Europe that would have upset other nefarious agendas.

Under the leadership of German Industrialist and Foreign Minster Walter Rathenau, and his counterpart Russian Foreign Minister Georgi Chicherin, the treaty was signed in Rapallo, Italy on April 16, 1922 premised upon the forgiveness of all war debts and a renouncement of all territorial claims from either side. The treaty said Russia and Germany would “co-operate in a spirit of mutual goodwill in meeting the economic needs of both countries.”

When Rathenau was assassinated by a terrorist cell called the Organization Consul on June 24, 1922 the success of the Rapallo Treaty lost its steam and the nation fell into a deeper wave of chaos and money printing. The Organization Consul had taken the lead in the murder of over 354 German political figures between 1919-1923, and when they were banned in 1922, the group merely changed its name and morphed into other German paramilitary groups (such as the Freikorps) becoming the military arm of the new National Socialist Party.

1923: City of London’s Solution is imposed

When the hyperinflationary blowout of Germany resulted in total un-governability of the state, a solution took the form of the Wall Street authored “Dawes Plan” which necessitated the use of a London-trained golem by the name of Hjalmar Schacht. First introduced as Currency Commissioner in November 1923 and soon President of the Reichsbank, Schacht’s first act was to visit Bank of England’s governor Montagu Norman in London who provided Schacht a blueprint for proceeding with Germany’s restructuring. Schacht returned to “solve” the crisis with the very same poison that caused it.

First announcing a new currency called the “rentenmark” set on a fixed value exchanging 1 trillion reichsmarks for 1 new rentenmark, Germans were robbed yet again. This new currency would operate under “new rules” never before seen in Germany’s history: Mass privatizations resulted in Anglo-American conglomerates purchasing state enterprises. IG Farben, Thyssen, Union Banking, Brown Brothers Harriman, Standard Oil, JP Morgan and Union Banking took control Germany’s finances, mining and industrial interests under the supervision of John Foster Dulles, Montagu Norman, Averill Harriman and other deep state actors. This was famously exposed in the 1961 film Judgement at Nuremburg by Stanley Kramer.

Schacht next cut credit to industries, raised taxes and imposed mass austerity on “useless spending”. 390 000 civil servants were fired, unions and collective bargaining was destroyed and wages were slashed by 15%.

As one can imagine, this destruction of life after the hell of Versailles was intolerable and civil unrest began to boil over in ways that even the powerful London-Wall Street bankers (and their mercenaries) couldn’t control. An enforcer was needed unhindered by the republic’s democratic institutions to force Schacht’s economics onto the people. An up-and-coming rabble rousing failed painter who had made waves in a Beerhall Putsch on November 8, 1923 was perfect.

One Last Attempt to Save Germany

Though Hitler grew in power over the coming decade of Schachtian economics, one last republican effort was made to prevent Germany from plunging into a fascist hell in the form of the November 1932 election victory of General Kurt von Schleicher as Chancellor of Germany. Schleicher had been a co-architect of Rapallo alongside Rathenau a decade earlier and was a strong proponent of the Friedrich List Society’s program of public works and internal improvements promoted by industrialist Wilhelm Lautenbach. The Nazi party’s public support collapsed and it found itself bankrupt. Hitler had fallen into depression and was even contemplating suicide when “a legal coup” was unleashed by the Anglo-American elite resulting in Wall Street funds pouring into Nazi coffers.

By January 30, 1933 Hitler gained Chancellorship where he quickly took dictatorial powers under the “state of emergency” caused by the burning of the Reichstag in March 1933. By 1934 the Night of the Long Knives saw General Schleicher and hundreds of other German patriots assassinated and it was only a few years until the City of London-Wall Street Frankenstein monster stormed across the world.

How the 1929 Crash was Manufactured

While everyone knows that the 1929 market crash unleashed four years of hell in America which quickly spread across Europe under the great depression, not many people have realized that this was not inevitable, but rather a controlled blowout.

The bubbles of the 1920s were unleashed with the early death of President William Harding in 1923 and grew under the careful guidance of JP Morgan’s President Coolidge and financier Andrew Mellon (Treasury Secretary) who de-regulated the banks, imposed austerity onto the country, and cooked up a scheme for Broker loans allowing speculators to borrow 90% on their stock. Wall Street was deregulated, investments into the real economy were halted during the 1920s and insanity became the norm. In 1925 broker loans totalled $1.5 billion and grew to $2.6 billion in 1926 and hit $5.7 billion by the end of 1927. By 1928, the stock market was overvalued fourfold!

When the bubble was sufficiently inflated, a moment was decided upon to coordinate a mass “calling in” of the broker loans. Predictably, no one could pay them resulting in a collapse of the markets. Those “in the know” cleaned up with JP Morgan’s “preferred clients”, and other financial behemoths selling before the crash and then buying up the physical assets of America for pennies on the dollar. One notable person who made his fortune in this manner was Prescott Bush of Brown Brothers Harriman, who went onto bailout a bankrupt Nazi party in 1932. These financiers had a tight allegiance with the City of London and coordinated their operations through the private central banking system of America’s Federal Reserve and Bank of International Settlements.

The Living Hell that was the Great Depression

Throughout the Great depression, the population was pushed to its limits making America highly susceptible to fascism as unemployment skyrocketed to 25%, industrial capacity collapsed by 70%, and agricultural prices collapsed far below the cost of production accelerating foreclosures and suicide. Life savings were lost as 4000 banks failed.

This despair was replicated across Europe and Canada with eugenics-loving fascists gaining popularity across the board. England saw the rise of Sir Oswald Mosley’s British Union of Fascists in 1932, English Canada had its own fascist solution with the Rhodes Scholar “Fabian Society” League of Social Reconstruction (which later took over the Liberal Party) calling for the “scientific management of society”. Time magazine had featured Il Duce over 6 times by 1932 and people were being told by that corporate fascism was the economic solution to all of America’s economic woes.

In the midst of the crisis, the City of London removed itself from the gold standard in 1931 which was a crippling blow to the USA, as it resulted in a flight of gold from America causing a deeper contraction of the money supply and thus inability to respond to the depression. British goods simultaneously swamped the USA crushing what little production was left.

It was in this atmosphere that one of the least understood battles unfolded in 1933.

1932: A Bankers’ Dictatorship is Attempted

In Germany, a surprise victory of Gen. Kurt Schleicher caused the defeat of the London-directed Nazi party in December 1932 threatening to break Germany free of Central Bank tyranny. A few weeks before Schleicher’s victory, Franklin Roosevelt won the presidency in America threatening to regulate the private banks and assert national sovereignty over finance.

Seeing their plans for global fascism slipping away, the City of London announced that a new global system controlled by Central Banks had to be created post haste. Their objective was to use the economic crisis as an excuse to remove from nation states any power over monetary policy, while enhancing the power of Independent Central Banks as enforcers of “balanced global budgets”. elaborate

In December 1932, an economic conference “to stabilize the world economy” was organized by the League of Nations under the guidance of the Bank of International Settlements (BIS) and Bank of England. The BIS was set up as “the Central Bank of Central Banks” in 1930 in order to facilitate WWI debt repayments and was a vital instrument for funding Nazi Germany- long after WWII began. The London Economic Conference brought together 64 nations of the world under a controlled environment chaired by the British Prime Minister and opened by the King himself.

A resolution passed by the Conference’s Monetary Committee stated:

“The conference considers it to be essential, in order to provide an international gold standard with the necessary mechanism for satisfactory working, that independent Central Banks, with requisite powers and freedom to carry out an appropriate currency and credit policy, should be created in such developed countries as have not at present an adequate central banking institution” and that “the conference wish to reaffirm the great utility of close and continuous cooperation between Central Banks. The Bank of International Settlements should play an increasingly important part not only by improving contact, but also as an instrument for common action.”

Echoing the Bank of England’s modern fixation with “mathematical equilibrium”, the resolutions stated that the new global gold standard controlled by central banks was needed “to maintain a fundamental equilibrium in the balance of payments” of countries. The idea was to deprive nation states of their power to generate and direct credit for their own development.

FDR Torpedoes the London Conference

Chancellor Schleicher’s resistance to a bankers’ dictatorship was resolved by a “soft coup” ousting the patriotic leader in favor of Adolph Hitler (under the control of a Bank of England toy named Hjalmar Schacht) in January 1933 with Schleicher assassinated the following year. In America, an assassination attempt on Roosevelt was thwarted on February 15, 1933 when a woman knocked the gun out of the hand of an anarchist-freemason in Miami resulting in the death of Chicago’s Mayor Cermak.

Without FDR’s dead body, the London conference met an insurmountable barrier, as FDR refused to permit any American cooperation. Roosevelt recognized the necessity for a new international system, but he also knew that it had to be organized by sovereign nation states subservient to the general welfare of the people and not central banks dedicated to the welfare of the oligarchy. Before any international changes could occur, nation states castrated from the effects of the depression had to first recover economically in order to stay above the power of the financiers.

By May 1933, the London Conference crumbled when FDR complained that the conference’s inability to address the real issues of the crisis is “a catastrophe amounting to a world tragedy” and that fixation with short term stability were “old fetishes of so-called international bankers”. FDR continued “The United States seeks the kind of dollar which a generation hence will have the same purchasing and debt paying power as the dollar value we hope to attain in the near future. That objective means more to the good of other nations than a fixed ratio for a month or two. Exchange rate fixing is not the true answer.”

The British drafted an official statement saying “the American statement on stabilization rendered it entirely useless to continue the conference.”

FDR’s War on Wall Street

The new president laid down the gauntlet in his inaugural speech on March 4th saying: “The money-changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit”.

FDR declared a war on Wall Street on several levels, beginning with his support of the Pecorra Commission which sent thousands of bankers to prison, and exposed the criminal activities of the top tier of Wall Street’s power structure who manipulated the depression, buying political offices and pushing fascism. Ferdinand Pecorra who ran the commission called out the deep state when he said “this small group of highly placed financiers, controlling the very springs of economic activity, holds more real power than any similar group in the United States.”

Pecorra’s highly publicized success empowered FDR to impose sweeping regulation in the form of 1) Glass-Steagall bank separation, 2) bankruptcy re-organization and 3) the creation of the Security Exchange Commission to oversee Wall Street. Most importantly, FDR disempowered the London-controlled Federal Reserve by installing his own man as Chair (Industrialist Mariner Eccles) who forced it to obey national commands for the first time since 1913, while creating an “alternative” lending mechanism outside of Fed control called the Reconstruction Finance Corporation (RFC) which became the number one lender to infrastructure in America throughout the 1930s.

One of the most controversial policies for which FDR is demonized today was his abolishment of the gold standard. The gold standard itself constricted the money supply to a strict exchange of gold per paper dollar, thus preventing the construction of internal improvements needed to revive industrial capacity and put the millions of unemployed back to work for which no financial resources existed. It’s manipulation by international financiers made it a weapon of destruction rather than creation at this time. Since commodity prices had fallen lower than the costs of production, it was vital to increase the price of goods under a form of “controlled inflation” so that factories and farms could become solvent and unfortunately the gold standard held that back. FDR imposed protective tariffs to favor agro-industrial recovery on all fronts ending years of rapacious free trade.

FDR stated his political-economic philosophy in 1934: “the old fallacious notion of the bankers on the one side and the government on the other side, as being more or less equal and independent units, has passed away. Government by the necessity of things must be the leader, must be the judge, of the conflicting interests of all groups in the community, including bankers.”

The Real New Deal

Once liberated from the shackles of the central banks, FDR and his allies were able to start a genuine recovery by restoring confidence in banking. Within 31 days of his bank holiday, 75% of banks were operational and the FDIC was created to insure deposits. Four million people were given immediate work, and hundreds of libraries, schools and hospitals were built and staffed- All funded through the RFC. FDR’s first fireside chat was vital in rebuilding confidence in the government and banks, serving even today as a strong lesson in banking which central bankers don’t want you to learn about.

From 1933-1939, 45 000 infrastructure projects were built. The many “local” projects were governed, like China’s Belt and Road Initiative today, under a “grand design” which FDR termed the “Four Quarters” featuring zones of megaprojects such as the Tennessee Valley Authority area in the south east, the Columbia River Treaty zone on the northwest, the St Laurence Seaway zone on the North east, and Hoover Dam/Colorado zone on the Southwest. These projects were transformative in ways money could never measure as the Tennessee area’s literacy rose from 20% in 1932 to 80% in 1950, and racist backwater holes of the south became the bedrock for America’s aerospace industry due to the abundant and cheap hydropower. As I had already reported on the Saker, FDR was not a Keynesian (although it cannot be argued that hives of Rhodes Scholars and Fabians penetrating his administration certainly were).

Wall Street Sabotages the New Deal

Those who criticize the New Deal today ignore the fact that its failures have more to do with Wall Street sabotage than anything intrinsic to the program. For example, JP Morgan tool Lewis Douglass (U.S. Budget Director) forced the closure of the Civil Works Administration in 1934 resulting in the firing of all 4 million workers.

Wall Street did everything it could to choke the economy at every turn. In 1931, NY banks loans to the real economy amounted to $38.1 billion which dropped to only $20.3 billion by 1935. Where NY banks had 29% of their funds in US bonds and securities in 1929, this had risen to 58% which cut off the government from being able to issue productive credit to the real economy.

When, in 1937, FDR’s Treasury Secretary persuaded him to cancel public works to see if the economy “could stand on its own two feet”, Wall Street pulled credit out of the economy collapsing the Industrial production index from 110 to 85 erasing seven years’ worth of gain, while steel fell from 80% capacity back to depression levels of 19%. Two million jobs were lost and the Dow Jones lost 39% of its value. This was no different from kicking the crutches out from a patient in rehabilitation and it was not lost on anyone that those doing the kicking were openly supporting Fascism in Europe. Bush patriarch Prescott Bush, then representing Brown Brothers Harriman was found guilty for trading with the enemy in 1942!

Coup Attempt in America Thwarted

The bankers didn’t limit themselves to financial sabotage during this time, but also attempted a fascist military coup which was exposed by Maj. Gen. Smedley Butler in his congressional testimony of November 20, 1934. Butler had testified that the plan was begun in the Summer of 1933 and organized by Wall Street financiers who tried to use him as a puppet dictator leading 500 000 American Legion members to storm the White House. As Butler spoke, those same financiers had just set up an anti-New Deal organization called the American Liberty League which fought to keep America out of the war in defense of an Anglo-Nazi fascist global government which they wished to partner with.

The American Liberty league only changed tune when it became evident that Hitler had become a disobedient Frankenstein monster who wasn’t content in a subservient position to Britain’s idea of a New World Order. In response to the Liberty League’s agenda, FDR said “some speak of a New World Order, but it is not new and it is not order”.

FDR’s Anti-Colonial Post-War Vision

One of the greatest living testimonies to FDR’s anti-colonial vision is contained in a little known 1946 book authored by his son Elliot Roosevelt who, as his father’s confidante and aide, was privy to some of the most sensitive meetings his father participated in throughout the war. Seeing the collapse of the post-war vision upon FDR’s April 12, 1945 death and the emergence of a pro-Churchill presidency under Harry Truman, who lost no time in dropping nuclear bombs on a defeated Japan, ushering in a Soviet witch hunt at home and launching a Cold War abroad, Elliot authored ‘As He Saw It’ (1946) in order to create a living testimony to the potential that was lost upon his father’s passing.

As Elliot said of his motive to write his book:

“The decision to write this book was taken more recently and impelled by urgent events. Winston Churchill’s speech at Fulton, Missouri, had a hand in this decision,… the growing stockpile of American atom bombs is a compelling factor; all the signs of growing disunity among the leading nations of the world, all the broken promises, all the renascent power politics of greedy and desperate imperialism were my spurs in this undertaking… And I have seen the promises violated, and the conditions summarily and cynically disregarded, and the structure of peace disavowed… I am writing this, then, to you who agree with me that… the path he charted has been most grievously—and deliberately—forsaken.”

The Four Freedoms

Even before America had entered the war, the principles of international harmony which FDR enunciated in his January 6, 1941 Four Freedoms speech to the U.S. Congress served as the guiding light through every battle for the next 4.5 years. In this speech FDR said:

“In future days, which we seek to secure, we look forward to a world founded upon four essential human freedoms.

“The first is the freedom of speech and expression–everywhere in the world.

“The second is the freedom of every person to worship God in his own way–everywhere in the world.

“The third is the freedom from want–which, translated into world terms, means economic understandings which will secure to every nation a healthy peacetime life for its inhabitants–everywhere in the world.

“The fourth is freedom from fear–which, translated into world terms, means a worldwide reduction of armaments to such a point and in such a thorough fashion that no nation will be in a position to commit an act of physical aggression against any neighbor–anywhere in the world.

“That is no vision of a distant millennium. It is a definite basis for a kind of world attainable in our time and generation. That kind of world is the very antithesis of the so-called new order of tyranny which dictators seek to create with the crash of a bomb.

“To that new order, we oppose the greater conception–the moral order. A good society is able to face schemes of world domination and foreign revolutions alike without fear.

“Since the beginning of American history, we have been engaged in change–in a perpetual peaceful revolution–a revolution which goes on steadily, quietly, adjusting itself to changing conditions–without the concentration camp or the quicklime in the ditch. The world order which we seek is the cooperation of free countries, working together in a friendly, civilized society.

“This nation has placed its destiny in the hands and heads and hearts of millions of free men and women; and its faith in freedom under the guidance of God. Freedom means the supremacy of human rights everywhere. Our support goes to those who struggle to gain those rights or to keep them. Our strength is our unity of purpose.”

Upon hearing these Freedoms outlined, American painter Norman Rockwell was inspired to paint four masterpieces that were displayed across America and conveyed the beauty of FDR’s spirit to all citizens.

FDR’s patriotic Vice President (and the man who SHOULD have been president in 1948) Henry Wallace outlined FDR’s vision in a passionate video address to the people in 1942 which should also be watched by all world citizens today:

Churchill vs FDR: The Clash of Two Paradigms

Elliot’s account of the 1941-1945 clash of paradigms between his father and Churchill are invaluable both for their ability to shed light into the true noble constitutional character of America personified in the person of Roosevelt but also in demonstrating the beautiful potential of a world that SHOULD HAVE BEEN had certain unnatural events not intervened to derail the evolution of our species into an age of win-win cooperation, creative reason and harmony.

In As He Saw It, Elliot documents a conversation he had with his father at the beginning of America’s entry into WWII, who made his anti-colonial intentions clear as day saying:

“I’m talking about another war, Elliott. I’m talking about what will happen to our world, if after this war we allow millions of people to slide back into the same semi-slavery!

“Don’t think for a moment, Elliott, that Americans would be dying in the Pacific tonight, if it hadn’t been for the shortsighted greed of the French and the British and the Dutch. Shall we allow them to do it all, all over again? Your son will be about the right age, fifteen or twenty years from now.

“One sentence, Elliott. Then I’m going to kick you out of here. I’m tired. This is the sentence: When we’ve won the war, I will work with all my might and main to see to it that the United States is not wheedled into the position of accepting any plan that will further France’s imperialistic ambitions, or that will aid or abet the British Empire in its imperial ambitions.”

This clash came to a head during a major confrontation between FDR and Churchill during the January 24, 1943 Casablanca Conference in Morocco. At this event, Elliot documents how his father first confronted Churchill’s belief in the maintenance of the British Empire’s preferential trade agreements upon which it’s looting system was founded:

“Of course,” he [FDR] remarked, with a sly sort of assurance, “of course, after the war, one of the preconditions of any lasting peace will have to be the greatest possible freedom of trade.”

He paused. The P.M.’s head was lowered; he was watching Father steadily, from under one eyebrow.

“No artificial barriers,” Father pursued. “As few favored economic agreements as possible. Opportunities for expansion. Markets open for healthy competition.” His eye wandered innocently around the room.

Churchill shifted in his armchair. “The British Empire trade agreements” he began heavily, “are—”

Father broke in. “Yes. Those Empire trade agreements are a case in point. It’s because of them that the people of India and Africa, of all the colonial Near East and Far East, are still as backward as they are.”

Churchill’s neck reddened and he crouched forward. “Mr. President, England does not propose for a moment to lose its favored position among the British Dominions. The trade that has made England great shall continue, and under conditions prescribed by England’s ministers.”

“You see,” said Father slowly, “it is along in here somewhere that there is likely to be some disagreement between you, Winston, and me.

“I am firmly of the belief that if we are to arrive at a stable peace it must involve the development of backward countries. Backward peoples. How can this be done? It can’t be done, obviously, by eighteenth-century methods. Now—”

“Who’s talking eighteenth-century methods?”

“Whichever of your ministers recommends a policy which takes wealth in raw materials out of a colonial country, but which returns nothing to the people of that country in consideration. Twentieth-century methods involve bringing industry to these colonies. Twentieth-century methods include increasing the wealth of a people by increasing their standard of living, by educating them, by bringing them sanitation—by making sure that they get a return for the raw wealth of their community.”

Around the room, all of us were leaning forward attentively. Hopkins was grinning. Commander Thompson, Churchill’s aide, was looking glum and alarmed. The P.M. himself was beginning to look apoplectic.

“You mentioned India,” he growled.

“Yes. I can’t believe that we can fight a war against fascist slavery, and at the same time not work to free people all over the world from a backward colonial policy.”

“What about the Philippines?”

“I’m glad you mentioned them. They get their independence, you know, in 1946. And they’ve gotten modern sanitation, modern education; their rate of illiteracy has gone steadily down…”

“There can be no tampering with the Empire’s economic agreements.”

“They’re artificial…”

“They’re the foundation of our greatness.”

“The peace,” said Father firmly, “cannot include any continued despotism. The structure of the peace demands and will get equality of peoples. Equality of peoples involves the utmost freedom of competitive trade. Will anyone suggest that Germany’s attempt to dominate trade in central Europe was not a major contributing factor to war?”

A vintage photo of a group of people sitting posing for the camera Description automatically generated

It was an argument that could have no resolution between these two men…

The following day, Elliot describes how the conversation continued between the two men with Churchill stating:

“Mr. President,” he cried, “I believe you are trying to do away with the British Empire. Every idea you entertain about the structure of the postwar world demonstrates it. But in spite of that”—and his forefinger waved—”in spite of that, we know that you constitute our only hope. And”—his voice sank dramatically—”you know that we know it. You know that we know that without America, the Empire won’t stand.”

Churchill admitted, in that moment, that he knew the peace could only be won according to precepts which the United States of America would lay down. And in saying what he did, he was acknowledging that British colonial policy would be a dead duck, and British attempts to dominate world trade would be a dead duck, and British ambitions to play off the U.S.S.R. against the U.S.A. would be a dead duck. Or would have been, if Father had lived.”

This story was delivered in full during an August 15 lecture by the author:

FDR’s Post-War Vision Destroyed

While FDR’s struggle did change the course of history, his early death during the first months of his fourth term resulted in a fascist perversion of his post-war vision.

Rather than see the IMF, World Bank or UN used as instruments for the internationalization of the New Deal principles to promote long term, low interest loans for the industrial development of former colonies, FDR’s allies were ousted from power over his dead body, and they were recaptured by the same forces who attempted to steer the world towards a Central Banking Dictatorship in 1933.

The American Liberty League spawned into various “patriotic” anti-communist organizations which took power with the FBI and McCarthyism under the fog of the Cold War. This is the structure that Eisenhower warned about when he called out “the Military Industrial Complex” in 1960 and which John Kennedy did battle with during his 900 days as president.

This is the structure which is out to destroy President Donald Trump and undo the November elections under a military coup and Civil War out of fear that a new FDR impulse is beginning to be revived in America which may align with the 21st Century international New Deal emerging from China’s Belt and Road Initiative and Eurasian alliance. French Finance Minister Bruno LeMaire and Marc Carney have stated their fear that if the Green New Deal isn’t imposed by the west, then the New Silk Road and yuan will become the basis for the new world system.

The Bank of England-authored Green New Deal being pushed under the fog of COVID-19’s Great Green Global Reset which promise to impose draconian constraints on humanity’s carrying capacity in defense of saving nature from humanity have nothing to do with Franklin Roosevelt’s New Deal and they have less to do with the Bretton Woods conference of 1944. These are merely central bankers’ wet dreams for depopulation and fascism “with a democratic face” which their 1923 and 1933 efforts failed to achieve and can only be imposed if people remain blind to their own recent history.


Matthew Ehret is the Editor-in-Chief of the Canadian Patriot Review , a BRI Expert on Tactical talk, and has authored 3 volumes of ‘Untold History of Canada’ book series. In 2019 he co-founded the Montreal-based Rising Tide Foundation

Western Bankocracy: Banks loaned 0.2% of $600 billion in Main Street lending plan

Western Bankocracy: Banks loaned 0.2% of $600 billion in Main Street lending plan

September 18, 2020

By Ramin Mazaheri for the Saker Blog

Bloomberg reported that the Federal Reserve’s Main Street Lending Program (MSLP) has left 99.8% of its $600 billion loan pool untapped. So if you work for one of the just 118 medium-sized businesses who have acquired a loan – congrats, you might just make it through 2020.

Just as the Eurozone was emphatically reminded during its pre-Covid “Austerity Decade”, government-issued Quantitative Easing will never flow down (much less trickle) in the endemically low growth Western bankocracies unless strings are attached. However, the defining feature of the Western neoliberal bankocracy is that there are never any strings to free money for the 1%.

The failure of the MSLP proves yet again that QE is wasted on the rich and their fake FIRE economies.

Or, in this case, QE is not even used because in the Western system governments are only permitted to throw money at the banks and hope that banks use it – they are not permitted to give directly to the people nor to compel banks to loan, unlike in socialist-inspired economies like China, Iran, etc.

Why is MSLP not being used? Short answer: even though the government is backing 95% of the loans, multinational corporate banks refuse to participate with just a 5% risk.

Longer answers: They obviously cannot see the forest for the trees; their shareholders would sue them for acting patriotically; foreign banks are quite happy to foreclose on US assets; major domestic banks are quite happy to foreclose on US assets.

The only people in the Western financial world who even decry the bankocracy I so often describe don’t want to change it – these are the vultures who are quite upset that they can’t happily (but patriotically, they insist) foreclose on assets themselves. This “pure capitalism” they Salafistically aspire to would lead to a vast reduction in inequality to the point where we would talk about the “2%” instead of the current “1%”.

As I wrote from the start and ad infinitum (50 articles in 4 months/1 Groundhog Day), this was an easily-foreseeable disaster because their Great Lockdown attempted to (poorly and hysterically) emulate countries like China even though the West has none of the systemic socioeconomic safeguards socialist-inspired countries use in order to weather these types of disruptive events.

Personally, I’ve been so focused on covering the US election – and reporting on genuinely leftist parties like Party for Socialism and Liberation (Total 2016 presidential votes which were denied to the duopoly and made in favor of a rather spectacular campaign platform: 74,401 (0.05% of the total, and counting!)) – that I’ve neglected to keep documenting what a total catastrophe the Western coronavirus response still is.

The MSLP failure is rather a douse of cold water.

The program was designed to fail’ because Western bankocracy is designed to fail the average citizen

While the Paycheck Protection Program was aimed at small businesses (less than 500 employees) which were in total desperation due to the impeccable logic of quarantining healthy people continent-wide, MSLP was aimed at medium-sized businesses (less than 15,000 employees), which represent 1/3rd of private sector GDP and which employ 50 million Americans.

After being announced in April but not starting until mid-June, it’s now clear that small community banks, who actually may care about their Main Street not collapsing the entire community, are the only ones doing any lending.

Major banks like JPMorgan are sabotaging MSLP by refusing to participate by – per Bloomberg – doing things like asking applicants for terms which go beyond onerous, such as to “pledge real estate it doesn’t have”. JPMorgan reportedly had 2,000 applicants for MSLP – after finding out what JPMorgan demanded in return for a merely 5% risk only around 100 applicants still applied.

This is a doubly big problem, as MSLP was expressly intended for companies who cannot get loans during even normal times. Triply big problem: we should give JPMorgan some credit, I guess, because Wells Fargo, Citigroup and US Bank are refusing to take new customers.

This why applicants lamented MSLP is “designed to fail” – or in socialist terms, designed to increase market concentration and inequality. Governments can take risks, as they can print money, but in Western neoliberalism they cannot force private banks to take risks. The only choice, obviously, is for direct government control over at least some parts of banking but that is verboten in the US.

MSLP is such a catastrophe – and one surely colluded upon beforehand in a smoky backroom “filled” with the heads of the mere handful of top US banks – that one Florida lender accounts for half of all the loans.

The failure of MSLP shows that without lobbying and/or corporate power the “We the people” US government cannot help you. The “people” in a bankocracy is, of course, corporations and shareholders only – the US Supreme Court formally codified this in the 2010 Citizens United case.

For companies which cannot benefit from the Fed-backstopped corporate bond-buying craze ($1.2 trillion since March) and who needed more than just the Paycheck Protection Program, the failure to secure loans will mean more bankruptcies and social disaster.

Given that US culture is so very German-influenced – in the composition of its citizenry, in its evangelical and supremacist fascism, in its anti-socialism, in the original neoliberalism (ordoliberalism) – it’s ironic that the US cannot preserve these medium-sized Mittlestand businesses which are the backbone of German economic strength. Germany, of course, relies much more on local banks than international corporate ones. And, thanks to the money neoliberally/neo-imperialistically (the two are synonymous, of course) bloodsucked from their Eurozone “allies”, their $1.5 trillion coronavirus fiscal stimulus package – the biggest in the West compared to national GDP and a stunningly hypocritical 52% of all coronavirus aid approved by the European Commission – will allow them to only increase their European supremacy amid the Eurozone’s endless stagnation.

From the individual to the medium-big business, those without lobby influence and without credit at the start of the crisis aren’t getting influence or credit now (and this was widely predicted by capitalist-cynics like myself) even with MSLP. The US government has made a show of being independent from high finance, but MSLP is yet another proof that in the Western bankocracy it is banks who decide on socio-economic policy, even amid unprecedented crisis.

In a crisis you have to dance with the girl that brung ya: That is why I wrote so much about the certain suicide of a Great Lockdown in the capitalist-imperialist West. Contrarily, China, due to their very different economic inspirations, will be the only G20 country with positive economic growth – they’ve even doubled their annual projection from (back in only June) 1.8% for 2020 to 3.7%.

MSLP’s failure will only add to US economic woes, and even if they make changes it will be too late to save so very many jobs, assets, companies, households, etc.

I do not get much pleasure to write in September that my prediction that socialist-inspired countries would economically and socially weather the coronavirus better than Western capitalist-inspired ones has been proven correct. The only thing I can say is that Westerners often do not understand the underpinnings of their own system. That helps explain why they delusionally believed a “V-shaped” recovery was not only possible but certain, when an inequality-increasing “K-shaped” has been the clear result of their Great Lockdown. (Get the Nation of Islam’s take on that economy reality here. Interviewing Black Muslim leaders on national, not identity, issues – what a concept! Interviewing Black Muslims at all in the US – what a concept, LOL.)

The West thinks they are a walking, talking “universal value” but it is not like them everywhere. Just call up someone from Party for Socialism and Liberation to learn how There Is No An Alternative.

If the West still insists on not massively switching to the socialist alternative, then they should dance with the girl that brung them – i.e., start sending coronavirus-infected blankets to places rich in natural resources, and then claim it was more advanced intellectual ideas which increased the bottom line.

The problem with that is that the coronavirus has been somewhat serious but not anywhere equal to the hysteria evinced in Western nations, so it won’t really decimate populations like in the good old days.


Ramin Mazaheri is currently covering the US elections. He is the chief correspondent in Paris for PressTV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. He is the author of Socialism’s Ignored Success: Iranian Islamic Socialism’as well as ‘I’ll Ruin Everything You Are: Ending Western Propaganda on Red China’, which is also available in simplified and traditional Chinese.

Lockdowns, Coronavirus, and Banks: Following the Money

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By Prof. Anthony Hall

Source

FED in the Trojan Horse 7e820

It usually makes sense to follow the money when seeking understanding of almost any major change. The strategy of following the money in our current convergence of crises in late summer of 2020 leads us directly to the lockdowns. The lockdowns were first imposed on people in the Wuhan area of China. Then other populations throughout the world were told to “shelter in place,” all in the name of combating the COVID-19 virus.

Understanding of the enormous impact of the lockdowns is still developing. The lockdowns are proving to pack a far more devastating punch than any other aspect of the strange sequence of events that is making 2020 a year like no other. Even when the issues are narrowed to those of human health, the lockdowns have had, and will continue to have, far more wide-ranging and devastating impacts than the celebrity virus.

The lockdowns have, for starters, been directly responsible for explosive rates of suicide, domestic violence, overdoses, and depression. In the long run, these maladies from the lockdowns will probably kill and harm many more people than COVID-19.

But this comparison does not tell the full story. The nature and length of the lockdowns are causing millions of people to lose their jobs, businesses and financial viability. It seems that the economic descent is still gathering force. The assault of the lockdowns on our economic wellbeing still has much farther to go.

The lockdowns have proven to be a powerful instrument of social control. This attribute is becoming very attractive especially to some politicians. They have discovered they can derive considerable political traction from hyping and exploiting the largely manufactured pandemic panic.

The lockdowns are still a work-in-progress. There are past lockdowns, revolving lockdowns, partial lockdowns, mandatory lockdowns, voluntary lockdowns, severe lockdowns and probably an array of many lockdown types yet to be invented.

The lockdowns extend to disruptions in supply chains, disruptions in money flows, drops in consumption, breakdowns in transport and travelling, increased bankruptcies, losses of finance leading to losses of housing, as well as the inability to pay taxes and debts.

The lockdowns extend beyond personal habitations to prohibitions on large assemblies of people in stadiums, concert halls, churches, and a myriad of places devoted to public recreation and entertainment. On the basis of this way of looking at what is happening, it becomes clear the economic and health effects of the lockdowns are far more pronounced than the damage wrought directly by the new coronavirus.

This approach to following the money leads to the question of whether the spread of COVID-19 was set in motion as a pretext. Was COVID-19 unleashed as an expedient for bringing about the lockdowns with the goal of crashing the existing economy? What rationale could there possibly be for purposely crashing the existing economy?

One possible reason might have been to put in place new structures to create the framework for a new set of economic relationships. With these changes would come accompanying sets of altered social and political relationships.

Among the economic changes being sought are the robotization of almost everything, cashless financial interactions, and elaborate AI impositions. These AI impositions extend to digital alterations of human consciousness and behavior. The emphasis being placed on vaccines is very much interwoven with plans to extend AI into an altered matrix of human nanobiotechnology.

There are other possibilities to consider. One is that in the autumn of 2019 the economy was already starting to falter. Fortuitously for some, the new virus came along at a moment when it could be exploited as a scapegoat. By placing responsibility for the economic debacle on pathogens rather than people, Wall Street bankers and federal authorities are let off the hook. They can escape any accounting for an economic calamity that they had a hand in helping to instigate.

A presentation in August of 2019 by the Wall Street leviathan, BlackRock Financial Management, provides a telling indicator of foreknowledge. It was well understood by many insiders in 2019 that a sharp economic downturn was imminent.

At a meeting of central bankers in Jackson Hole Wyoming, BlackRock representatives delivered a strategy for dealing with the future downturn. Several months later during the spring of 2020 this strategy was adopted by both the US Treasury and the US Federal Reserve. BlackRock’s plan from August of 2019 set the basis of the federal response to the much-anticipated economic meltdown.

Much of this essay is devoted to considering the background of the controversial agencies now responding to the economic devastation created by the lockdowns. One of these agencies is empowered to bring into existence large quantities of debt-laden money.

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The very public role in 2020 of the Federal Reserve of the United States resuscitates many old grievances. When the Federal Reserve was first created in 1913 it was heavily criticized as a giveaway of federal authority.

The critics lamented the giveaway to private bankers whose firms acquired ownership of all twelve of the regional banks that together constitute the Federal Reserve. Of these twelve regional banks, the Federal Reserve Bank of New York is by far the largest and most dominant especially right now.

The Federal Reserve of the United States combined forces with dozens of other privately-owned central banks thoughout the world to form the Bank of International Settlements. Many of the key archetypes for this type of banking were developed in Europe and the City of London where the Rothschild banking family had a large and resilient role, one that persists until this day.

Along with the Federal Reserve Bank of New York, BlackRock was deeply involved in helping to administer the bailout in 2008. This bailout resuscitated many failing Wall Street firms together with their counterparties in a number of speculative ventures involving various forms of derivatives.

The bailouts resulted in payments of $29 trillion, much of it going to restore failing financial institutions whose excesses actually caused the giant economic crash. Where the financial sector profited greatly from the bailouts, taxpayers were abused yet again. The burden of an expanded national debt fell ultimately on taxpayers who must pay the interest on the loans for the federal bailout of the “too big to fail” financial institutions.

Unsettling precedents are set by the Wall Street club’s manipulation of the economic crash of 2007-2010 to enrich its own members so extravagantly. This prior experience bodes poorly for the intervention by the same players in this current round of responses to the economic crisis of 2020.

In preparing this essay I have enjoyed the many articles by Pam Martens and Russ Martens in Wall Street on Parade. These hundreds of well-researched articles form a significant primary source on the recent history of the Federal Reserve, including over the last few months.

In this essay I draw a contrast between the privately-owned regional banks of the Federal Reserve and the government-owned Bank of Canada that once issued low-interest loans to build infrastructure projects.

With this arrangement in place, Canada went through a major period of national growth between 1938 and 1974. Canada emerged from this period with a national debt of only $20 billion. Then in 1974 Prime Minister Pierre Trudeau dropped this arrangement to enable Canada to join the Bank of International Settlements. One result is that national debt rose to $700 billion by 2020.

We need to face the current financial crisis by developing new institutions that avoid the pitfalls of old remedies for old problems that no longer prevail. We need to make special efforts to change our approach to the problem of excessive debts and the overconcentration of wealth in fewer and fewer hands.

Locking Down the Viability of Commerce

Of all the facets of the ongoing fiasco generally associated with the coronavirus crisis, none has been so widely catastrophic as the so-called “lockdowns.” The supposed cure of the lockdowns is itself proving to be much more lethal and debilitating than COVID-19’s flu-like impact on human health.

Many questions arise from the immense economic consequences attributed to the initial effort to “flatten the curve” of the hospital treatments for COVID-19. Did the financial crisis occur as a result of the spread of the new coronavirus crisis? Or was the COVID-19 crisis set in motion to help give cover to a long-building economic meltdown that was already well underway in the autumn of 2019?

The lockdowns were first instituted in Wuhan China with the objective of slowing down the spread of the virus so that hospitals would not be overwhelmed. Were the Chinese lockdowns engineered in part to create a model to be followed in Europe, North America, Indochina and other sites of infection like India and Australia? The Chinese lockdowns in Hubei province and then in other parts of China apparently set an example influencing the decision of governments in many jurisdictions. Was this Chinese example for the rest of the world created by design to influence the nature of international responses?

The lockdowns represented a new form of response to a public health crisis. Quarantines have long been used as a means of safeguarding the public from the spread of contagious maladies. Quarantines, however, involve isolating the sick to protect the well. On the other hand the lockdowns are directed at limiting the movement and circulation of almost everyone whether or not they show symptoms of any infections.

Hence lockdowns, or, more euphemistically “sheltering in place,” led to the cancellation of many activities and to the shutdown of institutions. The results extended, for instance, to the closure of schools, sports events, theatrical presentations and business operations. In this way the lockdowns also led to the crippling of many forms of economic interaction. National economies as well as international trade and commerce were severely impacted.

The concept of lockdowns was not universally embraced and applied. For instance, the governments of Sweden and South Korea did not accept the emerging orthodoxy about enforcing compliance with all kinds of restrictions on human interactions. Alternatively, the government of Israel was an early and strident enforcer of very severe lockdown policies.

At first it seemed the lockdown succeeded magnificently in saving Israeli lives. According to Israel Shamir, in other European states the Israeli model was often brought up as an example. In due course, however, the full extent of the assault on the viability of the Israeli economy began to come into focus. Then popular resistance was aroused to reject government attempts to enforce a second wave of lockdowns against a second wave of supposed infections. As Shamir sees it, the result is that “Today Israel is a failed state with a ruined economy and unhappy citizens.”

In many countries the lockdowns began with a few crucial decisions made at the highest level of government. Large and proliferating consequences would flow from the initial determination of what activities, businesses, organizations, institutions and workers were to be designated as “essential.”

The consequences would be severe for those individuals and businesses excluded from the designation identifying what is essential. This deep intervention into the realm of free choice in market relations set a major precedent for much more intervention of a similar nature to come.

The arbitrary division of activities into essential and nonessential categories created a template to be frequently replicated and revised in the name of serving public heath. Suddenly central planning took a great leap forward. The momentum from a generation of neoliberalism was checked even as the antagonistic polarities between rich and poor continued to grow.

To be defined as “nonessential” would soon be equated with job losses and business failures across many fields of enterprise as the first wave of lockdowns outside China unfolded. Indeed, it becomes clearer every day that revolving lockdowns, restrictions and social distancing are being managed in order to help give false justification to a speciously idealized vaccine fix as the only conclusive solution to a manufactured problem.

What must it have meant for breadwinners who fed themselves and their families through wages or self-employment to be declared by government to be “non-essential”? Surely for real providers their jobs, their businesses and their earnings were essential for themselves and their dependents. All jobs and all businesses that people depend on for livelihoods, sustenance and survival are essential in their own way.

Was COVID-19 a Cover for an Anticipated or Planned Financial Crisis?

A major sign of financial distress in the US economy kicked in in mid-September of 2019 when there was a breakdown in the normal operation of the Repo Market. This repurchase market in the United States is important in maintaining liquidity in the financial system.

Those directing entities like large banks, Wall Street traders and hedge funds frequently seek large amounts of cash on a short-term basis. They obtain this cash from, for instance, money market funds by putting up securities, often Treasury Bills, as collateral. Most often the financial instruments go back, say the following night, to their original owners with interest payments attached for the use of the cash.

In mid-September the trust broke down between participants in the Repo Market. The Federal Reserve Bank of New York then entered the picture making trillions of dollars available to keep the system for short-term moving of assets going. This intervention repeated the operation that came in response to the first signs of trouble as Wall Street moved towards the stock market crash of 2008.

One of the major problems on the eve of the bailout of 2008-09, like the problem in the autumn of 2019, had to do with the overwhelming of the real economy by massive speculative activity. The problem then, like a big part of the problem now, involves the disproportionate size of the derivative bets. The making of these bets have become a dangerous addiction that continues to this day to menace the viability of the financial system headquartered on Wall Street.

By March of 2020 it was reported that the Federal Reserve Bank of New York had turned on its money spigot to create $9 trillion in new money with the goal of keeping the failing Repo Market operational. The precise destinations of that money together with the terms of its disbursement, however, remain a secret. As Pam Martens and Russ Martens write,

Since the Fed turned on its latest money spigot to Wall Street [in September of 2019], it has refused to provide the public with the dollar amounts going to any specific banks. This has denied the public the ability to know which financial institutions are in trouble. The Fed, exactly as it did in 2008, has drawn a dark curtain around troubled banks and the public’s right to know, while aiding and abetting a financial coverup of just how bad things are on Wall Street.

Looking back at the prior bailout from their temporal vantage point in January of 2020, the authors noted  “During the 2007 to 2010 financial collapse on Wall Street – the worst financial crisis since the Great Depression, the Fed funnelled a total of $29 trillion in cumulative loans to Wall Street banks, their trading houses and their foreign derivative counterparties.”

The authors compared the rate of the transfer of funds from the New York Federal Reserve Bank to the Wall Street banking establishment in the 2008 crash and in the early stages of the 2020 financial debacle. The authors observed, “at this rate, [the Fed] is going to top the rate of money it threw at the 2008 crisis in no time at all.”

The view that all was well with the economy until the impact of the health crisis began to be felt in early 2020 leads away from the fact that money markets began to falter dangerously in the autumn of 2019. The problems with the Repo Market were part of a litany of indicators pointing to turbulence ahead in troubled economic waters.

For instance, the resignation in 2019 of about 1,500 prominent corporate CEOs can be seen as a suggestion that news was circulating prior to 2020 about the imminence of serious financial problems ahead. Insiders’ awareness of menacing developments threatening the workings of the global economy were probably a factor in the decision of a large number of senior executives to exit the upper echelons of the business world.

Not only did a record number of CEOs resign, but many of them sold off the bulk of their shares in the companies they were leaving.

Pam Marten and Russ Marten who follow Wall Street’s machinations on a daily basis have advanced the case that the Federal Reserve is engaged in fraud by trying to make it seem that “the banking industry came into 2020 in a healthy condition;” that it is only because of “the COVID-19 pandemic” that the financial system is” unravelling,”

The authors argue that this misrepresentation was deployed because the deceivers are apparently “desperate” to prevent Congress from conducting an investigation for the second time in twelve years on why the Fed, “had to engage in trillions of dollars of Wall Street bailouts.” In spite of the Fed’s fear of facing a Congressional investigation after the November 2020 vote, such a timely investigation of the US financial sector would well serve the public interest.

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The authors present a number of signs demonstrating that “the Fed knew, or should have known…. that there was a big banking crisis brewing in August of last year. [2019]” The signs of the financial crisis in the making included negative yields on government bonds around the world as well as big drops in the Dow Jones average. The plunge in the price of stocks was led by US banks, but especially Citigroup and JP Morgan Chase.

Another significant indicator that something was deeply wrong in financial markets was a telling inversion in the value of Treasury notes with the two-year rate yielding more than the ten-year rate.

Yet another sign of serious trouble ahead involved repeated contractions in the size of the German economy. Moreover, in September of 2019 news broke that officials of JP Morgan Chase faced criminal charges for RICO-style racketeering. This scandal added to the evidence of converging problems plaguing core economic institutions as more disruptive mayhem gathered on the horizons.

Accordingly, there is ample cause to ask if there are major underlying reasons for the financial crash of 2020 other than the misnamed pandemic and the lockdowns done in its name of “flattening” its spikes of infection. At the same time, there is ample cause to recognize that the lockdowns have been a very significant factor in the depth of the economic debacle that is making 2020 a year like no other.

Some go further. They argue that the financial crash of 2020 was not only anticipated but planned and pushed forward with clear understanding of its instrumental role in the Great Reset sought by self-appointed protagonists of creative destruction. The advocates of this interpretation place significant weight on the importance of the lockdowns as an effective means of obliterating in a single act a host of old economic relationships. For instance Peter Koenig examines the “farce and diabolical agenda of a universal lockdown.”

Koenig writes, “The pandemic was needed as a pretext to halt and collapse the world economy and the underlying social fabric.”

Inflating the Numbers and Traumatizing the Public to Energize the Epidemic of Fear

There have been many pandemics in global history whose effects on human health have been much more pervasive and devastating than the current one said to be generated by a new coronavirus. In spite, however, of its comparatively mild flu-like effects on human health, at least at this point in the summer of 2020, there has never been a contagion whose spread has generated so much global publicity and hype. As in the aftermath of 9/11, this hype extends to audacious levels of media-generated panic. As with the psyop of 9/11, the media-induced panic has been expertly finessed by practitioners skilled in leveraging the currency of fear to realize a host of radical political objectives.

According to Robert E. Wright in an essay published by the American Institute for Economic Research, “closing down the U.S. economy in response to COVID-19 was probably the worst public policy in at least one-hundred years.” As Wright sees it, the decision to lock down the economy was made in ignorant disregard of the deep and devastating impact that such an action would spur. “Economic lockdowns were the fantasies of government officials so out of touch with economic and physical reality that they thought the costs would be fairly low.”

The consequences, Wright predicts, will extend across many domains including the violence done to the rule of law. The lockdowns, he writes, “turned the Constitution into a frail and worthless fabric.” Writing in late April, Wright touched on the comparisons to be made between the economic lockdowns and slavery. He write, “Slaves definitely had it worse than Americans under lockdown do, but already Americans are beginning to protest their confinement and to subtly subvert authorities, just as chattel slaves did.”

The people held captive in confined lockdown settings have had the time and often the inclination to imbibe much of the 24/7 media coverage of the misnamed pandemic. Taken together, all this media sensationalism has come to constitute one of the most concerted psychological operations ever.

The implications have been enormous for the mental health of multitudes of people. This massive alteration of attitudes and behaviours is the outcome of media experiments performed on human subjects without their informed consent. The media’s success in bringing about herd subservience to propagandistic messaging represents a huge incentive for more of the same to come. It turns out that the subject matter of public health offers virtually limitless potential for power-seeking interests and agents to meddle with the privacies, civil liberties and human rights of those they seek to manipulate, control and exploit.

The social, economic and health impacts of the dislocations flowing from the lockdowns are proving to be especially devastating on the poorest, the most deprived and the most vulnerable members of society. This impact will continue to be marked in many ways, including in increased rates of suicide, domestic violence, mental illness, addictions, homelessness, and incarceration far larger than those caused directly by COVID-19. As rates of deprivation through poverty escalate, so too will crime rates soar.

The over-the-top alarmism of the big media cabals has been well financed by the advertising revenue of the pharmaceutical industry. With some few exceptions, major media outlets pushed the public to accept the lockdowns as well as the attending losses in jobs and business activity. In seeking to push the agenda of their sponsors, the big media cartels have been especially unmindful of their journalistic responsibilities. Their tendency has been to avoid or censor forums where even expert practitioners of public health can publicly question and discuss government dictates about vital issues of public policy.

Whether in Germany or the United States or many other countries, front line workers in this health care crisis have nevertheless gathered together with the goal of trying to correct the one-sided prejudices of of discriminatory media coverage. One of the major themes in the presentations by medical practitioners is to confront the chorus of media misrepresentations on the remedial effects of hydroxychloroquine and zinc.

On July 27 a group of doctors gathered on the grounds of the US Supreme Court to try to address the biases of the media and the blind spots of government.

Another aspect in the collateral damage engendered by COVID-19 alarmism is marked in the fatalities arising from the wholesale postponement of many necessary interventions including surgery. How many have died or will die because of the hold put on medical interventions to remedy cancer, heart conditions and many other potentially lethal ailments?

Did the unprecedented lockdowns come about as part of a preconceived plan to inflate the severity of an anticipated financial meltdown? What is to be made of the suspicious intervention of administrators to produce severely padded numbers of reported deaths in almost every jurisdiction? This kind of manipulation of statistics raised the possibility that we are witnessing a purposeful and systemic inflation of the severity of this health care crisis.

Questions about the number of cases arise because of the means of testing for the presence of a supposedly new coronavirus. The PCR system that is presently being widely used does not test for the virus but tests for the existence of antibodies produced in response to many health challenges including the common cold. This problem creates a good deal of uncertainty of what a positive test really means.

The problems with calculating case numbers extend to widespread reports that have described people who were not tested for COVID-19 but who nevertheless received notices from officials counting them as COVID-19 positive. Broadcaster Armstrong Williams addressed the phenomenon on his network of MSM media outlets in late July.

From the mass of responses he received, Williams estimated that those not tested but counted as a positive probably extends probably to hundreds of thousands of individuals. What would drive the effort to exaggerate the size of the afflicted population?

This same pattern of inflation of case numbers was reinforced by the Tricare branch of the US Defense Department’s Military Health System. This branch sent out notices to 600,000 individuals who had not been tested. The notices nevertheless informed the recipients that they had tested positive for COVID 19.

Is the inflation of COVID-19 death rates and cases numbers an expression of the zeal to justify the massive lockdowns? Were the lockdowns in China conceived as part of a scheme to help create the conditions for the public’s acceptance of a plan to remake the world’s political economy? What is to be made of the fact that those most identified with the World Economic Forum (WEF) have led the way in putting a positive spin on the reset arising from the very health crisis the WEF helped introduce and publicize in Oct. of 2019?

As Usual, the Poor Get Poorer

The original Chinese lockdowns in the winter of 2020 caused the breakdowns of import-export supply chains extending across the planet. Lockdowns in the movement of raw materials, parts, finished products, expertise, money and more shut down domestic businesses in China as well as transnational commerce in many countries outside China. The supply chain disruptions were especially severe for businesses that have dispensed with the practice of keeping on hand large inventories of parts and raw material, depending instead on just-in-time deliveries.

As the supply chains broke down domestically and internationally, many enterprises lacked the revenue to pay their expenses. Bankruptcies began to proliferate at rates that will probably continue to be astronomical for some time. All kinds of loans and liabilities were not paid out in full or at all. Many homes are being re-mortgaged or cast into real estate markets as happened during the prelude and course of the bailouts of 2007-2010.

The brunt of the financial onslaught hit small businesses especially hard. Collectively small businesses have been a big creator of jobs. They have picked up some of the slack from the rush of big businesses to downsize their number of full-time employees. Moreover, small businesses and start-ups are often the site of exceptionally agile innovations across broad spectrums of economic activity. The hard financial slam on the small business sector, therefore, is packing a heavy punch on the economic conditions of everyone.

The devastating impact of the economic meltdown on workers and small businesses in Europe and North America extends in especially lethal ways to the massive population of poor people living all over the world. Many of these poor people reside in countries where much of the paid work is irregular and informal.

At the end of April the International Labor Organization (ILO), an entity created along with the League of Nations at the end of the First World War, estimated that there would be 1.6 billion victims of the meltdown in the worldwide “informal economy.” In the first month of the crisis these workers based largely in Africa and Latin America lost 60% of their subsistence level incomes.

As ILO Director-General, Guy Ryder, has asserted,

This pandemic has laid bare in the cruellest way, the extraordinary precariousness and injustices of our world of work. It is the decimation of livelihoods in the informal economy – where six out of ten workers make a living – which has ignited the warnings from our colleagues in the World Food Programme, of the coming pandemic of hunger. It is the gaping holes in the social protection systems of even the richest countries, which have left millions in situations of deprivation. It is the failure to guarantee workplace safety that condemns nearly 3 million to die each year because of the work they do. And it is the unchecked dynamic of growing inequality which means that if, in medical terms, the virus does not discriminate between its victims in its social and economic impact, it discriminates brutally against the poorest and the powerless.

Guy Ryder remembered the optimistic rhetoric in officialdom’s responses to the economic crash of 2007-2009. He compares the expectations currently being aroused by the vaccination fixation with the many optimistic sentiments previously suggesting the imminence of remedies for grotesque levels of global inequality. Ryder reflected,

We’ve heard it before. The mantra which provided the mood music of the crash of 2008-2009 was that once the vaccine to the virus of financial excess had been developed and applied, the global economy would be safer, fairer, more sustainable. But that didn’t happen. The old normal was restored with a vengeance and those on the lower echelons of labour markets found themselves even further behind.

The internationalization of increased unemployment and poverty brought about in the name of combating the corona crisis is having the effect of further widening the polarization between rich and poor on a global scale. Ryder’s metaphor about the false promises concerning a “vaccine” to correct “financial excess” can well be seen as a precautionary comment on the flowery rhetoric currently adorning the calls for a global reset.

Wall Street and 9/11

The world economic crisis of 2020 is creating the context for large-scale repeats of some key aspects of the bailout of 2007-2010. The bailout of 2007-2008 drew, in turn, from many practices developed in the period when the explosive events of 9/11 triggered a worldwide reset of global geopolitics.

While the events of 2008 and 2020 both drew attention to the geopolitical importance of Wall Street, the terrible pummelling of New York’s financial district was the event that ushered in a new era of history, an era that has delivered us to the current financial meltdown/lockdown.

It lies well beyond the scope of this essay to go into detail about the dynamics of what really transpired on 9/11. Nevertheless, some explicit reckoning with this topic is crucial to understanding some of the essential themes addressed in this essay.

Indeed, it would be difficult to overstate the relevance of 9/11 to the background and nature of the current debacle. The execution and spinning of 9/11 were instrumental in creating the repertoire of political trickery presently being adapted in the manufacturing and exploiting of the COVID-19 hysteria. A consistent attribute of the journey from 9/11 to COVID-19 has been the amplification of executive authority through the medium of emergency measures enactments, policies and dictates.

Wall Street is a major site where much of this political trickery was concocted in planning exercises extending to many other sites of power and intrigue. In the case of 9/11, a number of prominent Wall Street firms were involved before, during and after the events of September 11. As is extremely well documented, these events have been misrepresented in ways that helped to further harness the military might of the United States to the expansionistic designs of Israel in the Middle East.

The response of the Federal Reserve to the events of 9/11 helped set in motion a basic approach to disaster management that continues to this day. Almost immediately following the pulverization of Manhattan’s most gigantic and iconographic landmarks, Federal Reserve officials made it their highest priority to inject liquidity into financial markets. Many different kinds of scenario can be advanced behind the cover of infusing liquidity into markets.

For three days in a row the Federal Reserve Bank of New York turned on its money spigots to inject transfusions of $100 billion dollars of newly generated funds into the Wall Street home of the financial system. The declared aim was to keep the flow of capital between financial institutions well lubricated. The Federal Reserve’s infusions of new money into Wall Street took many forms. New habits and appetites were thereby cultivated in ways that continue to influence the behaviour of Wall Street organizations in the financial debacle of 2020.

The revelations concerning the events of 9/11 contained a number of financial surprises. Questions immediately arose, for instance, about whether the destruction of the three World Trade Center skyscrapers had obliterated software and hardware vital to the continuing operations of computerized banking systems. Whatever problems arose along these lines, it turned out that there was sufficient digital information backed up in other locations to keep banking operations viable.

But while much digital data survived the destruction of core installations in the US financial sector, some strategic information was indeed obliterated. For instance, strategic records entailed in federal investigations into many business scandals were lost. Some of the incinerated data touched on, for instance, the machinations of the energy giant, Enron, along with its Wall Street partners, JP Morgan Chase and Citigroup.

The writings of E. P Heidner are prominent in the literature posing theories about the elimination of incriminating documentation as a result of the controlled demolitions of 9/11. What information was eliminated and what was retained in the wake of the devastation? Heidner has published a very ambitious account placing the events of 9/11 at the forefront of a deep and elaborate relationship linking George H. W. Bush to Canada’s Barrick Gold and the emergence of gold derivatives.

The surprises involving 9/11 and Wall Street included evidence concerning trading on the New York Stock Exchange. A few individuals enriched themselves significantly by purchasing a disproportionately high number of put options on shares about to fall precipitously as a result of the anticipated events of 9/11. Investigators, however, chose to ignore this evidence because it did not conform to the prevailing interpretation of who did what to whom on 9/11.

Another suspicious group of transactions conducted right before 9/11 involved some very large purchases of five-year US Treasury notes. These instruments are well known hedges when one has knowledge that a world crisis is imminent. One of these purchases was a $5 billion transaction. The US Treasury Department would have been informed about the identity of the purchaser. Nevertheless the FBI and the Securities Exchange Commission collaborated to point public attention away from these suspect transactions. (p. 199)

On the very day of 9/11 local police arrested Israeli suspects employed in the New York area as Urban Movers. The local investigators were soon pressured to ignore the evidence, however, and go along with the agenda of the White House and the media chorus during the autumn of 2001.

In the hours following the pulverization of the Twin Towers the dominant mantra was raised “Osama bin Laden and al-Qeada did it.” That mantra led in the weeks, months and years that followed to US-led invasions of several Muslim-majority countries. Some have described these military campaigns as wars for Israel.

Soon New York area jails were being filled up with random Muslims picked up for nothing more than visa violations and such. The unrelenting demonization of Muslims collectively can now be seen in retrospect as a dramatic psychological operation meant to poison minds as the pounding of the war drums grew in intensity. In the process a traumatized public were introduced to concepts like “jihad.” At no time has there ever been a credible police investigation into the question of who is responsible for the 9/11 crimes.

Defense Secretary Donald Rumsfeld chose September 10, the day before 9/11, to break the news at a press conference that $2.3 trillion had gone missing from the Pentagon’s budget. Not surprisingly the story of the missing money got buried the next day as reports of the debacle in Manhattan and Washington DC dominated MSM news coverage.

As reported by Forbes Magazine, the size of the amount said to have gone missing in Donald Rumsfeld’s 2001 report of Defense Department spending had mushroomed by 2015 to around $21 trillion. It was Mark Skidmore, an Economics Professor at the University of Michigan, who became the main sleuth responsible for identifying the gargantuan amount of federal funds that the US government can’t account for.

As the agency that created the missing tens of trillions that apparently has disappeared without a trace, wouldn’t the US Federal Reserve be in a position to render some assistance in tracking down the lost funds? Or is the Federal Reserve somehow a participant or a complicit party in the disappearance of the tens of trillions without a paper trail?

The inability or unwillingness of officialdom to explain what happened to the lost $21 trillion, an amount comparable to the size of the entire US national debt prior to the lockdowns, might be viewed in the light of the black budgets of the US Department of Defense (DOD). Black budgets are off-the-books funds devoted to secret research and to secret initiatives in applied research.

In explaining this phenomenon, former Canadian Defense Minister, Paul Hellyer, has observed, “thousands of billions of dollars have been spent on projects about which Congress and the Commander In Chief have deliberately been kept in the dark.” Eric Zuess goes further. As he explains it, the entire Defense Department operates pretty much on the basis of an unusual system well outside the standard rules of accounting applied in other federal agencies.

When news broke about the missing $21 trillion, federal authorities responded by promising that special audits would be conducted to explain the irregularities. The results of those audits, if they took place at all, were never published. The fact that the Defense of Department has developed in a kind of audit free zone has made it a natural magnet for people and interests engaged in all kinds of criminal activities.

Eric Zuess calls attention to the 1,000 military bases around the world that form a natural network conducive to the cultivation of many forms of criminal trafficking. Zuess includes in his reflections commentary on the secret installations in some American embassies but especially in the giant US Embassy in Baghdad Iraq.

The US complex in Baghdad’s Green Zone is the biggest Embassy in the world. Its monumental form on a 104 acre site expresses the expansionary dynamics of US military intervention in the Middle East and Eurasia following 9/11.

The phenomenon of missing tens of trillions calls attention to larger patterns of kleptocratic activity that forms a major subject addressed here. The shifts into new forms of organized crime in the name of “national security” began to come to light in the late 1980s. An important source of disclosures was the series of revelations that accompanied the coming apart of the Saudi-backed Bank of Credit and Commerce International, the BCCI.

The nature of this financial institution, where CIA operatives were prominent among its clients, provides a good window into the political economy of drug dealing, money laundering, weapons smuggling, regime change and many much more criminal acts that took place along the road to 9/11.

The BCCI was a key site of financial transactions that contributed to the end of the Cold War and the inception of many new kinds of conflict. These activities often involved the well-financed activities of mercenaries, proxy armies, and a heavy reliance on private contractors of many sorts.

The Enron scandal was seen to embody some of the same lapses facilitated by fraudulent accounting integral to the BCCI scandal. Given the bubble of secrecy surrounding the Federal Reserve, there are thick barriers blocking deep investigation into whether or not the US Central Bank was involved in the relationship of the US national security establishment and the BCCI.

The kind of dark transactions that the BCCI was designed to facilitate must have been channelled after its demise into other banking institutions probably with Wall Street connections. Since 9/11, however, many emergency measures have been imposed that add extra layers of secrecy protecting the perpetrators of many criminal acts from public exposure and criminal prosecutions.

The events of 9/11 have sometimes been described as the basis of a global coup. To this day there is no genuine consensus about what really transpired to create the illusion of justification for repeated US military invasions of Muslim-majority countries in the Middle East and Eurasia.

The 9/11 debacle and the emergency measures that followed presented Wall Street with an array of new opportunities for profit that came with the elaborate refurbishing and retooling of the military-industrial complex.

The response to 9/11 was expanded and generalized upon to create the basis of a war directed not at a particular enemy, but rather at an ill-defined conception identified as “terrorism.” This alteration was part of a complex of changes adding trillions to the flow of money energizing the axis of interaction linking the Pentagon and Wall Street and the abundance of new companies created to advance the geopolitical objectives emerging from the 9/11 coup.

According to Pam Martens and Russ Martens, the excesses of deregulation helped induce an anything-goes-ethos on Wall Street and at its Federal Reserve regulator in the wake of 9/11. As the authors tell it, the response to 9/11 helped set important precedents for the maintaining flows of credit and capital in financial markets.

Often the destination of the funds generated in the name of pumping liquidity into markets was not identified and reported in transactions classified as financial emergency measures. While the priority was on keeping financial pumps primed, there was much less concern for transparency and accountability among those in positions of power at the Federal Reserve.

The financial sector’s capture of the government instruments meant to regulate the behaviour of Wall Street institutions was much like the deregulation of the US pharmaceutical industry. Both episodes highlight a message that has become especially insistent as the twenty-first century unfolds.

The nature of the response to 9/11 emphasized the mercenary ascent of corporate dominance as the primary force directing governments. Throughout this transformation the message to citizens became increasingly clear. Buyer Beware. We cannot depend on governments to represent our will and interests. We cannot even count on our governments to protect citizens from corporatist attacks especially on human health and whatever financial security we have been able to build up.

Bailouts, Derivatives, and the Federal Reserve Bank of New York

The elimination of the Glass-Steagall Act in 1999 was essential to the process of dramatically cutting back the government’s role as a protector of the public interest on the financial services sector. The Glass-Steagall Act was an essential measure in US President Franklin D. Roosevelt’s New Deal. Some view the New Deal as a strategy for saving capitalism by moderating ts most sharp-edged features. Instituted in 1933 in response to the onset of the Great Depression, the Glass-Steagall Act separated the operations of deposit-accepting banks from the more speculative activity of investment brokers.

The termination of the regulatory framework put in place by the Glass Steagall Act opened much new space for all kinds of experiments in the manipulation of money in financial markets. The changes began with the merger of different sorts of financial institutions including some in the insurance field. Those overseeing the reconstituted entities headquartered on Wall Street took advantage of their widened latitudes of operation. They developed all sorts of ways of elaborating their financial services and presenting them in new packages.

The word, “derivative” is often associated with many applications of the new possibilities in the reconstituted financial services sector. The word, derivative, can be applied to many kinds of transactions involving speculative bets of various sorts. As the word suggests, a derivative is derived from a fixed asset such as currency, bonds, stocks, and commodities. Alterations in the values of fixed assets affect the value of derivatives that often take the form of contracts between two or more parties.

One of the most famous derivatives in the era of the financial crash of 2007-2010 was described as mortgaged-backed securities. On the surface these bundles of debt-burdened properties might seem easy to understand. But that would be a delusion. The value of these products was affected, for instance, by unpredictable shifts in interest rates, liar loans extended to homebuyers who lacked the capacity to make regular mortgage payments, and significant shifts in the value of real estate.

Mortgage-backed securities were just one type of a huge array of derivatives invented on the run in the heady atmosphere of secret and unregulated transactions between counterparties. Derivatives could involve contracts formalizing bets between rivals gambling on the outcome of competitive efforts to shape the future.  An array of derivative bets was built around transactions often placed behind the veil of esoteric nomenclature like “collateralized debt obligations” or “credit default swaps.”

The variables in derivative bets might include competing national security agendas involving, for instance, pipeline constructions, regime change, weapons development and sales, false flag terror events, or money laundering. Since derivative bets involve confidential transactions with secret outcomes, they can be derived from all sorts of criteria. Derivative bets can, for instance, involve all manner of computerized calculations that in some cases are constructed much like war game scenarios.

The complexity of derivatives became greater when the American Insurance Group, AIG, began selling insurance programs to protect all sides in derivative bets from suffering too drastically from the consequences of being on the losing side of transactions.

The derivative frenzy, sometimes involving bets being made by parties unable to cover potential losses, overwhelmed the scale of the day-to-day economy. The “real economy” embodies exchanges of goods, services, wages and such that supply the basic necessities for human survival with some margin for recreation, travel, cultural engagement and such.

The Swiss-based Bank of International Settlements calculated in 2008 that the size of the all forms of derivative products had a monetary value of $1.14 quadrillion. A quadrillion is a thousand trillions. By comparison, the estimated value of all the real estate in the world was $75 trillion in 2008.

[Bank for International SettlementsSemiannual OTC derivative statistics at end-December, 2008.]

As the enticements of derivative betting preoccupied the leading directors of Wall Street institutions, their more traditional way of relating to one another began to falter. It was in this atmosphere that the Repo Market became problematic in December of 2007 just as it showed similar signs of breakdown in September of 2019.

In both instances the level of distrust between those in charge of financial institutions began to falter because they all had good reason to believe that their fellow bankers were overextended. All had reason to believe their counterparts were mired by too much speculative activity enabled by all sorts of novel experiments including various forms of derivative dealing.

In December of 2007 as in the autumn of 2019, the Federal Reserve Bank of New York was forced to enter the picture to keep the financial pumps on Wall Street primed. The New York Fed kept the liquidity cycles flowing by invoking its power to create new money with the interest charged to tax payers.

As the financial crisis unfolded in 2008 and 2009 the Federal Reserve, but especially the privately-owned New York Federal Reserve bank, stepped forward to bail out many financial institutions that had become insolvent or near insolvent. In the process precedents and patterns were established that are being re-enacted with some modifications in 2020.

One of the innovations that took place in 2008 was the decision by the Federal Reserve Bank of New York to hire a large Wall Street financial institution, BlackRock, to administer the bailouts. These transfers of money went through three specially created companies now being replicated as Special Purpose Vehicles in the course of the payouts of 2020.

In 2008-09 BlackRock administered the three companies named after the address of the New York Federal Reserve Bank on Maiden Lane. BlackRock emerged from an older Wall Street firm called Blackstone. Its former chair, Peter C. Peterson, was a former Chair of the Federal Reserve Bank of New York.

The original Maiden Lane company paid Bear Stearns Corp $30 billion. This amount from the New York Fed covered the debt of Bear Stearns, a condition negotiated to clear the way for the purchase of the old Wall Street institution by JP Morgan Chase. Maiden Lane II was a vehicle for payouts to companies that had purchased “mortgage-backed securities” before these derivative products turned soar.

Maiden Lane III was to pay off “multi-sector collateralized debt obligations.” Among these bailouts were payoffs to the counterparties of the insurance giant, AIG. As noted, AIG had developed an insurance product to be sold to those engaged in derivative bets. When the bottom fell out of markets, AIG lacked the means to pay off the large number of insurance claims made against it. The Federal Reserve Bank of New York stepped in to bail out the counterparties of AIG, many of them deemed to be “too big to fail.”

Among the counterparties of AIG was Goldman Sachs. It received of $13 billion from the Federal Reserve. Other bailouts to AIG’s counterparties were $12 billion to Deutsche Bank, $6.8 billion to Merrill Lynch, $5 billion to Switzerland’s UBS, $7.9 billion to Barclays, and $5.2 billion to Bank of America. Some of these banks received additional funds from other parts of the overall bailout transaction. Many dozens of other counterparties to AIG also received payouts in 2008-2009. Among them were the Bank of Montreal and Bank of Scotland.

The entire amount of the bailouts was subsequently calculated to be a whopping $29 trillion with a “t.” The lion’s share of these funds went to prop up US financial institutions and the many foreign banks with which they conducted business.

Much of this money went to the firms that were shareholders in the Federal Reserve Bank of New York or partners of the big Wall Street firms. Citigroup, the recipient of the largest amount, received about $2.5 trillion in the federal bailouts. Merrill Lynch received $2 trillion,

The Federal Reserve Bank was established by Congressional statute in 1913. The Federal Reserve headquarters is situated in Washington DC. The Central Bank was composed of twelve constituent regional banks. Each one of these regional banks is owned by private banks.

The private ownership of the banks that are the proprietors of the Federal Reserve system has been highly contentious from its inception. The creation of the Federal Reserve continues to be perceived by many of its critics as an unjustifiable giveaway whereby the US government ceded to private interests its vital capacity to issue its own currency and to direct monetary policy like the setting of interest rates.

Pam Martens and Russ Martens at Wall Street on Parade explain the controversial Federal Reserve structure as follows

While the Federal Reserve Board of Governors in Washington, D.C. is deemed an “independent federal agency,” with its Chair and Governors appointed by the President and confirmed by the Senate, the 12 regional Fed banks are private corporations owned by the member banks in their region. The settled law under John L. Lewis v. the United States confirms: “Each Federal Reserve Bank is a separate corporation owned by commercial banks in its region.”

In the case of the New York Fed, which is located in the Wall Street area of Manhattan, its largest shareowners are behemoth multinational banks, including JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanley.

There was no genuine effort after the financial debacle of 2007-2010 to correct the main structural problems and weaknesses of the Wall Street-based US financial sector. The Dodd-Frank Bill signed into law by US President Barack Obama in 2010 did make some cosmetic changes. But the main features of the regulatory capture that has taken place with the elimination of the Glass-Steagall Act remained with only minor alterations. In particular the framework was held in place for speculative excess in derivative bets.

In the summer edition of The Atlantic, Frank Partnoy outlined a gloomy assessment of the continuity leading from the events of 2007-2010 to the current situation. This current situation draws a strange contrast between the lockdown-shattered quality of the economy and the propped-up value of the stock market whose future value will in all probability prove unsustainable. Partnoy writes,

It is a distasteful fact that the present situation is so dire in part because the banks fell right back into bad behavior after the last crash—taking too many risks, hiding debt in complex instruments and off-balance-sheet entities, and generally exploiting loopholes in laws intended to rein in their greed. Sparing them for a second time this century will be that much harder.

Wall Street Criminality on Display

The frauds and felonies of the Wall Street banks have continued after the future earnings of US taxpayers returned them to solvency after 2010. The record of infamy is comparable to that of the pharmaceutical industry.

The criminal behaviour in both sectors is very relevant to the overlapping crises that are underway in both the public health and financial sectors. In 2012 the crime spree in the financial sector began with astounding revelations about the role of many major banks in the LIBOR, the London Interbank Offered Rate. The LIBOR rates create the basis of interest rates involved in the borrowing and lending of money in the international arena.

When the scandal broke there were 35 different LIBOR rates involving various types of currency and various time frames for loans between banks. The rates were calculated every day based on information forwarded from 16 different banks to a panel on London. The reporting banks included Citigroup, JP Morgan Chase, Bank of America, UBS, and Deutsche Bank. The influence of the LIBOR rate extended beyond banks to affect the price of credit in many types of transactions.

The emergence of information that the banks were working together to rig the interest rate created the basis for a huge economic scandal. Fines extending from hundreds of millions into more than a billion dollars were placed on each of the offending banks. But in this instance and many others to follow, criminality was attached to the financial entities but not to top officials responsible for the decisions that put their corporations on the wrong side of the law.

One of the factors in the banking frauds comprising the LIBOR scandal was the temptation to improve the chance for financial gains in derivative bets. The biggest failure of the federal response to the financial meltdown of 2007-210 was that little was done to curb the excesses of transactions in the realm of derivatives.

Derivatives involved a form of gambling that exists in a kind of twilight zone. This twilight zone fills a space somewhere between the realm of the real economy and the realm of notional value. Notional values find expression in unrealized speculation about what might or might not come to fruition; what might or might not happen; who might win and who might lose in derivative speculations.

The addiction of Wall Street firms to derivative betting remains unchecked to this day. The bankers’ continuing fixation with unregulated gambling, often with other people’s money, is deeply menacing for the future of the global economy…. indeed for the future of everyone on earth. According to the Office of the Controller of Currency, in 2019 JP Morgan Chase had $59 trillion in derivative bets. In July of 2020 it emerged that Citigroup held $62 trillion in derivative contracts, about $30 trillion more than it held before it was bailed out in 2008. In 2019 Goldman Sachs held $47 trillion and Bank of America held $20.4 trillion in derivate bets.

A big part of the scandal embodied in these figures is embedded in the reality that all of these banks carry their most risky derivative bets in units of their corporate networks that are protected by the Federal Deposit Insurance Corporation. This peril played a significant part in deepening the crisis engendered by financial meltdown that began in 2007.

One of the most redeeming features of the Dodd-Frank Act as originally drafted was a provision preventing financial institutions from keeping their derivative portfolios in banks whose deposits and depositors were backed up by federal insurance.

Citigroup led the push in Congress in 2014 to allow Wall Street institutions to revert back to a more deregulated and danger-prone economic environment. The notoriously inept decisions and actions of Citigroup had played a significant role in the lead up to the financial debacle of 2007 to 2010. Since 2016 Citigroup has become once again the biggest risk taker by loading itself up with more derivative speculations than any other financial institution in the world.

By returning derivative speculations to the protections of federal financial backstops, taxpayers are once again forced to assume responsibility for the most outlandish risks of Wall Street’s high rollers. It is taxpayers who are the backers of the federal government when it comes to their commitment to compensate banks for losses, even when these losses come about from derivative bets.

How much more Wall Street risk and public debt can be loaded onto taxpayers and even onto generations of taxpayers yet unborn? How is national debt to be understood when it plunders working people to guarantee and augment the wealth of the most privileged branches of society? Why should those most responsible for creating the most excessive risks to the financial wellbeing of our societies be protected from bearing the consequences of the very risks they themselves created?

Along with Citigroup, JP Morgan Chase stands out among a group of financial sector reprobates most deeply involved in sketchy activities that extend deep into the realm of criminality. In a simmering scandal six of JP Morgan Chase’s traders have been accused of breaking laws in conducting the bank’s futures trading in the value of precious metals. They have been accused of violating the RICO statute, a law meant for people suspected of being part of organized crime.

In the charges pressed by the Justice Department on JP Morgan Chase’s traders it is alleged that they “conducted the affairs of the [minerals] desk through a pattern of racketeering activity, specifically, wire fraud affecting a financial institution and bank fraud.”

In 2012 JP Morgan Chase faced a $1 billion fine for its role in the “London Wale” series of derivative bets described as follows by the Chair of the US Senate’s Permanent Subcommittee on Investigation. Senator Carl Levin explained, “Our findings open a window into the hidden world of high stakes derivatives trading by big banks. It exposes a derivatives trading culture at JPMorgan that piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight, and misinformed the public.”

Traders at Goldman Sachs appear to have been part of the Wall Street crime spree. The tentacles of corruption in the Goldman Sachs case apparently extend deep into the US Justice Department. The case involves allegations of embezzlement, money laundering and missing billions. These manifestations of malfeasance all spin out of a scandal-prone Malaysian sovereign wealth fund administered by Goldman Sachs.

A big part of the scandal reported in Wall Street on Parade in July of 2020 involves the fact that the Justice Department’s prosecutors seem to be dragging their feet in this possible criminal felony case against Goldman Sachs. The prosecutors, including the US Attorney-General, William Barr, worked previously for the law firm, Kirkland and Ellis. Kirkland and Ellis was retained to defend Goldman Sachs in this matter.

Pam Martens and Russ Martens express dismay at the failure of US officialdom to hold Wall Street institutions accountable for the crime spree of some of its biggest firms. They write, “Congress and the executive branch of the government seem determined to protect Wall Street criminals, which simply assures their proliferation.”

Even racketeering charges against officials at JP Morgan Chase, where Jamie Dimon presides as CEO, failed to receive any attention from the professional deceivers that these days dominate MSM. The star reporters of Wall Street on Parade write, “Crime and fraud are so de rigueur at the bank led by Dimon that not one major newspaper ran the headline [of the racketeering charge] on the front page or anywhere else in the paper.

While federal charges that JP Morgan Chase’s Wall Street operation engaged in criminal racketeering was not of interest to the press, Jamie Dimon’s surprise visit in early June to a Chase branch in Mt. Kisco New York aroused considerable media attention. Dimon was photographed with staff wearing a mask and taking the knee. By participating in this ritual Dimon signaled that his Wall Street operation is in league with the sometimes violent cancel culture pushed into prominence by the Democratic Party in partnership with Black Lives Matter and Antifa.

Jamie Dimon takes a knee 039df

*(JPMorgan CEO Jamie Dimon takes a knee with employees in front of a bank vault. Credit: JPMorgan)

In an article on 21 July marking ten years since the Dodd-Frank Act of 2010, the Martens duo conclude, “So here we are today, watching the Fed conduct another secret multi-trillion dollar bailout of Wall Street while the voices of Congress and mainstream media are nowhere to be heard.”

Enter BlackRock

In March it was announced that representatives of the US Treasury Department, the Federal Reserve Board and the BlackRock financial management were joining forces to make adjustments in the US economy. The aim was to address the financial dislocations resulting from the decision to lock down businesses, citizens, schools, entertainment, and social mingling outside the home, all in response to the health care hysteria promoted by governments and their media extensions.

The format of this process suggested some relaxation in the strict distinctions historically drawn between the US Treasury and the Federal Reserve. What would be the role of the third member of the group? In reflecting on this topic Joyce Nelson observed, “the new bailout bill not only further erases the line between the Federal Reserve and the U.S. Treasury, it places BlackRock effectively in an overseer position for both.”

Some saw as symbolically instructive the delegation to BlackRock of a larger role than that assigned it during the first bailout of 2007-2008. It would be hard to overestimate the significance of this prominent Wall Street firm’s return to a strategic role near the very heart of this major exercise of federal power. This invitation to take part in such crucial negotiations at such a consequential juncture in history caused some to characterize BlackRock as a “fourth branch of government.”

As Victoria Guida commented in Politico, “This is a transformational moment for the Fed, and BlackRock’s now going to be in an even stronger position to serve the Fed in the future.”

BlackRock officials had been instrumental in helping to manoeuvre their company into such a strategic role by responding proactively to the understanding in some elite circles that another financial debacle was imminent. Only months before the financial meltdown actually occurred a group of former central bankers all commissioned by BlackRock delivered a recovery plan in August of 2019.

Presented at a G 7 summit of central bankers in Jackson Hole Wyoming, the plan for the government responses to the looming financial collapse was entitled Dealing with the Next Downturn. Its authors are Stanley Fischer, former Governor of the Central Bank of Israel, Philipp Hildebrande, former Chairman of the Governing Board of the Swiss National Bank, Jean Boivin, former Deputy Governor of the Bank of Canada, and Elga Bartsch, Economist at Morgan Stanley.

The BlackRock Team at Jackson Hole put forward the case that a more aggressive and coordinated combination of monetary and fiscal policy must be brought to the job of stimulating a financial recovery. Monetary policy includes the setting of interest rates. Where monetary policy has historically been the domain of the central banks, fiscal policy, involving issues of taxation as well as the content and size of government budgets, lies within the jurisdiction of elected legislatures.

The nub of the proposal to unite fiscal and monetary policy put the US Treasury and the US Federal Reserve on the same political platform. As the author of this merger of monetary and fiscal policy, BlackRock became third member of the triumvirate charged to address the broad array of economic maladies that arrived in the wake of the lockdowns.

In the spring of 2020 BlackRock has been hired by the Bank of Canada and by Sweden’s Central Bank, the Riksbank, to deliver on the approaches to crisis management its representatives had laid out at Jackson Hole. BlackRock’s most high-profile and strategic engagement, however, began with its involvement in the negotiation of the $2 trillion CARES stimulus package that passed through the US Congress in March of 2020.

The CARES Act included $367 billion for loans and grants to small business, $130 billion for health care systems, $150 billion for state and local government, $500 billion for loans to corporate America, and $25 billion for airlines (in addition to loans).

The heart of the plan involved a payout of $1,200 per adult and $500 per child for households making up to $75,000. This payment to citizens approaches the concept of disseminating “helicopter money” as referred to in BlackRock’s initial outline for dealing with the “downturn.” Helicopter money distributed by the federal government to its citizens was also related to the concept of “going direct” in strategies for stimulating the economy.

BlackRock seems to be moving into the space recently held by Goldman Sachs as Wall Street’s best embodiment of ostentatious success including in the preparation of its corporate leaders for high-ranking positions in the federal government. Laurence Fink, BlackRock’s founder and CEO, might well have replicated this career path to become Treasury Secretary if Hillary Clinton had succeeded in becoming US President in 2016.

BlackRock’s leadership went to great lengths to avoid being tagged with the title in the United States of a “systematically important financial institution” (sifi). To be subject to this “sifi” label entails added federal scrutiny and regulation as well as heightened requirements to keep high amounts of capital on hand. BlackRock’s status as a private company not subject to sifi regulations makes the financial management firm more attractive to its federal partners in the federal payout operation presently underway.

One of the reasons for including a private company in the trio of partners involved in the payouts is to sneak around limitations on the legal powers of the Federal Reserve. As explained by Ellen Brown in her essay, Meet BlackRock: The New Great Vampire Squid, the Federal Reserve can only purchase “safe federally-guaranteed assets.” As a private company, BlackRock apparently faces no such restrictions. It can purchase more risky assets not backstopped by federal insurance.

The regional banks of the Federal Reserve Board are owned by private companies whose directors seem to have been part of the decision to include BlackRock in the implementation of the CARES process. There can be no doubt that the format of the CARES negotiations pulled the supposedly independent Federal Reserve more deeply into the political orbit of the US Treasury branch. The presence of a major Wall Street firm in the process, however, apparently gave the advocates of the Fed’s supposed independence from politics a sense that they retained some leverage in the process.

The inclusion of private companies in the conduct of government business has become in recent decades a very common expression of neoliberalism. One of the reasons for this embrace of public-private partnerships in the conduct of government business is to take advantage of the legal nature of private companies. The apportionment to private companies of significant roles in deciding and implementing public policies helps put veils of secrecy over the true nature of government decisions and actions.

Private companies can more easily assert claims to “proprietary information” than can public institutions when they act on behalf of citizens. This feature of privatization in the performance of public responsibilities by elected government runs counter to the imperatives of democratic transparency. It puts obstacles in the way of genuine accountability because the public is more likely to be kept in the dark about key aspects of what is being decided and done on their behalf.

Suck Up Economics and State Monopoly Capitalism

BlackRock owns, controls, or manages about $30 trillion in total in securities. It directly controls or owns somewhat less than a third of this amount. The remainder of the assets BlackRock manages are to service clients responsible for taking care of pension funds, philanthropies, foundations, endowments, family offices, superannuation funds and such.

A big part of BlackRock’s business model involves attracting customers by allowing them access to great masses of timely information of significant utility to those responsible for making investment decisions. This technological wizardry happens on a very advanced computational platform known as Aladdin.

Aladdin remains a work-in-progress, one that is widely recognized as the most sophisticated medium of its kind for assessing all manner of financial risks and potentials for profit. Its future as an investment platform is to become more and more integrated into the complex mix of hardware and software animating Artificial Intelligence.

BlackRock’s job is to dispense funds ushered into existence through the money-creating powers of the Federal Reserve. These transactions are to take place through eleven so-called “special purpose vehicles” similar to the Maiden Lane companies that BlackRock administered during the prior bailouts.

The funds it distributes in this round starting in 2020 are meant, at least at this early stage of the crisis, as payments for various sorts of assets. These assets might include an array of corporate bonds spanning a range from so-called investment grade to garbage grade junk bonds. The losses incurred in this exchange, involving supposed assets that might turn out to be worthless, or loans that might not be paid back, are to be charged to the US Treasury. Ultimately the liability lies on US taxpayers who are the holders of the national debt.

Bonds of varying levels of worth lie beneath another asset eligible for transformation into cash. This instrument of value is referred to as Exchange Traded Funds, ETFs. ETFs happen to be a specialty of BlackRock ever since the company launched a range of commercial ETFs into Stock Market circulation through its iShares division. BlackRock’s role on both sides of buying and selling ETFs comes up repeatedly as one of the many conflicts of interest of which the Wall Street firm stands accused.

Given that BlackRock is involved in one way or another in the proprietorship of pretty much every major company in the world, there is plenty to back up the allegation that Black Rock is an interested party in most of the transactions in which it engages as part of its partnership with the US Fed and Treasury Branch.

Pam Matens and Russ Martens have been very critical of the role of the Federal Reserve and BlackRock in the current economic crisis. They have anticipated that, if the current drift of events continues, American taxpayers will once again be gobsmacked with a huge growth in the national debt. This development would amount to another major transfer of wealth away from working people to the beneficiaries of Wall Street firms and the same commercial institutions that received the lion’s share of funds during the last bailout.

The co-authors picture BlackRock is part of a scheme to use “Special Purpose Vehicles” like “Enron used to hide the true state of its finances and blow itself up.” They entitle their article published on 31 March, 2020 as  “The Dark Secrets in the Fed’s Wall Street Bailout Are Getting a Devious Makeover in Today’s Bailout.”

The authors observe. “What makes the New York Fed’s bailout of Wall Street so much more dangerous this time around is that it has decided to use a different structure for its loans to Wall Street – one that will force losses on taxpayers and, it hopes, will provide an ironclad secrecy curtain around how much it spends and where the money goes.”

I find this account of an effort by the Federal Reserve to create an “ironclad secrecy curtain” shocking under these circumstances. It suggests an intention to exceed the deceptiveness of the last bailout. This warning renews longstanding suspicions that the failures of transparency and accountability have not subsided since the beginning of the era when deregulation and the 9/11 deceptions converged in the domestic and international operations of Wall Street.

The structural problems already identified in the process initiated to implement the CARES Act could have enormous consequences if the current economic crisis continues to deteriorate. This deterioration is not likely to stop anytime soon given the depth of the crash and its probable domino effects. It was reported in late July that during the second quarter of 2020 the US Gross Domestic Product collapsed at an annualized rate of 33%, the deepest decline in output ever recorded since the US government began measuring GDP in 1947.

The CARES Act helped set in motion a program with the potential to repeat elements of the earlier bailout. The amount of $454 billion was to be set aside to assist the banking sector. The Fed can leverage this amount by ten times according to the principles of fractional reserve banking.

The news of this development caused Mike Whitney to imagine “the Fed turning itself into a hedge fund in order to buy the sludge that has accumulated on the balance sheets of corporations and financial institutions for the last decade,” Whitney pictured an onslaught of “scheming sharpies who will figure out how to game the system and turn the whole fiasco into another Wall Street looting operation.”

Meanwhile the Martens Team at Wall Street on Parade called attention to the $9 trillion already injected by the New York Fed to flood liquidity into the still-troubled Repo Markets that began to falter in September of 2019. Add to this revelation the news that the Fed “has not announced one scintilla of information on what specific Wall Street firms have received this money or how much they individually received.”

There is no doubt that the nature of economic relations will be substantially altered in the process of dealing with the financial meltdown induced by the lockdowns and by the overreliance on high debt rates combined with artificially low interest rates prior to 2020. The altered political economy that is beginning to emerge following the lockdowns is sometimes described as state monopoly capitalism.

In deciding what companies get bailed out and what companies don’t, the financial authorities that are intervening in this crisis are pretty much deciding what enterprises get the advantage of federal financial backstops and what enterprises will not enjoy government sanction. Increasingly, therefore, it is the state that determines winners and losers in the organizing of financial relations. This development further undermines any notion that some idealized vision of competition and market forces will determine winners and losers in the economy of the future.

As Peter Ewarts has observed, it seems that BlackRock is being delegated by federal authorities to exercise “discretionary powers to pick winners and losers,” a choice that is “where the real bonanza and clout lies.” Will the winners be chosen from the companies run by executives that used the money gained from the prior bailouts to engage in stock buy backs? This process of buying back stock tends to be reflected in CEO bonuses and higher share prices. Alternatively this way of allocating funds tends to short change workers as well as innovation and efficiency in industrial production?

Will companies be rewarded whose executives have moved production facilities overseas or issued billions in junk bonds? Will companies be rewarded whose directors have participated in the effort to censor the Internet, bring about lockdowns or foment mask hysteria? Why is it that the coddled elites serving the financial imperatives of most wealthy branches of society are being put in the best position to decide who gets a life preserver from the state and who must sink and drown?

Might this bias be a factor in the current process that led Forbes Magazine to conclude in a headline that “Billionaries Are Getting Richer During the Covid-19 Pandemic While Most Americans Suffer.”

There can be no doubt that the financial transactions beginning with the CARES Act represent a crucial initial stage in what the promoters of the World Economic Forum have been labeling as the Great Reset. Laurence Fink and the BlackRock firm are significant participants in the World Economic Forum. The WEF helped introduce the pandemic in Event 201 in October of 2019 even as it is now trying to put a positive face on the fiasco.

Why should the people most harshly affected by the lockdowns tolerate that the very Wall Street interests dispossessing them, are tasked once again to lead and exploit the reset of the financial system? As presently structured by the likes of BlackRock and its beneficiaries, this process is once again transferring new wealth to the most wealthy branches of society. Simultaneously it is burdening the rest of the population with yet another massive increase in both personal and national indebtedness.

There is no more discussion of “trickle down” economics, a frequent metaphor invoked in the Reagan-Thatcher era. Instead we are in the midst of an increasingly intense phase of suck up economics. The rich are being further enriched and further empowered through the dispossession of the poor and the middle classes. This procedure, initiated when locked down citizens were sidelined from the political process, has the potential to result in the largest upward transfer of wealth so far in history.

BlackRock Versus the Debt-Lite Legacy of the Bank of Canada

At the end of March Laurence Fink, CEO and founder of BlackRock, announced in a letter to his company’s shareholder, “We are honored to have been selected to assist the Federal Reserve Bank of New York and the Bank of Canada on programs designed to facilitate capital to businesses and support the economy.”

This announcement might leave the impression that the Bank of Canada and the Federal Reserve Bank of New York are similar institutions. This impression is unfounded. The two banks have very different structures and histories. A spotlight on these differences helps illuminate the nature of a number of core financial issues.

These financial issues should command avid attention during this time of reckoning with a serious economic crisis that may well be still in its early stages. Such issues inevitably draw attention to the current manifestations of very old questions about the character of money and its relationship to the concepts of usury and debt. Questions about debt, debt enslavement as well as the possibility of debt renunciation or debt forgiveness are becoming especially pressing.

These controversial queries arise in an era when a tiny minority is aggressively asserting sweeping claims to ownership of vast concentrations of the world’s available assets. The other side of this picture reveals that the largest mass of humanity is sinking into a swamp of rising debt on a scale that is concurrently unsustainable and unconscionable. How did this level of inequity reach such audacious extremes? Are there any remedies in sight?

There is nothing to suggest structural remediation in the current approach to the economic crisis. In fact so far there is every indication that the current approach of bringing about an enormous expansion in the availability of debt-laden money will only compound the further dispossession of the already dispossessed in order to expand the wealth of the already wealthy.

As already noted, the Federal Reserve Bank of New York is one of twelve regional banks that together constitute the US Federal Reserve. Every regional Federal Reserve Bank is owned by a group of private banks. Each of the private banks at the base of a Federal Reserve regional bank marks its proprietorship through the ownership of shares. These shares cannot be freely traded in stock markets. The ownership of these shares expresses the private ownership of the US banking system.

The Fed’s New York regional bank has a special role in money creation given its location at the heart of the US financial sector on and around Wall Street. In this crisis, the Federal Reserve Bank of New York is creating new money in the name of holding back onslaughts of destitution and penury in a traumatized society. Ever since 1913 every new dollar brought into existence by the Federal Reserve, which is the central bank of the United States, creates added debt that collects compound interest as long as it is left unpaid.

The Bank of Canada was created to counter the delegation of money-creating authority to privately-owned banks. The Bank of Canada was founded during the Great Depression, a time when the failure of many existing institutions created the conditions to try out alternative entities in the attempt to improve economic relationships.

One of the driving forces in the creation of Canada’s new banking system was Gerald Gratten McGeer. McGreer was an elected official in British Columbia dedicated to changing the system so that the people of Canada could generate their own currency through the sovereign authority of Canada’s Parliament. McGeer helped to push the national government of Prime Minister R.B. Bennett in this direction. The wheels were set in motion in 1933 through the work on the Royal Commission on Banking and Currency.

McGeer drew much of his inspiration from former US President, Abraham Lincoln. Lincoln led the US federal government throughout the US Civil War. To finance the Armed Forces of the Union, Lincoln used the authority of the federal government to create “Greenbacks” as a means of paying the troops. By employing the sovereign authority of the US government to create its own currency, Lincoln avoided the intrigues that often accompanied the process of borrowing money from foreign lenders.

McGreer had obtained what he viewed as credible evidence that Lincoln had been assassinated because of his antagonism to the designs of private bankers seeking to widen their base of power in the United States. The Canadian politician had taken to heart a comment attributed often to Lincoln: “The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity.”

The Bank of Canada was created in 1934 and nationalized as a Crown Corporation in 1938. To this day it retains its founding charter that affirms,

WHEREAS it is desirable to establish a central bank in Canada to regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada.

The Bank of Canada formed an essential basis of a very creative period of Canadian growth, development, and diversification throughout the middle decades of the twentieth century. The Bank of Canada created the capital that financed the Canadian war effort from 1939 until 1945. After the war the Bank of Canada lent money at very low rates of interest to the municipal, provincial and national governments. The monies were used for infrastructure projects and for investments to increase the wellbeing and creative potential of Canada’s most important resource, its people.

This type of low interest or no interest financing formed the economic basis for projects like the creation of a national pension plan, national health care insurance, the Trans-Canada Highway, the St. Lawrence Seaway, the Avro-Arrow initiative as well as a formidable system of colleges and universities.

One could say that the Bank of Canada provided an indigenous money supply that was spent into the operations of a fast growing economy greased with lots of federal liquidity. The new money derived its value from the efforts of Canadian workers.  Together they brought about significant increases in the country’s net worth through practical improvements that bettered the lives of all citizens.

Consider the contrast between this type of national development and the kind of larceny facilitated by the Federal Reserve’s infusions of the money it creates into Wall Street’s operations in the twenty-first century. In, for instance, the financial bailouts of 2007 to 2010 the largest part of the newly-created money ended up in the coffers of the wealthy whereas the new debt created ended up as part of a US national debt.

The burden of carrying this debt falls inter-generationally on average working people who form the lion’s share of taxpayers. They have long been saddled with an “inextinguishable debt” that unrelentingly grows, hardly ever shrinks, and remains basically unpayable forever. The very concept of “compound interest” conveys the image of an overall debt spread out over many venues. This debt must grow in perpetuity. There is a constant need for additional debtors while existing debtors must face constantly growing personal debt.

There is reason to suspect that the financial debacle of 2020 will re-enact some the worst excesses of the 2008 bailout. Might the payouts this time around to derivative-addicted Wall Street firms like Citigroup, Goldman Sachs and JP Morgan Chase exceed the scale of the prior bailout? Would there be any way of even knowing whether the current round of payouts outdoes the former round of bailouts? The current process of federal disbursements is not transparent. In fact the process has been described as one designed to “provide an ironclad secrecy curtain around how much [the Fed} spends and where the money goes.”

Why is the Canadian government turning to the very firm that emerged as Wall Street’s main fixer and winner in the 2008 bailouts? Why is Justin Trudeau looking to BlackRock to respond to the Canadian aspects of the 2020 economic crash?

Justin Trudeau seems unwilling or unable to provide a coherent answer to this question and others requiring thoughtful replies rather than barrages of platitudes. Why is Justin Trudeau instituting what Joyce Nelson has characterized as a “new feudalism” in Canada’s economic policies?

Any decent effort of response on Trudeau’s part would have to make some reference to the background of the current debacle. There would have to be some acknowledgment that between 1934 and 1974 the Canada government did not build up any significant national debt. Then, between 1974 and 2020, the national debt of Canada skyrocketed from $22 billion to $700 billion.

Why was such a good and sustainable use of the Bank of Canada put aside, one that contributed magnificently to the health and wellbeing of the Canadian people as well as the Canadian federation? Who lost out? Who gained besides the international bankers?

The incomprehensible abandonment of a winning formula for Canadian development by Prime Minister Pierre Trudeau puts a special onus on his son, Canada’s current PM, to explain the incredibly costly mistake of his father. Why won’t Justin Trudeau fix the mistake of his father and restore the Bank of Canada to its former role in Canadian nation building?

There has never been a full and satisfactory explanation of what really happened in 1974 to persuade Pierre Trudeau to throw aside the means of developing infrastructure with resources generated internally within Canada. Trudeau Senior’s decision to stop building up Canada through the operation of the Canadian people’s own national bank was not debated in Parliament. The option was never part of an election platform let alone the subject of a national referendum.

Apparently the Swiss-based Bank of International Settlements, which is often referred to as the central bank for central bankers, had some role in Pierre Trudeau’s decision to cease using the Bank of Canada’s powers to generate near-debt-free Canadian currency.

Government as a Means of Escaping Debt Entrapment

That powers of debt-lite money creation invested by Parliament in the Bank of Canada have never been formally withdrawn. The Bank of Canada could still revert back to the direct creation of Canadian currency to be spent into an economy of national recovery; to be spent in investments in infrastructure as well as in cultivating and applying the creative skills of the Canadian people.

Between 2011 and 2017 a court case was brought against the government of Canada with the aim of restoring the Bank of Canada to its former role. As Rocco Galati, the lawyer for the Committee on Monetary and Economic Reform (COMER) explained  “Not only has the government abandoned its constitutional duty to govern, but it has transferred it to international private banks which corresponds to an abandonment of its sovereignty.”

After some significant rulings and contentious appeals, the COMER case came to an end without delivering results that its plaintiffs sought. But the court case helped to put a spotlight on the potential of the Bank of Canada. If properly utilized, this institution could provide a model corrective to the subordination of governance to the international Lords of Debt Explotation and their minions.

This process of politicizing the role of the Bank of Canada should extend to a process of calling out Justin Trudeau’s current approach to selling off key components of Canada’s infrastructure.

This topic came up in private discussions between Larry Fink and Justin Trudeau at the World Economic Forum in Davos in January of 2016. Fink apparently got Trudeau interested in attracting private investors to the project of improving or building Canadian infrastructure projects like roads, high-speed trains, airports and such. This kind of approach to developing infrastructure projects runs counter to the role once played by the Bank of Canada in incorporating self-sufficiency into the process of national building.

The dangers and opportunities in this time of manufactured crises are indeed unprecedented.  Instead of rejecting the Davos crowd’s preoccupation with a giant reset, why not embrace the concept? Why not treat this moment as an opening to reset the global economy in a way that would restore the Bank of Canada to some of its former functions. Why not highlight this return to the sovereign embrace of benevolent nation building as an example for the rest of the world?

Why not reconstitute the worldwide structures of the international system of economic relations to restore elected governments to the functions that have been pre-empted by unaccountable institutions like the US Federal Reserve or the Bank for International Settlements? Why not renew the model of banking as an exercise and expression of national sovereignty and the self-determination of peoples in a dynamic global arena of rules-based economic interaction?

Why not withdraw the power from private bankers to create national currencies? Why not follow the advice of the deceased Abraham Lincoln by restoring “the greatest of all creative possibilities available to governments,” namely their power to issue money and set interest rates. The restoration of economic power to governments and the people and peoples they represent would involve the infusion of life into conceptions of globalization very different than those used to justify the industrialization of China and the deindustrialization of North America.

By delegating to international organizations much of their capacity to influence the economic conditions affecting their own people, national legislatures have lost much of their capacity to provide responsible government. Governments thus weakened are not realistically in a position to derive their authority from the consent of the governed. When representative bodies cannot effectively express the right of their constituents to collective self-determination in economic realm, what legitimacy is left to the institution of representative government?

This strange moment puts humanity face to face with much that is novel and unprecedented and much that is old and integral to the history of human interaction. The economic dimensions of this crisis constitute its most devastating and far-reaching attribute. The supposed remedy being rushed into operation is to flood large quantities of debt-laden loans into existence and for governments to distribute the borrowed funds to individuals, businesses, and organizations as they see fit.

Once again, vast quantities of debt-laden money are being created without the informed consent of those on whose shoulders the vastly increased loads of debt are falling. Once again governments are rewarding political friends and punishing political enemies by means of the way the new funds are being apportioned.

Decisions are pushed forward that emanate not from citizen constituents but from cabals of supranational connivers actively engaged in wrecking what little remains of responsible government. As governments lose legitimacy by engaging in collusion with corrupt cronies and international crime syndicates they must depend more and more on police state thuggery to enforce some semblance of order.

This process is going forward in spite of the fact that alternative means exist to create as much new money as is required without having to pay large amounts of compound interest to private bankers. Every sovereign government has the capacity to generate new money by following the model of the Bank of Canada between 1938 and 1974.

There is an especially urgent need at this time for some serious reckoning with the economic dimensions of the crisis before us. This reckoning will inevitably meet the resistance of extremely powerful interests who are deriving great benefits from the existing system. The process of privatizing the creation of money has enriched and empowered a clique whose institutionalized, deep-rooted and continuing kleptocracy was exposed in part by the bailout of 2008.

Why should we take for granted in 2020 that the best way to deal with the economic debacle put before us is to create new money by agreeing to go much deeper into a quagmire of debt entrapment. This debt trap, whose cumulative amount will soon be more that $300 trillion globally, creates gross liabilities in a trajectory of disadvantage that severely limits the life chances even of many generations still unborn.

The other side of debt is embodied in assets. Who gets the assets and who gets the liabilities that coalesce to form indebtedness? What is to be made of the role of birth or inheritance or race or natural ability or social connections in apportioning assets or imposing the enslavements of accumulated debt?

John Perkins addressed some of these issues in his Confessions of an Economic Hit Man and in a subsequent follow-up volume. Perkins chronicled how an inter-related complex of US institutions aligned themselves with his own greedy and unscrupulous interventions. The goal of their coordinated aggressions was aimed at imposing the enslavements of massive debt with compound interest. Their version of loan sharking is one of many manifestations expressing a very old and common phenomenon. It often happens that powerful interests parasitically exploit the weak to further enrich themselves.

This partnership between John Perkins and the kleptocratic agencies directed by the US government has long been drawing wealth from struggling countries by pushing them more deeply into national indebtedness. Once the governments of target countries succumbed to greater dependence on debt-based financing, the conditions were ripe to force officials into adopting policies of austerity that harmed local citizens in order to augment the assets of international investors.

Significantly the World Bank demonstrated how this coercion works in the context of the current economic crisis. The World Bank attempted to impose conditions on a loan of $940 million to Belarus because the WB wanted Belarus to conform to the lockdowns that are a primary cause of the current manufactured crisis.

As revealed by the Belarus’s President, Alexander Lukashenko, the World Bank wanted his country to adopt the full set of COVID-19 measures that had been implemented by the Italian government. Lukashenko said no to the loan. He refused to accept the conditions and carried on the established policies of Belarus, a country that has “not implemented strict coronavirus containment measures.”

Lukashenko is far from alone in his contempt for the manipulative tactics of the apparatus promoting the manufactured crisis. For instance Tanzanian President, John Magufuli, tested the accuracy of the testing procedures being forced on his country by the World Health Organization. President and Medical Doctor Mugufi included in the samples submitted to the testing agency some tissue of a goat and a papaya. Both the goat and the papaya tested positive for COVID-19, an outcome he publicized before ordering the WHO group to leave his country.

The Political Economy of Usury From the Middle Ages to the Era of Social Credit and Ezra Pound

We cannot assess the division of humanity between a massive group of debtors and a much smaller group of creditors without touching on the issue of usury. The subject of usury, the lending of money with the addition of interest payments, has been an extremely contentious issue throughout much of human history.

There were prohibitions against usury in ancient Greece, ancient India and the Roman Empire. Throughout much of the last thousand years usury has been regarded as a sin outlawed in the Bible, the Torah and the Koran. At different times in history the Roman Catholic Church has been an especially zealous opponent of some forms of usury.

Considering the nature of our current predicaments including obscene levels of economic inequality, usury might yet again arouse contentions. Some of the core ethical issues raised by the resort to usury remain unresolved. How is it ethical, for instance, to subject disinherited children in poor countries to the indignities of deepened poverty so that rich folks in rich parts of the world can reap larger dividends?

Beginning in the Middle Ages, forms of usury began to show up first in the Italian city states and in the towns of the Franco-Flemish realm. The act of loaning money with interest gradually spread throughout Europe. In some predominately-Muslim jurisdictions, the concept conveyed in the Arabic term, “riba,” approximated the idea of usury or interest. Over time various versions of riba have affected Muslim banking practices.

Often there were prohibitions preventing Jews from demanding interest on loans made to other Jews. There were many Talmudic teachings, however, permitting interest to be collected from gentiles when they borrowed money from Jews. Many accounts of Jewish efforts to break down prohibitions on usury highlight obstacles preventing Jews from pursuing other lines of work. The case is made that the pull of some Jews into banking came about in part because of their exclusion from other occupations.

Whatever the case, the obstacles to usury continued to be lessened including through the changes to Biblical interpretation that came with the Protestant Reformation. Even in the twentieth century, however, usury continued to arouse criticism and distrust. Ezra Pound was one of those who became very outspoken when it came to problems with usury.

The modernist poet and scholar, Ezra Pound, was one of the most influential literary figures of the twentieth century. The importance of his work was expressed not only in his own literary efforts but also in his contributions to other authors in his circle of friends and colleagues.

Pound’s outspoken criticism of usury formed part of the discourse that was integral to the political movements seeking economic reform. The creation and successful nationalization of the Bank of Canada was one of the outgrowths of the concerted quest to give substance to economic institutions that would more effectively serve human needs.

The creation of the Bank of Canada drew on the ideas of Abraham Lincoln and also on those of many other theorists including Major C.H. Douglas. While Major Douglas and John Maynard Keynes each denounced one another’s work, both sought to stimulate economic activity by expanding the supply and distribution of money.  Major Douglas’ vision of Social Credit, one that Pound enthusiastically embraced, sought to bring about greater harmony and equilibrium between the forces of production and consumption.

A biographer of Pound has explained that this formidable literary figure believed “there was the prospect of building a Social Credit society where money served the consumer and served the producer.”  As Pound pictured it, “the middle men” seeking usurious, interest bearing profit” to be collected “without work or prior motivation, could be cut out.” During the Depression the hope of prosperity through the application of Social Credit principles was seized upon by many. One of them was an evangelical preacher in the Canadian province of Alberta.

Largely as a result of the popularity he gained by incorporating Major Douglas’ analysis of Social Credit into his Sunday afternoon Christian radio broadcast, “Bible Bill” Aberhart became the Premier of Alberta. His Social Credit Party gained 56 of 63 seats in the Alberta Legislature. The Social Credit Party continued in power until 1971.

The Social Credit preoccupation with bringing about changes in the relationship of citizens to financial institutions helped add to the discourse from which the Bank of Canada emerged as a dynamic instrument of nation building.

The enthusiasm was well placed of those who threw their lot in with the movement to create and enlivened the Bank of Canada. The generations that put their trust in this federal financial institution had the satisfaction of knowing that their taxes were not devoured to pay big amounts of interest to private bankers in the style that presently prevails almost everywhere.

Like his good friend and colleague, Ernest Hemingway, Pound was a devotee of clear, terse and succinct prose.

This characteristic of his writing comes through strongly in his harsh condemnations of usury. “Usury is the cancer of the world,” Pound wrote. He explained, “Until you know who has lent to whom, you know nothing of politics, you know nothing whatever of history, you know nothing of international wrangles.”

Ezra Pound was born in Idaho but was attracted to Italy throughout long periods of his life. In Italy he lionized its fascist leader, Benito Mussolini. He embraced the Axis side in World War II developing close relations with the British fascist leader, Oswald Mosley. Pound threw himself into the contest producing a torrent of radio broadcasts seeking to win over English-speaking converts to the Axis side. These broadcasts are today widely described as war propaganda.

Pound was indicted in the United States in 1943 and arrested at the war’s end by the US Armed Forces in Italy. After being jailed in Pisa, Pound was charged with treason. Then Pound was diagnosed as being mentally unfit to face charges.

The finding that he was mentally ill caused Pound to be locked up as a patient in St. Elizabeth’s Hospital in the Washington DC area for the next 13 years. In spite of his severe prejudices against Jewish bankers and his active embrace of fascism during the war years, Pound continued to carry on very lively interactions with his formidable circle of poets, essayists and novelists.

Pound’s circle included James Joyce, Ernest Hemingway, and T.S. Eliot. All these writers wrote works that won a Nobel Prize for Literature. These and many other authors benefited from Pound’s encouragement and mentorship. In 1948 Eustace Mullins joined Pound’s circle. Mullins was introduced to the famous poet and scholar through Pound’s wife, Dorothy Shakespeare,

When he first met Pound, Mullins was an art school student and a veteran of the US Air Force. He had already published some short pieces in the British journal, Social Creditor. Mullins remembered Pound’s place of forced residence as “a hideous, urine-soaked madhouse in Washington D.C.” As their visits became increasingly regular, Pound encouraged Mullins to conduct research into the history and activities of the Federal Reserve.

When Pound proposed the idea Mullins was unaware of the existence of the Federal Reserve. Nevertheless, Mullins threw himself into the project that he supported by combining his research with work as a book stacker at the Library of Congress. At the Library he befriended George Stimpson who was well known among Washington journalists and government officials for his wealth of knowledge and his ability to locate relevant research materials.

Stimpson happily worked with Mullins. He helped the aspiring author by guiding him into the primary and secondary literature illuminating many facets of the Federal Reserve’s history

Eustace Mullins Explores the Secrets of the Federal Reserve

An initial edition of the volume appeared in 1952 as Mullins on the Federal Reserve. Another edition with added information was published in 1954. The text has been republished many times, sometimes in different editions under the title Secrets of the Federal Reserve. The text is organized around both thematic and chronological facets.

Mullins lays out the history of the Federal Reserve with considerable attention to the institution’s roots and origins. The author emphasizes several strands of continuity showing the links of the Federal Reserve to the banking establishments of Europe but especially those of Great Britain and Germany.

Mullins characterizes the Federal Reserve as the most powerful institution in the United States whose influence grew so that “it gradually superseded the popular elected government of the United States.” The power of the Fed and its core facet, the Federal Reserve Bank of New York, is said to have become so formidable because the agency operates in secrecy without any genuine form of accountability to any public institution. The NY Fed combines the power of secrecy with the enormous power to create new currency and to set interest rates becoming in the process “the most gigantic trust on earth.”

Mullins makes the case that the financial district known as the City of London exercised enormous influence over the activities of the Federal Reserve and many of the large Wall Street banks. Mullins wrote, “London is the world’s financial centre, because it commands enormous sums of capital created at its command by the Federal Reserve Board of the United States.”

Mullins is conscientious in presenting many citations to back up his observations and interpretations. He cites, for instance the New York Times on January of 1920 where it states, “The Federal Reserve is a fount of credit not capital.” The manipulation of credit, however, can greatly affect the industrial economy by affecting the ability of manufacturers and farmers to produce.

Mullins emphasizes throughout the text how events are often engineered to strengthen the hand of the Lords of Credit in the matrix of society’s operations. In referring, for instance, to a secret banker’s plan to crash the stock market in 1929, Mullins expressed a view that could as easily describe the growing suspicion in 2020. Could it be that the lockdowns of businesses and workers were purposely engineered to strengthen the hands of the Lords of Credit whose main platform is the Federal Reserve Bank of New York?

Mullins explains that sometimes “bankers paralyse the industrial energies of the country” in order to highlight and strengthen “their tremendous powers” over the financial and business organization of the American economy. Mullins’ observation that “panic is an instrument of [financial] power” is another statement with obvious relevance to the current crisis.

As have many authors since, Mullins emphasizes the importance of a top-secret meeting on Jekyll Island in the state of Georgia in 1910. At this meeting Paul Warburg essentially took the intellectual lead in creating a plan for a Central Bank in the United States. Such an institution was long contemplated and promoted but it had been stopped repeatedly, most famously be Andrew Jackson. Jackson’s political career culminated in his winning the US presidency between 1829 and 1837.

Warburg left his family banking business in Hamburg Germany in 1902. He joined the Wall Street Office of Kuhn Loeb, a Wall Street House that helped finance the Bolshevik Revolution in Russia. Mullins devotes much effort to describing the complex of alliances and rivalries that characterized banking before and after the founding of the Fed.

Weaving throughout these networks of financial activity were the banking operations of the Rothschild family. Mullins leaves no doubt that the operations of the Rothschild family of bankers were extensive, elaborate and very influential.

In the nineteenth century the Rothschild banking establishment gradually wove its operations into those of large segments of Europe’s royal and aristocratic establishments. Mullins emphasizes the genesis of the close business relationship between the Rothschild banking clan and a London-based US company, George Peabody and Company.

Peabody’s bank was passed on to a father and son team, Junius Spencer Morgan and John Pierpont Morgan. In the days of the Fed’s founding and even today, the name of J.P. Morgan is synonymous with New York banking. Mullins explains how the Rothschild bankers kept a fairly low profile in New York by conducting much of their American business largely through the financial organizations associated with the name and reputation of J.P. Morgan.

Mullins outlines the role of the Federal Reserve in the funding of two world wars. Many of the topics covered in Secrets of the Federal Reserve were later pursued in much more detail in the prolific writings of Antony C. Sutton.

Most of Sutton’s volumes describe the role of Wall Street in helping to bring about many of world history’s major turning points during the twentieth century. These turning points include Wall Street’s funding of the rise of the National Socialist government in Germany in the 1930s and the role of Wall Street in financing the Bolshevik Revolution and the business activities of the Soviet Union.

The capacity of the New York Bank of the Federal Reserve to create vast quantities of credit to finance wars, often with the same bankers funding competing sides in conflicts, provided the key to the creation of huge fortunes. The funding of both sides in war can be seen as an early form of hedging one’s bets. This kind of high impact intervention through banking sometimes created huge leverage for a very small number of people to steer history towards preconceived destinations.

As Mullins explains it, the Federal Reserve was founded in extreme secrecy and often employs deceptive tactics to misrepresent its true nature. As Mullins sees it, for instance, the creation of the twelve regional banks was a ploy to gain political acceptance for the Central Bank’s core entity, the Federal Reserve Bank of New York. Mullins explains, “the other eleven banks were so many expensive mausoleums erected to salve local pride and quell the Jacksonian fears of the hinterland.”

The ability of Wall Street bankers to invoke the credit creating powers of the New York Fed forms a key aspect of the frequent military adventurism of the US government. This military adventurism continued full force even after the United States became the world’s largest debtor nation after 1990. How large has been the role of the US Fed in building up the US national debt together with the tens of trillions missing from the books of the US Defense Department?

The Israel Lobby and the Federal Reserve

Much of the military adventurism of the United States especially after 9/11 was directed into invasions of Muslim-majority countries that threaten a particular view of Israel as a dominant power in its region and in the world. Why would it be that the Federal Reserve is any less involved in creating the available credit for the waging of wars in the twenty-first century than it was in creating the wars of the twentieth century?

In his authorship of The Secrets of the Federal Reserve, Mullins seems largely oblivious to the role in world history of Zionism and the genesis of Israel. His main attention lay elsewhere. As I read his text, he accurately conveyed how the large Jewish influence in the banking institution of Europe, including the influence of the Rothschild consortium, was extended into Wall Street including the Federal Reserve.

While Mullins does not shy aware from dealing with the Jewish component of the story he set out to tell, I don’t think he belabours this subject or becomes aggressively polemical about it. Certainly the same cannot be said of some of his critics whose condemnations of Mullins can sometimes be extremely polemical.

Mullins might have made more of the identity politics prevailing throughout the twentieth century. The sensibilities of the dominant Christian constituency in the United States probably influenced the decisions of many customers shopping for banking services. Quite likely some of them would have been more comfortable dealing with firms identified with names like J.P. Morgan, Rockefeller and Mellon rather than Warburg, Greenspan or Fink. Times, however, have changed.

Some of the more severe prejudices seem to have subsided around the time that Sandy Weill combined his Travellers Insurance Company with Citicorp to create Citigroup. This merger helped create the political momentum leading to the elimination of the Glass-Steagall Act in 1999. With Glass-Steagall’s elimination, Citigroup tried to become a giant department store of varied financial services. In its inner sanctums, however, Citigroup developed a preoccupation with derivatives that continues yet.

In the twenty-first century it happened that some of the cosmetic overlays were removed that had previously been imposed to disguise the large representation of Jews in Wall Street banking, including in the Federal Reserve Bank of New York. For good or bad, usury has become a core features of how the contemporary world is organized. Some reckoning with the ethnic inheritances attending usury are therefore inescapable, especially when dealing with the some of the most dramatic displays of usury on steroids in Wall Street institutions.

Where I see the need to draw a line in the sand is not on the question of the ethnicity of Wall Street personnel. Rather this line in the sand involves the question of how power is used or abused at the domineering heights of our financial institutions. Generally speaking it is not a justifiable use of the Federal Reserve to produce credit that enables the waging of wars that are offensive rather than defensive in character.

The waging of war has long been one of the big bonanzas producing major windfalls for international bankers. In the twenty-first century so many of the wars involve the flexing of military might by the United States to advance the expansionary designs of the Israeli state. The US Federal Reserve has been part of the process of creating what some would consider wars for Israel in Iraq, Syria, Yemen and Iran.

Why are the money-generating powers of the secretive Federal Reserve being invoked to help fund wars for Israel and also to help shape public opinion to accept the US role in these wars of aggression. Especially sensitive is the further indebting of the American people to subsidize the production of propaganda aimed at persuading them to back wars for Israel. This propaganda is deemed necessary to deflate opposition to Israel’s actions including the ruthless dehumanizing treatment of Palestinian Arabs.

We have seen that the Federal Reserve Bank of New York was deeply engaged in 2008 in transferring tens of trillions into the coffers of its own member institutions and counterparties. What uses were made of this bailout produced through a dubious process of legalized financial larceny?

One way or another the Israel Lobby must be a prime beneficiary of the machinations of Wall Street and its money spigot, the Federal Reserve Bank of New York. This pattern of priority can easily be related to US federal funding of the Israel project as a higher priority in federal budgeting than even the basic needs of the domestic population of the United States. Black Lives Do Matter but why is it that the lives of Israel First Partisans seem to matter more than any other group?

This Israel Lobby has the power to prevent any critic of Israeli policies from gaining the nomination of a major US party to run for US president. The result is that, in election after election, Americans are offered a very limited choice between competitors who are equally supportive of Israel.

The Israel Lobby can intervene to prevent the leadership of opposition parties from adopting policies that emphasize equity in Israel-Palestinian relations. Through its campaign contributions, the Israel Lobby dominates the process of choosing and electing representatives in Congress. How much does it cost to buy the political obedience of most federal politicians? How much does it cost to replicate this feat in the state legislatures and even municipal governments?

Through the ownership and/or control of major media outlets, the Israel Lobby exerts major influence in determining the main outlines of much public discourse when it comes to US-Israeli relations and many related subjects. How could one calculate the amount of money it took to achieve this feat? How much of this money is directed into payments for compliance, in other words, bribery? In the post-Epstein era what is the role of bribery’s criminal cousin, namely backmail?

The Israel Lobby is deeply engaged with other lobbies in transforming the Internet from an open forum of public interaction and debate into a centrally controlled propaganda instrument. Prominent among the Internet’s most aggressive censors and thought police are Google, You Tube, Facebook, Twitter and the Anti-Defamation League of B’nai B’rith.

Through all kinds of interventions the Israel Lobby asserts significant forms of control over a broad array of institutions and operations including those of the judiciary, the universities, book publishing, magazine publishing, municipal governments, trade unions and cultural groups. The biggest and most influential cultural group of all is the Hollywood film industry. Not surprisingly there is little in its cinematic output that provides critical perspectives on Zionism and its emanations.

The injection of huge amounts of money are essential to the exercise of so much concerted influence over such a broad sweep of political, intellectual and cultural organizations. Where do the large quantities of money supporting the activities the Israel project come from? Why is it that so many of agencies of the Israel Lobby have the status of charitable organizations with the capacity to extend tax write-offs to donors? What is the relationship of the Israel Lobby to Wall Street and the Federal Reserve Bank of New York?

Even the act of asking such questions will be seen by some as heretical. There is, however, nothing wrong with looking into issues that have so much impact on the quality of our political discourse… so much impact on our capacity to live together with the civility and security we have been losing so quickly with the imposition of the economically crippling lockdowns.

It is no less legitimate to ask questions about the ethnic identity of those who benefit most from the US economy than it is to ask questions about what groups suffer the most from the deprivations of poverty. Wouldn’t it make sense to try to moderate the disparities beginning with processes of research and discussion?

In a book of the same name, former ADL Executive Director, Abe Foxman, has opened the discussion of Jews and Money. Foxman effectively counters the view that all Jews are rich. Foxman, of course, is correct in this assertion. All Jews are not rich. Some are outright poor. A fairly large number of Jews, however, are somewhat rich and a small minority of Jews are disproportionately invested with wealth and power. Jews are especially well represented in the billionaires club both within the United States and internationally.

Some of the wealthiest Jews are part of the Wall Street establishment including the Federal Reserve Bank of New York. Perhaps the time has come to begin retiring this, “the most gigantic trust on earth.” Perhaps it is time to retire some of the debt created over more than a century of putting private bankers in charge of dictating interest rates as well as creating debt-laden dollars. Perhaps the time has come to lessen the debt burden that is narrowing the life chances of so many people who have been funding the wars for Israel mounted in the wake of the 9/11 deception.

The severity of the crisis before us compel all thoughtful people of conscience to look beyond the redeployment of old institutions and old remedies for old problems that are different from the challenges facing us now. One of the most obvious ways to avert further calamity is to move away altogether from the empowerment of private bankers to massively expand national debts with compound interest charged to tax payers.

The alternative to this approach is to change the present means of creating new money. The creation of many banking systems similar to that of the Bank of Canada should be considered in the quest for the main ingredients of a global reset. The Bank of Canada brought about an almost-debt-free run of prodigious nation building before Pierre Trudeau bent the policies of his government to meet the impositions of the Bank of International Settlements.

The Twilight of Neo-liberalism?

The Twilight of Neo-liberalism?

by Francis Lee for the Saker Blog

It speaks volumes about the gravity of the current political and economic situation that the leading US investment bank Goldman-Sachs has seen fit to issue a sombre warning.

‘’Goldman Sachs Group Inc. put a spotlight on the suddenly growing concern over inflation in the U.S. by issuing a bold warning on Tuesday that the dollar is in danger of losing its status as the world’s reserve currency. With Congress closing in on another round of fiscal stimulus to shore up the pandemic-ravaged economy, and the Federal Reserve having already swelled its balance sheet by about $2.8 trillion this year, Goldman strategists cautioned that U.S. policy is triggering currency “debasement fears” that could end the dollar’s reign as the dominant force in global foreign-exchange markets …

There are many factors pushing the gold price higher, including fear of increasing political uncertainty, rising concerns involving another spike in COVID-19 infections in the country, increasing government debt, rising inflation, and concerns that the US dollar is seeing a new downtrend to the Chinese Yuan.’’ (1)

The fact that gold is being spoken about by the financial cognoscenti is in itself significant. Gold bugs (like me!) have long been regarded by orthodox academic economists and business financiers as being beyond the pale in terms of their relevance to current economic and financial issues. But, as with everything, times change, fashion changes, paradigm shifts take place – such is the way of the world.

At the time of writing gold has, after the 2012 engineered smackdown, been ascending remorselessly toward its present gold price of $1972,00.00 a whisker away from $2000.00 per oz. This latter price has an important psychological significance – a tipping point for both investors and owners of this particular asset. The new economic order established paper assets – representations of wealth, which replaced real wealth – i.e., gold. This was the beginning of the new epoch, a turbulent period now reaching what appears to be a climax. The increasing economic disorder has become chaotic since that date as fundamental and seemingly intractable problems began to manifest themselves.

The Nonage

In order to maintain a semblance of vitality, western capitalism entered into a period of steroid-enforced growth based upon increasingly unorthodox methods. This inflexion point took place in 1971 when in a televised broadcast Richard Nixon took the US off the gold standard and introduced a fiat standard based purely upon the US dollar. This was a little later supplemented by the US-Saudi agreement whereby oil would be fixed to a dollar price. At a stroke, these two events destroyed the Bretton Woods system of a dollar-gold standard with the $ convertible with gold at $35 per oz. The old order was finished; a new ideological economic regimen was rolled out. When and how long it might last is a matter of speculation.

In this Brave New World and following the lead of the US most of the rest of the world economies followed suit. This was a pivotal moment in economic history. But, whisper it softly, there were deep-going structural weaknesses initially hidden from view in the new economy which would eventually become increasingly problematic. The global economy had become increasingly dependent on expanding debt levels and on the expansion of fictitious capital. This was all part of what was to become known as neoliberalism, globalization or increasing financialization, call it what you will, it amounts to the same thing. [2]

Fictitious capital, consists of layers of financial paper assets – but it should be understood that these ‘assets’ are only symbols of value, not real values. For example, company shares which are traded like goods and services do not, in the same way, embody value. They are tokens which represent part ownership of a company and the potential distribution of future profits in the form of dividends. The paper or electronic certificate itself is not a genuine value it is only a claim on value. Real value is the production of goods and services such as cars, haircuts, IPhones, hotels and eating out, aroma therapy, shoes, books … and so forth, in a productive economy. This as opposed to rising share/stock prices which are often presented as a healthy economy, but the amount of money a share/stock changes hand for says nothing definitive about the value of a company’s assets or about its productive capacity.

John Stuart Mill once commented in this respect.

‘’The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies’’ (3)

Capital movements into and out of existing assets was not necessarily productive investment but mainly pure speculation. And speculation itself was driven by increasing levels of cheap debt, both sovereign and private. This process may be observed in the Fed’s force-feeding new monies into the economy at which corporations use this largesse to buy-back their own stock thus enhancing their market price. Insofar as it might be produced it becomes clear that finance led growth is based upon trickle-up economics in which the gains of the wealthy come directly at the expense of ordinary people. Financialization involves the extraction of economic rent from the circulation (of capital) process, as well as patents, copyrights and land/property.

The United States demonstrates these tendencies very clearly and its interest rates remain the dominant influence across the mature economies. This is due to the dollar’s role as a reserve status, i.e., the world money. But there has been a long trajectory of decline in real commercial bank interest rates which averaged 7% during the 1980s, 5.5% during the 1990s 4% during the 2000s for the period leading up to the financial crash of 2008 and have been below 2% and even lower ever since. They are now being held down to zero or even minus interest levels and functioning as free monies for the speculating community or corporations who wish to avail themselves to this monetary largesse to increase their market capitalisation. Demonstrably the US and the rest of the mature economies have been undergoing a secular decline since the 1970s which has eventuated in what seems to be a policy of demented money printing.

Moreover, financialisation has not to any extent been adept at creating more wealth for all, but instead has channelled this wealth to particular favoured groups. This is evidenced with the GDP metric which is only measured in terms of output and not the distribution of and ownership of wealth produced. The result is, in short, that the rich have got considerably richer and the rest have either stagnated or declined. And this has not been an accident.

Maturity and Decline

The present crisis in the global economy has been brought about by the culmination of a number of variables which taken as a whole have been responsible for the present impasse. All the early promises of a new world order of stability, prosperity and peace which were touted in the 80s 90s and 00s never lived up to their billing. The then UK Prime Minister, Gordon Brown, boasted that under ‘New Labour’s’ stewardship the boom-bust cycles of both the domestic and world economies had been banished. University of Chicago’s Professor Robert Lucas claimed that macro-economics had ‘’solved for all practical purposes’’ the problem of economic depressions. In the real world, however, the entire period from 1971 and well into the 21st century was punctuated by a series of rolling bubbles and crises: the 1987 stock market crash, 1990, the collapse of the junk bond market, the 1994 great bond market massacre together with the Tequila crisis in Mexico, the 1997 Asian financial crisis, the 1998 collapse of Long Term Capital Management, the 1998 default in Russia, and the 2000-02 dot-com bubble crash and finally the 2008 blowout. These once in a lifetime events seem to occur every year or so.

But the economic/financial powers that be (PTB) ensconced in the ivory towers of University Economics departments and Editorials in the Washington Post, Financial Times, The Wall Street Journal and Economist were having none of it. As these esteemed ladies and gentlemen saw it the new paradigm was going through a ’tricky’ teething stage and all would be well in the fullness of time, or so we were persuaded. It is difficult to know whether or not these people actually believed what they were articulating or were just plain stupid. But their theories at times actually verged upon a timeless circulation of axioms which are true by definition. It has been noted that,

‘’Academic economics has become a disaster and disgrace … Not only did the academic economists fail to see the great 2008 implosion coming, they weren’t even looking in the right direction. And having been surprised by its arrival, they had little to say about its implications – the greatest event to have befallen the capitalist system since WW2 … although there are shining exceptions, most academic economists, whilst clinging to the idea that their subject is relevant and of interest to the wider world, in fact practice a modern form of medieval scholasticism – of no use to man or beast. The output of this activity consists of articles entombed in ‘scholarly’ journals usually about questions of startling irrelevance, badly thought out and appallingly badly written, littered with jargon and liberally dosed with mathematics, destined to be read by no-one outside of a narrow coterie, and increasingly, not even by them.’’ (5) Agreed!

The Interregnum 2008-2020

The Great Financial Crisis (GFC) of 2008 has shown that perpetual growth and progress is an illusion. Moreover this was the first leg of the mega-crisis of which the second leg is now looming. Recent indicators include structural unemployment which is around 15% in the US – but this figure is almost always understated: See John Williams’ excellent repudiations in Shadow Government Statistics. Additionally there has been the growth of semi-employment in the ‘gig’ economy, short-term contracts, non-unionized labour, and illegal (often foreign) presence in itinerant employment and workers from the EU’s southern and eastern peripheries who are temporarily employed on farms during the summer for lack of UK workers. Many of these workers have no insurance or medical cover and live hand-to-mouth on a daily basis.

Unprecedented debt levels, chronic levels of debt-driven consumption are now common-place and the modern workforce is increasingly stratified. There are well-paid jobs for a small portion of those with requisite skills, but the vast majority of new employment is in the low paid service sector, such as retail, leisure, hospitality, security, aged care, and health care … youth unemployment remains high, even where work can be found starting incomes are around 10 to 12 percent lower than they were in 2007.

This situation was not only present in the UK but on the European continent also.

Millions of Europeans in temporary, part-time or bogus self-employed contracts can only find insecure and badly paid jobs, despite the healthy economic climate. That is the price of deregulating labour markets, Investigate Europe reports. This precarious set of labour conditions was created intentionally.

‘’The misery of bad jobs has many faces. It can take the form of work contracts without health or social insurance; it can be part-time jobs, which don’t pay enough to live on. Or those affected are kept dangling from one temporary contract to the next, or they have to eke out a living as bogus self-employed and contract workers. The methods vary from one country’s national legislation to that of another, but the outcome is always the same: millions of EU citizens have to get by with insecure and badly paid jobs, offering them no prospects.’’ (6)

2020 – the Debacle

Thus the world enters the second decade of the 21st century totally unprepared for what’s coming and with a leadership bereft of any plans or ideas of how to handle the situation. GDP growth is in unprecedented negative territory pretty much everywhere. In the United States, the birthplace of the Washington Consensus, GDP growth rate fell by no less than -32.9% and GDP annual growth rate by -9.5%. In Germany GDP growth rate fell by -10.1% and annual GDP growth rate by -11.7%. In China GDP growth rate was positive 11.5% and annual GDP growth rate was 3.2%. In the euro area GDP growth rate was -12.1% and annual growth rate was -15%. These are quite extraordinary figures which will need to sink in before any reasoned judgements are made. One look at the US situation is hardly comforting however.

‘’On Thursday, the Labor Department reported that 1.43 million new claims for unemployment benefits were filed last week, the 19th straight week that new claims have exceeded one million. After declining for months, new claims have risen over the last two weeks.

The number of workers claiming continuing unemployment benefits also rose from 16.1 million to 17 million for the week ending July 18. In addition, 830,000 new claims were filed for federal Pandemic Unemployment Assistance, which covers self-employed, gig workers and others who do not qualify for traditional jobless benefits.

Under these conditions, the $600-a-week federal supplement to state unemployment benefits is running out today for an estimated 20 million workers. Overnight, millions will see their incomes cut by two-thirds, from an average of $921 a week in May to about $321 a week. In some states, the theft of this lifeline will be even worse. In Oklahoma, jobless aid will be cut by 93 percent to $44 a week.

It is a measure of the precarious situation American workers faced even before the pandemic that the weekly supplemental assistance and the paying out of a one-time $1,200-per-person “stimulus” check led to a 45 percent increase in US personal income in the second quarter. Seventy percent of those who returned to work in June suffered an income loss by doing so.

Last week, the moratorium on evictions expired for about 18 million renters—more than a third of the 44 million total US renter households—who live in buildings with mortgages backed by the federal government. With rent bills accumulated over the last four months now due, housing advocates predict a “tsunami” of evictions, with half a million households in Los Angeles alone threatened.

Millions in the US are also going hungry. According to a US Census Bureau survey, food insecurity last week reached its highest reported level since May, with almost 30 million Americans reporting they had not had enough to eat at some point in the seven days through July 21.’’ (7)

Mindful of the impact of the Corona Virus and not wishing to rush to any rash judgement, the fact still remains that the world economy was already in a parlous and brittle condition, long over-due for a big correction which was going to happen with or without the complication of the Corona Virus. All the sugar-coated promises made at the turn of the century by various politicians, journalists, and world leaders regarding the new economy, a world-wide system of prosperity peace, harmony and growth turned out to be fairy-tales best suited to infants – and infants are precisely what our leaders seem to think we are.

Speculating about future developments is difficult since we are in the early phases of the downturn. What we do know is that it is like most previous downturns but beyond bad and seemingly unprecedented. Events can only be assessed retrospectively. It is now also clear that hegemonic turbo-capitalism and its tendency toward imperialism and war is not congruent for further human development and even perhaps life on this planet. This seems patently obvious to anyone who actually thinks about these issues. We (humanity) is now at a critical juncture in history. But the world has postponed, indefinitely, dealing decisively with the challenges. Anyone who questions the present course is held up to ridicule as a professional permanent pessimist, or worse. Nothing is done, and we ignore reality. Unfortunately as the Russian/American writer Ayn Rand – who is not one of my favourite writers – declared. “We can ignore reality, but we cannot ignore the consequences of ignoring reality.”

Enough said. Francis Lee

NOTES

(1)Bloomburg – 27-July-2020

(2) Phillip Mullan – Creative Destruction – pp57/5 – ’In addition to the direct contribution of the fire sector to raising GDP artificially, the explosive growth in debt and other features of financialization a major, probably a bigger role.

(3) The notion of economic rent – made famous by David Ricardo and his theory of ground-rent – is based upon the extraction of rent from particular income streams or other assets, including land. Monopolistic rents are those which contain price levels which are over and above the costs of production.

(4) J.S.Mill – The Principles of Political Economy – 1848

(5) Roger Bootle – The Trouble with Markets – pp.232-233

(6) Tagesspiegel – Berlin – 25-10-2017

(7) World-Wide Socialist Website – 31-July-2020

The ’Americanized’ Europe is Crumbling towards Bankruptcy and Chaos

The ’Americanized’ Europe is Crumbling towards Bankruptcy and Chaos

By George Haddad

Sofia – Until World War II, old Colonialism has prevailed in the world [excluding the Soviet Union which was besieged and isolated]. Production [i.e. industry and industry-based agriculture] was the center of the colonial system. The metropolitans [European colonial countries] were the “factory of the world”. As for the colonies and semi-colonies that were once called the “Third World”, they were obliged by force to be:

  1. Sources of raw materials [crude and agricultural] to supply the metropolitan industry.
  2. Markets for metropolitan industrial and agricultural products.

The so-called “price-cutter” was being forcefully imposed on the peoples of the colonial and semi-colonial countries, that is, they were forced to buy the commodities of European countries at high prices [higher than their real value], and to sell their raw materials at low prices [lesser than their real value].

The ruling capitalist classes of the colonials sewed up most of these “surplus” profits resulting from the aforementioned “price cuts” [the price differences]. But it was “waiving” a portion of less or more of those “surplus profits” to increase the living standards of the popular masses in colonial Europe, to anaesthetize them and obtain their support for a colonial policy, and at least make them condone that policy.

The historical consequence of that colonial system was that progress and affluence in the colonial Europe countries happened on the expense of the colonial and semi-colonial peoples of the third world by slaughtering, subduing, humiliating, and starving them.

The Second World War marked a turning point in the previous world order; on the one hand, the former socialist camp emerged, and on the other hand, the old colonial system collapsed due to the revolutions in the colonies and semi-colonies. The former colonial metropolitan countries [which emerged from the war weak and semi-destroyed] could no longer forcefully impose their “production” on the third world. Socialist thought spread like wildfire through the “Third World”. A large group that antagonize communism, especially in its economic and social aspects, embraced many groups that were hostile to or disagree politically, religiously and ideologically with communism. Accordingly, a realistic possibility for the global capitalist system as a whole to collapse saw light. But the American geostrategic intervention, militarily, politically, and economically, had blocked this possibility.

Not only did the United States emerge from the war safe and sound having distanced itself from the battlefields, but rather, it emerged wealthier and literally became the “World Bank” for gold reserves and thousands of billions of capital fleeing its countries due to the wars, revolutions, and the collapse of the old colonial system. This accumulation of global capitals in the US led to the emergence of multinational companies and major global capitalist monopolies alongside their Jewish capital nuclei and the adoption of the dollar as the main international currency, as well as the emergence of the World Bank and the International Monetary Fund [IMF] to control the dollar process in the global economy as a whole. This led to a paradigm shift in the global capitalist system, which was to transfer the centre point of the global capitalist economy from “production” to “financing”, represented by loans, employment, and investments, which was the basis for the emergence of the new neoliberal system, American globalization, and the so-called “savage capitalism”. Due to these mechanisms, America worked and is still working to dominate the world.

This “paradigm shift” of the world capitalist-imperialist system resulted in the following:

  1. The insane increase of the financial sector’s share in the global economy from 5% in the aftermath of World War II to 50% today.
  2. Centralizing the global economy around the dollar, i.e. placing it under the mercy of the dollar-printing machine owned by the Jewish financial group that controls the American Central Bank’s “governor” called “Federal Reserve Bank”.
  3. Turning the US, almost completely, into a parasitic state. As American production now represents less than 18% of the American economy, which in turn represents less than 20% of the global economy; whereas – the US – consumes more than 40% of global production.
  4. Europe itself, with its rich history, has turned into a US-influence zone. Consequently, Europe became a producer and the US a consumer of its production [and others production] in exchange for a dollar currency, which is constantly losing its purchasing value. This means that Europe gradually lost all the extra wealth it had looted from colonial and semi-colonial peoples for hundreds of years, in just a few decades in favour of the US. And that is to say, Europe is living day to day on its production, which in turn gradually loses its marketing value due to the peg to the dollar that is gradually losing its purchasing value in favour of the American-Jewish monetary monopoly of the dollar.
  5. And by seeking to obtain profits in any way, the global American-Jewish monopolistic monetary bloc objectively encouraged industrialization and increased production in what was called the “Asian Tigers”: Japan, Korea, Taiwan, Malaysia, Indonesia, etc., as it “neglected” and also objectively encouraged the overwhelming industrial revival of China that is governed by the Communist Party, whose population is 50% more than the combined population of Europe and America. These countries produced in huge quantities industrial commodities [with international specifications] that are much cheaper than expensive European ones because their labour remuneration is much lower than the “pampered” labour remuneration in Europe. The production of ex-colonial countries made a fierce and deadly competition for European production, whose proportion has shrunk considerably in the world trade.

Finally, under the same general economic laws of capitalism, the inflated balloon of rentier financial capital [interest – speculative] exploded, and the financial-economic crisis in the US erupted spilling over to Europe in 2008. The main cause behind this continues crisis is the explosive collision between the infinite and senseless rise in profits resulting from the fiscal usurious-speculative policy and the limited purchasing power of consumers. The US has been able to partially and interim deal with the consequences of the crisis, thanks to its capacity to print more dollars, which the world has no choice but to “receive” gratefully [!]. As for Europe, it is impossible to do so. Therefore, its situation is worse than that of the US, and it “is solving” the problems resulting from the crisis by inflation, unemployment and lowering the living standard of the European masses.

Meanwhile, the Coronavirus pandemic hit. Whether this pandemic is a form of biological warfare [as US President Donald Trump suggests in his repeated accusations to China], or a “natural” phenomenon as a result of environmental pollution due to the brutality of the capitalist greed system dealing with nature, the economic crisis is quickly and severely making its way into Europe: production is shrinking at a very high level below zero, unemployment is exacerbating, social services are disastrously diminishing, the educational system is collapsing, and prices are skyrocketing.

And if the US presented the “Marshall Plan” to Europe after World War II, to dominate it, then the US today [which is today embroiled in crisis] cannot and does not want to help Europe; but rather it wants, if possible, to overcome its crisis at the expense of Europe.

What is China really doing with its digital Yuan?

Source

What is China really doing with its digital Yuan?

June 28, 2020

by Chris Faure for the Saker Blog

Reserve currency, backing of a currency and value of the financial systems that distribute a currency.

Its going to take years for the US dollar as reserve currency to fully reduce in importance and of course, the US should continue to use their currency as their own even when it changes into a normal currency. Yet there are financial technologies (FinTech) which may accelerate this process via leapfrogging and I would argue that from a Chinese perspective this is happening. (Leapfrogging is easiest understood by looking at an older example: slower developing countries without a well developed terrestrial telephone system, where these countries leapfrogged the building of a terrestrial system, and directly went to cellular telephone technological networks without loss of function.)

Let’s first take a look at some general concepts:

The fact of ownership of financial systems is very powerful. There is value in the currency that the financial system produces, and there is value in the system itself.

The value proposition is similar but differently done in cryptocurrencies and in digital currencies. The backing frequently lies in the system itself, and not as many think, in a hard asset such as gold. This is a large step to take in thinking for most people, as the idea generally still is that money has to be something that is tangible and real – like gold (or cowrie shells). But it is not such a big step to take if one considers that the act of money creation, production and distribution of currency itself is modernizing and is developing on the same trajectory that the rest of our technological and currently digital society is developing in.

As an example, compare the development of current money distribution systems and the new Financial Technologies (FinTech) with fully automated manufacturing plants for example, where the product coming off the production line is as a result of the technological system. Money is the same, it has to be manufactured, distributed or created or somehow brought into being and these systems are now modernizing, just the same as modern fully automated manufacturing.

The current financial systems belong to the west and banking systems technology is expensive, old, legacy, decrepit and not friendly to the ordinary person, not to mention very hard to maintain. Even the ubiquitous credit cards are now old technology and fast becoming deprecated technology and being replaced by wallets on cell phones that work like supermarket scanners.

It is often speculated that China will back their digital Yuan with gold. This is not an accurate speculation. The backing is the same as with other digital and cryptocurrencies, i.e., the work that the system provides to create the financial transactions in the financial ledger confirms that the transaction is secure and someone actually owns digital currency, they can pay for goods or sell goods and they can do it much easier and incredibly cheaper via a scan of a cell phone or other digital device.

The difference between China’s digital Yuan and common crytocurrencies is the ownership of the system. In modern independent cryptocurrencies the system (the technology) is owned by those that use the cryptocurrency – it is open source. Obviously for the digital Yuan ownership of the system lies with the Chinese State. The digital Yuan though retains the strength of other cryptocurrencies. It is secure transactions, tamper proof, immediate, inexpensive, easily distributed, can cross borders and all this by virtue of being a distributed blockchain system. The easiest to explain a blockchain is that it is self-policing because of technology of consensus algorithms that verify the efficacy of financial transactions. Blockchain very simply stated is blocks of financial transactions that are algorithmically created, are by definition encrypted, and chained together in such a way that nobody can meddle with any one of them.

To recap:

– The digital Yuan is not a cryptocurrency. It is a state issued digital electronic currency that happens to run on a blockchain (the FinTech).

– As the Chinese digital yuan is not and will not be backed by gold at least in our term (it is backed by the strength of the yuan as well as its system), we may well ask what the objective is of this currency.

Is it just a cute technological way of using money?

I would argue absolutely not.

Internationalization of the Yuan

Few realize the extent of the internationalization of the Yuan. As example, 20% of French trade with China is currently settled in Yuan and this is 55% of payments made between both countries. The Macron government is encouraging banks and companies to increase Yuan uptake.

I would argue that the digital yuan is a part of the 5th plank of the Belt and Road process of facilitating cross border investments and supply chain cooperation (perhaps not openly stated).  If one takes into consideration that belt and road is operating now in infrastructure development and investments in nearly 70 countries and international organizations – this is not such a difficult leap to make.

So how can that bold statement be supported? It may be hard for people in countries with old financial systems (the US would be one), to even imagine the new FinTech operating in many other countries. Where I live, I can go to the local corner store, and literally send cash money to someone on the other side of the country, and they will have it immediately. I don’t have to go to a bank, do a bank transfer, send a check, or interact with a bank or a type of Paypal at all. This is a service that the corner store offers at a very reasonable cost. I can also do this directly from my cell phone. We know that in China there is little use for hard currency, and most transactions take place on internal Chinese financial networks and cell phones for the average person, but business finance still flows through banks.

So, let’s start supporting that bold statement

  • The Chinese authorities added Crypto (cryptographic as well as cryptocurrency) to the School Curriculum – quite literally ‘educating the future’ in new FinTech.

https://cointelegraph.com/news/chinese-communist-party-adds-crypto-to-curriculum

  • In reality the distribution of the new Chinese Digital Yuan is proceeding apace. In size, the following is not a massive deal, but in construction of the agreement, this is probably the number one of the new Chinese Digital Yuan Deals and is pure modern FinTech.

China Baowu Group, the world’s largest iron and steel complex, completed a yuan-denominated, blockchain-technology-based transaction of more than 100 million yuan ($14 million) with Rio Tinto …, a move signaling the rising influence of Chinese currency in pricing major commodities.

Standard Chartered issued a blockchain-technology-powered letter of credit for the Baowu-Rio Tinto deal, which the bank said was the world’s first such certificate pegged with offshore yuan.

The use of blockchain technology – a digital public ledger of transactions that has seen increased usage in the global commodity trade – helped facilitate the trade and reduced costs for all parties involved in the transaction …”.

https://www.globaltimes.cn/content/1188131.shtml

So, what can we learn from this transaction?

This is not only a further distribution of the Yuan, but is a further distribution of the digital Yuan. While we do not know how this deal is constructed in detail, the use of the words blockchain-technology-powered letter of credit says it all. It looks like this deal will run completely on a blockchain, in the form commonly known as a smart contract, where each step of the deal and its payment schedule in digital currency are transactions on a blockhain. (Now try and skim off that transaction where the rules are hardcoded at the outset with technical principles of consensus pre-programmed in the smart contract and agreements signed directly on contract existent on the blockchain– those that know project management, will know the value of a self-documenting project).

  • the “Moodies

In addition China has become the ranker of record for private cryptocurrency projects.

The health of financial systems or countries are ranked by three major ranking agencies. These are S&P Global Ratings (S&P), Moody’s, and Fitch Group. S&P and Moody’s are based in the US, while Fitch is dual-headquartered in New York City and London, and is controlled by Hearst. These organizations hold the collective global market share of who can be considered good, and who can be considered bad in the global financial system. Not too healthy in my opinion as this is a disproportionate western control over the financial well-being of other countries.

So, as the proverbial quote from Buckminster Fuller states: “You never change things by fighting against the existing reality. To change something, build a new model that makes the old model obsolete.

The old banking and financial systems are indicative of the existing reality and are old, decrepit, ancient technology, needs a bunch of maintenance, and the worst is that they are of course owned by those that use them as weapons against others.

China is doing no less than building a new model in FinTech that will make the old model obsolete and in this way they are simply leapfrogging the current financial systems distributing the dollar with fast, lean and modern systems supporting the Financial Silk Road. They have made their own ranking system in new FinTech, i.e., cryptocurrencies. The June rankings are as follows:

Quite rightly the Asiatimes is asking .. Who is actually decoupling from Whom? And I can add, and using modern FinTech to do so with solutions appropriate contextually to our modern world.

My own expectation is that the notable private cryptocurrency systems (those that actually make it to the Chinese ranking system) will eventually be able to exchange smoothly and seamlessly with the Chinese Digital Yuan.

A quick look for the same trajectory, leapfrogging legacy systems, outside of FinTech

We see this creation of seamless new systems outside of hard FinTech as well. Here are three examples. The current hegemon in its common ‘break it’ style, made errors as it thinks if it breaks something, people will come back begging, to make a new plan. This is not happening any longer, and the world simply decouples and creates new systems, as we see from three seminal events and the hegemon further losing its power base.

– The US attacked the WTO on the basis of refusing to allow it to vote for and institute staff for the appeals body for trade disputes. Usually this would have taken many meetings to solve. This time, what happened is that China has joined 18 other members including the European Union, Canada, Australia, Singapore and Hong Kong in launching a temporary system for trade disputes at the World Trade Organization, with the agency’s appeal body having ceased to function in December after the United States blocked appointments of new judges to the top trade court.

The needed functionality is now still there, the US having excluded itself (actually shot itself in the foot), while the rest of the world moved forward saying we need this body, and we will have this body, with or without hegemon. The Multi-Party Interim Appeal Arbitration Arrangement (MPIA) was developed in just over three months, after the members announced at the World Economic Forum in January that they would seek to form a new body to work around the demise of the regular WTO panel.

From a combined statement by the European Union: The new system is designed to preserve the principle enshrined in international trade law that governments have the right to appeal in any dispute.

https://www.scmp.com/economy/global-economy/article/3082748/china-eu-join-19-member-temporary-global-trade-dispute

– Most readers of this blog will know how the US is trying to carve out for itself some way back to the JPCOA, the Iran agreement, after simply breaking this agreement. It is proving to be not so easy to walk this one back and so far, they have lost their power base. Do-overs are not so easy in terms of diplomacy, after one has squandered the world’s goodwill and Iran is receiving widespread help to overcome the results of any further sanctions.

It is no wonder then that the EU policy chief made this statement: US century ceding to Asian one, says EU foreign policy chief. https://tass.com/world/1160031

– The third event is the US stunt at the recent Vienna arms control talks. The US stealthily placed Chinese flags, took photos and posted media – then accused China of being a no-show, knowing full well that China declined to attend these talks and refuses to be roped into an agreement that is not in the least appropriate for it. Clear petulance is the hegemon’s only response to a visible decoupling of the world with the US and western cronies. They have nothing more left than petulance and literal pictures of false flagging to offer.

So, it is clear that both inside and outside of hard FinTech which this writing is about, the trajectory of recreating systems and simply leaving the US out, is alive and well.

A small note on Iran and Venezuela as part of the empire resistance countries. Iran is mining cryptocurrency and Venezuela floated theirs, namely the Petro. Unfortunately (and this is not the focus of this writing), they did not do that cleverly but the newest news is that the Venezuelan government is now beginning to trade in cryptocurrencies, and for example, accepting current private chain cryptos for payment for passports. Bear in mind I said that some private chain cryptos will eventually be exchanged with the digital Yuan, so, very soon now, if a government takes payment in a crypto, they will have digital Yuan if they decide to exchange – and they do not need anyone’s permission (Like a Central Bank).

What is the Chinese View

With ‘the moodies’ rating system, cryptography education in China, a clear project based on the digital yuan and blockchain technology and more to follow, it becomes clear that the Yuan and the digital Yuan is being moved into the global financial sphere, de facto without years of negotiation and agreements and trade type negotiations. My expectation then is that certain cryptography and cryptocurrencies will eventually be seamlessly exchanged on China’s blockchain(s) – and you will have a digital yuan wallet on your phone, or on your computer or even a credit card supporting and in this way, you and I could be right on the Belt and Road. In other words, if I want to use a cryptocurrency to pay for something, and I have digital Yuan or another crypto, I can simply, within my electronic wallet exchange for the right currency that I need. This is how China is distributing their Digital Yuan de facto.

What is the Russian view

Russia is still a little behind this revolution in FinTech. but with one fell swoop they can get rid of their central bank if they so choose. The Russian Central bank is following Western ways on the renewal of currency through their central bank. https://cointelegraph.com/news/russias-central-bank-seeks-to-ban-crypto-issuance-and-circulation.

Yet, the decoupling continues. It is interesting to wait to see if the 5 UN security council countries will in fact gather for the summit that Mr. Putin invited them to. My expectation is that if they don’t, Putin will run out of patience and choose others, perhaps the G20 or something new. The decoupling will continue.

We now have clear precedence set on the decoupling part of FinTech and other organizations. It is no longer a big deal to decouple from empire.

What is the Western view?

Forbes stated recently that the launch of the Digital Yuan could create serious problems for the U.S. banking system—potentially forcing the U.S. to digitalize the dollar to compete. The Federal Reserve has warned that central bank digital currencies might one day replace commercial banks, creating “a deposit monopolist” and playing “havoc” with the banking system. (This seemed to me somewhat like gobbeldy-gook and is meaningless – yet, they know something is happening.)

The West is 20 years behind this technology, because China decided to leapfrog and not follow the accepted development trajectory and as such has reconfigured the potentials for the entire planet.

It is high time and in the words of Michael Hudson: “So the United States, through the World Bank, has become I think the most dangerous, right-wing, evil organization in modern history — more evil than the IMF. That’s why it’s almost always been run by a Secretary of Defense. It has always been explicitly military. It’s the hard fist of American imperialism.”

The world is leapfrogging, and elegantly zig-zagging around current imperial financial systems, for a true birth of a new post capitalist post industrial order, without going to war for it.

Paradigm Shifts

source

by Francis Lee for The Saker Blog

Paradigm Shifts

INTRODUCTION:

I first wrote this article in 2012 and have had to make a number of minor alterations. Of course a great deal has happened since that time, most of it bad. We now seem to stand on the threshold of an even bigger and deeper crisis than in 2008, plus additional worrying features, viz. the pandemic and possible future pandemics as well as increasing and widespread economic and geopolitical instability. The crisis portents were always there but both the PTB and the populations at large did not seem unduly concerned about these developments which were taking place and maturing through the post-2008 period.

Paradigm Shifts

Some years ago I reviewed a book – State Building – by one Francis Fukuyama. This was one of Mr Fukuyama’s lesser known works, he is more famous for being the theorist of the ‘end of history’ – a view promulgated during the halcyon days of the neo-liberal counter-revolution circa the 1980s. After the collapse of communism in Eastern Europe, and with social-democracy effectively throwing in the towel in Western Europe, Mr F postulated that liberal, deregulated, market capitalism was now the historical norm, and if countries had not arrived at this terminal point in their history, then in the fullness of time they surely would. In short this is when one paradigm or epoch ends and another one begins. Certainly, the world underwent a both quantitative and qualitative paradigm shift in 1980s an historical shift which has lasted for at least 4 decades.

This current view was to become the received wisdom in official circles, and I would argue that in a contingent sense still is, at least among the political, financial and media elites. But it could be plausibly argued that this current paradigm is in secular decline and a new paradigm seems to be emerging. That is why we study history. Epochs come and go. Whether this will be for good or ill is an open question. Paradoxically, the established paradigm – let’s call it the Thatcher/Reagan settlement – represented almost a theoretical mirror image of the cruder types of Marxist historical materialism. Of course, both were extremely contestable since the human agency was excised from the historical process; a process apparently beyond human volition and control; almost a force of nature. It followed from this, therefore, that politics was no longer about choice, according to the post-modernist fraternity, the grand political narratives were at an end; henceforth politics was to be simply about administration: the relevant question being who could run the system more efficiently. How simplistic and facile these notions now seem.

To be fair Fukuyama has now admitted that he was wrong, and the more humanistic interpretation of Marxism – as espoused by inter alia Georgy Lukacs and Antonio Gramsci – does allow for human intervention in the historical process, in fact it insists upon this. Marx also, at least in his early years, put forward the famous dialectic. ‘Men make history, but they do not do it as they please.’ This is to say that they were creatures of their time and made political choices, but these choices were historically conditioned and constrained.

However, it seems commonplace among the journalistic types and other jobbing mediocrities to think that history is something in the past and that the present is the point of arrival; a tendency to take the empirically given as somehow natural and inevitable; its permanence taken for granted. And of course those who have most to gain from the present dispensation will fight tooth and nail against any attempt to change this state of affairs. Reforms are possible – even though these will be generally opposed by these same entrenched interests – but the fundamental structures and institutions of the system will be left broadly unchanged. This is true at all times and in all places, including our own.

We can say, therefore, that the world crisis of 2008 and its various explanations were thus all based upon the notion that the neo-liberal capitalist order is inevitable and permanent. Even erstwhile radicals like Will Hutton of the Guardian and Paul Krugman of the New York Times believed this to be the case. These are essentially mainstream Keynesians, who argue for a more regulated capitalism which they regard as viable, whilst their opponents the free-market Hayekians – Peter Schiff and US libertarian Ron Paul – believe in less or even no regulation. But of course both schools are committed to the capitalist system so the argument has been something of an in-house debate between the two establishment viewpoints.

That the system is in a protracted and long-term crisis is self-evident. But the contending viewpoints above are posited in a rather narrow and orthodox spectrum of economic theories which I think fail to address the depth of the predicament.

The Hayekian/Von Mises Austrian school

For a long time after the Second World War these particular theorists were exiled to a virtual leper colony of macro-economic theory. This was a period of the Roosevelt/Attlee settlement, the spread of communism over Eastern Europe, China and Indo-China. The catastrophe of depression/fascism/war, all emanating from uncontrolled markets and market crashes, followed by trade wars of the 1930s and then the shooting wars, was rejected absolutely by the electorates of the western world as well as by their leaders. But Von Mises, Hayek, et al. bided their time until their moment came. This moment came in the 1970s when the post-war boom petered out. They found a populariser of their beliefs – albeit in crude form – in Milton Friedman of the Chicago School and what was called monetarism. These ideas then migrated from academe via the broadsheet press and finally to the right-wing political parties at the time headed by Thatcher and Reagan.

The Austrian school believe that attempts to control capitalism through state intervention will fail and will in fact be positively counter-productive. This is because such interventions distort the price mechanism leading to misallocation of resources, inflation, and asset price bubbles. A good example of this would be the credit/property boom (2008) which was enabled by the accommodative actions of the Central Banks and Treasuries around the world, but particularly by the Bank of England and the US Federal Reserve Board. Interest rates were kept low and both heads of the two respective central banks as well as Treasury officials, in the UK’s Labour government, Gordon Brown and Edward ‘light touch regulation’ Balls in the UK, and the Fed boss Alan Greenspan in the US. Thus the natural cyclical tendencies immanent in the capitalist system were given an additional push by government monetary policy. Why? The answer is disarmingly simple: booms and bubbles (at least during the up-phase) are popular with the masses and are therefore good politics. Who can ever forget ‘the-end-of-boom-and-bust’ triumphalism of the period? However, the Austrians continued to argue that booms and busts are intrinsic to the system. One cannot exist without the other. During the boom phase of the cycle investors and consumers tend to become overconfident and make foolish investment and purchasing decisions. Prices start to rise due to the continual demand for factor inputs, growth becomes more and more febrile, banks make foolish loans and acquisitions (Northern Rock and the Royal Bank of Scotland come to mind), and then, when rises in income can no longer support rises in asset prices, the whole thing collapses. This is what happened in 2008; the bust part of the cycle then begins. All the bad investments and overspending now come to light. Companies go bust, unemployment mounts, debts are written down simply because debtors cannot pay, and all the misallocations of resources can clearly be seen with half-finished empty houses standing as the self-evident physical symbols of the manic bubble period which preceded them. Here Andrew Gamble explains:

‘’For the Austrians, the business cycle had a necessary and important function within capitalism. The crisis phase of the cycle was crucial if capitalism were to renew itself and purge itself of the false values and the misallocation of productive resources which had grown up during the boom phase. The crisis was a moment of truth, when suddenly the plans, the claims and the expectations which had been formed during the upswing were put to the test. Many of them would be found wanting, and those responsible for them would have to face the consequences. The process was not just to keep capitalism efficient; it was also necessary to keep capitalism moral. Only if agents bore full responsibility for their actions would the values of prudence, reliability and sound judgement and trust, on which capitalism relied, be upheld. The crisis purged capitalism in a double sense: both practically and morally. To many of its defenders the two were equally important. It was what gave capitalism its moral legitimacy and its practical dynamism.’’ (1)

It was argued that full recovery would not be achieved by bail-outs, Keynesian deficit spending, or by rescuing companies which were simply inefficient or did not supply consumers or investors with their preferences as demonstrated by the market price mechanism. Such policies would simply create ‘moral hazard’ a tendency for investors and consumers to carry on as usual with their losses being underwritten by the state; in this situation there was no intention or incentive for improving their business efficiency. These bailed-out entities were the economy’s living dead, kept alive on state support – zombie banks as in Europe and Japan and zombie auto companies like Fiat, Kia, and GM, or insurance companies like AIG, all of which should have been allowed to fail. With their failure more competitive efficient companies would arise in their place.

Recovery could only get underway when, as during classical depressions, prices fell, which meant that if wages and interest rates fell more slowly – if at all – then disposable income would start to increase. This being the case consumers would start to spend again and businesses start to invest. Similarly bankrupted and distressed firms would be bought out at fire–damage prices by the more efficient and larger firms with more up to date equipment. Growth now resumes given the destruction of existing capital values. The process of accumulation can restart.

What is striking about this (Austrian) theory is its similarity to Marx’s view of trade cycles, and also to those views espoused by Schumpeter. But much of both theories were formulated in an earlier phase of capitalism. But for all that the Austrian theory’s analysis of the bust is quite plausible and sophisticated.

‘’The anti-deflation policies which have been adopted (i.e., Keynesian demand management) is largely a policy of price-fixing, a policy of preventing the market from exposing capital misallocations and then liquidating them. The root causes of the crisis remain in place and the underlying problems unaddressed … The economy cannot realistically be expected to rectify itself if the market is not allowed to liquidate capital misallocations. The state has erected a protective fence around the most dislocated sectors of the economy (house prices for example) trying to keep market forces outside. As long as it lasts no true recovery is possible.’’ (2)

Summing up the Austrian view, capitalism is intrinsically cyclical. The Growth periods tend to run out of control resulting in bad investments and resource misallocation. This process is fed by easy credit and excess liquidity. Asset price inflation rises to a level which can no longer be sustained by rises in income or further borrowing. The boom turns into a bubble and the bubble bursts. Then the whole process swings into reverse – the bust has arrived. However, the bust rectifies the situation by liquidating all the mal-investments and making way for a reconfiguration of the system on a more sustainable and efficient basis. Capitalism restructures itself through these types of crises.

Prescriptions

Although the Austrian (and indeed Marxist) analysis of the bust is, I would argue broadly speaking correct, but the future policy prescriptions of the Hayekians seem frankly alarming. The scope and interdependence of the system is such that the notion of simply letting the bust take its course would lead to quite massive economic, political, and social dislocations on a global scale – as would have been the case had world governments simply let the coronavirus pandemic rampage through societies and run its course in 2020 – such a policy would dwarf the depression of the 1930s and 2008. In a strictly logical sense the reasonings of the Austrian school are correct, but their policy prescriptions are simply too terrible to contemplate.

‘’The Libertarians are actively promoting policies sure to bring about immediate economic hell, in the faith that punishment and suffering are the prerequisites to an economic afterlife in a better world. While in the end their philosophy of economic karma may ultimately prove correct, before accepting the remedy through collapse, other approaches should be put to the test. Economic reincarnation could take a lot longer than the Libertarians anticipate. The Renaissance did follow the fall of Rome – but only after 10 centuries.’’ (3)

So what about the alternatives?

John Maynard Keynes and his followers

Well I think we need to clear up one or two things about Lord Keynes before we start. Keynes was emphatically not a socialist, if anything he was actively hostile to socialism. He opined that: ‘’The class struggle will find me on the side of the educated bourgeoisie.’’ (4) We might legitimately enquire who, apart from Keynes himself, might be the ‘educated bourgeoisie’ exactly! Further, The Labour party is a class party, and that class is not my class. Again, How can I adopt a creed – Socialism – which, preferring the mud to the fish, exalts the boorish proletariat above the bourgeois and intelligentsia who, with whatever faults, are the quality in life and surely carry the seeds of all human advancement. It seems necessary to state this because of the widespread belief on the left that Lord Keynes was indeed some sort of (closet)-socialist. This could not be further from the truth: Keynes main aim in life was to save capitalism from itself.

His magnum opus, ‘’The General Theory of Employment Interest and Money’’ first published in 1936, represented the culmination of his earlier writings in which he elaborated what he believed to be the problem situation which had arisen in the world economy during the 1930s, and what he believed to be the solutions. But Keynesianism is not really a theory of the trade cycle, nor is it a general theory (more of which later) it is more a theory of boom/bust and possible ways out of economic depressions. The bust period in a capitalist economy generally follows a period of excess credit and hence debt-fuelled growth. This was the case during the roaring 20s with runaway credit (debt) fuelling growth until – pop went the weasel! Credit duly contracted as the defaults multiplied, and so the Roaring 20s transmuted into the depressed 30s.

‘’In 1930 the US money supply comprised currency held by the public (9%) and deposits held at commercial banks (91%). Banks used these deposits to fund their loans. When the credit that fuelled the Roaring 20s could not be repaid, the banks began to fail. When a borrower defaults it not only destroys credit, it also destroys the deposits which funded the credit. Between 1930 and 1933, 9,000 US banks failed. The corresponding destruction of deposits caused the country’s money supply to contract by a third from $46 billion in 1928 to $31 billion in 1933. As the money supply shrank the happy economic dynamic that expanding credit had made possible, went into reverse, and the global economy spiralled into catastrophe.’’ (5)

Post-crash, the problem was not excess demand but insufficient demand. This became known as debt-deflation. This is where Keynes and his co-thinkers entered the scene. With consumers and investors not spending, aggregate demand in deflationary conditions is flat, or even falling. Therefore the solution could only be increased spending by the government. This to be carried out by a mixture of monetary policy (lowering interest rates and Open Market Operations, and now Quantitative Easing – QE) and/or fiscal policy (taxation and public spending). This is of course something of an oversimplification of Keynes’ theories which were somewhat more radical than most of his enthusiasts found to their taste, but it broadly captures the gist of what he said. The increase in aggregate demand would feed through to the rest of the economy and so induce an increase in output which would be eventually self-sustaining. Governments would find it necessary therefore to run budget deficits during this period. Q.E.D.

This approach was taken up by the Roosevelt administration when it came to office in 1933. At that time unemployment in the US stood at the alarming figure of 25%. A raft of policy measures including the Works Programme Administration (WPA), National Recovery Act (NRA), Tennessee Valley Authority (TVA) Civilian Conservation Corps, were implemented. Unemployment fell to 14% by 1936, but then rose again during a new recession in 1937/38 to 20%. So the track record of Keynes policies seems patchy to say the least.

The Long Boom and its collapse 1980-2008

In our own time we have seen almost a repeat of the 1930s debacle. The long boom of 1980-2007 was floated on a sea of debt. But even this period was punctuated by blow-outs, first in the Savings and Loans episode of the 80s and 90s, then the Long-Term Capital Management collapse in the 90s, and finally the dot.com bubble in 2001. The 2008 crisis was, however, seemingly worse than these events and more global than that of the 1930s. In 2008 the whole credit/property induced boom came to a shuddering halt when the sub-prime borrowers in the US defaulted. House prices, which, had been rising by double digit percentages since the early 90s collapsed in 2006 and have been falling, apart from one or two transient minor upturns, ever since.

The same was to also happen in Iceland, Ireland the UK and Spain who had also built their policies around house-price inflation. Mortgage backed derivatives – i.e., those financial products which were based upon these repackaged dubious mortgages were parcelled up and sold as new financial products to brain-dead investors around the world after being given the triple AAA seal of approval by the ratings agencies. These derivatives were only producing a stream of income so long has the mortgagees continued to pay their instalments – when they defaulted the derivatives became worthless, the banks, who among others such as pension funds who had been purchasing these debt instruments, then found that their newly acquired ‘assets’ had turned into liabilities overnight. Many banks were effectively insolvent, and the great bank panic of 2008 spread around the world.

Governments found it necessary to bail-out these institutions in order to avoid a global meltdown. So the banks happily transferred their junk ‘assets’ onto the sovereign nations’ balance sheets courtesy of the Central Banks. Needless to say this was only the opening of the great recession of 2008/09 which in spite of its putative ‘recovery’ still drags on. The crisis was to cross the pond from the US – whose fundamental problems still seem unresolved – to Europe where the problem became more acute.

Stabilisation and low growth 2009-onwards

Since the nadir of 2008/09 there has been a stabilisation rather than what we might meaningfully call a recovery in the global economy. Growth is flat or falling in Europe, although there are very marked regional disparities, and very weak (and as I write, beginning to actually stall) in the USA, again with regional disparities. Interestingly, perhaps with all the clamour regarding austerity in the eurozone, no mention was made in the 40 or so US states – some effectively insolvent – which oversaw swingeing austerity programmes, California and Wisconsin come to mind, as does Detroit, famous for Tamla Motown and auto-vehicle production. A one time industrial city of 2 million people became a ghost town of 700,000.

Concomitant with this there were high levels of unemployment on both sides of the pond. Official figures for US unemployment, as found in the Bureau of Labor Statistics (BLS) are completely fraudulent and always have been since whole swathes of de facto unemployed have been disappeared off the register simply by definition. (The same disappearing trick was used with the core inflation figures.) The BLS gives three levels of unemployment according to how the word is defined. In fact there are six definitions ranging from U1-U6. The BLS uses U3 but the figure for U6 is double. And if the same definition were applied as used to be the case then unemployment would be almost 4 times the official account. The same jiggery-pokery is used when defining inflation. Each redefinition gives a lower figure.

Regarding this universal practise, it was the late Conservative Member of Parliament and at one time member of Mrs. Thatcher’s Cabinet, Lord Gilmour, who once said of his government’s unemployment reduction programme: ‘’Now we have reduced the unemployment figures, perhaps we can make a start on reducing unemployment.’’ I am afraid the pollution of statistics is the same for inflation, GDP growth and various other economic statistics. These statistics are not some measurements of objective facts, but simply political constructions. (6)

In passing we should become aware of a new economic development which came into being after 2008 and persists to this day. This was the genesis of the so-called ‘gig’ sometimes called ‘sharing’ economy. It should be made clear that this sector of the economy is generally very much ’off the books.’ The modern workforce has become increasingly stratified. There are well-paid jobs for a small portion with the requisite skills, but the vast majority of new employment is in the low-paid service sector, such as retail, leisure, hospitality, age-care and health-care. The sharing-economy is generally part of the informal sector but requires abundant cheap contract labourers to be available at the touch of a smartphone screen. Fulltime employees with normal benefits would make the model unworkable. This ‘gig’ or sharing economy exploits low-wage workers in a weak economic environment. This new ‘eke-onomy’ consists of individuals renting out their houses, cars, or labour make only a fraction of what they would receive in traditional full-time jobs, without any employment benefits. This is what Marx/Engels termed the industrial reserve army consisting of the unemployed and under-employed. Moreover, in the UK at least most of the workforce engaged in this low-paid, insecure drudgery are for the most part, immigrant labour, often illegal, from Romania, Spain, Portugal, Poland, the English-speaking part of Africa and even as far as China. Welcome to the ‘smart’ economy.

Keynesian policies … and debt levels

The general Keynesian response to the downturn has been a hue and cry for stimulus at all costs. Keynesian counter-cyclical policies traditionally consisted of 1. Monetary policy. This comes under the remit of the Central Bank and consists of control of interest rates and money supply. 2. Fiscal policy, which is the remit of the Treasury consisting of taxation and public expenditure. Sotto Voce It should be noted at this point that the Central Banks became the source of economic policy. This was a new departure since it meant that fiscal policy was relegated to a secondary role in economic planning. Monetary – i.e., central bank – policy now ruled the roost. The rigidly orthodox European Central Bank (ECB) – more catholic than the Pope – adopted hard-nosed monetary policies in the eurozone with alacrity, whilst the Anglo-American approach involving monetary and second-tier fiscal policies were partially adopted in the UK and more rigorously in the US.* The ECB put the weaker economies in the eurozone – Greece, Spain, Portugal, Ireland, Italy, Latvia – through the wringer of a grinding depression. No stimulus policies were undertaken, since it is argued this would pile more debt onto unprecedented levels already extant. Results have to say the least, not been exactly encouraging, particularly in the southern European periphery. This situation has received press coverage ad infinitum much of it justified, but much incredibly biased and ignorant, but hey, this is the white noise of democracy in action.

Given that the eurozone crisis has received saturation coverage we will move on to the UK. Here we have a bizarre mismatch of policies: a loose monetary policy with the Bank of England lowering the base rate to 0.5% and engaging in money printing – otherwise known as Quantitative Easing – and a tight fiscal policy with the Treasury cutting back on public spending. The result? The worst of both worlds, inflation, and – good old 1970s stagflation.

The poster child for the Keynesians was the United States which threw everything but the kitchen sink at the problem in both fiscal and monetary terms. This produced some low growth and a slight fall in unemployment, albeit from an extremely high level, and recently reversed, but each additional stimulus has had less of an impact than the one preceding it. A sort of diminishing returns was to set in, whereby more and more of the ‘fix’ is needed to get any sort of result.

‘’ … in the 1970s the increase in GDP was about 60 cents for every dollar of increased debt. By the early 2000s this had decreased to close to 20% of GDP growth for every new dollar of debt.’’ (7)

The Federal Reserve had already initiated 2 rounds of QE injecting literally trillions of $s into the economy. In addition it lowered interest rates to 0.25% – zero to all intents and purposes. The Fed’s purchase of paper assets was facilitated with the printing of paper monies. These paper assets consisted of US Treasury bonds and junk securities from government sponsored enterprises such as Freddie Mac and Fanny Mae, the two government agencies whose remit was to issue mortgages to prospective US homebuyers. This meant that the assets purchased by the Fed were nothing more than debt, unredeemable debt at that. This is a weird situation where the Fed was buying US bonds issued by the Treasury department so that the US Federal government could pay its current bills. And where did the Fed get its money from? Out of thin air apparently, it simply printed the stuff! When the stage is reached where governments have to pay their current expenditures by printing money then the alarm bells should start ringing. An idea of the monies involved was described as follows:

‘’Before the first round of QE began, the Fed held roughly $900 billion of assets. When it ended on March 31, 2010 the Fed’s balance sheet had more than doubled to $2.3 trillion. There is no precedent for fiat money creation on this scale in the US during peacetime.’’(8)

Suffice it to say that money printing has continued and massively expanded to the present day 2020. Increasing the supply of paper money in the economy in the absence of demand for it can only produce one result – inflation, albeit after a time lag. (But this works on the assumption that the velocity of circulation of such monies remains constant. If the circulation falls to zero, then there will be no inflation. Deflation is more likely if the money supply does not reach the real economy. If the rate of money circulation does not alter, we can expect inflation to appear.) It will be objected, however, that the US rate of inflation was at the time of the 2008 episode only 2.3%. True. But bear in mind that both food and fuel price increases are left out of the calculation in what is termed US ‘core inflation’; another egregious example of officialdom’s statistical sleight of hand. Were those price rises added in then at the very least the US inflation figures would almost certainly double. Moreover, the global effects of the Fed’s policies has been to export this inflation around the world as a mass of greenbacks flew out of the US looking for more favourable investment outlets. The global supply of these Eurodollars (i.e., US$s circulating outside of the US) had ballooned, and this led to an inflationary impact globally as food and commodity prices (notably oil) had spiked. This in turn led to food riots and political disturbances throughout the world, particularly in the Middle East. A sort of unforeseen justice was done, however, when higher oil prices hit the price of gasoline in the US – a boomerang effect. The inflationary effect of the Fed’s money printing also meant that local currencies were put under pressure. When the $ tsunami entered a country their own currency was subject to an upward revaluation, which meant a higher exchange rate. They were therefore faced with two choices: one, do nothing and let their export markets contract since their currency was now more expensive, or two, maintain the value of their currency against the US$ by purchases of more of these dollars with their own currency. This would mean that their own money supply would expand and become inflated. Thus US inflation had become global inflation. Yes, devaluation is a great way to start a currency war.

As far as fiscal policy goes the US has consistently run budget deficits since the 1990s when it actually recorded a small surplus. The cost of the government takeover of Fannie Mae and Freddie Mac, the cost of ongoing wars in the middle east, the cost of bailouts to various financial institutions, the cost of fiscal transfers to cash-strapped states and various stimulus programmes has raised the US budget deficit (2008 figures) to $15.5 trillion, which given that the Gross Domestic Product of the US as of May 2012 was $15.6 trillion, makes the ratio close to 100%. Even before the economic crisis, the U.S. debt grew 50% between 2000-2007, ballooning from $6-$9 trillion. Now the implications of this are indeed sobering.

According to the authors Reinhart and Rogoff when debt to GDP ratio reaches 90% this will constitute a drag on future growth. And bear in mind that this figure of debt-to-GDP has risen to 107% in 2020. Longer term implications of America’s chronic debt problem are manifest. Sure the Fed can print unlimited monies, but it can’t guarantee that these greenbacks will have any value.

Over the next 20 years, the Social Security Trust Fund won’t have enough funds to cover the retirement benefits promised to Baby Boomers. That means higher taxes since the high U.S. debt rules out further loans from other countries. Unfortunately, it’s most likely that these benefits will be curtailed, either to retirees younger than 70, or to those who are high income and therefore aren’t as dependent on Social Security payments to fund their retirement.

Second, many of the foreign holders of U.S. debt are investing more in their own economies. Over time, diminished demand for U.S. Treasuries could increase interest rates, thus slowing the economy. Furthermore, anticipation of this lower demand puts downward pressure on the dollar. That’s because dollars, and dollar-denominated Treasury Securities, may become less desirable, so their value declines. As the dollar declines, foreign holders get paid back in currency that is worth less, which further decreases demand.

The bottom line is that the large Federal debt is like driving with the emergency brake on, further slowing the U.S. economy.

Now if we add in private debt to the equation – i.e., the debts of household sector corporate sector, business sector, non-corporate businesses, State, and local government – then the debt soars to something like $50 trillion, or 363% of GDP. Then of course there is the chronic deficit on current account which adds a further dimension to the problem, and all of these seemingly intractable processes are still ongoing but hey, let’s not labour the point.

The seriousness of the situation is only matched by the complacency of the US authorities who seem to think they can go on raising the budget borrowing ceiling and that overseas investors will simply keep on buying their Treasury bonds forever. If ever there was a definition of unsustainable this is it.

In fact the structural problems in the US economy could well be fatal if these colossal debt levels are not reined in or simply stabilised. The US is being kept afloat by their ownership of the global reserve currency and the willingness (for now) of investors, mainly China, Japan and the oil-rich states in the middle-east to keep purchasing US Treasury paper – paper assets of dubious value and paltry yields. Overseas investors are aware of this situation and have begun to lower their exposure to the US$s and dollar denominated assets by diversifying into other assets and have also started to trade in their own currencies rather than the dollar. Straws in the wind perhaps, but indicative of future trends.

Taken by themselves Keynesian demand-side policies of stimulating the economy hardly begin to grapple with the problem. This is because deeper problems are on the supply-side not the demand-side of the economy. They can be classified as follows. Deindustrialisation as the manufacturing base is hollowed out or emigrates to cheaper venues; ageing populations; rising energy costs and scarcity; saturation of markets; lack of leadership at the political level; finance running amok; the ability to create paper money and assets without limit; an inadequately trained workforce; skills and investment deficit; and structural unemployment brought about by new technologies. And to crown it all there is the dreaded ‘Triffin Paradox’ to be factored into the equation, but this would take another article. Moreover, I could also have added in the issue of climate change but didn’t want to depress my readers unduly.

Keynesianism is fixated on the demand-side. But in a world beset by the sort of supply-side problems listed above traditional demand-management policies used since the war will not be effective. It is also worth adding that both Germany and Japan, where the wartime devastation was manifest both recovered strongly without Keynesian demand management. This actually serves to validate the Austrian and Marxist theory that upturns and booms in a capitalist economy are the result of the destruction of existing capital values. Japan and Germany roared ahead because their own industries and infrastructure was decimated, and they had to install the most modern up to date capital equipment and technologies and again start from scratch. Economies which start from a low base tend to have extremely high rates of growth.

I did mention earlier that Keynes’ General Theory is in fact not a general theory at all but a special theory. Such policies may have been appropriate for the post-war period with the usual cyclical movements of the trade cycle, but dare I say, this time it’s different. What we are now confronted with is a systemic global crisis of capitalism. In the present situation Keynesian policies – which are commonly understood and promulgated by his epigones – are unlikely to have the desired effect for the following reasons.

‘’Keynes’ theory that government spending could stimulate aggregate demand turns out to be one that works in limited conditions only, making it more of a special theory than a general theory which he had claimed. Stimulus programmes work better in the short run than in the long run. Stimulus works better in a liquidity crisis than in an insolvency crisis, and better in a mild recession than a severe oneStimulus also works better for economies that have entered recessions with relatively low levels of debt at the outset … None of these favourable conditions for Keynesian stimulus was present in the United States in 2009.’’ (9)

It has been calculated that growth would have to be at the rate of 6% per annum which when inflation is factored in reduces to actual growth of 2% to make any inroads into the huge debts. This seems very, very unlikely, although this is what the US authorities will attempt to do.

One final point with regard to Keynesian policies: They are often thought of as an alternative to austerity, when in fact they are simply austerity by other means. It is an open secret, though never admitted, that both the Fed and the Bank of England are attempting to monetize the debt levels in both countries. This entails keeping inflation one or more jumps ahead of wages, pensions, benefits, and interest rates. This inflation is engineered by the Central Bank which devalues the currency – supposedly to make exports more ‘competitive’ and printing money through QE. Devaluation leads to an increase in import prices which will tend to feed through the rest of the economy causing domestic inflation. The time-honoured claim made by the then British Prime Minister, Harold Wilson, in 1967 that the proposed 17% devaluation of the £ ‘would not affect the pound in your pocket’ was simply a barefaced lie. When a country devalues its currency it makes itself poorer (‘competitive’ is of course the preferred description). That is its whole raison d’être, and in this respect, it is no different from a policy of deflation.

Thus the disposable income of the mass of the population is effectively pushed down as prices rise, and the most acutely affected will be the poorer sections of the community or anyone who keeps their assets in cash. The more opulent, however, will be able to switch into stronger currencies, and physical assets such as precious metals, property, L’Objets d’Art which will appreciate in price. Inflation will help debtors since their debts will be effectively amortized, i.e. grow less as inflation lowers the magnitude of the debt. Of course the principal debtor is the government.

Forcing down interest rates to near zero in an inflationary environment gives savers two options. Do nothing and watch their savings melt away, or just go out and blow the lot. Similarly investors will be forced into more risky investments as they see the paltry return to safer bolt holes such as gilts being eaten away by inflation. It all rather sounds like a re-run of 2002-2007 credit-fuelled growth madness. And paradoxically, because disposable income is crimped by such a policy, aggregate demand falls, and this gives another push to deflation – the law of unintended consequences.

Keynesians see the problems of past and present capitalism as purely technical. They apparently believe that capitalism can be ‘fixed’ using appropriate tools and that it would therefore be possible to have permanent semi-boom conditions. This is clearly expounded by economists such as the American Keynesian, Paul Krugman in his book Peddling Prosperity, first published in 1994. Having spent most of his life during the post-war boom, he is apparently dumbfounded that it suddenly ended in the early 1970s. He intoned that … In 1973 the magic went away. Well ‘magic’ had nothing to do with it. Capitalism was beginning to enter into a periodic systemic convulsion which is now reaching its climax.

After Keynes – What to Do?

‘’Can Capitalism survive? No I do not think it can … Can Socialism work? Of course it can.’’ (10)

On the first point Schumpeter was at that time wrong, but it is now a question which needs to be raised again. On the second point, he has to be right. But this is a political rather than a purely technical question. The present crisis will be solved sooner or later (preferably sooner) but the question is how, by whom, and for whom?

The question for socialists, or for that matter any oppositionists to the present regime, is what should the strategy be for the coming struggles with this system – a system which cannot go on in its present form for the simple reason that it needs to grow at a compound rate of 3% forever – this is not possible for both political, economic and environmental reasons. (My emphasis) Socialism or a collapse into semi-barbarism seems to be on the agenda once again. But we shouldn’t be surprised by this; it is surely what we have been expecting since the trouble started brewing in the late 60s. After all capitalism moves in huge cyclical convulsions, and this is one of them.

This is a colossal question and I can only allude to possible areas of political action. The first thing to realise is that the historical window for a social-democratic Keynesian solution to the crisis is now closed. It was only made possible by a specific conjuncture of political and economic circumstances. The Thatcher-Reagan settlement and globalization marked the death-knell of the Keynes/Beveridge consensus. (11) Does this mean that socialists should not support a policy of reform within the system? Not at all. But this support must perforce have in view the objective of forcing a paradigm shift away from what has been a trade unionist approach of simply gaining and defending reforms – to a struggle for real political and economic power. (My emphasis).

The programme of the liberal-left – the type of journalism which we see in the Guardian and Independent and Labour party publications – actually advocates reform of a system which is beyond reformIt should also be clearly understood that such reforms as advocated by most of the liberal-left such as public spending on work creation programmes, investment in green technology, a national investment bank will only provide a temporary fix, and may well have negative downsides, such as inflation.

‘’A short-run revival of growth, as opposed to proliferating distress, can … buy time for longer term solutions to the transition to be worked out. But bought time is only useful if it is put to good use.’’ (My Emphasis – FL)(12)

Keynesian reform will not be a long-term solution, but it can alter the political balance of power and shift the argument in favour of the 99%. The politicisation of the mass of ordinary folk can begin with such an approach. Socialists, however, need to go much further than the type of Keynesian stimulus programme as advocated by Hutton, Krugman, Elliott, et al. Such a programme might consist of the following set of workable policies.

  1. Public works programmes to reduce unemployment. Or full maintenance for the unemployed.
  2. Nationalization of all deposit taking institutions and the setting up of a national bank.
  3. Strict rules on credit creation and the Shadow banking system.
  4. More transparency and an end to over-the-counter (OTC) trading.
  5. Closure of tax havens. Stop tax avoidance scams such as Transfer Pricing.
  6. Withdrawal from overseas conflicts and NATO.
  7. Harmonisation of corporate tax rates within the EU.
  8. End of the global reserve status of the US dollar.
  9. Indexation of wages, pensions, benefits, interest rates to inflation
  10. A move away from indirect to direct taxation, and higher tax rates for the upper quintile of the population.
  11. Tax harmonisation in Europe to prevent tax competition and the race to the bottom.

These represent the economic demands. But capitalism also works at a political micro-level. The power relations in the work-place are such that employees and consumers have no say in how the business is run, by whom and for whom. Shareholder value is all that matters. This should be replaced by a stakeholder approach were all the interest groups have a say in the running of the organization.

Of course there is no possibility that such demands as these will be met, there is a war going on after all, and at the moment the class enemy have the power and the veto, notwithstanding the democratic will of the people. Moreover, some of these questions can only be raised at regional and/or global levels. This opens up several additional cans of worms. There is the seemingly intractable issue of Europe and the euro? Reversion to national currencies (as advocated by the Guardian’s economics team) may only lead to devaluation and trade and currency wars. Then there are global currency and trade issues: What replaces the dollar as the basis for a global currency? The IMFs Special Drawing Rights? A new gold standard? Or Keynes’ idea of a global currency – Bancor – to replace national currencies, in international trade. Then there is the massive question of climate change and the massive ecological damage and negative externalities which is the corollary of consumer capitalism. The problem we face is that politics are national, but capitalism and economics are global. But reforms of this type can obviously only be carried out at international level (13) but the starting place must be national. Co-ordinated global action is not going to happen any time soon, but regional action, whether in Europe, North and Latin America as well as the ASEAN bloc is a possibility – in fact it is the only option for supra-national policy making at the present time.

The task seems truly Herculean, the point is, however, that these issues must sooner or later (preferably sooner) be raised. They cannot be evaded. We do not choose history, history chooses us. And this is the labour of Hercules which history has bequeathed.

‘’An alternative (to capitalism – FL) will have to be found. And it is here that the emergence of a global co-revolutionary movement becomes critical not only to stemming the tide of self-destructive capitalistic behaviour … but also to our re-organizing ourselves and beginning to build new collective organizational forms, knowledge banks and mental conceptions, new technologies and systems of production and consumption, all the while experimenting with new institutional arrangements, new forms of social and natural relations, and with the redesign of an increasingly urbanized daily life …

While capital has provided us with an abundant means with which to approach the task of anti-capitalist transition, the capitalists, and their hangers on will do all in their power to prevent such a transition no matter how imperative the circumstances may be. But the task of transition lies with us not the plutocrats. As Shakespeare once advised: ‘’The fault … is not in our stars, that in ourselves that we are underlings.’ Right now, as Warren Buffet (the famous American investor – FL) asserts his class is winning (the class war) our immediate task is to prove him wrong.’’ (14).

NOTES

(1) Andrew Gamble – The Spectre at the Feast.

(2) Detlev Schlichter – Paper Money Collapse.

(3) Richard Duncan – The New Depression p.105

( 4) JMK – Essays in Persuasion – 1925 – Am I a Liberal, A short view of Russia. Ibid

(5) Richard Duncan -The New Depression – p.121

(6) In this connection see ChrisMartenson.com Crash Course, Fuzzy Numbers and John Williams Shadow Government Statistics – passim.

(7) Foster and Magdoff – The Great Financial Crisis – p.49

(8) Richard Duncan Ibid.

(9) James Rickards – Currency Wars –pp.186/187 – My emphasis FL

(10) Joseph Alois Schumpeter – Capitalism, Socialism and Democracy – 1943

(11) William Henry Beveridge, 1st Baron Beveridge, KCB was a British economist and Liberal politician who was a progressive and social reformer. His 1942 report Social Insurance and Allied Services served as the basis for the

post-World War II welfare state put in place by the Labour government elected in 1945

(12) David Harvey -The Enigma of Capital– p.278

(13) I have since revised this view and would argue that that starting place for the sweeping reforms which are necessary at the global world system must include and start at the national level. This is not the EU we signed up to in 1976, and there comes a time in politics where it is judicious to give up flogging a dead horse. A progressive Labour government under Corbyn would not have been allowed by EU law to implement its economic reforms, cancel Trident, leave, or even modify its NATO membership. Democracy is impossible without some measure of sovereignty, and nations must get control of their own foreign and economic policies since if they don’t the globalisers and Bilderbergers will and have done

(14) David Harvey, op.cit

*The Federal Reserve Act of 1977 modified the original act establishing the Federal Reserve in 1913 and clarified the roles of the Board of Governors. The Federal Reserve has two mandates: maintaining maximum employment and maintaining stable prices and moderate long-term interest rates. Congress explicitly stated the Fed’s goals should be “maximum employment, stable prices, and moderate long-term interest rates. It is these goals that have come to be known as the Fed’s “dual mandate’’. All of which was enabled to act in both monetary and stimulus capacities.

Francis Lee

Updated from 2012 to 2020

Why America’s revolution won’t be televised

Why America’s revolution won’t be televised

June 03, 2020

by Pepe Escobar – posted with permission

The so far purely emotional insurrection lacks political structure and a credible leader to articulate grievances

The Revolution Won’t Be Televised because this is not a revolution. At least not yet.

Burning and/or looting Target or Macy’s is a minor diversion. No one is aiming at the Pentagon (or even the shops at the Pentagon Mall). The FBI. The NY Federal Reserve. The Treasury Department. The CIA in Langley. Wall Street houses.

People raise their hands and shout slogans as they protest at the makeshift memorial in honour of George Floyd on Tuesday in Minneapolis. Photo: AFP / Chandan Khanna

The real looters – the ruling class – are comfortably surveying the show on their massive 4K Bravias, sipping single malt.

This is a class war much more than a race war and should be approached as such. Yet it was hijacked from the start to unfold as a mere color revolution.

US corporate media dropped their breathless Planet Lockdown coverage like a ton of – pre-arranged? – bricks to breathlessly cover en masse the new American “revolution.” Social distancing is not exactly conducive to a revolutionary spirit.

There’s no question the US is mired in a convoluted civil war in progress, as serious as what happened after the assassination of Dr Martin Luther King in Memphis in April 1968.

Yet massive cognitive dissonance is the norm across the full “strategy of tension” spectrum. Powerful factions pull no punches to control the narrative. No one is able to fully identify all the shadowplay intricacies and inconsistencies.

Hardcore agendas mingle: an attempt at color revolution/regime change (blowback is a bitch) interacts with the Boogaloo Bois – arguably tactical allies of Black Lives Matter – while white supremacist “accelerationists” attempt to provoke a race war.

To quote the Temptations: it’s a ball of confusion.

Antifa is criminalized but the Boogaloo Bois get a pass (here is how Antifa’s main conceptualizer defends his ideas). Yet another tribal war, yet another – now domestic – color revolution under the sign of divide and rule, pitting Antifa anti-fascists vs. fascist white supremacists.

Meanwhile, the policy infrastructure necessary for enacting martial law has evolved as a bipartisan project.

Protesters jump on a street sign near a burning barricade near the White House during a demonstration against the death of George Floyd on May 31, 2020 in Washington, DC. Photo: AFP

We are in the middle of the proverbial, total fog of war. Those defending the US Army crushing “insurrectionists” in the streets advocate at the same time a swift ending to the American empire.

Amidst so much sound and fury signifying perplexity and paralysis, we may be reaching a supreme moment of historical irony, where US homeland (in)security is being boomerang-hit not only by one of the key artifacts of its own Deep State making – a color revolution – but by combined elements of a perfect blowback trifecta:  Operation PhoenixOperation Jakarta; and Operation Gladio.

But the targets this time won’t be millions across the Global South. They will be American citizens.

Empire come home

Quite a few progressives contend this is a spontaneous mass uprising against police repression and system oppression – and that would necessarily lead to a revolution, like the February 1917 revolution in Russia sprouting out of the scarcity of bread in Petrograd.

So the protests against endemic police brutality would be a prelude to a Levitate the Pentagon remix – with the interregnum soon entailing a possible face-off with the US military in the streets.

But we got a problem. The insurrection, so far purely emotional, has yielded no political structure and no credible leader to articulate myriad, complex grievances. As it stands, it amounts to an inchoate insurrection, under the sign of impoverishment and perpetual debt.

Adding to the perplexity, Americans are now confronted with what it feels like to be in Vietnam, El Salvador, the Pakistani tribal areas or Sadr City in Baghdad.

Iraq came to Washington DC in full regalia, with Pentagon Blackhawks doing “show of force” passes over protestors, the tried and tested dispersal technique applied in countless counter-insurgency ops across the Global South.

And then, the Elvis moment: General Mark Milley, chairman of the Joint Chiefs of Staff, patrolling the streets of DC. The Raytheon lobbyist now heading the Pentagon, Mark Esper, called it “dominating the battlespace.”

Well, after they got their butts kicked in Afghanistan and Iraq, and indirectly in Syria, full spectrum dominance must dominate somewhere. So why not back home?

Troops gather during a demonstration on June 1, 2020 in Washington, DC. Photo: Joshua Roberts/Getty Images/AFP

Troops from the 82nd Airborne Division, the 10th Mountain Division and the 1st Infantry Division – who lost wars in Vietnam, Afghanistan, Iraq and, yes, Somalia – have been deployed to Andrews Airbase near Washington.

Super-hawk Tom Cotton even called, in a tweet, for the 82nd Airborne to do “whatever it takes to restore order. No quarter for insurrectionists, anarchists, rioters and looters.” These are certainly more amenable targets than the Russian, Chinese and Iranian militaries.

Milley’s performance reminds me of John McCain walking around in Baghdad in 2007, macho man-style, no helmet, to prove everything  was OK. Of course: he had a small army weaponized to the teeth watching his back.

And complementing the racism angle, it’s never enough to remember that both a white president and a black president signed off on drone attacks on wedding parties in the Pakistani tribal areas.

Esper spelled it out: an occupying army may soon be “dominating the battlespace” in the nation’s capital, and possibly elsewhere. What next? A Coalition Provisional Authority?

Compared to similar ops across the Global South, this will not only prevent regime change but also produce the desired effect for the ruling oligarchy: a neo-fascist turning of the screws. Proving once again that when you don’t have a Martin Luther King or a Malcolm X to fight the power, then power crushes you whatever you do.

Inverted Totalitarianism

The late, great political theorist Sheldon Wolin had already nailed it in a book first published in 2008: this is all about Inverted Totalitarianism.

Wolin showed how “the cruder forms of control – from militarized police to wholesale surveillance, as well as police serving as judge, jury and executioner, now a reality for the underclass – will become a reality for all of us should we begin to resist the continued funneling of power and wealth upward.

“We are tolerated as citizens only as long as we participate in the illusion of a participatory democracy. The moment we rebel and refuse to take part in the illusion, the face of inverted totalitarianism will look like the face of past systems of totalitarianism,” he wrote.

Sinclair Lewis (who did not say that, “when fascism comes to America, it will come wrapped in the flag and waving the cross”) actually wrote, in It Can’t Happen Here (1935), that American fascists would be those “who disowned the word ‘fascism’ and preached enslavement to capitalism under the style of constitutional and traditional native American liberty.”

So American fascism, when it happens, will walk and talk American.

George Floyd was the spark. In a Freudian twist, the return of the repressed came out swinging, laying bare multiple wounds: how the US political economy shattered the working classes; failed miserably on Covid-19; failed to provide affordable healthcare; profits a plutocracy; and thrives on a racialized labor market, a militarized police, multi-trillion-dollar imperial wars and serial bailouts of the too big to fail.

Instinctively at least, although in an inchoate manner, millions of Americans clearly see how, since Reaganism, the whole game is about an oligarchy/plutocracy weaponizing white supremacism for political power goals, with the extra bonus of a steady, massive, upwards transfer of wealth.

US President Donald Trump walks back to the White House escorted by the Secret Service after appearing outside of St John’s Episcopal church across Lafayette Park in Washington, DC, June 1, 2020. Photo: AFP/ Brendan Smialowski

Slightly before the first, peaceful Minneapolis protests, I argued that the realpolitik perspectives post-lockdown were grim, privileging both restored neoliberalism – already in effect – and hybrid neofascism.

President Trump’s by now iconic Bible photo op in front of St John’s church – including a citizen tear-gassing preview – took it to a whole new level. Trump wanted to send a carefully choreographed signal to his evangelical base. Mission accomplished.

But arguably the most important (invisible) signal was the fourth man in one of the photos.

Giorgio Agamben has already proved beyond reasonable doubt that the state of siege is now totally normalized in the West. Attorney General William Barr now is aiming to institutionalize it in the US: he’s the man with the leeway to go all out for a permanent state of emergency, a Patriot Act on steroids, complete with “show of force” Blackhawk support.

The Federal Reserve: More Lethal than Coronavirus

Source

written by ron paulmonday may 4, 2020

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Last week the Federal Reserve announced it will keep interest rates at or near zero until the economy recovers from the government-imposed shutdown. Following this announcement, Federal Reserve Chairman Jerome Powell urged Congress and the Trump administration to put aside any concerns about the deficit and spend whatever it takes to stimulate the economy and combat coronavirus.

The Federal Reserve previously announced it would make unlimited purchases of Treasury securities, thus encouraging Congress and the president to increase spending and debt. With some members of Congress talking about another multi-trillion-dollar stimulus bill, and with President Trump proposing a two trillion dollars infrastructure plan as a way to get Americans back to work, it is obvious, and not surprising, that Congress and President Trump gleefully agree with Powell’s advice.

Increasing the purchase of federal debt is not the only action the Fed has taken in a desperate attempt to keep the economy afloat. Since the coronavirus lockdowns began in early March, the Fed has greatly expanded its balance sheet. The Federal Reserve has also launched an unprecedented program to “loan” money directly to businesses.

While some states are beginning to end the lockdowns, it may be months or even another year before all the lockdowns are finally ended. It is unlikely that the economy will completely recover after the shutdown ends.

The economy was teetering on the brink of a recession months before anyone heard of coronavirus. Last September, a panicked Fed began emergency infusions of cash into the repurchasing market, which is where banks make short-term loans to each other. The Fed’s balance sheet expansion also began in September. The Fed was also pushing interest rates down before the coronavirus panic, and it will likely keep rates at or even below zero long after the crisis related to the shutdown subsides.

Economic stagnation combined with zero or negative interest rates remove incentive for people to save. This depletes the supply of private capital available to invest in businesses and jobs. The lack of private capital will put pressure on the Federal Reserve to maintain, and even expand, its new lending programs indefinitely.

Each of the Federal Reserve’s responses to the coronavirus shutdown increases the distortions of the market caused by the Federal Reserve’s meddling with the money supply and interest rates. These increased distortions guarantee the inevitable crash will be much more severe than the current downturn. The one upside is that the next meltdown will likely lead to the end of the fiat money system and thus the end of the welfare-warfare state.

The only way to minimize the coming crisis is to begin immediately unwinding the current system. The first step is to end the lockdown and let businesses reopen and people go back to work. Congress must then begin challenging monetary policy by passing the Audit the Fed bill. Congress should also cut spending, starting with ending our hyper-interventionist foreign policy and bringing the troops home. Ending the welfare-warfare state and the fiat money system may cause some short-term pain, but that pain will be dwarfed by the long-term gains in liberty, peace, and prosperity.

The Saker interviews Michael Hudson about the current economic crisis

May 01, 2020

Source

The Saker interviews Michael Hudson about the current economic crisis

Dear friends,

I have always held Michael Hudson in the greatest esteem.  Not only do I consider him my favorite US economist out there, I also know that he is a kind human being.  He manifested this kindness again when he agreed to reply to some very basic questions which a non-economist like myself would ask.  I am deeply grateful to Michael for taking the time to reply to them!

The Saker
——-

The Saker: I suppose that like any system, the economy and financial system in the USA and, more generally, in the West can take some punishment, but there has to be a “point of no return” after which the entire systems comes tumbling down like a house of card.  My first question is double: a) what would be this “point of no return” and do you think that we have (or will soon) reach it? b)  What would be the signs that this “point of no return” has been reached (or is about to be reached)?

Michael Hudson: The point of no return would arrive when the Federal Reserve and government stop bailing out the bankers and the stock and bond markets and let real “free market” asset prices collapse to reflect the “real” economy’s shrinkage. There would be a sell-off without the Fed’s promise to be the buyer of last resort.

The problem is that the economy can never recover from the Obama Depression (resulting from his refusal to write down the junk-mortgage debts and the other debts to the leading financial institutions) as long as it keeps the present debt overhead on the books. But Sheila Bair’s comment still applies: “It’s all about the bondholders.”

So I don’t expect a soon “point of no return.” But when it finally does occur, it will be sudden – as all crashes are. It may be triggered by a bank or speculator making a bad trade and being unable to pay, as AIG’s London office was unable to do so in 2008.

That said, who would have believed that the stock market would continue to go up while the underlying “real” economy is shrinking drastically. Obviously, there has been a decoupling of the economy’s two sectors: the Financial, Insurance and Real Estate (FIRE) sector from the production-and-consumption economy.

I think that the Fed will let the large insiders sell out (and even make a fortune on selling stocks and bonds short) before they pull the plug. The key is that the collapse of the economy must be managed as a financial gain-seeking opportunity for the big banks and financial speculators.

The Saker: There is a lot of talk about the big corporations out there, but I want to ask you about the “little guy” (like myself and most of our readers): what can we do to prepare for a possible economic and financial collapse?  For example, do you consider that our money is safe in US FDIC insured deposits banks?  Or there be a “bank holiday” or even a full scale “run on banks” like what happened in Argentina?  Should we pull our saving and keep cash?  Or even get gold/silver?  What do you recommend for the “little guy”?

Michael Hudson: FDIC-insured deposits are safe. They won’t let that go, because that would end the banking system.

There won’t be an Argentina-style run, because its foreign debt is owed in U.S. dollars, which it can’t print. But US debt is owed in its own currency, which the Fed and Treasury can create at will.

The stock market will zig-zag in approximately the current range, until the plunge is permitted to occur. The safest investment is in U.S. Treasury securities. Gold is fine also, but the problem is how to keep it free from theft. Like currency, it can be robbed.

For your small investors, the best aim to protect themselves is to get (and stay) out of debt, secure their home and livelihood from what may be a Third-World type austerity plan, IMF style resulting from state and local bankruptcy. (Avoid buying tax-exempt state and local bonds.)

The Saker: How bad is, in your opinion, the current crisis in financial/economic terms?  Some say that this will (or, already is) worse than 2008, 9/11 or even the Great Depression.  Do you agree and, if not, why?

Michael Hudson: The current depression is the worst since the 1930s. There will be a new wave of foreclosures, on commercial real estate as well as residential homes. The problem will not be merely junk mortgages, but the loss of income by rent-paying stores and other commercial property and residential housing.

We are at the end of the 75-year upswing that began in 1945 when the war ended with few private-sector debts and abundant savings. Now, the situation has been reversed: a heavy debt overhead, with little savings by most of the population. The growth in the economic surplus is now spent almost entirely on debt service and other financial charges and rentier payments to the FIRE sector. Rentier capitalism has replaced industrial capitalism.

The Saker: a lot of people (and corporations) out there are loosing millions and even billions. But others are making a killing (Amazon?).  Who in your opinion benefits most from this crisis and how?

Michael Hudson: Financial and political insiders will benefit from the crisis, along with monopolists. The rest of the economy will lose – but the quickest fortunes often are made in a crisis. As Adam Smith noted, profits often are highest in countries going fastest to ruin. But this time it is not profits that are the key to fortunes, but “capital gains” from bank-inflated asset prices.

In a nutshell, the financial game has been rigged by political insiders and their financial backers. Their time frame is short-run.

ZeroHedge, a response to Mr. Littlejohn & the future of dollar dominance

April 30, 2020

ZeroHedge, a response to Mr. Littlejohn & the future of dollar dominance

by Ramin Mazaheri for The Saker Blog

It was very pleasant and informative to read Mr. Gary Littlejohn’s April 19 article, Strengthening the US Dollar: Comments on Ramin Mazaheri. I am very happy that he agreed with my article No, the dollar will only strengthen post-corona, as usual: it’s a crisis, after all, which sought to temper the eager glee of those whom I call the “dollar demisers” with some historical facts and socialist-based analysis.

What it seems Mr. Littlejohn essentially did was combine my analysis with a very popular article from “high finance dissident” site ZeroHedge, “Down The Rabbit Hole” – The Eurodollar Market Is The Matrix Behind It All, penned by Michael Every of the Netherlands’ Rabobank, and then add his own considerable insights and commentary.

Mr. Littlejohn wrote such a fine article that I am happy to respond to both his and ZeroHedge’s articles.

He began, ”This supportive response aims to provide recent relevant evidence that many of the likely changes Mazaheri describes are already happening very quickly.”

Things are indeed happening very quickly, but they could also be arrested quicker than people think. My article was a counterweight to the idea that the US (and their Western allies, and their client/puppets) is somehow entirely out of control of this process – it is not. I hope that I have overestimated a prediction of 20-30 years more of dollar dominance, but my article demonstrated how from 2008-20 they have more than just weathered a Great Recession they primarily caused. There will be a true anti-dollar revolution, but nobody can accurately predict any revolution – who could have even predicted this Great Lockdown hysteria?

I’m very glad Mr. Littlejohn agrees with the class-based analysis that the 1% is indeed international – it is not some tinfoil-hat conspiracy claim. This fundamental tenet of socialist analysis seems odd in the West only because it is so rarely said – after all, hedge funds, billionaires and wannabe-billionaires decide the editorial policy of Western media.

But, above all, this remains a competition between two ideologies: capitalist-imperialist cultures (and their repressed client states) and socialist-inspired cultures. The latter culture acknowledges this openly – the former hide and denies it, famously declaring an ideological “end of history“. Both of these cultures remain supranational in scope and reach, even if capitalist-imperialists continue to falsely assume their global political dominance and persist with their “clash of civilisations” (which first came for the Muslims) with a book of self-flattering “universal values” at the tip of their spear.

What Westerners have started to realise – 2008 began this process and the looming 2020 crisis will accentuate it – is that the neoliberal empires they cheered on always intended to come for their 99% as well. For proof just look at Greece, the Yellow Vests and the decade-long austerity self-cannibalisation of the Eurozone. There are those who believe the upcoming explosion of this critical mass will cause the revolution implied by the fall of the dollar – this article will pose an alternative view; it’s a view which Westerners cannot even conceive of much less discuss because – of course – they have no enemies, There Is No Alternative, their ideology conquered even before their armies arrived, they are so willing to die for their own rightly-guided governments… right?

Mr. Littlejohn was right to marvel at the primacy of Western/international high finance in his discussion of the enormous consequences of the recent decisions by the Fed & ECB to purchase corporate bonds.

If we care about our nation, then we must ensure corporations and individuals (and in the US corporations are now legally treated as individuals, in a major 1%er victory) are legally and fiscally subservient to not only our nation’s laws but our nation’s moral values (i.e. the spirit of the law). Capitalist-imperialist ideologies do not have this type of patriotism: their patriotism, due to a system predicated on competition and not cooperation, cannot be displayed via this positive defense but only via a very negative attacking – be it Putin, Russia, Muslims, those on the other side of the political aisle, socialists, the Iraqis, the Vietnamese, the Algerians, etc.

Mr. Littlejohn writes of the corporate debt purchases: ”This seems to allow the development of a possible strategy that discriminates against foreign-owned companies (such as Chinese-owned Huawei) to be starved of Fed funds.

Indeed it does. But nations have a right to defend themselves (like with protectionism), after all; contrarily, national aggression (like with blockades) is the cardinal sin of international law. The new Fed-Treasury open alliance, with BlackRock as their bureaucratic arm, is a problem for the American citizen in that the priority is not the elevation of American corporations/individuals, but of Western/international high finance.

This lack of patriotism is rightly offensive to the many Tyler Durdens of ZeroHedge, but because they reject socialist analysis they don’t fully understand it nor can they proffer actual solutions instead of a useless, destructive Fight Club-esque rage.

ZeroHedge: the West does not rule the whole world, try as they might

It’s important to note the very fair criticism often made of “dissidents-but-not-really” like ZeroHedge: they have been wrong for years. They keep saying that capitalism is about to collapse because just look at this excellent data we culled and this fine analysis… and yet it has not collapsed. This doesn’t make ZeroHedge permanently wrong, necessarily – it could make them ahead of the curve. Mr. Littlejohn was quite right in relying on them as he did.

I also wonder if ZeroHedge would do any better if they were put in charge of the Western economy? ZeroHedge’s editorial line is resolutely Austrian/Chicago economics. They do not publish any articles advocating socialist reforms, but they do publish many anti-socialist diatribes which may or may not be reprinted from the 1930s. Indeed, I am always flattered when they do occasionally reprint some of my geopolitical articles, and I definitely find it very amusing because many of the comments are – and this is a direct quote: “This is the worst thing I have ever read on ZeroHedge!” LOL!!! Well, they are based around socialism, not Austrian/Chicago economic brutality, selfishness and egotism. But when it comes to economics ZeroHedge is not about providing balance and objectivity – they are trying to protect their investments.

But in most newspapers the best, objective hard news about foreign countries is actually found in the business section – they need some truth because they are trying to protect their investments. ZeroHedge is indeed indispensable during this economic crisis because of their excellent taste in culling key hard business news from around the world – we can never find such contrarian-yet-factual, everything-is-not-100%-rosy, up-to-the-minute hard news at any of the Mainstream Media business sections or websites. ZeroHedge knows what to look for regarding Western economic problems and it wants them fixed – they are trying to protect their investments.

One of the favourite sources of analysis for ZeroHedge is Rabobank. Perhaps it is because they are Dutch, and their “junior partner” status in the North European strangulation of Latin Europe gives them some pause regarding the ruthlessness of the Germanic-Austrian-Chicagoan mindset? Perhaps because it is a bank based not only around cooperatives but agriculture as well that they have a very un-New York City view on the desirability of empire? Or maybe not… anyway.

As Mr. Littlejohn wrote of their “Rabbit Hole” article: “It treats the global market for Dollars under a single label, namely Eurodollars, but if one adopts that approach then it tends to downplay the historical significance of the rise of the petrodollar….” Indeed to both assertions – calling the eurodollar the “matrix behind it all” is rather magical thinking – it would be nice if the flaws of capitalism-imperialism could be entirely sourced to this one issue but, alas…. I think Mr. Littlejohn may agree with me that Every overrates the exceptionalism and risk of eurodollars. It’s very name is misleading – “globodollars” would be more accurate than “westdollars”, as socialist countries have participated. Eurodollars are a key part of offshore banking money laundering – they are not some new development – and I will discuss later how they are still, in application and spirit, dollars.

Yet the Rabobank analysis of the future of dollar dominance by Every is useful and has great merit. Here is how Every sees the possible outcomes of this QE Infinity post-corona hysteria world:

“Indeed, look at the Eurodollar logically over the long term and there are only three ways such a system can ultimately resolve itself:

  1. The US walks away from the USD reserve currency burden, as Triffin said, or others lose faith in it to stand behind the deficits it needs to run to keep USD flowing appropriately;
  2. The US Federal Reserve takes over the global financial system little by little and/or in bursts; or
  3. The global financial system fragments as the US asserts primacy over parts of it, leaving the rest to make their own arrangements.”

Thus, the first possibility is for the US to abandon dollar dominance via essentially declaring bankruptcy/refusing to pay debts.

The third possibility is for the global financial system to collapse and for the US to assert primacy over parts of it. But this idea is inherently flawed: socialist-inspired systems would NOT fragment, due to the independent, anti-capitalist, anti-Western nature of their systems.

Argue all you want about how China, Iran, Cuba, Vietnam and others would be negatively impacted by the Great Depression II, but I will argue just as long about how all their laws, governmental economic control, and a culture of interventionism will allow socialist-inspired nations to weather this storm EXACTLY as they have weathered Hot War, Cold War and Western blockades. This report for PressTV I did from Havana on “How the Cuban blockade works” opens with a rare sight in Cuba: a billboard. It reads “The blockade: the longest-running genocide in human history.” What is Great Depression 2 compared to that, at least for Cubans?

So I would not be arguing small points, indeed: Cuba exists, Iran exists, China exists – all resist. Every fatally assumes that the West and the entire globe are synonymous – they absolutely are not!

Thus, option three’s critical mistake is seemingly caused by common Western arrogance: It is not “The global financial system fragments” but the “WESTERN financial system fragments”. Again, this is not a small difference between our analyses: the West does not run the entire globe, try as they might and as self-flattering as that has been for them to insist. Here is the new, corrected option #3:

The WESTERN financial system fragments as the US asserts primacy over parts of it, leaving the rest to make their own arrangements.

The West’s incestuous 1% will maintain their primacy over the West and their most-favoured puppets, i.e. no change, except for the obvious, looming degradation of THEIR financial system.

Yet Every seems to believe some clients will perhaps slip away from the US/West – really? When he writes “leaving the rest to make their own arrangements” he is completely vague, probably because he is used to equating “the West” with “the world”: how can a nation leave the world, after all? No wonder he is vague. What Every fails to see is that any nation making “arrangements” outside of the West’s orbit can only go over to a necessarily China-focused – which is to say, a socialist-inspired bloc-focused – arrangement which is indeed already in place.

How can it not be binary in this fashion?

Is Every saying that some nations will soon adopt the 1979 slogan of the Iranian Islamic Revolution – “Neither East nor West but the Islamic Republic of Iran”? That would be quite interesting and I would cheer very loudly… but I do not expect that many nations will reclaim their sovereignty in such an emphatic fashion in 2020. Every is predicting revolutions (and many of them), which is even riskier than predicting a date for a Covid-19 vaccine.

And why should we be optimistic, when all it takes is some bribes and just a couple thousand soldiers to hold a nation’s capital, transportation hubs and sources of natural wealth (as in all over West Africa with France) – why would the Western 1% just “leave the rest” alone? That would be terrible for the capitalist bottom line: if France stops getting African uranium for peanuts then the consumer costs of their nuclear-dependent energy system will skyrocket, to give a single example among many. Thus, any nation which says to the West that they want to “make their own arrangements” will either need strong patrons (i.e., the anti-Western socialist-inspired bloc), or 1979-Iran style determination for true independence.

Anyway, no nation is a (geopolitical) island – Iran’s turn away form the West necessarily implied a turn to the East, and today they are China’s most trusted non-Oriental ally. Every, in a historical nihilist fashion, negates the existence and reality that There Is An Alternative… sorry Westerners, this IS real and is not some mere fad.

While the US (which leads the Western 1%) may say, “You want your money? Come get it,” (option 1) they will definitely not abandon neo-colonialism (option 3), which is so very, very profitable.

Thus, we appear to be stuck with option 2 – “The US Federal Reserve takes over the global financial system little by little and/or in bursts;”.

But we are not: Every is entirely mistaken to present that as some sort of new development!

The Western central banker collusion which was the “solution” to the 2008 crisis was based around following the diktat of top US bankers regarding when to issue QE and when to enact ZIRP (Zero Interest Rate Policies). Discussing this evidence that the Fed has colluded with the central banks of their allies was the basis of my 10-part series on the Western “bankocracy” from last winter, but the idea that bankers collude is not at all a new development in socialist thought.

Therefore what will happen is his third option, but accurately modified: The global Western financial system fragments, as the West asserts primacy over as many puppets/clients as possible, but the persistent economic success of the socialist-inspired camp attracts fresh allies.”

Such a development is entirely in keeping with my original article’s thesis of continued, but not endless, dollar dominance. The competition between two ideologies has never ended: the fallout from the corona hysteria may indeed bust out capitalism-imperialism but it cannot & will not cause the socialist-inspired camp to suddenly quit just as their popularity and relative strength is about to peak; just as after 2008 China peaked so high that they were able to end the (allegedly) “unipolar” world.

So where do we go from here? Answer: a slow decline for the West, which – again – is NOT the entire globe

I will keep saying it because it is true: Even if we judge via their own capitalist metrics, China, Vietnam, Iran – these countries have soared over the past four decades while the real economy of the West has been trashed. Iran only began to have postwar hardship when the inhuman Western blockade ramped up with the EU, US, UN triple sanctions of 2011. Even Cuba has had more economic growth and stability since the end of the Special Period (the fall of the USSR) than the West! ZeroHedgers will protest, “But we said not THIS capitalism (the neoliberal form)”, but it’s not like they have remained anywhere but the powerless fringe and, anyway, that is not my problem.

So a “slow decline” is imprecise journalism – it is a continued decline. Maybe a drastic plummeting in dollar dominance is indeed around the corner, but anyone in April 2020 who says they can predict the future is lying.

So what was Every’s take on the most certain scenario? We should learn it because despite its flaws, caused by its unbalanced and blinkered pro-“capitalism with Western characteristics”, it’s a very fine article.

“In other words, the BIS (Bank for International Settlements) is making clear that somebody (i.e., the Fed) must ensure that Eurodollars are made available on [a] massive scale, not just to foreign central banks, but right down global USD supply chains. As they note, there are many practical issues associated with doing that – and huge downsides if we do not do so. Yet they overlook that there are huge geopolitical problems linked to this step too.

Notably, if the Fed does so then we move rapidly towards logical end-game #2 of the three possible Eurodollar outcomes we have listed previously, where the Fed de facto takes over the global financial system. Yet if the Fed does not do so then we move towards end-game #3, a partial Eurodollar collapse.”

Again it’s a fine analysis but hobbled by the same two flaws: Every does not realise that #2 (“where the Fed de facto takes over the global financial system Western financial system”) has already happened, although it certainly must increase in order to forestall #3; and he does not realise that the Fed will NOT take over the financial systems of the “socialist-inspired bloc” with any amount of QE due to the laws, culture and modern history of said bloc. I hope it’s clear where Every goes astray and why.

This is also not my problem, but: To preserve the Western system we should assume that the long, LONG-awaited downloaning of Western QE “right down global USD supply chains” has finally come. However, it has come too late, and it has only finally arrived on top of the economic disaster which is the suicidal (for the West’s lower classes) Great Lockdown, and it will be expressly designed to be just enough downloaning to forestall mass domestic revolt yet not enough to prohibit the endless increasing of the 1%’s market concentration.

QE Infinity (barring an absurd amount of downloaning, which is politically impossible and would amount to a debt jubilee) cannot forever forestall a dollar collapse, but the “dollar demisers” falsely believe that fiscal policy/money issuance is the only tool the Western elite has. The end-of-the-dollar-revolution will not occur after, as I wrote in my first article, rounds of QE are rotated among different allies, and – as needed – massive Western propaganda campaigns, very watered-down but socialist-inspired concessions to the 99%, debt moratoriums, military distractions and maybe even World War III. Maybe even World War IV, too, and this is why I don’t exaggerate against a culture which believes deeply in their “clash of civilisations”:

The Western 1% simply cannot get “in” the socialist-inspired bloc or the yuan – after all, the aristocratic class in Iran, Cuba, China and elsewhere was totally expelled (to the West) – think they won’t make the dollar their “last stand” and use all their tools? As always, the West underrates the totalitarian nature of their most successful sons and daughters, but Iranians, Cubans and others do not. Yes, the economic scale of the crisis in 2020 is (potentially) revolutionary, but anyone who says it has already gone beyond the capacity of the Western 1% to rein it in and keep profiting… all this accuracy-driven journalist can say is, “Maybe, it’s still early.”

At the heart of Every’s argument, ZeroHedge’s complaints, Austrian/Chicagoan indignation that a national economy is indeed the same as a household, and also the West’s many “dissidents but not really” is a common theme that capitalism will implode because they cannot keep “rolling the debt over”. This is essentially echoed by Trotskyism, which holds that capitalism will eventually crumble under the weight of its own contradictions. (It is also notable that all these Westerners also think that the West – which has no enemies, which has no competition, to which no credible alternative exists – can never be defeated, only implode. More arrogance, but I have digressed.)

But they can keep rolling it over.

Again, they can keep rolling it over.

Every believes that the “eurodollar” is so very risky and exceptional because, “They (are dollars which) are not under the US’ legal jurisdiction, nor are they subject to US rules and regulations.” What he has ignored is that the high-finance holders of these dollars and markers are still very, very much informal upholders of the US-led Western system: Every has ignored culture, psychology and history in favor of a purely legal view of these eurodollars, instead of how the owners of these eurodollars operate in practice.

The Caymans, Luxembourg, Switzerland, Hong Kong and Singapore (all in the top 13 for eurodollar-dependant nations) – we should be worried that these tax havens will disobey the US and jeopardise the system? We should believe that they are even being honest about their claimed dollar reserves? We should be worried that the 1% is going to start sending their dollars to the average person instead of into these tax havens, creating a liquidity crisis? Anyone who has their money in the Caymans is certainly a parasite on society – we should worry for them, or fear them creating a “moral hazard” reckoning-implosion of the Western financial system? If all these eurodollars in the Caymans disappeared the real global economy would be fine – some rich people would be forced to get by on what’s in their Swiss bank accounts. Eurodollars are a problem – they are often the imaginary credit used by the elite who manipulate the West’s imaginary FIRE/QE economy – but there are bigger fish to fry in April 2020.

However, at root the Eurodollar system is based on using the national currency of just one country, the US, as the global reserve currency. This means the world is beholden to a currency that it cannot create as needed,” – exactly: a large percentage of these tax-haven eurodollars are hoarded, immorally stolen dollars, but they are still dollars. Again, they are not being held by the types of people who can be called “revolutionaries” or “patriots” or “moralists”, LOL – they will not be used in international warfare against the West because they are part of a truly supranational 1% Western financial system. They are held by people who are very over-leveraged, true, but these are not people whom repo men visit, eh? Again – it’s still the dollar which is in charge, and the dollar is on the 1%’s side, not America’s side.

Every’s “nationalist” view – that the Caymans are about to make a geopolitical power play – lacks the wider, better perspective provided by the socialist lens: the Western 1% can indeed collude to create more dollars as they need, and they have since 2008. This group can, “keep USD flowing out or else a global Eurodollar liquidity crisis will inevitably occur”, which Every mistakenly fears. They can indeed keep “rolling it over” via QE Infinity – the fact that QE Infinity is a term which journalists finally devised came up after years of foolish waiting for QE to end shows that the Western 1% has a very sound, but immoral, grasp on reality.

Fundamental question: Why would the West stop rolling it over?

If you ask ZeroHedge they might say – with an oxymoronic “capitalist idealism”: because we can’t reward excessive greed nor failure. LOL….

But who among the West’s high-finance 0.01% will be the class traitor who calls in the marker which implodes the system? He or she would implode his or herself, as well. The West is so big it is not just one person who can implode it, anyway: there is no single marker with a “quadrillion” after the number.

And forget mass domestic protests (which will be banned for months and months in the few Western countries which actually have a protesting culture) because whoever heard of mass protests for “reformism” (which is all Western semi-dissidents propose)? That is nonsensical – mass protests either lead to revolution or they fizzle quickly in the “can’t we all just get along”, middle-class, political status quo-ism which defines the West’s eternally anti-socialist culture.

Thus there is no saviour – individual or national – to be had – there is only long, hard opposition via socialism, which is an entirely new system that has fixed the errors of the old capitalism-imperialism system. Therefore the only entity which could cause the system to explode – if we are being pragmatic – is a bloc led by China. Only they have they weight, combined with their allies, to ever break the dollar’s dominance. But they are not going to do that next Tuesday:

They are not economically strong enough, nor are their few allies, nor do they have enough allies, nor could they be aided within a Western society which has nearly no “5th columnists” but merely “semi-dissidents” whose greatest minor achievement is to not want more war/blockades with the socialist-inspired bloc (because it could blow up the planet, negatively affect the rainforest, trigger negative emotions, disrupt the avocado-toast supply chain, etc.). Look at where we are in April 2020: it is a radical, unheard of idea to be reading of any “socialist-inspired bloc” – how can we say that China today is anywhere as omnipresent and dominant as the USSR-led bloc was in, say, 1945, ’55, ’65, ’75 or ‘85? Many of you right now are denying this idea that in 2020 there is any possible “socialist-inspired bloc” – remember that your (likely) reactionary grandfathers and grandmothers had no such illusions of their total victory.

This relative weakness, this inability to provide an alternative to dollar dominance, is why Iranians will tell you: China is not going to “save” anyone except for China, because they are not strong enough. Iran was the first non-Oriental country to learn this fact, even if some in Iran haven’t learned it yet.

However, what China will do is work with you – they will create long-term plans with you (as China and Iran have done on the Belt and Road Initiative) if you prove your socialist and anti-imperialist bonafides. They will work with you even if you are imperialist-capitalists – it is the only way to gain strength and ultimately beat them.

Every, ZeroHedge, the countless Western Rabobanks – they believed the socialist-inspired bloc had been crushed; they are incredibly upset that the 2008 Great Recession and the phony QE “solution” has permitted China to rise and have the temerity to question their neoliberal, neo-imperial, greedy “universal values”. China is indeed now a threat to the West but it is not yet what the USSR was for decades – a concrete alternative which was willing to foot your bills (the USSR was the only empire where the centre bled for the periphery) while your national culture reforms itself away from imperialist ideals in order to (don’t you get this yet?) break the grip of international high finance on your people.

Thus, the dollar will not be beaten next Tuesday.

This is why corona hysteria will ultimately be manipulated by the Western 1% to strengthen the dollar, i.e. – their dollar and not America’s dollar. Barring reforms – and I have seen none which hyper-financialisation did not take advantage of since 2008 – 2008 will only largely repeat itself.

Indeed, it would take a revolution for a Western crisis to be unsuccessfully manipulated… but “semi-dissidents”, i.e. liberal reformists, hold out that mere false hope. They don’t see – like China, Iran, Cuba and others – that the Western 1% will do, like Mario Draghi of the ECB, whatever it takes to maintain their neoliberal empire.

The proof that this analysis is correct could not be more clearly illustrated than by World War I: a war started by international high finance to forestall the victory of socialism and to defend capitalism-imperialism despite its failure for their 99%.

Mr. Littlejohn grasps these historical concepts, and their political-moral implications, far more than the rabidly capitalist ZeroHedge and their preferred analysts.

Mr. Littlejohn and the dream of Eurasia, a concept which strikes down European exceptionalism

I disagree with Mr. Littlejohn where he gives his extension of Every’s three-outcome analysis:

Even a partial Eurodollar collapse would do serious damage to those countries (more than half) which have sought emergency IMF support, and so this new power gives the Fed enormous political leverage over most major economies and over multilateral agencies such as the IMF, the World Bank or even the European Union [EU]. Given that Trump sees the EU as a potential competitor to the USA, and given the low proportion of US Dollars that its major economies have in relation to their trading needs, the EU is very vulnerable to US economic pressure in the present circumstances.”

Indeed, the developing world who are Western clients and not socialist-inspired clients will have huge problems very shortly. The impact of the Great Lockdown hysteria on the developing world is another article I have been meaning to write, but it will be an extension of Part 3 from the “bankocracy” series: QE paid for a foreign buying spree: developing countries hurt the most.

However, while Trump (who looks even riskier post-corona to the 1% free-trade globalists than he did in November 2016, when they did all the could to prevent his election and his protectionist ideas) may personally see the EU as a competitor, the many people richer than him know that this is not the case – the US and EU will continue to collude. Ergo, not only does the Fed want that “enormous political leverage” but the European 1% wants the Fed to have it, too. The dollar needs to remain in charge for the Western financial system to profitably continue for Europe’s 1% – the structure of the Eurozone was penned by the US for precisely this reason, as was the Plaza Accord for the yen. (As I wrote in the final part of a 7-part series in 2017, which socialistically examined the QE crisis in the Eurozone, “With the Plaza Accord of 1985, Japan adopted the US-orchestrated neoliberal changes that were designed to suck the surpluses from Japan back into the United States.”)

Thus the Fed’s sidelining (outspending) of the IMF and World Bank (but not the ECB, as they can print money) should be viewed as what it is – increased market concentration which will profit the Western 1%, as predicted by Marx. Every’s analysis is so unblinkered-capitalist that he likely cannot see this Eurogroup-Fed alliance, but the fine analyst Alastair Crooke alludes to it; however, Crooke still fails to use the socialist class analysis lens and instead fundamentally looks at such global political changes via a slightly-wider but still outdated nationalist lens.

Europe’s 1% may publicly gripe against the Fed’s decisions but they cannot go against them without effectively declaring war on the dollar. The US, Eurozone, Japan, and Saudi economies, plus their clients, are all intertwined – happily, for their 1%. If they did declare war on the dollar they would only have two options:

  1. Join the socialist-inspired bloc – this means renouncing capitalist-imperialist culture, and that will never happen.
  2. Europe carves out a “Third Way”, in a drastic revolution to the binary ideological system which has raged for over a century. This revolution has been so very often discussed in Europe but it has never, ever happened precisely because Europeans are so very devoted to their capitalist-imperialist culture. They have proven that they don’t want a Third Way, should one even exist. Talk of a “Third Way” has proven to be merely a way for Europeans to arrogantly assert their alleged exceptionalism/chauvinism. At some point they will give up and embrace “Eurasia”, but that is a ways away.

I think Mr. Littlejohn need not worry about “if the Euro collapses as a currency in the coming depression” – the euro, the yen and the dollar will all strengthen in a crisis because that is when investors seek safe havens and these are three of the four biggest global economies in what is soon to be an increasingly economically-depressed global market. All three also collude to fix their currencies relative to each other, due to the interconnected nature of the Western 1%, so while they will jockey for position for export power it is only within agreed-upon limits as it is as a fundamentally-united trio, and also fundamentally (as of 2008) united against the yuan, the champion currency of the socialist-inspired bloc.

So, overall, I think perhaps Mr. Littlejohn underestimates the way the euro/EU can burst free of these bonds to become a sovereign counterweight to the dollar/US, and also that Europe will embrace a culturally-unwanted idea of Eurasia anytime soon. Crooke does a good job in his article of linking the actions of the Fed with what I wrote about in Part 3 of the 2017 series, The hopelessly corrupt structure of the Eurozone & the Eurogroup. I think we simply have to look at how then-Economy Minister Emmanuel Macron organised the takeover of national giant Alstom Energy for GE in 2015 to show that Europe’s leaders will prioritise the US 1% (who are richer and thus have more influence ) than the EU’s 1%. It’s not a “new” or “slow” decline for Europe, but a “continued” decline as well.

Europe does not want sovereignty, which is a modern concept; sovereignty has become “modern” because it has been wiped out by Western-led globalisation. The neoliberal (and thus also neo-imperial) empire which is the EU does not respect sovereignty but suppresses it, as Europe is obviously NOT modern.

It’s difficult to change the matrix which modern Western commentators place the world upon – nationalism, imperialism-as-inevitable, chauvinism against non-Western cultures, existentialism (the feeling of being trapped due to not perceiving any alternative) and the historical & political nihilism which is the legacy of WWII.

It’s thus a radical, unheard of concept which still easily upends Every’s analysis – the West is NOT the entire world. New York, London, Paris and Tokyo will grow even more powerful post-corona due to even-greater wealth/market concentration, but their Greeces, “Flyover Country” and their developing world clients will continue to be bled. And as Western inequality, dominance, militarism and market concentration re-doubles amid their supranational financial system chaos, a whole other bloc is poised to not just weather the storm but thrive amid the post-corona chaos precisely because they rejected the Western legal and cultural system.

It’s not that as if these entities didn’t all collude to try and stop China’s rise – WWII was only more murderous to the Soviets, after all – it’s that they could not. It’s not as if they didn’t beg the CCP to change their laws to allow foreign control of Chinese industries – it’s that China would not. The West finally gave up because the CCP made the Western 1% too much money while still retaining control and serving the Chinese people. It’s not as if the West hasn’t tried to get Iran to go “neoliberal” (LOL) and sell off the 90% of the non-Black Market, non-carpet economy which the Iranian government controls – it’s that they could not. It’s not as if the West hasn’t tried to break Cuba, North Korea and others – it’s that they could not.

You cannot stop an idea, especially a superior idea.

My original article was aimed at the hasty, gleeful “dollar demises” and sought to, as the French say, “put some water in your wine”. The West’s “double bubble economy + Great Lockdown hysteria” crisis now is indeed enormous, but it cannot possibly ruin the socialist-inspired bloc – only themselves because that is THEIR economy, not ours.

That is a very sober – and not immoderately gleeful – analysis from the socialist-inspired bloc.

Mr. Littlejohn is on the right track and hopeful that Europe will come around – who would argue with hope in right action? I would remind Mr. Every that there IS an alternative and that it is not new. I would remind ZeroHedge that socialism does not ban competition and that socialism WILL win the binary ideological struggle, as they have been doing since 1980 (as ZeroHedge keeps pointing out via their fine documenting of the West’s continued economic failures).

I thank Mr. Littlejohn for his time, consideration and efforts.

***********************************

Corona contrarianism? How about some corona common sense? Here is my list of articles published regarding the corona crisis, and I hope you will find them useful in your leftist struggle!

Capitalist-imperialist West stays home over corona – they grew a conscience? – March 22, 2020

Corona meds in every pot & a People’s QE: the Trumpian populism they hoped for? – March 23, 2020

A day’s diary from a US CEO during the Corona crisis (satire) March 23, 2020

MSNBC: Chicago price gouging up 9,000% & the sports-journalization of US media – March 25, 2020

Tough times need vanguard parties – are ‘social media users’ the West’s? – March 26, 2020

If Germany rejects Corona bonds they must quit the Eurozone – March 30, 2020

Landlord class: Waive or donate rent-profits now or fear the Cultural Revolution – March 31, 2020

Corona repeating 9/11 & Y2K hysterias? Both saw huge economic overreactions – April 1, 2020

(A Soviet?) Superman: Red Son – the new socialist film to watch on lockdown – April 2, 2020

Corona rewrites capitalist bust-chronology & proves: It’s the nation-state, stupid – April 3, 2020

Condensing the data leaves no doubt: Fear corona-economy more than the virus – April 5, 2020

‘We’re Going Wrong’: The West’s middling, middle-class corona response – April 10, 2020

Why does the UK have an ‘army’ of volunteers but the US has a shortage? – April 12, 2020

No buybacks allowed or dared? Then wave goodbye to Western stock market gains – April 13, 2020

Pity post-corona Millennials… if they don’t openly push socialism – April 14, 2020

No, the dollar will only strengthen post-corona, as usual: it’s a crisis, after all – April 16, 2020

Same 2008 QE playbook, but the Eurozone will kick off Western chaos not the US – April 18, 2020

We’re giving up our civil liberties. Fine, but to which type of state? – April 20, 2020

Coronavirus – Macron’s savior. A ‘united Europe’ – France’s murderer – April 22, 2020

Iran’s ‘resistance economy’: the post-corona wish of the West’s silent majority (1/2) – April 23, 2020

The same 12-year itch: Will banks loan down QE money this time? – April 26, 2020

The end of globalisation won’t be televised, despite the hopes of the Western 99% (2/2) – April 27, 2020

What would it take for proponents to say: ‘The Great Lockdown was wrong’? – April 28, 2020

Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. He is the author of the books ‘I’ll Ruin Everything You Are: Ending Western Propaganda on Red China’ and the upcoming ‘Socialism’s Ignored Success: Iranian Islamic Socialism’.

Global Economic Collapse Reveals the Complete Failure of Neo-Liberal Capitalism

Global Economic Collapse Reveals the Complete Failure of Neo-Liberal Capitalism

Written by Dr. Leon Tressell exclusively for SouthFront

  • Fitch Ratings, ‘Unparalleled Global Recession Underway’
  • Economist Sven Heinrich, ‘Central banks are weapons of economic mass destruction.’

As each day passes by data pours in revealing the immense economic damage caused by the Coronavirus pandemic. Most politicians and economic pundits will put the blame for up the economic hurricane, blasting tens of millions into unemployment, on Coronavirus lock downs. Fitch Ratings has given a brief snapshot of the unfolding economic catastrophe which it predicts will last well into the 2020s:

“World GDP is now expected to fall by 3.9% in 2020, a recession of unprecedented depth in the post-war period. This is twice as large as the decline anticipated in our early April GEO update and would be twice as severe as the 2009 recession.”

“The decline in GDP equates to a USD2.8 trillion fall in global income levels relative to 2019 and a loss of USD4.5 trillion relative to our pre-virus expectations of 2020 global GDP. Fitch expects Eurozone GDP to decline by 7%, US GDP by 5.6%, and UK GDP by 6.3% in 2020.”javascript:window[“$iceContent”]

Yet at the beginning of this year the financial media and political classes around the world were making rosy forecasts how we were going to experience moderate economic growth this year built upon solid economic foundations. There was no cause for worry or alarm just let global capital work its magic and trickle-down economics would ensure living standards would rise for all.

Fast forward 4 months and a global health pandemic has revealed how shallow, brittle and unstable were the economic foundations of the neo-liberal economic order that has been heralded as such a success since the Reagan-Thatcher era of the 1980s. These foundations were built upon infinitely low interest rates, an exponential rise in debt both public and private (sending global debt over the $250 trillion mark) and a massive increase in social and economic inequality. Alongside this, has been the intense exploitation of nations in the developing world and the use of regime change wars as naked resource grabs which cement the neo-liberal economic model in position.The world economy was slowing down during 2019 and heading towards a global recession. Japan’s economy had already entered recession territory in the last quarter of 2019, meanwhile PMI data from China and Germany indicated that they were hovering just outside recession territory.The global economy at the end of 2019 was teetering on the brink and just needed a catalyst or pin to pop the everything bubble which has seen massive inflation in the prices of paper assets across the globe ranging from stocks and bonds to derivatives such as collateralized loan obligations.

The anaemic economic growth experienced by global capitalism since the last financial crisis, which was a mere 12 years ago, has been based upon a gigantic expansion of the global money supply as central banks and governments mistakenly believe that the only way to sustain our debt fuelled economic system was to create ever more debt.

The last 12 years since the 2008 global financial crisis have witnessed an unparalleled wealth transfer from the working classes to the billionaire class which wields immense political influence over governments across the world. Central bank stimulus programs i.e. quantitative easing together with historically low interest rates fuelled a speculative bonanza which has pushed financial markets to all-time highs across the globe.

Meanwhile, governments across the world have sought to give the hard pressed billionaire class a helping hand by cutting capital gains, income and corporation taxes across the board. President Trump’s $1 trillion tax give away to the economic elites in 2017 is the most egregious example of this phenomena.

At the same time, wages for billions of ordinary people have stagnated or fallen whilst welfare benefits and health care have declined. We now have the utterly surreal situation whereby 26 billionaires control as much wealth as the poorest half of humanity amounting to over 3.8 billion people.

The working and middle classes together with the underemployed poor of the developing world were made to pay for the costs of the 2008 global economic crisis. Once the Coronavirus pandemic has finally burned itself out the working people of this world will be confronted with an economic depression which will rival and indeed may exceed in severity that of the 1930s. Governments across the board will once again seek to make ordinary people pay for the cost of the gigantic debts incurred by government and central bank bailouts.

In a desperate effort to prop up their system and protect the interests of their own class central bankers and corporate politicians across the globe are presiding over yet another wealth transfer that benefits the richest 1% in society. Bloomberg has noted how over $8 trillion has been printed out of thin air by global central banks and governments to prop up their debt fuelled system. The bulk of this horde of fiat money has gone to service the needs of Wall Street and its counterparts in London, Paris Frankfurt, Shanghai et cetera.The Wall Street Journal has openly acknowledged this truth in an editorial:

“The Fed may feel all of this is essential to protect the financial system’s plumbing and reduce systemic risk until the virus crisis passes, but make no mistake the Fed is protecting Wall Street first. The goal seems to be to lift asset prices, as the Fed did after the financial panic, and hope that the wealth effect trickles down to the rest of the economy.”

As the 2020s progress massive wealth and health inequalities, hunger and poverty will lead large numbers of people to question the hyper financialised economic system whose sole motive is to protect the interests of the 1%.

The American dominated monetary system which gives preferential treatment to the empire and its allies is in decline. Its decline will be exacerbated by the twin hammer blows of the Coronavirus pandemic and the global economic depression now unfolding.

During the coming decade the make the world will become an even more unstable place as the hegemonic power of our era seeks to maintain its dominant position in the global economy at the expense of other nations. The contradictions and tensions between the United States and its rival China will be greatly exacerbated during the next period. As we saw in the 1930s once these economic contradictions and tensions reach breaking point then the superpowers of the day have few course of action open to them beyond war or appeasement of their rival.Yet during the 1930s there were instances where the onward march to war could have been averted. If Republican Spain had defeated Franco’s fascist insurgency then the momentum towards war would have been slowed. It would have greatly strengthened the Popular Front government in France and halted the appeasement policies that allowed Nazi Germany to grow in strength like a cancerous tumour.
During the next decade there will no doubt be other such instances where the onward march to war can be averted.

Strengthening the US Dollar: Comments on Ramin Mazaheri

Source

April 19, 2020

Strengthening the US Dollar: Comments on Ramin Mazaheri

by Gary Littlejohn for The Saker Blog

Implications of Recent Changes in US Monetary Policy

Ramzin Mazaheri’s excellent article of 16th April attracted some very interesting comments:

This supportive response aims to provide recent relevant evidence that many of the likely changes Mazaheri describes are already happening very quickly. Over the past few months since December, it has become clear that the US Federal Reserve (the Fed, which has actually been privately owned since 1913 but is allowed unconstitutionally to act as the US Government’s central bank) has been grappling with serious problems of liquidity in various US financial markets. This included the ‘repo’ market which handles overnight lending between financial institutions, especially commercial banks, but also other very large financial markets, many of which did not have the funds to pay off debts that were due at the ‘year end’ of their contracts. Depending on the contract, the 2019 ‘year end’ could be at any time between 14 December 2019 and 16 January 2020, but it turned out that the problems did not end in mid-January. All of these problems have been made worse by the COVID-19 pandemic.

This link below times the start of the acute liquidity crisis to September 2019, before I had personally noticed it, and argues that the COVID-19 pandemic only triggered the current crisis, rather than caused it:

https://www.zerohedge.com/economics/how-think-about-fed-now

The author concludes that monetary policy as we know it is as dead as a doornail and that the Fed is, in effect, a lawless economic government unto itself. This deep crisis has recently led to the development of a new strategy to strengthen the US Dollar by new means that have effectively eliminated any safeguarding constraints on US monetary policy. These new measures are reported to have the implicit backing of the Bank of International Settlements [BIS]. This backing by the BIS is said to include backing for the new Fed policy of buying corporate bonds, which effectively means that the Fed controls which companies survive and which do not, and could probably do this internationally. If this BIS backing is true, then that confirms Ramin Mazaheri’s view that the USA would not be acting alone to retain the global dominance of the US Dollar. I think that time will also confirm Mazaheri’s view that such subaltern countries as the UK and the EU Member States will not oppose these new measures, even though they break the already stretched/broken conventions on monetary policy.

The recent outcome of this has been that a version of Quantitative Easing [QE, or electronic ‘printing’ of money] has been being run by the Fed without the usual requirement to buy US Treasury debts to avoid all that money going straight into the everyday economy and fuelling inflation.  Very recently, the Fed started to break its own rules and buy corporate bonds, which are private companies’ debt. This effectively means that the Fed is taking a stake in large private companies. Something very similar has happened with the European Central Bank (ECB, based in Frankfurt) but in the EU the Competition Commissioner has very recently changed the competition rules to allow but also to regulate this crisis-driven behaviour (see The Guardian newspaper recently). That has had the intention (if not the guaranteed effect) of trying to avoid one EU Member State supporting its own companies at the expense of other Member States.

Yet what seems to be happening in the USA is that Steve Mnuchin (US Secretary of the Treasury) has formed an alliance with head of the Fed Jerome Powell to permit the Fed to issue unlimited quantities of money but with no safeguards in corporate bond buying.  (Remember that corporate bond buying is itself against the Fed’s own rules.) This seems to allow the development of a possible strategy that discriminates against foreign-owned companies (such as Chinese-owned Huawei) to be starved of Fed funds. Indeed it may well become a lot easier to sanction both companies and countries that the US Government sees as a threat or merely a strong competitor. This approach seems to have influenced what looks like a recent change of attitude towards the IMF by Steve Mnuchin, and he has recently appointed a close ally as the No. 2 in the IMF. IMF policy is now especially important because the present crisis has meant that over half of the world’s countries have asked for IMF support.

https://www.zerohedge.com/economics/over-half-world-has-asked-imf-emergency-bailout

This seems to give the USA enormous leverage in placing any company it dislikes in a difficult position, at a time when US Dollars [USD] remain the means of payment for at least 80 per cent of all international trade.  I will later refer to a link that shows how much USD is being held by various countries, compared to an estimate of how much they need to carry on trading as normal. The largest EU economies such as France and Germany have only a few per cent of USD in their foreign exchange [FX] reserves, and the same applies to the UK. So Mnuchin is now apparently in a position to inform Trump that he could cause very serious damage to the EU, China and Iran such that the USA could come out of this incipient global depression ahead of its main economic competitors. They may also think the same about Russia but in my view that would be more difficult, because Russia’s economy is inherently more resilient these days. And as indicated above, the USA could also target individual companies. [Incidentally, there is a lot of lobbying going on in Congress right now to gain access to the Fed’s largesse and other emergency funding, and so such preferential treatment could be applied within the USA in a Presidential election year.]

Before providing links to show this situation as it has emerged very recently, it is important to show that the non-financial sectors of the US economy have been in real and accelerating trouble, despite Trump’s claims to the contrary. These illustrative indicators make it clear that the problem is not only financial and so any recovery will probably be very slow because the ‘real’ US economy was heading for a deep recession anyway. Doubtless an awareness of this underlying situation has helped drive the desperate financial measures that we now witness, measures attempting to prop up the US Dollar and ensure that it fully recovers its global dominance.

The following indicators of the contraction of the US economy illustrate a process which started months before the COVID-19 pandemic. There were other earlier indicators – this list is just to give a flavour of the developing trends. The first shows that the Fed has been fully aware of all this:

https://www.zerohedge.com/economics/fed-beige-book-economic-activity-contracted-sharply-and-abruptly-across-all-regions

https://www.zerohedge.com/economics/us-industrial-production-crashes-most-1946

https://www.zerohedge.com/personal-finance/us-retail-sales-crash-most-ever-march-despite-hoarding

https://www.zerohedge.com/markets/ford-scrambles-raise-money-dwindling-cash-balance-becomes-focus

https://www.zerohedge.com/economics/us-leading-economic-indicators-crash-most-over-60-years

Now for the evidence of the apparent policy changes described above:

https://www.wsj.com/articles/imf-approves-top-mnuchin-ally-geoffrey-okamoto-as-no-2-official-11584625344

[19 Mar 2020.]

https://mediacenter.imf.org/news/imf-mnuchin/s/55573d05-c9d0-4a20-835d-f2d40c8fa59c

[10 Apr 2020.] Mnuchin says IMF and World Bank are important partners in addressing global issues. So this is before the public change of heart.

https://www.bloomberg.com/news/articles/2020-04-15/imf-warning-fed-partnership-20-unemployment-eco-day

Here is a crucial quote from the above link:

“In the U.S., Treasury Secretary Steven Mnuchin has forged a crisis partnership with Federal Reserve Chairman Jerome Powell, giving the central bank a bigger role in fiscal policy.”

Now for the public change of position on the IMF:

https://www.marketwatch.com/story/mnuchin-says-he-opposes-imf-special-issuance-of-sdrs-2020-04-16

Also on the 16th April various reports covered the reasons that Mnuchin gave for not supporting the IMF issuance of Special Drawing Rights [SDRs] to support a whole series of countries: he basically suggested the use of much more limited IMF funds for developing countries on the grounds that 70 per cent of the IMF SDRs would go mostly to stronger economies, and developing countries would only get 3 per cent. But some commentators think that the real reason for this change of approach to the IMF is that SDRs would give China and Iran funding without any strings.

The Latent Demand for US Dollars at a Time of Serious Economic Contraction

The link below by Michael Every of Rabobank estimates the impact of the sudden global economic contraction on the demand by various countries for US Dollars:

https://www.zerohedge.com/markets/down-rabbit-hole-euroDollar-market-matrix-behind-it-all

It treats the global market for Dollars under a single label, namely Eurodollars, but if one adopts that approach then it tends to downplay the historical significance of the rise of the petrodollar after Nixon took the Dollar off its fixed exchange rate to gold in 1971. Following that major policy change, Saudi Arabia was quietly given permission to raise the price of oil in 1973 in exchange for US guarantees of its military security. What the US got out of this deal was a guaranteed demand for Dollars because Saudi Arabia agreed to insist that oil had to be traded internationally in Dollars. There was a repeat oil price shock in 1979, further strengthening the dominance of the US Dollar.

The article linked above in part uses The Matrix movie to make some of its points, but the argument is still understandable if you have not seen that movie. The BIS is often described as the central bankers’ central bank, but in my view there is a power hierarchy there. The article claims that the origins of the EuroDollar market are mysterious but in fact it was mainly the US Dollars that arrived in Western Europe as funding for the Marshall Plan for post-war reconstruction of Western Europe that created the market. One part of the argument slightly overstates its case, although it is historically true:

“However, there is a cost involved for the US. Running a persistent current-account deficit implies a net outflow of industry, manufacturing and related jobs. The US has obviously experienced this for a generation, and it has led to both structural inequality and, more recently, a backlash of political populism wanting to Make America Great Again.”

Yet while running a persistent current account deficit implies such a net outflow, it does not entail it. A more judicious policy promoting industrial investment and innovation could have fostered a greater resilience of US industry. Despite its reputation for innovation, in fact most post-war US innovation has either come from the military-industrial complex (increasingly feeble at creating new products owing to the political gravy train that reduced incentives to innovate) or was actually imported, mainly from Nazi Germany or the UK.

The important point now is that few countries can manage to trade without access to US Dollars [USD]. China has reduced its USD holdings for over $2 trillion a few years ago to less than $1.8 trillion now, judging by Table 1 in the link above. That Table highlights in red those countries that are most vulnerable to a US Dollar shortage. Yet it seems that China will need about double its current US Dollar reserves to avoid serious trading difficulties, according to the above article. China has been buying US Dollars and US Treasury Bills [T-bills] again recently, as Mazaheri would expect in the present circumstances:

https://www.zerohedge.com/markets/japanese-holdings-us-treasuries-hit-record-highs-china-big-buyer-too

No other country has anything like the absolute amount of US Dollar holdings as China, and few have as good a ratio of holdings to required US Dollar finance demands (0.52. for China, or 52 per cent).  Switzerland has 0.48, Russia has 0.36 and Saudi Arabia has 0.69. (Taiwan with 0.51 is too small an economy to have that much global impact.)  Russia has far greater resilience in my view than most other countries, because it also holds Euros and Gold, and has swap arrangements with various countries. It is also able to source most of its raw materials within its own borders, can feed its own population and has sufficient reserves to pay off all government and corporate debt immediately on demand – or did until the COVID-19 pandemic and the oil price war with Saudi Arabia and the USA forced it to start selling foreign exchange within the last few weeks. (The amount of such recent sales is not known.) But the currency swap deals will make it easier for it to keep its international trade going better than most countries.

However, such Russian currency swap deals must pale into insignificance in relation to the easy swap deals that the Fed has engaged in, and these have been ramped up in volume and now include additional countries. As Michael Every explains:

“The Fed has, of course, stepped up. It has reduced the cost of accessing existing USD swap lines–where USD are exchanged for other currencies for a period of time–for the Bank of Canada, Bank of England, European Central Bank, and Swiss National Bank; and another nine countries were given access to Fed swap lines with Australia, Brazil, South Korea, Mexico, Singapore, and Sweden all able to tap up to USD60bn, and USD30bn available to Denmark, Norway, and New Zealand. This alleviates some pressure for some markets – but is a drop in the ocean compared to the level of Eurodollar liabilities.”

He goes on later:

“Yet despite all the Fed’s actions so far, USD keeps going up vs. EM FX. Again, this is as clear an example as one could ask for of structural underlying Eurodollar demand.”

He shows this with a graph of the US Dollar holdings within European Markets’ Foreign Exchange holdings [EM FX]:

https://www.zerohedge.com/s3/files/inline-images/USD%20vs%20EM%20FX.jpg?itok=k7qkcjpM

He then quotes the Bank of International Settlements [BIS] where in a recent report the BIS argued that:

“…today’s crisis differs from the 2008 GFC [Global Financial Crisis], and requires policies that reach beyond the banking sector to final users. These businesses, particularly those enmeshed in global supply chains, are in constant need of working capital, much of it in dollars. Preserving the flow of payments along these chains is essential if we are to avoid further economic meltdown.”

Every comments:

“In other words, the BIS is making clear that somebody (i.e., the Fed) must ensure that Eurodollars are made available on massive scale, not just to foreign central banks, but right down global USD supply chains. As they note, there are many practical issues associated with doing that – and huge downsides if we do not do so. Yet they overlook that there are huge geopolitical problems linked to this step too.”

This clearly implies that the Fed has had a green light from the BIS to lend to companies, as I suggested near the beginning of my commentary on Mazaheri above. I mentioned some of the possible geopolitical problems then. But Michael Every spells out the logical endpoint of such an approach. He had earlier mentioned this as one of three outcomes that were possible in principle, while now pointing out that recent policy changes make this outcome the logical one, even if we have not yet reached it:

“Notably, if the Fed does so then we move rapidly towards logical end-game #2 of the three possible Eurodollar outcomes we have listed previously, where the Fed de facto takes over the global financial system. Yet if the Fed does not do so then we move towards end-game #3, a partial Eurodollar collapse.”

Even a partial Eurodollar collapse would do serious damage to those countries (more than half) which have sought emergency IMF support, and so this new power gives the Fed enormous political leverage over most major economies and over multilateral agencies such as the IMF, the World Bank or even the European Union [EU]. Given that Trump sees the EU as a potential competitor to the USA, and given the low proportion of US Dollars that its major economies have in relation to their trading needs, the EU is very vulnerable to US economic pressure in the present circumstances.

Since the US Dollar is used for about 80 per cent of global trade, then even the fact that the Euro is a fairly substantial international trading currency and forms part of the FX holdings of various non-EU governments such as Russia counts for relatively little. All it could be used for is to buy some time to trade when the global economy slowly pulls out of the COVID-19 recession/depression. A similar argument applies to non-Dollar currency swap arrangements between, for example China and Iran or Russia and Venezuela. All four countries could be potential targets, given that China is seen as the major economic competitor to the USA and the others have important oil and/or gas reserves while the US shale industry is now in deep trouble and will cost billions to keep in business. It should not be surprising that the USA is keeping up the military pressure on Venezuela:

https://www.zerohedge.com/geopolitical/us-builds-naval-forces-caribbean-pressure-campaign-against-maduro

Turning to the EU in more detail, it is clear that the Euro currency itself is under stress as it has led to increased economic inequalities between EU Member States. In addition, political solidarity with the EU has declined partly owing to these growing differences and the austerity policies of the European Commission [EC] and the European Central Bank [ECB]. The ‘bailout’ of Greece was really a bailout of French and Italian banks that had made loans to Greece, and the Greek economy has shrunk enormously since 2008. Now Italy is feeling the pinch as it finds itself constrained by EC/ECB policies in its attempts to kick start economic growth. A recent opinion poll shows that 49 per cent of Italians favour leaving the EU and only 40 per cent want to remain in it. Budgetary problems for the EU will increase after the UK leaves it since the UK is only one of about three net contributors to the EU budget and the tensions over the next EU budget are very visible.

The EU has again very recently failed to agree to ‘debt mutualisation’ whereby the richer economies such as Germany and the Netherlands would also take responsibility for the debts of others, mainly the southern European economies, especially the debts of Italy which is the third largest Eurozone economy. The latest attempt to reach this agreement though the issuance of common EU bonds meant that these proposed EU bonds were relabelled ‘coronabonds’ in the hope that the COVID-19 pandemic would concentrate minds. Despite a public apology from the head of the European commission for the EU’s failure to help Italy after the coronavirus outbreak there, the electorates of the northern EU countries will not accept what amounts to a fiscal union within the EU. No wonder the Italian Prime minister stated that the EU now faces an “existential crisis”. Trump (advised by Mnuchin) may see this as an ideal opportunity to undermine a competitor. It is not at all certain that the EU institutions themselves would survive the collapse of the Euro currency, even though some Member States still have their own currencies.

It may not be well-known worldwide, but it is well understood within the EU that most of the global trading in the Euro currency takes place in London, even though the UK stayed outside of the Eurozone when it was created. Paris, Frankfurt and Amsterdam would love to take over this trading market which amounts to trillions of Euros daily, but for practical reasons (well-established institutional expertise and even sheer amount of office space) this cannot happen in the near future, even though the UK is scheduled to leave the EU at the end of this year. Because of the importance of the Euro trading to the UK economy, the UK government is keeping a very close detailed eye on global financial flows, and is increasing its capacity to do so.

So if the Euro collapses as a currency in the coming depression, apart from causing a further bout of economic contraction in the EU, it would cause serious damage to the UK economy, thereby rendering the UK even more subservient to US interests than it is now. Doubtless the Fed and the Trump administration would take full advantage of this in any trade deal negotiations. [These have already being going on behind the scenes and it does not look good for important sectors of the UK economy including farming.]

So could the EU turn to the Eurasian Economic Union [EAEU] to retain some measure of independence from the USA and keep its economy growing? This would require a major cultural change within the European Commission and in some Member States which harbour hostility to Russia, and which may not see Central Asian markets as having much growth potential. Even China has not invested as much in Central Asia as those countries would like. That might change if economic relations between China and the USA become even worse, and China decides to invest more in countries where the Belt and Road Initiative has already provided infrastructure that is less susceptible to foreign military intervention. Yet the population sizes of the Central Asian countries place a limit on how quickly demand for Chinese and other foreign products can be fostered.

Conclusion

While the standoff between Russia and Saudi Arabia would have sounded the death knell for the US shale oil industry in normal circumstances (and it was dying anyway because US capital markets had effectively stopped lending to this sector) there is now a distinct possibility that it will be kept going by the Fed as part of a strategy to keep up pressure on economic competitors. Whereas I recently saw the declining price of oil as loosening US dominance of the global economy by reducing its means of influencing the price of oil, it now appears that giving the Fed unlimited powers to finance companies as well as financial institutions has so changed the global economic landscape that the USA may well emerge from the incipient global depression in a position whereby it remains dominant, albeit in a much smaller global economy.

In such a scenario, and given the inevitably increased dependence of developing countries on the US via the IMF, then the policy options for the Russia-China ‘helix’ will become more constricted as the BRICS group (Brazil, Russia, India, China and South Africa) becomes weaker owing to the probable increased dependence of India, Brazil and South Africa on USD funding. This inevitably raises the profile of the EAEU as a possible source of continued growth despite the fairly limited consumer power within this bloc at the moment. While Russia has managed more or less to stabilise its population and has reduced inflation, thereby easing pressure on living standards, China has been unable to turn round the effects of its earlier policy of limiting child birth. While China has been moving from an export-oriented growth strategy to one promoting rising living standards within its own borders, the ageing population (which like that of Japan has a high propensity to save) means that this strategy will run into limits if China cannot rely on exports to maintain its growth rates through what was intended to be a transition period to the new growth strategy. This implies that the EAEU becomes much more important to both Russia and China, although it would be prudent for China to use institutions such as the Asia Infrastructure Investment Bank to try to sustain the EU as a source of demand for its exports. It will have to do this at a time when it is possibly going to be under legal attack from the USA for what some in the USA are claiming is China’s legal responsibility for the COVID-19 pandemic.

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