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Debt enslavement

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"It's barbarism. I see it coming masqueraded under lawless alliances and predetermined enslavements. It may not be about Hitler's furnaces, but about the methodical and quasi-scientific subjugation of Man. His absolute humiliation. His disgrace"

Odysseas Elytis, Greek poet, in a press conference on the occasion of receiving the Nobel Prize (1979)

One of "innovations" of neoliberalism was extension known since Ancient Greece concept of debt slavery to the whole countries. Here is description based on Debt bondage - Wikipedia, the free encyclopedia

Debt bondage (also known as debt slavery or bonded labor) is a person's pledge of their labor or services as security for the repayment for a debt or other obligation. The services required to repay the debt may be undefined, and the services' duration may be undefined. Debt bondage can be passed on from generation to generation.

Debt bondage has been described by the United Nations as a form of "modern day slavery" and the [3]  Most countries are parties to the Convention, but the practice is still prevalent in South Asia. Debt bondage in India was legally abolished in 1976 but remains prevalent.

Debt bondage was very common in Ancient Greece. In ancient Athens, Solon forbade taking out loans using oneself as a security and ended such debts.

Europe

Classical antiquity

Debt bondage was "quite normal" in [4]  The poor or those who had fallen irredeemably in debt might place themselves into bondage "voluntarily"—or more precisely, might be compelled by circumstances to choose debt bondage as a way to anticipate and avoid worse terms that their creditors might impose on them.[5] In the Greco-Roman world, debt bondage was a distinct legal category into which a free person might fall, in theory temporarily, distinguished from the pervasive practice of slavery, which included enslavement as a result of defaulting on debt. Many forms of debt bondage existed in both ancient Greece and [6].

Debt bondage was widespread in ancient Greece. The only city-state known to have abolished it is Athens, as early as the Archaic period under the debt reform legislation of [7] Both enslavement for debt and debt bondage were practiced in [8]  By the Hellenistic period, the limited evidence indicates that debt bondage had replaced outright enslavement for debt.[8]

The most onerous debt bondage was various forms of paramonē, "indentured labor." As a matter of law, a person subjected to paramonē was categorically free, and not a slave, but in practice his freedom was severely constrained by his servitude.  Solon's reforms occurred in the context of democratic politics at Athens that required clearer distinctions between "free" and "slave"; as a perverse consequence.

The selling of one's own child into slavery is likely in most cases to have resulted from extreme poverty or debt, but strictly speaking is a form of chattel slavery, not debt bondage. The exact legal circumstances in Greece, however, are far more poorly documented than in ancient Rome.

Nexum was a debt bondage contract in the early Roman Republic. Within the Roman legal system, it was a form of mancipatio. Though the terms of the contract would vary, essentially a free man pledged himself as a bond slave (nexus) as surety for a loan. He might also hand over his son as collateral. Although the bondsman might be subjected to humiliation and abuse, as a legal citizen he was supposed to be exempt from corporal punishment. Nexum was abolished by the Lex Poetelia Papiria in 326 BC, in part to prevent abuses to the physical integrity of citizens who had fallen into debt bondage.

Roman historians illuminated the abolition of nexum with a traditional story that varied in its particulars; basically, a nexus who was a handsome but upstanding youth suffered sexual harassment by the holder of the debt. In one version, the youth had gone into debt to pay for his father's funeral; in others, he had been handed over by his father. In all versions, he is presented as a model of virtue. Historical or not, the cautionary tale highlighted the incongruities of subjecting one free citizen to another's use, and the legal response was aimed at establishing the citizen's right to liberty (libertas), as distinguished from the slave or [11]

Cicero considered the abolition of nexum primarily a political maneuver to appease the common people (plebs): the law was passed during the Conflict of the Orders, when plebeians were struggling to establish their rights in relation to the hereditary privileges of the patricians. Although nexum was abolished as a way to secure a loan, debt bondage might still result after a debtor defaulted.

While serfdom under feudalism was the predominant political and economic system in Europe in the High Middle Ages, persisting the Austrian Empire till 1848 and the Russian Empire until 1861 ([12]  debt bondage (and slavery) provided other forms of unfree labour.

Americas

For more details on indentured servitude in the American colonies, see Indentured servant.

Asia

The Indian indenture system was an ongoing system of indenture, based on debt bondage, by which perhaps two million Indians were transported to various colonies of European powers to provide labour for the (mainly sugar) plantations. It started from the end of slavery in 1833 and until 1920.

Current status

See also: Human trafficking

According to the Anti-Slavery Society:

Pawnage or pawn slavery is a form of servitude akin to bonded labor under which the debtor provides another human being as security or collateral for the debt. Until the debt (including interest on it) is paid off, the creditor has the use of the labor of the pawn.[15]

Debt bondage has been described by the United Nations as a form of "modern day slavery"[3] and is prohibited by international law. It is specifically dealt with by article 1(a) of the United Nations 1956 Supplementary Convention on the Abolition of Slavery. It persists nonetheless especially in developing countries, which have few mechanisms for credit security or bankruptcy, and where fewer people hold formal title to land or possessions. According to some economists, for example Hernando de Soto, this is a major barrier to development in those countries because, for example, entrepreneurs do not dare take risks and cannot get credit because they hold no citation needed

Researcher Siddharth Kara has calculated the number of slaves in the world by type, and determined that at the end of 2006 there were 18.1 million people subject to debt bondage.[16]

In India, the rise of Dalit activism, government legislation starting as early as 1949,[17] as well as ongoing work by NGOs and government offices to enforce labour laws and rehabilitate those in debt, appears to have contributed to the reduction of bonded labour there. However, according to research papers presented by the International Labour Organization, there are still many obstacles to the eradication of bonded labour in India.[19]

Reprinted from "SUPER CAPITALISM, SUPER IMPERIALISM by Henry C K Liu"

PART 1: A Structural Link

Robert B Reich, former US Secretary of Labor and resident neo-liberal in the Clinton administration from 1993 to 1997, wrote in the September 14, 2007 edition of The Wall Street Journal an opinion piece, "CEOs Deserve Their Pay", as part of an orchestrated campaign to promote his new book: Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (Afred A Knopf). Hexter Professor of Social and Economic Policy at the Heller School for Social Policy and Management at Brandeis University. He is currently a professor at the Goldman School of Public Policy at the University of California (Berkley) and a regular liberal gadfly in the unabashed supply-side Larry Kudlow TV show that celebrates the merits of capitalism.

Reich's Supercapitalism brings to mind Michael Hudson's Super Imperialism: The Economic Strategy of American Empire (1972-2003). While Reich, a liberal turned neo-liberal, sees "supercapitalism" as the natural evolution of insatiable shareholder appetite for gain, a polite euphemism for greed, that cannot or should not be reined in by regulation, Hudson, a Marxist heterodox economist, sees "super imperialism" as the structural outcome of post-World War II superpower geopolitics, with state interests overwhelming free market forces, making regulation irrelevant. While Hudson is critical of "super imperialism" and thinks that it should be resisted by the weaker trading partners of the US, Reich gives the impression of being ambivalent about the inevitability, if not the benignity, of "supercapitalism".

The structural link between capitalism and imperialism was first observed by John Atkinson Hobson (1858-1940), an English economist, who wrote in 1902 an insightful analysis of the economic basis of imperialism. Hobson provided a humanist critique of neoclassical economics, rejecting exclusively materialistic definitions of value. With Albert Frederick Mummery (1855-1895), the great British mountaineer who was killed in 1895 by an avalanche while reconnoitering Nanga Parbat, an 8,000-meter Himalayan peak, Hobson wrote The Physiology of Industry (1889), which argued that an industrial economy requires government intervention to maintain stability, and developed the theory of over-saving that was given a glowing tribute by John Maynard Keynes three decades later.

The need for governmental intervention to stabilize an expanding national industrial economy was the rationale for political imperialism. On the other side of the coin, protectionism was a governmental counter-intervention on the part of weak trading partners for resisting imperialist expansion of the dominant power. Historically, the processes of globalization have always been the result of active state policy and action, as opposed to the mere passive surrender of state sovereignty to market forces. Market forces cannot operate in a vacuum. They are governed by man-made rules. Globalized markets require the acceptance by local authorities of established rules of the dominant economy. Currency monopoly of course is the most fundamental trade restraint by one single dominant government.

Adam Smith published Wealth of Nations in 1776, the year of US independence. By the time the constitution was framed 11 years later, the US founding fathers were deeply influenced by Smith's ideas, which constituted a reasoned abhorrence of trade monopoly and government policy in restricting trade. What Smith abhorred most was a policy known as mercantilism, which was practiced by all the major powers of the time. It is necessary to bear in mind that Smith's notion of the limitation of government action was exclusively related to mercantilist issues of trade restraint. Smith never advocated government tolerance of trade restraint, whether by big business monopolies or by other governments in the name of open markets.

A central aim of mercantilism was to ensure that a nation's exports remained higher in value than its imports, the surplus in that era being paid only in specie money (gold-backed as opposed to fiat money). This trade surplus in gold permitted the surplus country, such as England, to invest in more factories at home to manufacture more for export, thus bringing home more gold. The importing regions, such as the American colonies, not only found the gold reserves backing their currency depleted, causing free-fall devaluation (not unlike that faced today by many emerging-economy currencies), but also wanting in surplus capital for building factories to produce for domestic consumption and export. So despite plentiful iron ore in America, only pig iron was exported to England in return for English finished iron goods. The situation was similar to today's oil producing countries where despite plentiful crude oil, refined petrochemical products such as gasoline and heating oil have to be imported.

In 1795, when the newly independent Americans began finally to wake up to their disadvantaged trade relationship and began to raise European (mostly French and Dutch) capital to start a manufacturing industry, England decreed the Iron Act, forbidding the manufacture of iron goods in its American colonies, which caused great dissatisfaction among the prospering colonials. Smith favored an opposite government policy toward promoting domestic economic production and free foreign trade for the weaker traders, a policy that came to be known as "laissez faire" (because the English, having nothing to do with such heretical ideas, refuse to give it an English name). Laissez faire, notwithstanding its literal meaning of "leave alone", meant nothing of the sort. It meant an activist government policy to counteract mercantilism. Neo-liberal free-market economists are just bad historians, among their other defective characteristics, when they propagandize "laissez faire" as no government interference in trade affairs.

Friedrich List, in his National System of Political Economy (1841), asserts that political economy as espoused in England, far from being a valid science universally, was merely British national opinion, suited only to English historical conditions. List's institutional school of economics asserts that the doctrine of free trade was devised to keep England rich and powerful at the expense of its trading partners and it must be fought with protective tariffs and other protective devices of economic nationalism by the weaker countries.

Henry Clay's "American system" was a national system of political economy. US neo-imperialism in the post WWII period disingenuously promotes neo-liberal free-trade against governmental protectionism to keep the US rich and powerful at the expense of its trading partners. Before the October Revolution of 1917, many national liberation movements in European colonies and semi-colonies around the world were influenced by List's economic nationalism. The 1911 Nationalist Revolution in China, led by Sun Yat-sen, was heavily influenced by Lincoln's political ideas - government of the people, by the people and for the people - and the economic nationalism of List, until after the October Revolution when Sun realized that the Soviet model was the correct path to national revival.

Hobson's magnum opus, Imperialism, (1902), argues that imperialistic expansion is driven not by state hubris, known in US history as "manifest destiny", but by an innate quest for new markets and investment opportunities overseas for excess capital formed by over-saving at home for the benefit of the home state. Over-saving during the industrial age came from Richardo's theory of the iron law of wages, according to which wages were kept perpetually at subsistence levels as a result of uneven market power between capital and labor. Today, job outsourcing that returns as low-price imports contributes to the iron law of wages in the US domestic economy. (See my article Organization of Labor Exporting Countries [OLEC]).

Hobson's analysis of the phenology (study of life cycles) of capitalism was drawn upon by Lenin to formulate a theory of imperialism as an advanced stage of capitalism: "Imperialism is capitalism at that stage of development at which the dominance of monopolies and finance capitalism is established; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist powers has been completed." (Vladimir Ilyich Lenin, 1916, Imperialism, the Highest Stage of Capitalism, Chapter 7).

Lenin was also influenced by Rosa Luxemberg, who three year earlier had written her major work, The Accumulation of Capital: A Contribution to an Economic Explanation of Imperialism (Die Akkumulation des Kapitals: Ein Beitrag zur ökonomischen Erklärung des Imperialismus), 1913). Luxemberg, together with Karl Liebknecht a founding leader of the Spartacist League (Spartakusbund), a radical Marxist revolutionary movement that later renamed itself the Communist Party of Germany (Kommunistische Partei Deutschlands, or KPD), was murdered on January 15, 1919 by members of the Freikorps, rightwing militarists who were the forerunners of the Nazi Sturmabteilung (SA) led by Ernst Rohm.

The congenital association between capitalism and imperialism requires practically all truly anti-imperialist movements the world over to be also anti-capitalist. To this day, most nationalist capitalists in emerging economies are unwitting neo-compradors for super imperialism. Neo-liberalism, in its attempts to break down all national boundaries to facilitate global trade denominated in fiat dollars, is the ideology of super imperialism.

Hudson, the American heterodox economist, historian of ancient economies and post-WW II international balance-of-payments specialist, advanced in his 1972 book the notion of 20th century super imperialism. Hudson updated Hobson's idea of 19th century imperialism of state industrial policy seeking new markets to invest home-grown excess capital. To Hudson, super imperialism is a state financial strategy to export debt denominated in the state's fiat currency as capital to the new financial colonies to finance the global expansion of a superpower empire. No necessity, or even intention, was entertained by the superpower of ever having to pay off these paper debts after the US dollar was taken off gold in 1971.

Monetary Imperialism and Dollar Hegemony

Super imperialism transformed into monetary imperialism after the 1973 Middle East oil crisis with the creation of the petrodollar and two decades later emerged as dollar hegemony through financial globalization after 1993. As described in my 2002 AToL article, Dollar hegemony has to go, a geopolitical phenomenon emerged after the 1973 oil crisis in which the US dollar, a fiat currency since 1971, continues to serve as the primary reserve currency for  international trade because oil continues to be denominated in fiat dollars as a result of superpower geopolitics, leading to dollar hegemony in 1993 with the globalization of deregulated financial markets.

Three causal developments allowed dollar hegemony to emerge over a span of two decades after 1973 and finally take hold in 1993. US fiscal deficits from overseas spending since the 1950s caused a massive drain in US gold holdings, forcing the US in 1971 to abandon the 1945 Bretton Woods regime of fixed exchange rate based on a gold-backed dollar. Under that international financial architecture, cross-border flow of funds was not considered necessary or desirable for promoting international trade or domestic development. The collapse of the 1945 Bretton Woods regime in 1971 was the initial development toward dollar hegemony.

The second development was the denomination of oil in dollars after the 1973 Middle East oil crisis. The emergence of petrodollars was the price the US, still only one of two contending superpowers in 1973, extracted from defenseless oil-producing nations for allowing them to nationalize the Western-owned oil industry on their soil. As long as oil transactions are denominated in fiat dollars, the US essentially controls all the oil in the world financially regardless of specific ownership, reducing all oil producing nations to the status of commodity agents of dollar hegemony.

The third development was the global deregulation of financial markets after the Cold War, making cross-border flow of funds routine, and a general relaxation of capital and foreign exchange control by most governments involved in international trade. This neo-liberal trade regime brought into existence a foreign exchange market in which free-floating exchange rates made computerized speculative attacks on weak currencies a regular occurrence. These three developments permitted the emergence of dollar hegemony after 1994 and helped the US win the Cold War with financial power derived from fiat money.

Dollar hegemony advanced super imperialism one stage further from the financial to the monetary front. Industrial imperialism sought to achieve a trade surplus by exporting manufactured good to the colonies for gold to fund investment for more productive plants at home. Super imperialism sought to extract real wealth from the colonies by paying for it with fiat dollars to sustain a balance of payments out of an imbalance in the exchange of commodities. Monetary imperialism under dollar hegemony exports debt denominated in fiat dollars through a permissive trade deficit with the new colonies, only to re-import the debt back to the US as capital account surplus to finance the US debt bubble.

The circular recycling of dollar-denominated debt was made operative by the dollar, a fiat currency that only the US can print at will, continuing as the world's prime reserve currency for international trade and finance, backed by US geopolitical superpower. Dollars are accepted universally because oil is denominated in dollars and everyone needs oil and thus needs dollars to buy oil. Any nation that seeks to denominate key commodities, such as oil, in currencies other than the dollar will soon find itself invaded by the sole superpower. Thus the war on Iraq is not about oil, as former Federal Reserve chairman Alan Greenspan suggested recently. It is about keeping oil denominated in dollars to protect dollar hegemony. The difference is subtle but of essential importance.

Since 1993, central banks of all trading nations around the world, with the exception of the US Federal Reserve, have been forced to hold more dollar reserves than they otherwise need to ward off the potential of sudden speculative attacks on their currencies in unregulated global financial markets. Thus "dollar hegemony" prevents the exporting nations, such as the Asian Tigers, from spending domestically the dollars they earn from the US trade deficit and forces them to fund the US capital account surplus, shipping real wealth to the US in exchange for the privilege of financing further growth of the US debt economy.

Not only do these exporting nations have to compete by keeping their domestic wages down and by prostituting their environment, the dollars that they earn cannot be spent at home without causing a monetary crisis in their own currencies because the dollars they earn have to be exchanged into local currencies before they can be spent domestically, causing an excessive rise in their domestic money supply which in turn causes domestic inflation-pushed bubbles. While the trade-surplus nations are forced to lend their export earnings back to the US, these same nations are starved for capital, as global capital denominated in dollars will only invest in their export sectors to earn more dollars. The domestic sector with local currency earnings remains of little interest to global capital denominated in dollars. As a result, domestic development stagnates for lack of capital.

Dollar hegemony permits the US to transform itself from a competitor in world markets to earn hard money, to a fiat-money-making monopoly with fiat dollars that only it can print at will. Every other trading nation has to exchange low-wage goods for dollars that the US alone can print freely and that can be spent only in the dollar economy without monetary penalty.

The victimization of Japan and China

Japan is a classic victim of monetary imperialism. In 1990, as a result of Japanese export prowess, the Industrial Bank of Japan was the largest bank in the world, with a market capitalization of $57 billion. The top nine of the 10 largest banks then were all Japanese, trailed by Canadian Alliance in 10th place. No US bank made the top-10 list. By 2001, the effects of dollar hegemony have pushed Citigroup into first place with a market capitalization of $260 billion. Seven of the top 10 largest financial institutions in the world in 2001 were US-based, with descending ranking in market capitalization: Citigroup ($260 billion), AIG ($209 billion), HSBC (British-$110 billion), Berkshire Hathaway ($100 billion), Bank of America ($99 billion), Fanny Mae ($80 billion), Wells Fargo ($74 billion), JP Morgan Chase ($72 billion), RBS (British-$70 billion) and UBS (Swiss-$67 billion). No Japanese bank survived on the list.

China is a neoclassic case of dollar hegemony victimization even though its domestic financial markets are still not open and the yuan is still not freely convertible. With over $1.4 trillion in foreign exchange reserves earned at a previously lower fixed exchange rate of 8.2 to a dollar set in 1985, now growing at the rate of $1 billion a day at a narrow-range floating exchange rate of around 7.5 since July 2005, China cannot spend much of it dollar holdings on domestic development without domestic inflation caused by excessive expansion of its yuan money supply. The Chinese economy is overheating because the bulk of its surplus revenue is in dollars from exports that cannot be spent inside China without monetary penalty. Chinese wages are too low to absorb sudden expansion of yuan money supply to develop the domestic economy. And with over $1.4 trillion in foreign exchange reserves, equal to its annual GDP, China cannot even divest from the dollar without having the market effect of a falling dollar moving against its remaining holdings.

The People's Bank of China announced on July 20, 2005 that effective immediately the yuan exchange rate would go up by 2.1% to 8.11 yuan to the US dollar and that China would drop the dollar peg to its currency. In its place, China would move to a "managed float" of the yuan, pegging the currency's exchange value to an undisclosed basket of currencies linked to its global trade. In an effort to limit the amount of volatility, China would not allow the currency to fluctuate by more than 0.3% in any one trading day. Linking the yuan to a basket of currencies means China's currency is relatively free from market forces acting on the dollar, shifting to market forces acting on a basket of currencies of China's key trading partners. The basket is composed of the euro, yen and other Asian currencies as well as the dollar. Though the precise composition of the basket was not disclosed, it can nevertheless be deduced by China's trade volume with key trading partners and by mathematical calculation from the set-daily exchange rate.

Thus China is trapped in a trade regime operating on an international monetary architecture in which it must continue to export real wealth in the form of underpaid labor and polluted environment in exchange for dollars that it must reinvest in the US. Ironically, the recent rise of anti-trade sentiment in US domestic politics offers China a convenient, opportune escape from dollar hegemony to reduce its dependence on export to concentrate on domestic development. Chinese domestic special interest groups in the export sector would otherwise oppose any policy to slow the growth in export if not for the rise of US protectionism which causes shot-term pain for China but long-term benefit in China's need to restructure its economy toward domestic development. Further trade surplus denominated in dollar is of no advantage to China.

Emerging markets are new colonies of monetary imperialism

Even as the domestic US economy declined after the onset of globalization in the early 1990s, US dominance in global finance has continued to this day on account of dollar hegemony. It should not be surprising that the nation that can print at will the world's reserve currency for international trade should come up on top in deregulated global financial markets. The so-called emerging markets around the world are the new colonies of monetary imperialism in a global neo-liberal trading regime operating under dollar hegemony geopolitically dominated by the US as the world's sole remaining superpower.

Denial of corporate social responsibility
In Supercapitalism, Reich identifies corporate social responsibility as a diversion from economic efficiency and an un-capitalistic illusion. Of course the late Milton Friedman had asserted that the only social responsibility of corporations is to maximize profit, rather than to generate economic well-being and balanced growth through fair profits. There is ample evidence to suggest that a single-minded quest for maximizing global corporate profit can lead to domestic economic decline in even the world's sole remaining superpower. The US public is encouraged to blame such decline on the misbehaving trading partners of the US rather than US trade policy that permits US transnational corporation to exploit workers in all trading nations, including those in the US. It is a policy that devalues work by over-rewarding financial manipulation.

Yet to Reich, the US corporate income tax is regressive and inequitable and should be abolished so that after-tax corporate profit can be even further enhanced. This pro-profit position is at odds with even rising US Republican sentiment against transnational corporations and their global trade strategies. Reich also thinks the concept of corporate criminal liability is based on an "anthropomorphic fallacy" that ends up hurting innocent people. Reich sees as inevitable an evolutionary path towards an allegedly perfect new world of a super-energetic capitalism responding to the dictate of all-powerful consumer preference through market democracy.

Reich argues that corporations cannot be expected to be more "socially responsible" than their shareholders or even their consumers, and he implies that consumer preference and behavior are the proper and effective police forces that supersede the need for market regulation. He sees corporations, while viewed by law as "legal persons", as merely value-neutral institutional respondents of consumer preferences in global markets. Reich claims that corporate policies, strategies and behavior in market capitalism are effectively governed by consumer preferences and need no regulation by government. This is essentially the ideology of neo-liberalism.

Yet US transnational corporations derive profit from global operations serving global consumers to maximize return on global capital. These transnational corporations will seek to shift production to where labor is cheapest and environmental standards are lowest and to market their products where prices are highest and consumer purchasing power the strongest. Often, these corporations find it more profitable to sell products they themselves do not make, controlling only design and marketing, leaving the dirty side of manufacturing to others with underdeveloped market power. This means if the US wants a trade surplus under the current terms of trade, it must lower it wages. The decoupling of consumers from producers weakens the conventional effects of market pressure on corporate social responsibility. Transnational corporations have no home community loyalty. Consumers generally do not care about sweat shop conditions overseas while overseas workers do not care about product safety on goods they produce but cannot afford to buy. Products may be made in China, but they are not made by China, but by US transnational corporations which are responsible for the quality and safety of their products.

Further, it is well recognized that corporations routinely and effectively manipulate consumer preference and market acceptance often through if not false, at least misleading advertising, not for the benefit of consumers, but to maximize return on faceless capital raised from global capital markets. The subliminal emphasis by the corporate culture on addictive acquisition of material things, coupled with a structural deprivation of adequate income to satisfy the manipulated desires, has made consumers less satisfied than in previous times of less material abundance. Corporations have been allowed to imbed consumption-urging messages into every aspect of modern life. The result is a disposable culture with packaged waste, an obesity crisis for all age groups, skyrocketing consumer debt, the privatization of public utilities that demand the same fee for basic services from rich and poor alike, causing a sharp disparity in affordability. It is a phenomenon described by Karl Marx as "Fetishism of Commodities".

Marx's concept of Fetishism of Commodities
Marx wrote in Das Kapital:[1]

The relation of the producers to the sum total of their own labor is presented to them as a social relation, existing not between themselves, but between the products of their labor. This is the reason why the products of labor become commodities, social things whose qualities are at the same time perceptible and imperceptible by the senses … The existence of the things qua commodities, and the value relation between the products of labor which stamps them as commodities, have absolutely no connection with their physical properties and with the material relations arising therefrom. It is a definite social relation between men that assumes, in their eyes, the fantastic form of a relation between things. In order, therefore, to find an analogy, we must have recourse to the mist-enveloped regions of the religious world. In that world, the productions of the human brain appear as independent beings endowed with life, and entering into relation both with one another and the human race. So it is in the world of commodities with the products of men's hands. This I call the Fetishism which attaches itself to the products of labor, as soon as they are produced as commodities, and which is therefore inseparable from the production of commodities. This Fetishism of Commodities has its origin … in the peculiar social character of the labor that produces them.
Marx asserts that "the mystical character of commodities does not originate in their use-value" (Section 1, p 71). Market value is derived from social relations, not from use-value which is a material phenomenon. Thus Marx critiques the Marginal Utility Theory by pointing out that market value is affected by social relationships. For example, the marginal utility of door locks is a function of the burglary rate in a neighborhood which in turn is a function of the unemployment rate. Unregulated free markets are a regime of uninhibited price gouging by monopolies and cartels.

Thus the nature of money cannot be adequately explained even in terms of the material-technical properties of gold, but only in terms of the factors behind man's desire and need for gold. Similarly, it is not possible to fully understand the price of capital from the technical nature of the means of production, but only from the social institution of private ownership and the terms of exchange imposed by uneven market power. Market capitalism is a social institution based on the fetishism of commodities.

Democracy threatened by the corporate state
While Reich is on target in warning about the danger to democracy posed by the corporate state, and in claiming that only people can be citizens, and only citizens should participate in democratic decision making, he misses the point that transnational corporations have transcended national boundaries. Yet in each community that these transnational corporations operate, they have the congenital incentive, the financial means and the legal mandate to manipulate the fetishism of commodities even in distant lands.

Moreover, representative democracy as practiced in the US is increasingly manipulated by corporate lobbying funded from high-profit-driven corporate financial resources derived from foreign sources controlled by management. Corporate governance is notoriously abusive of minority shareholder rights on the part of management. Notwithstanding Reich's rationalization of excessive CEO compensation, CEOs as a class are the most vocal proponents of corporate statehood. Modern corporations are securely insulated from any serious threats from consumer revolt. Inter-corporate competition presents only superficial and trivial choices for consumers. Motorists have never been offered any real choice on gasoline by oil companies or alternatives on the gasoline-guzzling internal combustion engine by car-makers.

High pay for CEOs
Reich asserts in his Wall Street Journal piece that modern CEOs in finance capitalism nowadays deserve their high pay because they have to be superstars, unlike their bureaucrat-like predecessors during industrial capitalism. Notwithstanding that one would expect a former labor secretary to argue that workers deserve higher pay, the challenge to corporate leadership in market capitalism has always been and will always remain management's ruthless pursuit of market leadership power, a euphemism for monopoly, by skirting the rule of law and regulations, framing legislative regimes through political lobbying, pushing down wages and worker benefits, increasing productivity by downsizing in an expanding market and manipulating consumer attitude through advertising. At the end of the day, the bottom line for corporate profit is a factor of lowering wage and benefit levels.

Reich seems to have forgotten that the captains of industry of 19th century free-wheeling capitalism were all superstars who evoked public admiration by manipulating the awed public into accepting the Horatio Alger myth of success through hard work, honesty and fairness. The derogatory term "robber barons" was first coined by protest pamphlets circulated by victimized Kansas farmers against ruthless railroad tycoons during the Great Depression.

The manipulation of the public will by moneyed interests is the most problematic vulnerability of US economic and political democracy. In an era when class warfare has taken on new sophistication, the accusation of resorting to class warfare argument is widely used to silence legitimate socio-economic protests. The US media is essentially owned by the moneyed interests. The decline of unionism in the US has been largely the result of anti-labor propaganda campaigns funded by corporations and government policies influenced by corporate lobbyists. The infiltration of organized crime was exploited to fan public anti-union sentiments while widespread corporate white collar crimes were dismissed as mere anomalies. (See Capitalism's bad apples: It's the barrel that's rotten)

Superman capitalism
As promoted by his permissive opinion piece, a more apt title for Reich's new book would be Superman Capitalism, in praise of the super-heroic qualities of successful corporate CEOs who deserve superstar pay. This view goes beyond even fascist superman ideology. The compensation of corporate CEOs in Nazi Germany never reached such obscene levels as those in US corporate land today.

Reich argues that CEOs deserve their super-high compensation, which has increased 600% in two decades, because corporate profits have also risen 600% in the same period. The former secretary of labor did not point out that wages rose only 30% in the same period. The profit/wage disparity is a growing cancer in

the US-dominated global economy, causing over-production resulting from stagnant demand caused by inadequate wages. A true spokesman for labor would point out that enlightened modern management recognizes that the performance of a corporation is the sum total of effective team work between management and labor.

System analysis has long shown that collective effort on the part of the entire work force is indispensable to success in any complex organism. Further, a healthy consumer market depends on a balance between corporate earnings and worker earnings. Reich's point would be valid if US wages had risen by the same multiple as CEO pay and corporate profit, but he apparently thought that it would be poor etiquette to raise embarrassing issues as a guest writer in an innately anti-labor journal of Wall Street. Even then, unless real growth also rose 600% in two decades, the rise in corporate earning may be just an inflation bubble.

An introduction to economic populism

To be fair, Reich did address the income gap issue eight months earlier in another article, "An Introduction to Economic Populism" in the Jan-Feb, 2007 issue of The American Prospect, a magazine that bills itself as devoted to "liberal ideas". In that article, Reich relates a "philosophical" discussion he had with fellow neo-liberal cabinet member Robert Rubin, then treasury secretary under Bill Clinton, on two "simple questions".

The first question was: Suppose a proposed policy will increase the incomes of some people without decreasing the incomes of any others. Of course Reich must know that it is a question of welfare economics long ago answered by the "pareto optimum", which asserts that resources are optimally distributed when an individual cannot move into a better position without putting someone else into a worse position. In an unjust society, the pareto optimum will perpetuate injustice in the name of optimum resource allocation. "Should it be implemented? Bob and I agreed it should," writes Reich. Not exactly an earth-shaking liberal position. Rather, it is a classic neo-liberal posture.

And the second question: But suppose the people whose incomes will rise are already wealthier than everyone else. Although no one will lose ground, inequality will widen. Should it still be implemented? "I won't tell you where he and I came out on that second question," writes Reich without explaining why. He allows that "we agreed that people who don't share in such gains feel relatively poorer. Widening inequality also further tips the balance of political power in favor of the wealthy."

Of course, clear thinking would have left the second question mute because it would have invalidated the first question, as the real income of those whose nominal income has not fallen has indeed fallen relative to those whose nominal income has risen. In a macro monetary sense, it is not possible to raise the nominal income of some without lowering the real income of others. All incomes must rise together proportionally or inequality in after-inflation real income will increase.

Inequality only a new worry?

But for the sake of argument, let's go along with Reich's parable on welfare economics and financial equality. That conversation occurred a decade ago. Reich says in his January 2007 article that "inequality is far more worrisome now", as if it had not been or that the policies he and his colleagues in the Clinton administration, as evidenced by their answer to their own first question, did not cause the now "more worrisome" inequality. "The incomes of the bottom 90% of Americans have increased about 2% in real terms since then, while that of the top 1% has increased over 50%," Reich wrote in the matter of fact tone of an innocent bystander.

It is surprising that a former labor secretary would err even on the record on worker income. The US Internal Revenue Service reports that while incomes have been rising since 2002, the average income in 2005 was $55,238, nearly 1% less than in 2000 after adjusting for inflation. Hourly wage costs (including mandatory welfare contributions and benefits) grew more slowly than hourly productivity from 1993 to late 1997, the years of Reich's tenure as labor secretary. Corporate profit rose until 1997 before declining, meaning what should have gone to workers from productivity improvements went instead to corporate profits. And corporate profit declined after 1997 because of the Asian financial crisis, which reduced offshore income for all transnational companies, while domestic purchasing power remained weak because of sub-par worker income growth.

The break in trends in wages occurred when the unemployment rate sank to 5%, below the 6% threshold of NAIRU (non-accelerating inflation rate of unemployment) as job creation was robust from 1993 onwards. The "reserve army of labor" in the war against inflation disappeared after the 1997 Asian crisis when the Federal Reserve injected liquidity into the US banking system to launch the debt bubble. According to NAIRU, when more than 94% of the labor force is employed, the war on wage-pushed inflation will be on the defensive. Yet while US inflation was held down by low-price imports from low-wage economies, US domestic wages fell behind productivity growth from 1993 onward. US wages could have risen without inflationary effects but did not because of the threat of further outsourcing of US jobs overseas. This caused corporate profit to rise at the expense of labor income during the low-inflation debt bubble years.

Income inequality in the US today has reached extremes not seen since the 1920s, but the trend started three decades earlier. More than $1 trillion a year in relative income is now being shifted annually from roughly 90,000,000 middle and working class families to the wealthiest households and corporations via corporate profits earned from low-wage workers overseas. This is why nearly 60% of Republicans polled support more taxes on the rich.

Carter the granddaddy of deregulation

The policies and practices responsible for today's widening income gap date back to the 1977-1981 period of the Carter administration which is justly known as the administration of deregulation. Carter's deregulation was done in the name of populism but the results were largely anti-populist. Starting with Carter, policies and practices by both corporations and government underwent a fundamental shift to restructure the US economy with an overhaul of job markets. This was achieved through widespread de-unionization, breakup of industry-wide collective bargaining which enabled management to exploit a new international division of labor at the expense of domestic workers.

The frontal assault on worker collective bargaining power was accompanied by a realigning of the progressive federal tax structure to cut taxes on the rich, a brutal neo-liberal global free-trade offensive by transnational corporations and anti-labor government trade policies. The cost shifting of health care and pension plans from corporations to workers was condoned by government policy. A wave of government-assisted compression of wages and overtime pay narrowed the wage gap between the lowest and highest paid workers (which will occur when lower-paid workers receive a relatively larger wage increase than the higher-paid workers with all workers receiving lower pay increases than managers). There was a recurring diversion of inflation-driven social security fund surpluses to the US fiscal budget to offset recurring inflation-adjusted federal deficits. This was accompanied by wholesale anti-trust deregulation and privatization of public sectors; and most egregious of all, financial market deregulation.

Carter deregulated the US oil industry four years after the 1973 oil crisis in the name of national security. His Democratic challenger, Senator Ted Kennedy, advocated outright nationalization. The Carter administration also deregulated the airlines, favoring profitable hub traffic at the expense of traffic to smaller cities. Air fares fell but service fell further. Delays became routine, frequently tripling door-to-door travel time. What consumers save in airfare, they pay dearly in time lost in delay and in in-flight discomfort. The Carter administration also deregulated trucking, which caused the Teamsters Union to support Ronald Reagan in exchange for a promise to delay trucking deregulation.

Railroads were also deregulated by Railroad Revitalization and Regulatory Reform Act of 1976 which eased regulations on rates, line abandonment, and mergers to allow the industry to compete with truck and barge transportation that had caused a financial and physical deterioration of the national rail network railroads. Four years later, Congress followed up with the Staggers Rail Act of 1980 which provided the railroads with greater pricing freedom, streamlined merger timetables, expedited the line abandonment process, and allowed confidential contracts with shippers. Although railroads, like other modes of transportation, must purchase and maintain their own rolling stock and locomotives, they must also, unlike competing modes, construct and maintain their own roadbed, tracks, terminals, and related facilities. Highway construction and maintenance are paid for by gasoline taxes. In the regulated environment, recovering these fixed costs hindered profitability for the rail industry.

After deregulation, the railroads sought to enhance their financial situation and improve their operational efficiency with a mix of strategies to reduce cost and maximize profit, rather than providing needed service to passengers around the nation. These strategies included network rationalization by shedding unprofitable capacity, raising equipment and operational efficiencies by new work rules that reduced safety margins and union power, using differential pricing to favor big shippers, and pursuing consolidation, reducing the number of rail companies from 65 to 5 today. The consequence was a significant increase of market power for the merged rail companies, decreasing transportation options for consumers and increasing rates for remote, less dense areas.

In the agricultural sector, rail network rationalization has forced shippers to truck their bulk commodity products greater distances to mainline elevators, resulting in greater pressure on and damage to rural road systems. For inter-modal shippers, profit-based network rationalization has meant reduced access - physically and economically - to Container on Flat Car (COFC) and Trailer on Flat Car (TOFC) facilities and services. Rail deregulation, as is true with most transportation and communication deregulation, produces sector sub-optimization with dubious benefits for the national economy by distorting distributional balance, causing congestion and inefficient use of land, network and lines.

Carter's Federal Communications Commission's (FCC) approach to radio and television regulation began in the mid-1970s as a search for relatively minor "regulatory underbrush" that could be
cleared away for more efficient and cost-effective administration of the important rules that would remain. Congress largely went along with this updating trend, and initiated a few deregulatory moves of its own to make regulation more effective and responsive to contemporary conditions.

Reagan's anti-government fixation

The Reagan administration under Federal Communications Commission (FCC) chairman Mark Fowler in 1981 shifted deregulation to a fundamental and ideologically-driven reappraisal of regulations away from long-held principles central to national broadcasting policy appropriate for a democratic society. The result was removal of many longstanding rules to permit an overall reduction in FCC oversight of station ownership concentration and network operations. Congress grew increasingly wary of the pace of deregulation, however, and began to slow the pace of FCC deregulation by the late 1980s.

Specific deregulatory moves included (a) extending television licenses to five years from three in 1981; (b) expanding the number of television stations any single entity could own from seven in 1981 to 12 in 1985, with further changes in 1995; (c) abolishing guidelines for minimal amounts of non-entertainment programming in 1985; (d) elimination of the Fairness Doctrine in 1987; (e) dropping, in 1985, FCC license guidelines for how much advertising could be carried; (f) leaving technical standards increasingly in the hands of licensees rather than FCC mandates; and (g) deregulation of television's competition, especially cable which went through several regulatory changes in the decade after 1983.

The 1996 Telecommunications Act eliminated the 40-station ownership cap on radio stations. Since then, the radio industry has experienced unprecedented consolidation. In June 2003, the FCC voted to overhaul limits on media ownership. Despite having held only one hearing on the complex issue of media consolidation over a 20-month review period, the FCC, in a party-line vote, voted 3-2 to overhaul limits on media concentration. The rule would (1) increase the aggregate television ownership cap to enable one company to own stations reaching 45% of our nation's homes (from 35%), (2) lift the ban on newspaper-television cross-ownership, and (3) allow a single company to own three television stations in large media markets and two in medium ones. In the largest markets, the rule would allow a single company to own up to three television stations, eight radio stations, the cable television system, cable television stations, and a daily newspaper. A wide range of public-interest groups filed an appeal with the Third Circuit, which stayed the effective date of the new rules.

According to a BIA Financial Network report released in July 2006, a total of 88 television stations had been sold in the first six months of 2006, generating a transaction value of $15.7 billion. In 2005, the same period saw the sale of just 21 stations at a value of $244 million, with total year transactions of $2.86 billion.

Congress passed a law in 2004 that forbids any network to own a group of stations that reaches more than 39% of the national television audience. That is lower than the 45% limit set in 2003, but more than the original cap of 35% set in 1996 under the Clinton administration - leading public interest groups to argue that the proposed limits lead to a stifling of local voices.

Newspaper-television cross-ownership remains a contentious issue. Currently prohibited, it refers to the "common ownership of a full-service broadcast station and a daily newspaper when the broadcast station's area of coverage (or "contour") encompasses the newspaper's city of publication".

Capping of local radio and television ownership is another issue. While the original rule prohibited it, currently a company can own at least one television and one radio station in a market. In larger markets, "a single entity may own additional radio stations depending on the number of other independently owned media outlets in the market".

Most broadcasters and newspaper publishers are lobbying to ease or end restrictions on cross-ownership; they say it has to be the future of the news business. It allows newsgathering costs to be spread across platforms, and delivers multiple revenue streams in turn. Their argument is also tied to a rapidly changing media consumption market, and to the diversity of opinions available to the consumer with the rise of the Internet and other digital platforms.

The arguments against relaxing media ownership regulations are put forth by consumer unions and other interest groups on the ground that consolidation in any form inevitably leads to a lack of diversity of opinion. Cross-ownership limits the choices for consumers, inhibits localism and gives excessive media power to one entity.

Professional and workers' guilds of the communication industry (the Screen Actors Guild and American Federation of TV and Radio Artists among others) would like the FCC to keep in mind the independent voice, and want a quarter of all prime-time programming to come from independent producers. The Children's Media Policy Coalition suggested that the FCC limit local broadcasters to a single license per market, so that there is enough original programming for children. Other interest groups like the National Association of Black Owned Broadcasters are worried about what impact the rules might have on station ownership by minorities.

Deregulatory proponents see station licensees not as "public trustees" of the public airwaves requiring the provision of a wide variety of services to many different listening groups. Instead, broadcasting has been increasingly seen as just another business operating in a commercial marketplace which did not need its management decisions questioned by government overseers, even though they are granted permission to use public airways. Opponents argue that deregulation violates a key mandate of the Communications Act of 1934 which requires licensees to operate in the public interest. Deregulation allows broadcasters to seek profits with little public service programming.

Clinton and telecommunications deregulation

The Telecommunications Act of 1996 was the first major overhaul of US telecommunications law in nearly 62 years, amending the Communications Act of 1934, and leading to media consolidation. It was approved by Congress on January 3, 1996 and signed into law on February 8, 1996 by President Clinton, a Democrat whom some have labeled as the best president the Republicans ever had.

The act claimed to foster competition, but instead it continued the historic industry consolidation begun by Reagan, whose actions reduced the number of major media companies from around 50 in 1983 to 10 in 1996 and 6 in 2005.

Regulation Q

The Carter administration increased the power of the Federal Reserve through the Depository Institutions and Monetary Control Act (DIDMCA) of 1980 which was a necessary first step in ending the New Deal restrictions placed upon financial institutions, such as Regulation Q put in place by the Glass-Steagall Act of 1933 and other restrictions on banks and financial institutions.

The populist Regulation Q imposed limits and ceilings on bank and savings-and-loan (S&L) interest rates to provide funds for low-risk home mortgages.

But with financial market deregulation, Regulation Q created incentives for US banks to do business outside the reach of US law, launching finance globalization. London came to dominate this offshore dollar business.

The populist Regulation Q, which regulated for several decades limits and ceilings on bank and S&L interest to serve the home mortgage sector, was phased out completely in March 1986. Banks were allowed to pay interest on checking account - the NOW accounts - to lure depositors back from the money markets. The traditional interest-rate advantage of the S&Ls was removed, to provide a "level playing field", forcing them to take the same risks as commercial banks to survive. Congress also lifted restrictions on S&Ls' commercial lending, which promptly got the whole industry into trouble that would soon required an unprecedented government bailout of depositors, with tax money. But the developers who made billions from easy credit were allowed to keep their profits. State usury laws were unilaterally suspended by an act of Congress in a flagrant intrusion on state rights. Carter, the well-intentioned populist, left a legacy of anti-populist policies. To this day, Greenspan continues to argue disingenuously that subprime mortgages helped the poor toward home ownership, instead of generating obscene profit for the debt securitization industry.

The party of Lincoln taken over by corporate interests

During the Reagan administration, corporate lobbying and electoral strategies allowed the corporate elite to wrest control of the Republican Party, the party of Lincoln, from conservative populists.

In the late 1980s, supply-side economics was promoted to allow corporate interests to dominate US politics at the expense of labor by arguing that the only way labor can prosper is to let capital achieve high returns, notwithstanding the contradiction that high returns on capital must come from low wages.

New legislation and laws, executive orders, federal government rule-making, federal agency decisions, and think-tank propaganda, etc, subsequently followed the new political landscape, assisting the implementation of new corporate policies and practices emerging from corporate headquarters rather than from the shop floor. Economists and analysts who challenged this voodoo theory were largely shut out of the media.

Workers by the million were persuaded to abandon their institutional collective defender to fend for themselves individually in the name of freedom. It was a freedom to see their job security eroded and wages and benefits fall with no recourse.

Note
1. Das Kapital, Volume One, Part I: Commodities and Money, Chapter One: Commodities, Section I.

Next: PART 2: Global war on labor

Henry C K Liu is chairman of a New York-based private investment group. His website is at http://www.henryckliu.com.

Copyright 2007, Henry C K Liu


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[Nov 30, 2017] Money Imperialism by Michael Hudson

Highly recommended!
Notable quotes:
"... Since World War II the United States has used the Dollar Standard and its dominant role in the IMF and World Bank to steer trade and investment along lines benefiting its own economy. But now that the growth of China's mixed economy has outstripped all others while Russia finally is beginning to recover, countries have the option of borrowing from the Asian Infrastructure Investment Bank (AIIB) and other non-U.S. consortia. ..."
"... The problem with surrendering is that this Washington Consensus is extractive and lives in the short run, laying the seeds of financial dependency, debt-leveraged bubbles and subsequent debt deflation and austerity. The financial business plan is to carve out opportunities for price gouging and corporate profits. Today's U.S.-sponsored trade and investment treaties would make governments pay fines equal to the amount that environmental and price regulations, laws protecting consumers and other social policies might reduce corporate profits. "Companies would be able to demand compensation from countries whose health, financial, environmental and other public interest policies they thought to be undermining their interests, and take governments before extrajudicial tribunals. These tribunals, organised under World Bank and UN rules, would have the power to order taxpayers to pay extensive compensation over legislation seen as undermining a company's 'expected future profits.' ..."
"... At the center of today's global split are the last few centuries of Western social and democratic reform. Seeking to follow the classical Western development path by retaining a mixed public/private economy, China, Russia and other nations find it easier to create new institutions such as the AIIB than to reform the dollar standard IMF and World Bank. Their choice is between short-term gains by dependency leading to austerity, or long-term development with independence and ultimate prosperity. ..."
"... The price of resistance involves risking military or covert overthrow. Long before the Ukraine crisis, the United States has dropped the pretense of backing democracies. The die was cast in 1953 with the coup against Iran's secular government, and the 1954 coup in Guatemala to oppose land reform. Support for client oligarchies and dictatorships in Latin America in the 1960 and '70s was highlighted by the overthrow of Allende in Chile and Operation Condor's assassination program throughout the continent. Under President Barack Obama and Secretary of State Hillary Clinton, the United States has claimed that America's status as the world's "indispensible nation" entitled it back the recent coups in Honduras and Ukraine, and to sponsor the NATO attack on Libya and Syria, leaving Europe to absorb the refugees. ..."
"... The trans-Atlantic financial bubble has left a legacy of austerity since 2008. Debt-ridden economies are being told to cope with their downturns by privatizing their public domain. ..."
"... The immediate question facing Germany and the rest of Western Europe is how long they will sacrifice their trade and investment opportunities with Russia, Iran and other economies by adhering to U.S.-sponsored sanctions. American intransigence threatens to force an either/or choice in what looms as a seismic geopolitical shift over the proper role of governments: Should their public sectors provide basic services and protect populations from predatory monopolies, rent extraction and financial polarization? ..."
"... Today's global financial crisis can be traced back to World War I and its aftermath. The principle that needed to be voiced was the right of sovereign nations not to be forced to sacrifice their economic survival on the altar of inter-government and private debt demands. The concept of nationhood embodied in the 1648 Treaty of Westphalia based international law on the principle of parity of sovereign states and non-interference. Without a global alternative to letting debt dynamics polarize societies and tear economies apart, monetary imperialism by creditor nations is inevitable. ..."
"... The past century's global fracture between creditor and debtor economies has interrupted what seemed to be Europe's democratic destiny to empower governments to override financial and other rentier interests. Instead, the West is following U.S. diplomatic leadership back into the age when these interests ruled governments. This conflict between creditors and democracy, between oligarchy and economic growth (and indeed, survival) will remain the defining issue of our epoch over the next generation, and probably for the remainder of the 21 st century. ..."
"... wiki/Anglo-Persian Oil Company "In 1901 William Knox D'Arcy, a millionaire London socialite, negotiated an oil concession with Mozaffar al-Din Shah Qajar of Persia. He financed this with capital he had made from his shares in the highly profitable Mount Morgan mine in Queensland, Australia. D'Arcy assumed exclusive rights to prospect for oil for 60 years in a vast tract of territory including most of Iran. In exchange the Shah received £20,000 (£2.0 million today),[1] an equal amount in shares of D'Arcy's company, and a promise of 16% of future profits." Note the 16% = ~1/6, the rest going off-shore. ..."
"... The Greens in Aus researched the resources sector in Aus, to find that it is 83% 'owned' by off-shore entities. Note that 83% = ~5/6, which goes off-shore. Coincidence? ..."
"... Note that in Aus, the democratically elected so-called 'leaders' not only allow exactly this sort of economic rape, they actively assist it by, say, crippling the central bank and pleading for FDI = selling our, we the people's interests, out. Those traitor-leaders are reversing 'Enlightenment' provisions, privatising whatever they can and, as Michael Hudson well points out the principles, running Aus into debt and austerity. ..."
"... US banking oligarchs will expend the last drop of our blood to prevent a such a linking, just as they were willing to sacrifice our blood and treasure in WW1 and 2, as is alluded to here.: ..."
"... The past century's global fracture between creditor and debtor economies has interrupted what seemed to be Europe's democratic destiny to empower governments to override financial and other rentier interests. Instead, the West is following U.S. diplomatic leadership back into the age when these interests ruled governments. This conflict between creditors and democracy, between oligarchy and economic growth (and indeed, survival) will remain the defining issue of our epoch over the next generation, and probably for the remainder of the 21st century. ..."
"... It's important to note that such interests have ruled (owned, actually) imperial Britain for centuries and the US since its inception, and the anti-federalists knew it. ..."
"... "After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support costs among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered the Great War in 1917. The Allies turned to Germany for reparations to pay these debts." The Yank banker, the Yankee Wall Street super rich, set off a process of greed that led to Hitler. ..."
"... But they didn't invent anything. They learned from their WASP forebears in the British Empire, whose banking back to Oliver Cromwell had become inextricably entangled with Jewish money and Jewish interests to the point that Jews per capita dominated it even at the height of the British Empire, when simpleton WASPs assume that WASPs truly ran everything, and that WASP power was for the good of even the poorest WASPs. ..."
"... The Berlin Baghdad railway was an important cause for WWI. ..."
"... Bingo. Stopping it was a huge factor. There was no way the banksters of the world were going to let that go forward, nor were they going to let Germany and Russia link up in any other ways. They certainly were not about to allow any threats to the Suez Canal nor any chance to let the oil fields slip from their control either. ..."
"... This is not how the Enlightenment was supposed to evolve ..."
"... In fact, this is exactly how it was supposed to work. The wave of liberal democracies was precisely to overturn the monarchies, which were the last bulwark protecting the people from the full tyranny of the financiers, who were, by nature, one-world internationalists. ..."
"... The real problem with this is that any form of monetary arrangement involves an implied trusteeship, with obligations on, as well as benefits for, the trustee. The US is so abusing its trusteeship through the continual use of an irresponsible sanctions regime that it risks a good portion of the world economy abandoning its system for someone else's, which may be perceived to be run more responsibility. The disaster scenario would be the US having therefore in the future to access that other system to purchase oil or minerals, and having that system do to us what we previously did to them -- sanction us out. ..."
"... " Marx believed that capitalism was inherently built upon practices of usury and thus inevitably leading to the separation of society into two classes: one composed of those who produce value and the other, which feeds upon the first one. In "Theories of Surplus Value" (written 1862-1863), he states " that interest (in contrast to industrial profit) and rent (that is the form of landed property created by capitalist production itself) are superfetations (i.e., excessive accumulations) which are not essential to capitalist production and of which it can rid itself." ..."
Nov 30, 2017 | www.unz.com

Money Imperialism Introduction to the German Edition Michael Hudson November 29, 2017 3,500 Words 1 Comment Reply

In theory, the global financial system is supposed to help every country gain. Mainstream teaching of international finance, trade and "foreign aid" (defined simply as any government credit) depicts an almost utopian system uplifting all countries, not stripping their assets and imposing austerity. The reality since World War I is that the United States has taken the lead in shaping the international financial system to promote gains for its own bankers, farm exporters, its oil and gas sector, and buyers of foreign resources – and most of all, to collect on debts owed to it.

Each time this global system has broken down over the past century, the major destabilizing force has been American over-reach and the drive by its bankers and bondholders for short-term gains. The dollar-centered financial system is leaving more industrial as well as Third World countries debt-strapped. Its three institutional pillars – the International Monetary Fund (IMF), World Bank and World Trade Organization – have imposed monetary, fiscal and financial dependency, most recently by the post-Soviet Baltics, Greece and the rest of southern Europe. The resulting strains are now reaching the point where they are breaking apart the arrangements put in place after World War II.

The most destructive fiction of international finance is that all debts can be paid, and indeed should be paid, even when this tears economies apart by forcing them into austerity – to save bondholders, not labor and industry. Yet European countries, and especially Germany, have shied from pressing for a more balanced global economy that would foster growth for all countries and avoid the current economic slowdown and debt deflation.

Imposing austerity on Germany after World War I

After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support costs among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered the Great War in 1917. The Allies turned to Germany for reparations to pay these debts. Headed by John Maynard Keynes, British diplomats sought to clean their hands of responsibility for the consequences by promising that all the money they received from Germany would simply be forwarded to the U.S. Treasury.

The sums were so unpayably high that Germany was driven into austerity and collapse. The nation suffered hyperinflation as the Reichsbank printed marks to throw onto the foreign exchange also were pushed into financial collapse. The debt deflation was much like that of Third World debtors a generation ago, and today's southern European PIIGS (Portugal, Ireland, Italy, Greece and Spain).

In a pretense that the reparations and Inter-Ally debt tangle could be made solvent, a triangular flow of payments was facilitated by a convoluted U.S. easy-money policy. American investors sought high returns by buying German local bonds; German municipalities turned over the dollars they received to the Reichsbank for domestic currency; and the Reichsbank used this foreign exchange to pay reparations to Britain and other Allies, enabling these countries to pay the United States what it demanded.

But solutions based on attempts to keep debts of such magnitude in place by lending debtors the money to pay can only be temporary. The U.S. Federal Reserve sustained this triangular flow by holding down U.S. interest rates. This made it attractive for American investors to buy German municipal bonds and other high-yielding debts. It also deterred Wall Street from drawing funds away from Britain, which would have driven its economy deeper into austerity after the General Strike of 1926. But domestically, low U.S. interest rates and easy credit spurred a real estate bubble, followed by a stock market bubble that burst in 1929. The triangular flow of payments broke down in 1931, leaving a legacy of debt deflation burdening the U.S. and European economies. The Great Depression lasted until outbreak of World War II in 1939.

Planning for the postwar period took shape as the war neared its end. U.S. diplomats had learned an important lesson. This time there would be no arms debts or reparations. The global financial system would be stabilized – on the basis of gold, and on creditor-oriented rules. By the end of the 1940s the United States held some 75 percent of the world's monetary gold stock. That established the U.S. dollar as the world's reserve currency, freely convertible into gold at the 1933 parity of $35 an ounce.

It also implied that once again, as in the 1920s, European balance-of-payments deficits would have to be financed mainly by the United States. Recycling of official government credit was to be filtered via the IMF and World Bank, in which U.S. diplomats alone had veto power to reject policies they found not to be in their national interest. International financial "stability" thus became a global control mechanism – to maintain creditor-oriented rules centered in the United States.

To obtain gold or dollars as backing for their own domestic monetary systems, other countries had to follow the trade and investment rules laid down by the United States. These rules called for relinquishing control over capital movements or restrictions on foreign takeovers of natural resources and the public domain as well as local industry and banking systems.

By 1950 the dollar-based global economic system had become increasingly untenable. Gold continued flowing to the United States, strengthening the dollar – until the Korean War reversed matters. From 1951 through 1971 the United States ran a deepening balance-of-payments deficit, which stemmed entirely from overseas military spending. (Private-sector trade and investment was steadily in balance.)

U.S. Treasury debt replaces the gold exchange standard

The foreign military spending that helped return American gold to Europe became a flood as the Vietnam War spread across Asia after 1962. The Treasury kept the dollar's exchange rate stable by selling gold via the London Gold Pool at $35 an ounce. Finally, in August 1971, President Nixon stopped the drain by closing the Gold Pool and halting gold convertibility of the dollar.

There was no plan for what would happen next. Most observers viewed cutting the dollar's link to gold as a defeat for the United States. It certainly ended the postwar financial order as designed in 1944. But what happened next was just the reverse of a defeat. No longer able to buy gold after 1971 (without inciting strong U.S. disapproval), central banks found only one asset in which to hold their balance-of-payments surpluses: U.S. Treasury debt. These securities no longer were "as good as gold." The United States issued them at will to finance soaring domestic budget deficits.

By shifting from gold to the dollars thrown off by the U.S. balance-of-payments deficit, the foundation of global monetary reserves came to be dominated by the U.S. military spending that continued to flood foreign central banks with surplus dollars. America's balance-of-payments deficit thus supplied the dollars that financed its domestic budget deficits and bank credit creation – via foreign central banks recycling U.S. foreign spending back to the U.S. Treasury.

In effect, foreign countries have been taxed without representation over how their loans to the U.S. Government are employed. European central banks were not yet prepared to create their own sovereign wealth funds to invest their dollar inflows in foreign stocks or direct ownership of businesses. They simply used their trade and payments surpluses to finance the U.S. budget deficit. This enabled the Treasury to cut domestic tax rates, above all on the highest income brackets.

U.S. monetary imperialism confronted European and Asian central banks with a dilemma that remains today: If they do not turn around and buy dollar assets, their currencies will rise against the dollar. Buying U.S. Treasury securities is the only practical way to stabilize their exchange rates – and in so doing, to prevent their exports from rising in dollar terms and being priced out of dollar-area markets.

The system may have developed without foresight, but quickly became deliberate. My book Super Imperialism sold best in the Washington DC area, and I was given a large contract through the Hudson Institute to explain to the Defense Department exactly how this extractive financial system worked. I was brought to the White House to explain it, and U.S. geostrategists used my book as a how-to-do-it manual (not my original intention).

Attention soon focused on the oil-exporting countries. After the U.S. quadrupled its grain export prices shortly after the 1971 gold suspension, the oil-exporting countries quadrupled their oil prices. I was informed at a White House meeting that U.S. diplomats had let Saudi Arabia and other Arab countries know that they could charge as much as they wanted for their oil, but that the United States would treat it as an act of war not to keep their oil proceeds in U.S. dollar assets.

This was the point at which the international financial system became explicitly extractive. But it took until 2009, for the first attempt to withdraw from this system to occur. A conference was convened at Yekaterinburg, Russia, by the Shanghai Cooperation Organization (SCO). The alliance comprised Russia, China, Kazakhstan, Tajikistan, Kirghizstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. U.S. officials asked to attend as observers, but their request was rejected.

The U.S. response has been to extend the new Cold War into the financial sector, rewriting the rules of international finance to benefit the United States and its satellites – and to deter countries from seeking to break free from America's financial free ride.

The IMF changes its rules to isolate Russia and China

Aiming to isolate Russia and China, the Obama Administration's confrontational diplomacy has drawn the Bretton Woods institutions more tightly under US/NATO control. In so doing, it is disrupting the linkages put in place after World War II.

The U.S. plan was to hurt Russia's economy so much that it would be ripe for regime change ("color revolution"). But the effect was to drive it eastward, away from Western Europe to consolidate its long-term relations with China and Central Asia. Pressing Europe to shift its oil and gas purchases to U.S. allies, U.S. sanctions have disrupted German and other European trade and investment with Russia and China. It also has meant lost opportunities for European farmers, other exporters and investors – and a flood of refugees from failed post-Soviet states drawn into the NATO orbit, most recently Ukraine.

To U.S. strategists, what made changing IMF rules urgent was Ukraine's $3 billion debt falling due to Russia's National Wealth Fund in December 2015. The IMF had long withheld credit to countries refusing to pay other governments. This policy aimed primarily at protecting the financial claims of the U.S. Government, which usually played a lead role in consortia with other governments and U.S. banks. But under American pressure the IMF changed its rules in January 2015. Henceforth, it announced, it would indeed be willing to provide credit to countries in arrears other governments – implicitly headed by China (which U.S. geostrategists consider to be their main long-term adversary), Russia and others that U.S. financial warriors might want to isolate in order to force neoliberal privatization policies. [1] I provide the full background in "The IMF Changes its Rules to Isolate China and Russia," December 9, 2015, available on michael-hudson.com, Naked Capitalism , Counterpunch and Johnson's Russia List .

Article I of the IMF's 1944-45 founding charter prohibits it from lending to a member engaged in civil war or at war with another member state, or for military purposes generally. An obvious reason for this rule is that such a country is unlikely to earn the foreign exchange to pay its debt. Bombing Ukraine's own Donbass region in the East after its February 2014 coup d'état destroyed its export industry, mainly to Russia.

Withholding IMF credit could have been a lever to force adherence to the Minsk peace agreements, but U.S. diplomacy rejected that opportunity. When IMF head Christine Lagarde made a new loan to Ukraine in spring 2015, she merely expressed a verbal hope for peace. Ukrainian President Porochenko announced the next day that he would step up his civil war against the Russian-speaking population in eastern Ukraine. One and a half-billion dollars of the IMF loan were given to banker Ihor Kolomoiski and disappeared offshore, while the oligarch used his domestic money to finance an anti-Donbass army. A million refugees were driven east into Russia; others fled west via Poland as the economy and Ukraine's currency plunged.

The IMF broke four of its rules by lending to Ukraine: (1) Not to lend to a country that has no visible means to pay back the loan (the "No More Argentinas" rule, adopted after the IMF's disastrous 2001 loan to that country). (2) Not to lend to a country that repudiates its debt to official creditors (the rule originally intended to enforce payment to U.S.-based institutions). (3) Not to lend to a country at war – and indeed, destroying its export capacity and hence its balance-of-payments ability to pay back the loan. Finally (4), not to lend to a country unlikely to impose the IMF's austerity "conditionalities." Ukraine did agree to override democratic opposition and cut back pensions, but its junta proved too unstable to impose the austerity terms on which the IMF insisted.

U.S. neoliberalism promotes privatization carve-ups of debtor countries

Since World War II the United States has used the Dollar Standard and its dominant role in the IMF and World Bank to steer trade and investment along lines benefiting its own economy. But now that the growth of China's mixed economy has outstripped all others while Russia finally is beginning to recover, countries have the option of borrowing from the Asian Infrastructure Investment Bank (AIIB) and other non-U.S. consortia.

At stake is much more than just which nations will get the contracting and banking business. At issue is whether the philosophy of development will follow the classical path based on public infrastructure investment, or whether public sectors will be privatized and planning turned over to rent-seeking corporations.

What made the United States and Germany the leading industrial nations of the 20 th century – and more recently, China – has been public investment in economic infrastructure. The aim was to lower the price of living and doing business by providing basic services on a subsidized basis or freely. By contrast, U.S. privatizers have brought debt leverage to bear on Third World countries, post-Soviet economies and most recently on southern Europe to force selloffs. Current plans to cap neoliberal policy with the Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP) and Transatlantic Free Trade Agreement (TAFTA) go so far as to disable government planning power to the financial and corporate sector.

American strategists evidently hoped that the threat of isolating Russia, China and other countries would bring them to heel if they tried to denominate trade and investment in their own national currencies. Their choice would be either to suffer sanctions like those imposed on Cuba and Iran, or to avoid exclusion by acquiescing in the dollarized financial and trade system and its drives to financialize their economies under U.S. control.

The problem with surrendering is that this Washington Consensus is extractive and lives in the short run, laying the seeds of financial dependency, debt-leveraged bubbles and subsequent debt deflation and austerity. The financial business plan is to carve out opportunities for price gouging and corporate profits. Today's U.S.-sponsored trade and investment treaties would make governments pay fines equal to the amount that environmental and price regulations, laws protecting consumers and other social policies might reduce corporate profits. "Companies would be able to demand compensation from countries whose health, financial, environmental and other public interest policies they thought to be undermining their interests, and take governments before extrajudicial tribunals. These tribunals, organised under World Bank and UN rules, would have the power to order taxpayers to pay extensive compensation over legislation seen as undermining a company's 'expected future profits.' "

[2] Lori M. Wallach, "The corporation invasion," La Monde Diplomatique , December 2, 2013, http://mondediplo.com/2013/12/02tafta . She adds: "Some investors have a very broad conception of their rights. European companies have recently launched legal actions against the raising of the minimum wage in Egypt; Renco has fought anti-toxic emissions policy in Peru, using a free trade agreement between that country and the US to defend its right to pollute (6). US tobacco giant Philip Morris has launched cases against Uruguay and Australia over their anti-smoking legislation." See also Yves Smith, "Germany Bucking Toxic, Nation-State Eroding Transatlantic Trade and Investment Partnership," Naked Capitalism , July 17, 2014, and "Germany Turning Sour on the Transatlantic Trade and Investment Partnership," Naked Capitalism, October 30, 2014.

This policy threat is splitting the world into pro-U.S. satellites and economies maintaining public infrastructure investment and what used to be viewed as progressive capitalism. U.S.-sponsored neoliberalism supporting its own financial and corporate interests has driven Russia, China and other members of the Shanghai Cooperation Organization into an alliance to protect their economic self-sufficiency rather than becoming dependent on dollarized credit enmeshing them in foreign-currency debt.

At the center of today's global split are the last few centuries of Western social and democratic reform. Seeking to follow the classical Western development path by retaining a mixed public/private economy, China, Russia and other nations find it easier to create new institutions such as the AIIB than to reform the dollar standard IMF and World Bank. Their choice is between short-term gains by dependency leading to austerity, or long-term development with independence and ultimate prosperity.

The price of resistance involves risking military or covert overthrow. Long before the Ukraine crisis, the United States has dropped the pretense of backing democracies. The die was cast in 1953 with the coup against Iran's secular government, and the 1954 coup in Guatemala to oppose land reform. Support for client oligarchies and dictatorships in Latin America in the 1960 and '70s was highlighted by the overthrow of Allende in Chile and Operation Condor's assassination program throughout the continent. Under President Barack Obama and Secretary of State Hillary Clinton, the United States has claimed that America's status as the world's "indispensible nation" entitled it back the recent coups in Honduras and Ukraine, and to sponsor the NATO attack on Libya and Syria, leaving Europe to absorb the refugees.

Germany's choice

This is not how the Enlightenment was supposed to evolve. The industrial takeoff of Germany and other European nations involved a long fight to free markets from the land rents and financial charges siphoned off by their landed aristocracies and bankers. That was the essence of classical 19 th -century political economy and 20 th -century social democracy. Most economists a century ago expected industrial capitalism to produce an economy of abundance, and democratic reforms to endorse public infrastructure investment and regulation to hold down the cost of living and doing business. But U.S. economic diplomacy now threatens to radically reverse this economic ideology by aiming to dismantle public regulatory power and impose a radical privatization agenda under the TTIP and TAFTA.

Textbook trade theory depicts trade and investment as helping poorer countries catch up, compelling them to survive by becoming more democratic to overcome their vested interests and oligarchies along the lines pioneered by European and North American industrial economies. Instead, the world is polarizing, not converging. The trans-Atlantic financial bubble has left a legacy of austerity since 2008. Debt-ridden economies are being told to cope with their downturns by privatizing their public domain.

The immediate question facing Germany and the rest of Western Europe is how long they will sacrifice their trade and investment opportunities with Russia, Iran and other economies by adhering to U.S.-sponsored sanctions. American intransigence threatens to force an either/or choice in what looms as a seismic geopolitical shift over the proper role of governments: Should their public sectors provide basic services and protect populations from predatory monopolies, rent extraction and financial polarization?

Today's global financial crisis can be traced back to World War I and its aftermath. The principle that needed to be voiced was the right of sovereign nations not to be forced to sacrifice their economic survival on the altar of inter-government and private debt demands. The concept of nationhood embodied in the 1648 Treaty of Westphalia based international law on the principle of parity of sovereign states and non-interference. Without a global alternative to letting debt dynamics polarize societies and tear economies apart, monetary imperialism by creditor nations is inevitable.

The past century's global fracture between creditor and debtor economies has interrupted what seemed to be Europe's democratic destiny to empower governments to override financial and other rentier interests. Instead, the West is following U.S. diplomatic leadership back into the age when these interests ruled governments. This conflict between creditors and democracy, between oligarchy and economic growth (and indeed, survival) will remain the defining issue of our epoch over the next generation, and probably for the remainder of the 21 st century.

Endnotes

[1] I provide the full background in "The IMF Changes its Rules to Isolate China and Russia," December 9, 2015, available on michael-hudson.com, Naked Capitalism , Counterpunch and Johnson's Russia List .

[2] Lori M. Wallach, "The corporation invasion," La Monde Diplomatique , December 2, 2013, http://mondediplo.com/2013/12/02tafta . She adds: "Some investors have a very broad conception of their rights. European companies have recently launched legal actions against the raising of the minimum wage in Egypt; Renco has fought anti-toxic emissions policy in Peru, using a free trade agreement between that country and the US to defend its right to pollute ( 6 ). US tobacco giant Philip Morris has launched cases against Uruguay and Australia over their anti-smoking legislation." See also Yves Smith , " Germany Bucking Toxic, Nation-State Eroding Transatlantic Trade and Investment Partnership ," Naked Capitalism , July 17, 2014 , and " Germany Turning Sour on the Transatlantic Trade and Investment Partnership ," Naked Capitalism, October 30, 2014 .

Priss Factor , Website November 30, 2017 at 5:28 am GMT

More like Dollar Supremacism

The Alarmist , Next New Comment November 30, 2017 at 8:02 am GMT

"Austerity" is such a misused word these days. What the Allies did to Germany after Versailles was austerity, and everyone paid dearly for it.

What the IMF and the Western Banking Cartel do to third world countries is akin to a pusher hopping up addicts on debt and then taking it away while stripping them of their assets, pretty much hurting only the people of the third world country; certainly not the WBC, and almost certainly not the criminal elite who took the deal.

The Austerity everyone complains about in the developed world these days is a joke, hardly austerity, for it has never meant more than doing a little less deficit-spending than in prior periods, e.g. UK Labour whining about "Austerity" is a joke, as the UK debt has done nothing but grow, which in terms understandable to simple folk like me means they are spending more than they can afford to carry.

jilles dykstra , Next New Comment November 30, 2017 at 8:15 am GMT
" The immediate question facing Germany and the rest of Western Europe is how long they will sacrifice their trade and investment opportunities with Russia, Iran and other economies by adhering to U.S.-sponsored sanctions "

In the whole article not a word about the euro, also an instrument of imperialism, that mainly benefits Germany, the country that has to maintain a high level of exports, in order to feed the Germans, and import raw materials for Germany's industries.

Isolating China and Russia, with the other BRICS countries, S Africa, Brazil, India, dangerous game.
This effort forced China and Russia to close cooperation, the economic expression of this is the Peking Petersburg railway, with a hub in Khazakstan, where the containers are lifted from the Chinese to the Russian system, the width differs.
Four days for the trip.
The Berlin Baghdad railway was an important cause for WWI.
Let us hope that history does not repeat itself in the nuclear era.

Edward Mead Earle, Ph.D., 'Turkey, The Great Powers and The Bagdad Railway, A study in Imperialism', 1923, 1924, New York

jacques sheete , Next New Comment November 30, 2017 at 11:29 am GMT
Another excellent article.

The U.S. response has been to extend the new Cold War into the financial sector, rewriting the rules of international finance to benefit the United States and its satellites – and to deter countries from seeking t o break free from America's financial free ride .

Nah, the NY banksters wouldn't dream of doing such a thing; would they?

skrik , Next New Comment November 30, 2017 at 11:29 am GMT

This is not how the Enlightenment was supposed to evolve

What I said, and beautifully put, the whole article.

World War I may well have been an important way-point, but the miserable mercantile modus operandi was well established long before.

An interesting A/B case:

a) wiki/Anglo-Persian Oil Company "In 1901 William Knox D'Arcy, a millionaire London socialite, negotiated an oil concession with Mozaffar al-Din Shah Qajar of Persia. He financed this with capital he had made from his shares in the highly profitable Mount Morgan mine in Queensland, Australia. D'Arcy assumed exclusive rights to prospect for oil for 60 years in a vast tract of territory including most of Iran. In exchange the Shah received £20,000 (£2.0 million today),[1] an equal amount in shares of D'Arcy's company, and a promise of 16% of future profits." Note the 16% = ~1/6, the rest going off-shore.

b) The Greens in Aus researched the resources sector in Aus, to find that it is 83% 'owned' by off-shore entities. Note that 83% = ~5/6, which goes off-shore. Coincidence?

Then see what happened when the erstwhile APOC was nationalized; the US/UK perpetrated a coup against the democratically elected Mossadegh, eventual blow-back resulting in the 1979 revolution, basically taking Iran out of 'the West.'

Note that in Aus, the democratically elected so-called 'leaders' not only allow exactly this sort of economic rape, they actively assist it by, say, crippling the central bank and pleading for FDI = selling our, we the people's interests, out. Those traitor-leaders are reversing 'Enlightenment' provisions, privatising whatever they can and, as Michael Hudson well points out the principles, running Aus into debt and austerity.

We the people are powerless passengers, and to add insult to injury, the taxpayer-funded AusBC lies to us continually. Ho, hum; just like the mainly US/Z MSM and the BBC do – all corrupt and venal. Bah!

Now, cue the trolls: "But Russia/China are worse!"

jacques sheete , Next New Comment November 30, 2017 at 12:04 pm GMT

The immediate question facing Germany and the rest of Western Europe is how long they will sacrifice their trade and investment opportunities with Russia, Iran and other economies by adhering to U.S.-sponsored sanctions.

US banking oligarchs will expend the last drop of our blood to prevent a such a linking, just as they were willing to sacrifice our blood and treasure in WW1 and 2, as is alluded to here.:

Today's global financial crisis can be traced back to World War I and its aftermath.

Excellent.:

The principle that needed to be voiced was the right of sovereign nations not to be forced to sacrifice their economic survival on the altar of inter-government and private debt demands Without a global alternative to letting debt dynamics polarize societies and tear economies apart, monetary imperialism by creditor nations is inevitable.

This is a gem of a summary.:

The past century's global fracture between creditor and debtor economies has interrupted what seemed to be Europe's democratic destiny to empower governments to override financial and other rentier interests. Instead, the West is following U.S. diplomatic leadership back into the age when these interests ruled governments. This conflict between creditors and democracy, between oligarchy and economic growth (and indeed, survival) will remain the defining issue of our epoch over the next generation, and probably for the remainder of the 21st century.

Instead, the West is following U.S. diplomatic leadership back into the age when these interests ruled governments. It's important to note that such interests have ruled (owned, actually) imperial Britain for centuries and the US since its inception, and the anti-federalists knew it.

Here is a revolution as radical as that which separated us from Great Britain.

You will find all the strength of this country in the hands of your enemies [ ed comment: the money grubbers ]

Patrick Henry June 5 and 7, 1788―1788-1789 Petersburg, Virginia edition of the Debates and other Proceedings . . . Of the Virginia Convention of 1788

The Constitution had been laid down under unacceptable auspices; its history had been that of a coup d'état.

It had been drafted, in the first place, by men representing special economic interests. Four-fifths of them were public creditors, one-third were land speculators, and one-fifth represented interests in shipping, manufacturing, and merchandising. Most of them were lawyers. Not one of them represented the interest of production -- Vilescit origine tali.

- Albert Jay Nock [Excerpted from chapter 5 of Albert Jay Nock's Jefferson, published in 1926]

Biff , Next New Comment November 30, 2017 at 12:39 pm GMT
The golden rule is one thing. The paper rule is something else. May you live in interesting times.
Jake , Next New Comment November 30, 2017 at 2:09 pm GMT
"After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support costs among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered the Great War in 1917. The Allies turned to Germany for reparations to pay these debts." The Yank banker, the Yankee Wall Street super rich, set off a process of greed that led to Hitler.

But they didn't invent anything. They learned from their WASP forebears in the British Empire, whose banking back to Oliver Cromwell had become inextricably entangled with Jewish money and Jewish interests to the point that Jews per capita dominated it even at the height of the British Empire, when simpleton WASPs assume that WASPs truly ran everything, and that WASP power was for the good of even the poorest WASPs.

Joe Hide , Next New Comment November 30, 2017 at 2:12 pm GMT
To Michael Hudson,
Great article. Evidence based, factually argued, enjoyably readable.
Replacements for the dollar dominated financial system are well into development. Digital dollars, credit cards, paypal, stock and currency exchange online platforms, and perhaps most intriguing The exponential rise of Bitcoin and similar crypto-currencies.

The internet is also exponentially exposing the screwing we peasants have been getting by the psychopath, narcissistic, hedonistic, predatory lenders and controllers. Next comes the widespread, easily usable, and inexpensive cell phone apps, social media exposures, alternative websites (like Unz.com), and other technologies that will quickly identify every lying, evil, jerk so they can be neutrilized / avoided

The Alarmist , Next New Comment November 30, 2017 at 2:13 pm GMT

"Textbook trade theory depicts trade and investment as helping poorer countries catch up, compelling them to survive by becoming more democratic to overcome their vested interests and oligarchies along the lines pioneered by European and North American industrial economies."

I must be old; the economic textbooks I had did explain the benefits of freer trade among nations using Ricardo and Trade Indifference Curves, but didn't prescribe any one political system being fostered by or even necessary for the benefits of international trade to be reaped.

Astuteobservor II , Next New Comment November 30, 2017 at 2:26 pm GMT
to be honest, this way of running things only need to last for 10-20 more years before automation will replace 800 million jobs. then we will have a few trillionaire overlords unless true AI comes online. by that point nothing matters as we will become zoo animals.
jacques sheete , Next New Comment November 30, 2017 at 2:36 pm GMT
@The Alarmist

What the IMF and the Western Banking Cartel do to third world countries is akin to a pusher hopping up addicts on debt and then taking it away while stripping them of their assets, pretty much hurting only the people of the third world country; certainly not the WBC, and almost certainly not the criminal elite who took the deal.

That's true and the criminals do similar asset stripping to their own as well, through various means.

It's always the big criminals against the rest of us.

jacques sheete , Next New Comment November 30, 2017 at 2:48 pm GMT
@jilles dykstra

The Berlin Baghdad railway was an important cause for WWI.

Bingo. Stopping it was a huge factor. There was no way the banksters of the world were going to let that go forward, nor were they going to let Germany and Russia link up in any other ways. They certainly were not about to allow any threats to the Suez Canal nor any chance to let the oil fields slip from their control either.

The wars were also instigated to prevent either Germany or Russia having control of, and free access to warm water ports and the wars also were an excuse to steal vast amounts of wealth from both Germany and Russia through various means.

All pious and pompous pretexts aside, economics was the motive for (the) war (s), and the issues are not settled to this day. I.e., it's the same class of monstrously insatiable criminals who want everything for themselves who're causing the major troubles of the day.

Unfortunately, as long as we have SoB's who're eager to sacrifice our blood and treasure for their benfit, things will never change.

jacques sheete , Next New Comment November 30, 2017 at 2:51 pm GMT

The golden rule is one thing. The paper rule is something else.

May you live in interesting times.

The golden rule is for dreamers, unfortunately. Those who control paper money rule, and your wish has been granted; we live in times that are both interesting and fascinating, but are nevertheless the same old thing. Only the particular particulars have changed.

Michael Kenny , Next New Comment November 30, 2017 at 3:01 pm GMT
Essentially, the anti-EU and anti-euro line that Professor Hudson has being pushing for years, which has now morphed into a pro-Putin line as the anti-EU faction in the US have sought to use Putin as a "useful idiot" to destroy the EU. Since nobody in Europe reads these articles, Ii doesn't really matter and I certainly don't see any EU leader following the advice of someone who has never concealed his hostility to the EU's very existence: note the use of the racist slur "PIIGS" to refer to certain EU Member States. Thus, Professor Hudson is simply pushing the "let Putin win in Ukraine" line dressed up in fine-sounding economic jargon.
jacques sheete , Next New Comment November 30, 2017 at 3:54 pm GMT

Since nobody in Europe reads these articles, Ii doesn't really matter

None of it rally matters anyway, no matter how valid. To paraphrase Thucydides, the money grubbers do what they want and the rest of us are forced to suck it up and limp along.

and I certainly don't see any EU leader following the advice

I doubt that that's Hudson's intent in writing the article. I see it as his attempt to explain the situation to those of us who care about them even though our concern is pretty much useless.

I do thank him for taking the time to pen this stuff which I consider worthwhile and high quality.

Anonymous , Disclaimer Next New Comment November 30, 2017 at 4:08 pm GMT
That sounds good but social media is the weapon of choice in the EU too. Lot's of kids know and love Hudson. Any half capable writer who empathetically explains why you're getting fucked is going to have some followers. Watering, nutrition, weeding. Before too long you'll be on the Eurail to your destination.
Wally , Website Next New Comment November 30, 2017 at 4:23 pm GMT
@Jake

said: "The Yank banker, the Yankee Wall Street super rich, set off a process of greed that led to Hitler." If true, so what? That's a classic example of 'garbage in, garbage out'. http://www.codoh.com

nickels , Next New Comment November 30, 2017 at 4:48 pm GMT

This is not how the Enlightenment was supposed to evolve

In fact, this is exactly how it was supposed to work. The wave of liberal democracies was precisely to overturn the monarchies, which were the last bulwark protecting the people from the full tyranny of the financiers, who were, by nature, one-world internationalists.

William McAdoo , Next New Comment November 30, 2017 at 5:08 pm GMT
The real problem with this is that any form of monetary arrangement involves an implied trusteeship, with obligations on, as well as benefits for, the trustee. The US is so abusing its trusteeship through the continual use of an irresponsible sanctions regime that it risks a good portion of the world economy abandoning its system for someone else's, which may be perceived to be run more responsibility. The disaster scenario would be the US having therefore in the future to access that other system to purchase oil or minerals, and having that system do to us what we previously did to them -- sanction us out.

The proper use by the US of its controlled system thus should be a defensive one -- mainly to act so fairly to all players that it, not someone else, remains in control of the dominant worldwide exchange system. This sensible course of conduct, unfortunately, is not being pursued by the US.

joe webb , Next New Comment November 30, 2017 at 10:11 pm GMT
there is fuzzy, and then there is very fuzzy, and then there is the fuzziness compounded many-fold. The latter is this article.

Here from wiki: "

" Marx believed that capitalism was inherently built upon practices of usury and thus inevitably leading to the separation of society into two classes: one composed of those who produce value and the other, which feeds upon the first one. In "Theories of Surplus Value" (written 1862-1863), he states " that interest (in contrast to industrial profit) and rent (that is the form of landed property created by capitalist production itself) are superfetations (i.e., excessive accumulations) which are not essential to capitalist production and of which it can rid itself."

Wiki goes on to identify "rentier" as used by Marx, to be the same thing as "capitalists." What the above quotation says is that capitalism CAN rid itself of genuine rent capital. First, the feudal rents that were extracted by landowners were NOT part of a free market system. Serfdom was only one part of unfree conditions. A general condition of anarchy in rules and laws by petty principalities characteristic of feudalism, both contained commerce and human beings. There was no freedom, political or economic.

The conflation (collapsing) of rents and interest is a Marxist error which expands into complete nonsense when a competitive economy has replaced feudal conditions. ON top of that, profits from a business, firm, or industrial enterprise are NOT rents.

Any marxist is a fool to pretend otherwise, and is just another ideological (False consciousness ) fanatic.

... ... ...

Wally, Next New Comment December 1, 2017 at 1:49 am GMT
@Michael Kenny

Indeed, Putin should be praised & supported. But where is the proof that 'Russia & Trump colluded to get Trump elected'? You also ignore the overwhelming Crimean support for returning to Russia. And you won't like this at all: Trump Declares "National Day for the Victims of Communism." https://www.whitehouse.gov/the-press-office/2017/11/07/national-day-victims-communism Hence, the Liars of the scamming "Holocau$t Industry" go crazy: https://www.salon.com/2017/11/07/trumps-national-day-for-the-victims-of-communism-is-opposite-of-holocaust-statement/

ThreeCranes , December 1, 2017 at 3:34 am GMT
@jilles dykstra

Germany loans money back to the poorer nations who buy her exports just as China loans money to the United States (they purchase roughly a third of our Treasury bonds) so that Americans can continue to buy Chinese manufactured goods.

The role to be played by the USA in the "new world order" is that of being the farmer to the world. The meticulous Asians will make stuff.

The problem with this is that it is based on 19th century notions of manufacturing. Technique today is vastly more complicated than it was in the 1820′s and a nation must do everything in its power to protect and nurture its manufacturing and scientific excellence. In the United States we have been giving this away to our competitors. We educate their children at our taxpayer's expense and they take the knowledge gained back to their native countries where, with state subsidies, they build factories that put Americans out of work. We fall further and further behind.

[Nov 30, 2017] Money Imperialism by Michael Hudson

Nov 30, 2017 | www.unz.com

Money Imperialism Introduction to the German Edition Michael Hudson November 29, 2017 3,500 Words 1 Comment Reply

In theory, the global financial system is supposed to help every country gain. Mainstream teaching of international finance, trade and "foreign aid" (defined simply as any government credit) depicts an almost utopian system uplifting all countries, not stripping their assets and imposing austerity. The reality since World War I is that the United States has taken the lead in shaping the international financial system to promote gains for its own bankers, farm exporters, its oil and gas sector, and buyers of foreign resources – and most of all, to collect on debts owed to it.

Each time this global system has broken down over the past century, the major destabilizing force has been American over-reach and the drive by its bankers and bondholders for short-term gains. The dollar-centered financial system is leaving more industrial as well as Third World countries debt-strapped. Its three institutional pillars – the International Monetary Fund (IMF), World Bank and World Trade Organization – have imposed monetary, fiscal and financial dependency, most recently by the post-Soviet Baltics, Greece and the rest of southern Europe. The resulting strains are now reaching the point where they are breaking apart the arrangements put in place after World War II.

The most destructive fiction of international finance is that all debts can be paid, and indeed should be paid, even when this tears economies apart by forcing them into austerity – to save bondholders, not labor and industry. Yet European countries, and especially Germany, have shied from pressing for a more balanced global economy that would foster growth for all countries and avoid the current economic slowdown and debt deflation.

Imposing austerity on Germany after World War I

After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support costs among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered the Great War in 1917. The Allies turned to Germany for reparations to pay these debts. Headed by John Maynard Keynes, British diplomats sought to clean their hands of responsibility for the consequences by promising that all the money they received from Germany would simply be forwarded to the U.S. Treasury.

The sums were so unpayably high that Germany was driven into austerity and collapse. The nation suffered hyperinflation as the Reichsbank printed marks to throw onto the foreign exchange also were pushed into financial collapse. The debt deflation was much like that of Third World debtors a generation ago, and today's southern European PIIGS (Portugal, Ireland, Italy, Greece and Spain).

In a pretense that the reparations and Inter-Ally debt tangle could be made solvent, a triangular flow of payments was facilitated by a convoluted U.S. easy-money policy. American investors sought high returns by buying German local bonds; German municipalities turned over the dollars they received to the Reichsbank for domestic currency; and the Reichsbank used this foreign exchange to pay reparations to Britain and other Allies, enabling these countries to pay the United States what it demanded.

But solutions based on attempts to keep debts of such magnitude in place by lending debtors the money to pay can only be temporary. The U.S. Federal Reserve sustained this triangular flow by holding down U.S. interest rates. This made it attractive for American investors to buy German municipal bonds and other high-yielding debts. It also deterred Wall Street from drawing funds away from Britain, which would have driven its economy deeper into austerity after the General Strike of 1926. But domestically, low U.S. interest rates and easy credit spurred a real estate bubble, followed by a stock market bubble that burst in 1929. The triangular flow of payments broke down in 1931, leaving a legacy of debt deflation burdening the U.S. and European economies. The Great Depression lasted until outbreak of World War II in 1939.

Planning for the postwar period took shape as the war neared its end. U.S. diplomats had learned an important lesson. This time there would be no arms debts or reparations. The global financial system would be stabilized – on the basis of gold, and on creditor-oriented rules. By the end of the 1940s the United States held some 75 percent of the world's monetary gold stock. That established the U.S. dollar as the world's reserve currency, freely convertible into gold at the 1933 parity of $35 an ounce.

It also implied that once again, as in the 1920s, European balance-of-payments deficits would have to be financed mainly by the United States. Recycling of official government credit was to be filtered via the IMF and World Bank, in which U.S. diplomats alone had veto power to reject policies they found not to be in their national interest. International financial "stability" thus became a global control mechanism – to maintain creditor-oriented rules centered in the United States.

To obtain gold or dollars as backing for their own domestic monetary systems, other countries had to follow the trade and investment rules laid down by the United States. These rules called for relinquishing control over capital movements or restrictions on foreign takeovers of natural resources and the public domain as well as local industry and banking systems.

By 1950 the dollar-based global economic system had become increasingly untenable. Gold continued flowing to the United States, strengthening the dollar – until the Korean War reversed matters. From 1951 through 1971 the United States ran a deepening balance-of-payments deficit, which stemmed entirely from overseas military spending. (Private-sector trade and investment was steadily in balance.)

U.S. Treasury debt replaces the gold exchange standard

The foreign military spending that helped return American gold to Europe became a flood as the Vietnam War spread across Asia after 1962. The Treasury kept the dollar's exchange rate stable by selling gold via the London Gold Pool at $35 an ounce. Finally, in August 1971, President Nixon stopped the drain by closing the Gold Pool and halting gold convertibility of the dollar.

There was no plan for what would happen next. Most observers viewed cutting the dollar's link to gold as a defeat for the United States. It certainly ended the postwar financial order as designed in 1944. But what happened next was just the reverse of a defeat. No longer able to buy gold after 1971 (without inciting strong U.S. disapproval), central banks found only one asset in which to hold their balance-of-payments surpluses: U.S. Treasury debt. These securities no longer were "as good as gold." The United States issued them at will to finance soaring domestic budget deficits.

By shifting from gold to the dollars thrown off by the U.S. balance-of-payments deficit, the foundation of global monetary reserves came to be dominated by the U.S. military spending that continued to flood foreign central banks with surplus dollars. America's balance-of-payments deficit thus supplied the dollars that financed its domestic budget deficits and bank credit creation – via foreign central banks recycling U.S. foreign spending back to the U.S. Treasury.

In effect, foreign countries have been taxed without representation over how their loans to the U.S. Government are employed. European central banks were not yet prepared to create their own sovereign wealth funds to invest their dollar inflows in foreign stocks or direct ownership of businesses. They simply used their trade and payments surpluses to finance the U.S. budget deficit. This enabled the Treasury to cut domestic tax rates, above all on the highest income brackets.

U.S. monetary imperialism confronted European and Asian central banks with a dilemma that remains today: If they do not turn around and buy dollar assets, their currencies will rise against the dollar. Buying U.S. Treasury securities is the only practical way to stabilize their exchange rates – and in so doing, to prevent their exports from rising in dollar terms and being priced out of dollar-area markets.

The system may have developed without foresight, but quickly became deliberate. My book Super Imperialism sold best in the Washington DC area, and I was given a large contract through the Hudson Institute to explain to the Defense Department exactly how this extractive financial system worked. I was brought to the White House to explain it, and U.S. geostrategists used my book as a how-to-do-it manual (not my original intention).

Attention soon focused on the oil-exporting countries. After the U.S. quadrupled its grain export prices shortly after the 1971 gold suspension, the oil-exporting countries quadrupled their oil prices. I was informed at a White House meeting that U.S. diplomats had let Saudi Arabia and other Arab countries know that they could charge as much as they wanted for their oil, but that the United States would treat it as an act of war not to keep their oil proceeds in U.S. dollar assets.

This was the point at which the international financial system became explicitly extractive. But it took until 2009, for the first attempt to withdraw from this system to occur. A conference was convened at Yekaterinburg, Russia, by the Shanghai Cooperation Organization (SCO). The alliance comprised Russia, China, Kazakhstan, Tajikistan, Kirghizstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. U.S. officials asked to attend as observers, but their request was rejected.

The U.S. response has been to extend the new Cold War into the financial sector, rewriting the rules of international finance to benefit the United States and its satellites – and to deter countries from seeking to break free from America's financial free ride.

The IMF changes its rules to isolate Russia and China

Aiming to isolate Russia and China, the Obama Administration's confrontational diplomacy has drawn the Bretton Woods institutions more tightly under US/NATO control. In so doing, it is disrupting the linkages put in place after World War II.

The U.S. plan was to hurt Russia's economy so much that it would be ripe for regime change ("color revolution"). But the effect was to drive it eastward, away from Western Europe to consolidate its long-term relations with China and Central Asia. Pressing Europe to shift its oil and gas purchases to U.S. allies, U.S. sanctions have disrupted German and other European trade and investment with Russia and China. It also has meant lost opportunities for European farmers, other exporters and investors – and a flood of refugees from failed post-Soviet states drawn into the NATO orbit, most recently Ukraine.

To U.S. strategists, what made changing IMF rules urgent was Ukraine's $3 billion debt falling due to Russia's National Wealth Fund in December 2015. The IMF had long withheld credit to countries refusing to pay other governments. This policy aimed primarily at protecting the financial claims of the U.S. Government, which usually played a lead role in consortia with other governments and U.S. banks. But under American pressure the IMF changed its rules in January 2015. Henceforth, it announced, it would indeed be willing to provide credit to countries in arrears other governments – implicitly headed by China (which U.S. geostrategists consider to be their main long-term adversary), Russia and others that U.S. financial warriors might want to isolate in order to force neoliberal privatization policies. [1] I provide the full background in "The IMF Changes its Rules to Isolate China and Russia," December 9, 2015, available on michael-hudson.com, Naked Capitalism , Counterpunch and Johnson's Russia List .

Article I of the IMF's 1944-45 founding charter prohibits it from lending to a member engaged in civil war or at war with another member state, or for military purposes generally. An obvious reason for this rule is that such a country is unlikely to earn the foreign exchange to pay its debt. Bombing Ukraine's own Donbass region in the East after its February 2014 coup d'état destroyed its export industry, mainly to Russia.

Withholding IMF credit could have been a lever to force adherence to the Minsk peace agreements, but U.S. diplomacy rejected that opportunity. When IMF head Christine Lagarde made a new loan to Ukraine in spring 2015, she merely expressed a verbal hope for peace. Ukrainian President Porochenko announced the next day that he would step up his civil war against the Russian-speaking population in eastern Ukraine. One and a half-billion dollars of the IMF loan were given to banker Ihor Kolomoiski and disappeared offshore, while the oligarch used his domestic money to finance an anti-Donbass army. A million refugees were driven east into Russia; others fled west via Poland as the economy and Ukraine's currency plunged.

The IMF broke four of its rules by lending to Ukraine: (1) Not to lend to a country that has no visible means to pay back the loan (the "No More Argentinas" rule, adopted after the IMF's disastrous 2001 loan to that country). (2) Not to lend to a country that repudiates its debt to official creditors (the rule originally intended to enforce payment to U.S.-based institutions). (3) Not to lend to a country at war – and indeed, destroying its export capacity and hence its balance-of-payments ability to pay back the loan. Finally (4), not to lend to a country unlikely to impose the IMF's austerity "conditionalities." Ukraine did agree to override democratic opposition and cut back pensions, but its junta proved too unstable to impose the austerity terms on which the IMF insisted.

U.S. neoliberalism promotes privatization carve-ups of debtor countries

Since World War II the United States has used the Dollar Standard and its dominant role in the IMF and World Bank to steer trade and investment along lines benefiting its own economy. But now that the growth of China's mixed economy has outstripped all others while Russia finally is beginning to recover, countries have the option of borrowing from the Asian Infrastructure Investment Bank (AIIB) and other non-U.S. consortia.

At stake is much more than just which nations will get the contracting and banking business. At issue is whether the philosophy of development will follow the classical path based on public infrastructure investment, or whether public sectors will be privatized and planning turned over to rent-seeking corporations.

What made the United States and Germany the leading industrial nations of the 20 th century – and more recently, China – has been public investment in economic infrastructure. The aim was to lower the price of living and doing business by providing basic services on a subsidized basis or freely. By contrast, U.S. privatizers have brought debt leverage to bear on Third World countries, post-Soviet economies and most recently on southern Europe to force selloffs. Current plans to cap neoliberal policy with the Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP) and Transatlantic Free Trade Agreement (TAFTA) go so far as to disable government planning power to the financial and corporate sector.

American strategists evidently hoped that the threat of isolating Russia, China and other countries would bring them to heel if they tried to denominate trade and investment in their own national currencies. Their choice would be either to suffer sanctions like those imposed on Cuba and Iran, or to avoid exclusion by acquiescing in the dollarized financial and trade system and its drives to financialize their economies under U.S. control.

The problem with surrendering is that this Washington Consensus is extractive and lives in the short run, laying the seeds of financial dependency, debt-leveraged bubbles and subsequent debt deflation and austerity. The financial business plan is to carve out opportunities for price gouging and corporate profits. Today's U.S.-sponsored trade and investment treaties would make governments pay fines equal to the amount that environmental and price regulations, laws protecting consumers and other social policies might reduce corporate profits. "Companies would be able to demand compensation from countries whose health, financial, environmental and other public interest policies they thought to be undermining their interests, and take governments before extrajudicial tribunals. These tribunals, organised under World Bank and UN rules, would have the power to order taxpayers to pay extensive compensation over legislation seen as undermining a company's 'expected future profits.' "

[2] Lori M. Wallach, "The corporation invasion," La Monde Diplomatique , December 2, 2013, http://mondediplo.com/2013/12/02tafta . She adds: "Some investors have a very broad conception of their rights. European companies have recently launched legal actions against the raising of the minimum wage in Egypt; Renco has fought anti-toxic emissions policy in Peru, using a free trade agreement between that country and the US to defend its right to pollute (6). US tobacco giant Philip Morris has launched cases against Uruguay and Australia over their anti-smoking legislation." See also Yves Smith, "Germany Bucking Toxic, Nation-State Eroding Transatlantic Trade and Investment Partnership," Naked Capitalism , July 17, 2014, and "Germany Turning Sour on the Transatlantic Trade and Investment Partnership," Naked Capitalism, October 30, 2014.

This policy threat is splitting the world into pro-U.S. satellites and economies maintaining public infrastructure investment and what used to be viewed as progressive capitalism. U.S.-sponsored neoliberalism supporting its own financial and corporate interests has driven Russia, China and other members of the Shanghai Cooperation Organization into an alliance to protect their economic self-sufficiency rather than becoming dependent on dollarized credit enmeshing them in foreign-currency debt.

At the center of today's global split are the last few centuries of Western social and democratic reform. Seeking to follow the classical Western development path by retaining a mixed public/private economy, China, Russia and other nations find it easier to create new institutions such as the AIIB than to reform the dollar standard IMF and World Bank. Their choice is between short-term gains by dependency leading to austerity, or long-term development with independence and ultimate prosperity.

The price of resistance involves risking military or covert overthrow. Long before the Ukraine crisis, the United States has dropped the pretense of backing democracies. The die was cast in 1953 with the coup against Iran's secular government, and the 1954 coup in Guatemala to oppose land reform. Support for client oligarchies and dictatorships in Latin America in the 1960 and '70s was highlighted by the overthrow of Allende in Chile and Operation Condor's assassination program throughout the continent. Under President Barack Obama and Secretary of State Hillary Clinton, the United States has claimed that America's status as the world's "indispensible nation" entitled it back the recent coups in Honduras and Ukraine, and to sponsor the NATO attack on Libya and Syria, leaving Europe to absorb the refugees.

Germany's choice

This is not how the Enlightenment was supposed to evolve. The industrial takeoff of Germany and other European nations involved a long fight to free markets from the land rents and financial charges siphoned off by their landed aristocracies and bankers. That was the essence of classical 19 th -century political economy and 20 th -century social democracy. Most economists a century ago expected industrial capitalism to produce an economy of abundance, and democratic reforms to endorse public infrastructure investment and regulation to hold down the cost of living and doing business. But U.S. economic diplomacy now threatens to radically reverse this economic ideology by aiming to dismantle public regulatory power and impose a radical privatization agenda under the TTIP and TAFTA.

Textbook trade theory depicts trade and investment as helping poorer countries catch up, compelling them to survive by becoming more democratic to overcome their vested interests and oligarchies along the lines pioneered by European and North American industrial economies. Instead, the world is polarizing, not converging. The trans-Atlantic financial bubble has left a legacy of austerity since 2008. Debt-ridden economies are being told to cope with their downturns by privatizing their public domain.

The immediate question facing Germany and the rest of Western Europe is how long they will sacrifice their trade and investment opportunities with Russia, Iran and other economies by adhering to U.S.-sponsored sanctions. American intransigence threatens to force an either/or choice in what looms as a seismic geopolitical shift over the proper role of governments: Should their public sectors provide basic services and protect populations from predatory monopolies, rent extraction and financial polarization?

Today's global financial crisis can be traced back to World War I and its aftermath. The principle that needed to be voiced was the right of sovereign nations not to be forced to sacrifice their economic survival on the altar of inter-government and private debt demands. The concept of nationhood embodied in the 1648 Treaty of Westphalia based international law on the principle of parity of sovereign states and non-interference. Without a global alternative to letting debt dynamics polarize societies and tear economies apart, monetary imperialism by creditor nations is inevitable.

The past century's global fracture between creditor and debtor economies has interrupted what seemed to be Europe's democratic destiny to empower governments to override financial and other rentier interests. Instead, the West is following U.S. diplomatic leadership back into the age when these interests ruled governments. This conflict between creditors and democracy, between oligarchy and economic growth (and indeed, survival) will remain the defining issue of our epoch over the next generation, and probably for the remainder of the 21 st century.

Endnotes

[1] I provide the full background in "The IMF Changes its Rules to Isolate China and Russia," December 9, 2015, available on michael-hudson.com, Naked Capitalism , Counterpunch and Johnson's Russia List .

[2] Lori M. Wallach, "The corporation invasion," La Monde Diplomatique , December 2, 2013, http://mondediplo.com/2013/12/02tafta . She adds: "Some investors have a very broad conception of their rights. European companies have recently launched legal actions against the raising of the minimum wage in Egypt; Renco has fought anti-toxic emissions policy in Peru, using a free trade agreement between that country and the US to defend its right to pollute ( 6 ). US tobacco giant Philip Morris has launched cases against Uruguay and Australia over their anti-smoking legislation." See also Yves Smith , " Germany Bucking Toxic, Nation-State Eroding Transatlantic Trade and Investment Partnership ," Naked Capitalism , July 17, 2014 , and " Germany Turning Sour on the Transatlantic Trade and Investment Partnership ," Naked Capitalism, October 30, 2014 .

Priss Factor , Website November 30, 2017 at 5:28 am GMT

More like Dollar Supremacism

The Alarmist , Next New Comment November 30, 2017 at 8:02 am GMT

"Austerity" is such a misused word these days. What the Allies did to Germany after Versailles was austerity, and everyone paid dearly for it.

What the IMF and the Western Banking Cartel do to third world countries is akin to a pusher hopping up addicts on debt and then taking it away while stripping them of their assets, pretty much hurting only the people of the third world country; certainly not the WBC, and almost certainly not the criminal elite who took the deal.

The Austerity everyone complains about in the developed world these days is a joke, hardly austerity, for it has never meant more than doing a little less deficit-spending than in prior periods, e.g. UK Labour whining about "Austerity" is a joke, as the UK debt has done nothing but grow, which in terms understandable to simple folk like me means they are spending more than they can afford to carry.

jilles dykstra , Next New Comment November 30, 2017 at 8:15 am GMT
" The immediate question facing Germany and the rest of Western Europe is how long they will sacrifice their trade and investment opportunities with Russia, Iran and other economies by adhering to U.S.-sponsored sanctions "

In the whole article not a word about the euro, also an instrument of imperialism, that mainly benefits Germany, the country that has to maintain a high level of exports, in order to feed the Germans, and import raw materials for Germany's industries.

Isolating China and Russia, with the other BRICS countries, S Africa, Brazil, India, dangerous game.
This effort forced China and Russia to close cooperation, the economic expression of this is the Peking Petersburg railway, with a hub in Khazakstan, where the containers are lifted from the Chinese to the Russian system, the width differs.
Four days for the trip.
The Berlin Baghdad railway was an important cause for WWI.
Let us hope that history does not repeat itself in the nuclear era.

Edward Mead Earle, Ph.D., 'Turkey, The Great Powers and The Bagdad Railway, A study in Imperialism', 1923, 1924, New York

jacques sheete , Next New Comment November 30, 2017 at 11:29 am GMT
Another excellent article.

The U.S. response has been to extend the new Cold War into the financial sector, rewriting the rules of international finance to benefit the United States and its satellites – and to deter countries from seeking t o break free from America's financial free ride .

Nah, the NY banksters wouldn't dream of doing such a thing; would they?

skrik , Next New Comment November 30, 2017 at 11:29 am GMT

This is not how the Enlightenment was supposed to evolve

What I said, and beautifully put, the whole article.

World War I may well have been an important way-point, but the miserable mercantile modus operandi was well established long before.

An interesting A/B case:

a) wiki/Anglo-Persian Oil Company "In 1901 William Knox D'Arcy, a millionaire London socialite, negotiated an oil concession with Mozaffar al-Din Shah Qajar of Persia. He financed this with capital he had made from his shares in the highly profitable Mount Morgan mine in Queensland, Australia. D'Arcy assumed exclusive rights to prospect for oil for 60 years in a vast tract of territory including most of Iran. In exchange the Shah received £20,000 (£2.0 million today),[1] an equal amount in shares of D'Arcy's company, and a promise of 16% of future profits." Note the 16% = ~1/6, the rest going off-shore.

b) The Greens in Aus researched the resources sector in Aus, to find that it is 83% 'owned' by off-shore entities. Note that 83% = ~5/6, which goes off-shore. Coincidence?

Then see what happened when the erstwhile APOC was nationalized; the US/UK perpetrated a coup against the democratically elected Mossadegh, eventual blow-back resulting in the 1979 revolution, basically taking Iran out of 'the West.'

Note that in Aus, the democratically elected so-called 'leaders' not only allow exactly this sort of economic rape, they actively assist it by, say, crippling the central bank and pleading for FDI = selling our, we the people's interests, out. Those traitor-leaders are reversing 'Enlightenment' provisions, privatising whatever they can and, as Michael Hudson well points out the principles, running Aus into debt and austerity.

We the people are powerless passengers, and to add insult to injury, the taxpayer-funded AusBC lies to us continually. Ho, hum; just like the mainly US/Z MSM and the BBC do – all corrupt and venal. Bah!

Now, cue the trolls: "But Russia/China are worse!"

jacques sheete , Next New Comment November 30, 2017 at 12:04 pm GMT

The immediate question facing Germany and the rest of Western Europe is how long they will sacrifice their trade and investment opportunities with Russia, Iran and other economies by adhering to U.S.-sponsored sanctions.

US banking oligarchs will expend the last drop of our blood to prevent a such a linking, just as they were willing to sacrifice our blood and treasure in WW1 and 2, as is alluded to here.:

Today's global financial crisis can be traced back to World War I and its aftermath.

Excellent.:

The principle that needed to be voiced was the right of sovereign nations not to be forced to sacrifice their economic survival on the altar of inter-government and private debt demands Without a global alternative to letting debt dynamics polarize societies and tear economies apart, monetary imperialism by creditor nations is inevitable.

This is a gem of a summary.:

The past century's global fracture between creditor and debtor economies has interrupted what seemed to be Europe's democratic destiny to empower governments to override financial and other rentier interests. Instead, the West is following U.S. diplomatic leadership back into the age when these interests ruled governments. This conflict between creditors and democracy, between oligarchy and economic growth (and indeed, survival) will remain the defining issue of our epoch over the next generation, and probably for the remainder of the 21st century.

Instead, the West is following U.S. diplomatic leadership back into the age when these interests ruled governments. It's important to note that such interests have ruled (owned, actually) imperial Britain for centuries and the US since its inception, and the anti-federalists knew it.

Here is a revolution as radical as that which separated us from Great Britain.

You will find all the strength of this country in the hands of your enemies [ ed comment: the money grubbers ]

Patrick Henry June 5 and 7, 1788―1788-1789 Petersburg, Virginia edition of the Debates and other Proceedings . . . Of the Virginia Convention of 1788

The Constitution had been laid down under unacceptable auspices; its history had been that of a coup d'état.

It had been drafted, in the first place, by men representing special economic interests. Four-fifths of them were public creditors, one-third were land speculators, and one-fifth represented interests in shipping, manufacturing, and merchandising. Most of them were lawyers. Not one of them represented the interest of production -- Vilescit origine tali.

- Albert Jay Nock [Excerpted from chapter 5 of Albert Jay Nock's Jefferson, published in 1926]

Biff , Next New Comment November 30, 2017 at 12:39 pm GMT
The golden rule is one thing. The paper rule is something else. May you live in interesting times.
Jake , Next New Comment November 30, 2017 at 2:09 pm GMT
"After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support costs among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered the Great War in 1917. The Allies turned to Germany for reparations to pay these debts." The Yank banker, the Yankee Wall Street super rich, set off a process of greed that led to Hitler.

But they didn't invent anything. They learned from their WASP forebears in the British Empire, whose banking back to Oliver Cromwell had become inextricably entangled with Jewish money and Jewish interests to the point that Jews per capita dominated it even at the height of the British Empire, when simpleton WASPs assume that WASPs truly ran everything, and that WASP power was for the good of even the poorest WASPs.

Joe Hide , Next New Comment November 30, 2017 at 2:12 pm GMT
To Michael Hudson,
Great article. Evidence based, factually argued, enjoyably readable.
Replacements for the dollar dominated financial system are well into development. Digital dollars, credit cards, paypal, stock and currency exchange online platforms, and perhaps most intriguing The exponential rise of Bitcoin and similar crypto-currencies.

The internet is also exponentially exposing the screwing we peasants have been getting by the psychopath, narcissistic, hedonistic, predatory lenders and controllers. Next comes the widespread, easily usable, and inexpensive cell phone apps, social media exposures, alternative websites (like Unz.com), and other technologies that will quickly identify every lying, evil, jerk so they can be neutrilized / avoided

The Alarmist , Next New Comment November 30, 2017 at 2:13 pm GMT

"Textbook trade theory depicts trade and investment as helping poorer countries catch up, compelling them to survive by becoming more democratic to overcome their vested interests and oligarchies along the lines pioneered by European and North American industrial economies."

I must be old; the economic textbooks I had did explain the benefits of freer trade among nations using Ricardo and Trade Indifference Curves, but didn't prescribe any one political system being fostered by or even necessary for the benefits of international trade to be reaped.

Astuteobservor II , Next New Comment November 30, 2017 at 2:26 pm GMT
to be honest, this way of running things only need to last for 10-20 more years before automation will replace 800 million jobs. then we will have a few trillionaire overlords unless true AI comes online. by that point nothing matters as we will become zoo animals.
jacques sheete , Next New Comment November 30, 2017 at 2:36 pm GMT
@The Alarmist

What the IMF and the Western Banking Cartel do to third world countries is akin to a pusher hopping up addicts on debt and then taking it away while stripping them of their assets, pretty much hurting only the people of the third world country; certainly not the WBC, and almost certainly not the criminal elite who took the deal.

That's true and the criminals do similar asset stripping to their own as well, through various means.

It's always the big criminals against the rest of us.

jacques sheete , Next New Comment November 30, 2017 at 2:48 pm GMT
@jilles dykstra

The Berlin Baghdad railway was an important cause for WWI.

Bingo. Stopping it was a huge factor. There was no way the banksters of the world were going to let that go forward, nor were they going to let Germany and Russia link up in any other ways. They certainly were not about to allow any threats to the Suez Canal nor any chance to let the oil fields slip from their control either.

The wars were also instigated to prevent either Germany or Russia having control of, and free access to warm water ports and the wars also were an excuse to steal vast amounts of wealth from both Germany and Russia through various means.

All pious and pompous pretexts aside, economics was the motive for (the) war (s), and the issues are not settled to this day. I.e., it's the same class of monstrously insatiable criminals who want everything for themselves who're causing the major troubles of the day.

Unfortunately, as long as we have SoB's who're eager to sacrifice our blood and treasure for their benfit, things will never change.

jacques sheete , Next New Comment November 30, 2017 at 2:51 pm GMT

The golden rule is one thing. The paper rule is something else.

May you live in interesting times.

The golden rule is for dreamers, unfortunately. Those who control paper money rule, and your wish has been granted; we live in times that are both interesting and fascinating, but are nevertheless the same old thing. Only the particular particulars have changed.

Michael Kenny , Next New Comment November 30, 2017 at 3:01 pm GMT
Essentially, the anti-EU and anti-euro line that Professor Hudson has being pushing for years, which has now morphed into a pro-Putin line as the anti-EU faction in the US have sought to use Putin as a "useful idiot" to destroy the EU. Since nobody in Europe reads these articles, Ii doesn't really matter and I certainly don't see any EU leader following the advice of someone who has never concealed his hostility to the EU's very existence: note the use of the racist slur "PIIGS" to refer to certain EU Member States. Thus, Professor Hudson is simply pushing the "let Putin win in Ukraine" line dressed up in fine-sounding economic jargon.
jacques sheete , Next New Comment November 30, 2017 at 3:54 pm GMT

Since nobody in Europe reads these articles, Ii doesn't really matter

None of it rally matters anyway, no matter how valid. To paraphrase Thucydides, the money grubbers do what they want and the rest of us are forced to suck it up and limp along.

and I certainly don't see any EU leader following the advice

I doubt that that's Hudson's intent in writing the article. I see it as his attempt to explain the situation to those of us who care about them even though our concern is pretty much useless.

I do thank him for taking the time to pen this stuff which I consider worthwhile and high quality.

Anonymous , Disclaimer Next New Comment November 30, 2017 at 4:08 pm GMT
That sounds good but social media is the weapon of choice in the EU too. Lot's of kids know and love Hudson. Any half capable writer who empathetically explains why you're getting fucked is going to have some followers. Watering, nutrition, weeding. Before too long you'll be on the Eurail to your destination.
Wally , Website Next New Comment November 30, 2017 at 4:23 pm GMT
@Jake

said: "The Yank banker, the Yankee Wall Street super rich, set off a process of greed that led to Hitler." If true, so what? That's a classic example of 'garbage in, garbage out'. http://www.codoh.com

nickels , Next New Comment November 30, 2017 at 4:48 pm GMT

This is not how the Enlightenment was supposed to evolve

In fact, this is exactly how it was supposed to work. The wave of liberal democracies was precisely to overturn the monarchies, which were the last bulwark protecting the people from the full tyranny of the financiers, who were, by nature, one-world internationalists.

William McAdoo , Next New Comment November 30, 2017 at 5:08 pm GMT
The real problem with this is that any form of monetary arrangement involves an implied trusteeship, with obligations on, as well as benefits for, the trustee. The US is so abusing its trusteeship through the continual use of an irresponsible sanctions regime that it risks a good portion of the world economy abandoning its system for someone else's, which may be perceived to be run more responsibility. The disaster scenario would be the US having therefore in the future to access that other system to purchase oil or minerals, and having that system do to us what we previously did to them -- sanction us out.

The proper use by the US of its controlled system thus should be a defensive one -- mainly to act so fairly to all players that it, not someone else, remains in control of the dominant worldwide exchange system. This sensible course of conduct, unfortunately, is not being pursued by the US.

joe webb , Next New Comment November 30, 2017 at 10:11 pm GMT
there is fuzzy, and then there is very fuzzy, and then there is the fuzziness compounded many-fold. The latter is this article.

Here from wiki: "

" Marx believed that capitalism was inherently built upon practices of usury and thus inevitably leading to the separation of society into two classes: one composed of those who produce value and the other, which feeds upon the first one. In "Theories of Surplus Value" (written 1862-1863), he states " that interest (in contrast to industrial profit) and rent (that is the form of landed property created by capitalist production itself) are superfetations (i.e., excessive accumulations) which are not essential to capitalist production and of which it can rid itself."

Wiki goes on to identify "rentier" as used by Marx, to be the same thing as "capitalists." What the above quotation says is that capitalism CAN rid itself of genuine rent capital. First, the feudal rents that were extracted by landowners were NOT part of a free market system. Serfdom was only one part of unfree conditions. A general condition of anarchy in rules and laws by petty principalities characteristic of feudalism, both contained commerce and human beings. There was no freedom, political or economic.

The conflation (collapsing) of rents and interest is a Marxist error which expands into complete nonsense when a competitive economy has replaced feudal conditions. ON top of that, profits from a business, firm, or industrial enterprise are NOT rents.

Any marxist is a fool to pretend otherwise, and is just another ideological (False consciousness ) fanatic.

... ... ...

Wally, Next New Comment December 1, 2017 at 1:49 am GMT
@Michael Kenny

Indeed, Putin should be praised & supported. But where is the proof that 'Russia & Trump colluded to get Trump elected'? You also ignore the overwhelming Crimean support for returning to Russia. And you won't like this at all: Trump Declares "National Day for the Victims of Communism." https://www.whitehouse.gov/the-press-office/2017/11/07/national-day-victims-communism Hence, the Liars of the scamming "Holocau$t Industry" go crazy: https://www.salon.com/2017/11/07/trumps-national-day-for-the-victims-of-communism-is-opposite-of-holocaust-statement/

ThreeCranes , December 1, 2017 at 3:34 am GMT
@jilles dykstra

Germany loans money back to the poorer nations who buy her exports just as China loans money to the United States (they purchase roughly a third of our Treasury bonds) so that Americans can continue to buy Chinese manufactured goods.

The role to be played by the USA in the "new world order" is that of being the farmer to the world. The meticulous Asians will make stuff.

The problem with this is that it is based on 19th century notions of manufacturing. Technique today is vastly more complicated than it was in the 1820′s and a nation must do everything in its power to protect and nurture its manufacturing and scientific excellence. In the United States we have been giving this away to our competitors. We educate their children at our taxpayer's expense and they take the knowledge gained back to their native countries where, with state subsidies, they build factories that put Americans out of work. We fall further and further behind.

[Nov 24, 2017] Vanishing act: how global auditor failed to spot theft of 15% of Moldova's wealth

"..."We have organized crime specialized in finance. As a consequence of the discovery of the theft, the banks stopped issuing loans for a while. There was a domino effect which hit the leu.""
July 2, 2015

Local franchise of accountancy giant Grant Thornton was working for three of the country's largest banks when $1bn was embezzled

One of the world's leading auditors has been accused of negligence and incompetence after $1bn was siphoned out of Moldova from under its nose – a sum equivalent to 15% of the former Soviet republic's GDP.

Grant Thornton, the UK based accountancy giant with local franchises in dozens of countries, was the auditor for three of Moldova's largest banks through which the money was embezzled and spirited out of the country in complex financial transactions, some through UK companies.

As a result, the authorities had to rescue the three banks with a bailout equivalent to half the annual budget. The knock-on effect was a currency collapse and a plunge towards recession, ruining the economy almost overnight. Moldova is already Europe's poorest country.

The theft was discovered in November 2014 at Unibank, Banca de Economii and Banca Sociala , which the Moldovan member of Grant Thornton, a global network of independent firms, has been auditing since 2010, 2011 and 2013 respectively.

Iurie Chirinciuc, a Moldovan MP who was part of a commission set up to investigate the affair, believes Grant Thornton was negligent and obstructive.

"All the [audit] reports give positive opinions," he said. "How can you give a positive opinion when the situation at these banks was so grave?"

Grant Thornton said it drew the attention of the banks and relevant authorities to its concerns about the banks and that its audit reports contained alerts about loans. But Chirinciuc said it should not have given the banks a generally clean bill of health.

He claims repeated requests for the auditors to give testimony to the inquiry were "vehemently opposed".

"I have made a formal request for analysis of Grant Thornton to the central bank," Chirinciuc said. "In the commission, I was shocked to see that all state institutions were informed and updated as to the situation at the banks, but did not intervene. These circumstances make me think that very high-ranking dignitaries are involved in the theft of the billion."

Chirinciuc was also aghast that after the fraud was discovered, Grant Thornton's Moldova director, Stéphane Bridé, was appointed economy minister. Bridé told the Guardian his nomination "was made in conformity with the legislation of the Republic of Moldova, according to which my professional qualities and experience were exclusively considered".

Multiple spurious loans were granted by Banca de Economii and Unibank on the basis of false guarantees to companies that then transferred the money offshore. Some went to British companies controlled by entities registered in places where directors' identities are kept secret.Two preliminary reports – one by the parliamentary commission and the other by corporate investigation firm Kroll – suggest that fraud eventually became the main occupation of the banks.

The parliamentary report says: "The management of the banks have manifested evident lapses in professionalism and integrity … by giving credits that were compromised from the beginning" and made transactions of "fictional and fraudulent character". The MPs concluded the banks had knowingly endangered their "capacity to make basic operations" such as paying out pensions and public sector salaries.

The banks consistently misrepresented cash balances by using unorthodox "overnight deposits" – zero-interest deposits from Russian banks Interprombank, Gazprombank, Alef Bank and Metrobank – to disguise the lack of capital while continuing to give out nonperforming loans. "In essence these operations were operations of manipulation," the parliamentary report says.

So contaminated have the banks become that the IMF and World Bank have suspended programmes with Moldova, and the EU is considering following suit. World Bank country manager Alex Kremer said last week: "We are advising the authorities that the three banks ... should be liquidated." He said trying to nationalise or recapitalise the banks would risk wasting more taxpayers' money.

Moldovan prosecutors have since launched an investigation that has so far put about 30 people under criminal indictment, including bank executives. Among these is Ilan Shor, chairman of the board at Banca de Economii since April 2014, allegedly the mastermind. Shor was released from house arrest on 23 May, having agreed to cooperate with investigators. The chief prosecutor has not returned a request for comment. Shor denies wrongdoing. Earlier this month, he was elected mayor of the small town of Orhei.

Kroll's confidential report was published online in April by the speaker of the Moldovan parliament, Andrian Candu. It says a group of companies under Shor's control gradually took over the banks and in 2010 started giving never-to-be-repaid loans to themselves. When watchdogs closed in, "orders were given by management of the banks to archive loan documentation relating to the suspicious transactions". A vehicle belonging to another Shor company that collected the paperwork was subsequently stolen and burned.

Between 2011, when Shor's companies were allegedly beginning to sink their teeth into the banks, and October 2014 when the scam went bust, Kroll found the number of Shor-related companies involved grew from 10 to 39. By December 2014, 90% of Unibank's loans were to Shor group companies. Deposits recorded as being from Russian banks, which enabled Banca de Economii to make huge loans, were not received.

"Ilan Shor and individuals associated with him played an integral role in coordinating this activity," Kroll says in its report, claiming there was "a deliberate intention to extract as much benefit as possible for entities connected to Mr Shor and to the detriment of the bank". A Kroll representative said the report was leaked without consent and declined to comment further.

The "missing billion" contributed to a run on the Moldovan leu in which it lost a quarter of its value against the dollar in February.

Grant Thornton had no presence in Moldova before 2010, but its ascent has been startling. Seven of the country's 14 biggest banks became its clients in the space of four years, making it by far the biggest player in the market. International competitors such as KPMG and Deloitte steadily lost Moldova to Grant Thornton, with neither having more than two major banks on their roster in the country by 2013.

Representatives of the Moldovan Grant Thornton franchise deny impropriety and say that that auditors cannot be held responsible if clients do not disclose full financial information.

"While we would like to detect all fraud, according to International Standards of Auditing, the auditors' role is not to discover fraud, or to prosecute clients for fraud," they said in a statement. "We stand by the quality of our work – which is public record - and believe the audit opinions were correct under the circumstances."

A spokesman for the global office said Grant Thornton member firms acted autonomously and their work was only scrutinised by head office every three years. It did not respond to a question asking what it planned to do about its relationship with GT Moldova.

A Moldovan financial system insider who wishes to remain anonymous said: "It's clear Grant Thornton was at least negligent if not worse. How could it not have known what was going on, especially at Unibank where the scam was almost total?"

In its response, GT Moldova said: "Various observations were mentioned annually in the letters we addressed to management and shareholders of these banks and to the National Banks of Moldova.

"We wish to remind you that in 2013, the inquiry commission for the assets of Banca de Economii was based not only on the audit of the court and reports of the International Monetary Fund but also mentions of Grant Thornton audit."

The effect of the financial loss has been felt by ordinary Moldovans. Ion Preașcă, a finance journalist in ther capital Chișinău, said: "We have organised crime specialised in finance. As a consequence of the discovery of the theft, the banks stopped issuing loans for a while. There was a domino effect which hit the leu."

Alexei, who owns a small construction business, said: "They will invent some new taxes to make up for the damage. I had an account at Banca Sociala and have stopped using it since. I opened two new accounts in banks with foreign ownership."

Natasha, a bookkeeper, said: "The resulting price rises had bad effects. The electricity price nearly doubled from one month to the next. The bill was 300 lei [£10] and it's now 500. Pensions and salaries haven't increased."

The criminal investigation is ongoing. Neither the Moldovan National Bank or government returned requests for information. An estimated 50,000 Moldovans protested on 3 May in Chișinău, demanding justice and the recovery of the stolen money.

Thanks to Iurie Sanduta, editor of www.rise.md, for help researching this article.

[Oct 25, 2017] The Situation in Puerto Rico The Roads

Notable quotes:
"... although I haven't heard of private equity pushing Puerto Rican toll roads they would own ..."
"... My dear Lambert, were I a vulture capitalist (which I am not!), I would not put one plugged nickel into infrastructure in PR. Not toll roads, not resorts, not power grid, not rebuilding the pharma factories, nada. Because another Maria will just happen again and trash it all before sufficient ROI, and who's gonna insure it now? Insurance companies believe in climate change, whether they will admit it or not. ..."
"... But I would put a few $$$ into PR debt, and gamble that the US govt will bail *me*and my fellow vultures (not PR) out. Am I cynical enough? ..."
"... This is just incompetence. Load up cargo ships (which are the most enormous transportation devices on the planet) and bring an aircraft carrier or two with cargo helicopters to bring the goods inland: ..."
"... "The political class seems to have lost the ability to mobilize on behalf of its citizens.". It wasn't always this way. Read http://northernwoodlands.org/articles/article/thirty-eight-new-england-lumber-storm . ..."
"... When I read what the FDR Administration was able to accomplish amidst the devastation of New England's forests wrought by the hurricane of 1938, it brought tears to my eyes. ..."
"... "The political class seems to have lost the ability to mobilize on behalf of its citizens." ..."
"... most convenient/fast/cost effective ..."
"... If the U.S. is not an empire, Puerto Rico would not be a protectorate or whatever. If the U.S. is an empire in decline, Puerto Rico being abandoned would be a signal to the world that the U.S. dollar is in serious trouble. ..."
"... What with PR's situation and the apparent U.S. tendency to retreat from simple truths, could a collapse in preference falsification* be in progress? ..."
Oct 25, 2017 | www.nakedcapitalism.com

Synoia , October 23, 2017 at 2:21 pm

[4] Too bad we don't have a Jobs Guarantee .

The most important things are guaranteed:

Funding the military, enforcing payment of debts, Profit, promises made to campaign contributors, and of course death and taxes.

Glen , October 23, 2017 at 2:31 pm

Somehow, I think our government's response to PR/Maria will be the new norm unless there are a bunch of billionaire's calling the gov reps they bought to complain. And even they may be frustrated by the current boob in the WH.

HotFlash , October 23, 2017 at 3:06 pm

although I haven't heard of private equity pushing Puerto Rican toll roads they would own

My dear Lambert, were I a vulture capitalist (which I am not!), I would not put one plugged nickel into infrastructure in PR. Not toll roads, not resorts, not power grid, not rebuilding the pharma factories, nada. Because another Maria will just happen again and trash it all before sufficient ROI, and who's gonna insure it now? Insurance companies believe in climate change, whether they will admit it or not.

But I would put a few $$$ into PR debt, and gamble that the US govt will bail *me*and my fellow vultures (not PR) out. Am I cynical enough?

PKMKII , October 23, 2017 at 3:27 pm

The Intercept has a good article on a Puerto Rican recovery for Puerto Ricans and not outside interests.

Code Name D , October 23, 2017 at 3:32 pm

What about the cars? I would imagine that many cars were destroyed, heavely damaged, or simply lost. Getting cars repaired and replaced will also be a major challenge. And this I bet would fall on the backs of the individual owners who will already be strapped for cash to begin with.

HotFlash , October 23, 2017 at 4:23 pm

Pretty well, yup. Insurance companies gonna pay pennies on the dollar, assuming you actually have insurance for stuff like this. Poor people tend to get the very minimum needed to get their vehicle on the road, which is usually liability. If you do have bountiful; coverage for Acts O'God, where are you going to get your car repaired or replaced anyway? This may sound super-cynical, even for me, but looking at those washed out and blown-away roads, getting cargo into remote places in PR is a job for sure-footed critters like mules and horses. Dirt bikes can move people over difficult terrain. So can bicycles , and they have been preparing for such a thing.

cocomaan , October 23, 2017 at 3:41 pm

The crisis in PR compared to the crises in FL and TX really opened my eyes to how dangerous and precarious it must be to live on an island, even one ostensibly connected to a powerful country. The logistical nightmare of getting things there is compounded so much by that sea barrier. At least in TX, you can call in the cajun navy who can drive their boats to the location, then launch.

So now one thing is even clearer to me: the first losers of rising sea levels and climate change disasters will be islanders. Places like the Maldives and the Leewards will have a really hard time in the next few decades.

a different chris , October 23, 2017 at 5:21 pm

>is compounded so much by that sea barrier.

??? The sea is how people got things everywhere long, long before the first steam engine (and I'm talking those Roman toy ones) was even conceived?

This is just incompetence. Load up cargo ships (which are the most enormous transportation devices on the planet) and bring an aircraft carrier or two with cargo helicopters to bring the goods inland:

"The CH-53E heavylift transport helicopter can carry cargo with a maximum weight of 13.6 t internally or 14.5 t externally."

But yes, agree on the precarity of island life.

cocomaan , October 23, 2017 at 6:39 pm

I get what both of you are saying vis a vis sea travel, Jones Act and all, but even in the best of all possible human organizations, it's still a major factor in any relief effort. It's just not nearly as easy to get people from point A to point B by boat. If your car breaks down, you're stranded, if your boat breaks down, you could easily die.

rd , October 23, 2017 at 6:01 pm

Much of the sea barrier is man-made, namely the Jones Act. As a result, it is more expensive for Puerto Rico to get supplies form the US than from non-American sources because of shipping costs.

Joel , October 23, 2017 at 11:50 pm

Could NC do a post on the Jones Act?

Do we allow foreign-flagged vessels to transport goods between, say, California and Hawaii? What about Guam and the US Virgin Islands?

Thor's Hammer , October 24, 2017 at 5:27 pm

We do live on a global island. Soot from Chinese coal burning lands on the few remaining glaciers in Glacier National Park and hastens their demise. Methane from melting permafrost in the Northwest Territories acts as a blanket to increase solar heating of the ocean surface. Increased ocean temperatures help hurricanes to explode from Category 1 to 5 almost overnight and stall over Houston as a Biblical deluge.

Three well-placed air-burst EMP nuclear bombs can disable communication and transport over most of the country. And a week without water and food being transported into New York would turn it into San Juan with no rescue boats on the horizon and frozen corpses piling up in the alleys in mid-winter.

We all live on an island -- one held together by a thin spider web of technology and resting upon an biosphere that we are waging war against with our insatiable imperative of growth.

Mark K , October 23, 2017 at 3:46 pm

"The political class seems to have lost the ability to mobilize on behalf of its citizens.". It wasn't always this way. Read http://northernwoodlands.org/articles/article/thirty-eight-new-england-lumber-storm .

When I read what the FDR Administration was able to accomplish amidst the devastation of New England's forests wrought by the hurricane of 1938, it brought tears to my eyes.

HotFlash , October 23, 2017 at 4:30 pm

"The political class seems to have lost the ability to mobilize on behalf of its citizens."

My momma used to say, "Where there's a will, there's a way." I have observed that if there's 'no way', it's because there is no will. I think this is the case in PR, as it was in NOLA, and as it seems to be in Houston (except for the *nice* neighbourhoods, of course). Cali fire victims, prepare to be On Your Own(tm).

JohnS , October 23, 2017 at 4:05 pm

Great job, Lambert .insight and solid research into a topic overlooked by the MSM and the politicals .

If your interest and time permits, I would love a report on what FEMA will/has provided for LONG TERM HOUSING for PR, Northern CA, and the areas hit hard by hurricanes on the USA mainland ..

I have not been able to locate much on this topic

Last I heard was that FEMA had Zero trailers on hand and had let out a contract to some company(s) to build new trailers.

In the interim, there was a report that FEMA would be distributing TENTS to some people in need of shelter. I believe this article was a report from Florida after the fist Hurricane hit there.

A look at Puerto Rico shows that there at lots of homes without roofs ..and they are probably not accessible for a trailer delivery up in the hills. In Santa Rosa, CA, there is very little affordable and available housing close to Santa Rosa. The rains will arrive and then the Mud will Turn the Sand into YUCK and MUCK.

I remember, after Katrina and her friends beat up New Orleans, a lot of folks were flown away from New Orleans (Barbara Bush opined it was probably a good deal for a lot of 'em) and many did not return. Others were put in FEMA trailers. (TREME on HBO covered the KATRINA aftermath as only David Simon can!)

Anyone else, who can provide me with links or information, is most welcome to respond.

Happy Trails,

JohnS

Bruce , October 24, 2017 at 1:16 pm

FEMA's mission is emergency/first response mobilization. It is not their job or within its functionality or budget to provide long-term rebuilding solutions. That falls on the island's government, with congressional financial assistance if congress allocates money for it.

Mel , October 23, 2017 at 4:08 pm

The Army Corps of Engineers are one thing, the other things are the Combat Engineers, organized perhaps as regiments and assigned to combat brigades. These are the people who do roads, airfields, etc., and the ones you would have wanted on the spot in Puerto Rico from maybe day two.

a different chris , October 23, 2017 at 5:29 pm

I strongly believe the problem is the deployment to the Middle East. Bullies strongly believe they must never, ever show weakness. So they believe that they can't pull Combat Engineers out of Whateveristan without looking weak.

So they don't – and they bless their lucky stars that Puerto Rico isn't a state and Puerto Ricans aren't considered Americans by most Americans. However – how many of those deployed to the ME are from Puerto Rico, and how are they reacting? I gotta wonder.

rd , October 23, 2017 at 6:06 pm

USGS has started mapping the landslide impacts:

https://landslides.usgs.gov/research/featured/2017-maria-pr/

http://blogs.agu.org/landslideblog/2017/10/05/hurricane-maria-1/

To get a road open, you need to clear the trees and debris, repair bridges, and repair landslides. In rugged terrain, this is a serious effort as just one break makes the road unusable for deliveries beyond the break.

SerenityNow , October 23, 2017 at 7:43 pm

The Bloomberg piece explains:

Puerto Rico has one of the highest rates of car ownership in the world, thanks to urban sprawl and the government's failure to build public transportation that commuters might actually use . Puerto Ricans are isolated without cars About 931,000 Puerto Ricans drive or carpool to work out of 3.4 million total residents, according to U.S. Census data. [T]he island has the fifth-highest number of vehicles per capita in the world.

The only thing I would like to mention is that people don't drive because there soley because there is no public transportation, they drive because it is the most convenient/fast/cost effective mode of travel available. You could build all the lightrail in the world, but if it wasn't more convenient/cheaper/cost effective than driving, people wouldn't take it. Disincentives for driving are much more powerful than incentives for transit.

How much road do they have per inhabitant there? Maybe disasters like these could be a wakeup call for how we lay out our development and where we spend our infrastructure dollars? Unfortunately probably not.

Vatch , October 23, 2017 at 9:28 pm

I haven't read the book or seen the movie, so maybe my comment is off base, but I'll proceed anyway. This article makes me think of the post-apocalyptic drama "The Road", by Cormac McCarthy.

AbateMagicThinking but Not money , October 23, 2017 at 11:40 pm

If the U.S. is not an empire, Puerto Rico would not be a protectorate or whatever. If the U.S. is an empire in decline, Puerto Rico being abandoned would be a signal to the world that the U.S. dollar is in serious trouble.

What with PR's situation and the apparent U.S. tendency to retreat from simple truths, could a collapse in preference falsification* be in progress?

From my side of the world, the U.S. is becoming more than ever a busted flush of apparent and unsustainable inconsistencies which might take us all down with it.

Here's hoping that there is a bounty of brilliant minds and and excellent administrators in the U.S. military leadership who are ready to step up.

Pip Pip!

*see Timur Kuran's 1995 work.

George Phillies , October 24, 2017 at 12:23 am

By report Puerto Rico is making a deal with a Washington (state) power company on power line repair, the issues involved in running power lines through PR and through inland Washington being rather similar. the last Saffir 3, 4, or 5 hurricanes ot hit the island did so in 1928 and 1932, or so I have read, so on one hand there is plenty of time to get a return on investment, and on the other hand, there was no rationale for building power lines that could survive a force 4 or 5 hurricane.

Felix_47 , October 24, 2017 at 1:18 am

Puerto Rico is third world lite. They could rebuild and become a model for the third world. There are only 3 million people on the island. They dont have to pay Fed income tax. It could be a great retirement location for elderly whites. It just requires investment. Currently the single largest employer is the US govt. They need leadership from within.

Vatch , October 24, 2017 at 10:28 am

Here's what the IRS says about Puerto Rico and income taxes (quoted from Wikipedia ):

In general, United States citizens and resident aliens who are bona fide residents of Puerto Rico during the entire tax year, which for most individuals is January 1 to December 31, are only required to file a U.S. federal income tax return if they have income sources outside of Puerto Rico or if they are employees of the U.S. government. Bona fide residents of Puerto Rico generally do not report income received from sources within Puerto Rico on their U.S. income tax return.

So they pay income tax, but only on income from outside Puerto Rico. Also from Wikipedia:

In 2009, Puerto Rico paid $3.742 billion into the US Treasury.[10] Residents of Puerto Rico pay into Social Security, and are thus eligible for Social Security benefits upon retirement. However, they are excluded from the Supplemental Security Income.

The federal taxes paid by Puerto Rico residents include import/export taxes,[11] federal commodity taxes,[12] and others. Residents also pay federal payroll taxes, such as Social Security[13] and Medicare taxes.[14]

[Oct 25, 2017] Shocking the Shock Doctrine What Recovery in Puerto Rico Could Look Like

Oct 25, 2017 | www.nakedcapitalism.com

If neoliberalism is the belief that the proper role of government is to enrich the rich -- in Democratic circles they call it "wealth creation" to hide the recipients; Republicans are much more blatant -- then the " shock doctrine " is its action plan.

Click the link above for more information (or read the book ), but in essence the idea is to use any form of disaster, whether earthquake or economic/political crisis, to remake a society in the neoliberal image. To reconstruct the destroyed world, in other words, to the liking of holders of great wealth -- by privatizing everything of value held by the public (think water rights, public roads); by forcing austerity on cash-strapped governments as the price for "aid" (think loans, not grants, repaid by unwritten social insurance checks); by putting "managers," or simply loan officers, in charge of democratic decision-making.

In simple, a "shock doctrine" solution always takes this form: "Yes, we'll help you, but we now own your farm and what it produces. Also, your family must work on it for the next 50 years."

This is what happened in Chile after Pinochet and his coup murdered the democratically elected socialist Salvador Allende and took over the government. It's what's happening to Greece, victim of collusion between greedy international bankers and the corrupt Greek politicians they cultivated. And it's what happened in the U.S. during the 2008 bailout of bankers, by which government money was sent in buckets to companies like AIG so they could pay their debts in full to companies like Goldman Sachs. While millions of mortgaged homeowners crashed and burned to the ground.

The populist reaction to neoliberal "reform" is usually social revolt, often or usually ineffective, since creditors are, almost by definition, people with money, and people with money, almost by definition, control most governments. In Greece, the revolt sparked the election of an (ineffective) "socialist" government -- plus the rise of the Greek neo-Nazi party, Golden Dawn. In the U.S. the revolt still still sparks universal (and ineffective) hatred of the 2008 bank bailout -- plus the rise of the failed Sanders candidacy and the successful Trump presidency.

The form this same revolt will take in 2018 and 2020 is still to be determined.

The Shock Doctrine and Puerto Rico

The "shock doctrine" -- the stripping of wealth from the devastated by the already-way-too-wealthy -- is now being applied to Puerto Rico. Even before the hurricanes hit it, Puerto Rico was a second-class citizen relative to states of the U.S., even among its non-state territories. In contrast to Puerto Rico, for example, the American Virgin Islands were instantly much better treated when it came to relief from the Jones Act , a sign of already-established prejudice.

The reason should be obvious. In Puerto Rico , English is the primary language of less than 10% of the people, while Spanish is the dominant language of the school system and daily life. In the American Virgin Islands , English is the dominant language, and Spanish is spoken by less than 20% of the population. The fact that two-thirds of the population of the U.S. Virgin Islands is black seems to be lost on most Americans, a fact that likely benefits those inhabitants greatly in times like these.

Thus, to most Americans the citizens of Puerto Rico are conveniently (for neoliberals) easy to paint as "them," the undeserving, which changes what atrocities can be committed in the name of "aid" -- much like it did after Hurricane Katrina devastated "them"-inhabited New Orleans.

Synoia , October 24, 2017 at 6:41 am

Puerto Rico is not Sovereign. Are its debts valid? Could they be repudiated?

Huey Long , October 24, 2017 at 8:09 am

Congress passed a law back in the 80's prohibiting PR from defaulting. Repudiation of PR debt would entail getting our current congress and prez to pass legislation to repudiate it, so in other words divine intervention ;-).

rd , October 24, 2017 at 10:56 am

The one place in the US that did get hammered by NAFTA was Puerto Rico. http://www.nytimes.com/1993/01/03/us/trade-pact-threatens-puerto-rico-s-economic-rise.html?pagewanted=all

When NAFTA was passed, Congress also stripped companies of tax benefits for having operations in Puerto Rico. In addition, the Jones Act makes shipping to and from Puerto Rico more expensive than shipping to and from Mexico. Oddly enough, many companies moved operations from Puerto Rico and Puerto Rico has been in recession/depression ever since.

Norb , October 24, 2017 at 9:28 am

I think Puerto Rico will be interesting to watch to see if anti neoliberal sentiment can take hold and survive. In one sense, every individual abandoned or ensnared in debt is in the same boat. Once put in a situation of debt servitude, the only recourse to extricate oneself is to become self reliant and attempt to build supporting networks. The trouble is, once those networks start to form, the traditional game plan is to bring in force and break them up.

If strong, self-supporting communities can form in PR, it will provide inspiration for communities on the mainland.

It will be also interesting to see if self-funded initiatives can make headway against the banking and financial interests.

This situation in PR is important in that it can change the focus of community building away form personal self-interest as now exists in America, and towards the common good, as it should be. The same is happening all across the mainland in economically devastated communities, but successfully blacked out in the media.

This truly is a long term endeavor, but tragically, climate change will increase the opportunities for proper action. The proper long term investment is in people and life skills. Lets roll up our sleeves.

flora , October 24, 2017 at 10:43 am

an aside:
" Once put in a situation of debt servitude, the only recourse to extricate oneself is to become self reliant and attempt to build supporting networks. "

US people born 1880 – 1900 were adults/young adults with families when the Great Depression hit. Their children, sometimes referred to as The Greatest Generation, were children or teens during the depression and saw how debt destroyed families. When those children grew up they were debt averse. The Depression/Greatest Gen's children, the Baby Boomers, would often joke their parents, who were Depression kids, could squeeze a nickel until it screamed. Boomers, having no memory of systemic economic bad times, took on large debts for school and housing on the theory their income would always increase as it had for their parents. Now the Boomers children are facing a wholly different economy, more like the Great Depression than the Booming 50's and 60's.

I expect today's younger generation will become debt averse. That would hurt the FIRE sector's reliance on ever increasing debt payment rents. Reducing the FIRE sectors influence would be good for both the Main Street economy and individuals, imo.

diptherio , October 24, 2017 at 11:52 am

It will be also interesting to see if self-funded initiatives can make headway against the banking and financial interests.

See my comment below. Puerto Rico already has a thriving, self-funded co-op movement, so I think they've got a better chance than most.

Jim Haygood , October 24, 2017 at 9:57 am

"What's killing the modern world is the world-wide overhang of personal debt -- not government deficits, which are entirely different."

This is an odd claim to make in an article about Puerto Rico, whose troubled debt is entirely governmental. Pie chart:

https://en.wikipedia.org/wiki/Puerto_Rican_government-debt_crisis#/media/File:Distribution-puerto-rico-outstanding-debt.png

In turn, Puerto Rico's govt debt crisis led to the imposition of a crushing 11.5% sales tax, making retail prices already jacked up by the Jones Act even more unaffordable.

Puerto Rico's recovery will depend almost entirely on how much of a haircut is imposed on bondholders versus restructuring and extending in the Greek fashion, which would doom PR forevahhhh.

Thor's Hammer , October 24, 2017 at 10:22 am

It would be interesting to compare the pace of recovery in Cuba with that of Puerto Rico. Both were hit by category 5 hurricanes within days of each other. In the case of Cuba, Havana was every much at the center of the bulls eye as San Juan Puerto Rico if I am correct. But I've not been able to uncover a single scrap of reporting that draws the comparison. Perhaps it would be embarrassing to the defenders of "free market" capitalism and social organization?

But hurricanes are last month's news. We've moved on to the startling revelations that fat pig movie directors are pussy grabbers just like our President.

Rakesh , October 24, 2017 at 12:18 pm

http://www.frontline.in/world-affairs/a-tale-of-two-islands/article9892265.ece

GlobalMisanthrope , October 24, 2017 at 1:34 pm

Thank you posting this!

I have always believed that one of the primary aims of the Cuba travel ban was to keep us Puerto Ricans from traveling there to see what isolation and poverty -- the constant threats leveled at those who support PR independence -- could look like.

Thor's Hammer , October 24, 2017 at 6:28 pm

Thanks for posting this journalism from an Indian source. While it may be accurate, the writing style reads like it was copied straight from the Ideologe's Bible. So I'll file it along most commentary from outlets like the Washington Post– assume it is fraudulent propaganda until proven otherwise.

Jeremy Grimm , October 24, 2017 at 11:48 am

It's very nice to talk about how to rebuild Puerto Rico but how long will it be before Puerto Rico is hit by another major hurricane? And while we're thinking of Puerto Rico what about Houston, and Florida? What about the North Carolina sea coast -- or New Jersey -- NYC? I don't expect anything reasonable will be done in rebuilding any of these places or beginning an orderly retreat to higher ground.

Some parts of these areas may remain habitable -- at least long enough to make it worthwhile to build infrastructure but I believe it will be a mistake to simply "rebuild". Replacement infrastructure should be built to better withstand the future storms and rising seas. I am aware that not "rebuilding" is neither socially nor politically viable. It just seems a shame to waste what time and resources remain.

diptherio , October 24, 2017 at 11:50 am

I was fortunate enough to get to meet a number of Puerto Rican cooperators at this year's Assoc. of Cooperative Educators Institute in Denver. Puerto Rico has a very strong cooperative sector/movement. Co-ops in Puerto Rico don't pay tax to the gov't. Instead, each co-op provides (iirc) 2% of net revenues to Liga de Cooperativas de Puerto Rico , the apex co-op organization for the island. This provides an internally funded support mechanism for co-ops and has helped create a thriving co-op ecosystem.

So I've got some optimism that my Puerto Rican friends will be able to replace at least some of the failed systems that have been afflicting them with cooperative, sustainable, alternative solutions.

Watt4Bob , October 24, 2017 at 11:58 am

Things are moving fast, from MSN ;

Puerto Rico has agreed to pay a reported $300 million for the restoration of its power grid to a tiny utility company which is primarily financed by a private equity firm founded and run by a man who contributed large sums of money to President Trump, an investigation conducted by The Daily Beast has found.

Whitefish Energy Holdings, which had a reported staff of only two full-time employees when Hurricane Maria touched down, appears ill-equipped to handle the daunting task of restoring electricity to Puerto Rico's over 3 million residents.

As usual, donate a few thousand, reap millions.

FEC data compiled by The Daily Beast shows that Colonnetta contributed $20,000 to the "Trump Victory" PAC during the general election, $27,000 to Trump's primary election campaign (then the maximum amount permitted), $27,000 to Trump's general election campaign (also the maximum), and a total of $30,700 to the Republican National Committee in 2016 alone.

Colonnetta's wife, Kimberly, is no stranger to Republican politics either; shortly after Trump's victory she gave $33,400 to the Republican National Committee, the maximum contribution permitted for party committees in 2016.

Bears repeating, we're not only 'ruled' by whores, we're ruled by cheap whores.

Of course I make apologies to all ladies of negotiable affection.

[Oct 01, 2017] The key role of IMF and World bank in enforcement of neoliberalism globally. Neoliberals throwing out all the Keynesians in those institutions and replaced them with neoclassical supply-side theorists who subscribed to the theory of "structural adjustment" which is the essence of disaster capitalism

Notable quotes:
"... They were replaced by neoclassical supply-side theorists and the first thing they did was decide that from then on the IMF should follow a policy of structural adjustment whenever there's a crisis anywhere. ..."
"... In 1982, sure enough, there was a debt crisis in Mexico. The IMF said, "We'll save you." Actually, what they were doing was saving the New York investment banks and implementing a politics of austerity. ..."
"... The population of Mexico suffered something like a 25 percent loss of its standard of living in the four years after 1982 as a result of the structural adjustment politics of the IMF. ..."
"... What are they doing to Greece now ? It's almost a copy of what they did to Mexico back in 1982, only more savvy. This is also what happened in the United States in 2007–8. They bailed out the banks and made the people pay through a politics of austerity. ..."
Oct 01, 2017 | www.jacobinmag.com

BSR There have been numerous crises since 2007. How does the history and concept of neoliberalism help us understand them? DH There were very few crises between 1945 and 1973; there were some serious moments but no major crises. The turn to neoliberal politics occurred in the midst of a crisis in the 1970s , and the whole system has been a series of crises ever since. And of course crises produce the conditions of future crises.

In 1982–85 there was a debt crisis in Mexico, Brazil, Ecuador, and basically all the developing countries including Poland. In 1987–88 there was a big crisis in US savings and loan institutions. There was a wide crisis in Sweden in 1990, and all the banks had to be nationalized .

Then of course we have Indonesia and Southeast Asia in 1997–98, then the crisis moves to Russia, then to Brazil, and it hits Argentina in 2001–2.

And there were problems in the United States in 2001 which they got through by taking money out of the stock market and pouring it into the housing market. In 2007–8 the US housing market imploded, so you got a crisis here.

You can look at a map of the world and watch the crisis tendencies move around. Thinking about neoliberalism is helpful to understanding these tendencies.

One of big moves of neoliberalization was throwing out all the Keynesians from the World Bank and the International Monetary Fund in 1982 -- a total clean-out of all the economic advisers who held Keynesian views .

They were replaced by neoclassical supply-side theorists and the first thing they did was decide that from then on the IMF should follow a policy of structural adjustment whenever there's a crisis anywhere.

In 1982, sure enough, there was a debt crisis in Mexico. The IMF said, "We'll save you." Actually, what they were doing was saving the New York investment banks and implementing a politics of austerity.

The population of Mexico suffered something like a 25 percent loss of its standard of living in the four years after 1982 as a result of the structural adjustment politics of the IMF.

Since then Mexico has had about four structural adjustments. Many other countries have had more than one. This became standard practice.

What are they doing to Greece now ? It's almost a copy of what they did to Mexico back in 1982, only more savvy. This is also what happened in the United States in 2007–8. They bailed out the banks and made the people pay through a politics of austerity. BSR Is there anything about the recent crises and the ways in which they have been managed by the ruling classes that have made you rethink your theory of neoliberalism? DH Well, I don't think capitalist class solidarity today is what it was. Geopolitically, the United States is not in a position to call the shots globally as it was in the 1970s.

I think we're seeing a regionalization of global power structures within the state system -- regional hegemons like Germany in Europe, Brazil in Latin America, China in East Asia.

Obviously, the United States still has a global position, but times have changed. Obama can go to the G20 and say, "We should do this," and Angela Merkel can say, "We're not doing that." That would not have happened in the 1970s.

So the geopolitical situation has become more regionalized, there's more autonomy. I think that's partly a result of the end of the Cold War. Countries like Germany no longer rely on the United States for protection.

Furthermore, what has been called the "new capitalist class" of Bill Gates , Amazon , and Silicon Valley has a different politics than traditional oil and energy.

As a result they tend to go their own particular ways, so there's a lot of sectional rivalry between, say, energy and finance, and energy and the Silicon Valley crowd, and so on. There are serious divisions that are evident on something like climate change, for example.

The other thing I think is crucial is that the neoliberal push of the 1970s didn't pass without strong resistance. There was massive resistance from labor, from communist parties in Europe, and so on.

But I would say that by the end of the 1980s the battle was lost. So to the degree that resistance has disappeared, labor doesn't have the power it once had, solidarity among the ruling class is no longer necessary for it to work.

It doesn't have to get together and do something about struggle from below because there is no threat anymore. The ruling class is doing extremely well so it doesn't really have to change anything.

Yet while the capitalist class is doing very well, capitalism is doing rather badly. Profit rates have recovered but reinvestment rates are appallingly low, so a lot of money is not circulating back into production and is flowing into land-grabs and asset-procurement instead.

[Aug 24, 2017] Putting an End to the Rent Economy by Michael Hudson

Notable quotes:
"... Interview with Vlado Plaga in the German magazine FAIRCONOMY, September 2017. ..."
"... Absentee Ownership and its Discontents ..."
"... Theories of Surplus Value ..."
"... Clue to the Economic Labyrinth ..."
"... is the author of Killing the Host (published in e-format by CounterPunch Books and in print by Islet ). His new book is J is For Junk Economics . He can be reached at mh@michael-hudson.com ..."
Aug 16, 2017 | www.unz.com

Interview with Vlado Plaga in the German magazine FAIRCONOMY, September 2017.

Originally, you didn't want to become an economist. How did it come that you changed your plans and digged so deep into economics?

I found economics aesthetic, as beautiful as astronomy. I came to New York expecting to become an orchestra conductor, but I met one of the leading Wall Street economists, who convinced me that economics and finance was beautiful.

I was intrigued by the concept of compound interest. and by the autumnal drain of money from the banking system to move the crops at harvest time. That is when most crashes occurred. The flow of funds was the key.

I saw that there economic cycles were mainly financial: the build-up of debt and its cancellation or wipe-out and bankruptcy occurring again and again throughout history. I wanted to study the rise and fall of financial economies.

But when you studied at the New York University you were not taught the things that really interested you, were you?

I got a PhD as a union card. In order to work on Wall Street, I needed a PhD. But what I found in the textbooks was the opposite of everything that I experienced on Wall Street in the real world. Academic textbooks describe a parallel universe. When I tried to be helpful and pointed out to my professors that the texbooks had little to do with how the economy and Wall Street actually work, that did not help me get good grades. I think I got a C+ in money and banking.

So I scraped by, got a PhD and lived happily ever after in the real world.

So you had to find out on your own Your first job was at the Savings Banks Trust Company, a trust established by the 127 savings banks that still existed in New York in the 1960s. And you somehow hit the bull's eye and were set on the right track, right from the start: you've been exploring the relationship between money and land. You had an interesting job there. What was it?

Savings banks were much like Germany's Landesbanks. They take local deposits and lend them out to home buyers. Savings and Loan Associations (S&Ls) did the same thing. They were restricted to lending to real estate, not personal loans or for corporate business loans. (Today, they have all been turned into commercial banks.)

I noticed two dynamics. One is that savings grew exponentially, almost entirely by depositors getting dividends every 3 months. So every three months I found a sudden jump in savings. This savings growth consisted mainly of the interest that accrued. So there was an exponential growth of savings simply by inertia.

The second dynamic was that all this exponential growth in savings was recycled into the real estate market. What has pushed up housing prices in the US is the availability of mortgage credit. In charting the growth of mortgage lending and savings in New York State, I found a recycling of savings into mortgages. That meant an exponential growth in savings to lend to buyers of real estate. So the cause of rising real estate prices wasn't population or infrastructure. It was simply that properties are worth whatever banks are able and willing to lend against them.

As the banks have more and more money, they have lowered their lending standards.

It's kind of automatic, it's just a mathematical law

Yes, a mathematical law that is independend of the economy. In other words, savings grow whether or not the economy is growing. The interest paid to bondholders, savers and other creditors continues to accrue. That turns out to be the key to understanding why today's economy is polarizing between creditors and debtors.

You wrote in " Killing the Host " that your graphs looked like Hokusai's "Great Wave off Konagawa" or even more like a cardiogram. Why?

Any rate of interest has a doubling time. One way or another any interest-bearing debt grows and grows. It usually grows whenever interest is paid. That's why it looks like a cardiogram: Every three months there's a jump. So it's like the Hokusai wave with a zigzag to reflect the timing of interest payments every three months.

The exponential growth of finance capital and interest-bearing debt grows much faster then the rest oft he economy, which tends to taper off in an S-curve. That's what causes the business cycle to turn down. It's not really a cycle, it's more like a slow buildup like a wave and then a sudden

This has been going on for a century. Repeated financial waves build up until the economy becomes so top-heavy with debt that it crashes. A crash used to occur every 11 years in the 19th century. But in the United States from 1945 to 2008, the exponential upswing was kept artificially long by creating more and more debt financing. So the crash was postponed until 2008.

Most crashes since the 19th century had a silver lining: They wiped out the bad debts. But this time the debts were left in place, leading to a masive wave of foreclosures. We are now suffering from debt deflation. Instead of a recovery, there's just a flat line for 99% of the economy.

The only layer of the economy that is growing is the wealthiest 5% layer – mainly the Finance, Insurance and Real Estate (FIRE) sector. That is, creditors living of interest and economic rent: monopoly rent, land rent and financial interest. The rest of the economy is slowly but steadily shrinking.

And the compound interest that was accumulated was issued by the banks as new mortgages. Isn't this only logical for the banks to do?

Savings banks and S&Ls were only allowed to lend for mortgages. Commercial banks now look for the largest parts of the economy as their customers. Despite the fact that most economic textbooks describe industry and manufacturing as being the main part of economy, real estate actually is the largest sector. So most bank lending is against real estate and, after that, oil, gas and mining.

That explains why the banking and financial interests have become the main lobbyists urging that real estate, mining and oil and gas be untaxed – so that there'll be more economic rent left to pay the banks. Most land rent and natural resource rent is paid out as interest to the banks instead of as taxes to the government.

So instead of housing becoming cheaper and cheaper it turns out to be much less affordable in our days than in the 1960s?

Credit creation has inflated asset prices. The resulting asset-price inflation is the distinguishing financial feature of our time. In a race tot he bottom, banks have steadily lowered the terms on which they make loans. This has made the eocnomy more risky.

In the 1960s, banks required a 25-30% down payment by the buyer, and limited the burden of mortgage debt service to only 25% of the borrower's income. But interest is now federally guaranteed up to 43% of the home buyer's income. And by 2008, banks were making loans no down payment at all. Finally, loans in the 1960s were self-amortizing over 30 years. Today we have interest-only loans that are never paid off.

So banks loan much more of the property's market price. That is why most of the rental value of land isn't paid to the homeowner or commercial landlord any more. It's paid to the banks as interest.

Was this the reason for the savings and loan crisis that hit the US in 1986 and that was responsible for the failure of 1,043 out of the 3,234 savings and loan associations in the United States from 1986 to 1995?

The problem with the savings and loan crisis was mainly fraud! The large California S&L's were run by crooks, topped by Charles Keating. Many were prosecuted for fraud and sent to jail. By the 1980s the financial sector as a whole had become basically a criminalized sector. My colleague Bill Black has documented most of that. He was a prosecutor of the S&L frauds in the 1980s, and wrote a book "The best way to rob a bank is to own one".

That's a famous quotation, I also heard that.

Fraud was the main financial problem, and remains so.

Since 2007 Americans were strangled by their mortgages in the sub-prime crisis

These were essentially junk mortgages, and once again it was fraud. Already in 2004 the FBI said that the American economy was suffering the worst wave of bank fraud in history. Yet there was no prosecution. Essentially in the United States today, financial fraud is de-criminalized. No banker has been sent to jail, despite banks paying hundreds of billions of dollars of fines for financial fraud. These fines are a small portion of what they took illegally. Such paymets are merely a cost of doing business. The English language was expanded to recognize junk loans. Before the financial crash the popular press was using the word "junk mortgages" and "Ninjas": "No Income, No Jobs, no Assets". So everybody knew that there was fraud, and the bankers knew they would not go to jail, because Wall Street had become the main campaign contributer to the leading politicians, especially in the Democratic party. The Obama Administration came in basically as representatives of the bank fraudsters. And the fraud continues today. The crooks have taken over the banking system. It is hard for Europeans to realize that that this really has happened in America. The banks have turned into gangsters, which is why already in the 1930s President Roosevelt coined the word "banksters".

I also heard the nice English sayings "Too big to fail" or "Too big to jail"
But what has become of those 10 million households that ended up losing their homes to foreclosure? How are their economic and living conditions today? What has become of their houses? The economy has recovered

Most of the houses that were foreclosed on have been bought out by hedge funds for all cash. In the wake of 2008, by 2009 and 2010 hedge funds were saying "If you have $5,000,000 to invest, we're going to buy these houses that are being sold at distress prices. We're going to buy foreclosed properties for all cash, because we can make a larger rate of return simply by renting them out." So there has been a transfer of property from homeowners to the financial sector. The rate of home-ownership in America is dropping.

The economy itself has not recovered. All economic growth since 2008 has accrued only to the top 5% of the economy. 95% of the economy has been shrinking by about 3% per year and continues to shrink, because the debts were kept in place. President Obama saved the banks and Wall Street instead of saving the economy.

That's why we live in an "age of deception" as the sub-title of your latest book suggests, I guess?

"People have the idea that when house prices go up, somehow everybody's getting richer. And it's true that the entry to the middle class for the last hundred years has been to be able to own your own home "

What is deceptive is the fact that attention is distracted away from how the real world works, and how unfair it is. Economics textbooks teach that the economy is in equilibrium and is balanced. But every economy in the world is polarizing between creditors and debtors. Wealth is being sucked up to the top of the economic pyramid mainly by bondholders and bankers. The textbooks act as if the economy operates on barter. Nobel prices for Paul Samuelson and his followers treat the economy as what they call the "real economy," which is a fictitious economy that in theory would work without money or debt. But that isn't the real economy at all. It is a parallel universe. So the textbooks talk about a parallel universe that might exist logically, but has very little to do with how the real economy works in today's world.

If you had a picture you'd see me nodding all the time, because that's what I also found out: if you look at the mathematics, it is polarizing all the time, it is de-stabilizing. Without government interference we'd have crash after crash It is not under control anymore.

But you also suggest that there's another factor that makes housing prices go up – and that's property tax cuts. Why?

"Taxes were shifted off the Donald Trumps of the world and onto homeowners ."

Whatever the tax collector relinquishes leaves more rental income available to be paid to the banks. Commercial real estate investors have a motto: "Rent is for paying interest." When buyers bid for an office building or a house, the buyer who wins is the one who is able to get the largest bank loan. And that person is the one who pays all the rent to the bank. The reason why commercial investors were willing to do this for so many decades is that they wanted to get the capital gain – which really was the inflation of real estate prices as a result of easier credit. But now that the economy is "loand up," prospects for further capital gains are gone. So the prices are not rising much anymore. There is no reason to be borrowing. So the system is imploding.

So, how could we change the situation and make land a public utility?

There are two ways to do this. One way is to fully tax the land's rental value. Public investment in infrastructure – roads, schools, parks, water and sewer systems – make a location more desirable. A subway line, like the Jubilee tube line in London, increases real estate prices all along the line. The resulting rise in rents increases prices for housing. This rental value could be taxed back by the community to pay for this infrastructure. Roads and subways, water and sewer systems could be financed by re-capturing the rental value of the land that this public investment creates. But that is not done. A free lunch is left in private hands.

The alternative is direct public ownership of the land, which would be leased out to whatever is deemed to be most socially desirable, keeping down the rental cost. In New York City, for instance, restaurants and small businesses are being forced out. They're closing down because of the rising rents. The character of the economy is changing. It is getting rid of the bookstores, restaurants and low-profit enterprises. Either there should be a land tax, or public ownership of the land. Those are the alternatives. If you tax away the land's rent, it would not be available to be paid to the banks. You could afford to cut taxes on labor. You could cut the income tax, and you could cut taxes on consumption. That would reduce the cost of living.

To me that's pretty close to the position of Georgists on how to handle land, isn't it?

I don't like to mention Henry George, because he didn't have a theory of land rent or of the role of the financial sector and debt creation. The idea of land tax came originally from the Physiocrats in France, François Quesnay, and then from Adam Smith, John Stuart Mill, and in America from Thorstein Veblen and Simon Patten . All of these economists clarified the analysis of land rent, who ended up with it, and how it should be taxed. In order to have a theory of how much land rent there is to tax, you need a value and price theory. Henry George's value theory was quite confused. Worst of all, he spent the last two decades of his life fighting against socialists and labor reformers. He was an irascible journalist, not an economist.

The classical economists wrote everything you need to know about land rent and tax policy. That was the emphasis of Adam Smith, John Stuart Mill all the classical economists. The purpose of their value and price theory was to isolate that part of the economy's income that was unearned: economic rent, land rent, monopoly rent, and financial interest. I think it is necessary to put the discussion of tax policy and rent policy back in this classical economic context. Henry George was not part of that. He was simply a right-wing journalist whom libertarians use to promote neoliberal Thatcherite deregulation and anti-government ideology. In Germany, his followers were among the first to support the Nazi Party already in the early 1920s, for instance, Adolf Damaschke. Anti-Semitism also marked George's leading American followers in the 1930s and ‚40s.

So I guess I have to go back a bit further in history, to read the original Physiocrats as well

John Stuart Mill is good, Simon Patten is good, Thorstein Veblen is wonderful. Veblen was writing about the financialization of real estate in the 1920s in his Absentee Ownership . I recently edited a volume on him: Absentee Ownership and its Discontents (ISLET, Dresden, 2016).

Germany's land tax reform seems to go in the wrong direction. Germany has to establish new rules for it's "Grundsteuer" that in fact is a mingled tax on land and the buildings standing on it, based on outdated rateable values of 1964 (in the West) and 1935 (in the East). The current reform proposals of the federal states will maintain this improper mingling and intend a revenue neutral reform of this already very low tax. It brings about 11 billion Euro to the municipal authorities, but this is only 2% of the total German tax revenue, whereas wage tax and sales tax make up for 25% each. We need a complete tax shift, don't we?

Germany is indeed suffering from rising housing prices. I think there are a number of reasons for this. One is that Germans have not had a real estate bubble like what occurred in the US or England. They did lose money in the stock market, and many decided simply to put their money in their own property. There is also a lot of foreign money coming into Germany to buy property, especially in Berlin.

The only way to keep housing prices down is to tax awat the rise in the land value. If this is done, speculators are not going to buy. Only homeowners or commercial users will buy for themselves. You don't want speculators or bank credit to push up prices. If Germany lets its housing prices rise, it is going to price its labor out of the market. It would lose its competitive advantage, because the largest expense in every wage-earner's budget is the cost of housing. In Ricardo's era it was food; today it is housing. So Germany should focus on how to keep its housing prices low.

I'd like to come back to the issue of interest once more. The English title of "Der Sektor" is " Killing the host – How Financial Parasites and Debt Bondage Destroy the Global Economy". It's much more coming to the point. It struck me that you mention John Brown. He wrote a book called "Parasitic wealth or Money Reform" in 1898. I came across his book some years ago and thought that he was somehow America's Helmut Creutz of the 19th century. He was a supporter of Henry George, but in addition John Brown analyzed and criticized the interest money system and its redistribution of wealth. He said that labour is robbed of 33% of its earnings by the parasitic wealth with subtle and insideous methods, so that it's not even suspected. Why does almost nobody know this John Brown?

John Brown's book is interesting. It is somewhat like that of his contemporary Michael Flürscheim . Brown's book was published by Charles Kerr, a Chicago cooperative that also published Marx's Capital . So Brown was a part of the group of American reformers who became increasingly became Marxist in the 19 th and early 20 th century. Most of the books published by Kerr discussed finance and the exponential growth of debt.

The economist who wrote most clearly about how debt grew by its own mathematics was Marx in Vol. III of Capital and his Theories of Surplus Value . Most of these monetary writers were associated with Marxists and focused on the tendency of debt and finance to grow exponentially by purely mathematical laws, independently of the economy, not simply as a by-product of the economy as mainstream economics pretends.

So you recommend reading his book?

Sure, it is a good book, although only on one topic. Also good is Michael Flürscheim's Clue to the Economic Labyrinth (1902). So is Vol. III of Capital .

Brown's plan of reforms included the nationalization of banks and the establishment of a bank service charge in lieu of interest. The latter sounds remarkably up-to-date. In Germany the banks are raising charges because of the decrease in their interest margins. How is your view on the matter of declining interest rates?

Well, today declining interest rates are the aim of central bank Quantitative Easing. It hasn't helped. The most important questio nto ask is: what are you going to make your loans for? Most lending at these declining interest rates has been parasitic and predatory. There's a lot of corporate take-over lending to companies that borrow to buy other companies. There is an enormous amount of stock market credit that has helped bid up stock prices with low-interest credit and arbitrage. This has inflated asset prices for stocks, bonds and real estate. If the result of low interest rates is simply to inflate asset prices, the only way this can work is to have a heavy tax on capital gains, that is asset price gains. But in the US, England, and other countries there are very low taxes on capital gains, and so low interest rates simply make housing more expensive, and make stocks and buying a flow retirement income (in the form of stocks or bonds that yield dividends and interest) much more expensive.

I guess Brown is getting to the positive aspects of low interest also.

What Brown was talking about were the problems of finance. In the final analysis there is only one ultimate solution: to write down the debts. Nobody really wants to talk about debt cancellation, because they try to find a way to save the system. But it can't be fixed so that debts can keep growing at compound rates ad infinitum . Any financial system tends to end in a crash. So the key question is how a society is NOT going not to pay debts that go bad. Will it let creditors foreclose, as has occurred in the US? Or are you going to write down the debts and wipe out this overgrowth of creditor claims? That's the ultimate policy that every society has to face.

Very topical, the German Bundesbank sees the combination of low interest rates and a booming housing market as a dangerous cocktail for the banking sector. "The traffic lights have jumped to yellow or even to dark yellow", Andreas Dombret said, after the Bundesbank had denied the problem in the last years by dismissing it as Germany's legitimate catch-up effects. The residential property prices have gone up by 30% since 2010, in the major cities even by more than 60%. The share of real estate loans in the total credit portfolio is significantly rising. The mortgage loans of the households have increased in absolute terms as well as relative to their income. It's only due to the low interest rates that the debt service has not increased yet. But the banks and savings companies are taking on the risk: the mortgages with terms of more than ten years have risen to more than 40% of the residential real estate loans. The interest-change risks lie with the banks. Don't we have to face up to the truth that interest rates shouldn't go up again?

What should be raised are taxes on the land, natural resource rent and monopoly rent. The aim should be to keep housing prices low instead of speculation. Land rent should serve as the tax base, as the classical economists said it should. Adam Smith, John Stuart Mill all urged that the basis of the tax system should be real-estate and natural resource rent, not income taxes (which add to the cost of labor), the cost of labor and not value-added taxes (which increase consumer prices). So tax policy and debt write-downs today are basically the key to economic survival.

Banking should be a public utility. If you leave banking in the present hands, you're leaving it in the hands of the kind of crooks that brought about the financial crisis of 2008.

Couldn't the subprime-crisis have been prevented if the Fed had introduced negative interest rates in the 1990s?

No. The reason there was the crash was fraud and speculation. It was junk mortgages and the financialization of the economy. Pension funds and people's savings were turned over to the financial sector, whose policy is short-term. It seeks gains mainly by speculation and asset price inflation. So the problem is the financial system. I think the Boeckler foundation has annual meetings in Berlin that focus on financialization and explain what the problem is.

Yes, that's a big topic. The financial sector is interested, as you said, in short-term gains, but people who want to save for their retirement are interested in long-term stability – that is contradictory. Do you know the " Natural Economic Order by Free Land and Free Money" by Silvio Gesell

It is not practical for today's world, it is very abstract. The solution to the financial problem really has to be ultimately a debt write-down, and a shift to the tax system, as the classical economists talked about.

Gesell was also advocating the taxing of land. I think he had something in mind with bidding for the land, letting the market fix the prices.

He did not go beneath the surface to ask what kind of market do you want. Today, the market for real estate is a financialized market. As I said, the basic principle is that most rent is paid out as interest. The value of real estate is whatever a bank will lend against it. Unless you have a theory of finance and the overall economy, you really don't have a theory of the market.

You are advocating a revival of classical economics. What did the classical economists understand by a free economy?

They all defined a free economy as one that is free from land rent, free from unearned income. Many also said that a free economy had to be free from private banking. They advocated full taxation of economic rent. Today's idea of free market economics is the diametric opposite. In an Orwellian doublethink language, a free market now means an economy free for rent extractors, free for predators to make money, and essentially free for financial and corporate crime. The Obama Administration de-criminalized fraud. This has attracted the biggest criminals – and the wealthiest families – to the banking sector, because that's where the money is. Crooks want to rob banks, and the best way to rob a bank is to own one. So criminals become bankers. You can look at Iceland, at HSBC, or at Citibank and Wells-Fargo in the news today. Their repeated lawbreaking and criminal activities have been shown tob e endemic in the US. But nobody goes to jail. You can steal as much money as you want, and you'll never go to jail if you're a banker and pay off the political parties with campaign contribution. It's much like drug dealers paying off crooked police forces. So crime is pouring into the financial system.

I think this is what's going to cause a return to classical economics – the realization that you need government banks. Of course, government banks also can be corrupted, so you need some kind of checks and balances. What you need is an honest legal system. If you don't have a legal system that throws crooks in jail, your economy is going to be transformed into something unpleasant. That's what is happening today. I think that most Europeans don't want to acknowledge that that's what happened in America (USA). There is such an admiration of America that there is a hesitancy to see that it has been taken over by financial predators (a.k.a. "the market").

We always hear that oligarchies are in the east, in Russia, but hardly anyone is calling America an oligarchy although alternative media says that it's just a few families that rule the country.

Yes.

Michael Hudson is the author of Killing the Host (published in e-format by CounterPunch Books and in print by Islet ). His new book is J is For Junk Economics . He can be reached at mh@michael-hudson.com

War for Blair Mountain > , August 16, 2017 at 2:10 pm GMT

It is absolutely urgent that Richard Spencer and the Alt Right adopt the ideas and framework of Michael Hudson and and Ha Joon Chang(Kicking away the ladder.)

Support Socialism!!!=violation of free market principles

Pinochet=Neoliberal free market terrorism!!!

Albertde > , August 16, 2017 at 2:46 pm GMT

It is always a joy to read Michael Hudson but he is always discreetly incomplete as he never discusses the role of the privately owned US Federal Reserve, the other privately owned central banks and the BIS (Bank for International Settlements), which collectively force governments to borrow money from their central bank in order to create new money instead of these governments unilaterally creating the money themselves as they theoretically could.

Linda Green > , August 16, 2017 at 11:04 pm GMT

@Albertde It is always a joy to read Michael Hudson but he is always discreetly incomplete as he never discusses the role of the privately owned US Federal Reserve, the other privately owned central banks and the BIS (Bank for International Settlements), which collectively force governments to borrow money from their central bank in order to create new money instead of these governments unilaterally creating the money themselves as they theoretically could. This is a good point.

I believe Hitler made the same point, but due to our education consisting of largely being told what to think, rather than being taught how to think, we have had it pounded into our heads that such ideas as monetary sovereignty only come out of the minds of truly evil men. We are repeatedly told the only way to prevent Weimar style inflation is to run our economy as we presently do, no improvements are possible and to even consider such is a sign of sociopathology. Our betters for some reason want the children of the white stock that founded the country to hate themselves and become submissive to the advancing immigrant hordes while our politicians figure out ways to sell off large chunks of our infrastructure, like our roads for instance, so they can they can charge us and all the new immigrants they are letting in to drive on them.

Hell, just last week they taught a group of white men a good lesson when they tried to peaceably assemble to protest about their grievances. The media & leftist politicians (both Dem & Republican) teamed up on an alternative story of the event and allowed a group of paid communist thugs to come in and beat them while the media reported the white group to be the aggressor.

If I didn't know better, I would swear the United States has been taken over by a hostile globalist elite, that cares not one bit for the natives of our country.

Exciting times are ahead in our nation, this is for sure.

As to Michael Hudson's article, it is more gibberish from a lefty economist, he dances around facts but always in the end puts a disingenuous spin on it. The article is garbage and awfully loose with the facts.

Si1ver1ock > , August 16, 2017 at 11:43 pm GMT

Mr. Hudson is interesting as usual. I almost always learn something new from one of his interviews. I'm not sure how "taxing the land" squares with MMT, unless he is suggesting that we should shift taxes off the middle class to free up money for circulation.

In other words, fiscal policy (taxing and spending) is part economic policy and part social policy. It's a political economy.

Here is a primer on MMT for people who haven't looked into it yet.

Linda Green > , August 17, 2017 at 12:11 am GMT

I am familiar with MMT.

All that needs to be done at present is to change the FED's charter to allow infrastructure to be funded with some degree of monetary financing to prevent the selling off of the commons to global finance. I suggest this form of financing should only be used for maintenance of the commons, i.e. infrastructure.

All the rest will remain theoretical.

While not perfect the FED has all the tools and statistics to facilitate some level of monetary financing of infrastructure. I will take an independent federal reserve with a revised charter over selling off the commons to investors who will then charge us to use them. Funding our infrastructure the way it is presently done through congress is a joke, we need a better system, the economists at the FED are presently in a good position to speak to how best this might be accomplished. We need a plan, not a patchwork of resolutions and stop gap measures as to how the nations infrastructure will be funded.
It could be dollar matching to other funding sources, percentages, econometric models, etc. but unemployment levels and inflationary concerns would need to be considered.

another fred > , August 17, 2017 at 11:35 am GMT

One does not have to project too far into the future to see that the future needs for "money" to "pay" the unfunded obligations of the Federal government are going to require some serious changes in the monetary system.

The US cannot politically survive, and therefore will not allow, a repeat of the Great Depression where economic activity collapses to the same extent it did in 1929-30 (roughly 40%).

It seems to me likely that something on the order of MMT will be followed where the government issues "money" directly rather than funding its creation through debt instruments.

I think it is naive, however, to believe that this will be some kind of panacea, a cure for all our ills. In order to institute MMT, or anything like it, the government will have to have far more power as it will have far more responsibility .

More power in the hands of fewer people – what could possibly go wrong?

https://en.wikipedia.org/wiki/Iron_law_of_oligarchy

jacques sheete > , August 17, 2017 at 9:06 pm GMT

While the topic is dry one for me, Hudson makes it somewhat interesting and I like that he calls a fraud a fraud.

In fact pretty much the whole system, financial and political and all their appendages such as schools and the media, is a huge fraud. A pox on all the SOBs.

How could anyone argue against this, for instance?

Today's idea of free market economics is the diametric opposite. In an Orwellian doublethink language, a free market now means an economy free for rent extractors, free for predators to make money, and essentially free for financial and corporate crime.

I've long been impressed that what we have is not a free market, but a free-for-all market that excludes all but the richest from obtaining much by way of benefits.

Jim Bob Lassiter > , August 17, 2017 at 10:14 pm GMT

I, along with many others wish we were renting an apartment instead of "owning" our house free and clear and unsellable for 50% of what I paid for it in 1993 due to my neighborhood being targeted by AFFH on steroids.

And set aside my abject racism to see how easy it is to understand why younger people (highly skilled and otherwise) with absolutely nothing resembling job security would not want to own a home when they are forced on a wholesale basis to move frequently hundreds or thousands of miles away to find another unstable replacement job.

Brian Reilly > , August 17, 2017 at 11:50 pm GMT

An interesting but (alas ) incomplete and lop-sided view of the world. A couple comments:

The sheer size of the government apparatus (over 40% gdp in the US, more in most of the rest of the West) ensures rampant and intentional mis-allocation of capital, backed by the full police and judicial power of those various levels of government. This is an unavoidable aspect of human nature.

The fiscal and monetary fraud is no more than one aspect of many alluded to in the paragraph above. We have allowed charlatans masquerading as Utopian saviors and Paradigm Changers to capture police power to enforce laws and regulations obviously designed to shear the sheep, and reward the wolves. Too Big To Fail? More like Too Big To be Held to Account lest me and my friends and their children have to get real jobs instead of stealing from the rubes.

Last, it will be interesting to see how the debt is dealt with. It is a truly global issue, with too many people having to pledged to pay more money than can possibly be paid. It is so bad that the very accounting of the fiction has become near-impossible. Sooner or later, the accounting will become impossible, and some sort of reset (which will include a default and repudiation of most public and private debt instruments and their associated derivatives) will be agreed on? Implemented? Forced upon? By whom? Using what legal structure and in what currency denomination? Not any currency now in circulation, I think. Unclear to me, It will be fascinating to watch.

Linda Green > , August 17, 2017 at 11:53 pm GMT

If the options for infrastructure finance (maintenance and expansion of roads in particular) are basically:

- Soak the rich (taxes go up on the haves to pay)
- Some degree of monetary finance (money will be earned into existence rather than loaned into existence)
- Selling off the commons (the rich buy the infrastructure and charge the masses to use it)
- Continued patchwork of debt finance and can kicking

I would say monetary finance would make everyone short of the greedy asshole that wants to buy the highways happy.

I am fully aware that we have the appearance of a shortage of responsible enough parties to handle this sort of proposition. If it were widely known and the left got wind of it they would likely have brawndo water fountains on every corner. But Gary Cohn has not left the White House yet, and he is just the sort of guy that can pull something like this off through some acronym backed with hard facts and a near guarantee of success. We need to back away from socialism writ large and focus on long term sustained full employment with a gradual return to free market principles in all area of commerce.

In my economic utopia full employment and maintenance of infrastructure would be at the top of central bank or FED area of concern.

Medical care is expensive because it is subsidized and corrupted. Let the medical care bubble burst and let doctors compete for patients like other area of commerce. Until we figure out how to do that there will be no affordable medicine for the masses.

Linda Green > , August 18, 2017 at 12:03 am GMT

Furthermore there is discussion in some circles of guaranteed minimum income. What a horrible idea. Let me guess, the people will drive to pick up their money on some pothole filled road, right? What a misguided notion. Can we please put off all that talk until all the roads are fixed, every tree is trimmed, every sidewalk fixed, every park glisteningly beautiful, etc until we even remotely consider it a possibility. The ghettos already give everyone free money and they line up in their own filth stepping over garbage to pick up their checks. Give me a break!

Bayan > , August 18, 2017 at 1:17 pm GMT

Not every land owner is happy when roads or sewer systems are built close by. They may lose in terms of historical, cultural, and environmental values they attach to their surroundings. How are you going to compensate them? Nationalizing land does not solve this problem. One way of making people lose their attachment to a particular surrounding is to force them move every few years. But why do you want do that? To celebrate Bolshevist craziness? Why?

in the middle > , August 18, 2017 at 4:10 pm GMT

@Linda Green Linda Green:

What is needed is to use a different approach when protesting. Why not call it, 'American pride parade?" Or, "love the USA parade?", others use different naming conventions when in reality its other objectives that they sought after. For example, the federal reserve act=taking over the economy of the USA. Patriot act=taking your rights away, etc. So whomever is trying to even the field in 'pride' such as the T-shirts that read: 'brown pride', 'black pride', etc. Whities should have 'American pride', and who will fight that? So then American pride=White pride, period. That will put an end to the rabid attacks from the fake news media, and all its dumb followers.

myb6 > , August 18, 2017 at 5:45 pm GMT

Nationalizing all, or even most, land-rent only makes sense if the national government will take on the financial responsibility of funding local infrastructure, which seems like a disaster in the making.

Socializing all, or even most, land-rent even at the local level would completely destroy the balance sheets of millions of productive citizens. Cruel and arbitrary. As far as the response, "torches and pitchforks" would be understatement.

The only fair solution is to grandfather current land-rents and then tax the increment. Still discourages speculation. You could even phase-out the grandfather without destroying innocent families so long as it's gradual over a very long term, say 50 years.

TG > , August 18, 2017 at 9:50 pm GMT

A very interesting and intelligent commentary, as always from this source.

I would like to suggest that there is, in addition to what has been described here, another factor influencing rent, and that's demographics.

In the middle ages, Europe was essentially fully populated relative to its technology and infrastructure. All land was owned by a handful for wealthy families, and they could charge peasants rents so high that wages were hardly more than subsistence.

Then the Black Death came, and, unlike most plagues that quickly burned themselves out, it held the population low for generations. Suddenly the rich could not just coast on unearned interest from inherited land, because land was no longer a limiting factor. The rich tried reigning in wages via statute, but it's hard to beat supply and demand, and the rich failed. This caused the renaissance. It is little appreciated, but the physical standard of living of late medieval England was higher than many s0-called modern third-world countries

I suggest that, not in replacement of what has been mentioned here, but in addition, that demographics and population pressure also play a signficant role. When there is more land than people, it gets hard to collect rent (in the ante-bellum American South, the plantation owners had to resort to slavery. In the North, you had a lot of owner-operator farmers).

I would also think that, with a stable or slowly growing population, eventually every family pays off their mortgage, all the roads that need to get built are built, and then the children inherit, and debt goes away. A rapidly growing population means that big sums must constantly be borrowed to fund new construction and infrastructure, both public and private

And finally, I would posit that anything which reduces wages – such as too-rapid population growth – will also cause financialization, but for a different reason. I propose that in a low-wage society, where losing a job likely means a lifetime sentence of poverty, that people become wage-slaves, and beholden to their employers – and this includes economists and journalists etc. In this case only the occasional saint will take a stand on principle, and most of us are not saints. On the other hand, in a tight labor market, if an employee defies their boss (CNN, the University of Chicago, etc.), and is fired, it's not a big issue – they can easily find comparable well-paid work elsewhere.

another fred > , August 18, 2017 at 11:08 pm GMT

@Si1ver1ock I would like to offer an observation about "taxing the land". In my home state property taxes are among the lowest in the nation and this is a significant political issue. I cannot offer a "correct balance," but since it is an issue that has been front and center in local politics I think I can offer some relevant observations.

Because property taxes are low in my state "persons" (including corporate) have been able to tie up large tracts for agricultural (including silvicultural) and mineral (including speculative) purposes. Most of it is in pine forest which offers very low returns and then there is the occasional mineral "jackpot" when somebody strikes oil or opens a mine (usually coal). The low tax cost means that it is not expensive to hold land for these purposes. Other beneficiaries are family farms where the land is actively worked, but does not yield a high rate of return.

While family farms are pretty bulletproof politically, there is strong opposition to the large corporate interests. The main argument against these interests has been that they inhibit "growth." Arguments "for" (besides the campaign contributions) are that we are better off with a more stable, steadily growing agricultural (silvicultural) economy as rapid "growth" creates instability, i.e. that "creative destruction" is not an unalloyed good, of which the rate should be maximized.

There IS a tendency towards old rich families, some of whom are degenerate, but some of whom are "pillars of the community" who support charitable organizations that benefit "everybody" if one thinks slower moving societies are a good thing.

My general impression is that Mr. Hudson thinks that lots of "growth" is a good thing, but he thinks he knows a better way to achieve it (better than Trump, e.g.). Obviously, since I put "growth" in scare quotes I am not sold on the idea no matter how it is achieved.

Outside the issue of "growth" there is the issue of how much a community benefits from having "pillars."

You makes your choice and you takes your chance. Personally, I don't think the universe gives a damn one way or the other – if it works, it works, if it doesn't, "batter up!"

Nature bats last.

[May 14, 2017] IMF to Greece Sorry Well Destroy You by Michael Hudson

Notable quotes:
"... It doesn't matter what the people vote for. Either you do what we say or we will smash your banking system." Tsipras's job is to say, "Yes I will do whatever you want. I want to stay in power rather than falling in election." ..."
"... Somebody's going to suffer. Should it the wealthy billionaires and the bankers, or should it be the Greek workers? Well, the Greek workers are not the IMF's constituency. It says: "We feel your pain, but we'd rather you suffer than our constituency." ..."
"... The basic principle at work is that finance is the new form of warfare. You can now destroy a country's economy not merely by invading it. You don't even have to bomb it, as you've done in the Near East. All you have to do is withdraw all credit to the banking system, isolate it economically from making payments to foreign countries so that you essentially put sanctions on it. You'll treat Greece like they've treated Iran or other countries. ..."
"... The class war is back in business – the class war of finance against labor, imposing austerity and shrinking living standards, lowering wages and cutting back social spending. It's demonstrating who's the winner in this economic warfare that's taking place. ..."
"... Then why is the Greek population still supportive of Syriza in spite of all of this? I mean, literally not only have they, as a population, been cut to no social safety net, no social security, yet the Syriza government keeps getting supported, elected in referendums, and they seem to be able to maintain power in spite of these austerity measures. Why is that happening? ..."
"... You also need a contingency plan for when the European Union wrecks the Greek banks, which basically have been the tool of the oligarchy in Greece. The government is going to have to take over these banks and socialize them, and use them for public purposes. Unfortunately, Tsipras never gave Varoufakis and his staff the go ahead. In effect, he ended up double crossing them after the referendum two years ago that said not to surrender. That lead to Varoufakis resigning from the government. ..."
"... Tsipras decided that he wanted to be reelected, and turned out to be just a politician, realizing that in order to he had to represent the invader and act as a client politician. His clientele is now the European Union, the IMF and the bondholders, not the Greeks. What that means is that if there is an election in Greece, people are not going to vote for him again. He knows that. He is trying to prevent an election. But later this month the Greek parliament is going to have to vote on whether or not to shrink the economy further and cut pensions even more. ..."
"... The Greek government has not said that no country should be obliged to disregard its democratic voting, dismantle its public sector and give up its sovereignty to bondholders. No country should be obliged to pay foreign creditors if the price of that is shrinking and self destruction of that economy. ..."
"... They haven't translated this political program of not paying into what this means in practice to cede sovereignty to the Brussels bureaucracy, meaning the European Central Bank on behalf of its bondholders. ..."
May 14, 2017 | www.unz.com
Sharmini Peries: The European Commission announced on May 2, that an agreement on Greek pension and income tax reforms would pave the way for further discussions on debt release for Greece. The European Commission described this as good news for Greece. The Greek government described the situation in similar terms. However, little attention has been given as to how the wider Greek population are experiencing the consequences of the policies of the Troika. On May Day thousands of Greeks marked International Workers Day with anti-austerity protests. One of the protester's a 32-year-old lawyer perhaps summed the mood, the best when he said
"The current Greek government, like all the ones before it, have implemented measures that has only one goal, the crushing of the workers, the working class and everyone who works themselves to the bone. We are fighting for the survival of the poorest who need help the most."

To discuss the most recent negotiations underway between Greece and the TROIKA, which is a European Central Bank, the EU and the IMF, here's Michael Hudson. Michael is a distinguished research professor of Economics at the University of Missouri, Kansas City. He is the author of many books including, "Killing the Host: How Financial Parasites and Debt Bondage the Global Economy" and most recently "J is for Junk Economics: A Survivor's Guide to Economic Vocabulary in the Age of Deception" .Michael, let's start with what's being negotiated at the moment.

Michael Hudson: I wouldn't call it a negotiation. Greece is simply being dictated to. There is no negotiation at all. It's been told that its economy has shrunk so far by 20%, but has to shrink another 5% making it even worse than the depression. Its wages have fallen and must be cut by another 10%. Its pensions have to be cut back. Probably 5 to 10% of its population of working age will have to immigrate.

The intention is to cut the domestic tax revenues (not raise them), because labor won't be paying taxes and businesses are going out of business. So we have to assume that the deliberate intention is to lower the government's revenues by so much that Greece will have to sell off even more of its public domain to foreign creditors. Basically it's a smash and grab exercise, and the role of Tsipras is not to represent the Greeks because the Troika have said, "The election doesn't matter.

It doesn't matter what the people vote for. Either you do what we say or we will smash your banking system." Tsipras's job is to say, "Yes I will do whatever you want. I want to stay in power rather than falling in election."

Sharmini Peries: Right. Michael you dedicated almost three chapters in your book "Killing the Host" to how the IMF economists actually knew that Greece will not be able to pay back its foreign debt, but yet it went ahead and made these huge loans to Greece. It's starting to sound like the mortgage fraud scandal where banks were lending people money to buy houses when they knew they couldn't pay it back. Is it similar?

Michael Hudson: The basic principle is indeed the same. If a creditor makes a loan to a country or a home buyer knowing that there's no way in which the person can pay, who should bear the responsibility for this? Should the bad lender or irresponsible bondholder have to pay, or should the Greek people have to pay?

IMF economists said that Greece can't pay, and under the IMF rules it is not allowed to make loans to countries that have no chance of repaying in the foreseeable future. The then-head of the IMF, Dominique Strauss-Kahn, introduced a new rule – the "systemic problem" rule. It said that if Greece doesn't repay, this will cause problems for the economic system – defined as the international bankers, bondholder's and European Union budget – then the IMF can make the loan.

This poses a question on international law. If the problem is systemic, not Greek, and if it's the system that's being rescued, why should Greek workers have to dismantle their economy? Why should Greece, a sovereign nation, have to dismantle its economy in order to rescue a banking system that is guaranteed to continue to cause more and more austerity, guaranteed to turn the Eurozone into a dead zone? Why should Greece be blamed for the bad malstructured European rules? That's the moral principle that's at stake in all this.

Sharmini Peries: Michael, The New York Times has recently published an article titled, "IMF torn over whether to bail out Greece again." It essentially describes the IMF as being sympathetic towards Greece in spite of the fact, as you say, they knew that Greece could not pay back this money when it first lent it the money with the Troika. Right now, the IMF sounds rational and thoughtful about the Greek people. Is this the case?

Michael Hudson: Well, Yanis Varoufakis, the finance minister under Syriza, said that every time he talked to the IMF's Christine Lagarde and others two years ago, they were sympathetic. They said, "I am terribly sorry we have to destroy your economy. I feel your pain, but we are indeed going to destroy your economy. There is nothing we can do about it. We are only following orders." The orders were coming from Wall Street, from the Eurozone and from investors who bought or guaranteed Greek bonds.

Being sympathetic, feeling their pain doesn't really mean anything if the IMF says, "Oh, we know it is a disaster. We are going to screw you anyway, because that's our job. We are the IMF, after all. Our job is to impose austerity. Our job is to shrink economies, not help them grow. Our constituency is the bondholders and banks."

Somebody's going to suffer. Should it the wealthy billionaires and the bankers, or should it be the Greek workers? Well, the Greek workers are not the IMF's constituency. It says: "We feel your pain, but we'd rather you suffer than our constituency."

So what you read is simply the usual New York Times hypocrisy, pretending that the IMF really is feeling bad about what it's doing. If its economists felt bad, they would have done what the IMF European staff did a few years ago after the first loan: They resigned in protest. They would write about it and go public and say, "This system is corrupt. The IMF is working for the bankers against the interest of its member countries." If they don't do that, they are not really sympathetic at all. They are just hypocritical.

Sharmini Peries: Right. I know that the European Commission is holding up Greece as an example in order to discourage other member nations in the periphery of Europe so that they won't default on their loans. Explain to me why Greece is being held up as an example.

Michael Hudson: It's being made an example for the same reason the United States went into Libya and bombed Syria: It's to show that we can destroy you if you don't do what we say. If Spain or Italy or Portugal seeks not to pay its debts, it will meet the same fate. Its banking system will be destroyed, and its currency system will be destroyed.

The basic principle at work is that finance is the new form of warfare. You can now destroy a country's economy not merely by invading it. You don't even have to bomb it, as you've done in the Near East. All you have to do is withdraw all credit to the banking system, isolate it economically from making payments to foreign countries so that you essentially put sanctions on it. You'll treat Greece like they've treated Iran or other countries.

"We have life and death power over you." The demonstration effect is not only to stop Greece, but to stop countries from doing what Marine Le Pen is trying to do in France: withdraw from the Eurozone.

The class war is back in business – the class war of finance against labor, imposing austerity and shrinking living standards, lowering wages and cutting back social spending. It's demonstrating who's the winner in this economic warfare that's taking place.

Sharmini Peries: Then why is the Greek population still supportive of Syriza in spite of all of this? I mean, literally not only have they, as a population, been cut to no social safety net, no social security, yet the Syriza government keeps getting supported, elected in referendums, and they seem to be able to maintain power in spite of these austerity measures. Why is that happening?

Michael Hudson: Well, that's the great tragedy. They initially supported Syriza because it promised not to surrender in this economic war. They said they would fight back. The plan was not pay the debts even if this led Europe to force Greece out of the European Union.

In order to do this, however, what Yanis Varoufakis and his advisors such as James Galbraith wanted to do was say, "If we are going not to pay the debt, we are going to be expelled from the Euro Zone. We have to have our own currency. We have to have our own banking system." But it takes almost a year to put in place your own physical currency, your own means of reprogramming the ATM machines so that people can use it, and reprogramming the banking system.

You also need a contingency plan for when the European Union wrecks the Greek banks, which basically have been the tool of the oligarchy in Greece. The government is going to have to take over these banks and socialize them, and use them for public purposes. Unfortunately, Tsipras never gave Varoufakis and his staff the go ahead. In effect, he ended up double crossing them after the referendum two years ago that said not to surrender. That lead to Varoufakis resigning from the government.

Tsipras decided that he wanted to be reelected, and turned out to be just a politician, realizing that in order to he had to represent the invader and act as a client politician. His clientele is now the European Union, the IMF and the bondholders, not the Greeks. What that means is that if there is an election in Greece, people are not going to vote for him again. He knows that. He is trying to prevent an election. But later this month the Greek parliament is going to have to vote on whether or not to shrink the economy further and cut pensions even more.

If there are defections from Tsipras's Syriza party, there will be an election and he will be voted out of office. I won't say out of power, because he has no power except to surrender to the Troika. But he'd be out of office. There will probably have to be a new party created if there's going to be hope of withstanding the threats that the European Union is making to destroy Greece's economy if it doesn't succumb to the austerity program and step up its privatization and sell off even more assets to the bondholders.

Sharmini Peries: Finally, Michael, why did the Greek government remove the option of Grexit from the table in order to move forward?

Michael Hudson: In order to accept the Eurozone. You're using its currency, but Greece needs to have its own currency. The reason it agreed to stay in was that it had made no preparation for withdrawing. Imagine if you are a state in the United States and you want to withdraw: you have to have your own currency. You have to have your own banking system. You have to have your own constitution. There was no attempt to put real thought behind what their political program was.

They were not prepared and still have not taken steps to prepare for what they are doing. They haven't made any attempt to justify non-payment of the debt under International Law: the law of odious debt, or give a reason why they are not paying.

The Greek government has not said that no country should be obliged to disregard its democratic voting, dismantle its public sector and give up its sovereignty to bondholders. No country should be obliged to pay foreign creditors if the price of that is shrinking and self destruction of that economy.

They haven't translated this political program of not paying into what this means in practice to cede sovereignty to the Brussels bureaucracy, meaning the European Central Bank on behalf of its bondholders.

Note: Wikipedia defines Odious Debt: "In international law, odious debt, also known as illegitimate debt, is a legal doctrine that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable."

Michael Hudson is the author of Killing the Host (published in e-format by CounterPunch Books and in print by Islet ). His new book is J is For Junk Economics . He can be reached at mh@michael-hudson.com

[Apr 25, 2017] The Fall of the Latin American Left, Part I: Brazil's Boom and Bust

Notable quotes:
"... By Ignacio Portes, formerly the economy editor of the English-speaking daily Buenos Aires Herald. He has also published at Pando Daily and NSFWcorp ..."
"... Folha de São Paulo ..."
"... "'I know your works: you are neither cold nor hot. Would that you were cold or hot! So, because you are lukewarm, and neither cold nor hot, I will spew you out of my mouth.'" ..."
"... Her response of a Greek-style, slow austerity plan during the next two years only helped her lose a large part of her harder-core electoral base. ..."
"... mierda de toro ..."
"... O Globo ..."
"... Globo ..."
"... While these economic own-goals are definitely the key, ..."
Apr 25, 2017 | www.nakedcapitalism.com
Posted on April 25, 2017 by Yves Smith Yves here. I wanted to emphhsize a factor to consider in the difficulties Latin American (and developing) countries have had in trying to manage their affairs, namely, the impact of advanced central bank monetary operations on them. Our guest writer Ignacio Portes mentions it in his post below, but it is worth discussing at greater length.

Remember how for at least 18 months before the 2014 Bernanke "taper tantrum" that markets around the world were following a "risk on/risk off" trade, with reactions based largely on the latest central bank oracle reading? And that emerging economies were the ones most whipsawed by these trades?

None other than that card-carrying Communist, former IMF chief economist Raghuram Rajan complained about it when he was the head of the Central Bank of India. From a 2014 post in which we first quote a Rajan interview with Bloomberg and then add further comments:

Rajan is blunt by the standards of official discourse Some of his key points:

Emerging markets were hurt both by the easy money which flowed into their economies and made it easier to forget about the necessary reforms, the necessary fiscal actions that had to be taken, on top of the fact that emerging markets tried to support global growth by huge fiscal and monetary stimulus across the emerging markets. This easy money, which overlaid already strong fiscal stimulus from these countries. The reason emerging markets were unhappy with this easy money is "This is going to make it difficult for us to do the necessary adjustment." And the industrial countries at this point said, "What do you want us to do, we have weak economies, we'll do whatever we need to do. Let the money flow."

Now when they are withdrawing that money, they are saying, "You complained when it went in. Why should you complain when it went out?" And we complain for the same reason when it goes out as when it goes in: it distorts our economies, and the money coming in made it more difficult for us to do the adjustment we need for the sustainable growth and to prepare for the money going out

International monetary cooperation has broken down. Industrial countries have to play a part in restoring that, and they can't at this point wash their hands off and say we'll do what we need to and you do the adjustment. .Fortunately the IMF has stopped giving this as its mantra, but you hear from the industrial countries: We'll do what we have to do, the markets will adjust and you can decide what you want to do . We need better cooperation and unfortunately that's not been forthcoming so far.

Narrowly, Rajan is correct, but the underlying problem is much bigger and most orthodox economists are unwilling to confront it because it conflicts with their free markets religion. Carmen Reinhart and Ken Rogoff, in an analysis that got much less attention that their work on debt levels and growth, looked at 800 years of history of crises and found a strong correlation between the level of international capital flows and the frequency and severity of financial crises. That's implicit in his discussion of the impact of hot money flowing in and out. The Reinhart/Rogoff finding was confirmed by a 2010 paper by Claudio Borio and Piti Disyatat of the BIS that argued that what drives financial crises is not net capital flows ("global imbalances") but gross capital flows (too much financial "elasticity" as they called it, or what most of us would describe as too much speculation). But Rajan may in fact be referring to remedies like capital controls when he says, basically, that the industrial economies may not like the remedies that emerging economies implement.

Back to the present post. Voters in countries in Latin America hold their officials accountable for economic performance. Yet the destabilizing impact of hot money in and outflows, brought to them by the tender ministrations of neoliberal orthodoxy, means that the degree of control is limited.

By Ignacio Portes, formerly the economy editor of the English-speaking daily Buenos Aires Herald. He has also published at Pando Daily and NSFWcorp

The world's attention over the last few months has been focused on the rise of right-wing movements across the first world, and the struggle of the previously-ruling liberal establishment to understand the nature of what hit them. Somewhat buried below those news, however, one can also read about what seem to be the last pangs of another regional alliance going haywire, though with somewhat different protagonists.

It wasn't long ago that South American governments were seen as the biggest political alternative in a world moving mostly to the right, as parties backed by unemployed and landless movements, trade unions, indigenous groups and socialist organizations took power and pushed for certain re-distributive policies.

Now, the continent's two biggest economies, Argentina and Brazil, are ruled by coalitions packed with center-right businessmen. And in Venezuela - the country which arguably started to turn the continental political tide to the left back in 1998 - Hugo Chávez's heir Nicolás Maduro is barely holding to the presidency, losing by a landslide in the last mid-term elections amid frightening levels of social disarray.

Unpacking what went wrong for them will be key for whoever ends up being the next leftist movement to have a shot at power. And much of what went wrong was about the economy.

The fact that those three collapses took place almost simultaneously had a lot to do with the end of the commodity price supercycle that made life so much easier for governments across Latin America throughout the 2000s. But it wasn't simply a stroke of bad luck with the region's primary exports.

Wherever you looked, voters also had the growing perception that the malaise was also explained by local policy. And that was much harder to accept both for officials and for their most ardent supporters, who preferred to focus on outside factors, be them the global economy or some kind of internal or external political conspiracy.

Not that some degree of conspiracy couldn't be a factor. Dilma Rousseff's ousting in Brazil was largely an exercise in hypocrisy from a political opposition mired in corruption scandals and with several past episodes of embellishing the budget's figures. Yet it accused the government of exactly those two things, first to switch sides from congressional allies to staunch enemies and then to impeach Rousseff.

But none of that would have worked hadn't Rousseff's government also been under growing popular pressure since the country fell into a recession in 2014. Rousseff had already lost most of the middle class before that. Her response of a Greek-style, slow austerity plan during the next two years only helped her lose a large part of her harder-core electoral base. With the recession deepening and unemployment soaring, Rousseff's approval ratings plunged below 20%. Her former allies turned on her and there was no way back from there.

Brazil's Workers' Party fell into the classic emerging market boom and bust. The capital that had flown into the country with the commodities at high prices made it easy for the government and the private sector to take on debt and finance a larger expansion. The hype made Brazil an easy sale. In 2009, The Economist famously printed Jesus' statue at the top of Rio de Janeiro's Corcovado mountain taking off from the ground as if it were a rocket, illustrating a story about the country's supposed transformation. The government seemed to believe it too, embarking into grandiose, costly projects to host the 2014 football World Cup and the 2016 summer Olympic Games announcing Brazil's arrival into the global center stage, while also playing up the significance of the massive (but hard to reach) oil deposits discovered off the Brazilian coast.

But the foundations of the boom weren't really solid. The country's currency, the real, appreciated beyond what many local industries could resist in the long run due to the sudden influx of foreign capital. Protectionism and subsidies to some of Brazil's top business owners tried to compensate for that, but the costs of doing so started to mount.

When commodity prices stopped helping, the underlying problems surfaced. By 2013, The Economist ran exactly the opposite cover than in 2009, with Jesus' statue crashing down after a failed launch. Short-term investors panicked and moved their cash elsewhere. Suddenly, re-financing public and private debt became much harder. Millions of Brazilians started struggling with defaulted loans for the consumer goods they had recently purchased, and repayments only got harder when the Central Bank also raised interest rates to try cut inflation. Subsidies to companies became hard to sustain too, while basic services and infrastructure, which never improved much, started suffering even more, with the tightening budgets focused on completing the billionaire Olympic and World Cup stadiums and luxury hotels. Even oil failed to deliver, both due to the plunge in international prices and the massive corruption schemes uncovered in the state-run Petrobras, which threw the company into disarray.

The question, then, is why did the Workers' Party go for policies that would end up destroying its popularity and its grip on power?

A tentative answer, unglamorous as it might be, is that they didn't know what else to do. Their problem could be seen as another manifestation of a general failing of the post Cold War left: the lack of a trusted economic programme of its own, which forced them to borrow from here and there as circumstances presented themselves.

They used a bit of orthodoxy to avoid "scaring" the markets when they first took office in 2003, tried to take advantage of those first moves by leveraging the credit they were given as a result, and added some re-distributive policies when there seemed to be room for them, all of that almost inevitably mixed with the endemic corruption schemes and inefficiency troubles that seem to mar all of the region's politics (but that hardly came to the surface during the boom times).

When the crises came, the government tried some countercyclical moves at first, but Brazilian laws made them less effective than normally expected, as private and public debt could not be diluted due to indexation clauses written into contracts, keeping the burden high despite some stimulus. So they resumed the international bond market appeasing as a (failed) last-ditch effort, with political scandals erupting in the background as capital flight and coalition disbanding made the end increasingly inevitable.

Brazil's elites decided for a transition behind the backs of the electorate, backing Rousseff's former VP Michel Temer, a man from the ideologically flexible PMDB party, to take her place after a largely ridiculous impeachment process where the charges against the President were barely even mentioned. Unconcerned about his lower-than-Dilma popularity, the possibility of re-election or the need to be loyal to his voting base, Temer is now enacting a much more thorough austerity program that has slightly turned markets around, but which has seen unemployment continue to skyrocket, now reaching 13% percent, up from 7% just a couple of years ago.

Could it have gone differently? In the most short-termist of views, it's hard to see how the Workers Party could have held on. Falling governments are the norm amid huge economic crises with no seemingly end in sight, and this was Brazil's largest recession on record. In a European-like parliamentary system, the situation would surely have led to a vote of no confidence, used in similar circumstances to oust Prime Ministers in more democratically-friendly fashion.

But as we'll see in parts II and III, the multiple roads taken by other left-of-centre coalitions in Latin America showed that the Workers Party's long-term approach was just one of many possibilities.

0 0 37 0 0 This entry was posted in Banana republic , Commodities , Currencies , Economic fundamentals , Free markets and their discontents , Guest Post , Income disparity , Macroeconomic policy , Politics on April 25, 2017 by Yves Smith . Ed , April 25, 2017 at 9:12 am

Actually I think the critical strategic mistake here was made by the Brazilian right, which had the option of just waiting until 2018 and then taking power in a normal election. They may have been spooked by the prospect of running against Lula again (though they have beaten Lula in the past several times). Or there may have been behind the scenes US pressure for a color revolution, due to Brazil's previous closeness to Russia.

But not just waiting until the election and then taking power on the normal pendulum swing will blow up in their faces.

The overall Workers' Party strategy was appropriate for the situation they were in. My only real criticism is political, they should have made winning statehouses more of a priority and less so the presidency, but you have to run a presidential candidate, and when you have a candidate like Lula you are going to try to capitalize.

RabidGandhi , April 25, 2017 at 10:44 am

I hope you're right that it was a mistake. Every poll I have seen shows Lula easily winning any election, and the Brazilian capitalist class was well aware of this. In fact there was the pathetic incident where Folha de São Paulo intentionally obfuscated poll data showing that 62 percent of Brazilians want new elections and they would have voted for Lula. The stunning speed and extent of the destruction wrought by Temer (and Macri) shows that the right wing is convinced that this may be their only shot at power, so they need to get in and obliterate as much of the welfare state as quickly as possible, like vandals who know the security guards will arrive any second.

That said, I agree that the impeachment debacle shows that PT needs a far bigger presence in congress and in the governorships, otherwise it is vulnerable to another constitutional coup. However, I disagree that "the overall Workers' Party strategy was appropriate": they were gravely wrong to implement austerity in an economic downturn.

PKMKII , April 25, 2017 at 1:06 pm

My only real criticism is political, they should have made winning statehouses more of a priority and less so the presidency

Now that sounds like a familiar criticism.

Harry , April 25, 2017 at 1:11 pm

The Brazilian right had no choice. If Dilma had been left in charge she might have chosen to sacrifice a whole bunch of corrupt businessman and politicians to placate the middle class. Someone was going down. The only question was who.

Left in Wisconsin , April 25, 2017 at 9:40 am

Well, I guess I will wait for parts 2 and 3. Thus far in the story, it is hard to see how Brazil, Argentina and Venezuela represent three cases of the same phenomenon.

Ignacio Portes , April 25, 2017 at 1:42 pm

Nah, their approaches were different for sure, I think it will become clear in far more detail starting in the second post. Part of the point of the series is to show that the governments fell into different failure modes, despite some common themes such as international economics (commodity prices first helping a lot, then not so much) or the fact they were all part of a regional political alliance.

johnnygl , April 25, 2017 at 10:02 am

I think this represents a clear example of the failure of 3rd way politics again. The jackals on the right in Latin America do not and will not respect parties of the left, no matter if they stick with orthodoxy. They must be confronted and beaten with deeper reforms and a well-organized base. Ecuador's recent election shows what can be done. Correa's party has achieved its best result ever and still won even though the opposition was united this election.

RabidGandhi , April 25, 2017 at 10:49 am

But Rousseff did use the stick of orthodoxy, and she was overthrown nonetheless!

"'I know your works: you are neither cold nor hot. Would that you were cold or hot! So, because you are lukewarm, and neither cold nor hot, I will spew you out of my mouth.'"

JohnnyGL , April 25, 2017 at 10:53 am

"But Rousseff did use the stick of orthodoxy, and she was overthrown nonetheless!" – Exactly! The lesson for parties of the left is not to trust the right. They are not your friends. They will stick the knife in your back at the first chance!

Martin Finnucane , April 25, 2017 at 11:59 am

Hence the term laodicean .

Perhaps the left needs a red hot response instead.

Alejandro , April 25, 2017 at 10:25 am

As far as the question of "how", Yves intro and 2014 post was more insightful. Parsing relevant facts from irrelevant facts seems always a grind, and discerning facts from opinion seems even more so. Context always matters, and proportionality often seems distorted or missing, imO. I've gravitated towards the opinion that "capital" seems a euphemism for power, "capitalism" seems a euphemism for a network of unaccountable, unelected "Davos" insiders(aka tPtb) , and "capitalists" seem to be the gatekeepers that keep the outsiders outside the power to shape, re-shape, form, re-form, structure, re-structure, structurally adjust and re-adjust etc., a social order that willingly or unwittingly serves these insiders as the highest priority and loftiest of purposes, at the expense of anything and everything else. Which is why I've also gravitated towards the opinion that "capitalism" and "democracy" are not only antithetical to each other, but irreconcilable a neoliberal project that facilitates a virtual-parliament, where "governance" is done through "capital" flows, by and at the behest of unseen, unaccountable, unelected insiders.

RabidGandhi , April 25, 2017 at 10:25 am

Anecdote: When I was in Brazil last December I asked everyone I could why Dilma was impeached. The near unanimous answer was "por corrupção" (the outliers were two responders who, interestingly, said it was because she was unpopular). While Ignacio's excellent post does hint at this, I think it's important to stress the battle for "hearts and minds" currently underway in LatAm that, in the case of Brazil, has led to Rousseff losing her base and the far right returning to power.

Yves and Ignacio look at two important aspects, with Yves focusing on deleterious capital flows and Ignacio on the resulting fiscal policy. Ignacio's point is particularly salient, and one that often gets lost among leftist pundits prone to ideological Manichaeism:

Her response of a Greek-style, slow austerity plan during the next two years only helped her lose a large part of her harder-core electoral base.

This, IMO, is the number one reason that led to Rousseff's overthrow: Dilma inflicted austerity on the working class and it abandoned her, leaving her vulnerable to a rightwing attack. But how can I say that when it goes against the findings of my (highly unscientific, anecdotal) survey? Let me answer that with yet more anecdotal evidence.

Here in Latin America there is an almost universal narrative as to why we have so much poverty, that goes as follows: "we live in a resource rich region, but we are plagued by 'corruption', which means politicians with their hands in the till. We wish we could have safe roads, sewers, transportation, hospitals but the state always ends up bankrupt because the politicians steal all the money". (At this point the narrative gets taken over by political allegiances and media memes: "what we need to do is throw these corrupt bums out of office and bring in [enter name of political party supported by the media]".

This narrative is, of course, total mierda de toro . First the state cannot go bankrupt, so that should be BS tell n° 1. When Rousseff's base saw their infrastructure, pensions and jobs cut, it was not because Rousseff is a corrupt politician with her hand in the till, bankrupting the state. Even in Brazil, which has a particularly corrupt political elite, they rob millions when the economy is a matter of hundreds of billions. Yet like so many revolutionaries of her generation, Rousseff is solid on socialist ideology when it comes to politics, but when it comes to economic understanding, not so much. So when the international economic crisis came to Brazil, she appointed the Finance Minister who seemed to know something about that economics stuff: Washington Consensus Superstar Joachim Levy. Levy sold her the usual neoliberal BS line that "the state is broke, TINA, we need to cut social programmes", yadda yadda. And austerity was suddenly on the menu.

Meanwhile, the monopolist media conglomerate O Globo broadcasted everywhere 24/7 that Dilma was corrupt with the usual narrative. If you're in a favela and you see your life getting worse because of budget cuts and you hear the non-stop "Corrupção!" narrative from the media, in the absence of a media and education system that tell the truth about economics, there is no way you stick your neck out to support Rousseff. Here the media and its oligarchical overlords ensure that people have a hard time differing between millions and trillions, between microeconomy and macroeconomy. The TV is full non-stop with caterwauling that this or that politician might have stolen $10m and they incorrectly associate that with the macroeconomic situation caused by the government's bad fiscal policy.

In sum, yes the QE/ZIRP capital flows play a role. Yes this was used to push the PT to make bad fiscal decisions. But there is also an ideological battle on in Latin America, where the oligarchic-dominated media are pushing a false 'corruption' narrative to take advantage of the fiscal missteps of ostensibly left-wing governments. While these economic own-goals are definitely the key, if it were not for this false narrative, the PT, Kirchnerism, Chavism even Lugo in Paraguay would still be in the drivers seat.

JohnnyGL , April 25, 2017 at 10:50 am

RabidGandhi, always enjoy your comments.

Personally, yes, the media is rotten and that's a tremendous problem. The plunging economy (caused by int'l capital tidal flows + austerity) + media narrative of scapegoating is, of course, how the script goes to throw left-leaning govts out of power. However, I don't think that gets you ALL the way there.

Otherwise, how to explain Venezuela and Ecuador? The oligarchs ran the same playbook in all countries in LatAm. But it doesn't always work.

1) Venezuela is arguably MORE vulnerable to capital flows and commodity prices than in Brazil. The government has been handicapped by its own incompetence (especially with regard to the currency, as Comrade Haygood will tell you any chance he gets!). The Chavista government has also had plenty of corruption problems, at least somewhat linked to those bad currency policies. Yet, somehow, the government is still hanging in there. In fact, its popularity seems to be on the rebound as the population gets tired of the violent, extremist idiots that seem to be leading the opposition. In my view, they've kept a core of supporters, who have stayed loyal and haven't been sold out by their government. Those core supporters are organized and actively pushing back against the hard-right in the country. This seems to be enough to endure the turbulence.

2) Ecuador's example is also telling. Correa's party, Allianza Pais, just hauled in its largest ever vote total. They seem less corrupt and incompetent than the Chavista party in Venezuela, but face the same problems of tumultuous capital flows and rabidly hostile media with the constant accusations of corruption that are present in Venezuela and Brazil. Yet, in spite of this, they continue to increase their support and expand their base.

From where I stand the lessons seem clear for lefty parties of Lat Am:

No compromise with the right or with orthodoxy. They hate you and will slit your throat if you let them. Do not abandon your base (and they won't abandon you). Organize your base and be prepared for crisis. These things let you survive as a political force. If you show competence and reduce corruption (in reality, not according to the media narrative), then you'll get even stronger and do even better at the ballot box.

RabidGandhi , April 25, 2017 at 11:42 am

Thanks Johnny, likewise. With regard to "ALL the way there", I tried to be clear that the main reason for Rousseff's fall was her austerity policies, with the media playing a crucial role thereafter. With regard to Ecuador vs. Venezuela, BOTH made currency missteps, as Correa's biggest failure was that he was never able to wean Ecuador off the USD. The main difference I see between the two countries' leftist governments is that Correa was somewhat more successful at diversifying the economy whereas Venezuela is still far too dependent on oil rents. In all the South American economies, the key is developing an internal market by bringing the excluded masses into the economy and ditching the commodity exporter model. Nevertheless I agree with your point about the Venezuelan right: they are overplaying their hand and Maduro is gaining strength (eg, yesterday's poor turnout opposition march).

I'd also point out that the last elections in the countries in question (Ecu 2017, Bol 2016, Arg 2015, Bra 2014, Ven 2013) were all photo finishes (with ≈2% margins), where the slightest tweeks could have reversed the outcome completely, so it is hard to talk about mandates or "what the people want".

Lastly you discuss corruption as being a factor for the Maduro and Correa administrations. Does that mean you disagree with my point that "corruption!" is just a rightwing meme that has little to do with most people's household economies?

JohnnyGL , April 25, 2017 at 2:08 pm

RabidGandhi,

Sorry, squishing too many thoughts into my comments with limited time to write (at work).

To clarify my addition to your point about austerity being the real Rousseff killer, I'd say, "Yes, that's absolutely the proximate cause. However, there are underlying reasons that are just as important that shouldn't be left out of the story".

Perry Anderson's article in LRB is a real must read on what has happened in Brazil. He covers a wide range of issues, including why the PT has failed in a broader political context.

https://www.lrb.co.uk/v38/n08/perry-anderson/crisis-in-brazil

If you're interested, read the part that starts: "Half-hidden, the roots of this debacle lay in the soil of the PT's model of growth itself. From the outset, its success relied on two kinds of nutrient: a super-cycle of commodity prices, and a domestic consumption boom."

Anderson goes on to discuss how the PT failed to improve public services, only relying on the private sector. Finance Minister Mantega tried to stimulate private investment and also attempted to split off industrial interests away from big finance. That attempt failed spectacularly. Again, here's Anderson's money quote: "In the belief that this must rally manufacturers to its side, the government confronted the banks by forcing interest rates down to an unprecedented real level of 2 per cent by the end of 2012. In São Paulo the Employers Federation briefly expressed its appreciation of the change, before hanging out flags in support of the anti-statist marchers of June 2013."

JohnnyGL , April 25, 2017 at 2:13 pm

Re: Ecuador election, yes it was close. However, I think the margin of victory doesn't tell the full story. Allianza Pais keeps building its vote totals every election since 2006. Check wikipedia on this. Correa had a big breakthrough from 2009 to 2013, but Moreno didn't lose votes, he got more. I could be wrong, but that makes me thing they're building something more lasting than what PT did.

Just looking, Rousseff couldn't match Lula's vote totals, neither could Maduro match Chavez's. Somehow, Moreno beat Correa's numbers from previous elections. That might be a real sign, or might not.

Lastly, regarding this, "Does that mean you disagree with my point that "corruption!" is just a rightwing meme that has little to do with most people's household economies?" - No, I think you're right. But I do think corruption is more of a problem in Venezuela. Unless you've got some other explanation for why they won't fix the screwy currency policy that seems to magnify problems, rather than dampen them (as a well managed currency should do)?

I can only guess that someone fairly important is making a lot of money in cross-border smuggling to Colombia.

I think Ecuador seems to have done better on corruption, the best the media could do was drum up a scandal that sounded ridiculous on its face. I don't recall the details, but it seemed like they were really desperate to latch onto something.

Ignacio Portes , April 25, 2017 at 3:48 pm

Corruption is important, just not in the way of the simplistic media spin that you mentioned – obviously what a President might take home is irrelevant when compared to a national budget or a GDP. (and Dilma, by the way, doesn't seen to have been personally corrupt at all; even if there was obviously corruption at her party, I have never seen any hint that it might have help line up her pockets)

A topic that I have never read anyone write about in depth is how left political alternatives can finance their campaigns. Obviously, if you are a business candidate you'll find it easier to get donors, but if you want to build a working class or socialist party then it gets tougher. And in Latin America, this has often led to all kinds of shady deals with the underworld, with public works contracts and so on. And the problem is the economic distortions that this brings: to keep those dirty schemes that finance your party going, you have to create infrastructure programmes not where they are most needed but where it's easier to take a cut off without anyone noticing it (this happened a lot in Argentina), you have to take part in corruption schemes with the country's oligarchs (see Brazil), you have to make deals with murderous criminal cartels and so on. This can be incredibly damaging: it weakens the economy for starters, but it ultimately even derails the point of the political project completely, turning a political party into a bureaucracy whose main goal is just self-perpetuation. Venezuela's military trying to hang on to power and to its failed economic policies no matter how in order to keep its power over black market deals is part of the explanation for that country's crisis, for sure, and another example of this.

RabidGandhi , April 25, 2017 at 4:59 pm

Example 1: Upon assuming the presidency, the Macri administration immediately embarks on a plan to devalue the peso. Four of Macri's ministers, including éminence grise Marcos Peña buy dollar futures before the devaluation and make out like bandits when the peso plummets.

Example 2: Upon Macri taking office as Buenos Aires Mayor, his cousin's construction firm, IECSA, suddenly jumps from virtual anonymity to being the third largest recipient of public works contracts.

Are these examples of corruption the same? I would argue no. In example 2– which is the type you mention and which is the type most screamed about in the press– the damage is that favouritism may have led to not the best postulant winning the bid, thus providing the public with inferior infrastructure. But there is a general good that occurs: insofar as Calcaterra hires local workers and uses domestic materials, the economy will grow from the multiplier effect. (Of course insofar as the money is not used for construction and instead gets parked in Miami, there is a net loss.) While I agree infrastructure does not get well distributed– I burn with rage when I see stupid multi-million peso overpasses in Buenos Aires while my neighbourhood doesn't even have proper sewers– there is no reason why both can't be built; Argentina has plenty of people and materials just waiting to be employed.

Example 1 on the other hand is the type of corruption we should worry about. It involves politicians making decisions not based on the public good, but rather to benefit themselves and/or a small group of powerful people. The devaluation of the peso immediately went to the supply chain and inflation skyrocketed, resulting in a 12% loss in real wages. This less-publicised corruption affected the pocketbook of everyone in the country, whereas the eternally repeated infrastructure issue– be it Calcaterra or Baéz or whoever– is not even noticeable in the average citizen's economy. Nevertheless, when Globo shows the latest accused in Lava Joto, the public inevitably gets angry because they think that the suspect's alleged crime cost them money personally; that he is the reason why there is no money for housing or pensions. No, the reason why there are housing and pension cuts is because it was a political decision by the Dilma/Temer governments; Lava Joto has nothing to do with it.

______

Secondly, with regard to campaign financing here's my two cents: I think it is less of an issue here then it is up north. First because mandatory voting makes GOTV largely unnecessary, thus greatly reducing the amount of money needed. Secondly, because (for better or worse) all the Mercosur countries have very strong party apparatuses that perform much of the campaigning work. And thirdly because of (partially) public funded elections. In this regard, politics here is not as much about fundraising as it is about lining up all the unions and social movements. But this system giveth and taketh. On one hand it often involves mass mobilisations that are largely based on individuals' political motivation and organising efforts; but on the other hand it entails party patronage systems that often fund goons who carry out ratf*cking operations and small-scale political violence (the mafias you mentioned? eg, the AAA in the 70s; or more recently the thugs who stormed the Santa Cruz Governer's House, etc.). This is not to say that there is not a growing trend toward expensive marketing campaigns and black money, but for now at least it is more subdued. And lastly, in the case the left needs campaign money, I think the Sanders 2016 campaign provided an excellent, viable model.

Left in Wisconsin , April 25, 2017 at 11:15 am

While these economic own-goals are definitely the key,

Rabid G: could you expound on which own-goals were problematic, what could or should have been done differently? There seems to be an argument that:
1. Rousseff mis-steps led to lack of support among people who were, and apparently still are, Lula supporters. Presumably the argument is that she could have run large fiscal deficits and targeted spending to poor? Or canceled the Olympics?
2. This lack of support made possible soft coup.

From what I know of what happened, I am skeptical of both claims. And seems to completely absolve hot money of any responsibility, which I took as the main point of the post. But I claim no expertise.

RabidGandhi , April 25, 2017 at 12:12 pm

Yes that is the argument: Rousseff implemented two rounds of austerity, cutting pensions and capping spending when Brazil's economy was already retracting. As readers here well know, these pro-cyclical measures always have the same result: throwing the country into deeper recession. Each round of austerity coincided with steep drops in Rousseff's top approval rating (Optimal/Good). Meanwhile, Lula– who never cut pensions and spending– remains the most popular politician in the country.

And as I made clear in my post (as Ignacio did in the OP), these factors are just part of what led to Rousseff's impeachment; no one is "completely absolving hot money" which is certainly another part of the equation. That said, given mainstream economists' monetarist bent, there is a tendency to see everything that happens in Latin America through a capital flow/commodity lens (cough *Haygood* cough). But this only holds true to the degree that these countries are dependent on finance and commodities. And the whole mantra of these leftist governments has been to supplant finance/commodity dependency with an internal market. So with all respect to Yves (and I think she might agree), to the degree to which they have been successful at creating this internal market, the hot money argument does not come into play.

Susan the other , April 25, 2017 at 12:41 pm

We never get ahead of the problem. In the early 70s Nixon was advised by Sec. Treas John Conally, of Dallas fame, that we could go off the gold standard bec we could basically do anything we wanted to generate growth in our own economy and that the imbalances that would follow for other countries "were their problem." This attitude preceded the free-market mania that followed, thinking that the market would balance it all out. So, starting with Breton Woods and an incomplete monetary system which did not address the real world, we have come to 2017 wherein candidates are running for office without a party and sovereign states don't understand the power of their own sovereignty. We need a "peg" – a new rational one. Gold has always been irrational, but the environment is as rational as you can get. And every sovereign country has an environment. The environment is everywhere! Whereas the nutty obsession with gold made it valuable and it was arbitrarily priced at some "standard" to which all else was valued (insane, right?) we could do it the rational way and price the environment at some value and thereby eliminate inflation altogether (because you can't inflate a currency that is both ubiquitous and invaluable already) and at the same time have a resourceful, healthy world. Everywhere. This would get rid of all the neoliberal money hoarding and all sorts of ills. But, I'm dreaming again.

Kalen , April 25, 2017 at 2:49 pm

Another great discussion set up by Yves but the article, probably because of limited length, could only scratch the surface of what is and was brewing in Latin America in last decade or so and Obama's policies of global color revolutions having a lot to do with it.

Moreover, it is hard in English speaking media to figure out what is going on in Latin America especially recently in Venezuela, Ecuador, Bolivia even Brazil or Argentina but one thing in my opinion, is sure there is no socialism there, nor ever was.

Instead there were more or less social-democratic governments trying to elevate horrible poverty of the peoples due to extreme exploitation by local oligarchs, while in all cases leaving intact capitalist/neo-feudal system and social structures including reactionary religious organizations as it was there before. Now all those governments are under a direct attack from Global oligarchy.

It may sound harsh but the main problem is that Maduro and other "people's" leaders in Latin America were being heavily influenced or down right corrupted by western money. Yes, leftist leaders directly or due to their global policies withd USD dominated financial system are in Wall Street pockets already. Too many friends of Lula, Chavez and now Maduro revolution have bank accounts in New York to appropriately respond to this blatant aggression we are witnessing in a revolutionary manner, as they should if they did not betray their people.

Those South American springs we are witnessing in Argentina, Brazil, Venezuela, Bolivia, and Ecuador, and soon Cuba etc., are not due to lack of cooperation between popular South American leaders and US.gov and Wall Street but that they cooperate to little to win approval of Washington hegemons, namely they do not exploit and betray their people hard enough.

It is a world oligarch's quarrel and those who do not heed the warnings are expelled from the cushy country club of globalists, and that's why they are so polite, yes polite, facing Washington economic aggression. But there is deeper reason for it.

Former radicals, communists, worker trade unionists or native populists and other leftist such as Lula-Rousseff, Chavez,(Maduro), Corea, Morales etc., after being brought to power, via peoples popular movements spawned by catastrophe of raging neoliberalism in previous decades , not on their own merits as a true leftists since they later betrayed the true left, but on the wave of global capital instigated booms of commodity demand from China itself stimulated to the brink of orgasm via Wall Street money changers and now is awaiting eruption anytime and following by a long secular economic flaccidity which will turn this mockery of workers' led Chinese government into openly fascistic/regional imperial regime as it already is.

One must realize that those recent South American leftist revolutions, including Chavez revolution, were underwritten by Wall Street bubbles, one might have asserted wrongly, that they were being skillfully exploited by leftist leaders while in truth they fell into a trap that ultimately doomed and condemned truly leftist Marxian or even Maoist/Leninist revolutionary political movements in South America into political oblivion for decades to come.

And hence sweeping counterrevolutionary wind of Washington doing, blowing across the South American continent.

And that seems to be the plan to discredit any political left as a vital and even viable or effective political force in South America, Europe and elsewhere.

It took him eight years but Obama Mission was Accomplished. And that's his legacy few wants to talk about.

marku52 , April 25, 2017 at 3:21 pm

Here's a similar take from Ian Welsh:

"Obey the Laws of Purges

"Let's not dance around. Your first steps will be breaking the power of current economic and political elites who are not willing to convincingly join you or at least let you rule without trying to sabotage you.

You must do this all at once. When it happens, it happens to everyone it is going to happen to. This is Machiavelli's dictum, and he was right. After it has happened, those who weren't broken know they're safe as long as they don't get in your way."

Break up the banks and the media, have competent administrators ready to step in, and insulate yourself from foreign cash flows as much as you can. Otherwise you will be sabotaged.

7 Rules for Running a Left wing Government.

http://www.ianwelsh.net/7-rules-for-running-a-real-left-wing-government/

Paulo A Franke , April 25, 2017 at 8:20 pm

I am transmitting from Brazil, having witnessed in situ the last 15 years of surreal economics.

The current 'crisis' has nothing to do with politics, ideology, government policy, corruption, etc.

In fact, there's no crisis at all happening in Brazil.

From 2003-2014, Brazil went through a surreal bubble of credit (and corresponding debt), equally divided amongst families and corporations.

The total debt stock went from 25% to 56% of GDP, in eleven years. That's roughly 3% of cocaine-like GDP injected into the veins of the economy, over quasi-eternal 11 years.

The debt bubble is now gloriously bursting. Two years of bubble deflation already checked, my guess is that the Brazilian economy should return to its natural size around 4Q 2017 / 1Q 2018.

From there on, there's slow growth in the works. We Brazilians do not know how to grow via investment and innovation. And everyone is vaxxed against diving into debt again.

johnnygl , April 25, 2017 at 8:41 pm

Without digging into details of your numbers, I don't think what you wrote is factually incorrect. However, the tone of what you wrote gives no agency to any person or institution. Big debt bubbles don't just 'happpen' like bad weather. They happen because of policy decisions made by people, individually and as groups.

Why those decisions were made and how they succeeded or failed is the part worth discussing.

[Apr 20, 2017] Mexicos Economy Is Being Plundered Dry naked capitalism

Notable quotes:
"... By Don Quijones, Spain & Mexico, editor at Wolf Street. Originally published at Wolf Street ..."
"... By Don Quijones . ..."
"... When it comes to debt, everything is relative, especially if you don't have a reserve-currency-denominated printing press. Read Is Mexico Facing "Liquidity Problems?" ..."
"... Greenspan's Fraud ..."
"... It would also stop phony war on drugs in Mexico ..."
"... To make matters worse, much of Mexico's new debt is in foreign-denominated currencies. Between 2015 and 2016 alone, the total amount of euro and dollar-denominated debt it issued rose by 46%. ..."
"... [u]nlike debt issued in pesos, Mexico's central bank cannot just print dollars and euros to bail out bond holders or inflate away the debt. ..."
"... Therefore shouldn't the question be the absolute external debt in dollars instead of the relative amount in pesos? ..."
"... To make matters worse, much of Mexico's new debt is in foreign-denominated currencies. ..."
Apr 20, 2017 | www.nakedcapitalism.com
Mexico's Economy Is Being Plundered Dry Posted on April 20, 2017 by Yves Smith Yves here. Most Americans know on some level that Mexico has become an economic and political disaster, save for those at the very top of the food chain. This post gives vignettes that bring home how much of a failed state it has become. And needless to say, the US had no small role in that outcome.

By Don Quijones, Spain & Mexico, editor at Wolf Street. Originally published at Wolf Street

The government of Mexico has a new problem on its hands: what to do with the burgeoning ranks of state governors, current or former, that are facing prosecution for fraud or corruption. It's a particularly sensitive problem given that most of the suspects belong to the governing political party, the Institutional Revolutionary Party (PRI), which ruled Mexico uninterruptedly from 1929 to 2000. It returned to power in December 2012 with the election of Enrique Peña Nieto. And it clearly hasn't changed its ways.

Some of the accused governors were so compromised they went on the run. In the last few weeks, two of them, Tomás Yarrington, former state governor of Tamaulipas, and Javier Duarte, former governor of Veracruz, were tracked down. Yarrington, accused of laundering proceeds from drug trafficking as well as helping Mexico's Gulf Cartel export "large quantities" of cocaine to the United States, was ensnared by Italian Police in the Tuscan city of Florence. He faces possible extradition to the United States.

Yarrington's successor as governor of Tamaulipas, Eugenio Hernández, a fellow PRI member who is also accused of close ties with narcotraficantes and money laundering, has not been seen in public since last June .

As for Duarte, he was caught this week by police in Guatemala. Like Yarrington, he wasn't exactly laying low. Among the accusations he faces is that of buying fake chemotherapy drugs , which were then unknowingly administered by state-run hospitals to children suffering from cancer. He and his cohorts purportedly pocketed the difference. He is also alleged to have set up 34 shell companies with the intention of diverting 35 billion pesos (roughly $2 billion) of public funds into his and his friends' deep pockets.

In just about any jurisdiction on earth, $2 billion is a substantial amount of money, even by today's inflated standards. But in Mexico, where neither the super rich (accounting for a very large chunk of the country's wealth) nor the super poor (accounting for roughly half of the population) pay direct taxes of any kind, it's a veritable fortune.

And when the country's public debt is already growing at an unprecedented pace, rampant corruption becomes a serious problem.

In the year 2000, Mexico had a perfectly manageable debt load of roughly 20% of GDP. Today, it is almost two and a half times that size. Last year alone the Mexican state issued a grand total of $20.31 billion in new debt, the largest amount since 1995, the year immediately after the Tequila Crisis when the country received an international bailout to rescue its entire banking system from collapse and to make whole the Wall Street investment banks that had gone all in on Mexican assets.

To make matters worse, much of Mexico's new debt is in foreign-denominated currencies. Between 2015 and 2016 alone, the total amount of euro and dollar-denominated debt it issued rose by 46%. Unlike debt issued in pesos, Mexico's central bank cannot just print dollars and euros to bail out bond holders or inflate away the debt. This debt must be serviced the hard way.

In recent years, Mexico's public debt has mushroomed in order to make up for lackluster growth, a weakening peso, much lower global oil prices, and the dwindling contribution to government coffers of the country's erstwhile sugar daddy, Pemex. The state-owned oil giant has itself been systematically plundered dry by its burgeoning ranks of senior managers and administrators, the untouchable, unsackable leaders of the oil workers' union, all closely aligned to PRI, and legions of Pemex contractors.

Between 2008 and 2016 Pemex's contribution to the government's tax revenues shrank from 40% to 13%. During roughly the same period (2009-2016) its debt grew 187% , to nearly $100 billion. Its pension liabilities amount to $1.2 billion. The losses and debt keep growing in tandem, while its production and reserves are shrinking. The company was already bailed out once last year.

The more Pemex's financial health declines, the larger the shortfall in public finances and the faster Mexico's public debt will grow.

The really twisted part? The more the debt grows, the more opportunities the country's corrupt politicians will get to feather their nests. It's not like there's much deterrent. In recent years only 17 of 42 serving or former governors suspected of corruption have been investigated, according to a study by María Amparo Casar, executive president of the advocacy group Mexicans Against Corruption and Impunity. Before the latest rash of detentions, only three of them ended up in prison.

"The decades of impunity have generated a level of shamelessness we've never seen before in Mexico," Max Kaiser, anti-corruption director for the Mexican Institute of Competitiveness (IMCO), told the New York Times . The excesses are more public than ever and have brought Mexicans to the verge of bankruptcy.

Mexico's debt continues to grow at a much faster pace than its economy, whose growth is forecast to slow this year to 1.5%, compared to last year's 2.4%. In February Mexico's top auditor, the Federal Audit Office (ASF), warned that Mexico's debt situation was just a step away from becoming unsustainable. A number of states are already facing bankruptcy , including Duarte's Veracruz.

Last August, Standard & Poor's lowered the outlook for Mexico's sovereign bonds from stable to negative and saw "an at least one-in-three possibility of a downgrade over the next 24 months." Mexico's foreign currency sovereign credit rating, which is what matters with bonds denominated in a foreign currency, at BBB+, is just three notches above junk. A downgrade would raise the cost of borrowing, pushing Mexico's finances even closer to the brink. In the meantime, the plunder must go on. By Don Quijones .

When it comes to debt, everything is relative, especially if you don't have a reserve-currency-denominated printing press. Read Is Mexico Facing "Liquidity Problems?"

0 0 9 0 0 This entry was posted in Banana republic , Free markets and their discontents , Globalization , Guest Post , Income disparity , Politics , The destruction of the middle class on April 20, 2017 by Yves Smith .
Trade now with TradeStation – Highest rated for frequent traders
Subscribe to Post Comments 37 comments Loblolly , April 20, 2017 at 10:15 am

And needless to say, the US had no small role in that outcome.

Can you elaborate on this? What responsibility do average US citizens bear for Mexico's crisis? Given the massive wealth transfer upwards in the last decade do we not have the same corruption issues in the US, regardless of it being under cover of law?

JTMcPhee , April 20, 2017 at 10:42 am

Maybe the stuff in this article has something to do with explaining the role "our" government and corruptorations have had and continue to have in catalyzing an dexporting and importing immiseration in Mexico and here "at home" too? "The Political Economy of Mexico's Drug War," http://isreview.org/issue/90/political-economy-mexicos-drug-war

jpj , April 20, 2017 at 10:44 am

I don't know if this is what was meant by that comment or not but, at the very least, it is the US' appetite for drugs that has allowed the cartels to flourish into practically nation states unto themselves.

Arizona Slim , April 20, 2017 at 12:46 pm

Exactly.

And, guess what, legalizing drugs that are currently illegal, will put quite the crimp in the cartels' business model.

If legalization is too big a leap, the US could try decriminalization. I believe that this was done in Portugal.

palamedes , April 20, 2017 at 1:59 pm

The problem with either is that a) The Mexican drug cartels are moving toward producing more lethal, cheaper drugs in massive quantities as the profits from selling marijuana dry up, and b) there needs to be, in the USA, a much more rigorous process regulating (as opposed to banning) controlled substances and of assisting addicts towards recovery. We've made periodic moves in this direction, but none have had staying power and that needs to change.

Massinissa , April 20, 2017 at 11:40 am

Us having no small role in crisis =/= US citizens having role in crisis.

If you havn't noticed yet, the government in the US doesn't answer to the citizenry at all.

Harry , April 20, 2017 at 2:55 pm

Quite so --

Adam Eran , April 20, 2017 at 12:25 pm

@Loblolly: The U.S.'s role south of its borders has been predation and looting for centuries now. I've read that between 1798 and 1994 the U.S. was responsible for 41 changes of government south of its borders.

When the Haitians, one of the two poorest nations in the hemisphere, had the temerity to elect Jean Bertrand Aristide, the candidate of the poor, the Clintons sent troops, and Bush 43 kidnapped him and took him to Central Africa.

The Reagan administration famously sold arms to Iran right after it had kidnapped U.S. embassy staff to fund a proxy war against the other poorest nation in the hemisphere, Nicaragua. Reagan asked the Mexican president to endorse his line that Nicaragua was a threat to the U.S. The Mexican president replied he would be happy to do that if there was any way he could say such a thing without being laughed out of office.

More recently, then secretary of state Hillary Clinton blessed the Honduran coup, installing a military junta to replace the democratically-elected government–a government which had the temerity to try to raise Honduras' minimum wage from 60¢ an hour. (The nerve of those people!). Meanwhile, 30,000 unaccompanied minors made their way to Gringolandia to avoid Honduran chaos. (I heard from WaPo's Ruben Navarette, deploring the treatment of these kids, but he uttered not a peep about what made them choose exile over their homes.)

For Mexico's current corruption and sad-and-sorry economy, we can at least take credit for NAFTA. Actually their president, Carlos Salinas Gotari, drank enough of the neoliberal koolaid with his Harvard education to propose "free trade" to Bush 41 whose administration authored the actual legislation. Clinton signed the treaty with environmental and labor provisions that just aren't enforced.

To demonstrate what a great idea was NAFTA, almost immediately the U.S. had to come up with a $20 billion loan to deal with the capital flight it permitted–and not incidentally to bail out U.S. banks that bet wrong on Mexico, and to rehearse the U.S. bank bailouts for any later financial scandal.

One might guess that shipping a bunch of subsidized Iowa corn south of the border would put some subsistence corn farmers in Mexico out of business and it did. Sure, corn is only arguably the most important food crop in the world, and those little farmers were keeping the diversity of the corn genome alive, but hey! They weren't making any money for Monsanto!

In the wake of NAFTA, Mexican real incomes declined 34% (says Ravi Batra in his Greenspan's Fraud )–really saying something in a country where half the population gets by on less than $4 a day. One has to return to the halcyon days of the Great Depression to find a decline like that in the U.S. economy.

Of course that U.S. decline provoked no great migration oh wait! The Okies! The only more recent comparable economic decline (besides the Greeks) that I can think of is when Cuba lost its oil and subsidies from the Soviets in the early '90s. In the U.S., Michael Pollan reports we get one calorie of food by burning 10 calories of petroleum. Without that Russian oil, I've read that the average Cuban lost 20 lbs.

So the constant attacks, political, economic and military, from the U.S. have had an effect. All those "illegal aliens" (no, not Martians with unpaid traffic tickets actually: "undocumented workers") came north for a reason. Ask one if he'd rather be back home, and you'll seldom hear them say "no."

We read daily in nakedcapitalism how we're sowing the wind, but we're surely going to reap the whirlwind for the way the U.S. has treated its southern neighbors.

lyman alpha blob , April 20, 2017 at 2:11 pm

It's widely known that NAFTA allowed US agriculture companies that are heavily subsidized by the government to dump their cheap corn in Mexico putting farmers there off their land and out of business. And yet people still wonder why so many are immigrating to the US.

Also, I'd keep an eye on that governor who is facing extradition to the US for facilitating the export of "large quantities" of cocaine. Speculation to be sure, but something tells me you don't do that without the knowledge and possible assistance of Uncle Sugar.

I'd say ask Gary Webb, but he's dead of course after exposing a similar scandal back in the 90s.

Ping , April 20, 2017 at 2:44 pm

NAFTA is directly responsible for increased cartel power. Besides corn dumping disrupting Mexico's rural economy and legitimate income, it generated the "maquiladora's" or Mexican factories along the US border for assembling tariff free imported materials for export.

The large population increase the factories attracted had no increase in public infrastructure like schools, housing etc and youth gangs proliferated. The cartels then began using the gangs as enforcers for smuggling routes and distribution into the US and many associated criminal tasks. A cascade of events ..

Jim Haygood , April 20, 2017 at 10:43 am

Between 2008 and 2016 Pemex's contribution to the government's tax revenues shrank from 40% to 13%.

A radio journalist friend in Guadalajara has been expecting and writing about this scenario for at least a dozen years. Mexico is a petro-state, but production is declining in its big oilfields and isn't being replaced. He visited South America to check out alternate bolt holes, on the theory that when the oil runs out, it's gonna turn ugly in Mexico.

So far his worries proved to be early. We don't have enough data points, but it's worth noting that Mexico's 1982 debt crisis occurred after a spike in US interest rates, a US recession and an oil patch meltdown in 1981.

Similarly, the US Fed started hiking interest rates in early 1994, while the price of oil had been sliding toward $15/bbl ever since the late 1990 spike to $40/bbl in anticipation of the Gulf war. Here's a long term chart of crude oil:

http://www.mrci.com/pdf/cl.pdf

Now J-Yel and her sidekick Stanley Mellon Fischer are once again "normalizing" interest rates, in a process they imagine to be smooth sailing. One should doubt this proposition. Among other things, recent extreme peso devaluation makes Mexico's dollar-denominated debt more onerous to service.

By next year, the question on everyone's lips in Vichy DC may be " Who lost Mexico? "

carl , April 20, 2017 at 12:10 pm

IIRC, Cantarell, the supergiant Mexican offshore field, peaked quite awhile ago. Maybe some new discoveries have made up for some of the decline, but I hadn't heard much about that.

Kalen , April 20, 2017 at 10:53 am

If US establishment would go after murderous Mexican oligarchy's Wall Street interests and support democratic movements in Mexico based of egalitarian principles, return of land to the people and establish social justice, we would have to build a wall to keep Mexicans in the US not the other way around.

It would also stop phony war on drugs in Mexico, a war that is nothing but a modern form, a sad reincarnation of popular insurrection against Mexican aristocracy happens to be at this time funded by drug trade, as a proud Mexican tradition of noble outlaws, a country founded on "Bandits" myth as national heroes bringers of independence from Spain.

If the US removed big Imperial foot of the throats of billions of peoples all over the world, and that includes Mexico nobody would want to go to America enjoying living in their own countries as everybody wants.

World immigration is an artifact of exploitative globalism and wars. Nothing natural or normal or desired is in emigration of people. Tourism yes but emigration is a sociopolitical tools of global oligarchy combined with chaos and violence.

If US let, as it were before in history (revolution of 1910-1930-ties, before PRI was corrupted to the bone) for political left to takeover the Mexican government then fate of Mexican people would have changed significantly for better.

djrichard , April 20, 2017 at 12:30 pm

It would also stop phony war on drugs in Mexico

This is an extension of the phone war on drugs in the US. See A Narco History: How the United States and Mexico Jointly Created the "Mexican Drug War" .

My belief is that the US war on drugs is just another example of what I'm calling CJ Hopkin's law of propaganda ,

The primary aim of official propaganda is to generate an "official narrative" that can be mindlessly repeated by the ruling classes and those who support and identify with them. This official narrative does not have to make sense, or to stand up to any sort of serious scrutiny. Its factualness is not the point. The point is to draw a Maginot line, a defensive ideological boundary, between "the truth" as defined by the ruling classes and any other "truth" that contradicts their narrative.

Or to use your language, it's to keep in place the foot of US authority on its own people. The damage to Mexico in the war on drugs is collateral damage – a necessary cost of keeping people in the US disciplined. Nothing personal just bidness.

Ranger Rick , April 20, 2017 at 11:18 am

This article focuses on the oil, but where does Carlos Slim figure into this? I find it endlessly fascinating that one of the world's richest people hails from one of its poorest countries.

Don Quijones , April 20, 2017 at 11:24 am

Here's an article on that very subject from a few years ago:

http://www.nakedcapitalism.com/2014/09/slimlandia-the-land-of-mexican-oligarchs.html

RabidGandhi , April 20, 2017 at 11:36 am

Point taken, but it should be noted that in terms of per capita GDP (PPP), Mexico is 68th out of 186 in the world, meaning it is not really one of the world's poorest countries. That said, there is rampant poverty in Mexico that makes Slim's hoarding all the more despicable.

Seamus Padraig , April 20, 2017 at 1:09 pm

Per capita GDP is just an average. Median income is what you should be considering here. There are a handful of Carlos Slims down there that bust the curve for everyone else. Oh, by the way, did I mention that Señor Slim now owns the New York Times?

RabidGandhi , April 20, 2017 at 1:25 pm

Agreed, median income is a much more telling stat. Mexican median annual household income is $11,680 vs. $9,733 worldwide.

RabidGandhi , April 20, 2017 at 11:31 am

Far be it from me to defend the Peña Nieto administration, but I'm not sure from where Quijones gets this:

To make matters worse, much of Mexico's new debt is in foreign-denominated currencies. Between 2015 and 2016 alone, the total amount of euro and dollar-denominated debt it issued rose by 46%.

The figures I have from the Bank of México show the country ended 2015 with a gross external debt of USD $417bn, while it ended 2016 at USD $412 bn: ie not a 46% increase but rather the first decrease in Mexico's external debt since 2009.

What I do see is that the total external debt (in dollars) decreased but the peso lost 18% to the USD in 2016. Since GDP only grew 7% last year, Mexico's external debt as a percentage of GDP (denominated in pesos) would have grown by around 40%. But this goes against Quijones' correct point that " [u]nlike debt issued in pesos, Mexico's central bank cannot just print dollars and euros to bail out bond holders or inflate away the debt. ". Therefore shouldn't the question be the absolute external debt in dollars instead of the relative amount in pesos?

Mel , April 20, 2017 at 11:58 am

I would guess that we want to answer the question "How much Mexican production would have to be diverted to pay off that debt?" So we either work out the value of Mexican GDP in dollars, or convert the value of the debt to pesos.

djrichard , April 20, 2017 at 12:12 pm

Therefore shouldn't the question be the absolute external debt in dollars instead of the relative amount in pesos?

Simpler to keep the currency conversions out, and just track changes on a per currency basis.

A perennial question I always ask when it comes to trade imbalances by the US is that we send our dollars to foreign countries for goods, and it only a subset of the US dollars come back to the US for goods what's happening to the rest of our US dollars? In the case of Mexico, an answer in theory could be that at least some of those US dollars are being used to pay US debt. But that would mean the Fed Gov of Mexico would have to implement a tax that is denominated in US dollars. Which would then fall on their exporters, as they're the ones hoovering up the US dollars. And they don't want that.

So instead they tax the losers. And they only have pesos. So the conversion rate is an issue.

What's interesting in all this is that while Mexico's Fed Gov is taking on debt in US dollars, their central bank owns US treasuries (that's how they manipulate their currency). But it begs the question, is there a way that Mexico's central bank and Mexico's Fed Gov could come to a deal to use the US treasuries that the central bank is holding to cancel out the US debt obligation by Mexico's Fed Gov? I'm guessing no – it's the principle of the matter, lol.

To make matters worse, much of Mexico's new debt is in foreign-denominated currencies.

Why do countries do this to themselves? Seems to be the very definition of insanity.

RabidGandhi , April 20, 2017 at 1:58 pm

"Why do countries do this to themselves?" They don't. They have an elite that does this to the country because it benefits them as a class, with most people in the country excluded from the decision-making process.

Susan the other , April 20, 2017 at 11:54 am

I don't get what good it can possibly do to build a wall to keep those bad hombres out when the bad hombres are all the politicians in Mexico. This is not a cautionary tale, it's too late for that. We need entirely new thinking here. Look how complex Brexit is – which lets us know how detailed the union tried to be in order to protect its interests. Which is looking pretty futile. Victor Orban was the only leader in the EU to put up a wall to keep refugees/immigrants out and instead of sanctioning Hungary, Mutti has confessed her immigration policy was a mistake. Why on earth didn't she say the ME war was a mistake? It's practically genocide. Three years ago when Syrians started leaving in a panic they knew it was going to be annihilation. How did they know they were sitting on such unlucky ground? If free trade treaties had a way of maintaining decent wages and living standards as the prerequisite to that trade we could begin to set things right. And that is what we should be doing instead of going to war to kickstart the free market economy. Trump is acting like that wall is actually infrastructure. And I wonder if people are amused by the double meaning of "the war on poverty." Everything is such a mess we can't keep pretending that the basics we follow are right. It seems like one long and insane emergency. I'm so burned out with political failure.

Seamus Padraig , April 20, 2017 at 1:12 pm

If free trade maintained "decent wages and living standards," the neo-liberal establishment would be against them.

pretzelattack , April 20, 2017 at 2:04 pm

heard that.

curlydan , April 20, 2017 at 12:10 pm

"[Pemex's] pension liabilities amount to $1.2 billion" this figure seemed a bit low in today's world of inflated pension return expectations–wondering about the source here. I saw the following study said Pemex's liabilities were closer to $90 billion although it is Wharton.

"Pemex's $90 billion in unfunded pension liabilities has been a major headache"
http://knowledge.wharton.upenn.edu/article/pemexs-pension-problem-oil-giant-slippery-ground/

Don Quijones , April 20, 2017 at 12:50 pm

Curly Dan,

That is a terrible typo on my part and I hang my head in shame - it should read 1.8 trillion pesos (roughly $90 billion at today's exchange rate), though there's some controversy around the number since some of the liabilities were supposed to have been transferred to the government's books last year. I don't how how the $1.2 billion crept in but I apologize with complete sincerity to all readers (and Yves) for the cock up.

DQ

Don Quijones , April 20, 2017 at 12:19 pm

Hi Rabid Gandhi,

That data point you mention was taken from an article (second paragraph down) published in EL Financiero, the third most read newspaper in Mexico and an affiliate of Bloomberg. Will look into the disparity.

As for Mexico's GDP, it grew by 2.3% last year, not 7%. The country hasn't experienced such buoyant growth for decades - and certainly not since joining NAFTA.

Thanks.

RabidGandhi , April 20, 2017 at 1:16 pm

Thanks DQ: sorry I wasn't clear about the 7% figure; the Bank of Mexico data I cited refer to nominal GDP growth in pesos. Since the peso devalued 18% to the dollar in 2016, real GDP in dollars shrank from USD 1.3 trillion to 1.15 trillion. Might this account for why EF calculated a 46% increase in external debt– because they are stating how many dollars Mexico borrowed but calculated in pesos? If so, this figure is misleading and detracts from your argument: those obligations are in foreign currencies, so their value in pesos is beside the point.

As I see it, the external debt is not (yet) a major issue in Mexico; more of a concern are the bonds issued by the states and semi-public companies that cannot print their own currencies and will leave the public on the hook. (Not to mention PRI whacking the public with spending cuts and utility/gas hikes, which are another story )

Don Quijones , April 20, 2017 at 1:30 pm

Thanks for clarifying, RG. And you're probably right: external debt is not the biggest issue here. More important are the out of control public spending at the regional level, the systemic corruption at both the state and federal level, which Peña Nieto's government has done nothing to address, and Pemex's worsening woes, and the risk they pose to Mexico's fiscal health.

If the peso once again begins to fall in value, the exposure of Mexico's corporate sector to foreign denominated debt is likely to be a much more immediate threat than the government's.

River , April 20, 2017 at 12:38 pm

Mexico has always been like this. Even prior to American meddling. Transferring all their mineral wealth i.e. silver to China for cheap, yet profitable, ceramics, and turning the Yucatan from growing food into the plants that were used to weave bags for storage containers in the 18th C., peonage and companies stores, on and on it goes.

What's happening now is just a continuation of the plundering that's been happening since the 16th C.

Seamus Padraig , April 20, 2017 at 1:13 pm

Quite correct. It all began with the Spaniards centuries ago.

Jeff N , April 20, 2017 at 12:44 pm

this sounds like the standard bezzle:
run up debts
buy things
pocket the things
burn down the store
collect insurance $ on everything that was "inside" the store (even though it had actually been looted long ago)

Sutter Cane , April 20, 2017 at 1:44 pm

As for Duarte, he was caught this week by police in Guatemala. Like Yarrington, he wasn't exactly laying low. Among the accusations he faces is that of buying fake chemotherapy drugs, which were then unknowingly administered by state-run hospitals to children suffering from cancer. He and his cohorts purportedly pocketed the difference.

Shades of Harry Lime, no? The drug war has done to Mexico what it took WWII to do to Vienna.

pretzelattack , April 20, 2017 at 2:05 pm

seems like the world is being plundered dry, at various rates of impoverishment.

Phemfrog , April 20, 2017 at 2:37 pm

Anecdote here, but an uncle on my husband's side who lives in Mexico City had mentioned big problems with his pension. (he works in media, and the family refers to it as a government pension). he said that pensions are being looted and they are paying out pennies on the dollar. so he withdrew what he could in lump sum and bought a small apartment near a beach somewhere. the only way to keep any of the value. they say what used to be hundreds of dollars a month to retire on is now less than $50 per month, and that no one can live off that little.

[Dec 25, 2016] Debt is about power as it affect social relationships, alter social norms, and affect relationships among individuals

Notable quotes:
"... That 'political pressure' turned out to be the bait and switch for a system that shifted power via debt creation. ..."
"... What we have not yet come to terms with are the implications of David Graeber's anthropological insights: how does debt affect social relationships, alter social norms, and affect relationships among individuals? ..."
"... Debt is a form of power, but by failing to factor this into their equations, the Central Bankers are missing the social, political, and cultural consequences of the profound shifts in 'credit market architecture'. In many respects, this is not about 'money'; it's about power. ..."
"... The Central Bankers' models can include all the parameters they can dream up, but until someone starts thinking more clearly about the role and function of money, and the way that 'different kinds of money' create 'different kinds of social relationships', we are all in a world of hurt. ..."
"... At this point, Central Bankers should also ask themselves what happens - socially, personally - when 'debt' (i.e., financialization) shifts from productivity to predation. That shift accelerated from the 1970s, through the 1990s, into the 2000s. ..."
"... Now, maybe it is just a coincidence, but it is hard for me not to notice that the explosion in consumer credit matches up nicely with the rise in inequality. ..."
www.nakedcapitalism.com

readerOfTeaLeaves , December 24, 2016 at 11:14 am

Of the structural changes, the evolution and revolution of credit market architecture was the single most important . In the US, credit card ownership and instalment credit spread between the 1960s and the 2000s; the government-sponsored enterprises – Fannie Mae and Freddie Mac – were recast in the 1970s to underwrite mortgages; interest rate ceilings were lifted in the early 1980s; and falling IT costs transformed payment and credit screening systems in the 1980s and 1990s. More revolutionary was the expansion of sub-prime mortgages in the 2000s, driven by rise of private label securitisation backed by credit default obligations (CDOs) and swaps. The 2000 Commodity Futures Modernization Act (CFMA) made derivatives enforceable throughout the US with priority ahead of claims by others (e.g. workers) in bankruptcy. This permitted derivative enhancements for private label mortgage-backed securities (PMBS) so that they could be sold on as highly rated investment grade securities. A second regulatory change was the deregulation of banks and investment banks . Similar measures to lower required capital on investment grade PMBS increased leverage at commercial banks. These changes occurred in the political context of pressure to extend credit to poor.

That 'political pressure' turned out to be the bait and switch for a system that shifted power via debt creation.

What we have not yet come to terms with are the implications of David Graeber's anthropological insights: how does debt affect social relationships, alter social norms, and affect relationships among individuals?

Debt is a form of power, but by failing to factor this into their equations, the Central Bankers are missing the social, political, and cultural consequences of the profound shifts in 'credit market architecture'. In many respects, this is not about 'money'; it's about power.

After Brexit, Trump, and the emerging upheaval in the EU, it's no longer enough to just 'build better economic models'.

The Central Bankers' models can include all the parameters they can dream up, but until someone starts thinking more clearly about the role and function of money, and the way that 'different kinds of money' create 'different kinds of social relationships', we are all in a world of hurt.

At this point, Central Bankers should also ask themselves what happens - socially, personally - when 'debt' (i.e., financialization) shifts from productivity to predation. That shift accelerated from the 1970s, through the 1990s, into the 2000s.

Allowing anyone to charge interest that is usurious is the modern equivalent of turning a blind eye to slavery.

By enabling outrageous interest, any government hands their hard working taxpayers over to what is essentially unending servitude.

This destroys the political power of any government that engages in such blind stupidity.

Frankly, I'm astonished that it has taken so long for taxpayers to show signs of outrage and revolt.

fresno dan , December 24, 2016 at 12:51 pm

readerOfTeaLeaves

December 24, 2016 at 11:14 am

I think you have come up with a good insight – I very much agree its about power and not money.

Now, maybe it is just a coincidence, but it is hard for me not to notice that the explosion in consumer credit matches up nicely with the rise in inequality.

And one other thing I would point out – it doesn't take usurious interest rates. If squillionaires have access to unlimited, essentially cost free money in which the distributors of money are guaranteed a profit, NO MATTER HOW MUCH THEY HAVE LOST, while the debts on non-squillionaires are collected with fees, penalties, and to the last dime, than it doesn't matter if interest rates are essentially zero.

Who gets bailed out is not due to logic or accounting that says that the banks' losses have to be made whole, but not home owners – that is an ideology called economics .

[Dec 06, 2016] What price the new democracy Goldman Sachs conquers Europe

Dec 06, 2016 | independent.co.uk
&Stephen Foley

November 17, 2011 | The Independent

While ordinary people fret about austerity and jobs, the eurozone's corridors of power have been undergoing a remarkable transformation

The ascension of Mario Monti to the Italian prime ministership is remarkable for more reasons than it is possible to count. By replacing the scandal-surfing Silvio Berlusconi, Italy has dislodged the undislodgeable. By imposing rule by unelected technocrats, it has suspended the normal rules of democracy, and maybe democracy itself. And by putting a senior adviser at Goldman Sachs in charge of a Western nation, it has taken to new heights the political power of an investment bank that you might have thought was prohibitively politically toxic.

This is the most remarkable thing of all: a giant leap forward for, or perhaps even the successful culmination of, the Goldman Sachs Project.

It is not just Mr Monti. The European Central Bank, another crucial player in the sovereign debt drama, is under ex-Goldman management, and the investment bank's alumni hold sway in the corridors of power in almost every European nation, as they have done in the US throughout the financial crisis. Until Wednesday, the International Monetary Fund's European division was also run by a Goldman man, Antonio Borges, who just resigned for personal reasons.

Even before the upheaval in Italy, there was no sign of Goldman Sachs living down its nickname as "the Vampire Squid", and now that its tentacles reach to the top of the eurozone, sceptical voices are raising questions over its influence. The political decisions taken in the coming weeks will determine if the eurozone can and will pay its debts – and Goldman's interests are intricately tied up with the answer to that question.

Simon Johnson, the former International Monetary Fund economist, in his book 13 Bankers, argued that Goldman Sachs and the other large banks had become so close to government in the run-up to the financial crisis that the US was effectively an oligarchy. At least European politicians aren't "bought and paid for" by corporations, as in the US, he says. "Instead what you have in Europe is a shared world-view among the policy elite and the bankers, a shared set of goals and mutual reinforcement of illusions."

This is The Goldman Sachs Project. Put simply, it is to hug governments close. Every business wants to advance its interests with the regulators that can stymie them and the politicians who can give them a tax break, but this is no mere lobbying effort. Goldman is there to provide advice for governments and to provide financing, to send its people into public service and to dangle lucrative jobs in front of people coming out of government. The Project is to create such a deep exchange of people and ideas and money that it is impossible to tell the difference between the public interest and the Goldman Sachs interest.

Mr Monti is one of Italy's most eminent economists, and he spent most of his career in academia and thinktankery, but it was when Mr Berlusconi appointed him to the European Commission in 1995 that Goldman Sachs started to get interested in him. First as commissioner for the internal market, and then especially as commissioner for competition, he has made decisions that could make or break the takeover and merger deals that Goldman's bankers were working on or providing the funding for. Mr Monti also later chaired the Italian Treasury's committee on the banking and financial system, which set the country's financial policies.

With these connections, it was natural for Goldman to invite him to join its board of international advisers. The bank's two dozen-strong international advisers act as informal lobbyists for its interests with the politicians that regulate its work. Other advisers include Otmar Issing who, as a board member of the German Bundesbank and then the European Central Bank, was one of the architects of the euro.

Perhaps the most prominent ex-politician inside the bank is Peter Sutherland, Attorney General of Ireland in the 1980s and another former EU Competition Commissioner. He is now non-executive chairman of Goldman's UK-based broker-dealer arm, Goldman Sachs International, and until its collapse and nationalisation he was also a non-executive director of Royal Bank of Scotland. He has been a prominent voice within Ireland on its bailout by the EU, arguing that the terms of emergency loans should be eased, so as not to exacerbate the country's financial woes. The EU agreed to cut Ireland's interest rate this summer.

Picking up well-connected policymakers on their way out of government is only one half of the Project, sending Goldman alumni into government is the other half. Like Mr Monti, Mario Draghi, who took over as President of the ECB on 1 November, has been in and out of government and in and out of Goldman. He was a member of the World Bank and managing director of the Italian Treasury before spending three years as managing director of Goldman Sachs International between 2002 and 2005 – only to return to government as president of the Italian central bank.

Mr Draghi has been dogged by controversy over the accounting tricks conducted by Italy and other nations on the eurozone periphery as they tried to squeeze into the single currency a decade ago. By using complex derivatives, Italy and Greece were able to slim down the apparent size of their government debt, which euro rules mandated shouldn't be above 60 per cent of the size of the economy. And the brains behind several of those derivatives were the men and women of Goldman Sachs.

The bank's traders created a number of financial deals that allowed Greece to raise money to cut its budget deficit immediately, in return for repayments over time. In one deal, Goldman channelled $1bn of funding to the Greek government in 2002 in a transaction called a cross-currency swap. On the other side of the deal, working in the National Bank of Greece, was Petros Christodoulou, who had begun his career at Goldman, and who has been promoted now to head the office managing government Greek debt. Lucas Papademos, now installed as Prime Minister in Greece's unity government, was a technocrat running the Central Bank of Greece at the time.

Goldman says that the debt reduction achieved by the swaps was negligible in relation to euro rules, but it expressed some regrets over the deals. Gerald Corrigan, a Goldman partner who came to the bank after running the New York branch of the US Federal Reserve, told a UK parliamentary hearing last year: "It is clear with hindsight that the standards of transparency could have been and probably should have been higher."

When the issue was raised at confirmation hearings in the European Parliament for his job at the ECB, Mr Draghi says he wasn't involved in the swaps deals either at the Treasury or at Goldman.

It has proved impossible to hold the line on Greece, which under the latest EU proposals is effectively going to default on its debt by asking creditors to take a "voluntary" haircut of 50 per cent on its bonds, but the current consensus in the eurozone is that the creditors of bigger nations like Italy and Spain must be paid in full. These creditors, of course, are the continent's big banks, and it is their health that is the primary concern of policymakers. The combination of austerity measures imposed by the new technocratic governments in Athens and Rome and the leaders of other eurozone countries, such as Ireland, and rescue funds from the IMF and the largely German-backed European Financial Stability Facility, can all be traced to this consensus.

"My former colleagues at the IMF are running around trying to justify bailouts of €1.5trn-€4trn, but what does that mean?" says Simon Johnson. "It means bailing out the creditors 100 per cent. It is another bank bailout, like in 2008: The mechanism is different, in that this is happening at the sovereign level not the bank level, but the rationale is the same."

So certain is the financial elite that the banks will be bailed out, that some are placing bet-the-company wagers on just such an outcome. Jon Corzine, a former chief executive of Goldman Sachs, returned to Wall Street last year after almost a decade in politics and took control of a historic firm called MF Global. He placed a $6bn bet with the firm's money that Italian government bonds will not default.

When the bet was revealed last month, clients and trading partners decided it was too risky to do business with MF Global and the firm collapsed within days. It was one of the ten biggest bankruptcies in US history.

The grave danger is that, if Italy stops paying its debts, creditor banks could be made insolvent. Goldman Sachs, which has written over $2trn of insurance, including an undisclosed amount on eurozone countries' debt, would not escape unharmed, especially if some of the $2trn of insurance it has purchased on that insurance turns out to be with a bank that has gone under. No bank – and especially not the Vampire Squid – can easily untangle its tentacles from the tentacles of its peers. This is the rationale for the bailouts and the austerity, the reason we are getting more Goldman, not less. The alternative is a second financial crisis, a second economic collapse.

Shared illusions, perhaps? Who would dare test it?

[Nov 15, 2016] Over half of Ukraines population lives below poverty level

Nov 15, 2016 | eadaily.com
Nearly 60% (58.3%) of the population in Ukraine lives below the poverty line, according to data of the M.V. Ptukha Institute of Demography and Social Surveys, the National Academy of Science of Ukraine.

In 2015, this indicator was half as much – 28.6%. "The poverty index has increased twofold along with the actual cost of living," says Svetlana Polyakova , the leading research fellow at the Living Standard Department at the Demography Institute. "In addition, within the past year, we saw a growth of the poverty level defined by the UN criteria for estimation of internationally comparable poverty line in Central and Eastern Europe."

The highest poverty line was registered among the families having at least one child – 38.6% and pensioners – 23%. The situation may deteriorate this year. According to the State Service of Statistics, savings of Ukrainians in April-June fell by 5.297billion hryvnias (more than $200 million at the current exchange rate).

The cost of living in Ukraine in 2016 makes up 1,544 hryvnias (about $60).

Earlier, Prime Minister of Ukraine Volodymyr Groysman said the previous policy of populism and "money printing and distribution to people" made the country weaker and the people poorer.

[Sep 15, 2016] Whats Behind The Revolt Against Global Integration?

Notable quotes:
"... Elites can continue on the current path of pursuing integration projects and defending existing integration, hoping to win enough popular support that their efforts are not thwarted. On the evidence of the U.S. presidential campaign and the Brexit debate, this strategy may have run its course. ... ..."
"... I think some fellows already had this idea: "Much more promising is this idea: The promotion of global integration can become a bottom-up rather than a top-down project" -- "Workers of the World, Unite. You have nothing to lose but your chains!" ~Marx/Engels, 1848 ..."
"... Krugman sort of said this when he saw that apparel multinationals were shifting jobs out of China to Bangladesh. Like $3 an hour is just way too high for workers. ..."
"... The "populists" are raging against global trade which benefits the world poor. The Very Serious economists know what is really going on and have to interests of the poor at heart. Plus they are smarter than the "populists" who are just dumb hippies. ..."
"... And what about neocolonialism and debt slavery ? http://historum.com/blogs/solidaire/245-debt-slavery-neo-colonialism-neoliberalism.html ..."
"... International debtors are the modern colonialists, sucking the marrow of countries; no armies are needed anymore to keep those countries subjugated. Debt is the modern instrument of enslavement, the international banks, corporations and hedge funds the modern colonial powers, and its enforcers are instruments like the Global Bank, the IMF, and the corrupt, collaborationist governments (and totalitarian regimes) of those countries, supported and propped up by these neo-colonials. ..."
"... Cover your a$$ much Larry? No mention of mass immigration? No mention of the elites' conscious, planned attack on homogeneous societies in Western Europe, the US, and now Japan? ..."
"... The US was 88% European as of 1960. As of 1800 it was like 90% English. So yes, it was basically a homogeneous society prior to the immigration act of 1965. Today it is extremely hard for Europeans to get into the US -- but easier for non-Europeans. Now why would that be? Hmm .... ..."
"... The only trade that is actually free is trade not covered by laws and/or treaties. All other trade is regulated trade. ..."
"... Here's a good rule to follow. When someone calls something the exact opposite of what it is, in all probability they are trying to hustle your wallet. ..."
"... ISIS was invented by Wall Street who financed them. ISIS is a scam, just like Bin Laden's group, just like "COMMUNISM!!!!" to control people. To manipulate them. ..."
"... Guys, the bourgeois state is a protection racket and always has been. It makes you feel safe, secure and "feel like man". So we can enjoy every indulgent individual lust the world has to offer. Then comes in dialectics of what that protection racket should do. ..."
"... To me, the bourgeois state is nothing more than a protection racket for the rich, something you should not forget. ..."
"... I find it rather precious that Summers pretends not to understand why people hate TPP. I do not think there is any real widespread antipathy toward global integration, though it does pose some rather substantial systemic dangers, as we saw in the global financial collapse. What people, including me, oppose is how that integration is structured. These agreements are about is not "free trade", but removing all restrictions on global capital and that is a big problem. ..."
"... TPP is not free trade. It is protectionism for the rich. ..."
"... All or most modern "free trade" agreements are like that. What people oppose is agreements which impoverish them and enrich capital. ..."
"... More free trade arrangement are not always better trade arrangements. People have seen the results of the labor race to the bottom caused by earlier free trade agreements; and now they are guessing we're going to get the same kind of race to the bottom with TPP when we have to put all of our environmental laws and other domestic regulations into capitalist competition with backward countries. ..."
"... progressive states (WA, OR, CA, NV, IL, NY, MD) could simply treat union busting the same way any OTHER major muscling or manipulation of the free market is treated: make it a felony. ..."
"... Summers: "Pie in the Sky" So trade negotiations would have to be lead by labor advocates and environmental groups -- sounds great to me, but I can't for the life of me figure out why the goods and service producers (i.e. capital owners) would have any incentive to promote trade under such a negotiated trade agreement... or that trade would actually occur. You'd have to eliminate private enterprise incentives to profit I think.. not something the U.S.'s "individualism" god can't tolerate. ..."
"... Alas, the Kaiser, the Tsar, and the Emperor did not act in accord with its tenets. Either increased global trade is irrelevant to war and peace, or World War I didn't happen. Your pick which to believe. ..."
Apr 11, 2016 | economistsview.typepad.com
Larry Summers:
What's behind the revolt against global integration? : Since the end of World War II, a broad consensus in support of global economic integration as a force for peace and prosperity has been a pillar of the international order. ...

This broad program of global integration has been more successful than could reasonably have been hoped. ... Yet a revolt against global integration is underway in the West. ...

One substantial part of what is behind the resistance is a lack of knowledge. ...The core of the revolt against global integration, though, is not ignorance. It is a sense - unfortunately not wholly unwarranted - that it is a project being carried out by elites for elites, with little consideration for the interests of ordinary people. ...

Elites can continue on the current path of pursuing integration projects and defending existing integration, hoping to win enough popular support that their efforts are not thwarted. On the evidence of the U.S. presidential campaign and the Brexit debate, this strategy may have run its course. ...

Much more promising is this idea: The promotion of global integration can become a bottom-up rather than a top-down project. The emphasis can shift from promoting integration to managing its consequences. This would mean a shift from international trade agreements to international harmonization agreements, whereby issues such as labor rights and environmental protection would be central, while issues related to empowering foreign producers would be secondary. It would also mean devoting as much political capital to the trillions of dollars that escape taxation or evade regulation through cross-border capital flows as we now devote to trade agreements. And it would mean an emphasis on the challenges of middle-class parents everywhere who doubt, but still hope desperately, that their kids can have better lives than they did.

Tom aka Rusty : , Monday, April 11, 2016 at 07:15 AM
Is Summers really this naive?
Jedgar Mihelic : , Monday, April 11, 2016 at 07:21 AM
I think some fellows already had this idea: "Much more promising is this idea: The promotion of global integration can become a bottom-up rather than a top-down project" -- "Workers of the World, Unite. You have nothing to lose but your chains!" ~Marx/Engels, 1848
pgl -> Jedgar Mihelic ... , Monday, April 11, 2016 at 07:28 AM
Krugman sort of said this when he saw that apparel multinationals were shifting jobs out of China to Bangladesh. Like $3 an hour is just way too high for workers.
pgl : Monday, April 11, 2016 at 07:32 AM
A large part of the concern over free trade comes from the weak economic performances around the globe. Summers could have addressed this. Jared Bernstein and Dean Baker - both sensible economists - for example recently called on the US to do its own currency manipulation so as to reverse the US$ appreciation which is lowering our net exports quite a bit.

What they left out is the fact that both China and Japan have seen currency appreciations as well. If we raise our net exports at their expense, that lowers their economic activity. Better would be global fiscal stimulus. I wish Larry had raised this issue here.

Peter -> pgl... , Monday, April 11, 2016 at 08:12 AM
The "populists" are raging against global trade which benefits the world poor. The Very Serious economists know what is really going on and have to interests of the poor at heart. Plus they are smarter than the "populists" who are just dumb hippies.
likbez -> pgl... , Monday, April 11, 2016 at 04:48 PM
pgl,

And what about neocolonialism and debt slavery ? http://historum.com/blogs/solidaire/245-debt-slavery-neo-colonialism-neoliberalism.html

=== quote ===

One of the most fundamental reasons for the poverty and underdevelopment of Africa (and of almost all "third world" countries) is neo-colonialism, which in modern history takes the shape of external debt.

When countries are forced to pay 40,50,60% of their government budgets just to pay the interests of their enormous debts, there is little room for actual prosperity left.

International debtors are the modern colonialists, sucking the marrow of countries; no armies are needed anymore to keep those countries subjugated. Debt is the modern instrument of enslavement, the international banks, corporations and hedge funds the modern colonial powers, and its enforcers are instruments like the Global Bank, the IMF, and the corrupt, collaborationist governments (and totalitarian regimes) of those countries, supported and propped up by these neo-colonials.

In reality, not much has changed since the fall of the great colonial empires. In paper, countries have gained their sovereignty, but in reality they are enslaved to the international credit system.

The only thing that has changed, is that now the very colonial powers of the past, are threatened to become debt colonies themselves. You see, global capitalism and credit system has no country, nationality, colour; it only recognises the colour of money, earned at all cost by the very few, on the expense of the vast, unsuspected and lulled masses.

Debt had always been a very efficient way of control, either on a personal, or state level. And while most of us are aware of the implementations of personal debt and the risks involved, the corridors of government debt are poorly lit, albeit this kind of debt is affecting all citizens of a country and in ways more profound and far reaching into the future than those of private debt.

Global capitalism was flourishing after WW2, and reached an apex somewhere in the 70's.

The lower classes in the mature capitalist countries had gained a respectable portion of the distributed wealth, rights and privileges inconceivable several decades before. The purchasing power of the average American for example, was very satisfactory, fully justifying the American dream. Similar phenomena were taking place all over the "developed" world.

Kgaard : , Monday, April 11, 2016 at 07:32 AM
Cover your a$$ much Larry? No mention of mass immigration? No mention of the elites' conscious, planned attack on homogeneous societies in Western Europe, the US, and now Japan?
anne -> Kgaard... , Monday, April 11, 2016 at 07:44 AM
There is of course no reasonable answering to prejudice, since prejudice is always unreasonable, but should there be a question, when was the last time that, say, the United States or the territory that the US now covers was a homogeneous society?

Before the US engulfed Spanish peoples? Before the US engulfed African peoples? Before the US engulfed Indian peoples? When did the Irish, just to think of a random nationality, ruin "our" homogeneity?

I could continue, but how much of a point is there in being reasonable?

Kgaard -> anne... , Monday, April 11, 2016 at 11:21 AM
The US was 88% European as of 1960. As of 1800 it was like 90% English. So yes, it was basically a homogeneous society prior to the immigration act of 1965. Today it is extremely hard for Europeans to get into the US -- but easier for non-Europeans. Now why would that be? Hmm ....

Also ... What is your definition of prejudice?

Benedict@Large -> pgl... , Monday, April 11, 2016 at 08:56 AM
The only trade that is actually free is trade not covered by laws and/or treaties. All other trade is regulated trade.

Here's a good rule to follow. When someone calls something the exact opposite of what it is, in all probability they are trying to hustle your wallet.

Has anyone been trying to hustle the wallets of the people who became ISIS? Oh please. That's a stupid question to even ask.

So is free trade, as in regulated trade that is called the opposite of what it is, responsible for ISIS? Of course it is.

Ben Groves -> pgl... , Monday, April 11, 2016 at 10:10 AM
ISIS was invented by Wall Street who financed them. ISIS is a scam, just like Bin Laden's group, just like "COMMUNISM!!!!" to control people. To manipulate them.

It is like using the internet to think you are "edgy". Some dudes like psuedo-science scam artist Mike Adams are uncovering secrets to this witty viewer............then you wonder why society is degenerating. What should happen with Mike Adams is, he should be beaten up and castrated. My guess he would talk then. Boy would his idiot followers get a surprise and that surprise would have results other than "poor mikey, he was robbed".

This explains why guys like Trump get delegates. Not because he uses illegal immigrants in his old businesses, not because of some flat real wages going over 40 years, not because he is a conman marketer.........he makes them feel safe. That is purely it. I think its pathetic, but that is what happens in a emasculated world. Safety becomes absolute concern. "Trump makes me feel safe".

Guys, the bourgeois state is a protection racket and always has been. It makes you feel safe, secure and "feel like man". So we can enjoy every indulgent individual lust the world has to offer. Then comes in dialectics of what that protection racket should do.

To me, the bourgeois state is nothing more than a protection racket for the rich, something you should not forget.

DrDick : , Monday, April 11, 2016 at 07:35 AM
I find it rather precious that Summers pretends not to understand why people hate TPP. I do not think there is any real widespread antipathy toward global integration, though it does pose some rather substantial systemic dangers, as we saw in the global financial collapse. What people, including me, oppose is how that integration is structured. These agreements are about is not "free trade", but removing all restrictions on global capital and that is a big problem.
pgl -> DrDick ... , Monday, April 11, 2016 at 07:57 AM
OK - some substance finally. TPP is not free trade. It is protectionism for the rich.
DrDick -> pgl... , Monday, April 11, 2016 at 11:10 AM
Actually, this is my first actual response to the post itself, but you were too busy being and a*****e to notice. All or most modern "free trade" agreements are like that. What people oppose is agreements which impoverish them and enrich capital.
Dan Kervick -> pgl... , Monday, April 11, 2016 at 03:33 PM
This has become a popular line, and it's not exactly false. But so what if it were a "free trade" agreement? More free trade arrangement are not always better trade arrangements. People have seen the results of the labor race to the bottom caused by earlier free trade agreements; and now they are guessing we're going to get the same kind of race to the bottom with TPP when we have to put all of our environmental laws and other domestic regulations into capitalist competition with backward countries.
Denis Drew : , Monday, April 11, 2016 at 07:38 AM
" The promotion of global integration can become a bottom-up rather than a top-down project. "

" ... whereby issues such as labor rights and environmental protection would be central ... "

+1

Now if we could just adopt that policy internally in the United States first we could then (and only then) support it externally across the world.

Easy approach: (FOR THE TEN MILLIONTH TIME!) progressive states (WA, OR, CA, NV, IL, NY, MD) could simply treat union busting the same way any OTHER major muscling or manipulation of the free market is treated: make it a felony. FYI (for those who are not aware) states can add to federal labor protections, just not subtract.

A completely renewed, re-constituted democracy would be born.

Biggest obstacle to this being done in my (crackpot?) view: human males. Being instinctive pack hunters, before they check out any idea they, first, check in with the pack (all those other boys who are also checking in with the pack) -- almost automatically infer impossibility to overcome what they see (correctly?) as wheels within wheels of inertia.

Self-fulfilling prophecy: nothing (not the most obvious, SHOULD BE easiest possible to get support for actions) ever gets done.

Peter : , Monday, April 11, 2016 at 08:31 AM
http://jaredbernsteinblog.com/new_path_forward/

I'm not the only one seeking a new path forward on trade.

by Jared Bernstein

April 11th, 2016 at 9:20 am

"...

Here's Larry's view of the way forward:

"The promotion of global integration can become a bottom-up rather than a top-down project. The emphasis can shift from promoting integration to managing its consequences. This would mean a shift from international trade agreements to international harmonization agreements, whereby issues such as labor rights and environmental protection would be central, while issues related to empowering foreign producers would be secondary. It would also mean devoting as much political capital to the trillions of dollars that escape taxation or evade regulation through cross-border capital flows as we now devote to trade agreements. And it would mean an emphasis on the challenges of middle-class parents everywhere who doubt, but still hope desperately, that their kids can have better lives than they did.

Good points, all. "Bottom-up" means what I've been calling a more representative, inclusive process. But what's this about "international harmonization?""

It's a way of saying that we need to reduce the "frictions" and thus costs between trading partners at the level of pragmatic infrastructure, not corporate power. One way to think of this is TFAs, not FTAs. TFAs are trade facilitation agreements, which are more about integrating ports, rail, and paperwork than patents that protect big Pharma.

It's refreshing to see mainstreamers thinking creatively about the anger that's surfaced around globalization. Waiting for the anger to dissipate and then reverting back to the old trade regimes may be the preferred path for elites, but that path may well be blocked. We'd best clear a new, wider path, one that better accommodates folks from all walks of life, both here and abroad."

anne : , Monday, April 11, 2016 at 09:12 AM
"What's Behind The Revolt Against Global Integration?" -- Washington Post editors title.

"Global trade should be remade from the bottom up" -- Lawrence Summers title.

I find the difference in titles important in showing just how slanted Washington Post editors are.

Longtooth : , Monday, April 11, 2016 at 01:41 PM
Summers: "Pie in the Sky" So trade negotiations would have to be lead by labor advocates and environmental groups -- sounds great to me, but I can't for the life of me figure out why the goods and service producers (i.e. capital owners) would have any incentive to promote trade under such a negotiated trade agreement... or that trade would actually occur. You'd have to eliminate private enterprise incentives to profit I think.. not something the U.S.'s "individualism" god can't tolerate.
pgl -> Longtooth... , Monday, April 11, 2016 at 01:46 PM
Imagine a trade deal negotiated by the AFL-CIO. Labor wins a lot and capital owners lose a little. We can all then smile and say to the latter - go get your buddies in Congress more serious about the compensation principle. Turn the table!
kthomas -> pgl... , Monday, April 11, 2016 at 03:01 PM
Not being rude, but I fail to understand your response.

AFL-CIO? turn the table?

Peter -> kthomas... , Monday, April 11, 2016 at 03:51 PM
It's okay. He's drunk again.
New Deal democrat : , Monday, April 11, 2016 at 03:07 PM
"consensus in support of global economic integration as a force for peace and prosperity " -- "The Great Illusion" ( https://en.m.wikipedia.org/wiki/The_Great_Illusion )
That increased trade is a bulwark against war rears its ugly head again. The above book which so ironically delivered the message was published in 1910.

Alas, the Kaiser, the Tsar, and the Emperor did not act in accord with its tenets. Either increased global trade is irrelevant to war and peace, or World War I didn't happen. Your pick which to believe.

George H. Blackford :
Our problems began back in the 1970s when we abandoned the Bretton Woods international capital controls and then broke the unions, cut taxes on corporations and upper income groups, and deregulated the financial system. This eventually led a stagnation of wages in the US and an increase in the concentration of income at the top of the income distribution throughout the world: http://www.rwEconomics.com/Ch_1.htm

The export-led growth model that began in the 1990s seriously exacerbated this problem as it proved to be unsustainable: http://www.rwEconomics.com/htm/WDCh_2.htm

When combined with tax cuts and financial deregulation it led to increasing debt relative to income in the importing countries that caused the financial catastrophe we went through in 2008, the economic stagnation that followed, and the social unrest we see throughout the world today. This, in turn, created a situation in which the full utilization of our economic resources can only be maintained through an unsustainable increase in debt relative to income: http://www.rwEconomics.com/htm/WDCh3e.htm

This is what has to be overcome if we are to get out of the mess the world is in today, and it's not going to be overcome by pretending that it's just going to go away if people can just become educated about the benefits of trade. At least that's not the way it worked out in the 1930s: http://www.rwEconomics.com/LTLGAD.htm

[Sep 15, 2016] On Views Of The War On Syria by Debs is Dead>

A pretty devious scheme -- creating difficulty for the government neoliberal wanted to depose by pushing neoliberal reforms via IMF and such. They channeling the discontent into uprising against the legitimate government. Similar process happened with Yanukovich in Ukraine.
Notable quotes:
"... the Syrian government put staying in power via adopting neoliberal strictures ahead of the welfare of Syrians ..."
"... it doesn't make President Assad virtuous of himself and neither does it reflect the reality that when push came to shove Assad put his position ahead of the people of Syria and kissed neoliberal butt. ..."
"... President Assad revealed his stupidity when he didn't pay attention to what happens to a leader who has previously been featured as a 'tyrant' in western media if he lets the neoliberals in: They fawn & scrape all the while developing connections to undermine him/her. If the undermining is ineffective there is no backing off. The next option is war. The instances are legion from President Noriega of Panama to President Hussein of Iraq to Colonel Ghaddaffi of Libya - that one really hurts as the Colonel was a genuinely committed and astute man. Assad is just another hack in comparison. ..."
"... Syrian leaders are politicians, they suffer the same flaws of politicians across the world. They are power seekers who inevitably come to regard the welfare of their population as a means to an end rather than an end in itself. ..."
"... No one denies that the opposition have been used and abused by FUKUSi, but that of itself does not invalidate the very real issues that persuaded them to resist an austerity imposed from above by assholes who weren't practicing what they preached. ..."
"... According to the European model of diplomacy imposed upon the globe, countries have interests not friends. ..."
"... A solution which reduces numbers of humans killed is worth attempting. ..."
"... Just because someone chooses an option that you disagree with does not make them evil or headchoppers or Islamofacist. ..."
"... On balance I would rather see Assad continue as leader of Syria but I'm not so naive as to believe he is capable of finding a long term resolution, or that there are not a good number of self interested murderous sadists in his crew. ..."
"... This war is about destroying real history, civilization, culture and replacing with fake. The war in Yemen is the same. Who in that region wants to replace real history with fake. Think about it. Most Islamic,Christian, Assyrian history is systematically being destroyed. ..."
"... you make some good points concerning Assad flirting with neoliberalism however, i don't know how you call an opposition 'moderate' when its toting firearms. ..."
"... The protests against Assad were moderate, and to his credit Assad was willing to meet them halfway. However, this situation was exploited by (((foreign powers))) ..."
"... This is not about "good or evil", this is about TOW missiles made in USA against T-55, Saudi money for mercenaries, Israeli regional ambitions and so on. Syria is another country that the US wants to destroy. Six years ago Syria was a peaceful country. ..."
"... Allegedly president Assad is a bad guy but Erdogan, Netanyhu and bin Saud are noble and good men. Who believes in such nonsense? The US has become similar to Israel and this is the reason why "Assad must go". Sick countries do sick things. ..."
"... no, because one side is so simplistically evi l(armed to the fucking teeth and resolved to violent insurrection!!!), if Assad didn't have the backing of the vast majority of his people and of his overreached army it would have ended a long time ago and Syria would be a failed state flailing away in the grip of anarchy. perhaps your Syrian 'friends' should meditate on this naked truth. ..."
"... when that shitty little country called Israel was squeezed onto the map in 1948, Syria welcomed Palestinian refugees with open arms by the hundreds of thousands. no, they didn't grant them citizenship, but prettty much all other rights. ..."
"... This whole nightmare was dreamed up from within the US Embassy in Damascus in 2006. Bashir al Assad was too popular in the country and the region for America's liking, so they plotted to get rid of him. Near all the organ eating, child killing, head chopping "moderate" opposition are from other countries, those that are Syrian, as was the case in Iraq, mostly live outside the country and are not in touch with main stream opinion, but very in touch with US, Saudi etc $$$s. ..."
"... I consider Bashar al-Assad the legitimate Syrian President and attempts to remove him by external interests as grounds for charges of crimes against humanity, crimes of war. ..."
"... As one of the bloggers rightly stated Wesley Clarke spilled the whole beans and revealed their true ilk. 7 countries in 5 years. How coincidental post 9/11. ..."
"... If you say "Assad was flirting with Neo Liberalism" then this is actually a compliment to Assad. Why? Because he wanted to win time. He wanted to prevent the same happening to Syria that has happened to Iraq. At that time there was no other protective power around. Russia was still busy recovering. ..."
"... As demeter said Posted by: Demeter @14, the flirrting with neoliberalism bought them time as neocons were slavering for a new target. It also made the inner circle a ridiculous amount of money. Drought made life terrible for many rural syrians. When the conflict started, if you read this website you'd notice people wondering what was going on and as facts unfolded. realizing that Assad was the lesser of two evils, and as the war has gone on, look like an angel in comparison to the opposition. ..."
"... Salafism is Racism. It de-egitimizes the entire anti Assad revolution. ..."
"... Wesley Clark's "seven countries in five years" transcript for anyone who has forgotten: http://genius.com/General-wesley-clark-seven-countries-in-five-years-annotated ..."
"... the armed conflict originated with scheming by foreign governments to use extremists as a weapon. ..."
"... Furthermore, Debsisdead sets up the same "binary division" that he says he opposes by tarnishing those who oppose using extremists as a weapon of state as Assad loving racists. The plot was described by Sy Hersh in 2007 in "The Redirection" . ..."
"... The fight IS "binary". You support Assad and his fighters, the true rebels, or you don't. Calling Assad a "hack" is a slander of a veritable hero. Watch his interviews. Assad presides over a multi-cultural, multi-confessional, diverse, secular state, PRECISELY what the Reptilians claim they cherish. ..."
"... "the Syrian government put staying in power via adopting neoliberal strictures ahead of the welfare of Syrians." - on that we can agree. ..."
"... It continues to annoy me that the primary trigger for the civil war in Syria has been totally censored from the press. The government deliberately ignited a population explosion, making the sale or possession of condoms or birth control pills illegal and propagandizing that it was every woman's patriotic duty to have six kids. The population doubled every 18 years, from 5 million to 10 million to 20 million and then at 22 the water ran out and things fells apart. Syria is a small country mostly arid plateau, in principle it could be developed to support even more people just not in that amount of time and with the resources that the Syrians actually had. ..."
"... It doesn't mean he's a saint that Assad is leading the very popular 'secular/multi-confessional Syria' resistance against an extremely well-funded army primarily of non-Syrians who are mainly 'headchoppers' who will stop at nothing to impose Saudi-style religious dictatorship on Syria. ..."
"... The 'moderate' opposition to Assad has largely disappeared (back into the loyal opposition that does NOT want a Saudi-style state imposed on Syria), but those who remain in armed rebellion surely must know that they are a powerless, very small portion of what is in fact mercenary army completely subservient to the needs and directives of its primary funders/enablers, the US and Saudi Arabia. So whatever their original noble intentions, they've become part of the Saudi/US imperial problem. ..."
"... All that land, all that resource...and a unifying language. Amazing. If only the Arab world could unite for the collective good of the region we might witness a rogue state in an abrupt and full decline. A sad tactic of colonial powers over the years, setting the native tribes upon each other. We've not evolved here. ..."
"... t in recent history the foreign policy of powerful nations is aimed at sponsoring social disintegration within the borders of targeted countries. ..."
"... Ethnic cleansing means destruction of culture, of historical memory, the forced disappearance of communities that were rooted in a place. ..."
"... Compare President Assad's leadership to that of the western, or Saudi, sponsors of terror; or measure his decisions against those of the hodgepodge of rebels and mercenaries, with their endless internal squabbles and infighting. Assad is so much more of a spokesman for the rights of sovereignty, and his words carry more weight and outshine the banalities that spring from the mouths of those who are paying the bills, and supplying weapons, and giving all kinds of diplomatic comfort to the enemies of the Syrian government. ..."
"... There is no need for sorting things into absolutes of good and evil. But there is a condition under which fewer, a lot fewer, humans would have died in Syria, Without foreign interference--money, weapons, and training--Assad's government would have won this war quite a while ago. ..."
"... And as for "Islamic Fundamentalism", it is this abnormal form of Islam that is purely based on racism and not the other way around. Islamic fundamentalists call everybody, and I mean everybody, who is not living according to their rule a non-believer, a Takfiri, who does not deserver to live. ..."
"... Fundamentalism is never satisfied until it can become a tyranny over the mind. Racism and fundamentalism are as American as apple pie. You have to take a close look at who is pouring oil on this fire! ..."
"... I disagree with you in that neoliberalism is seriously not difficult to define. It boils down to belief that public programs are bad/'inefficient' and that society would be better served by privatizing many things(or even everything) and opening services up to 'competition'. It's mainly just cover for parasites to come in and get rich off of the masses misery. The 'neoliberalism is just a snarl word' meme is incredibly stupid, since plenty of books and articles have been written explicitly defining it. ..."
"... American economic hegemony is inherently neoliberal, and has been for decades. The IMF is essentially an international loan shark that gives countries money on the condition that they dismantle their public spending apparatus and let the market run things. ..."
"... The situation is different now. One Syrian lady, who came to see me in April, who lives in California, told me that her father, who was a big pre-war oppositionist, now just wants to return to Syria to die. There's no question. if you want peace in Syria, Asad is the only choice. The jihadis, who dominate the opposition, don't offer an alternative. ..."
"... The lesson of Viet Nam was to keep the dead and wounded off the six o'clock news. ..."
"... The jackals are going in. Another coup. Syria was on the list. Remap the Middle East. Make it like Disney World. Israel as Mad King Ludwig's Neuschwanstein. ..."
"... I don't think anyone who comments here regularly ever assumed that Bashar al Assad was a knight in white shining armour. Most of us are aware of how he came to be President and that his father did rule the country from 1971 to 2000 with an iron fist. Some if not most also know that initially when Bashar al Assad succeeded to the Presidency, he did have a reformist agenda in mind. How well or not he succeeded in putting that across, what compromises he had to make, who or what opposed him, how he negotiated his way between and among various and opposed power structures in Syrian politics we do not know. ..."
"... Yes, I have trouble reconciling the fact that Bashar al Assad's government did allow CIA renditioning with his reformist agenda in my own head. That is something he will have to come to terms with in the future. I don't know if Assad was naive, under pressure or willing, even eager in agreeing to cooperate with the CIA, or trying to buy time to prepare for invasion once Iraq was down. Whether Assad also realises that he was duped by the IMF and World Bank in following their advice on economic "reforms" (such as privatising Syria's water) is another thing as well. ..."
"... I don't see why you call the problem "Islamic fundamentalism" when in fact it is Sunni fundamentalism. ..."
"... Manifest Destiny is fundamentalism. ..."
"... "Full Spectrum Dominance" and other US Military doctrines are fundamentalist in nature. ..."
"... I have no doubt that Assad was little more than a crude Arab strongman/dictator prince back in the 2011 when the uprising started. Since then, he has evolved into a committed, engaged defender of his country against multilateral foreign aggression, willingly leaving his balls in the vice and all. ..."
"... He could have fled the sinking ship many times so far. Instead, he decided to stay and fight the Takfiri river flowing in through the crack, and risk going down with the ship he inherited. The majority of the Syrians know this very well. ..."
"... Bashar of 2016 (not so much the one of 5 1/2 years ago) would not only win the next free elections, but destroy any opposition. The aggressors know that as a fact. ..."
"... if Syria had control over its borders with Turkey, Israel, Jordan and Iraq would the war have ended a long time ago ? Answer honestly. ..."
"... If yes, then the so-called "opposition" of the union of headchoppers does not represent a significant portion of the Syrian people. Were it otherwise Assad wouldnt be able to survive a single year, let alone 5. With or without foreign help. ..."
"... OK here is an interesting article from 2011 on Abdallah Dardari, the fellow who persuaded Bashar al Assad to adopt the disastrous neoliberal economic reforms that not only ruined Syria's economy and the country's agriculture in particular but also created an underclass who resented the reforms and who initially joined the "rebels". http://english.al-akhbar.com/node/2097 ..."
"... And where is Dardari now? He jumped ship in 2011 and went to Beirut to work for the UN's Economic and Social Commission for Western Asia (ESCWA). He seems like someone to keep a watchful eye on. https://en.wikipedia.org/wiki/Abdullah_Dardari ..."
"... of COURSE assad flirted with the west. between housing cia rendition houses and the less-than-flattering aspects of the wikileaks "syria files", assad and/or his handlers (family and/or military) have tried a little too hard to "assimilate" to western ideals (or the lack thereof). ..."
"... i seriously doubt they will make that mistake again. they saw what happened to al-qaddafi after he tried to play nice and mistook western politicians for human beings. they've learned their lesson and become more ruthless but they were always machiavellians because they have to be. not an endorsement, just an acceptance of how the region is. ..."
"... also: israel, the saudis (along with qatar and the other GCC psychopaths in supporting capacity) and the US are the main actors and throwing european "powers" into the circle of actual power does them an undue favor by ignoring their status as pathetic vassal states. "FrUkDeUSZiowhatever" isn't necessary. ..."
"... Look I know the MSM is utterly controlled - but the extent of that control still shocks at times. It is simply not possible to be "informed" by any normal definition of the word anymore without the alternative media - and for that reason this site serves a valuable purpose and I once again thank the host and contributors. ..."
"... The irony is, Assad is 10x smarter and bigger person than Debs. Yes, he made some mistakes, but if not "flirting with neoliberalism", war against Syria would have started many years earlier, when Resistance wasnt ready one bit (neither Russia, nor Iran, while on the other hand US was more powerful). ..."
"... Support for rebel groups was misguided at best at the beginning of the war. One could conceivably not appreciate the capacity of the KSA/USA/Quatar/Israel to influence and control and create these groups. Jesus it's hard for me to think of a single local opposition group that isnt drenched in fanaticism besides the Kurds. ..."
"... There's no way to a solution for the Syrian people, the population not imported that is, if these groups win. I hate to be so binary but its so naive in my eyes to think anything good will come from the long arm of the gulf countries and the USA taking control. ..."
"... As I've said repeatedly, the GOAL of the Syria crisis for the Western elites, Israel and the ME dictatorships is to take Syria OUT by any means necessary in order to get to IRAN. Nothing else matters to these people. In the same vein, nothing else matters to ninety percent of the CURRENT insurgents than to establish some Salafist state, exterminate the Shia, etc., etc. ..."
"... So, yes, right NOW the whole story is about US elites, Zionist "evil", corrupt monarchs, and scumbag fanatics, etc., etc. Until THAT is resolved, nothing about how Syria is being run is going to matter. ..."
"... Copeland @60: No, I don't think the problem is fundamentalism. It's the warring crusade method of spreading a belief's 'empire' that is the problem. This is a problem uniquely of the Saudi 'do whatever it takes' crusade to convert the entire 'Arab and Muslim world' to their worst, most misogynist form of Islam. ..."
"... Just want to mention that from the beginning there were people who took up arms against the government. This is why the situation went out of control. People ambushed groups of young soldiers. Snipers of unknown origin fired on police and civilians. ..."
"... I rather like Assad. I won't lie. But, he is not the reason for the insurrection in Syria ~ well, except for his alliances with Russia and Iran and his pipeline decisions and his support for Palestinian and Iraqi refugees. What happened in Syria is happening all over the globe because the nation with the most resources in the world, the self-declared exceptionalist state thinks this is the way to rule the world. . . . because they want to rule and they don't care how much destruction it takes to do so. And lucky for us there is no one big enough and bad enough to do it to us - except for our own government. ..."
"... There were a lot of people posting how Bashar al Assad was doing full neoliberalism. And at was true. ..."
"... So Assad was hit by a Tri-horror: global warming, dwindling cash FF resources, and IMF-type pressure, leaving out the trad. enemies, KSA, pipelines , etc. MSM prefer to cover up serious issues with 'ethnic strife' (sunni, shia, black lives matter, etc.) ..."
Sep 15, 2016 | www.moonofalabama.org

lifted from a comment

It is sad to see so many are so locked into their particular views that they see any offering of an alternative as 'neoliberal' or laughable or - if it weren't so serious - Zionist.

1/ I do not see the Syrian civil war as racist or race based, I do believe however that the rejection of all Islamic fundamentalism as being entirely comprised of 'headchoppers' is racist down to its core. It is that same old same old whitefella bullshit which refuses to consider other points of view on their own terms but considers everything through the lens of 'western' culture which it then declares wanting and discards.

2/ Noirette comes close to identifying one of the issues that kicked off the conflict, that the Syrian government put staying in power via adopting neoliberal strictures ahead of the welfare of Syrians. I realize many have quite foolishly IMO, adopted President Assad as some sort of model of virtue - mostly because he is seen to be standing up to American imperialism. That is a virtuous position but it doesn't make President Assad virtuous of himself and neither does it reflect the reality that when push came to shove Assad put his position ahead of the people of Syria and kissed neoliberal butt.

3/ President Assad revealed his stupidity when he didn't pay attention to what happens to a leader who has previously been featured as a 'tyrant' in western media if he lets the neoliberals in: They fawn & scrape all the while developing connections to undermine him/her. If the undermining is ineffective there is no backing off. The next option is war. The instances are legion from President Noriega of Panama to President Hussein of Iraq to Colonel Ghaddaffi of Libya - that one really hurts as the Colonel was a genuinely committed and astute man. Assad is just another hack in comparison.

4/ These Syrian leaders are politicians, they suffer the same flaws of politicians across the world. They are power seekers who inevitably come to regard the welfare of their population as a means to an end rather than an end in itself.

5/ My Syrians friends are an interesting bunch drawn from a range of people currently living inside and outside of Syria. Some longer term readers might recall that I'm not American, don't live in America and nowadays don't visit much at all. The first of the 'refugee' Syrians I got to know, although refugee is a misnomer since my friend came here on a migrant's visa because his skills are in demand, is the grandchild of Palestinian refugees - so maybe he is a refugee but not in the usual sense. Without going into too many specifics as this is his story not mine, he was born and lived in a refugee camp which was essentially just another Damascus suburb. As he puts it, although a Palestinian at heart, he was born in Syria and when he thinks of home it is/was Damascus. All sides in the conflict claimed to support Palestinian liberation, yet he and his family were starved out of their homes by both Syrian government militias and the FSA.

When he left he was initially a stateless person because even though he was born in Syria he wasn't entitled to Syrian citizenship. He bears no particular grudge against the government there but he told me once he does wish they were a lot smarter.

On the other hand he also understands why the people fighting the government are doing so. I'm not talking about the leadership of course (see above - pols are pols) but the Syrians who just couldn't take the fading future and the petty oppression by assholes any longer.

6/ No one denies that the opposition have been used and abused by FUKUSi, but that of itself does not invalidate the very real issues that persuaded them to resist an austerity imposed from above by assholes who weren't practicing what they preached.

I really despair at the mindset which reduces everything to a binary division - if group A are the people I support they must all be wonderful humans and group B those who are fighting Group A are all evil assholes.

If group A claim to support Palestinian self determination (even though they have done sweet fuck all to actually advance that cause) then everyone in Group B must be pro-Zionist even though I don't know what they say about it (the leadership of the various resistance groups are ME politicians and therefore most claim to also support Palestinian independence). Yes assholes in the opposition have done sleazy deals with Israel over Golan but the Ba'ath administration has done similar opportunist sell outs over the 40 years when the situation demanded it.

I fucking hate that as much as anyone else who despises the ersatz state of Israel, but the reality is that just about every ME leader has put expedience ahead of principle with regard to Palestine. Colonel Ghadaffi would be the only leader I'm aware of who didn't. Why do they? That is what all pols and diplomats do not just Arab ones. According to the European model of diplomacy imposed upon the globe, countries have interests not friends.

As yet no alternative to that model has succeeded since any attempt to do so has been rejected with great violence. The use of hostages offered by each party to guarantee a treaty was once an honorable solution, the hostages were well treated and the security they afforded reduced conflict - if Oblamblam had to put up one of his daughters to guarantee a deal does anyone think he would break it as easily as he currently does? Yet the very notion of hostages is considered 'terrorism' in the west. But I digress.

The only points I wanted to make was the same as those I have already made:

If you want to call me a Zionist lackey of the imperialists or whatever it was go right ahead - it is only yourself who you tarnish, I'm secure in the knowledge of my own work against imperialism, corporate domination and Zionism but perhaps you, who have a need to throw aspersions are not?

Posted by b on September 12, 2016 at 03:33 AM | Permalink

papa | Sep 12, 2016 3:51:57 AM | 1
Plus one more - it is humorous and saddening to see people throw senseless name-calling into the mix. It is the method preferred by those who are too stupid and ill informed to develop a logical point of view.

why you think your article is different from others senseless name-calling, i see exactly the same.

This war is about destroying real history, civilization, culture and replacing with fake. The war in Yemen is the same. Who in that region wants to replace real history with fake. Think about it. Most Islamic,Christian, Assyrian history is systematically being destroyed.

lemur | Sep 12, 2016 4:30:41 AM | 2
you make some good points concerning Assad flirting with neoliberalism however, i don't know how you call an opposition 'moderate' when its toting firearms.

The protests against Assad were moderate, and to his credit Assad was willing to meet them halfway. However, this situation was exploited by (((foreign powers)))

ash123 | Sep 12, 2016 5:43:53 AM | 3
If either side were so simplistically good or evil it would have ended a long time ago.
This is not about "good or evil", this is about TOW missiles made in USA against T-55, Saudi money for mercenaries, Israeli regional ambitions and so on. Syria is another country that the US wants to destroy. Six years ago Syria was a peaceful country.

Allegedly president Assad is a bad guy but Erdogan, Netanyhu and bin Saud are noble and good men. Who believes in such nonsense? The US has become similar to Israel and this is the reason why "Assad must go". Sick countries do sick things.

john | Sep 12, 2016 5:47:26 AM | 4

Debsisdead says:

If either side were so simplistically good or evil it would have ended a long time ago

no, because one side is so simplistically evi l(armed to the fucking teeth and resolved to violent insurrection!!!), if Assad didn't have the backing of the vast majority of his people and of his overreached army it would have ended a long time ago and Syria would be a failed state flailing away in the grip of anarchy. perhaps your Syrian 'friends' should meditate on this naked truth.

If group A claim to support Palestinian self determination (even though they have done sweet fuck all to actually advance that cause)...

when that shitty little country called Israel was squeezed onto the map in 1948, Syria welcomed Palestinian refugees with open arms by the hundreds of thousands. no, they didn't grant them citizenship, but prettty much all other rights.

so thanks, b, for headlining this obfuscatory drivel. thus, for posterity.

Felicity | Sep 12, 2016 6:04:27 AM | 5
This whole nightmare was dreamed up from within the US Embassy in Damascus in 2006. Bashir al Assad was too popular in the country and the region for America's liking, so they plotted to get rid of him. Near all the organ eating, child killing, head chopping "moderate" opposition are from other countries, those that are Syrian, as was the case in Iraq, mostly live outside the country and are not in touch with main stream opinion, but very in touch with US, Saudi etc $$$s.

Here again is the reality of where this all started, article from 2012 (below.). And never forget Wesley Clark's Pentagon informant after 9/11 of attacking "seven countries in five years." Those in chaos through US attacks or attempted "liberation" were on the list, a few more to go and they are a bit behind schedule. All responsible for this Armageddon should be answering for their actions in shackles and yellow jump suits in The Hague.

http://www.globalresearch.ca/syria-and-conspiracy-theories-it-is-a-conspiracy/29596

Formerly T-Bear | Sep 12, 2016 6:23:51 AM | 6
|~b~ Thank you for putting Debsisdead's comment @ 135 prior post into readable form. Failing eyesight made the original in its extended format difficult to read.

Reference Debsisdead comment:

Your definition of neoliberal would be nice to have. Usually it is used as ephemerally as a mirage, to appear in uncountable numbers of meaning.

Having determined your definition of neoliberal, are you sure it WAS neoliberal rather than a hegemonic entity? Neoliberal seems best used as the reactionary faux historic liberalism as applied to economic agendas (neocon is the political twin for neoliberal, libertarian had been previously been co-opted).

Instead of F•UK•US•i, maybe a F•UK•UZoP would suffice (France•United Kingdom•United Zionist occupied Palestine) given the spheres of influence involved.

Agree with your observations about the limited mentality of dualism; manichaeism is a crutch for disabled minds unaware and blind to subtle distinctions that comprise spectrums.

Though not paying close attention to Syrian history, it was Hafez al-Assad who became master of the Syrian Ba'athist coup d'état and politically stabilised Syria under Ba'athist hegemony. In the midst of the 'Arab-spring' zeitgeist, an incident involving a child with security forces led to a genuine public outcry being suppressed by state security forces. This incident, quickly settled became cause célèbre for a subsequent revolt, initially by SAA dissidents but soon thereafter by external interests having the motive of regime overthrow of Syrian Ba'athists and their leadership. Other narratives generally make little sense though may contain some factors involved; the waters have been sufficiently muddied as to obscure many original factors - possibly Bashar al-Assad's awareness of his security forces involvement in US rendition and torture as to compromise his immediately assuming command of his security forces in the original public protest over the child. Those things are now well concealed under the fogs of conflict and are future historians to sort.

I consider Bashar al-Assad the legitimate Syrian President and attempts to remove him by external interests as grounds for charges of crimes against humanity, crimes of war.

The opinions expressed are my own.

falcemartello | Sep 12, 2016 6:41:48 AM | 7
Classic western sheeple disconnect. As one of the bloggers rightly stated Wesley Clarke spilled the whole beans and revealed their true ilk. 7 countries in 5 years. How coincidental post 9/11. This total disconnect with global realities is a massive problem in the west cause the 86000 elite /oligarchs r pushing for a war with both the bears/ Russian and Chinese along with Iran. These countries have blatantly stated they will not be extorted by fascism. All western countries r all living a Corporate state. Just look all around every facet of our society is financialised. Health ,education , public services.
Wake up cause if we dont we will be extinct Nuclear winter
Mikael | Sep 12, 2016 6:41:56 AM | 8
I am of syrian origin, born in Beirut Lebanon. My family lived a happy life there, but shortly after I was born, Israel invaded Lebanon, and my family fled and emigrated to Europe, I was 1 year old. I call major bullshit on your piece.
Demeter | Sep 12, 2016 8:00:26 AM | 9
If you say "Assad was flirting with Neo Liberalism" then this is actually a compliment to Assad. Why? Because he wanted to win time. He wanted to prevent the same happening to Syria that has happened to Iraq. At that time there was no other protective power around. Russia was still busy recovering.

What do you think would have happened had Assad not pretended he would go along? Syria would have been bombed to pieces right then. Why did Assad change his mind later and refused to cooperate with Qatar, Saudi and US? Because the balance of power was about to change. Iran and Russia were rising powers (mainly in the military field).

I could say so much more. I stopped reading your post when you mentioned that your Palestinian friend ( I know the neighbourhood in Damascus, it is called Yarmouk and it is indeed a very nice suburb) does not have Syrian citizenship. Do you know why Palaestinians don't get Syrian citizenship? Because they are supposed to return to their homeland Palestine.

And they can only do that as Palestinians and not as Syrians. That is why.

And that so many (not all!) Palestinians chose to backstab the country that has hosted them and fed them and gave them a life for so many years, and fought side by side with islamist terrorists and so called Free Syrian Army traitors is a human error, is based on false promises, is lack of character and honour and understanding of the broader context and interests. How will some of these fools and misguided young men feel when they realise that they have played right into the hand of their biggest enemy, the Zionists.

I would like to remind some of you who might have forgotten that famous incident described by Robert Fisk years ago, when a Syrian Officer told him upon the capture of some of these "freedom fighters' on Syrian soil, one of them said: "I did not know that Palestine was so beautiful", not realising that he was not fighting in Palestine but in Syria.

And as for "Islamic Fundamentalism", it is this abnormal form of Islam that is purely based on racism and not the other way around. Islamic fundamentalists call everybody, and I mean everybody, who is not living according to their rule a non-believer, a Takfiri, who does not deserver to live.

Here is racism for you debsisdead.

AtaBrit | Sep 12, 2016 8:00:59 AM | 10
Though reluctant to get involved in what seems to be for some a personal spat, I would like to point out one fundemental point that renders the above published and counter arguments difficult to comprehend which is that they lack a time frame.
The 'Syrian opposition' or what ever you wish to call it is not now what it was 6 years ago. Thus, for me, at least, it is not possible to discuss the make up of the opposition unless there are some time frames applied.

An example is a Syrian who was an officer in the FSA but fled to Canada last year. He fled the Syrian conflict over 3 years ago to Turkey -which is how I know him - where he did not continue ties with any group. He simply put his head down and worked slavishly living at his place of work most of the time to escape to Canada - he feared remaining in Istanbul. He claimed that he and others had all been taken in by promises and that the conflict had been usurped by extremists. He was not a headchopper, he was not the beheader of 12 year old children. He was and is a devout Muslim. He was a citizen of Aleppo city. I know him and of him through other local Syrians in Istanbul and believe his testimony. I mention him only to highlight that the conflict is not what it was, not what some intended it to be ... Nor is it what some paint it to be. There are many who fight whomever attacks their community be they pro / anti Government. - Arabs especially have extended village communities/ tribes and pragmatically they 'agree' to be occupied as long as they are allowed to continue their lives in peace. If conflict breaks out they fight whomever is necessary.

DebIsDead makes some very excellent points in his/her comments. They deserve appraisal and respectful response. It is also clear thar he/she is writing defensively in some parts and those detract from what is actually being said.

Cresty | Sep 12, 2016 8:41:04 AM | 12
The piece suffers from several errors. As demeter said Posted by: Demeter @14, the flirrting with neoliberalism bought them time as neocons were slavering for a new target. It also made the inner circle a ridiculous amount of money. Drought made life terrible for many rural syrians. When the conflict started, if you read this website you'd notice people wondering what was going on and as facts unfolded. realizing that Assad was the lesser of two evils, and as the war has gone on, look like an angel in comparison to the opposition.

You can't change the fact that it took less than 2 years for the opposition to be dominated by both foreign and domestic takfiris who wanted to impose saudi style culture on an open relatively prosperous cosmopolitan country. They've succeeded in smashing it to pieces. Snuff your balanced account and your bold anti racism

Northern Observer | Sep 12, 2016 8:52:18 AM | 14
Salafism is Racism. It de-egitimizes the entire anti Assad revolution.
Felicity | Sep 12, 2016 9:22:01 AM | 15
Wesley Clark's "seven countries in five years" transcript for anyone who has forgotten: http://genius.com/General-wesley-clark-seven-countries-in-five-years-annotated
Jackrabbit | Sep 12, 2016 10:06:55 AM | 17
Debsisdead sets up a strawman - racism against Islamic fundamentalists and validity of opposition against Assad - and uses this to sidestep that the armed conflict originated with scheming by foreign governments to use extremists as a weapon.

Furthermore, Debsisdead sets up the same "binary division" that he says he opposes by tarnishing those who oppose using extremists as a weapon of state as Assad loving racists. The plot was described by Sy Hersh in 2007 in "The Redirection" .

ruralito | Sep 12, 2016 10:10:18 AM | 18
"If you want to call me a Zionist lackey of the imperialists or whatever it was go right ahead - it is only yourself who you tarnish, I'm secure in the knowledge of my own work against imperialism, corporate domination and Zionism but perhaps you, who have a need to throw aspersions are not?" Passive-aggressive much?

The fight IS "binary". You support Assad and his fighters, the true rebels, or you don't. Calling Assad a "hack" is a slander of a veritable hero. Watch his interviews. Assad presides over a multi-cultural, multi-confessional, diverse, secular state, PRECISELY what the Reptilians claim they cherish.

TG | Sep 12, 2016 10:22:59 AM | 20
"the Syrian government put staying in power via adopting neoliberal strictures ahead of the welfare of Syrians." - on that we can agree.

It continues to annoy me that the primary trigger for the civil war in Syria has been totally censored from the press. The government deliberately ignited a population explosion, making the sale or possession of condoms or birth control pills illegal and propagandizing that it was every woman's patriotic duty to have six kids. The population doubled every 18 years, from 5 million to 10 million to 20 million and then at 22 the water ran out and things fells apart. Syria is a small country mostly arid plateau, in principle it could be developed to support even more people just not in that amount of time and with the resources that the Syrians actually had.

No the issue was not 'climate change'. The aquifers in Syria had been falling for years, even when rainfall was above normal. Don't blame the weather.

"The more the merrier" - tell me exactly how people having more children than they can support creates wealth? It doesn't and it never has.

Whenever governments treat their people as if they were cattle, demanding that they breed the 'correct' number of children rather than making the decision based on their own desires and judgement of how many they can support, the result is always bad.

Assad treated the people of Syria as if they were cattle. Surely this deserves mention?

Diana | Sep 12, 2016 10:23:43 AM | 21
Cultural "left" bullshit at its best. Cultural "leftists" don't need to know any hostory or have any understanding of a political issue: it's sufficient to pull out a few details from the NATO press and apply their grad school "oppression" analysis.
juliania | Sep 12, 2016 10:26:32 AM | 22
Thanks to b for posting the comment of Debs is Dead. The point I would take issue with is where he states "I realize many have quite foolishly IMO, adopted President Assad as some sort of model of virtue. . ."

I don't believe this is a correct realization. I think the many to whom he refers know very well that any person in leadership of a country can be found to have flaws, major and minor, and even to have more of such than the average mortal. The crucial counterpoint, however, which used to be raised fairly often, is that it is the acceptance of the majority of the people governed by such leaders that ought to be the international norm for diplomatic relations.

I respect the knowledge DiD has gained from his Syrian friends and contacts. But I also remember a man called Chilabi and am very leery of destabilization attempts this country has been engaged in lo these many generations, using such displaced persons as surrogates. And rather than properly mourn the 9/11 victims and brave firemen and rescuers of that terrible day, I find myself mourning the larger tragedy of unnecessary wars launched as a consequence of our collective horror at that critical moment in our history.

Can we please stop doing this?

Wizzy | Sep 12, 2016 10:35:49 AM | 23
After making sound point about black-and-white worldview being unrealistic, the guy goes full retard. Position towards Palestinians as the one and only criteria to judge ME developments... C'mon, it's not even funny.

And while started from a "My Syrian friends" then he goes on reasoning on behalf of one single ex-Palestinian ex-Syrian guy...
Looks like self-revelation of a kind. Some guy, sitting in Israel, or whatever, waging informational warfare for the Mossad/CIA/NGO who pays his rent.

ruralito | Sep 12, 2016 10:38:01 AM | 24
"The government deliberately ignited a population explosion, making the sale or possession of condoms or birth control pills illegal and propagandizing that it was every woman's patriotic duty to have six kids."

Cite?

fairleft | Sep 12, 2016 10:58:51 AM | 25
DiD: "I realize many have quite foolishly IMO, adopted President Assad as some sort of model of virtue. . ." The big reveal is that DiD can't name a single contributor here who has written that Assad is "some sort of model of virtue."

It doesn't mean he's a saint that Assad is leading the very popular 'secular/multi-confessional Syria' resistance against an extremely well-funded army primarily of non-Syrians who are mainly 'headchoppers' who will stop at nothing to impose Saudi-style religious dictatorship on Syria.

The 'moderate' opposition to Assad has largely disappeared (back into the loyal opposition that does NOT want a Saudi-style state imposed on Syria), but those who remain in armed rebellion surely must know that they are a powerless, very small portion of what is in fact mercenary army completely subservient to the needs and directives of its primary funders/enablers, the US and Saudi Arabia. So whatever their original noble intentions, they've become part of the Saudi/US imperial problem.

Krollchem | Sep 12, 2016 11:35:06 AM | 28
@ rg the lg 33

Thanks for addressing the problem of angry comments by some posters who just want to throw verbal grenades is unacceptable. I hope this site continues to be a great source for sharing information and ideas.

paul | Sep 12, 2016 11:40:49 AM | 29
Why in God's name was this pointless comment by Debs is Dead promoted this way?!!! The only point being made, that I can see, is that the war in Syria does have some legitimate issues at its root. WELL OF COURSE IT DOES. The Hegemon rarely to never makes up civil unrest in countries it wants to overthrow out of whole cloth. They take some dispute that is already there and ramp it up; this process escalates until it turns into some form of a proxy war or coup. In other words, the domestic political process is DISTORTED until it is no longer remotely recognizable as a domestic process.

So sure, if the US and its allies had not stoked political factionism in Syria into a global proxy war, we could discuss the fine details of the Syrian domestic process very usefully. At this point, though, IT IS IRRELEVANT.

I do agree on one point: Assad joins the horrendous list of overlords who thought they could make a deal with the Hegemon on their own terms. Assad will pay for that mistake with his life very soon I would guess and I think that Putin will too, though that might take a little longer. If they had chosen to stand on principle as Chavez did, maybe they would be dead as Chavez is (possibly done in, who knows), but they'd be remembered with honor as Chavez is.

MadMax2 | Sep 12, 2016 12:16:07 PM | 33
It is a shame no one stood up for Libya, for a surviving Gaddafi would have emerged considerably stronger - as Assad eventually will.

Whatever genuine opposition there was has long been hijacked by opportunistic takfiris, wahabbists and there various paymasters. And so as ruralito says @25: "The fight IS "binary...". The fight is indeed binary, the enemy is plural. Assad versus the many appearances of both the first and fourth kind.

Appearances to the mind are of four kinds.
Things either are what they appear to be;
or they neither are, nor appear to be;
or they are, and do not appear to be;
or they are not, and yet appear to be.
Rightly to aim in all these cases is the wise man's task.

~Epictetus

Where there is obfuscation lay the enemy, hence Russia's long game of identification.

FecklessLeft | Sep 12, 2016 12:54:18 PM | 36
Does anyone remember the essay posted on this site a while back titled "The Feckless Left?" I don't believe B posted it, but if memory serves it's posted front and centre on the navigation bar beside this piece?

It really hammers those people like Tariq Ali, who while surely having legitimate grievances against the Assad govt, opened the door for legitimation of foreign sponsored war. They thought that funneling millions of dollars worth of training, weapons and mercs would open the door for another secular govt, but this time much 'better.' Surely.

No one thinks Assad is great. I really have trouble understanding where that notion comes from. It's just that the alternative is surely much worse. Lots of people didn't like Ghaddafi but jesus, I'm sure most Libyans would wish they could turn back the clock (at the risk of putting words in their mouths). It's not binary, no one sees this as good vs evil, its just that its become so painfully obvious at this point that if the opposition wins Syria will be so fucked in every which way. Those with real, tangible grievances are never going to have their voices heard. It will become the next Libya, except the US and it's clients will actually have a say in what's left of the political body in the country if you could even label it that at that point (which is quite frightenening in my eyes. Libya is already a shit show and they don't have much of a foothold there besides airstrikes and that little coastal base for the GNA to have their photo ops).

I find it ironic that when criticisms are levelled at Assad from the left they usually point out things that had he done more of, and worse of, he probably would be free of this situation and still firmly in power. If he had bowed down to Qatar and the KSA/USA I wonder if the 'armed opposition' would still have their problems with him? That's the ultimate irony to me. If he had accepted the pipelines, the privatization regimes, etc. would they still be hollering his name? It's very sad that even with the balancing act he did his country has been destroyed. Even if the SAA is able to come out on top at this point, the country is wholly destroyed. What's even the point of a having a 'legitimate' or 'illegitimate' opposition when they're essentially fighting over scraps now. I'd be surprised if they could rebuild the country in 120 years. Libya in my eyes will never be what it once was. It'll never have the same standards of living after being hit with a sledgehammer.

I don't mean to be ironic or pessimistic, its just a sad state of affairs all around and everyday it seems more and more unlikely that any halfway decent solution for the POPULATION OF SYRIA, not Assad, will come out of this.. It's like, I'm no nationalist, but in many countries I kind of would rather that than the alternative. Ghaddafi wasn't great but his people could've been a lot worse of - and ARE a lot worse of now. I'm no Assad fan, but my god look what the alternative is here. If it wasnt 95% foreign sponsored maybe id see your point.

Read the essay posted on the left there. "Syria, the Feckless Left" IIRC. I thought that summed up my thoughts well enough.

And guys, even if you agree with me please refrain from the name calling. It makes those of you with a legitimate rebuttal seem silly and wrong. I've always thought MoA was so refreshing because it was (somewhat) free of that. At least B is generating discussion. I kind of appreciate that. It's nice to hear ither views, even if they are a little unrealistic and pro violent and anti democratic.

FecklessLeft | Sep 12, 2016 1:01:58 PM | 37
QUICK DOUBLE POST

An example of an armed opposition with legitimate grievances that is far from perfect but still very sympathetic (in my eyes) is hizbollah. They have real problems to deal with. While they recieve foreign sponsorship they aren't a foreign group the way the Syrian opposition is. And they will be all but destroyed when their supply lines from Syria are cut off. I wonder how that fits in with OPs post.

Hoarsewhisperer | Sep 12, 2016 1:02:25 PM | 38
What makes Debs is Dead's turgid comment so irrational is that it endorses Regime Change in Syria as an ongoing, but necessary and inevitable, "good". But in doing so it tip-toes around the fact that it doesn't matter how Evil an elected President is, or is not, it's up to the the people who elected him to decide when they've had enough. It most certainly is NOT Neoconned AmeriKKKa's concern.

Debs also 'forgot' to justify totally wrecking yet another of many ME countries because of perceived and imaginary character flaws in a single individual.

It does not compute; but then neither does "Israel's" 70 year (and counting) hate crime, The Perpetual Palestinian Holohoax.

ruralito | Sep 12, 2016 1:07:59 PM | 39
@Shh, since you're so conveniently ensconced above the fray, perhaps you can see something we "nattering fuck wits" can't. Do tell.
Stillnottheonly1 | Sep 12, 2016 1:47:35 PM | 40
Whatever happened to the age old expression that one has to walk in someone else's shoes to understand their walk in life?

In an all too obvious fashion, another arm chair expert is blessing the world with his/her drivel.

To make it as concise as possible:

What would you have done in Assad's position? The U.S. is trying to annex Syria since 1948 and never gave up on the plan to convert it to what the neo-fascists turned Afghanistan, Iraq, Libya, Somalia and the Republic of Yugoslavia - whereas Yemen is still in the making, together with Ukraine, Turkey and Africa as a whole.

In the light of U.S. 'foreign policy', the piece reeks of the stench of obfuscation.

MadMax2 | Sep 12, 2016 2:02:43 PM | 41
@47 Hoarsewhisperer

Debs also 'forgot' to justify totally wrecking yet another of many ME countries because of perceived and imaginary character flaws in a single individual.

We shouldn't be surprised. Even a basic pragmatic approach to this conflict has been lost by many in the one sided, over the top shower of faeces that is the western MSM.

It does not compute; but then neither does "Israel's" 70 year (and counting) hate crime, The Perpetual Palestinian Holohoax.

All that land, all that resource...and a unifying language. Amazing. If only the Arab world could unite for the collective good of the region we might witness a rogue state in an abrupt and full decline. A sad tactic of colonial powers over the years, setting the native tribes upon each other. We've not evolved here.

Copeland | Sep 12, 2016 3:26:34 PM | 43
It is impossible for any one of us to possess the whole picture, which is why we pool our experience, and benefit from these discussions. The thing I see at the root of the Syrian war is the process of ethnic cleansing. In many cases that involve murderous prejudice, it erupts as civil war; but in recent history the foreign policy of powerful nations is aimed at sponsoring social disintegration within the borders of targeted countries.

Ethnic cleansing means destruction of culture, of historical memory, the forced disappearance of communities that were rooted in a place.

The objectives of the perpetrators have nothing to do with the convictions of the fundamentalists who do the dirty work; and the sectarian and mercenary troops are merely the tools of those who are creating hell on earth.

I agree with what papa wrote at the top of this thread:

why you think your article is different from others senseless name-calling,[?] i see exactly the same. This war is about destroying real history, civilization, culture and replacing with fake. The war in Yemen is the same. Who in that region wants to replace real history with fake. Think about it. Most Islamic,Christian, Assyrian history is systematically being destroyed.
Compare President Assad's leadership to that of the western, or Saudi, sponsors of terror; or measure his decisions against those of the hodgepodge of rebels and mercenaries, with their endless internal squabbles and infighting. Assad is so much more of a spokesman for the rights of sovereignty, and his words carry more weight and outshine the banalities that spring from the mouths of those who are paying the bills, and supplying weapons, and giving all kinds of diplomatic comfort to the enemies of the Syrian government.

Debsisdead has always brought much food for thought to this watering hole. I have always respected him, and I think he has a fine mind. Nonetheless, despite the valuable contribution of this piece as a beginning place, in which we might reevaluate some of our presumptions, I maintain there are a few errors which stand out, and ought to be discussed.

I call into question these two points:

(1) Just because someone chooses an option that you disagree with does not make them evil or headchoppers or Islamofacist.
Up thread @14, we were reminded of Robert Fisk's report about misdirected, misinformed "freedom fighters" naively wandering around in Syria, while thinking that they were fighting in Palestine. In this ruin of Syria, where the well-intentioned are captured, or co-opted into evil acts against the civilian population, --is it really incumbent upon us, --from where we sit, to agonize over the motives of those who are committing the actual atrocities against the defenseless? What is the point?
(2) On balance I would rather see Assad continue as leader of Syria but I'm not so naive as to believe he is capable of finding a long term resolution, or that there are not a good number of self interested murderous sadists in his crew. By the same token I don't believe all of those resisting the Ba'athist administration are headchopping jihadists or foreign mercenaries. This war is about 5 years old. If either side were so simplistically good or evil it would have ended a long time ago.

There is no need for sorting things into absolutes of good and evil. But there is a condition under which fewer, a lot fewer, humans would have died in Syria, Without foreign interference--money, weapons, and training--Assad's government would have won this war quite a while ago.

Copeland | Sep 12, 2016 4:01:33 PM | 46
I very much agree with what Demeter wrote @ 14:
And as for "Islamic Fundamentalism", it is this abnormal form of Islam that is purely based on racism and not the other way around. Islamic fundamentalists call everybody, and I mean everybody, who is not living according to their rule a non-believer, a Takfiri, who does not deserver to live.
Fundamentalism is never satisfied until it can become a tyranny over the mind. Racism and fundamentalism are as American as apple pie. You have to take a close look at who is pouring oil on this fire!
Kuma | Sep 12, 2016 4:05:35 PM | 47
@9
I disagree with you in that neoliberalism is seriously not difficult to define. It boils down to belief that public programs are bad/'inefficient' and that society would be better served by privatizing many things(or even everything) and opening services up to 'competition'. It's mainly just cover for parasites to come in and get rich off of the masses misery. The 'neoliberalism is just a snarl word' meme is incredibly stupid, since plenty of books and articles have been written explicitly defining it.

"Having determined your definition of neoliberal, are you sure it WAS neoliberal rather than a hegemonic entity?"

American economic hegemony is inherently neoliberal, and has been for decades. The IMF is essentially an international loan shark that gives countries money on the condition that they dismantle their public spending apparatus and let the market run things.

Laguerre | Sep 12, 2016 4:11:58 PM | 48
I usually enjoy DiD's rants (rant in the nice sense), but in this case he is wrong. His remarks are out of date.

No doubt he has Syrian friends in NZ, including the Syro-Palestinian he mentions. They will have been living their past vision of Syria for some time. Yes, back in 2011, there was a big vision of a future democratic Syria among the intellectuals. However those who fight for the rebellion are not middle class (who left) but rural Islamist Sunnis, who have a primitive al-Qa'ida style view.

The Syrian civil war is quite like the Spanish civil war. It started with noble republicans, including foreigners like Orwell, fighting against nasty Franco, but finished with Stalin's communists fighting against Nazi-supported fascists.

The situation is different now. One Syrian lady, who came to see me in April, who lives in California, told me that her father, who was a big pre-war oppositionist, now just wants to return to Syria to die. There's no question. if you want peace in Syria, Asad is the only choice. The jihadis, who dominate the opposition, don't offer an alternative.

john | Sep 12, 2016 4:18:12 PM | 50
james says:

must be a '''slow''' news day...

yeah, did you read that the American Imperium bombed 6 Muslim countries last Saturday?

Laguerre | Sep 12, 2016 4:51:42 PM | 51
Noirette comes close to identifying one of the issues that kicked off the conflict, that the Syrian government put staying in power via adopting neoliberal strictures ahead of the welfare of Syrians.
The Ba'thist regime is a mafia of the family, not a dictatorship of Bashshar. Evidently their own interest plays a premier role, but otherwise why not in favour of the Syrian people? There's lot of evidence in favour of Syrian peace.
fast freddy | Sep 12, 2016 4:53:30 PM | 52
The lesson of Viet Nam was to keep the dead and wounded off the six o'clock news.

The jackals are going in. Another coup. Syria was on the list. Remap the Middle East. Make it like Disney World. Israel as Mad King Ludwig's Neuschwanstein.

Islam and its backward dictates, and Christianity with its backward dictates and Manifest Destiny are problematic.

Curtis | Sep 12, 2016 7:22:18 PM | 55
I may be white and I may be a fella but don't believe I'm in the fold as described. Fundamentalists of any sort are free to believe as they will but when they force it on others via gun, govt, societal pressures, violence there's trouble. I've seen comparisons to the extremes from Christianity's past with the excuse of Islam as being in its early years. No excuses. Fundies out. But we don't see that in places like Saudi Arabia or Iran. Facts on the ground rule. Iran had a bit more moderation but only under the tyrant Shah. A majority may have voted for the Islamic Republic and all that entails but what of the minority?
BTW, where are the stories (links) that show Bashar has embraced neoliberalism? In the end, DiD reduced to pointing to two evils (with multi-facets) and it looks like Assad is the lesser. But who can come up with a solution for a country so divided and so infiltrated by outsiders? And here in the US, look at the choice of future leaders that so many do not want. Where is the one who will lead the US out of its BS? And who will vote for him/her?
Jen | Sep 12, 2016 7:39:57 PM | 57
Thanks to B for republishing the comment from Debsisdead. The comment raises some issues about how people generally see the war in Syria, if they know of it, as some sort of real-life video game substitute for bashing one side or another.

I am not sure though that Debsisdead realises the full import of what s/he has said and that much criticism s/he makes about comments in MoA comments forums could apply equally to what s/he says and has said in the past.

I don't think anyone who comments here regularly ever assumed that Bashar al Assad was a knight in white shining armour. Most of us are aware of how he came to be President and that his father did rule the country from 1971 to 2000 with an iron fist. Some if not most also know that initially when Bashar al Assad succeeded to the Presidency, he did have a reformist agenda in mind. How well or not he succeeded in putting that across, what compromises he had to make, who or what opposed him, how he negotiated his way between and among various and opposed power structures in Syrian politics we do not know.

Yes, I have trouble reconciling the fact that Bashar al Assad's government did allow CIA renditioning with his reformist agenda in my own head. That is something he will have to come to terms with in the future. I don't know if Assad was naive, under pressure or willing, even eager in agreeing to cooperate with the CIA, or trying to buy time to prepare for invasion once Iraq was down. Whether Assad also realises that he was duped by the IMF and World Bank in following their advice on economic "reforms" (such as privatising Syria's water) is another thing as well.

But one thing that Debsisdead has overlooked is the fact that Bashar al Assad is popular among the Syrian public, who returned him as President in multi-candidate direct elections held in June 2014 with at least 88% of the vote (with a turnout of 73%, better than some Western countries) and who confirmed his popularity in parliamentary elections held in April 2016 with his Ba'ath Party-led coalition winning roughly two-thirds of seats.

The fact that Syrians themselves hold Assad in such high regard must say something about his leadership that has endeared him to them. If as Debsisdead suggests, Assad practises self-interested "realpolitik" like so many other Middle Eastern politicians, even to the extent of offering reconciliation to jihadis who lay down their weapons and surrender, how has he managed to survive and how did Syria manage to hold off the jihadis and US-Turkish intervention and supply before requesting Russian help?

fairleft | Sep 12, 2016 8:03:18 PM | 59
Copeland @58: I don't see why you call the problem "Islamic fundamentalism" when in fact it is Sunni fundamentalism. Admittedly it's tough to 'name' the problem. I'm sure I speak for most here that the problem isn't fundamentalism but 'warring imperialist fundamentalist and misogynist Sunni Islam' that is the problem.

It'd be nice to have a brief and accurate way of saying what this is: 'Saudi Arabia violently exporting its worst form of Islam'.

Copeland | Sep 12, 2016 8:28:41 PM | 60
fairleft, @75

When people refer to Christian fundamentalism they use the broad term as well. Nothing is otherwise wrong with denominational belief, if past a certain point it is not fundamentalist. You say the problem is not fundamentalism, but something else. Indeed, the problem is fundamentalism.

Manifest Destiny is fundamentalism. There are even atheist fundamentalists. "Full Spectrum Dominance" and other US Military doctrines are fundamentalist in nature. We are awash in fundamentalism, consumerist fundamentalism, capitalist fundamentalism. If we are unlucky and don't succeed in changing the path we are on; then we will understand too late the inscription that appeared in the Temple of Apollo: "Nothing too much".

Kalen | Sep 12, 2016 8:31:13 PM | 61
They say that the first casualty of war is truth and from what I read in comments such a mental state prevails among readers, they see Assad, quite reasonably, as the only one who can end this horrible war and the only one who is really interested in doing so while US and even seemingly Russia seems to treat this conflict as a instrument of global geopolitical struggle instigated by US imperial delusions.

But of course one cannot escape conclusion that although provoked by the CIA operation Bashir Assad failed years befor 2011 exactly because, living in London, did not see neoliberalism as an existential threat ad his father did but a system that has its benefits and can be dealt with, so for a short while Saddam, Gaddafi and Mubarak thought while they were pampered by western elites.

Now Assad is the only choice I'd Syrians want to keep what would resemble unified Syrian state since nobody else seems to care.

Another interesting element that was touched upon is attitude to Israel and its US perceived role, but for that one needs deeper background starting from before 1948.
https://contrarianopinion.wordpress.com/history-revisited/

Quadriad | Sep 12, 2016 8:42:29 PM | 62
I have no doubt that Assad was little more than a crude Arab strongman/dictator prince back in the 2011 when the uprising started. Since then, he has evolved into a committed, engaged defender of his country against multilateral foreign aggression, willingly leaving his balls in the vice and all.

He could have fled the sinking ship many times so far. Instead, he decided to stay and fight the Takfiri river flowing in through the crack, and risk going down with the ship he inherited. The majority of the Syrians know this very well.

Bashar of 2016 (not so much the one of 5 1/2 years ago) would not only win the next free elections, but destroy any opposition. The aggressors know that as a fact.

Which is precisely why he "must go" prior to any such elections. He would be invincible.

redrooster | Sep 12, 2016 9:01:21 PM | 63
Dear Debs is Dead,

you wrote:

"This war is about 5 years old. If either side were so simplistically good or evil it would have ended a long time ago."

Question to you:

if Syria had control over its borders with Turkey, Israel, Jordan and Iraq would the war have ended a long time ago ? Answer honestly.

If yes, then the so-called "opposition" of the union of headchoppers does not represent a significant portion of the Syrian people. Were it otherwise Assad wouldnt be able to survive a single year, let alone 5. With or without foreign help.

Quadriad | Sep 12, 2016 10:00:23 PM | 65
#46 FecklessLeft

And that, my friend, may be the biggest oft ignored cui bono of the entire Syrian war.

If Assad goes:

  1. Syria falls apart. Western Golan has no more debtor nation to be returned to as far as the UN go. It immediately becomes fee simple property of the occupying entity, for as long as the occupier shall exist (and, with Western Golan included, that might be a bit longer perchance...).
  2. Hizbullah loses both its best supply line and all the strategic depth it might have as well as the only ally anywhere close enough to help. It becomes a military non-entity. Who benefits?

I think this cui bono (and a double one at that!) is a $100 difficulty level question, although it feels like a $64k one.

Bill Hicks | Sep 12, 2016 10:31:21 PM | 66
Best opinion post I've yet read on this site. "Binary division," also very much affects the U.S. election. If you hate Hillary, you must just LOVE Trump, even though many of the best reasons to hate her--her arrogance, her incompetence, her phoniness, her lies, her and Bill's relentless acquisition of great wealth, etc.--are also reasons to hate Trump. Assad is a bastard, Putin is a bastard, Saddam was a bastard--but so are Obama, Netanyahu, Hollande, etc. Is it REALLY that hard to figure out?
james | Sep 12, 2016 11:09:45 PM | 67
@ 62 john... we'll have to wait for debs to explain how all that (in your link) adds up, so long as no one calls him any name/s.... i'd like to say 'the anticipation of debs commenting again is killing me', but regardless, killing innocent people in faraway lands thanks usa foreign policy is ongoing..
Jen | Sep 13, 2016 1:17:04 AM | 71
OK here is an interesting article from 2011 on Abdallah Dardari, the fellow who persuaded Bashar al Assad to adopt the disastrous neoliberal economic reforms that not only ruined Syria's economy and the country's agriculture in particular but also created an underclass who resented the reforms and who initially joined the "rebels".
http://english.al-akhbar.com/node/2097

And where is Dardari now? He jumped ship in 2011 and went to Beirut to work for the UN's Economic and Social Commission for Western Asia (ESCWA). He seems like someone to keep a watchful eye on.
https://en.wikipedia.org/wiki/Abdullah_Dardari

the pair | Sep 13, 2016 2:12:09 AM | 72
not even sure where to begin...this article is barely worthy of a random facebook post and contains a roughly even mix of straw men and stuff most people already know and don't need dictated to them by random internet folks.

of COURSE assad flirted with the west. between housing cia rendition houses and the less-than-flattering aspects of the wikileaks "syria files", assad and/or his handlers (family and/or military) have tried a little too hard to "assimilate" to western ideals (or the lack thereof).

i seriously doubt they will make that mistake again. they saw what happened to al-qaddafi after he tried to play nice and mistook western politicians for human beings. they've learned their lesson and become more ruthless but they were always machiavellians because they have to be. not an endorsement, just an acceptance of how the region is.

and then there's "just about every ME leader has put expedience ahead of principle with regard to Palestine. Colonel Ghadaffi would be the only leader I'm aware of who didn't". that might be a surprise to nasrallah and a fair share of iran's power base. i'd also say "expedience" is an odd way to describe the simple choice of avoiding israeli/saudi/US aggression in the short term since the alternative would be what we're seeing in syria and libya as we speak. again, not an endorsment of their relative cowardice. just saying i understand the urge to avoid salfist proxy wars.

[also: israel, the saudis (along with qatar and the other GCC psychopaths in supporting capacity) and the US are the main actors and throwing european "powers" into the circle of actual power does them an undue favor by ignoring their status as pathetic vassal states. "FrUkDeUSZiowhatever" isn't necessary.]

as for "calling all islamic fundamentalism" "headchopping" being "racist", be sure not to smoke around all those straw men. never mind the inanity of pretending that all islamic "fundamentalism" is the same. never mind conflating religion with ethnicity. outside of typical western sites that lean to the right and are open about it few people would say anything like that. maybe you meant to post this on glenn beck's site?

whatever. hopefully there won't be more guest posts in the future.

bigmango | Sep 13, 2016 2:20:54 AM | 73
I read this site regularly and give thanks to the numerous intelligent posters who share their knowledge of the middle east and Syria in particular. Still, I do try to read alternative views to understand opposition perspectives no matter how biased or damaging these might they appear to the readers of this blog. So in the wake of recent agreements, I try find out what the mainstream media is saying about the Ahrar al-Sham refusal to recognize the US/Russia sponsored peace plan....and type that into google.......and crickets. All that comes up is a single Al-Masdar report.

Look I know the MSM is utterly controlled - but the extent of that control still shocks at times. It is simply not possible to be "informed" by any normal definition of the word anymore without the alternative media - and for that reason this site serves a valuable purpose and I once again thank the host and contributors.

Harry | Sep 13, 2016 2:28:44 AM | 74
The irony is, Assad is 10x smarter and bigger person than Debs. Yes, he made some mistakes, but if not "flirting with neoliberalism", war against Syria would have started many years earlier, when Resistance wasnt ready one bit (neither Russia, nor Iran, while on the other hand US was more powerful).

The other ironic point, Debs is guilty of many things he blames other for, hence comments about his hypocrisy and lack of self-awareness.

FecklessLeft | Sep 13, 2016 3:11:57 AM | 77
The essay I refered to earlier at 45/46 from this site I'll post below. I think it has a lot of bearing on what DiD is implying here. It's DEFINITELY worth a read and is probably the reason why I started appreciating this site in the first place.

Support for rebel groups was misguided at best at the beginning of the war. One could conceivably not appreciate the capacity of the KSA/USA/Quatar/Israel to influence and control and create these groups. Jesus it's hard for me to think of a single local opposition group that isnt drenched in fanaticism besides the Kurds. But now that we understand the makeup and texture of these groups much more and to continue support, even just in the most minor of ways, is really disheartening.

There's no way to a solution for the Syrian people, the population not imported that is, if these groups win. I hate to be so binary but its so naive in my eyes to think anything good will come from the long arm of the gulf countries and the USA taking control.

WORTH A READ. ONE OF THE BEST THINGS EVER POSTED ON MoA.

http://www.moonofalabama.org/2013/05/syria-the-feckless-left-.html

Richard Steven Hack | Sep 13, 2016 3:38:32 AM | 79
The problem with this post is simple: all this might have been true back when the insurgency STARTED. TODAY it is UTTERLY IRRELEVANT.

As I've said repeatedly, the GOAL of the Syria crisis for the Western elites, Israel and the ME dictatorships is to take Syria OUT by any means necessary in order to get to IRAN. Nothing else matters to these people. In the same vein, nothing else matters to ninety percent of the CURRENT insurgents than to establish some Salafist state, exterminate the Shia, etc., etc.

So, yes, right NOW the whole story is about US elites, Zionist "evil", corrupt monarchs, and scumbag fanatics, etc., etc. Until THAT is resolved, nothing about how Syria is being run is going to matter.

I don't know and have never read ANYONE who is a serious commenter on this issue - and by that I mean NOT the trolls that infest every comment thread on every blog - who seriously thinks Assad is a "decent ruler". At this point it does not matter. He personally does not matter. What matters is that Syria is not destroyed, so that Hizballah is not destroyed, so that Iran is not destroyed, so that Israel rules a fragmented Middle East and eventually destroys the Palestinians and that the US gets all the oil for free. This is what Russia is trying to defend, not Assad.

And if this leaves a certain percentage of Syrian citizens screwed over by Assad, well, they should have figured that out as much as Assad should have figured out that he never should have tried to get along with the US.

Frankly, this is a pointless post which is WAY out of date.

somebody | Sep 13, 2016 5:07:06 AM | 80
Posted by: Richard Steven Hack | Sep 13, 2016 3:38:32 AM | 79

In the same vein, nothing else matters to ninety percent of the CURRENT insurgents than to establish some Salafist state, exterminate the Shia, etc., etc.

This obviously is not the case. A recent take of the BBC with some real information on the realities of the war .

"We had to be fighters," he said, "because we didn't find any other job. If you want to stay inside you need to be a part of the FSA [Free Syrian Army, the group that has closest relations with the West]. Everything is very expensive. They pay us $100 a month but it is not enough.

"All this war is a lie. We had good lives before the revolution. Anyway this is not a revolution. They lied to us in the name of religion.

"I don't want to go on fighting but I need to find a job, a house. Everything I have is here in Muadhamiya."

Hoarsewhisperer | Sep 13, 2016 5:18:29 AM | 81
...
.. who seriously thinks Assad is a "decent ruler". At this point it does not matter. He personally does not matter.
...
Frankly, this is a pointless post which is WAY out of date.
Posted by: Richard Steven Hack | Sep 13, 2016 3:38:32 AM | 79

Well, according to RSH, who specialises in being wrong...

Assad does matter because he is the ELECTED leader chosen by the People of Syria in MORE THAN ONE election.
Did you forget?
Did you not know?
Or doesn't any of that "democracy" stuff matter either?

AtaBrit | Sep 13, 2016 5:24:44 AM | 82
@TG | 20

"It continues to annoy me that the primary trigger ..."
And yet you fail to mention the Muslim Brotherhood or the Turkish water wars ...

okie farmer | Sep 13, 2016 6:34:41 AM | 84
http://www.reuters.com/article/us-israel-syria-idUSKCN11J0EY

Israel said its aircraft attacked a Syrian army position on Tuesday after a stray mortar bomb struck the Israeli-controlled Golan Heights, and it denied a Syrian statement that a warplane and drone were shot down.

The air strike was a now-routine Israeli response to the occasional spillover from fighting in a five-year-old civil war, and across Syria a ceasefire was holding at the start of its second day.

Syria's army command said in a statement that Israeli warplanes had attacked an army position at 1 a.m. on Tuesday (2200 GMT, Monday) in the countryside of Quneitra province.

The Israeli military said its aircraft attacked targets in Syria hours after the mortar bomb from fighting among factions in Syria struck the Golan Heights. Israel captured the plateau from Syria in a 1967 war.

The Syrian army said it had shot down an Israeli warplane and a drone after the Israeli attack.

Denying any of its aircraft had been lost, the Israeli military said in a statement: "Overnight two surface-to-air missiles were launched from Syria after the mission to target Syrian artillery positions. At no point was the safety of (Israeli) aircraft compromised."

The seven-day truce in Syria, brokered by Russia and the United States, is their second attempt this year by to halt the bloodshed.

fairleft | Sep 13, 2016 9:33:38 AM | 89
Copeland @60: No, I don't think the problem is fundamentalism. It's the warring crusade method of spreading a belief's 'empire' that is the problem. This is a problem uniquely of the Saudi 'do whatever it takes' crusade to convert the entire 'Arab and Muslim world' to their worst, most misogynist form of Islam. T

here are of course many fundamentalists (the Amish and some Mennonites are examples from Christianity) that are not evangelical, or put severe (no violence, no manipulation, no kidnapping, stop pushing if the person says 'no') limits on their evangelism.

Only the Saudis, or pushers of their version of Islam, seem to put no limits at all on their sect's crusade.

brian | Sep 13, 2016 9:55:45 AM | 90
president Assad is a 'decent ruler' and thats the view of most syrians
papillonweb | Sep 13, 2016 10:01:56 AM | 92
Just want to mention that from the beginning there were people who took up arms against the government. This is why the situation went out of control. People ambushed groups of young soldiers. Snipers of unknown origin fired on police and civilians.

There are plenty of people in the United States right now who are just as oppressed - I would wager more so - than anyone in Syria. Immigrants from the south are treated horribly here. There are still black enclaves in large cities where young men are shot by the police on a daily basis for suspicious behavior and minor driving infractions. And then there are the disenfranchised white folks in the Teaparty who belong to the NRA and insist on 'open carry' of their weapons on the street and train in the back woods for a coming war. Tell me what would happen if there were a guarantor these people found believable who promised them that if they took up arms against the government (and anyone else in the country they felt threatened by) they would be guaranteed to win and become the government of a 'New America'. What if that foreign guarantor were to pay them and improve their armaments while providing political cover.

I rather like Assad. I won't lie. But, he is not the reason for the insurrection in Syria ~ well, except for his alliances with Russia and Iran and his pipeline decisions and his support for Palestinian and Iraqi refugees. What happened in Syria is happening all over the globe because the nation with the most resources in the world, the self-declared exceptionalist state thinks this is the way to rule the world. . . . because they want to rule and they don't care how much destruction it takes to do so. And lucky for us there is no one big enough and bad enough to do it to us - except for our own government.

TheRealDonald | Sep 13, 2016 10:08:27 AM | 93
http://www.huffingtonpost.com/entry/un-condemns-assad-syria-abuse_us_57d7c49ce4b0fbd4b7bb50d8?section=&

Now look what you've done, Debs.

On to Sebastopol for the One Party!

fairleft | Sep 13, 2016 10:25:10 AM | 94
OT, but that was an interesting Sunni Islam conference in Grozny , because it excluded and then 'excommunicated' Salafism and Wahabbism. Amazing!

"All of the petrodollars Saudi Arabia spends to advance this claim of leadership and the monopolistic use of Islam's greatest holy sites to manufacture a claim of entitlement to Muslim leadership were shattered by this collective revolt from leading Sunni Muslim scholars and institutions who refused to allow extremism, takfir, and terror ideology to be legitimized in their name by a fringe they decided that it is even not part of their community. This is the beginning of a new era of Muslim awakening the Wahhabis spared no efforts and no precious resources to ensure it will never arrive."

okie farmer | Sep 13, 2016 11:04:04 AM | 96
Josh Landis Syria Comment
There were a lot of people posting how Bashar al Assad was doing full neoliberalism. And at was true.
Noirette | Sep 13, 2016 12:25:52 PM | 99
Assad (=> group in power), whose stated aim was to pass from a 'socialist' to a 'market' economy. Notes.

> a. unemployment rose 'n rose (to 35-40% youth? xyz overall?), and social stability was affected by family/extended f/ district etc. organisation being smashed. education health care in poor regions suffered (2)

> b. small biz of various types went under becos loss of subs, competition from outsiders (free market policy), lack of bank loans it is said by some but idk, and loss of clients as these became impoverished. Syria does not have a national (afaik) unemployment scheme. Assad to his credit set up a cash-transfer thingie to poor families, but that is not a subsitute for 'growing employment..'

*opened up the country's banking system* (can't treat the details..)

So Assad was hit by a Tri-horror: global warming, dwindling cash FF resources, and IMF-type pressure, leaving out the trad. enemies, KSA, pipelines , etc. MSM prefer to cover up serious issues with 'ethnic strife' (sunni, shia, black lives matter, etc.)

1. all nos off the top of my head.

2. Acceptance of a massive refugee pop. (Pals in the past, Kurds, but numerically important now, Iraqis) plus the high birth rate

2011> 10 year plan syria in arabic (which i can't read) but look at images and 'supporters' etc.

http://www.planning.gov.sy/index.php?page=show&ex=2&dir=docs&lang=2&ser=2&cat=172&

[Aug 20, 2016] Leaked Memo Shows Soros Pushed Greece To Support Ukraine Coup, Paint Russia As Enemy

Notable quotes:
"... Last week we reported on the DC Leaks hack of what was over 2,500 documents detailing how George Soros and his NGOs influence world leaders, drive foreign policy, and help to create unrest in sovereign nations, that many times leads to chaos and civil war. ..."
"... One country of part ..."
Aug 19, 2016 | Zero Hedge

Submitted by Alex Christoforou via TheDuran.com,

Last week we reported on the DC Leaks hack of what was over 2,500 documents detailing how George Soros and his NGOs influence world leaders, drive foreign policy, and help to create unrest in sovereign nations, that many times leads to chaos and civil war.

One country of particular focus for George Soros and his NGOs is Ukraine. It is now accepted fact that Soros was deeply involved in the Maiden protests in 2014 and the violent coup, that saw a democratically elected government overthrown in the name of "EU values". What is even more troubling, as revealed by the DC Leaks hack, is how Soros and his network of "non-profit organisations" worked to lobby EU member states into not only buying his Ukraine "Maidan" narrative, but to also disavow any ties and support for Russia.

Leaked documents show that George Soros was active in mapping out the Greek media landscape with generous grants, so as to further his Ukraine project, while also using his deep pockets to get Greek media to turn against the Russian Federation…in what can only be described as a well-funded and orchestrated smear campaign.

In one document entitled: "Open Society Initiative For Europe (OSIFE). Mapping the Ukrainian debate in Greece" (Ukraine and Europe-greece-tor ukraine debate mapping greece.docx), Soros offers a consultant a remuneration of $6,500 (gross) for "at least 15 full working days in carrying out this task" plus all expenses paid.

The aim of this task:

The consultant is expected to chart the main players in the Greek debate on Ukraine, outline the key arguments and their evolution in the past 18 months. Specifically, the report will take stock of any existing polling evidence provide a 'who is who?' with information about at least
– 6 newspapers,
– 10 audiovisual outlets (TV and radio),
– 6 internet sites,
– About 50 opinion leaders and trends in social networks[1].

Categorize the main strains of discussion and eventually identify different sides / camps of the discussion.

Provide a brief account of how Russia has tried to influence the Greek debate on Ukraine through domestic actors and outlets

Include a section with recommendations on
– What are the spaces OSF should engage and would most likely to have impact?
– What are the voices (of reason or doubt) that should be amplified?

Open Society Initiative For Europe (OSIFE) selected Iannis Carras for the Greek media mapping grant. The justification why he was chosen…

All contracts were for the same amount. We needed to find highly specialized researchers to map the debate on Ukraine in Europe, therefore we identified a shortlist of candidates in consultation with colleagues in the Think Tank Fund, OSEPI and in consultation with members of the OSIFE board and chose the most qualified who could produce the report in the time allowed. I n the case of Greece we agreed that Iannis Carras, an economic and social historian of Balkan and Russian relations with expert knowledge of Greece's NGOs and social movements, was the best suited to the task.

What is even more interesting is not the grant from OSIFE, but a letter from grant winner Carras to a person named Mathew (another Greek speaker???), outlining his plan in detail for pushing Soros' Ukraine agenda in Greece.

Of significance is how Carras tells Mathew about Greek society's overall suspicion of The Open Society after the roll in played in seeding unrest in Yugoslavia. Carras even tells Mathew to not mention The Open Society in Greece.

"Do you want your name to appear alongside mine on the paper? Do make comments on all of the below.

In general, and at your discretion, do not say you are doing this for Open Society because it is likely to close down doors. There's a lot of suspicion about Open Society in Greece, mainly because of its positions vis-à-vis the former Yugoslavia. As I am simultaneously writing an article for Aspen Review Eastern Europe that can be used as the organisation for which research like this is taking place."

Carras then goes on to outline his approach in manipulating Greek society, covering topics such as:

1. Media.
2. Political parties and think tanks
3. Opinion polls.
4. Business relations.
5. Religious and cultural ties.
6. Migration and diaspora.
7. Greece and Ukraine in the context of Greece's economic crisis.
8. Greece, Ukraine and the Cyprus issue.
9. Names and brief description of significant actors: a 'who is who?' with information on at least 50 opinion leaders

Carras notes how Russia has much goodwill in Greece, exercising "significant soft power". Carras notes that Greece is, at this moment, a weak player in the Ukraine debate and the Greek Foreign Minister Kotzias realises this.

Summary: I am working on the hypotheses largely born out by the interviews carried out so far that Russia has significant soft power in Greece though this does not easily convert into hard power (e.g. vetoing EU sanctions). Greeks are basically not very interested in Ukraine and the crisis there. They reflect and understand that conflict through their own economic crisis and their relations with Europe (nowadays primarily Europe and not US). To the extent that relations with Europe remain the focus and do not go off the rails, Greece will bark but will not bite. If they improve, Greece might not even bark (as can be seen with Greece's policy on Israel, Kotzias can be very much a realist).

Carras does warn that should Greece's economic situation deteriorate further, than Greece may very well look to Russia for support, and this has implications on the Ukraine plan.

If they deteriorate however, Greece will be looking to Russia for increased support and will alter its Ukraine policies accordingly. Do you agree with these hypotheses? Can you find confirmation for or against them in the media outlets examined?

Carras places extra emphasis on influencing the media in Greece, citing various large news outlets that the Soros NGO can target, including approaching left wing and right wing blogs.

This is the bulk of the work (we have to think about how to divide the work up). We have to provide a 'who is who?' with information about at least 6 newspapers, 10 audio-visual outlets (TV and radio) and 6 internet sites. Some of these will be obvious, but, even in these cases, change over time (at least eighteen months) is an important consideration. Here are some suggestions for newspapers: Kathimerini, Avgi, Ta Nea, Vima, Efymerida Syntakton, Eleutherotypia, Proto Thema, Rizospastis? etc. What else? Protagon? Athens Review of Books? (info on Kotzias). As for TV, we'll just do the main ones. What about left wing blogs? What about commercial radio stations? I think we should cover Aristera sta FM. Sky. What else? Anything from the nationalist and far right? My choice would be Ardin (already looking at this) which at least tries to be serious. Patria is even more unsavoury. I'll deal with the religious web sites in the culture and religion appendix. I think we should interview Kostas Nisenko ( http://www.kathimerini.gr/757296/article/epikairothta/kosmos/viaih-epi8e... ) and Kostas Geropoulos of New Europe to get into the issues involved… not at all sure though that it's advisable to talk to the Russia correspondents Thanasis Avgerinos, Dimitris Liatsos, Achileas Patsoukas etc. (I know all of them). Also if we come across articles with interesting information on any one of the topics, we should mail them to one another.

Attention is placed on influencing political parties. Carras sees this as a more difficult task, as parties in Greece would not be warm towards turning their back on Russia.

Who if anyone deals with Russia / Ukraine within each of the political parties? How important are political parties in formulating policies? (my hunch is totally unimportant). I must admit I have little idea of how to proceed with this one, but I have written to the academic Vassilis Petsinis and I hope I'll get to skype with him soon. Think-tanks are easier, and, I think, more important. I have already interviewed Thanos Dokos (director Greek foreign policy institute, ELIAMEP) in person.

Carras notes how he has approached various religious leaders, academics and actors, to gauge a sense of how deep Russia's influence and "soft power" runs in Greek society and culture.

So far I have interviewed by telephone Metropolitan John of Pergamum (one of the top figures in the inner circle of the Istanbul based Ecumenical Patriarchate). I have read Metropolitan Nektarios of the Argolid's recent book (2014), "Two bullets for Donetsk". I have tried but so far not succeeded in contacting Metropolitan Nektarios himself, and have started work on two of the main religious news websites romfea.gr and amen.gr .

With respect to culture I intend to contact Georgos Livathinos, leading director of Russian and other plays and Lydia Koniordou, actress. Also the management of the Onassis Centre, particularly Afroditi Panagiotakou, the executive vice-director who is quite knowledgeable in this field having travelled to both Ukraine and Russia.

In 2016 Greece and Russia will be hosting each other as the focus of cultural events in the two respective countries. I will be looking to understand the extent to which Russia's unparalleled cultural soft-power might translate into Greek policy making.

Greek military is the final point of influence, with Carras interviewing Ambassadors and policy decision makers.

Foreign policy and the Greek military. So far I have interviewed in person Ambassador Elias Klis (formerly ambassador of Greece to Moscow, advisor to the current Foreign Minister, advisor to the Greek Union of Industrialists. He is perhaps the single most important person for understanding Greek-Russian diplomatic relations at present). Ambassador Alexandros Philon (formerly ambassador of Greece to Washington, to whom I am related). Captain Panos Stamou (submarines, extensive contacts in Crimea, also secretary and leading light of the Greek-Russian historical association) who emphasised the non-political tradition of the Greek armed forces. Tempted to talk to Themos Stoforopoulos for a nationalist left wing view. I have also read foreign minister Kotzias' latest book. All of this has provided me with useful insights for appendices 7 and 8, and particularly for the connection to the Cyprus issue (which at the moment Greece is very keen to downplay).

Carras places an emphasis on Cyprus, perhaps recognising the islands affinity to support Russia and its large Russian diaspora community.

The recommendations will be for the medium and the short term, cited here based on interviews carried out so far. Medium term recommendations will include a cultural event (to be specified later) and a one-day conference on Ukraine and international law, citing precedents for dealing with the situation in Ukraine (particularly Cyprus). Recommendations may include capacity building for local Ukrainian migrant spokesperson(s). Short term recommendations will include an action pack on what Greece has at stake in Ukraine, and ways to narrate parallels in interactions between nation and empire vis-à-vis Greece / Ukraine. Think about whether these work / what else we might recommend?

Both of the documents are below...

[Mar 10, 2016] The Brazilian Earthquake The Empire Of Chaos

Notable quotes:
"... Brazil is corrupt to the core - from the comprador elites down to a great deal of the crass "new" elites, which include the PT. The greed and incompetence displayed by an array of PT stalwarts is appalling - a reflection of the lack of quality cadres. Corruption and traffic of influence involving Petrobras, construction companies and politicians is undeniable, even if it pales compared to Goldman Sachs shenanigans or Big Oil and/or Koch Brothers/Sheldon Adelson-style buying/bribing of US politicians. ..."
"... The Central Bank still keeps its benchmark interest rate at a whopping 14.25%. A disastrous Rousseff neoliberal "fiscal adjustment" actually increased the economic crisis. Today Rousseff "governs" - that's a figure of speech - for the banking cartel and the rentiers of Brazilian public debt. Over $120 billion of the government's budget evaporates to pay interest on the public debt. ..."
"... It's no coincidence that three major BRICS nations are simultaneously under attack - on myriad levels: Russia, China and Brazil. The concerted strategy by the Masters of the Universe who dictate the rules in the Wall Street/Beltway axis is to undermine by all means the BRICS's collective effort to produce a viable alternative to the global economic/financial system, which for the moment is subjected to casino capitalism. It's unlikely Lula, by himself, will be able to stop them. ..."
"... These oligarchs,.. GOOD. Those oligarchs.... BAD. ..."
"... The Oligarchs of the BRICS have been duped and co-opted by TPTB in the US. Their foot-dragging and lack or decisive and timely action means that their Window Of Opportunity is probably gone. The various Trans-Oceanic Trade Deals that the US has cooking is front-running their indecisiveness and lack of action. ..."
"... They are 'toast', because these Trade Deals have the USD baked into them, and the combined GDPs of each Pact is far bigger than that of the BRICS. ..."
www.zerohedge.com
Authored by Pepe Escobar, originally posted at SputnikNews.com,

Imagine one of the most admired global political leaders in modern history taken from his apartment at 6 am by armed Brazilian Federal Police agents and forced into an unmarked car to the Sao Paulo airport to be interrogated for almost four hours in connection with a billion dollar corruption scandal involving the giant state oil company Petrobras.

This is the stuff Hollywood is made of. And that was exactly the logic behind the elaborate production.

The public prosecutors of the two-year-old Car Wash investigation maintain there are " elements of proof " implicating Lula in receiving funds - at least 1.1 million euros - from the dodgy kickback scheme involving major Brazilian construction companies connected to Petrobras. Lula might - and the operative word is "might" - have personally profited from it mostly in the form of a ranch (which he does not own), a relatively modest seaside apartment, speaking fees in the global lecture circuit, and donations to his charity.

Lula is the ultimate political animal - on a Bill Clinton level. He had already telegraphed he was waiting for such a gambit, as the Car Wash machine had already arrested dozens of people suspected of embezzling contracts between their companies and Petrobras - to the tune of over $2 billion - to pay for politicians of the Workers' Party (PT), of which Lula was leader.

Lula's name surfaced via the proverbial rascal turned informer, eager to strike a plea bargain. The working hypothesis - there is no smoking gun - is that Lula, when he led Brazil between 2003 and 2010, personally benefited from the corruption scheme with Petrobras at the center, obtaining favors for himself, the PT and the government. Meanwhile, inefficient President Dilma Rousseff is herself under attack engineered via a plea bargain by the former government leader in the Senate.

Lula was questioned in connection to money laundering, corruption and suspected dissimulation of assets. The Hollywood blitz was cleared by federal judge Sergio Moro - who always insists he's been inspired by the Italian judge Antonio di Pietro and the notorious 1990s Mani Pulite ("Clean Hands") investigation.

And here, inevitably, the plot thickens.

Round up the usual media suspects

Moro and the Car Wash prosecutors justified the Hollywood blitz insisting Lula refused to be interrogated. Lula and the PT vehemently insist otherwise.

And yet Car Wash investigators had consistently leaked to mainstream media words to the effect, "We can't just bite Lula. When we get to him, we will swallow him." This would imply, at a minimum, a politicization of justice, the Federal Police and the Public Ministry. And would also imply that the Hollywood blitz may have been supported by a smoking gun. As perception is reality in the frenetic non-stop news cycle, the "news" - instantly global - was that Lula was arrested because he's corrupt.

Yet it gets curioser and curioser when we learn that judge Moro wrote an article in an obscure magazine way back in 2004 (in Portuguese only, titled Considerations about Mani Pulite , CEJ magazine, issue number 26, July/September 2004), where he clearly extols "authoritarian subversion of juridical order to reach specific targets " and using the media to intoxicate the political atmosphere.

All of this serving a very specific agenda, of course. In Italy, right-wingers saw the whole Mani Pulite saga as a nasty judicial over-reach; the left, on the other hand, was ecstatic. The Italian Communist Party (PCI) emerged with clean hands. In Brazil, the target is the left - while the right, at least for the moment, seems to be composed of hymn-singing angels.

The pampered, cocaine-snorting loser candidate of the 2014 Brazilian presidential election, Aecio Neves, for instance, was singled out for corruption by three different accusers - and it all went nowhere, without further investigation. Same with another dodgy scheme involving former president Fernando Henrique Cardoso - the notoriously vainglorious former developmentalist turned neoliberal enforcer.

What Car Wash has already forcefully imprinted across Brazil is the perception that corruption only pays when the accused is a progressive nationalist. As for Washington consensus vassals, they are always angels - mercifully immune from prosecution.

That's happening because Moro and his team are masterfully playing to the hilt Moro's self-described use of the media to intoxicate the political atmosphere - with public opinion serially manipulated even before someone is formally charged with any crime. And yet Moro and his prosecutors' sources are largely farcical, artful dodgers cum serial liars. Why trust their word? Because there are no smoking guns, something even Moro admits.

And that leads us towards the nasty scenario of a made in Brazil media-judicial-police complex possibly hijacking one of the healthiest democracies in the world. And that is supported by a stark fact: the right-wing Brazilian opposition's entire "project" boils down to ruining the economy of the 7 th largest global economic power to justify the destruction of Lula as a presidential candidate in 2018.

Elite Plundering Rules

None of the above can be understood by a global audience without some acquaintance with classic Braziliana. Local legend rules that Brazil is not for beginners. Indeed; this is an astonishingly complex society - which essentially descended from a Garden of Eden (before the Portuguese "discovered" it in 1500) to slavery (which still permeates all social relations) to a crucial event in 1808: the arrival of Dom John VI of Portugal (and Emperor of Brazil for life), fleeing Napoleon's invasion, and carrying with him 20,000 people who masterminded the "modern" Brazilian state. "Modern" is an euphemism; history shows the descendants of these 20,000 actually have been raping the country blind for the past 208 years. And few have ever been held accountable.

Traditional Brazilian elites compose one of the most noxious arrogant-ignorant-prejudiced mixes on the planet. "Justice" - and police enforcement - are only used as a weapon when the polls do not favor their agenda.

Brazilian mainstream media owners are an intrinsic part of these elites. Much like the US concentration model, only four families control the media landscape, foremost among them the Marinho family's Globo media empire. I have experienced, from the inside, in detail, how they operate.

Brazil is corrupt to the core - from the comprador elites down to a great deal of the crass "new" elites, which include the PT. The greed and incompetence displayed by an array of PT stalwarts is appalling - a reflection of the lack of quality cadres. Corruption and traffic of influence involving Petrobras, construction companies and politicians is undeniable, even if it pales compared to Goldman Sachs shenanigans or Big Oil and/or Koch Brothers/Sheldon Adelson-style buying/bribing of US politicians.

If this was a no-holds-barred crusade against corruption - which the Car Wash prosecutors insist it is - the right-wing opposition/vassals of the old elites should have been equally exposed in mainstream media. But then the elite-controlled media would simply ignore the prosecutors. And there would be nothing remotely on the scale of the Hollywood blitz, with Lula - pictured as a lowly delinquent - humiliated in front of the whole planet.

Car Wash prosecutors are right; perception is reality. But what if it backfires?

No consumption, no investment, no credit

Brazil couldn't be in a gloomier situation. GDP was down 3.8% last year; probably will be down 3.5% this year. The industrial sector was down 6.2% last year, and the mining sector down 6.6% in the last quarter. The nation is on the way to its worst recession since…1901.

There was no Plan B by the - incompetent - Rousseff administration for the Chinese slowdown in buying Brazil's mineral/agricultural wealth and the overall global slump in commodity prices.

The Central Bank still keeps its benchmark interest rate at a whopping 14.25%. A disastrous Rousseff neoliberal "fiscal adjustment" actually increased the economic crisis. Today Rousseff "governs" - that's a figure of speech - for the banking cartel and the rentiers of Brazilian public debt. Over $120 billion of the government's budget evaporates to pay interest on the public debt.

Inflation is up - now in double-digit territory. Unemployment is at 7.6% - still not bad as many a player across the EU - but rising.

The usual suspects of course are gloating, spinning non-stop how Brazil has become "toxic" for global investors.

Yes, it's bleak. There's no consumption. No investment. No credit. The only way out would be to unlock the political crisis. Maggots in the opposition racket though have a one-track obsession; the impeachment of President Rousseff. Shades of good ol' regime change; for these Wall Street/Empire of Chaos vassals, an economic crisis, fueled by a political crisis, must by all means bring down the elected government of a key BRICS player.

And then, suddenly, out of left field, surges…Lula. The move against him by the Car Wash investigation may yet backfire - badly. He's already on campaign mode for 2018 - although he's not an official candidate, yet. Never underestimate a political animal of his stature.

Brazil is not on the ropes. If reelected, and assuming he could purge the PT from a legion of crooks, Lula could push for a new dynamic. Before the crisis, Brazilian capital was going global - via Petrobras, Embraer, the BNDES (the bank model that inspired the BRICS bank), the construction companies. At the same time, there might be benefits in breaking, at least partially, this oligarchic cartel that control all infrastructure construction in Brazil; think of Chinese companies building the high-speed rail, dams and ports the country badly lacks.

Judge Moro himself has theorized that corruption festers because the Brazilian economy is too closed to the outside world, as India's was until recently. But there's a stark difference between opening up some sectors of the Brazilian economy and let foreign interests tied to the comprador elites plunder the nation's wealth.

So once again, we must go back to the recurrent theme in all major global conflicts.

It's the oil, stupid

For the Empire of Chaos, Brazil has been a major headache since Lula was first elected, in 2002 (for an appraisal of complex US-Brazil relations, check the indispensable work of Moniz Bandeira).

A top priority of the Empire of Chaos is to prevent the emergence of regional powers fueled by abundant natural resources, from oil to strategic minerals. Brazil amply fits the bill. Washington of course feels entitled to "defend" these resources. Thus the need to quash not only regional integration associations such as Mercosur and Unasur but most of all the global reach of the BRICS.

Petrobras used to be a very efficient state company that then doubled as the single operator of the largest oil reserves discovered in the 21 st century so far; the pre-salt deposits. Before it became the target of a massive speculative, judicial and media attack, Petrobras used to account for 10% of investment and 18% of Brazilian GDP.

Petrobras found the pre-salt deposits based on its own research and technological innovation applied to exploring oil in deep waters - with no foreign input whatsoever. The beauty is there's no risk; if you drill in this pre-salt layer, you're bound to find oil. No company on the planet would hand this over to the competition.

And yet a notorious right-wing opposition maggot promised Chevron in 2014 to hand over the exploitation of pre-salt mostly to Big Oil. The right-wing opposition is busy altering the juridical regime of pre-salt; it's already been approved in the Senate. And Rousseff is meekly going for it. Couple it to the fact that Rousseff's government did absolutely nothing to buy back Petrobras stock - whose vertiginous fall was deftly engineered by the usual suspects.

The meticulous dismantling of Petrobras, Big Oil eventually profiting from the pre-salt deposits, keeping in check Brazil's global power projection, all this plays beautifully to the interests of the Empire of Chaos. Geopolitically, this goes way beyond the Hollywood blitz and the Car Wash investigation.

It's no coincidence that three major BRICS nations are simultaneously under attack - on myriad levels: Russia, China and Brazil. The concerted strategy by the Masters of the Universe who dictate the rules in the Wall Street/Beltway axis is to undermine by all means the BRICS's collective effort to produce a viable alternative to the global economic/financial system, which for the moment is subjected to casino capitalism. It's unlikely Lula, by himself, will be able to stop them.

Alok , Thu, 03/10/2016 - 21:04

Pepe precise! Very good analysis...

Kirk2NCC1701, Thu, 03/10/2016 - 21:04

I warned you about this last year, when neither Russia nor China had their version of BIS/SWIFT online.

Newsboy, Thu, 03/10/2016 - 21:04

The Ides of March approaches. Ceaser's health is good.

Relax!

tarabel, Thu, 03/10/2016 - 21:04

I see Pepe the Unrequited Leninist is still banging his drum. These oligarchs,.. GOOD. Those oligarchs.... BAD.

As if Brazil needs ANYBODY else to show it how to play the corruption game.

Kirk2NCC1701, Thu, 03/10/2016 - 21:12

The Oligarchs of the BRICS have been duped and co-opted by TPTB in the US. Their foot-dragging and lack or decisive and timely action means that their Window Of Opportunity is probably gone. The various Trans-Oceanic Trade Deals that the US has cooking is front-running their indecisiveness and lack of action.

They are 'toast', because these Trade Deals have the USD baked into them, and the combined GDPs of each Pact is far bigger than that of the BRICS.

Math + Action beats Hope + Hype every time, kiddies. (Those of you who can't handle the Truth or the Cognitive Dissonance, had best go to their "Safe Space".)

[Jan 10, 2016] Neoliberalism Raises Its Ugly Head in South America: Washington Targets Venezuela, Brazil and Argentina by Jack Rasmus

Notable quotes:
"... The USA used to complain about Japan Inc. Of course now it's USA as Neolibraconia Inc. and it's business is war along all lines : military, economic, environmental, social ... ..."
www.counterpunch.org

After 9-11, the United States focused its most aggressive foreign policy on the Middle East – from Afghanistan to North Africa. But the deal recently worked out with Iran, the current back-door negotiations over Syria between U.S. Secretary of State John Kerry, and Russia Foreign Minister Sergei Lavrov, and the decision to subsidize, and now export, U.S. shale oil and gas production in a direct reversal of U.S. past policy toward Saudi Arabia – together signal a relative shift of U.S. policy away from the Middle East.

With a Middle East consolidation phase underway, U.S. policy has been shifting since 2013-14 to the more traditional focus that it had for decades: first, to check and contain China; second, to prevent Russia from economically integrating more deeply with Europe; and, third, to reassert more direct U.S. influence once again, as in previous decades, over the economies and governments in Latin America.

... ... ...

Argentina & Brazil: Harbinger of Neoliberal Things to Come

Should the new pro-U.S., pro-Business Venezuela National Assembly ever prevail over the Maduro government, the outcome economically would something like that now unfolding with the Mauricio Macri government in Argentina. Argentina's Macri has already, within days of assuming the presidency, slashed taxes for big farmers and manufacturers, lifted currency controls and devalued the peso by 30 percent, allowed inflation to rise overnight by 25 percent, provided US$2 billion in dollar denominated bonds for Argentine exporters and speculators, re-opened discussions with U.S. hedge funds as a prelude to paying them excess interest the de Kirchner government previously denied, put thousands of government workers on notice of imminent layoffs, declared the new government's intent to stack the supreme court in order to rubber stamp its new Neoliberal programs, and took steps to reverse Argentine's recent media law. And that's just the beginning.

Politically, the neoliberal vision will mean an overturning and restructuring of the current Supreme Court, possible changes to the existing Constitution, and attempts to remove the duly-elected president from office before his term by various means. Apart from plans to stack the judiciary, as in Argentina, Venezuela's new business controlled National Assembly will likely follow their reactionary class compatriots in Brazil, and move to impeach Venezuela president, Maduro, and dismantle his popular government – just as they are attempting the same in Brazil with that country's also recently re-elected president, Rousseff.

What happens in Venezuela, Argentina, and Brazil in the weeks ahead, in 2016, is a harbinger of the intense economic and political class war in South America that is about to escalate to a higher stage in 2016.

jfl | Jan 8, 2016 6:08:12 PM | 10

The USA used to complain about Japan Inc. Of course now it's USA as Neolibraconia Inc. and it's business is war along all lines : military, economic, environmental, social ... Jack Rasmus has an excellent survey at Neoliberalism Raises Its Ugly Head in South America: Washington Targets Venezuela, Brazil and Argentina .

The war on the homefront seems won as far as Neolibraconia is concerned, at least the lock-up, see A Minimal Demand: Roll Back Incarceration to 1970 Levels , and here are pictures: animated and still .

That report from FARS seems worrisome indeed.

Our man b called Merkel's move for what it was before it was : After Creating Migration Flood Merkel Throws Up Emergency Dikes .

I'm still unconvinced that 1,000 rapists ran rampant in Cologne on New Years Eve. Where's Penelope and her fraud analysis when it seems most needed?

2016 will be the year when all this comes to a head. Perhaps Russia and the BRICS should preemptively repudiate their dollar denominated debts? It all seems to be going south at this particular point in time anyway.

jfl | Jan 8, 2016 6:45:14 PM | 11

Trying to follow nmb's link @1 without actually being shortened and sold myself led me to Pepe Escobar of 29 Dec

The lame duck Obama administration – whatever rhetorical and/or legalistic contortions – still sticks to the Cold War 2.0 script on Russia, duly prescribed by Obama mentor Dr. Zbigniew "Grand Chessboard" Brzezinski.

That follows a "tradition" Bill Blum , for instance, has extensively documented, as since the end of WWII Washington attempted to overthrow more than 50 governments – the absolute majority full democracies; dropped bombs on the civilian population of over 30 nations ; attempted to assassinate over 50 foreign leaders ; attempted to suppress nationalist movements in 20 nations ; interfered on countless democratic elections; taught torture through manuals and "advisers"; and the list goes on.

The key front though is the Russian economy; sooner or later there's got to be a purge of the Russian Central Bank and the Finance Ministry, but Putin will only act when he has surefire internal support, and that's far from given.

The fight to the death in Moscow's inner circles is really between the Eurasianists and the so-called Atlantic integrationists, a.k.a. the Western fifth column. The crux of the battle is arguably the Russian Central Bank and the Finance Ministry – where some key liberalcon monetarist players are remote-controlled by the usual suspects, the Masters of the Universe.

The same mechanism applies, geopolitically, to any side, in any latitude, which has linked its own fiat money to Western central banks. The Masters of the Universe always seek to exercise hegemony by manipulating usury and fiat money control.

So why President Putin does not fire the head of the Russian Central Bank, Elvira Nabiulina, and a great deal of his financial team - as they keep buying U.S. bonds and propping up the U.S. dollar instead of the ruble? What's really being aggressed here if not Russian interests?

[Sep 27, 2015] How America built its empire The real history of American foreign policy that the media won't tell you

Sep 27, 2015 | www.salon.com

Salon.com

The book tries to do two things. One is to cover the history of American foreign policy, from around 1900 to the present, tracing the gradual construction of a global empire. This first really came into view as a prospect during the Second World War and is today a reality across all five continents, as a glance at the skein of its military bases makes clear. The Cold War was a central episode within this trajectory, but the book doesn't treat just the U.S. record vis-á-vis the USSR or China. It tries to deal equally with American relations with the Europe and Japan, and also with the Third World, treated not as a homogenous entity but as four or five zones that required different policy combinations.

The second part of the book is a survey of American grand strategy-that is, the different ways leading counselors of state interpret the current position of the United States on the world stage and their recommendations for what Washington should do about it.

The "big think" set, in other words-Kissinger, of course, Brzezinski, Walter Russell Mead, Robert Kagan. And then people such as Francis Fukuyama, whom I consider a ridiculous figure but whose thinking you judged worth some scrutiny. How did you choose these?

From the range of in-and-outers-thinkers moving between government and the academy or think-tanks-who have sought to guide U.S. foreign policy since 2000, with some intellectual originality. Kissinger isn't among these. His ideas belong to a previous epoch, his later offerings are boilerplate. Fukuyama, who sensed what the effects of office on thought could be, and got out of state service quite early, is a mind of a different order. The figures selected cover the span of options within what has always been a bipartisan establishment.

You make a distinction between American exceptionalism, which is much in the air, and American universalism, which few of us understand as a separate matter. The first holds America to be singular (exceptional), and the second that the world is destined to follow us, that the trails we've blazed are the future of humanity. You call this a "potentially unstable compound." Could you elaborate on this distinction, and explain why you think it's unstable?

It's unstable because the first can exist without the second. There is, of course, a famous ideological linkage between the two in the religious idea, specific to the United States, of Providence-that is, divine Providence. In your own book "Time No Longer" you cite an astounding expression of this notion: "However one comes to the debate, there can be little question that the hand of Providence has been on a nation which finds a Washington, a Lincoln, or a Roosevelt when it needs him." That pronouncement was delivered in the mid-1990s-not by some television preacher, but by Seymour Martin Lipset: chairs at Harvard and Stanford, president of both the American Sociological and the American Political Science Associations, a one-time social democrat.

What is the force of this idea? A belief that God has singled out America as a chosen nation for exceptional blessings, a notion which then easily becomes a conviction of its mission to bring the benefits of the Lord to the world. President after president, from Truman through to Kennedy, the younger Bush to Obama, reiterate the same tropes: "God has given us this, God has given us that," and with the unique freedom and prosperity he has conferred on us comes a universal calling to spread these benefits to the rest of the world. What is the title of the most ambitious contemporary account of the underlying structures of American foreign policy? "Special Providence," by Walter Russell Mead. Year of publication: 2001.

But while a messianic universalism follows easily from providential exceptionalism, it is not an ineluctable consequence of it. You mount a powerful attack on the idea of exceptionalism in "Time No Longer," but-we may differ on this-if we ask what is the more dangerous element in the unstable compound of the nation's image of itself, I would say exceptionalism is the less dangerous. That may seem paradoxical. But historically the idea of exceptionalism allowed for an alternative, more modest deduction: that the country was different from all others, and so should not be meddling with them-the argument of Washington's Farewell Address [in 1796].

A century later, this position became known as isolationism, and as the American empire took shape, it was all but invariably castigated as narrow-minded, short-sighted and selfish. But it could often be connected with a sense that the republic was in danger at home, with domestic ills that needed to be addressed, which vast ambitions abroad would only compound. Mead terms this strand in American sensibility Jeffersonian, which isn't an accurate description of Jefferson's own empire-building outlook, but he otherwise captures it quite well.

We don't ordinarily apply the term "exceptionalist" in the same breath to America and to Japan, though if there is any nation that claims to be completely unique, it is Japan. But the claim produced a drastic isolationism as a national impulse, both in the Tokugawa period [1603-1868, a period of severely enforced seclusion] and after the war. Does that support the point you're making?

Exactly. Historically, exceptionalism could generate a self-limiting, self-enclosing logic as well as the gigantic expansionist vanities of the Co-Prosperity Sphere and the "Free World" [narrative]. In the American case, the two strands of exceptionalism and universalism remained distinct, respectively as isolationist and interventionist impulses, sometimes converging but often diverging, down to the Second World War. Then they fused. The thinker who wrote best about this was Franz Schurmann, whose " Logic of World Power" came out during the Vietnam War. He argued that each had a distinct political-regional base: the social constituency for isolationism was small business and farming communities in the Midwest, for interventionism it was the banking and manufacturing elites of the East Coast, with often sharp conflicts between the two up through the end of thirties. But in the course of the Second World War they came together in a synthesis he attributed-somewhat prematurely-to FDR, and they have remained essentially interwoven ever since. The emblematic figure of this change was [Arthur H.] Vandenberg, the Republican Senator from Michigan [1928-51], who remained an isolationist critic of interventionism even for a time after Pearl Harbor, but by the end of the war had become a pillar of the new imperial consensus.

Mainstream debate today seems to have constructed two very stark alternatives: There is either engagement or isolation. In this construction, engagement means military engagement; if we are not going to be militarily engaged we are isolationists. I find that absolutely wrong. There are multiple ways of being engaged with the world that have nothing to do with military assertion.

True, but engagement in that usage doesn't mean just military engagement, but power projection more generally. One of the thinkers I discuss toward the end of my book is Robert Art, a lucid theorist of military power and its political importance to America, who argues for what he calls selective-expressly, not universal-engagement. What is unusual about him is that in seeking to discriminate among engagements the U.S. should and should not select, he starts considering in a serious, non-dismissive way what would typically be construed as isolationist alternatives, even if ending with a fairly conventional position.

How far do you view the contemporary American crisis-if you accept that we are living through one-as, at least in part, one of consciousness? As an American, I tend to think that no significant departure from where find ourselves today can be achieved until we alter our deepest notions of ourselves and our place among others. I pose this question with some trepidation, since a change in consciousness is a generational project, if not more. Our leadership is not remotely close even to thinking about this. I'm suggesting a psychological dimension to our predicament, and you may think I put too much weight on that.

You ask at the outset whether I accept that Americans are living through a crisis. My reply would be: not anything like the order of crisis that would bring about the sort of change in consciousness for which you might hope. You describe that as a generational project, and there, yes, one can say that among the youngest cohorts of the U.S. population, the ideologies of the status quo are less deeply embedded, and in certain layers even greatly weakened. That is an important change, but it's generational, rather than society-wide, and it's not irreversible.

At the level of the great majority, including, naturally, the upper middle class, the image you use to describe the purpose of your last book applies: you write that it aims "to sound the tense strings wound between the pegs of myth and history during the hundred years and a few that I take to be the American century. It is this high, piercing tone that Americans now have a chance to render, hear, and recognize all at once. We have neither sounded nor heard it yet." That's all too true, unfortunately. The most one can say is that, among a newer generation, the strings are fraying a bit.

I tend to distinguish between strong nations and the merely powerful, the former being supple and responsive to events, the later being brittle and unstable. Is this a useful way to judge America in the early 21st century-monumentally powerful but of dubious strength? If so, doesn't it imply some change in the American cast of mind, as the difference between the two sinks in?

That depends on the degree of instability you sense in the country. In general, a major change in consciousness occurs when there is a major alteration in material conditions of life. For example, if a deep economic depression or dire ecological disaster strikes a society, all bets are off. Then, suddenly, thoughts and actions that were previously inconceivable become possible and natural. That isn't the situation so far in America.

Can you discuss the new accord with Iran in this context? I don't see any question it's other than a breakthrough, a new direction. What do you think were the forces propelling the Obama administration to pursue this pact? And let's set aside the desire for a "legacy" every president cultivates late in his time.

The agreement with Iran is an American victory but not a departure in U.S. foreign policy. Economic pressure on Iran dates back to Carter's time, when the U.S. froze the country's overseas assets after the ousting of the Shah, and the full range of ongoing U.S. sanctions was imposed by the Clinton administration in 1996. The Bush administration escalated the pressure by securing U.N. generalization of sanctions in 2006, and the Obama administration has harvested the effect.

Over the past decade, the objective has always been the same: to protect Israel's nuclear monopoly in the region without risking an Israeli blitz on Iran to preserve it-that might set off too great a wave of popular anger in the Middle East. It was always likely, as I point out in "American Policy and its Thinkers," that the clerical regime in Tehran would buckle under a sustained blockade, if that was the price of its survival. The agreement includes a time-out clause to save its face, but the reality is an Iranian surrender.

You can see how little it means any alteration in imperial operations in the region by looking at what the Obama administration is doing in Yemen, assisting Saudi Arabia's wholesale destruction of civilian life there in the interest of thwarting imaginary Iranian schemes.

This next question vexes many people, me included. On the one hand, the drives underlying the American imperium are material: the expansion of capital and the projection of power by its political representatives. The American mythologies are shrouds around these. On the other hand, the issue of security has a long history among Americans. It is authentically an obsession independent of capital-American paranoia dates back at least to the 18th century. I don't take these two accountings to be mutually exclusive, but I'd be interested to know how you reconcile these different threads in American foreign policy.

Yes, there has been a longstanding-you could say aboriginal-obsession with security in the United States. This can be traced as an independent strand running through the history of American dealings with the outside world. What happened, of course, from the Cold War through to the "war on terror" was a ruthless instrumentalization of this anxiety for purposes of expansion rather than defense. At the start of the Cold War you had the National Security Act and the creation of the National Security Council, and today we have the National Security Agency. Security became a euphemistic cloak for aggrandizement.

The United States occupies the better part of a continent separated by two immense oceans, which nobody in modern history has had any serious chance of invading, unlike any other major state in the world, all of which have contiguous land-borders with rival powers, or are separated from them only by narrow seas. The U.S. is protected by a unique geographical privilege. But if its expansion overseas cannot be attributed to imperatives of security, what has driven it?

A gifted and important group of historians, the Wisconsin school [which included the late William Appleman Williams, among others], has argued that the secret of American expansion has from the beginning lain in the quest by native capital for continuously larger markets, which first produced pressure on the internal frontier and the march across the continent to the Pacific, and when the West Coast was reached, a drive beyond into Asia and Latin America, and ultimately the rest of the world, under the ideology of the Open Door.

A couple of good scholars, Melvyn Leffler and Wilson Miscamble, one a liberal and the other a conservative, have identified my position with this tradition, taxing me with a belief that American foreign policy is essentially just an outgrowth of American business. This is a mistake. My argument is rather that because of the enormous size and self-sufficiency of the American economy, the material power at the disposal of the American state exceeded anything that American capital could directly make use of or require.

If you look at the First World War, you can see this very clearly. East Coast bankers and munitions manufacturers did well out of supplying the Entente powers, but there was no meaningful economic rationale for American entry into the war itself. The U.S. could tip the scales in favor of the British and French variants of imperialism against the German and Austrian variants without much cost to itself, but also much to gain.

The same gap between the reach of American business and the power of the American state explains the later hegemony of the United States within the advanced capitalist world after the Second World War. Standard histories wax lyrical in admiration of the disinterested U.S. generosity that revived Germany and Japan with the Marshall and Dodge Plans [reconstruction programs after 1945], and it is indeed the case that policies crafted at the State and Defense Departments did not coincide with the desiderata of the Commerce Department. The key requirement was to rebuild these former enemies as stable capitalist bulwarks against communism, even if this meant there could be no simple Open Door into them for U.S. capital.

For strategic political reasons, the Japanese were allowed to re-create a highly protected economy, and American capital was by and large barred entry. The priority was to defend the general integrity of capitalism as a global system against the threat of socialism, not particular returns to U.S. business. The importance of those were never, of course, ignored. But they had to bide their time. Today's Trans-Pacific Partnership will finally pry open Japanese financial, retail and other markets that have remained closed for so long.

Comments form marknesop.wordpress.com

Oddlots, September 26, 2015 at 9:38 am

This is full of insight to my mind:

http://www.salon.com/2015/09/23/how_america_built_its_empire_the_real_history_of_american_foreign_policy_that_the_media_wont_tell_you/

et Al, September 26, 2015 at 10:32 am
This stood out for me:

I'd like to turn to the origins of the Cold War, since I believe we are never going to get anywhere until these are honestly confronted. You give a forceful account of Stalin's reasons for avoiding confrontation after 1945 and Washington's reasons for not doing so. But should we attribute the outbreak of the Cold War to the U.S. without too much in the way of qualification?

We can look at the onset of the Cold War on two levels. One is that of punctual events. There, you are certainly right to pick out the ideological starting gun as Truman's speech on Greece in 1947, designed the "scare hell" out of voters to win acceptance for military aid to the Greek monarchy. In policy terms, however, the critical act that set the stage for confrontation with Moscow was the flat American refusal to allow any serious reparations for the staggering level of destruction Russia suffered from the German attack on it. The most developed third of the country was laid waste, its industry and its cities wrecked, while Americans suffered not a fly on the wrist at home-basking, on the contrary, in a massive economic boom. There was no issue Stalin spoke more insistently about than reparations in negotiations among the Allies. But once the fighting was over, the U.S. reneged on wartime promises and vetoed reparations from the larger part of Germany-far the richest and most developed, and occupied by the West - because it did not want to strengthen the Soviet Union and did want to rebuild the Ruhr as an industrial base under Western control, with a view to creating what would subsequently become the Federal Republic.

Oddlots, September 26, 2015 at 11:05 am
Agreed. I also think he helpfully callobrates the loss of European independence…

[Speaking of the era of De Gaulle, Adenauer and Eden] "Since then, there has been nobody like this. If we ask why, I think the answer is that all these people were formed before the First and Second World Wars broke out, in a period in which major European states had as much weight as the United States on the international checkerboard, if not more. They were not brought up in a world where American hegemony was taken for granted. All of them were involved in the two World Wars, and in the Second De Gaulle had good reason to be distrustful of the U.S., since Roosevelt was long pro-Vichy and wanted to oust him as leader of the Free French.

We could add, incidentally, a couple of later politicians, who fought in the second conflict. One was the English Tory prime minister, Edward Heath, the only postwar ruler of Britain who never made the trip to simper on the White House lawn, receiving an audience and paying tribute, that would become a virtual ceremony of investiture for any new ruler around the world. The other was Helmut Schmidt, a veteran of Operation Barbarossa [the Nazi invasion of the Soviet Union in June 1941] who scarcely concealed his disdain for Carter. These were latecomers from the past. Their successors have grown up under U.S. paramountcy and take it for granted. This is America's world. It is second nature for them to defer to it."

He also exposes that the crop that followed made a show of independence but toed the line:

"During the countdown to the war in Iraq, there were large street demonstrations in not a few countries, which Dominique Strauss-Kahn - no less - described as a European Declaration of Independence. Schröder [Gerhard, the German chancellor from 1998-2005] announced that Germany could not accept the war, and Chirac [Jacques, the French president, 1995-2007] blocked a U.N. resolution endorsing it. Were these bold acts of independence? Far from it. The French envoy in Washington told Bush in advance: You already have one U.N. resolution saying Saddam must comply with inspections, which is suitably vague. Don't embarrass us by trying to get another resolution that is more specific, which we'll have to oppose. Just use that one and go in. No sooner, indeed, was the attack launched than Chirac opened French skies to U.S. operations against Iraq. Can you imagine De Gaulle meekly helping a war he had said he opposed? As for Schröder, it was soon revealed that German intelligence agents in Baghdad had signaled ground targets for "Shock and Awe." These were politicians who knew the war was very unpopular in domestic opinion, and so made a show of opposing it while actually collaborating. Their independence was a comedy."

This last part was news to me.

[Sep 27, 2015] Ukraine was downgraded to default

"... the inept idiots in Kiev borrowed from whomever they wanted, including a group that helped push Argentina into near bankruptcy. ..."
"... "If Aurelius also refuses to take part, the bonds it holds will remain in default, potentially allowing the hedge fund to chase Ukraine in courts in London and elsewhere. "That bond will remain out there like some of the Argentine debt. Ukraine will remain in default," Nomura strategist Tim Ash said, although he noted that Ukraine had fewer assets than Argentina for hedge funds to seize." ..."
"... the judges in the US ruled in favor of the hedge fund over Argentina, so there's clear precedent ..."
Sep 27, 2015 | marknesop.wordpress.com
ucgsblog, September 26, 2015 at 12:55 pm
Time for Financial News. As a result of the Gas/Oil Wars, Russia pulled ahead, because Putin used the money intended for recapitalization of the gas/oil industry, to recapitalize the gas/oil industry. Some in the West are shocked at that, firmly believing that he was supposed to steal the money. Ah yes, the power of believing in your own propaganda.

In other news, Ukraine was downgraded to default: https://www.rt.com/business/316521-standardpoors-ukraine-selective-default/

Why you ask? Because the inept idiots in Kiev borrowed from whomever they wanted, including a group that helped push Argentina into near bankruptcy. And now they're about to do the same to Ukraine: http://www.buenosairesherald.com/article/199119/%E2%80%98vulture%E2%80%99-fund-aurelius-targets-ukraine-debt

"If Aurelius also refuses to take part, the bonds it holds will remain in default, potentially allowing the hedge fund to chase Ukraine in courts in London and elsewhere. "That bond will remain out there like some of the Argentine debt. Ukraine will remain in default," Nomura strategist Tim Ash said, although he noted that Ukraine had fewer assets than Argentina for hedge funds to seize."

Oh yeah, the judges in the US ruled in favor of the hedge fund over Argentina, so there's clear precedent. Whoopsie. The reason this looks really bad, is that there are no good solutions out of this. If Ukraine defaults, it'll be stuck permanently on the teat of the US/EU, as I predicted in June: https://ucgsblog.wordpress.com/2014/06/09/the-box-not-seen/

If the judges flip flop, Argentina will have a clear cut case against the hedge funds, pushing Obama into a battle with the hedge funds, when they have the Republicans on their side. If Obama pays this hedge fund, Franklin-Templeton will demand the same exact treatment, adding to Obama's sentiment as the Debt King of the United States. Not to mention that Congress wouldn't authorize that big a sum. There are no good options of out this, for either Poroshenko or Obama. To quote Gordon: "da, cheburashke ne vezet"

[Sep 27, 2015] Argentina vs vulture funds

"... The Argentine government managed to restructure about 93% of that debt through heavily discounted bond exchanges in 2005 and 2010. But a small group of investors refused to tender their defaulted bonds for new securities, and they have hounded Argentina in courts across the globe for close to a decade seeking full repayment. ..."
Sep 27, 2015 | marknesop.wordpress.com

et Al, September 26, 2015 at 1:44 pm

http://blogs.wsj.com/moneybeat/2014/06/30/argentina-vs-bondholders-the-epic-saga/

The Argentine government managed to restructure about 93% of that debt through heavily discounted bond exchanges in 2005 and 2010. But a small group of investors refused to tender their defaulted bonds for new securities, and they have hounded Argentina in courts across the globe for close to a decade seeking full repayment.

https://en.wikipedia.org/wiki/Argentine_debt_restructuring

As part of the restructuring process, Argentina drafted agreements in which repayments would be handled through a New York corporation and governed by United States law. The holdout bondholders found themselves unable to seize Argentine sovereign assets in settlement, but realized that Argentina had omitted to provide for holdout situations and had instead deemed all bonds repayable on pari passu (equal) terms that prevented preferential treatment among bondholders. The holdout bondholders therefore sought, and won, an injunction in 2014 that prohibited Argentina from repaying the 93% of bonds that had been renegotiated, unless they simultaneously paid the 7% holdouts their full amount due as well. Together with the agreement's Rights Upon Future Offers ("RUFO") clause, this created a deadlock in which the 93% of renegotiated bondholders could not be paid without paying the 7% holdouts, but any payment to the holdouts would potentially (according to Argentina) trigger the 93% being due repayment at full value too; a sum of around $100 billion which Argentina could not afford.[6] The courts ruled that as Argentina had itself drafted the agreement, and chosen the terms it wished to propose, it could not now claim the terms were unreasonable or unfair, and that this could not be worked around by asserting sovereign status since the injunction did not affect sovereign assets, but simply ruled that Argentina must not give preferential treatment of any group of bondholders over any other group when making repayments.

…NML Capital Limited, a Cayman Islands-based offshore unit of Paul Singer's Elliott Management Corporation, purchased many holdings in 2008, paying an estimated USD49 million for one series of bonds whose face value was over USD220 million;[22] with the subsequent boom in Argentine bond values, this face value grew to USD832 million by 2014.[26] They in turn established the American Task Force Argentina lobbying group against Argentine bond restructuring efforts,[19] and sued to enjoin Argentina's ongoing payments to the bondholders who had participated in the earlier restructurings.[2]
####

Nothing can stop red blooded capitalists! I suspect that death is but a minor inconvenience.

https://www.youtube.com/watch?v=fhw9qvoxKMM

https://youtu.be/IXKEKQ8vU28

ucgsblog, September 26, 2015 at 1:55 pm

And this is what awaits Ukraine. Welcome to Capitalism Kiev, please read the small font. Oh, you don't read? Wonderful! We shall have a good time doing business together! How much for Dnepropetrovsk?

Warren, September 26, 2015 at 2:24 pm

These hold-out creditors aren't called fondo buitre for nothing!!!!!

[Sep 26, 2015] The Table Is Set For The Next Financial Crisis

"... The $3.5 trillion of QE, six years of 0% interest rates for Wall Street (why are credit card interest rates still 13%?), and $8 trillion of deficit spending by the Federal government have provided the outward appearance of economic recovery, as the standard of living for most Americans has declined significantly. ..."
Sep 26, 2015 | Zero Hedge
The housing market peaked in 2005 and proceeded to crash over the next five years, with existing home sales falling 50%, new home sales falling 75%, and national home prices falling 30%. A funny thing happened after the peak. Wall Street banks accelerated the issuance of subprime mortgages to hyper-speed. The executives of these banks knew housing had peaked, but insatiable greed consumed them as they purposely doled out billions in no-doc liar loans as a necessary ingredient in their CDOs of mass destruction.

The millions in upfront fees, along with their lack of conscience in bribing Moody's and S&P to get AAA ratings on toxic waste, while selling the derivatives to clients and shorting them at the same time, in order to enrich executives with multi-million dollar compensation packages, overrode any thoughts of risk management, consequences, or the impact on homeowners, investors, or taxpayers. The housing boom began as a natural reaction to the Federal Reserve suppressing interest rates to, at the time, ridiculously low levels from 2001 through 2004 (child's play compared to the last six years).

... ... ...

Greenspan created the atmosphere for the greatest mal-investment in world history. As he raised rates from 2004 through 2006, the titans of finance on Wall Street should have scaled back their risk taking and prepared for the inevitable bursting of the bubble. Instead, they were blinded by unadulterated greed, as the legitimate home buyer pool dried up, and they purposely peddled "exotic" mortgages to dupes who weren't capable of making the first payment. This is what happens at the end of Fed induced bubbles. Irrationality, insanity, recklessness, delusion, and willful disregard for reason, common sense, historical data and truth lead to tremendous pain, suffering, and financial losses.

Once the Wall Street machine runs out of people with the financial means to purchase a home or buy a new vehicle, they turn their sights on peddling their debt products to financially illiterate dupes. There is a good reason people with credit scores below 620 are classified as sub-prime. Scores this low result from missing multiple payments on credit cards and loans, having multiple collection items or judgments and potentially having a very recent bankruptcy or foreclosure. They have low paying jobs or no job at all. They do not have the financial means to repay a large loan. Giving them a loan to purchase a $250,000 home or a $30,000 automobile will not improve their lives. They are being set up for a fall by the crooked bankers making these loans. Heads they win, tails the dupe gets kicked out of that nice house onto the street and has those nice wheels repossessed in the middle of the night.

The subprime debacle that blew up the world in 2008 was created by the Federal Reserve, working on behalf of their Wall Street owners. When interest rates are set by central planners well below levels which would be set by the free market, based on risk and return, it creates bubbles, mal-investment, and ultimately financial system disaster. Did the Fed, Wall Street, politicians, and people learn their lesson? No. Because we bailed them out with our tax dollars and have silently stood by while they have issued $10 trillion of additional debt to solve a debt problem. The deformation of our financial system accelerates by the day.

The $3.5 trillion of QE, six years of 0% interest rates for Wall Street (why are credit card interest rates still 13%?), and $8 trillion of deficit spending by the Federal government have provided the outward appearance of economic recovery, as the standard of living for most Americans has declined significantly. With real median household income still 6.5% BELOW 2007 levels, 7.3% BELOW 2000 levels, and about equal to 1989 levels, the only way the ruling class could manufacture a fake recovery is by ramping up the printing presses and reigniting a housing bubble and an auto bubble. They even threw in a student loan bubble for good measure.

... ... ...

The entire engineered "housing recovery" has had a suspicious smell to it all along. The true bottom occurred in 2009 with an annual rate of 4 million existing home sales. An artificial bottom of 3.5 million occurred in 2010 after the expiration of the Keynesian first time home buyer credit that lured more dupes into the market. The current rate of 5.31 million is at 2007 crash levels and on par with 2001 recession levels. With mortgage rates at record low levels for five years, this is all we got?

What really smells is the number of actual mortgage originations that have supposedly driven this 35% increase in existing home sales. If existing home sales are at 2007 levels, how could mortgage purchase applications be 55% below 2007 levels? If existing home sales are up 35% from the 2009/2010 lows, how could mortgage purchase applications be flat since 2010?

New home sales are up 80% from the 2010 lows, but before you get as excited as a CNBC bimbo over the "surging" new home sales, understand that new home sales are still 60% BELOW the 2005 high and 25% below the 1990 through 2000 average. So, in total, there are 1.5 million more annual home sales today than at the bottom in 2010. But mortgage originations haven't budged. That's quite a conundrum.

As you can also see, the median price for a new home far exceeds the bubble highs of 2005. A critical thinking individual might wonder how new home sales could be down 60% from 2005, while home prices are 15% higher than they were in 2005. Don't the laws of supply and demand work anymore? The identical trend can be seen in the existing homes sales market. The median price for existing home sales of $228,700 is an all-time high, exceeding the 2005 bubble levels. Again, sales are down 30% since 2005. I wonder who is responsible for this warped chain of events?

AlaricBalth

This FRED chart I have posted, which corresponds with the effective Fed Funds Rate chart in the article, will show exactly what a daunting problem the the US and the Federal Reserve is being forced to deal with. I have overlaid the Labor Force Participation Rate with M2 Velocity of Money, each beginning in 1960. M2 velocity refers to how fast money passes from one holder to the next. The labor force participation rate is a measure of the share of Americans at least 16 years old who are either employed or actively looking for work. If money demand is high, it could be a sign of a robust economy, with the usual corresponding inflationary pressure.

As you can see, each peaked around 1997-98 and have been in slow decline ever since. Unless the Fed has a plan to increase the LFPR, people are not going to be spending money they just do not have.

Demographically, this is not going to happen. Baby boomers will still be retiring at a rate of 10,000 per day and manufacturing is never coming back to the US until we are a third world country with a cheap labor force.

This is not an issue that can be fixed by political promises. So no matter which political party is in control, this will not be repaired with platitudes. This is a structural macro-economic phenomenon which is caused by demographics and poor long term fiscal planning.

https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1Vst

TeethVillage88s

Anyone have this video?

Elizabeth Warren Video, Late Night with Steven Colbert, 23 Sept 2015.

Defends Dodd-Frank and gave stats to prove the value of CFPB formed, like 650,000 complaints handled, and many changes forced on corporations.

Edit: Looks like CBS didn't release the segment of Elizabeth Warren only, so you have to go through whole show or just the 2:00 minute segment that only shows her saying she is not running for President.

Shame on CBS, as usual.

http://www.cbs.com/shows/the-late-show-with-stephen-colbert/video/jUNG_y...

Apparently I don't have the computer configured to play it anyway.

FreedomGuy

I do not think Wall Street and your local bankers or mortgage brokers are the bad guys here. Frankly, they look at the rules and try to make a living in the mortgage business. They are not angels but neither are they demons and I do not think they purposely write bad business.

I think the Wizard of Evil behind the curtain is first and last the government including a GSE like the Fed. They set this stuff up. You know you can load up Freddie and Fannie with smelly stuff and off-load risk. They hold rates near historic lows so people can buy more.

This drives prices and all the flipping crap and related stuff I hate.

I am in the middle of this. Being an avid reader of ZH I have become a proper pessimist. I did a cash-out refi and am paying off virtually all other loans...or more properly moving them to the tax deductible home loan. I was going to rent and move north because of work but after lots of research, breathtaking price increases and a few other cautions I decided to sit it out.

I am going to see what the economic terrain looks like in 6 months or more.

The thing is you have to play the game as it is, today, not as you think it should be.

marts321

Don't hate the player, hate the game.

TeethVillage88s

Check out the growth of Holding companies.

Financial Business; Credit Market Instruments; Liability, Level
2015:Q1: 14,104.57 Billions of Dollars (+ see more)
Quarterly, End of Period, Not Seasonally Adjusted, TCMDODFS,

Holding Companies; Credit Market Instruments; Liability, Level
2015:Q1: 1,380.52 Billions of Dollars (+ see more)
Quarterly, End of Period, Not Seasonally Adjusted, CBBHCTCMDODFS,
https://research.stlouisfed.org/fred2/series/CBBHCTCMDODFS

U.S.-Chartered Depository Institutions; Credit Market Instruments; Liability, Level
2015:Q1: 669.90 Billions of Dollars (+ see more)
Quarterly, End of Period, Not Seasonally Adjusted, CBTCMDODFS,

Now, we know that in 2007 the Biggest Wall Street banks wanted access to Deposits in the USA. So maybe I don't have the date, could have been planned from Lehman Request date to become a Deposit Bank while an Investment Bank.

So today we have Holding Companies that are allowed to have Deposits while doing commercial and investment work and proprietary trading... and now are 30% Bigger after all the Bailouts and transfer of Taxpayer and Retirement Funds to them.

Holding Companies have Doubled Liability since 3QTR 2007

Wow

TeethVillage88s

Too Bad we don't have Honest Brokers in DOJ, FBI, SEC, FINRA, FTC, GAO, CBO, FED, Treasury, OCC, FSOC, BCFP, CFTC, FDIC, FHFA, SIPC

I'm not sure how you can isolate or focus your condemnation or fault.

Edit: This applies, $8.16 Trillion in US Deposits

Total Savings Deposits at all Depository Institutions
2015-09-07: 8,164.3 Billions of Dollars (+ see more)
Weekly, Ending Monday, Not Seasonally Adjusted, WSAVNS,
https://research.stlouisfed.org/fred2/series/WSAVNS

dizzyfingers

"Sociopaths" (psychopaths) rise to the top. They are not like others. http://www.healthguidance.org/entry/15850/1/Characteristics-of-a-Sociopath.html

EndOfDayExit

To all hysterical critics of the FED, what do you suggest they do instead? The rich can do nothing, sit it out, the poor meanwhile will starve and die (and probably riot before they die).

The poor need jobs. Now almost at any cost, because those jobs are few and far in between as we are competing with China. So they do ZIRP, NIRP whatever, something, anything to at least marginally force the rich to spend. For, if people do not spend there will be even less jobs…and less tax revenue collected for the government to run and distribute around… and it all starts going downhill.

The FED is just trying to keep the system at the higher spending point. It does not seem to work very well, but the next option is a direct confiscation and redistribution of assets (to keep those poor jobless souls content). Nobody gives a f* about inequality until it becomes a riot-provoking problem itself. Ugly as it is there is actually logic in what the FED is doing.

Batman11

The globalists rush to take the profits in the good times but run and hide in the bad.

Where is the profit in sorting out the bad times? In the bad times national institutions, Governments and Central Banks, get left to sort out the mess loading the costs onto national tax payers.

When things go wrong nationalism rises as each nation is left to fend for itself. We should know how it works by now, this isn't the first time.

We are nearly there with the Middle East on fire and the two nuclear super-powers at each other's throats.

Maybe next time we will know better, third time lucky.

mianne

Cherry picker, I agree with you : " All our government up here has to do is get out of NATO, disband our version of the CIA, divorce Homeland Security, duty and tax all imports to the hilt, keep our water, electricity and natural resources to ourselves and manufacture our own products... Then you can have all the wars you want in the middle east and we will watch it on television without worrying about whether to be part of the murder brigade or not."

But as for ourselves, as governed by the totalitarian EU whose representatives are non elected by people, but were chosen by the international finance tycoons ( our elected presidents deprived of any power by the supranational non elected entity, US- OTAN driven European Union), we are just powerless slaves .

However we won the referendum ( 52 % ) against the content of the Maastricht-Lisbon European Constitution, but they do not take it into account, submitting us to the ignominious treaty . Democracy ?

[Sep 26, 2015] Paul Krugman Dewey, Cheatem Howe

"... That is brilliant - so Turing Pharmaceuticals is a classical - wait for it - parasitic infection! ..."
"... The point is we should be trying to make our regulation more intelligent (making it encourage not discourage innovation - cheaper and easier to police - less subject to regulatory capture etc.). ..."
Sep 26, 2015 | economistsview.typepad.com

Economist's View

Republicans can't help but side with business, but there are very good reasons for the recent increase in regulatory oversight:
Dewey, Cheatem & Howe, by Paul Krugman, Commentary, NY Times: Item: The C.E.O. of Volkswagen has resigned after revelations that his company committed fraud on an epic scale, installing software on its diesel cars that detected when their emissions were being tested, and produced deceptively low results.

There are, it turns out, people in the corporate world who will do whatever it takes, including fraud that kills people, in order to make a buck. And we need effective regulation to police that kind of bad behavior... But we knew that, right?

Well, we used to know it... But ... an important part of America's political class has declared war on even the most obviously necessary regulations. ...

A case in point: This week Jeb Bush, who has an uncanny talent for bad timing, chose to publish an op-ed article in The Wall Street Journal denouncing the Obama administration for issuing "a flood of creativity-crushing and job-killing rules." Never mind his misuse of cherry-picked statistics, or the fact that private-sector employment has grown much faster under President Obama's "job killing" policies than it did under Mr. Bush's brother's administration. ...

The thing is, Mr. Bush isn't wrong to suggest that there has been a move back toward more regulation under Mr. Obama, a move that will probably continue if a Democrat wins next year. After all, Hillary Clinton released a plan to limit drug prices at the same time Mr. Bush was unleashing his anti-regulation diatribe.

But the regulatory rebound is taking place for a reason. Maybe we had too much regulation in the 1970s, but we've now spent 35 years trusting business to do the right thing with minimal oversight - and it hasn't worked.

So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk opposition to regulation with the judicious use of regulation where there is good reason to believe that businesses might act in destructive ways. Will we see this effort continue? Next year's election will tell.

reason

"Item: Rights to a drug used to treat parasitic infections were acquired by Turing Pharmaceuticals, which specializes not in developing new drugs but in buying existing drugs and jacking up their prices. In this case, the price went from $13.50 a tablet to $750. ..."

That is brilliant - so Turing Pharmaceuticals is a classical - wait for it - parasitic infection!

reason

"So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk opposition to regulation with the judicious use of regulation where there is good reason to believe that businesses might act in destructive ways. Will we see this effort continue? Next year's election will tell."

Personally, I don't think this is really addressing the key point. You can't actually avoid regulation (the alternative to public regulation - as pushed by say Milton Friedman - ends up being private regulation - which is just as subject to regulatory capture). The point is we should be trying to make our regulation more intelligent (making it encourage not discourage innovation - cheaper and easier to police - less subject to regulatory capture etc.). The policy discussions about this a difficult enough with good faith - but bad faith politics makes this impossible. We need to throw the Gingrich revolution in the dustbin as soon as possible.

[Sep 25, 2015] Paul Krugman Dewey, Cheatem Howe

The point is we should be trying to make our regulation more intelligent (making it encourage not discourage innovation - cheaper and easier to police - less subject to regulatory capture etc.
"... So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk opposition to regulation with the judicious use of regulation where there is good reason to believe that businesses might act in destructive ways. Will we see this effort continue? Next year's election will tell. ..."
"... That is brilliant - so Turing Pharmaceuticals is a classical - wait for it - parasitic infection! ..."
"... The point is we should be trying to make our regulation more intelligent (making it encourage not discourage innovation - cheaper and easier to police - less subject to regulatory capture etc.). ..."
"... The reality is that, in the absence of effective regulation with substantial penalties, all of the incentives are to lie, cheat, and steal. In consequence, it really is the norm, if only in more minor ways than the ones that make the headlines. Wage theft, fraud, knowingly selling defective merchandise, and many other abuses are clearly rampant. This is exactly why markets cannot exist in the absence of effective government regulation to provide trust. ..."
"... Economic idealists have popularized the notion that the world can work without much regulations because their models tell them so. Unless they are behavioral economists, they often fail to include fraud, scams & information asymmetry into their models. This produces garbage like efficient markets that only exist in an idealistic dream world. The real world markets are filled with fraud, scams and disreputable agents. Failure to account for bad behavior is the bane of many a model. ..."
"... But I love Obama because he has created a wonderland of money for lawyers and consultants, a river of chocolate and honey to make Willy Wonka jealous. Go Barry go! ..."
"...


..."

Sep 25, 2015 | Economist's View
Republicans can't help but side with business, but there are very good reasons for the recent increase in regulatory oversight:
Dewey, Cheatem & Howe, by Paul Krugman, Commentary, NY Times: Item: The C.E.O. of Volkswagen has resigned after revelations that his company committed fraud on an epic scale, installing software on its diesel cars that detected when their emissions were being tested, and produced deceptively low results.

Item: The former president of a peanut company has been sentenced to 28 years in prison for knowingly shipping tainted products that later killed nine people and sickened 700.

Item: Rights to a drug used to treat parasitic infections were acquired by Turing Pharmaceuticals, which specializes not in developing new drugs but in buying existing drugs and jacking up their prices. In this case, the price went from $13.50 a tablet to $750. ...

There are, it turns out, people in the corporate world who will do whatever it takes, including fraud that kills people, in order to make a buck. And we need effective regulation to police that kind of bad behavior... But we knew that, right?

Well, we used to know it... But ... an important part of America's political class has declared war on even the most obviously necessary regulations. ...

A case in point: This week Jeb Bush, who has an uncanny talent for bad timing, chose to publish an op-ed article in The Wall Street Journal denouncing the Obama administration for issuing "a flood of creativity-crushing and job-killing rules." Never mind his misuse of cherry-picked statistics, or the fact that private-sector employment has grown much faster under President Obama's "job killing" policies than it did under Mr. Bush's brother's administration. ...

The thing is, Mr. Bush isn't wrong to suggest that there has been a move back toward more regulation under Mr. Obama, a move that will probably continue if a Democrat wins next year. After all, Hillary Clinton released a plan to limit drug prices at the same time Mr. Bush was unleashing his anti-regulation diatribe.

But the regulatory rebound is taking place for a reason. Maybe we had too much regulation in the 1970s, but we've now spent 35 years trusting business to do the right thing with minimal oversight - and it hasn't worked.

So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk opposition to regulation with the judicious use of regulation where there is good reason to believe that businesses might act in destructive ways. Will we see this effort continue? Next year's election will tell.

reason

"Item: Rights to a drug used to treat parasitic infections were acquired by Turing Pharmaceuticals, which specializes not in developing new drugs but in buying existing drugs and jacking up their prices. In this case, the price went from $13.50 a tablet to $750. ..."

That is brilliant - so Turing Pharmaceuticals is a classical - wait for it - parasitic infection!

reason

"So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk opposition to regulation with the judicious use of regulation where there is good reason to believe that businesses might act in destructive ways. Will we see this effort continue? Next year's election will tell."

Personally, I don't think this is really addressing the key point. You can't actually avoid regulation (the alternative to public regulation - as pushed by say Milton Friedman - ends up being private regulation - which is just as subject to regulatory capture). The point is we should be trying to make our regulation more intelligent (making it encourage not discourage innovation - cheaper and easier to police - less subject to regulatory capture etc.). The policy discussions about this a difficult enough with good faith - but bad faith politics makes this impossible. We need to throw the Gingrich revolution in the dustbin as soon as possible.

RC AKA Darryl, Ron said in reply to reason...

YEP!

What politicians can get away with is an artifact of the limited toolset that the electorate has to express its informed will. We need a well educated democracy and the democratic part of that requires Constitutional electoral reforms (e.g., gerrymandering, campaign finance). A bit of the educational aspect of a voting actually democratic republic would naturally work itself out with a more engaged and empowered electorate participating ACTIVELY.

With the system as it is then it takes a shock wave through the electorate for them to throw the bums out, but there is no follow through. There is a failsafe reaction function, but no more than that except on specific social issues that get overwhelming support where politicians can move with the electoral majority at zero cost while reactionary politicians can triangulate and pander some votes from the minority opinion of those too old or set in their ways to participate in the social sea change.

ilsm said in reply to RC AKA Darryl, Ron...

The threat is "faith voters", dogma developed by billionaires' propaganda to plunder the world.

DrDick said in reply to reason...

Krugman is far too kind to the businessmen. The reality is that, in the absence of effective regulation with substantial penalties, all of the incentives are to lie, cheat, and steal. In consequence, it really is the norm, if only in more minor ways than the ones that make the headlines. Wage theft, fraud, knowingly selling defective merchandise, and many other abuses are clearly rampant. This is exactly why markets cannot exist in the absence of effective government regulation to provide trust.

DeDude said in reply to reason...

Exactly; what we need is a detailed debate on each specific regulation. What it intends to accomplish, whether that could be accomplished in a less burdensome way, and whether the accomplishment is sufficient to justify the burden. However, that is not something that can happen in the 15 second soundbite that appears to be the attention span of the average voter.

Lee A. Arnold said in reply to Second Best...

Second Best: "Markets work if allowed to self regulate."

No. Never happened, except in local instances. For self-regulation you need proper prices, and for proper prices you need proper supply and demand.

For proper supply you need perfect competition, so there must be numerous competitors entering the same market, and this requires, among other things, almost no intellectual protection.

For proper demand, you need perfectly informed consumers, and this is not only impossible, but it is getting far far worse, because the complexity of the world is increasing.

The problem with state regulation is that it also falls prey to the same objections, although at a slower rate. We use votes not prices, but the same imperfection of information and lack of flexibility causes problems with the voting system.

When you combine this problem with the increase in inequality (which was masked temporarily by World War II and the subsequent spurt of blue-collar jobs productivity), we are headed into an accelerated amelioration of the market system by greater public ownership.


RC AKA Darryl, Ron said in reply to Lee A. Arnold...

"Peanut butter does not kill people, people kill people."

[If you can read a opening sentence like that and not recognize it as satirical parody, then you might want to look around to find the sense of humor that you lost. When the will of the people is no more than a euphemism for dollar democracy then parody, satire, sarcasm, and a healthy dose of cynicism are called for.]

JF said in reply to RC AKA Darryl, Ron..

Lee A Arnold - Think Jonathan Swift and his piece about the way to reduce subsidies for the orphaned poor infants, it is to reduce their number so we feel good about the fact that we help the few poor infants left alive.

I reacted a few times to Second Best's comments before I recognized the satire.

But I also have used his comments as a way to bring out the more logical, real-world of facts and rationality - so commentary helps either way. I suppose that serves 2nd Best's interests too.

JF said in reply to JF...

I believe the Jonathan Swift recommendations are the preferred republican-party approach to Social Security too. Really need fewer claimants, that will solve the accounting problems.

RC AKA Darryl, Ron said in reply to Second Best...

"Peanut butter does not kill people, people kill people. Car emissions do not kill people ... high drug prices do not kill people ... people do."

[This is an economics blog. You cannot be that "subtle (???)" and expect people to recognize your satire. Maybe there is a humorous math equation that economists can understand. I guess economics graduate school is so boring that most people lose all sense of humor. I am glad that Krugman has kept his.]

Richard H. Serlin said...

"Then there's for-profit education, an industry wracked by fraud - because it's very hard for students to assess what they're getting - that leaves all too many young Americans with heavy debt burdens and no real prospect of better jobs. But Mr. Bush denounces attempts at a cleanup."

And worse, wasting their incredibly valuable and rare young years, quite possibly their only chance before age and children make it extremely hard, not getting an education. Such a big thing. You don't do it when you're young, with the power and freedom and lack of dependents of youth, the opportunity may easily be gone forever. Such a brutal cost these predators and their Republican allies extract.

RC AKA Darryl, Ron said in reply to Richard H. Serlin...

https://en.wikipedia.org/wiki/College_tuition_in_the_United_States

Cost shifting and privatization

One cause of increased tuition is the reduction of state and federal appropriations to state colleges, causing the institutions to shift the cost over to students in the form of higher tuition. State support for public colleges and universities has fallen by about 26 percent per full-time student since the early 1990s.[10] In 2011, for the first time, American public universities took in more revenue from tuition than state funding.[9][11] Critics say the shift from state support to tuition represents an effective privatization of public higher education.[11][12] About 80 percent of American college students attend public institutions...

bakho said...

Economics Professors of the "free market" bent for years have indoctrinated youth with the misguided notion that "regulations are bad" and market methods, no matter how RubeGoldberg, are always better. " You don't need to regulate pollution, just put a tax on it," as an example. Even cap and trade would not work without stiff emissions regulations.

Economic idealists have popularized the notion that the world can work without much regulations because their models tell them so. Unless they are behavioral economists, they often fail to include fraud, scams & information asymmetry into their models. This produces garbage like efficient markets that only exist in an idealistic dream world. The real world markets are filled with fraud, scams and disreputable agents. Failure to account for bad behavior is the bane of many a model.

ilsm said in reply to bakho...

Sanctity of the "market"......

I got a jar of this snake oil here too!

The market they sell is the one that runs in Honduras

Tom aka Rusty said...

A couple of random observations:

Last time I looked about 150 Dodd-Frank regs had not been written yet, some of the key ACA regs are three years late.

Obama-ites have written some of the most complex, convoluted regs of the past 40 years, the health EMR regs have practically guaranteed a windfall for IT companies and a failure for EMR/EHR.

No mention of the Obama-Holder "too big to prosecute doctrine."

The new overtime regs will likely be in the "driving thumb tacks with a sledge hammer" mode.

But I love Obama because he has created a wonderland of money for lawyers and consultants, a river of chocolate and honey to make Willy Wonka jealous. Go Barry go!

pgl said in reply to kthomas...

Rusty wants us to believe he is the only one who understands health care so he is a persistent critic of ObamaCare. But now he wants to pretend he's the expert on financial markets too? Seriously? Dodd-Frank is complicated only because the Jamie Dimons of the world milk every opportunity to game financial markets. If Rusty thinks letting Jamie Dimon evade any financial market regulation is a good idea - he is the most clue person ever.

DrDick said in reply to pgl...

He was just trying to do us a favor and demonstrate exactly what is meant by "knee-jerk opposition to regulation ."

JF said in reply to Tom aka Rusty...

Have you ever looked at the multi-party derived hedging instruments in play now - they can hardly get more complex, and indeed most didn't understand them when they were made, and these are still complex now.

So I have to say, that the 'marketplace' makes Krugman's point about complexity. It comes from humans cunningly doing stuff that serves their interests at the time as they see it. Not always wisdom at work here.

But it is complex, and so regulation of such complexity, if the generally applicable rules seek some fairness (classes of people are usually affected differently) and stands a test of due process too - the regulations will also need to be complex. The complexity came first, the regulations come afterwards (after society learns of the stupidity the hard way).

Railing about this is a form of misleading sophistry, a rhetorical device to reverse the causality.

We can think with more foresight and regulate before the stupid complexity arises, but it does take a rational policy making environment for this exploration, discussion and policy-making to occur with good foresight - I am waiting for the new Congress in 2017.

If the Warren-Sanders people have any influence then, we may see a whole lot less complex financial system (it's a riot when you think how the Efficient Market Hypothesis, a theoretical justification for the marketplace's range of instruments in fact led to more complexity, less real efficiency and effectiveness, and ossification of the system when it needed to be resilient but stable as a well-behaved system can be).

We will probably be better off after the 2017 debates. After all, this community of actors are only intermediaries on behalf of real productive outcomes truly needed by society - right, they are just intermediaries? How much inter-mediation does the economy need?

david s said...

The Obama Administration has been friendlier to corporate America than W's was.

http://theweek.com/speedreads/454963/matt-taibbi-bush-far-tougher-than-obama-corporate-america

im1dc said...

While it was Ronald Reagan and his Republican Party that called for deregulation not much was done until Alan Greenspan, then Chairman of the Federal Reserve, gave federal deregulation his blessing in speeches from NY to Aspen to California in which he said "the market" will reign in excesses and regulate itself b/c of competition acting egregiously would create.

Oopsie, Old Alan got it ALL WRONG again!

I thought a little history would help in this thread.

likbez said...

My impression is that regulation always reflects the needs of who is in power today. One the key ingredients of political power is the ability to push the laws that benefit particular constituent. And to block laws that don't.

If we assume that financial oligarchy is in power today, then it is clear that there can be no effective regulation of financial services and by extension regulation of derivatives. And if on the wave of public indignation such regulation is adopted, it will be gradually watered down and then eliminated down the road.

And you can always hire people who will justify your point of view.

In this sense neither Milton Friedman nor Greenspan were independent players. They sold themselves for money and were promoted into positions they have for specific purpose. I am not sure the either of them believed the crap they speak or wrote.


[Sep 25, 2015] Big Business Is Economic Cancer, Part I Zero Hedge

It is under state capitalism that TBTF can't exists. Under neoliberalism they rule the country, so the question about cutting their political power of dismantling them is simply naive. Nobody give political power without a fight.
"... Today, with governments which are nothing but literally the junior partners (of Big Business) in government-by-crime-syndicate, these laws might as well no longer exist, as they are practically never enforced. Indeed, an entity must be a political/economic pariah, or simply lacking "connections" if it is unable to sneak some merger or take-over past our totally compliant governments, and their fast-asleep "regulators". ..."
"... There could never be an economic system, or economic argument where "too big to fail" could ever be a rational/legitimate policy. Put another way, no level of short-term economic harm or shock could possibly equal the long-term harm (and insanity) of institutionalized blackmail – which is all that "too big to fail" ever was/is. You must protect us, no matter what we do, no matter what the cost. Utter insanity. Utter criminality. ..."
"... An oligopoly is where a small group of companies dominate/control an entire market or sector. Here it is important to understand that oligopolies are every bit as "evil" as monopolies (in every way), but the oligopoly puts a happy-face on this evil. Oligopolies represent pretend competition. ..."
"... But such corporate extortion via oligopolies/monopolies is certainly not confined to the banking sector. The Oligarchs engage in such extortion (against corrupt governments which require absolutely no arm-twisting) in virtually every sector of our economies, but generally in not quite as extreme a form as what is perpetrated by the Big Banks. ..."
"... Read Schumpeter beginning to end. He recognized the evolution of increasingly larger-scale, boom-and-bust "capitalism" from free-enterprise, entrepreneurial capitalism to industrial capitalism and eventually to various forms of state-capitalism, corporate-statism, or quasi-fascism we have today, or what I refer to as militarist-imperialist, rentier-socialist, or Anglo-American corporate-state. ..."
Sep 25, 2015 | www.zerohedge.com

Today, with governments which are nothing but literally the junior partners (of Big Business) in government-by-crime-syndicate, these laws might as well no longer exist, as they are practically never enforced. Indeed, an entity must be a political/economic pariah, or simply lacking "connections" if it is unable to sneak some merger or take-over past our totally compliant governments, and their fast-asleep "regulators".

Today we have corporate monoliths which are literally orders of magnitude larger than any remotely "optimal" size, with the ultimate and most-obvious examples being those hideously bloated financial behemoths which we now know as "the Big Banks". How ridiculously too-big have the Big Banks gotten?

Even the most-ardent admirer of the Big Banks in the entire media world, Bloomberg, couldn't stop itself from openly salivating about how much "profit" could be had, just by beginning to chop-down the financial fraud-factory which we know as JPMorgan Chase & Co.:

JPMorgan Chase & Co, the biggest U.S. bank by assets, would be worth 30 percent more if broken into its four business segments, an unlikely scenario, an analyst at Stifel Financial Corp.'s KBW unit said.

Note that there is not one word in the article indicating that there couldn't be a lot more profit to be made, by then smashing those pieces into much smaller pieces still. This article simply pointed to the instant profit of 30% which would be available just by beginning to chop-down this obscenely large behemoth, and in the simplest manner possible.

Why would "smaller" be much more valuable, in our forward-looking markets, in the case of smashing JPMorgan down-to-size (or at least beginning that process)? Obviously a major portion of that profit quotient would have to be derived from greater efficiency. Smaller is better.

However, pointing out that even the greatest admirer/biggest cheerleader of the Big Banks has observed how we would all be better off if the Big Banks were smaller is only a start. We then come to the heinous propaganda which the cheerleaders (including Bloomberg) have dubbed "too big to fail".

This is a very simple subject. "Too big to fail" is a pseudo-concept which is entirely antithetical to any economic system which even pretends to adhere to the principles of "free markets". Free markets demand that insolvent entities fail, it is the only way for such free markets to heal, when weakened by the misallocation of assets (such as in the case of insolvent enterprises). No business, or group of businesses could ever be "too big to fail".

There could never be an economic system, or economic argument where "too big to fail" could ever be a rational/legitimate policy. Put another way, no level of short-term economic harm or shock could possibly equal the long-term harm (and insanity) of institutionalized blackmail – which is all that "too big to fail" ever was/is. You must protect us, no matter what we do, no matter what the cost. Utter insanity. Utter criminality.

Understand that our own, corrupt governments embarked upon this criminal insanity long after the equally criminalized government of Japan already proved that too-big-to-fail was a failed policy. Not only could there never be an argument in favor of this criminality, our governments knew it would fail before they ever rubber-stamped this systemic corruption.

But all of these arguments against the insanity of perverting and skewing our economies in favor of Big Business, and against Small Business pale into insignificance compared to the principal condemnation of too-Big Business: the economic "cannibals" known as monopolies and oligopolies.

For readers unfamiliar with these terms because the Corporate media and charlatan economists try to pretend that these words don't exist, a brief refresher is in order. As most readers know, a monopoly is where a single enterprise effectively controls an entire market or sector. While a "monopoly" may be desirable when playing a board-game, in the real world these parasitic entities do nothing but blood-suck, from any/every economy they are able to "corner".

However, the majority of people, even today, are at least partially familiar with the evils of monopolies, thus the ultra-wealthy Oligarchs rarely attempt to perpetrate their systemic theft via these corporate fronts. Instead, they perpetrate most of their organized crime via oligopolies.

An oligopoly is where a small group of companies dominate/control an entire market or sector. Here it is important to understand that oligopolies are every bit as "evil" as monopolies (in every way), but the oligopoly puts a happy-face on this evil. Oligopolies represent pretend competition.

These corporate fronts cooperate as closely as possible in systemically plundering economies. How do monopolies/oligopolies rob from us? The "old-fashioned" way for these blood-suckers to do so was via simple price-gouging. When you have complete control over a sector/market, you can charge any price you want.

However, not surprisingly, the Little People tend to notice when the Oligarchs use their corporate fronts to engage in simple price-gouging. They actually begin to notice the general evil which oligopolies/monopolies represent, and that is "bad for business" (i.e. crime).

Instead, the Oligarch Thieves of the 21st century engage in their robbery-by-corporation in a different, more sophisticated/less-visible manner: via corporate welfare. What other crime can monopolies and oligopolies perpetrate, with overwhelming success? Naked extortion.

As previously explained; "too-big-to-fail" (and now even "too big to jail") is nothing but the most-obvious and most-despicable form of corporate extortion (or simply economic terrorism): give us all the money we want, or we'll blow up the financial sector. Small banks could never perpetrate such a crime (terrorism).

But such corporate extortion via oligopolies/monopolies is certainly not confined to the banking sector. The Oligarchs engage in such extortion (against corrupt governments which require absolutely no arm-twisting) in virtually every sector of our economies, but generally in not quite as extreme a form as what is perpetrated by the Big Banks.

Typically, the extortion which precedes even more Corporate welfare, occurs in this form: give us everything we want, or we will close our factory/business, and you will (temporarily) lose those jobs. Here we don't need to imagine this in the hypothetical, as we have a particularly blatant example of such Corporate extortion/welfare, courtesy of U.S. Steel:

U.S. Steel Canada Inc. is threatening to cease operations in Canada by the end of the year if an Ontario Superior Court judge rejects its request to stop paying municipal taxes, halt payments into pension funds, and cut off health care and other benefits to 20,000 retirees and their dependents. [emphasis mine]

... ... ...

kanoli

Like most of Jeff Nielson's rants, this one is nonsensical. If small business hires more people to produce the same product or service as a big business, they cannot do so at the same or lower price unless they are paying a lower wage.

The problem with big business isn't that it is big - it is their tendency to lobby government for regulations that stifle small business competitors.

If politicians were not for sale, it wouldn't matter whether a business is big or small. Neither would have undue influence on the law.

The problem is regulatory democracy where all laws are constantly subject to fiddling by an elected legislature.

Element

In practice a balanced mix of all sized businesses are necessary in a planetary civilization that trades products globally. Getting the mix 'right' and not having big business get away with preventing competition, or of govt throttling to skim and micro-control is most of the deleterious effect on business, and on human beings in general.

Unfortunately humans have been trained to like Logos, and to buy 'wants' accordingly.

iDroned on a bit,

2c

newnormaleconomics

Read Schumpeter beginning to end. He recognized the evolution of increasingly larger-scale, boom-and-bust "capitalism" from free-enterprise, entrepreneurial capitalism to industrial capitalism and eventually to various forms of state-capitalism, corporate-statism, or quasi-fascism we have today, or what I refer to as militarist-imperialist, rentier-socialist, or Anglo-American corporate-state.

The current state of the evolution of "capitalism" is its advanced, late-stage, financialized, globalized phase.

With Peak Oil, population overshoot, unprecedented debt to wages and GDP, Limits to Growth, climate change, a record low for labor share, decelerating productivity, OBSCENE wealth and income inequality, and increasing geopolitical tensions, growth of real GDP per capita is done, which means that growth of profits, investment, and capital formation/accumulation is done, which in turn means "capitalism" is done.

... ... ...

[Sep 24, 2015] Central Banks Have Made the Rich Richer

Sep 24, 2015 | economistsview.typepad.com
Economist's View
Paul Marshall, chairman of London-based hedge fund Marshall Wace, in the FT:
Central banks have made the rich richer: Labour's new shadow chancellor has got at least one thing right. ... Quantitative easing ... has bailed out bonus-happy banks and made the rich richer. ...

It is no surprise that the left is angry about this, nor that they are looking for other versions of QE that do not so directly benefit bankers and the rich. Instead of increasing the money supply by buying sovereign bonds from banks, central banks could spread the love evenly by depositing extra money in every person's bank account..., it might have been fairer.

Mr McDonnell and Jeremy Corbyn, the new Labour leader, advocate a second approach: targeting QE at infrastructure projects. The central bank would buy bonds direct from the Treasury on the understanding that the funds would be used to improve housing and transport infrastructure. ...

QE had clear wealth effects, which could have been offset by fiscal measures. All political parties should acknowledge this. So should those of us who want free markets to retain their legitimacy.

[Sep 24, 2015] The Oligarch Recovery 30 Million Americans Have Tapped Retirement Savings Early In Last Year

Sep 24, 2015 | www.zerohedge.com

Zero Hedge

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

The ongoing oligarch theft labeled an "economic recovery" by pundits, politicians and mainstream media alike, is one of the largest frauds I've witnessed in my life. The reality of the situation is finally starting to hit home, and the proof is now undeniable.

Earlier this year, I published a powerful post titled, Use of Alternative Financial Services, Such as Payday Loans, Continues to Increase Despite the "Recovery," which highlighted how a growing number of Americans have been taking out unconventional loans, not simply to overcome an emergency, but for everyday expenses. Here's an excerpt:

Families' savings not where they should be: That's one part of the problem. But Mills sees something else in the recovery that's more disturbing. The number of households tapping alternative financial services are on the rise, meaning that Americans are turning to non-bank lenders for credit: payday loans, refund-anticipation loans, pawnshops, and rent-to-own services.

According to the Urban Institute report, the number of households that used alternative credit products increased 7 percent between 2011 and 2013. And the kind of household seeking alternative financing is changing, too.

It's not the case that every one of these middle- and upper-class households turned to pawnshops and payday lenders because they got whomped by an unexpected bill from a mechanic or a dentist. "People who are in these [non-bank] situations are not using these forms of credit to simply overcome an emergency, but are using them for basic living experiences," Mills says.

Of course, it's not just "alternative financial services." Increasingly desperate American citizens are also tapping whatever retirement savings they may have, including taking the 10% tax penalty for the privilege of doing so. In fact, 30 million Americans have done just that in the past year alone, in the midst of what is supposed to be a "recovery."

From Time:

With the effects of the financial crisis still lingering, 30 million Americans in the last 12 months tapped retirement savings to pay for an unexpected expense, new research shows. This undercuts financial security and underscores the need for every household to maintain an emergency fund.

Boomers were most likely to take a premature withdrawal as well as incur a tax penalty, according to a survey from Bankrate.com. Some 26% of those ages 50-64 say their financial situation has deteriorated, and 17% used their 401(k) plan and other retirement savings to pay for an emergency expense.

Two-thirds of Americans agree that the effects of the financial crisis are still being felt in the way they live, work, save and spend, according to a report from Allianz Life Insurance Co. One in five can be called a post-crash skeptic-a person that experienced at least six different kinds of financial setback during the recession, like a job loss or loss of home value, and feel their financial future is in peril.

So now we know what has kept meager spending afloat during this pitiful "recovery." A combination of "alternative loans" and a bleeding of retirement accounts. The transformation of the public into a horde of broke debt serfs is almost complete.

Don't forget to send your thank you card to you know who:

Screen Shot 2015-08-20 at 3.21.02 PM

* * *

For related articles, see:

[Sep 24, 2015] Michael Hudson – Episode 19

Sep 24, 2015 | store.counterpunch.org

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This week, Eric has an in depth conversation with economist Michael Hudson, author of the new book Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy. Eric and Prof. Hudson discuss the evolution of finance capital from its humble parasitical beginnings to the comprehensive global network of economic tapeworms and barnacles that it is today. They examine neoliberal terrorism, how debt is used as a weapon, and the disastrous effects of the financialization of the real economy. Hudson outlines the relationship between the parasites and their bloodsucking policies of austerity, providing insight using the example of Latvia, where he witnessed first hand the smash-and-grab nature of such prescriptions. Plus, Eric and Michael touch on Obama as Wall Street errand boy, the importance of left economic organizing, and much much more.

Musical interlude from the exciting new band GospelbeacH, and intro and outtro from David Vest.

[Sep 24, 2015] Is Goldman Preparing To Sacrifice The Next Lehman

Sep 24, 2015 | Zero Hedge

Wow, talk about a nice fit! The following image describes a speed wobble when going too fast on a bicycle.

Bay Area Guy

Paulson should most definitely be in prison. I was no fan of Lehman, but what happened to them was nothing short of a criminal conspiracy.

Thorny Xi

He's suffered so much though.

http://www.forbes.com/sites/morganbrennan/2012/06/05/billionaire-john-pa...

RopeADope

Hank not John.

John is the colossal failure that could not come up with a good trade idea on his own if his life depended on it.

Debt-Is-Not-Money

I was fascinated that Bear Stearns was the first to go as Bear was the only large company that failed to respond to the Fed's calls when LTCM almost brough down the house in 1998.

Not if_ But When

Well, you know........he also lied to Congress. (but that's small potatoes).

froze25

Very true, let them fall and then bailout the rest. Well played Goldman.

KnuckleDragger-X

Lehman had to die to save GS since GS were actually in more trouble......

Bay of Pigs

What ever happened to Douche Bank anyway?

Edit: Damn, good ole Marty beat me to the punch.

Deutsche Bank – the New Lehman Brothers?

http://www.armstrongeconomics.com/archives/37443

jeff montanye

the greatest control fraud in history, the 2008 seizure of the u.s. government's financial/regulatory apparatus by wall street's banks and trading houses to recapitalize themselves and avoid prosecution for their enormous crimes, is tremendously evil. it will never be prosecuted or its errors corrected until the psychopaths at the head of our society are neutralized.

only 9-11 can do this. it is the crime that is clear-cut, unambiguously wrong, provable, without a statute of limitations (treason/murder/kidnapping), sufficiently inflammatory (very important) and really comprehensive in its list of perps, especially after the fact (the editors of the new york times don't actually have to go to jail; just most people have to think they should).

https://www.youtube.com/watch?v=OsoY3AIRUGA.

https://www.youtube.com/watch?v=0GNww9cmZPo

http://www.luogocomune.net/site/modules/sections/index.php?op=viewarticl...

mind by mind. do your part.

Divine Wind

Bullish for PMs, right?

HardlyZero

After MF Global, it is not clear how the markets are safe for buyers, sellers, brokers, banks, etc.

But as always, have your physical setup and safe first before going out to see what's going on.

NoDebt

"If a counterparty liquidates, net exposure becomes gross [emphasis added by me], and suddenly everyone starts wondering where all those "physical" commodities are."

For those who may not quite grasp this, it means all your "hedging" against falling prices is null and void and you are left with full-in-the-face long exposure PLUS entities dealing in the physical commodity can suddenly be looking down a long tunnel of "failure to timely deliver" on contracts they've signed.

But, then again, 2016 is the last year for a lame duck president... traditionally a very good year to "clean house" and get the government to bail you out.

[Sep 20, 2015] Imperialism on the March: Africa, Syria, and Beyond

"...Draitser examines some of the volatile conflicts on the continent, attempting to trace how they relate to the US-NATO regional and global hegemonic agenda. From there, he provides his analysis of Syria and the US role in the rise of ISIS/ISIL, as well as Washington's militarization of Latin America in order to stifle its independence and growing alliances with the non-western world."
Sep 20, 2015 | stopimperialism.org

Eric Draitser appears on WBAI 99.5 FM (NYC) for part 2 of his interview on imperialism in the world today.

https://www.youtube.com/watch?feature=player_detailpage&v=WZghyoQi3yE

He describes in detail what the US and its neocolonial NATO allies are doing in Africa, with close attention to the grand strategy of militarily checking the economic influence of China. Draitser examines some of the volatile conflicts on the continent, attempting to trace how they relate to the US-NATO regional and global hegemonic agenda. From there, he provides his analysis of Syria and the US role in the rise of ISIS/ISIL, as well as Washington's militarization of Latin America in order to stifle its independence and growing alliances with the non-western world. Finally, Draitser touches on the current situation in Haiti and the grand strategy of containing China through the Asia Pivot and the Trans-Pacific Partnership. All this and much much more in this wide-ranging interview.

[Sep 19, 2015]Greece awaits outcome of Alexis Tsipras gamble: 'We have all aged'

I am not sure that what EU wants is recovery. I think that idea is a fire sell of key Greek assets to Germany for pennies of a dollar. Distressed sales, you know. Welcome to modern debt slavery.
.
"..."Dutch economist Maarten Verwey has unprecedented powers as his taskforce oversees the implementation of Greece's cash-for-reforms rescue package...Whoever ends up moving into Maximos Mansion, the official Athens residence of Greece's prime ministers, after Sunday's election, they will not, in any meaningful sense, be running the country.
.
That honour might be said to go instead to a besuited Dutch economist in Brussels with the imposing title of director-general in the secretariat-general of the European commission in charge of the Structural Reform Support Service.
.
Maarten Verwey, a senior civil servant at the Dutch finance ministry who joined the commission in 2011 and led its Cyprus assistance programme, heads what amounts to an EU taskforce for Greece, Greek media have said. "
Sep 19, 2015 | The Guardian

monzer7 19 Sep 2015 22:28

They sucked up to their politicians, whilst they ignored the obligations of their society. Any collective responsibility was surrendered for personal gain.

As usual... The Politicos grabbed the loot, and did a quick exit.

What remains, is your problem!

====

Do you see it?... That debt necklace that continues to engulf you?

The moral catastrophe this EU promoted...

We have to respond - but do reflect when you vote when Cameron decides.

rberger -> Sehome 19 Sep 2015 21:47

While there might be some economic sense to your idea, the politics make it unlikely to happen. The Southern Europe countries wanted the stable currency and low interest rates associated with the Bundesbank. If you asked Spain whether they wanted to go into a union with people like Greece, it wouldn't make any sense to them - they would prefer to stick to their own currency.

Xenkar -> Mackname 19 Sep 2015 21:42

We have to keep pretences about Democracy in Europe is all. As for the renaissance I can't see Greece waiting 3 centuries as a debt colony, unless you are referring to the word literally, or to the sociological results of the renaissance after its end which was the return of Democracy in a revolutionary fashion.

rberger -> Pannie321 19 Sep 2015 21:40

Of all the privatizations that have been done since the crisis started, not a single one has gone to a German company. (The airport operations one may go to a joint venture with Fraport but it hasn't been finalized yet.) The winners of the privatizations have been from countries like China, Hungary, Azerbaijan, etc (i.e., usually not EZ countries). I don't think there are any German companies involved in any of the upcoming privatizations either.

Mackname 19 Sep 2015 21:27

I don't understand the logical that keeps those people voting for something that they have no power to do a damned thing about it.

Those people need a renaissance.

slipangle -> Shizam13 19 Sep 2015 21:25

"German jackboot" that really is disgraceful, Germany would be far happier if Greece had run proper balanced budgets. The Greeks were the architects of their own disaster,Germans should be thanked for bailing the fools out rather then insulted.

randomguydeaustralie -> Sehome 19 Sep 2015 21:19

What, like an Austro-Hungarian Empire you mean?? That ended pretty badly as I recall

Pannie321 -> rberger 19 Sep 2015 21:14

Merkel has never been supportive of Greece, she along with Schauble are entirely responsible for impoverishing Greece for the benefit of German Banks. Just check out which Country's businesses are buying up Greek assets cheaply, check out the Nationality of the Business that hasn't paid any V.A.T. revenues or social security(N.I.) contributions for the past 20 years. That business has now conveniently sold their interests.

DogsLivesMatter -> TheRuthlessTruth 19 Sep 2015 21:10

The World Bank and the IMF.

deskandchair 19 Sep 2015 20:56

Why have elections when thanks to Tsipras treacherous deal it makes absolutely no difference who's elected. Greece your new PM is Maarten Vervwey:

"Dutch economist Maarten Verwey has unprecedented powers as his taskforce oversees the implementation of Greece's cash-for-reforms rescue package...Whoever ends up moving into Maximos Mansion, the official Athens residence of Greece's prime ministers, after Sunday's election, they will not, in any meaningful sense, be running the country.

That honour might be said to go instead to a besuited Dutch economist in Brussels with the imposing title of director-general in the secretariat-general of the European commission in charge of the Structural Reform Support Service.

Maarten Verwey, a senior civil servant at the Dutch finance ministry who joined the commission in 2011 and led its Cyprus assistance programme, heads what amounts to an EU taskforce for Greece, Greek media have said. "
http://www.theguardian.com/world/2015/sep/18/eurozone-greek-prime-minister-maarten-verway-greece-bailout

Sehome 19 Sep 2015 20:26

I have watched economic problems from Portugal to Greece for a few years now, seemingly insoluble without German/Brussells dictates, and I have a Propossal:
All Southern Europe, with its own level of economic strength, languages and cuisine and weather, should withdraw from EU and be its own Union, with its own currency. All of wealthy, arrogant Northern Europe including Scandinavia would be Europe North, but with no power to order anything at all in Europe South.
This would leave Czech Rep, Slovakia, Poland, the Balts and the poor small countries of Yugoslavia, either to form a Middle Europe, or break to join the North or South.
Three Europes, I think, makes more sense when one considers language, culture, values, and economics.

OXIOXI20 -> TheRuthlessTruth 19 Sep 2015 20:22

You ever hear of bank bailouts, 2008, 2010, 2012 ??

Scrotalyser 19 Sep 2015 19:46

I hate to have to tell them, but the Greeks sold their country for Euros. So they can't do anything, because they gave their power away to a cabal of faceless fraudsters.

Captain_Tibbets 19 Sep 2015 19:41

Tell the EU to shove their debts.

Iceland is doing fine now. You don't need the Euro. It's a curse not a blessing. We did tell you that.

This German mercantilist farce needs to stop. Do it now whilst they're in a blind panic about their disasterous asylum plans which are on the brink of causing war between Hungary and Slovenia. Kick the Germans when they are down - it's the best way, they're not so good fighting on two fronts historically...

[Sep 18, 2015] Ukranian official finds wrong kind of corruption, setup and arrested for corruption

Moscow Exile, September 16, 2015 at 1:09 am

You just couldn't make it up!

SBU catches State Employment Service chief taking bribe

See also: Ukraine Anti-Corruption Official Arrested for… Corruption

It's all Putin's/Russia's doing, though.

Stands to reason …

marknesop, September 16, 2015 at 7:49 am
Mmm hmmmm, large amount of cash found in vehicle, check. Weapon and ammunition found in vehicle, check. What…no air tickets to Moscow? Where's the flippin' air tickets, you incompetent cretins?? There always have to be air tickets, Christ, do I have to run a fucking seminar or something?

I'd be willing to bet his real crime was getting in someone's way in the Porky/Yatsie machine, simply because it has happened over and over since they took power – as predictable as darkness at the end of daylight. Official commissioned to root out corruption, official finds wrong kind of corruption, official announces the finding of corruption, official accused of corruption, found with large amount of cash, sometimes weapons although that's not of much consequence in a country full of them, and who uses a rifle downtown to extort money?…and air tickets, signifying an intent to flee. Always remember the air tickets, it's important.

I wouldn't go so far as to say he has done nothing wrong, but he is likely no more corrupt than the rest of the organization, including a president who is still raking in the dough from private enterprise and owns his own media channel. Perhaps that's what endears him so to the west, who see him taking his first tottering steps toward a society utterly dominated by corporatism and business to the exclusion of all other concerns, beyond paying them pious lip service at election time. American policymakers probably envy him his open graft and lawbreaking, and wish they, too were allowed to merely promise to sell their corporate interests if elected and then forget about it, whereupon everyone else would just ignore it and figure there is nothing untoward about a political figure making a little brass. After all, that pathetic Ukrainian in the man-on-the-street interview in the run-up to elections said he was voting for Poroshenko because he was already rich, so hopefully he would not steal as much.

marknesop , September 17, 2015 at 3:14 pm
Mosiychuk is stripped of his Parliamentary immunity and arrested. A video allegedly shows him soliciting and accepting bribes. Lyashko is stunned. This is apparently unprecedented. His own party is said to have voted for it, believing Mosiychuk would then be given the floor and would refute the allegations. But, in what is beginning to typify the last-of-the-wild-frontier politics in Kiev, they went straight to arrest. The masked police are a nice touch, and in my humble opinion, a great way to display European values. Keep it up, Ukraine – you're almost NATO material!!
marknesop, September 17, 2015 at 7:42 pm
Oh, dear – poor Ukraine. More corruption.

Three Million a year in salary and bonuses? Sounds fair to me – like he says, this is not a charity.

[Sep 18, 2015] Speech of Vladimir Putin before the Collective Security Treaty Organisation's Collective Security Council in Dushanbe

"..."Equally, Lavrov lifted the veil a little bit to let the Americans know that the Russian military intelligence has not only been monitoring the operations of the American military aircraft in Iraq but have scientifically analyzed the US aircraft's flight plans and so on. In sum, Russians seem to have intelligence dope to substantiate something that the Iranians have been all along maintaining, namely, that the American aircraft are regularly airdropping supplies for the IS." "

thesaker.is

The presidents of Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan met in narrow format and then continued their talks with their delegations present.

The summit's main focus was on effective response to the biggest current military and political challenges, including an upsurge in activity by terrorist and extremist groups and destabilisation of the situation on the CSTO countries' borders.

The meeting ended with a package of documents being signed, including a statement by the CSTO Collective Security Council's member states. In particular, documents were signed concerning cooperation in the transit of military formations and military products; readiness inspections for carrying out the Collective Rapid Reaction Forces' objectives, their composition and deployment, as well as the CSTO's budget.

* * *

Speech at CSTO Collective Security Council session

President of Russia Vladimir Putin: Thank you, Mr Rahmon!

First of all, I would like to express my gratitude for the opportunity to work in Tajikistan today.

I would like to note that Tajikistan is our strategic partner and ally. We see that here in Tajikistan, you also face problems with certain forays and attempts to destabilise the situation. I would like to say straight away that we are assessing these threats adequately and you can always count on our help and support, although we see that your law enforcement agencies and armed forces are handling the problems that come up effectively.

Just now, in the restricted format, we had a detailed discussion on the CSTO's zone of responsibility, as well as urgent regional and international problems, and outlined steps to further strengthen our organisation. We noted the increase in threats faced by CSTO member states in various areas.

We are concerned by the state of affairs in Afghanistan. International security forces have been in that nation a long time, carrying out certain work, including positive work; however, it still has not brought qualitative, definitive and decisive improvements to the situation. Unfortunately, the situation in that country is deteriorating following the withdrawal of most foreign military forces.

There is an increase in the real danger of terrorist and extremist groups entering nations that neighbour Afghanistan, and the threat is made worse by the fact that in addition to the well-known organisations, the influence of the so-called Islamic State has also spread to Afghanistan. The scope of the organisation's work has reached far beyond the borders of Iraq and Syria. Terrorists are carrying out mass executions, plunging entire nations into chaos and poverty and destroying cultural monuments and religious shrines.

The outcomes of the fight by international security forces against the production of narcotics is no less dispiriting. We know how this threat is growing from year to year; unfortunately, it is not decreasing.

I mentioned the situation in Syria and Iraq; they are the same as the situation in Afghanistan, in that they worry all of us. Please allow me to say a few words on the situation in this region, the situation around Syria.

The state of affairs there is very serious. The so-called Islamic State controls significant stretches of territory in Iraq and Syria. Terrorists are already publicly stating that they have targets set on Mecca, Medina and Jerusalem. Their plans include expanding activities to Europe, Russia, Central and Southeast Asia.

We are concerned by this, especially since militants undergoing ideological indoctrinations and military training by ISIS come from many nations around the world – including, unfortunately, European nations, the Russian Federation, and many former Soviet republics. And, of course, we are concerned by their possible return to our territories.

Basic common sense and a sense of responsibility for global and regional security require the international community to join forces against this threat. We need to set aside geopolitical ambitions, leave behind so-called double standards and the policy of direct or indirect use of individual terrorist groups to achieve one's own opportunistic goals, including changes in undesirable governments and regimes.

As you know, Russia has proposed rapidly forming a broad coalition to counteract the extremists. It must unite everyone who is prepared to make, or is already making, an input into fighting terrorism, just as Iraq and Syria's armed forces are doing today. We support the Syrian government – I want to say this – in countering terrorist aggression. We provide and will continue to provide the necessary military technology assistance and urge other nations to join in.

Clearly, without active participation by the Syrian authorities and military, without participation by the Syrian army, as the soldiers fighting with the Islamic State say, you cannot expel terrorists from this nation, as well as the region overall, it is impossible to protect the multi-ethnic and multi-faith people of Syria from elimination, enslavement and barbarism.

Of course, it is imperative to think about the political changes in Syria. And we know that President Assad is ready to involve the moderate segment of the opposition, the healthy opposition forces in these processes, in managing the state. But the need to join forces in the fight against terrorism is certainly at the forefront today. Without this, it is impossible to resolve the other urgent and growing problems, including the problem of refugees we are seeing now.

Incidentally, we are seeing something else: we are currently seeing attempts to practically put the blame on Russia for this problem, for its occurrence. As if the refugee problem grew because Russia supports the legitimate government in Syria.

First of all, I would like to note that the people of Syria are, first and foremost, fleeing the fighting, which is mostly due to external factors as a result of supplies of arms and other specialized equipment. People are feeling the atrocities of the terrorists. We know that they are committing atrocities there, that they are sacrificing people, destroying cultural monuments as I already mentioned, and so on. They are fleeing the radicals, first and foremost. And if Russia had not supported Syria, the situation in that nation would have been even worse than in Libya, and the flow of refugees would be even greater.

Second, the support of the legitimate government in Syria is not in any way related to the flow of refugees from nations like Libya, which I already mentioned, Iraq, Yemen, Afghanistan, and many others. We were not the ones that destabilised the situation in those nations, in whole regions of the world. We did not destroy government institutions there, creating power vacuums that were immediately filled by terrorists. So nobody can say that we were the cause of this problem.

But right now, as I said, we need to focus on joining forces between the Syrian government, the Kurdish militia, the so-called moderate opposition, and nations in the region to fight the threat against Syria's very statehood and the fight against terrorism – so that together, with our efforts combined, we can solve this problem.

I already spoke about the other issues that currently concern us, which we discussed today. In this respect, I would like to note that we plan to continue strengthening cooperation between our armed forces. We plan a whole set of activities in this area. I would like to also stress that our cooperation within the CSTO framework is certainly not directed against anybody. We are open to constructive cooperation, and that is precisely the approach that is reinforced in the final statement that will be signed today.

I am certain that we must resume concrete discussions on creating Euro-Atlantic systems for equitable and indivisible security; we need to carry out a full inventory of existing problems and disagreements. This analysis can be used to achieve a discussion of the principles of sustainable political development. The OSCE and other international organisations can be used to agree on legally binding guarantees concerning the indivisibility of security for all nations, achieve observance of important fundamental principles of international law (respecting the sovereignty of states, not meddling in their domestic affairs), and strengthen regulations on the inadmissibility of appeasing anti-state, anti-constitutional coups and the promotion of radical and extremist forces.

I would like to thank Mr Rahmon for his work as chairman of the CSTO, as well as my other colleagues, and to wish our Armenian partners and friends success in chairing the organisation. Thank you very much for your attention.

source: http://en.kremlin.ru/events/president/news/50291

Martin from S.E.B. on September 16, 2015 · at 12:51 am UTC

Putin speaks out all the related Truth now, finally!
Also rightfully he points out, that US-ISIS could spread to Europe and Russia like a wildfire during storm, if it cannot be extinguished very soon.

"""""But right now, as I said, we need to focus on joining forces between the Syrian government, the Kurdish militia, the so-called moderate opposition, and nations in the region to fight the threat against Syria's very statehood and the fight against terrorism – so that together, with our efforts combined, we can solve this problem."""""

I don't need a religion for this: I PRAY and wish all the Best!!!

Anonymous on September 16, 2015 · at 1:09 am UTC

re: Syria and the latest BBC article. At least they did not do a blatant hack job ( maybe the sarcastic article in RI today about how to write mindless attacks on Russia hit a nerve) And , my, my they have a defense analyzer who actually makes sense:

Analysis: Jonathan Marcus, BBC defence correspondent

"Russia's backing for Mr Assad should be seen not as a vote of confidence in Syria's embattled president but as an investment in a country where Russia believes it can play out its foreign-policy role.

Indeed Mr Putin's military deployments signal that he will not let the Assad regime fall. This does not mean Mr Assad will be there forever.

Russian diplomacy is working in tandem with its military policy, exploring all avenues for reaching some sort of interim deal in which Mr Assad might stay on, at least for the time being.

But Russia's horizons in Syria probably extend well beyond Mr Assad's active presence – a reflection of Russia's concerns about militant Islam and wider trends in the region, and also its belief that Western remedies in the Middle East have been an unmitigated disaster. "

David George, on September 16, 2015
It is very frustrating to hear from a French source what is going on in CSTO affairs, and not to hear it from Russian sources. Nothing in TASS, nothing in Sputnik-RIA Novosti, nothing like the Voltaire-net story in the speech from Putin. Is the Voltaire-net story true?
http://www.voltairenet.org/article188710.html

Meanwhile the US administration of criminals and liars pretends to be puzzled by Russia's support for Syria, what a load of tripe in the New York Times. The Americans are not worth talking to, they don't know how to tell the truth or hear it, it is something that sticks in their craw, there has to be some propaganda angle in play in everything they say, and behind that is a party line that is right out of the propaganda the west used to spout about Stalin. Beware, whoever dares to question the world according the New York Times: the truth is too important to be left out in the open and must be hidden behind a curtain of lies.

http://www.nytimes.com/2015/09/16/world/middleeast/white-house-split-on-opening-talks-with-putin.html?_r=0

It would be good someday to have access to a network of reporters committed to giving accurate information from every country, for example in the current crisis area from the capitals of Turkey, Syria, Iraq, Iran, Saudi, Qatar, Israel, Jordan, the western capitals, etc. so that each viewpoint can be assessed and a judgment formed.

Reading between lines and deciphering cryptic word bites really sucks, and I am sick of it. I don't know about anybody else but I have just about had it even with the internet. I get a better picture of the world from just daydreaming about it. Earth people can be so stupid!


Red Ryder on September 16, 2015 · at 3:15 am UTC

When you find a story on one source, spend a few minutes using a browser like DuckDuckGo or Yandex or Baidu and look for the essence, like the same headline facts.

If you don't find anything, it's generally not much more than wishful thinking.

If the topic is really compelling, try searching for the next day or two. If you find only the original source repeated or not at all addressed, it was fantasy.

Voltaire is cotton candy. Makes your feel good as the sugar rushes through your brain and bloodstream.

David George on September 16, 2015 · at 6:10 am UTC

I'm beginning to think you are right about Voltaire-net, but they have been good for some information I think.

Anonymous, on September 16, 2015

Nevertheless the footnotes to many of the articles in Voltairenet are a treasure trove and they remain available in full, also a rarity in my experience.

For example this one; http://www.voltairenet.org/article188650.html
……..http://www.theguardian.com/commentisfree/2015/jun/03/us-isis-syria-iraq
……..https://medium.com/insurge-intelligence/secret-pentagon-report-reveals-west-saw-isis-as-strategic-asset-b99ad7a29092
……..http://www.nytimes.com/2007/07/18/world/africa/18iht-iraq.4.6718200.html

and esp this one;……………..http://www.theguardian.com/world/2013/mar/06/el-salvador-iraq-police-squads-washington………..with its' first video documentary which I find extraordinary.

Cassandra on September 16, 2015 · at 3:41 am UTC

History lesson

The Soviet Union entered Afghanistan in late December, 1979. This is what happened in the first part of 1979, as told in "From the Shadows" by former CIA director and Secretary of Defense Robert Gates and reprinted at stormcloudsgathering.com.

"The Carter administration began looking at the possibility of covert assistance to the insurgents opposing the pro-Soviet, Marxist government of President Taraki at the beginning of 1979. . .

"On March 30, 1979, Aaron chaired a historic "mini-SCC" … Walt Slocombe, representing Defense, asked if there was value in keeping the Afghan insurgency going, "sucking the Soviets into a Vietnamese quagmire?". . .

Peter on September 16, 2015 · at 5:39 am UTC

USSR's Afghanistan. US's Vietnam.
Putin/Russia is not the USSR.
US is still the US.

Erebus on September 16, 2015 · at 4:15 am UTC

I'm looking for an even more pointed statement when Putin addresses the UN at the end of this month. The gloves are coming off. The Kremlin has been on a diplomatic blitzkrieg for a few months now, and they must think they have enough support to take the USA's strategy head-on.

By inviting the USA to join their coalition, Moscow has put Washington into Zugzwang.
The choice is: publicly support regime change in Syria over the destruction of ISIS, or join the Russian initiative to destroy the terror networks. Either way, American Exceptionalism, to say nothing of Indispensability, gets knocked cross-eyed.

Talk about getting out-maneuvered. Ouch.

Ann on September 16, 2015 · at 5:00 am UTC

sadly, when he said that Russia stands behind and will support any problems arising in Tajikistan I immediately … knee jerk … thought of when he said about the same thing in Donbass…that was very difficult to understand…I think the 5th column prevented Putin from entering Donbass right at the beginning of the war. Putin is not like a person that makes empty promises, and during that time, the beginning of the Donbass fiasco when he was making that promise, he was sitting on the edge of his seat I remember…as though it had already been talked about in the government and he thought he could make a tentative promise…but I guess he was overruled.

Grieved on September 16, 2015 · at 5:08 am UTC

I consistently admire the way in which Russia speaks only the truth required for the concerns of the day, but even so never hesitates to speak the necessary truth, and never speaks anything other than the truth when she does speak. Russia is formally a friend of Israel, and yet will speak of "joining forces between the Syrian government, the Kurdish militia, the so-called moderate opposition, and nations in the region to fight the threat against Syria's very statehood and the fight against terrorism…"

No mention of Israel or Turkey as belligerents acting against such a coalition. And perhaps as it comes together, these nations will reverse their positions and bow to the inevitable. Russia is quite elegant, I think, in allowing all parties in situations the maximum room to change and adapt, leaving it until the vital last moment for any potential opposition to gather its energy into a strike – at which time Russia will engage with that very energy to throw down the opponent.

I know it's irresistible to use these judo analogies with everything that Russia and Putin do – but how can we see it otherwise? The entire military doctrine and diplomatic activities of Russia display this every day. There's a rigorous adherence to the factual truth, combined with a severe reluctance to spend words or effort until the moment is right – combined yet again with zero hesitation to expend massive energy for actions deemed necessary, such as military drills.

It's clear I'm a fan of Russia, but only because of what i see.

Demeter on September 17, 2015 · at 5:26 pm UTC

"Russia is quite elegant, I think, in allowing all parties in situations the maximum room to change and adapt, leaving it until the vital last moment for any potential opposition to gather its energy into a strike – at which time Russia will engage with that very energy to throw down the opponent."

Thank you for saying that Grieved. I think this is quite true. I felt frustrated when I read that again Putin would not mention with one word the true culprits. But then again, as you said, he is giving them one more and another and yet another chance to change their mind and come to their senses. Lie one warning after another but wrapped as an invitation to join forces.

Should they (US, Israel, Turkey, Saudi etc) decide to continue to follow on the path of destruction of a sovereign nation Russia will hit back with full might.

Mulga Mumblebrain on September 17, 2015 · at 10:56 pm UTC

Israel will not change its position vis-a-vis the destruction of Syria. That's not how they operate. They demand 100% gratification of their desires, being above dealing with mere goyim as if they were their equals.

The Israeli elite want Syria broken up into four or so mutually antagonistic fragments, the better for Israel to dominate them, prior to the eventual annexation of those lands that they covet as Eretz Yisrael.

And, of course, Zionazi intransigence and ambition, while growing more explicit over the years as the hard Right took over in Israel, and the Jewish Fifth Columns took over Western polities, the USA in particular, has been there awaiting realisation, since the days of Herzl and Ben-Gurion. Israel does not, and I believe can not, do compromise because the essence of their cult is the ineradicable belief in their superiority over the goyim, and the pre-eminence of Judaic Law over International Law, which they believe, must not be applied to those acting directly according to Divine Will.

Jabotinsky's 'Iron Wall' of total intransigence and absolute refusal to compromise, negotiate in good faith or keep agreements with others, unless they definitively favour the Jews, is 'non-negotiable'. It is, of course, a psychology that has gotten them into strife, over and over again, throughout history, with hideous consequences, for the Jews and their victims as well, but today, with an increasingly deranged elite, inside Israel and in the Diaspora, armed with hundreds of nukes, it's positively apocalyptic.

Unfortunately there are lots of lunatics actively looking forward to such an outcome, particularly the loathsome Christian Zionists.

Stan K on September 18, 2015 · at 5:31 am UTC

This article explains what you are referring to. "The Promised Land",

http://www.globalresearch.ca/greater-israel-the-zionist-plan-for-the-middle-east/5324815

Reminds me of another sinister plan!

David George on September 16, 2015 · at 6:12 am UTC

I hope and pray that such a force will be created that it will destroy the psycho takfiris, their enablers and handlers, their psycho mullahs and preachers, ideologues, strategists, tacticians, lying political apologists, western criminal bankrollers, the whole evil society, and that a plague like this will never again be allowed to exist on the face of the Earth; and that the US and its minions will be presented with the whole bill for repairing the destruction they have caused and making the victims whole again.

Erebus on September 16, 2015 · at 9:39 am UTC

David,

Be careful what you wish for. If the forces unleashed were truly enough to destroy all your target parties, I doubt there'd be enough of the USA left to present any sort of bill to, or anyone left inclined to present it.

I believe it was Penelope who linked this article from Mike Whitney in another thread: http://www.strategic-culture.org/news/2015/08/21/ankara-the-new-capital-of-jihad.html

Though Mr. Whitney hyperventilates a bit, the scenario he paints is both believable and ominous.

I think one should hope that the clash consists of a short, sharp lesson. Say, the first few NATO/USAF planes entering Syrian airspace falling out of the sky would be absolutely devastating to Western pre-eminence. In a word, it would be over.

CSTO's bandwagon would break an axle under the crush of new partners, and the "psycho takfiris" could then be systematically destroyed.

David George on September 16, 2015 · at 1:12 pm UTC

I grew tired of Mike Whitney a long time ago, he is one of a long list of glib analysts who never manage to put their finger on the essential evil of the people they analyze, or who somehow manage to make it sound "everyday". There is nothing "everyday" about the criminals in Washington and Jerusalem, Ankara, Riyadh, and the other cesspools of global power like Las Vegas, Los Angeles, New York, and the various lily pads where they seek peace from their own consciences. They need to be destroyed. I remember when Turkey's foreign policy was "zero problems", then over one weekend it switched. Who promised what? Not only a few downed jets, but a few radiating airbases and a generation's worth of repentance might be the answer to today's slick sickness. If it were not for zombies like Brzezhinski and Kissinger and their banker sponsors, a young girl in Afghanistan or elsewhere might have a prospect of a reasonable future instead of the prospect of being married to a bearded psycho four times her age. Enough is enough.

Erebus on September 17, 2015 · at 12:00 am UTC

Your rage is not misplaced, but it is futile. The "evil" you speak of is just a point on the spectrum of human behaviors. Eradicating it? Maybe, over generations. In one cathartic event? Sure, but the collateral damage will be the rest of the spectrum, and even the planet.
I think the strategy being pursued by Russia & China is the only viable one. Box that "evil" in so it can't continue to destroy nations and lives on an international scale. Expose it, challenge it, drive it into its domestic corner(s) where, disconnected from its international wealth pumps it can be constrained by the local population.

Mulga Mumblebrain on September 17, 2015 · at 11:17 pm UTC

Erebus, that would be like trying to cage a cancer. If you do not then excise the cancer, you will suffer metabolic injury so great that you will perish, as the cancer pumps out various toxins, like 'Free Market Fundamentalism', 'Western moral values' or 'Exceptionalism'. Cut the tumour out, plus the chemotherapy of somehow rescuing the non-malignant members of the cancer societies from the inhuman habits inculcated in them from birth (ie gross materialism, unbridled greed, cultural and racial superiority, addiction to crass 'tittietainment' etc) and even a few escaping cancer cells can cause metastasis elsewhere. What is really needed is a miracle, a 'spontaneous remission' where the individual cells in the Western cancer suddenly transform themselves into non-malignant, human, organisms again. There might be some good signs, such as the rise of Corbyn in the UK, the eclipse of Harper, the character of Pope Francis, but there is a Hell of a way to go, and not much hope of success.

Outlaw Historian on September 16, 2015 · at 11:11 pm UTC

Russian intel watch very very closely the movements of Outlaw Empire airplanes over Syria & Iraq, not just the supposed airstrikes but air drops of supplies too. Excerpted from Lavrov's latest speech:

"Equally, Lavrov lifted the veil a little bit to let the Americans know that the Russian military intelligence has not only been monitoring the operations of the American military aircraft in Iraq but have scientifically analyzed the US aircraft's flight plans and so on. In sum, Russians seem to have intelligence dope to substantiate something that the Iranians have been all along maintaining, namely, that the American aircraft are regularly airdropping supplies for the IS."

http://blogs.rediff.com/mkbhadrakumar/2015/09/14/russia-exposes-us-hidden-agenda-in-syria/

So we have three recent very detailed speeches about the situation and what's being done. I would be remiss to not add Korybko's latest Sputnik oped to this list, http://sputniknews.com/columnists/20150915/1027039805.html

Finally, after 70 years the tables are about to be turned, and not a moment too soon.

[Sep 08, 2015]Yanis Varoufakis How Europe Crushed4 Greece

"...We all know that neoliberal economics is the driver of grotesque mal-distribution of wealth as a privileged nomenclature gorges on resources it has commandeered through insider dealing. The predations of this ideology over recent years mimic the violent reaction of Europe's other great Union – the Soviet Union – to any challenge to the privileges of the nomenclature."
.
"...As this story demonstrates yet again, the Troika never meant to negotiate in good faith with the Greek government, but simply imposed its own destructive austerity and privatization program on it. It's also clear that the EU per se has very little independent existence, being mainly administrative scaffolding for the German government to pursue its own essentially predatory policies directed at the subjugation of the rest of Europe."
.
"...Mr. Varoufakis also ignores the role that clientelism has played in making a bad situation even worse. He also ignores Greece's excessive debt and runaway fiscal spending. This has been going on since 1980. "
.
"...The divergence between Germany, on the one hand, and France and Italy, on the other, has been hinted at in various analyses. The existing Euro system does represent the rule of bankers, enforced by central bank control of the currency and pliable elected officials. As I observed over a long career representing debtors and creditors in big cases, it is useless to expect a realistic evaluation of the debtor's ability to repay, and a rational restructuring of debt, until the personnel responsible for making the ill-advised loans are no longer the decision-makers (i.e. fired, retired or escaped to greener pastures). The European banks, knowing that the Greeks could not repay, pressured their governments to bail them out in stages starting in 2010, and they have succeeded in getting out. The politicians who effected this bailout don't want to now tell the voters that they sold them out for the benefit of the banks; rather they excoriate the Greeks as deadbeats, and refuse to deal with anyone who speaks reality. So Greece, a small country, which can't repay the amount of debt outstanding, must wait for a new cast of European politicians before sound economic arrangements can be implemented. The current deal just kicks the can down the road pending such political change; it has no chance of success. Comme ca change, comme c'est la meme chose."
.
"...You are wrong. The bankers knew well that Greece's loans were unsustainable and yet, they kept lending, knowing that Merkel would cover the losses. However, what happened has happened. many were at fault. Countries cause wars and ethic cleansing and are not punished. Germany is a prime example. Why is Greece being held to a different standard? What happened to solidarity. Merkel is showing more solidarity to the migrants, inviting all of the Middle East to come to Europe. She should fly them directly to Germany. Why let them go through Greece first. Germany has a black eye, after her treatment of Greece and now wants to show her "softer side" Let her suffer the consequences then"
.
"...His arguments about how irrational the eurozone has been in not transforming its economic framework to a form more convenient to Greece, which represents only about 2% of the eurozone's GDP, is not compelling. It's like the argument of millions of illegal aliens from failed societies given citizenship who then turn around and agitate for changing the host society so that it better resembles the failed societies. The eurozone's economic framework is hardly "undemocratic" if its most vocal critics number so few among the whole."
.
"...Greece's rich and powerful, like the elites everywhere, "crushed Greece", because as countless man/woman in the street quotes in this paper indicate Greek business owners and professionals not on salary cheat and do not pay owed taxes. This criminal elite role modeling then infects the rest of the society as well. Obviously when not enough money goes into government treasuries this also causes deficits! But the rich and powerful, and their bought and paid for media, skillfully distract us from this reality by arranging the public discussion to just be about cuts to sympathetic government programs, cuts that are most often offered by the same criminal elites as the only solution to reducing deficits. Which means the same dysfunctional status quo is continued and so yet more and more loans and bailouts and debt forgiveness and screaming and yelling about being "victims" of it all go on - probably forever. "
Sep 08, 2015 | The New York Times

Since the beginning of Greece's financial crisis in 2010, two prime ministers have been swept from office after they were forced to adopt an unfeasible package of austerity measures in exchange for a bailout from the troika, as the eurozone authorities - the European Commission, the European Central Bank and the International Monetary Fund - are known. It pains me to watch the same fate befall a third prime minister, my friend and comrade Alexis Tsipras.

In July, when Mr. Tspiras was forced to capitulate to the troika's latest "program," it spelled the end of our government. It also caused a split in our party, Syriza, between those who reluctantly agreed to implement the program and the rest of us (approximately 40 Syriza members of Parliament, out of a total of 149) who did not. The general election set for Sept. 20 is a result of this crisis.

For my part, having resigned as finance minister over the troika's ruthless, humiliating imposition, I plan to sit this one out. I will not contest my parliamentary seat in a sad election that will not produce a Parliament capable of endorsing a realistic reform agenda for Greece.

Nor can I support the adoption of a troika program that everyone knows is destined to fail. There was a clear consensus, shared not only by myself and Mr. Tsipras, but also by Germany's finance minister, Wolfgang Schäuble, and officials at the International Monetary Fund, that the new bailout deal was not viable.

I will not, however, join those who think that exiting the eurozone, to bring about a major devaluation with a reintroduced drachma, is in itself a program for Greece's recovery.

The cause of this continuing trouble for Greece lies in the eurozone's existential crisis. The pioneers of the single currency, of whom Mr. Schäuble is the last active member, were undecided whether the euro should be modeled on the international gold standard of the interwar period or on a sovereign currency, like the dollar.

The gold standard relied on strict rules that were unenforceable during a crisis. In a severe downturn, these imposed the greatest burden on the worst-hit economies and thus made exit the only alternative to a humanitarian crisis. This is the reason that President Franklin D. Roosevelt took the United States off the gold standard in 1933, expanded the money supply and helped pull America out of the Depression.

A sovereign currency, or state money, demands a different, more flexible set of responses based on political union, as the French government and others have recently proposed. The great questions that Europe must answer are: What kind of political union do we want? And are we prepared to act quickly enough to prevent the fragmentation of the eurozone?

Europe's indecision is a result of a deep rift between Berlin and Paris. Berlin has traditionally backed a rules-based eurozone in which every member state is responsible for its own finances, including bank bailouts, with political union limited to a fiscal overlord's possessing veto power over national budgets that violate the rules. Paris and Rome, cognizant that their deficit position would condemn them to a slow-burning recession under such a rules-based political union, see things differently.

It was in the context of this standoff that Mr. Schäuble felt that accepting an alternative plan for Greece's recovery, in place of the troika's program, would weaken Germany's hand vis-à-vis the French. Thus little Greece was crushed while the elephants tussled.

We had such a plan. In March, I undertook the task of compiling an alternative program for Greece's recovery, with advice from the economist Jeffrey Sachs and input from a host of experts, including the former American Treasury Secretary Larry Summers, and the former British chancellor of the Exchequer Norman Lamont.

Our proposals began with a strategy for debt swaps to reduce the public debt's burden on state finances. This measure would allow for sustainable budget surpluses (net of debt and interest repayments) from 2018 onward. We set a target for those surpluses of no more than 2 percent of national income (the troika program's target is 3.5 percent). With less pressure on the government to depress demand in the economy by cutting public spending, the Greek economy would attract investors of productive capital.

As well as making this possible, the debt swaps would also render Greek sovereign debt eligible for the European Central Bank's quantitative easing program. This in turn would speed up Greece's return to the money markets, reducing its reliance on loans from European institutions.

To generate homegrown investment, we proposed a development bank to take over public assets from the state, collateralize them and so create an income stream for reinvestment. We also planned to set up a "bad bank" that would use financial engineering techniques to clear the Greek commercial banks' mountain of nonperforming loans. A series of other reforms, including a new, independent I.R.S.-like tax authority, rounded out our proposals.

The document was ready on May 11. Although I presented it to key European finance ministers, including Mr. Schäuble, as the Greek Finance Ministry's official plan, it never received the endorsement of our own prime minister. The reason? Because the troika made it abundantly clear to Mr. Tsipras that any such document would be seen as a hostile attempt to backtrack from the conditions of the troika's existing program. That program, of course, had made no provision for debt restructuring and therefore demanded cripplingly high budget surpluses.

The fact that few people ever got to hear about the Greek plan is a testament to the eurozone's deep failures of governance. If the "Athens Spring" - when the Greek people courageously rejected the catastrophic austerity conditions of the previous bailouts - has one lesson to teach, it is that Greece will recover only when the European Union makes the transition from "We the states" to "We the European people."

Across the Continent, people are fed up with a monetary union that is inefficient because it is so profoundly undemocratic. This is why the battle for rescuing Greece has now turned into a battle for Europe's integrity, soul, rationality and democracy. I plan to concentrate on helping set up a Pan-European political movement, inspired by the Athens Spring, that will work toward Europe's democratization.

Naturally, this will take years to bear fruit - years that Greece cannot afford. In the meantime, I shall continue to promote our plan for Greece's recovery as a true, viable alternative to the troika's impossible program.

Yanis Varoufakis, a former finance minister of Greece, is an outgoing member of Parliament for Syriza and a professor of economics at the University of Athens.


DaveG, Manhattan

Greece lied about its financial situation when it joined the Euro zone (with Goldman-Sachs' help.)

Beyond that, with no true political union in Europe, the Euro was a bad idea from the start. (Good for Germany, because it gets to sell its goods abroad more cheaply than if it still used the Mark, but bad for monetary and fiscal policy in less developed countries.)

Now with Greek insolvency, the EU has presented an aid plan, which Greece can never pay back. Austerity with a 25% unemployment rate is no solution. (In 1933, the US had a 25% unemployment rate because of Republican laissez-faire austerity policies. "New Deal" spending would reduce the rate to 15% by at least 1940; unfortunately, WWII did the rest.)

Though the Germans got a "haircut" in 1953 on their accumulated debt (as they had in the 20's/30's), they were not interested in any similar haircut for Greece. (Marshall Plan money the Germans got after the war, and the lack of reparations they were required to pay to countries like Greece under the terms of the 1953 haircut are additional benefits they received then.)

The Greeks and the Germans are no angels in any of this. Europe has just made an economic mess of itself.

Grouch, Toronto

As this story demonstrates yet again, the Troika never meant to negotiate in good faith with the Greek government, but simply imposed its own destructive austerity and privatization program on it.

It's also clear that the EU per se has very little independent existence, being mainly administrative scaffolding for the German government to pursue its own essentially predatory policies directed at the subjugation of the rest of Europe.

Yoda, DC

Dr. Varoufakis makes the same argument in his book "THe Global Minotaur". And he is correct about the very important role that capital flows and crushing debt have played on peripheral nations of which Greece is a member. However, there are other very important factors he ignores (in both this article and the book). He ignores the role and importance of institutions for example. Greece is the only nation in Europe not to have a land registry. Greece's institutions reek of corruption, cronyism and "roufeti" (Greek for you scratch my back, I scratch yours - a subtle form of corruption). This very important fact goes unsaid.

Mr. Varoufakis also ignores the role that clientelism has played in making a bad situation even worse. He also ignores Greece's excessive debt and runaway fiscal spending. This has been going on since 1980.

Robert Jennings, Lithuania/Ireland

A remarkable article.

I am one of the Old believers in the European ideal of Economic and Social cohesion; I have worked in support of the Accession process for over twenty years and watched in dismay as an alien ideology of neoliberalism (Corporatist Capitalism) has reduced the European Ideal to "fumbling in a greasy till", W. B. Yeats on Ireland.

I have also watched in dismay as the same ideology pre-empted Political decision-making in Ireland to force the Irish people to pay the private debts of headstrong and bankrupt Banks.

We all know that neoliberal economics is the driver of grotesque mal-distribution of wealth as a privileged nomenclature gorges on resources it has commandeered through insider dealing. The predations of this ideology over recent years mimic the violent reaction of Europe's other great Union – the Soviet Union – to any challenge to the privileges of the nomenclature.

The Greek people can be proud of their rejection (by referendum) of the European Union nomenclature –their action resonates with the Prague Spring rejection of the Soviet Union nomenclature way back in 1968. The Prague Spring was crushed by Soviet Tanks, the Greek Spring is being throttled by a combination of self-serving International Institutions designed to protect the Neoliberal ideology and the Corporate Capitalist nomenclature it serves.

I hope that people like Yanis Varoufakis can remain a dominant influence in the resistance to the takeover of the European Union.

serban, is a trusted commenter Miller Place

Varoufakis proposals were perfectly reasonably, never mind all the spleen toward Greece displayed by many commenters. None are seem to realize that much of the bloated Greek bureaucracy has in fact been reduced, from where do they think the 25% unemployment comes from? His problem was political weakness, not lack of economic wisdom. Greece did and does not have the muscle to stand up to whatever conditions Germany wanted to impose. Mr. Schauble may honestly believe that Greece needs hard medicine but his approach was to impose a plan that will keep Greece down for many more years. Eventually much of the debt will have to be written of, the longer this goes on the bigger the amount that will not be repaid.

Bill, Boston 8 hours ago

The divergence between Germany, on the one hand, and France and Italy, on the other, has been hinted at in various analyses. The existing Euro system does represent the rule of bankers, enforced by central bank control of the currency and pliable elected officials. As I observed over a long career representing debtors and creditors in big cases, it is useless to expect a realistic evaluation of the debtor's ability to repay, and a rational restructuring of debt, until the personnel responsible for making the ill-advised loans are no longer the decision-makers (i.e. fired, retired or escaped to greener pastures). The European banks, knowing that the Greeks could not repay, pressured their governments to bail them out in stages starting in 2010, and they have succeeded in getting out. The politicians who effected this bailout don't want to now tell the voters that they sold them out for the benefit of the banks; rather they excoriate the Greeks as deadbeats, and refuse to deal with anyone who speaks reality. So Greece, a small country, which can't repay the amount of debt outstanding, must wait for a new cast of European politicians before sound economic arrangements can be implemented. The current deal just kicks the can down the road pending such political change; it has no chance of success. Comme ca change, comme c'est la meme chose.

Uzi Nogueira, Florianopolis, SC 5 hours ago

Mr. Varoufakis: How Europe Crushed Greece. Really?

Greece's eurozone membership was the high point achieved by the political leadership. A tourism-based economy was sharing a common currency along with advanced-wealthy Germany, France, Italy and Netherlands. Everything was fine except for one small detail, the state of a backward economy.

The ruling political elite continued to run the country as business as usual. Namely, an over generous welfare system, a corrupt public patronage system and a backward third world-like economy. The end result, an unsustainable public debt brought about by the 2009 financial crisis.

Mr. Varoufakis -- and fellow politicians -- may still think (erroneously) eurozone membership is an inherited right fore being an European country. He misses, however, a fundamental point about economic integration.

Membership of a rich man's club does not entitle Greece to benefit from other country's wealth and prosperity for free. Greeks have to earn it. This is the ultimate lesson from the current debt crisis.

Richard Luettgen, New Jersey

Mr. Varoufakis needs to re-examine his history. FDR didn't end the Great Depression in the U.S. by abandoning the gold standard. The Great Depression persisted despite all his efforts until the demands of WWII put everyone to work either producing or fighting.

His arguments about how irrational the eurozone has been in not transforming its economic framework to a form more convenient to Greece, which represents only about 2% of the eurozone's GDP, is not compelling. It's like the argument of millions of illegal aliens from failed societies given citizenship who then turn around and agitate for changing the host society so that it better resembles the failed societies. The eurozone's economic framework is hardly "undemocratic" if its most vocal critics number so few among the whole.

Some of the plans Mr. Varoufakis extols have merit, such as his "development bank". But it's Syriza that's been least open to reforming excessively protective labor practices, reforming tax collection and a still-overwhelming public sector. The truth is that they don't really want to change and want the debt to simply go away. The only way it can is by exit, repudiation for a period of debt service and a starting over on a basis that is strategically sustainable.

And Mr. Varoufakis's desire for European "democratization" is merely self-interested rationalization for leveling ALL of Europe to avoid the consequences to peoples of excessive debt voluntarily and knowingly amassed.

Winthrop Staples, is a trusted commenter Newbury Park, CA 6 hours ago

Greece's rich and powerful, like the elites everywhere, "crushed Greece", because as countless man/woman in the street quotes in this paper indicate Greek business owners and professionals not on salary cheat and do not pay owed taxes. This criminal elite role modeling then infects the rest of the society as well. Obviously when not enough money goes into government treasuries this also causes deficits! But the rich and powerful, and their bought and paid for media, skillfully distract us from this reality by arranging the public discussion to just be about cuts to sympathetic government programs, cuts that are most often offered by the same criminal elites as the only solution to reducing deficits. Which means the same dysfunctional status quo is continued and so yet more and more loans and bailouts and debt forgiveness and screaming and yelling about being "victims" of it all go on - probably forever.

bob karp, new Jersey 5 hours ago

You are wrong. The bankers knew well that Greece's loans were unsustainable and yet, they kept lending, knowing that Merkel would cover the losses. However, what happened has happened. many were at fault. Countries cause wars and ethic cleansing and are not punished. Germany is a prime example. Why is Greece being held to a different standard? What happened to solidarity. Merkel is showing more solidarity to the migrants, inviting all of the Middle East to come to Europe. She should fly them directly to Germany. Why let them go through Greece first. Germany has a black eye, after her treatment of Greece and now wants to show her "softer side" Let her suffer the consequences then

Prof.Jai Prakash Sharma, is a trusted commenter Jaipur, India.

For now the Greek bailout deal with all its stringent austerity conditions attached to it might be okay as a one shot emergency move reluctantly accepted by the Greeks, but the lasting solution to the recurring crises in the Eurozone could only be an establishment of pan-European political union to sustain the existing monetary union with a broad common framework of fiscal policies applicable to the entire Union area, as rightly argued by the author.

Michael Boyajian, Fishkill

Thank you for your profound insight into the ham fisted idiocy of the so called troika.

Dr. MB, Irvine, CA

This gentleman seems to be oblivious of fundamental issue -- the duties one has when one talks of his/her rights! Where were the follow-ups on Greece's duties when she took all these debts? Were they (the Greeks) expecting these debts to be forgiven when the income from these "loans/debts" were crucial for the livelihoods of people in member countries of the EU? Simply stated, Greece, like any other party too often only talking of "rights" must realize that rights and duties are two sides of the same coin -- one does --or cannot exist without the other. Sooner Greece begins walking the walk, the better it is!

mr. mxyzptlk, Woolwich South Jersey 8 hours ago

Debt swaps? Selling off the commons to the "private sector" seems to me like a bad idea. Default on the debts to the private banksters, tell them you're writing down your debt at ten cents on the dollar and restart your own currency. Let the people of Greece run their own country and take it back from the banksters.

LG Phillips, California 5 hours ago

Not all of Greece's problems originate from EU membership, but the treatments imposed by the EU to remedy these ills are bizarre, irrational, and dangerous. For ex. while EU administrators insist Greece institute reforms to eliminate corruption and tax avoidance, they imposed govt spending constraints hindering Greek government's ability to implement the government programs/structures necessary to accomplish these reforms. While EU administrators insist Greece "deregulates" its mom and pop bakeries and other such markets, the truly labyrinthine thicket of boards, councils, ministries and agencies dictating Greece's nat'l government and economy is dizzying! There's the EU, the European Commission, the European Council, the European Central Bank, the European Stability Mechanism, & the IMF, which taken together lock-in and maximize inflexibility plus damagingly procyclical response when dealing with economic crises.

And the euro itself is a ridiculously designed and constrained currency. To paraphrase a metaphor given by Warren Mosler, the self-imposed constraints the EU's instituted on its own currency are as nonsensical as putting a big bag over your head to race in the 100m. What US conservatives who think Greece's problems are a harbinger for the US don't get is that Greece status in the EU has reduced to a status akin to PA or OH but WORSE, with no sovereignty of its currency plus (unlike PA or OH) Greece is compelled to fund guarantees of its own private banking system!

[Aug 16, 2015] Iran Nuclear Deal: Why Empire Blinked First

August 14, 2015 | ronpaulinstitute.org

We've now spent three weeks watching American politicians argue needlessly over the Iran nuclear deal. For or against, they all miss this one salient point: It is the US that needed to end this standoff with Iran – not the other way around.

For years we have been hearing that US sanctions "were biting" and had "teeth." Sanctions, it was said, would "change Iranian behaviors," whether in regards to the Islamic Republic's "support of terrorism," its "calculations" over its nuclear program, or by turning popular Iranian sentiment against its government.

Here is US President Obama spinning the fairytale at full volume:

"We put in place an unprecedented regime of sanctions that has crippled Iran's economy…And it is precisely because of the international sanctions and the coalition that we were able to build internationally that the Iranian people responded by saying, we need a new direction in how we interact with the international community and how we deal with this sanctions regime. And that's what brought President Rouhani to power."
There is, of course, scant evidence that any of this is true.

If anything, on the economic front, the net effect of sanctions has been to rally Iranians behind domestic production and thrift – establishing both the discipline and policy focus necessary to sustain the country indefinitely. A 2013 Congressional Research Service (CRS) report explains this unintended consequence of sanctions:

"There is a growing body of opinion and Iranian assertions that indicates that Iran, through actions of the government and the private sector, is mitigating the economic effect of sanctions. Some argue that Iran might even benefit from sanctions over the long term by being compelled to diversify its economy and reduce dependence on oil revenues. Iran's 2013-2014 budget relies far less on oil exports than have previous budgets, and its exports of minerals, cement, urea fertilizer, and other agricultural and basic industrial goods are increasing substantially."
Sanctions didn't succeed on the political front either. By in large, Iranians did not hold their leadership responsible for sanctions-related economic duress, nor did they seek rapprochement with the West as a way out. The US continues to flog the narrative that Iranians elected President Hassan Rouhani in a bid to "moderate" foreign policy stances, but a survey conducted by US pollster Zogby Research Services in the immediate aftermath of Rouhani's election turns that premise on its head:

Ninety-six percent of Iranians surveyed agreed with the statement that "maintaining the right to advance a nuclear program is worth the price being paid in economic sanctions and international isolation." Of those polled, a mere five percent of Iranians felt that improved relations with the US and the West were their top priority.

No, sanctions have not worked in any of the ways they were intended.
So if the Iranians were not 'dragged' to the negotiating table, then what was the sudden incentive behind a multilateral effort to forge a deal in 2015 - 36 years after the first US non-nuclear sanctions were levied against the Islamic Republic, and nine years after the UN Security Council first issued nuclear-related sanctions?

Keep in mind that both the Iranians and the permanent members of the UNSC have offered up proposals to end the nuclear deadlock since 2003. So why, this deal, now?

Could it be that the Americans had simply blinked first?

And the world turned

It must be understood that much of this nuclear brouhaha has nothing to do with Iran actually possessing or aspiring to possess nuclear weapons. The Islamic Republic neither has nuclear weapons, nor does it profess to want them.
US intelligence agencies, over the years, have conceded that Iran has not even made the "decision" to pursue weaponization, and the IAEA has repeatedly stated in 52 periodic assessment reports that there has been "no diversion"of nuclear materials to a weapons program.

In short, all the fuss has really only ever been about containing, isolating and taming a developing nation with aspirations that challenge Empire's hegemony.
Iran was never going to be able to change the rules of the game single-handedly. That is, until the game itself shifted hands and direction.

In 2012, cracks in the global economic and political power structures started to shift dramatically. We started to see the emergence of the BRICS, in particular Russia and China, as influential movers of global events. Whether it was a shift in trading currencies from the conventional dollar/euro to the rupee/yuan/ruble, or the emergence of new global economic/defense institutions initiated by BRICS member states, the world's middle powers began to assert themselves and project power on the international stage.

But it was in the vast and complicated Middle East arena that old power and new power came to clash most ferociously.

In November 2011, the year of the Arab uprisings, the BRICS announced their first collective foreign policy statement, urging the rejection of foreign intervention in Syria's internal affairs.

By 2012, it started becoming clear that the crisis in Syria was being heavily fomented by external players, including the three UNSC Western permanent members, the US, UK and France and their regional allies, Saudi Arabia, Qatar and NATO-member Turkey.

In 2012, it also became clear that Al-Qaeda and other militant Islamist fighters were dominating the opposition inside the Syrian military theater and that these elements were being backed by the United States and its allies.

The American calculus, at this point, was to allow and even encourage the proliferation of fighters prepared to unseat the government of Syrian President Bashar Assad, anticipating that at some future date they could then reverse the gains of radicals.

Assad did not fall, but extremism – fueled by funding, arming and training from US allies – entrenched itself further in Syria.

This did not go unnoticed in Washington, which has always struggled to make a coherent case for its Syria strategies. The rise of ISIS (IS, formerly ISIS/ISIL) and the flood of jihadists into the Syrian theater began to change the American calculations. The US began to work on hedging its bets…and that is when Iran began to factor significantly in America's Plan B.

That Plan B began in mid-2012, just as Saudi Arabia's incoming intelligence chief Bandar bin Sultan was preparing for a violent escalation in Syria, one that would exacerbate the Islamist militancy in the Levant exponentially.

That July, secret backchannel talks between the United States and Iran were established in Oman, kicked off, according to the Wall Street Journal, by "a pattern of inducements offered by Washington to coax Tehran to the table."

Take note that the Americans initiated this process, not the allegedly "sanctions-fatigued" Iranians, and that this outreach began when Iranian President Mahmoud Ahmadinejad was at the helm, not his successor Rouhani.

Iran – or bust

Iran's elite Quds Force Commander Qassem Soleimani said a few months ago: "Today, there is nobody in confrontation with [IS] except the Islamic Republic of Iran, as well as nations who are next to Iran or supported by Iran."

If you look at the array of ground forces amassed against Islamist radicals from Lebanon to Iraq, they consist almost entirely of elements allied with the Islamic Republic, or are recipients of weapons and sometimes training provided by the Iranians.

There are no combat forces from Western states and none from their Arab or Turkish allies within the region.

'Boots on the ground' are essential in asymmetrical warfare, but the US military will continue to oppose inserting its troops into direct combat situations in Syria and Iraq.

In a Telegraph op-ed on the eve of the Vienna nuclear agreement, Britain's influential former ambassador to Washington Christopher Meyer wrote:

"Whether we like it or not, we are in de facto alliance against ISIL with Assad of Syria and with Iran, the implacable foe of our long-standing ally, Sunni Saudi Arabia…. if ISIL is able to expand further in the Middle East, won't this unavoidably lead to the conclusion that our strategic ally in the region for the 21st century must be Iran?"
This is the conundrum Washington began facing in 2012. And so it set in motion a face-saving strategy to enable itself to "deal" with Iran directly.

The Vienna Agreement

Here's what the Iran nuclear deal does – besides the obvious: it takes the old American-Iranian "baggage" off the table for the US administration, allowing it the freedom to pursue more pressing shared political objectives with Iran.

The Iranians understood full well in Vienna that they were operating from a strong regional position and that the US needed this deal more urgently. The Americans tried several times to get Iran to expand discussions to address regional issues on a parallel track, but the Iranians refused point-blank. They were not prepared to allow the US to gain any leverage in various regional battlefields in order to weaken Iran's position within broader talks.

Although the Iranians are careful to point out that the Vienna agreement is only as good as the "intentions" of their partners, this deal is essentially a satisfactory one for Tehran. It ensures rigorous verification that Iran is not pursuing a nuclear weapons program, which is great for a country that doesn't seek one.
It also provides Iran with protections against 'over-inspection' and baseless accusations, dismisses all UNSC resolutions against the Islamic Republic, recognizes the country's enrichment program, provides extensive international sanctions relief, binds all UN member-states to this agreement (yes, Israel too) and nails down an end-date for this whole nuclear saga.

The deal also frees up Iran to pursue its regional plans with less inhibitions.
"What the president (Obama) and his aides do not talk about these days - for fear of further antagonizing lawmakers on Capitol Hill who have cast Iran as the ultimate enemy of the United States - are their grander ambitions for a deal they hope could open up relations with Tehran and be part of a transformation in the Middle East," reads a post-Vienna article in the New York Times.

US Secretary of State John Kerry, commenting after the deal, said: "I know that a Middle East that is on fire is going to be more manageable with this deal and opens more potential for us to be able to deal with those fires, whether it is Houthi in Yemen or ISIL in Syria and Iraq than no deal and the potential of another confrontation with Iran at the same time."

"The Iran agreement is a disaster for ISIS," blares the headline from a post-agreement op-ed by EU foreign affairs chief Frederica Mogherini. She explains:

"ISIS is spreading its vicious and apocalyptic ideology in the Middle East and beyond…An alliance of civilizations can be our most powerful weapon in the fight against terror…We need to restart political processes to end wars. We need to get all regional powers back to the negotiating table and stop the carnage. Cooperation between Iran, its neighbors and the whole international community could open unprecedented possibilities of peace for the region, starting from Syria, Yemen and Iraq."
Clearly, for Western leaders Iran is an essential component in any fight against ISIS and other like-minded terror groups. Just as clearly, they have realized that excluding Iran from the resolution of various regional conflicts is a non-starter.
That is some significant back-tracking from earlier Western positions explicitly excluding Iran from a seat at the table on Mideast matters.

And stay tuned for further policy revisions - once this train gets underway, it will indeed be "transformative."

As for the Iran nuclear deal…except for some hotheads in Congress and the US media, most of the rest of the world has already moved on. As chief US negotiator and undersecretary for political affairs, Wendy Sherman said recently: "If we walk away, quite frankly we walk away alone."

The balance of power has shifted decisively in the Middle East. Washington wants out of the mess it helped create, and it can't exit the region without Iran's help. The agreement in Vienna was reached to facilitate this possibility. Iran is not inclined to reward the US for bad behavior, but will also likely not resist efforts to broker regional political settlements that make sense.

It was not a weak Iran that came to the final negotiations in Vienna and it was not a crippled Iran that left that table.

As New York Times columnist Thomas Friedman (for once) aptly observed:

"It is stunning to me how well the Iranians, sitting alone on their side of the table, have played a weak hand against the United States, Russia, China, France, Germany and Britain on their side of the table. When the time comes, I'm hiring (Iran's Supreme Leader) Ali Khamenei to sell my house."
Iran just exited UNSC Chapter 7 sanctions via diplomacy rather than war, and it's now focusing its skill-sets on unwinding conflict in the Middle East. If you're planning to challenge Empire anytime soon, make sure to get a copy of Iran's playbook. Nobody plays the long game better - and with more patience.

Reprinted with permission from RT.

[Aug 10, 2015]The U.S. Is Destroying Europe

zerohedge.com

There are two ways to win, at any game: One is by improving one's own performance. The other is by weakening the performances by all of one's competitors. The United States is now relying almost entirely upon the latter type of strategy.

[Aug 09, 2015] US pledges $68mn NATO investment into Estonian military

marknesop, August 8, 2015 at 9:28 am
Loathing for Russians is cultivated and encouraged in Estonia by western governments and media; disparaging remarks about Russians are given wide and approving coverage, and if there are any of a more reasonable tone they are unreported. The same throughout the Baltics, really. For some reason, Washington regards them as a highly-important strategic area, probably because it is the most likely trigger for a NATO Article-5 intervention. But, as usual, they only do half the planning, and it is all on the military side. Let's build lots of bases and seed the ground with lots of stored military equipment to fight the Russian bear – but let's do fuck-all to stimulate the economy or compensate the region for loss of a major trading partner. Note the two headlines in the sidebar; "EPP: EU Should Tell Russia, We Are Ready to go to War", and "Latvian PM: If Russia Attacks NATO, the Treaty Will be Enforced". Reorientation of trade flows in the region will further hurt the economies of the Baltics, as well as Black Sea ports.

The effect, then, of Washington's endless meddling in the region will lead to a further and increasing exodus from the region of its population, fed up with the constant scare tactics coupled with economic contraction or stagnation caused by political maneuvering. And you know what? Washington doesn't care. It is gambling everything on being able to grow a regional war and bring Russia to battle while there is still a chance there might be something to save for American trade later.

[Aug 08, 2015]In order to be an imperialist power, the country should have a very powerful financial sector

spartacus, August 6, 2015 at 2:15 am
" I suspect that the simple scale of the dollar value of trading of financial claims on things – trading in which London and New York are dominant – contributes more to the maintenance of the dollar reserve system than you are proposing."

I think so too. One of the necessary conditions for a country to be imperialistic is for it to have ample amounts of financial capital at its disposal. Because I have red commie tendencies, I will point out that Hilferding and Lenin wrote extensively on this subject and even if their works are now outdated, they still give interesting insights on how financial capital is crucial for a country with imperialist tendencies. If anybody is interested Lenin's writings on imperialism, they are available here:

https://www.marxists.org/archive/lenin/works/1916/imp-hsc/

This is the reason I find it funny when people speak of "Russian imperialism". In order to be an imperialist power, Russia should, at least, have a very powerful financial sector. And it does not, at least not one that can be compared to the magnitude of the US financial sector. When you look at the list of world's biggest banks, you can see that Russian banks are actually pretty small when compared to their US counterparts.

http://blogs.marketwatch.com/thetell/2014/01/31/the-100-biggest-banks-in-the-world/

[Aug 08, 2015] U.S. As Corrupt As Russia, Says Former NSA Exec By: Vikas Shukla

August 06, 2015 | valuewalk.com

In: Politics, Russia 41 Comments

Americans believe that Russia is a corrupt country where everyone from the president to regional governors to government officials are flourishing on bribes. Russia has developed corruption into a "fine art," says a book titled "Putin's Kleptocracy: Who Owns Russia?" written by the University of Miami professor Karen Dawisha.

U.S. fares far better than Russia on Corruption Perceptions Index

In the absence of an efficient federal system, regional governors in Russia rule like mobsters. Moscow is also allegedly involved in the massive FIFA scandal. Americans and Europeans believe corruption in Russia is so widespread that when they imposed sanctions against Moscow following the annexation of Crimea, they also targeted "friends of Vladimir Putin" and rich oligarchs.

John McCain has said in the past that Vladimir Putin rules by "corruption, repression, and violence." If you take a look at the Corruption Perceptions Index, the United States in ranked 17th while Russia comes at a distant 136th spot. Does that really mean the U.S. is far less corrupt than Russia? Probably not, says Jerome Israel, a former senior executive at NSA and the FBI.

Jerome said in a column published in The Baltimore Sun that the legislation and behavior of the U.S. political class would open your eyes that the claims against Russia are hypocritical. For instance, last year's Cromnibus bill allows banks to undertake extremely risky investments. And if the banks suffer a huge loss, the American taxpayer gets the bill. Jerome says Congress has sold out the little guy to favor the K-Street lobbyists.

Contrary to Russia, U.S. specializes in 'soft bribes'

Another example is the trade pact currently under consideration by Congress. Details of the legislation are classified, and Americans don't know what's in it. Even a large number of lawmakers in Congress haven't read it. This is Soviet-style of lawmaking, says Jerome Israel.

Recently, CNN reported that at least 78 members of Congress have their family members as federally registered lobbyists. According to congressional watchdog Legistrom, these lobbyists have lobbied contracts worth over $2 billion. While corruption and bribery are prevalent in Russia, the U.S. specializes in "soft bribes." It's like you take care of the lawmakers' families and they will take good care of you. These "pay-to-play" schemes make it hard to understand how American politicians are better than their Russian counterparts.

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[Aug 07, 2015] Billmon The Eurosystems (Monetary) Control of Europes Politics

"..."The oligarchs have built a stable base on ignorant TV watching rubes, that base has to be shocked out of it's complacency. The fourth estate is their key instrument of power.""
Jul 16, 2015 | M of A

Note: This post was composed from a Twitteressay by Billmon.

J.W. Mason lists some Lessons from the Greek Crisis:

Before the crisis no one even knew that national central banks still existed - I certainly didn't. But now it's clear that the creditors' unchallenged control of this commanding high ground was decisive to the outcome in Greece. Next time an elected government challenges the EU authorities, their first order of business must be getting control or cooperation of their national central bank.

The quote says "control or cooperation," but I can guarantee the latter is never going to happen.

It is nearly impossible to exaggerate the degree to which the campaign for central bank "independence" has made them the enemies within for any left governments.

The central bankers waged a 50-60 year political war to wrest back the monetary flexibility that the break down of Bretton Woods gave to national governments. Having won that war across most of the developed world in the 70s and 80s, they extended the battlefield to the emerging markets in '90s and '00s.

The autonomy of central banks (meaning the political allegiance to Wall Street/London City/Frankfurt etc.) was maybe the biggest neoliberal victory of all. If rightwing political victories (Reagan, Thatcher et. al.) were the beachheads of the Great Counterattack on social democracy then "independent" central banks became the citadels of the occupation forces: Neoliberalism's "Republican Guard."

Ironically, the ECB was originally conceived - or at least was sold to the European left - as a way for governments to regain monetary flexibility at a higher level. As a way to a) escape US dollar hegemony and to b) outflank the Bundesbank by formalizing the joint political control of European monetary policy. I do not know if the hack establishment Social Democrats who sold that vision ever believed it, but if so, more fool them. Because what the European Monetary Union became, obvious now, was a way to turn the vision on its head: formalize joint MONETARY control of Europe's politics.

The "Eurosystem", the network of national central banks governed by the European Central Bank, gives central bankers unprecedented ability to squeeze and manipulate national governments in a coordinated way. It is as if every government in the Eurozone ALREADY has a colonial entity watching it like the Troika's agents are supposed to watch Syriza in Athens. And, since the ECB Governing Council (like other EU institutions) tries to operate by a non-transparent "consensus" (i.e. the votes are not revealed), the degree to which national central bank heads are representing the ECB in their countries, rather than the other way around, is often not clear.

As long as the cozy comprador system tied peripheral governments to the core (i.e. Berlin), the role of the ECB and the Eurosystem could be obscured. Peripheral governments appointed "made guys" (i.e. banksters and/or their technicians) to national central bank boards and pretended to govern. Core politicians and their local comprador politicians let the Eurosystem technicians in Frankfurt tell them what "structural reforms" they should push to make the EMU "work."

But the moment an outsider government like Syriza came to power, the role of the Eurosystem and the national central banks in it could no longer be hidden. The fact that the Greek National Bank was an instrument of the ECB in Frankfurt, not of the Greek government in Athens, became obvious to everybody. The ECB's role as the muscle behind the Eurogroup's (Berlin's) diktats put the Greek National Bank in the position of helping to choke its own banks and terrorize its own citizens. And under the rules of EMU the Greek government was completely powerless to do anything about it. A defining moment.

The inescapable conclusion is that the allegedly "independent" Eurosystem now operates not as a network of central banks but as a parallel government.

The role of the Eurosystem within the half-hidden political order of the eurozone really is comparable to the Soviet or Chinese Communist Party. Like the Communist Party, the Eurosystem is now the "leading organ" of the neoliberal order, operating at all levels of the EU structure and providing "guidance" to elected political structures which are not formally under its legal control, but in reality are dominated by it. And behind the administrative apparatus of the party (Eurosystem) is the Central Committee (Eurogroup) and the Politburo (the key creditor government officials). And behind THEM is the real locus of the party's centralized power: the General Secretary (Germany/Merkel).

So J.W. Mason is quite right: it is impossible for any left government to attack the dictatorship of finance unless it controls its national central bank. But while control of the national central bank is necessary, it is hardly sufficient. As long as the EMU exit is off the table, verboten, so to speak, control of the national central banks only eliminates the "near enemy."

Ultimately it comes down to political will, which in parliamentary democracies, comes down to public support. As long as the majority (of all voters or of propertied influentials, depending on the system) is more loyal to the Euro than to national sovereignty an effective challenge to the dictatorship of finance is impossible - no matter how many national central banks the left controls. nmb | Jul 16, 2015 7:20:43 AM | 1

Greece capitulates with the euro-dictatorship ... until the next battle

jfl | Jul 16, 2015 7:33:14 AM | 2

You know this 'independent' central bank as tool of the neolibraconian consensus is the most salient point drummed home about Russia : the central bank as 5th column.

And the Russian central bank preceded the ECB, didn't it? When the boys from Harvard went to Russia to 'straighten' things out they conducted an experiment ... and discovered it worked just great : rinse and repeat. Russia was the archetype of the gelded European nation to come.

So the next time says Russia is not a part of Europe I'll say ... not only of Europe, but the first European nation subverted by the gnomes of neolibraconia.

The Europeans who still have a pulse ought to note now just who their real enemy is : hint, the one that's occupying Europe. And who is their fellow European victim. And ban together to defeat their common enemy ... well run him out of town on a rail, at any rate.

Certainly rearrange their banking arrangements.

dana | Jul 16, 2015 9:09:23 AM | 8

Good post by Billmon and very interesting link posted by nmb, above.

For anyone who may have missed it, Andrew Gavin Marshall published an in-depth, well researched article, July 7, which paints a broad and ominous picture of where the EU is headed.

Between Berlin and a Hard Place: Greece and the German Strategy to Dominate Europe

Excerpt on centralization of monetary control:

"The European Commission is the third pillar of the Troika based in Brussels, functioning as the executive branch of the European Union overseeing a vast bureaucracy of unelected officials with responsibility for managing the union[…].

"Brussels was to be given the centralized power to approve and reject national budgets of eurozone nations, establishing a technocrat-run 'fiscal union' to match the ECB's role in managing the monetary union. EU institutions would have "more powers to serve like a finance ministry" for all the nations of the eurozone, potentially with its own finance minister, "who would have a veto against national budgets and would have to approve levels of new borrowing," said Mr. Schauble, the German Finance Minister".

Note: Technocrat-run EU institutions which would have the power to control national budgets of EU member states.

How about that? Anyway, Marshall's article is packed with information and is well worth reading in full.

ben | Jul 16, 2015 12:03:25 PM | 15

@ 13: "The oligarchs have built a stable base on ignorant TV watching rubes, that base has to be shocked out of it's complacency. The fourth estate is their key instrument of power."

Absolutely true, but, don't hold your breath waiting for a change.

james | Jul 16, 2015 12:08:33 PM | 16

b - thanks.. interesting post in that you seem to be venturing into trying to formulate a concept of how critical the financial system as it is presently defined impacts countries specifically within the euro.. as jfl points out - the recent dynamics in russia are another case in point.. brics is another fairly recent development which is in direct competition with the system in place that most people are in the dark about... well, when i mention the imf, world bank, special drawing rights, bank of international settlements - some of those institutions folks have heard of, but generally don't know much of anything about..

take a look at voting power in the imf membership at the bottom of this page.
then take a look at the basket of key international currencies used at present by the imf to define special drawing rights..

the other doozy is oil priced in us$...

i call it a financial ponzi scheme.. if you want to leave the mafia, or want to think you can work outside the mafia, you better be very prepared for the financial mafia coming after you... the coincidence of the patterns of destruction of countries in the past 15 years, beginning with iraq, and moving onto libya, syria, russia and moving on towards greece - all fit a pattern here and it has much to do with finances.. i wish more people were up on how finances drives many of these military agendas and how countries either work with the mafia, or they set themselves up for a lot of suffering attempting to break free of the same.. that's how i see the planet being run financially..

Hoarsewhisperer | Jul 16, 2015 12:42:22 PM | 17

I'm not convinced that the situation is as bleak as is being suggested.

The term 'left' (imo) is a derogatory epithet coined by Abusive, Ignorant Right Wing Cranks to describe people whom Right Wing Cranks dare not debate in public.
It's all about minimising exposure of their Abusive Ignorant Crankiness.
Hence all the behind-closed-doors negotiations and oaths of silence and confidentiality.

NATO, and now the European Commission, are fraudulently undemocratic 21st Century versions of the Star Chamber and modern people should have as little respect and tolerance for any Star Chamber as their forebears found the good sense to adopt and execute several centuries ago.

No-one should ever feel obliged to tolerate the intolerable.

Jackrabbit | Jul 16, 2015 12:52:58 PM | 18

IMO these 'lessons' miss the biggest one for the left: the loss of independent media. What good is protesting neolib control via banks if no one is listening?

Governments easily manipulate corporate controlled media via access journalism. Thus we get factual truths intermixed with propaganda spin that is relentlessly pro-business, pro-establishment.

Greece is a case in point. As described in Greek Government Insider Lifts the Lid on Five Months of 'Humiliation' and 'Blackmail', the Troika was gradually increasing pressure on Greece to do what the Troika demanded. They withheld billions of euro to Greece and cut off liquidity to the Greek government. Then they waited as the financial pressure on Greece grew. But along with those measures was a caustic media that painted Syriza as incompetent, then undemocratic (because most greeks wanted to remain in the euro), then irresponsible (for calling a referendum), etc.

Too often we give the media a pass when it has been well documented that business and government tries to control MSM (and increasingly other media as well) via access journalism, advertising revenue (a few industries dominate) writing stories that cite in-the-tank 'experts' from establishment-friendly think-tanks and controlled opposition.

Even within Greece, Syriza had trouble getting their message out because oligarchs own virtually all of the media! And many blogs also fell for the spin - even those that have been critical of the media in the past like Yves Smith at nakedcapitalism.com - despite the fact that the delay in Greece putting forth a proposal before the April 30th deadline could be logically attributed to the 2-step process that the Troika had forced (describing how they would service the debt would severely undermine Greece's position in future debt restructuring talks).

A Left that is not in touch with the people - and whose message is undermined by establishment-friendly media - is a disaster far greater than the loss of control of the financial system. The Left's greatest strength should be its connection with the people that it fights for. Yet, instead the Left has allowed itself to be marginalized by a corporate media that has strengthened the centrist 'faux Left' at the expense of the progressive Left. So much so that many people today identify THE LEFT with the identity politics that forms 'the base' for the fauxLeft. In short, people of the 'Left' are viewed as selfishly wanting something for themselves at the expense of others. (It should come as no surprise that reporting about Greece often fell in line with this line of thinking.)

For activists that are outside the centrist political establishment - anti-war, climate change, the environment (fracking, nuclear energy, etc.), inequality, constitutional and civil rights, etc. - it is very difficult to reach a wide audience. All 'change' is channeled into the pro-business, pro-establishment centrist political system. Anyone who is not a centrist is suspect.

Greece's coherent arguments quickly fell off media radar as sniping about their incompetence and their oh-so-strange Finance Minister took center stage. This put even more pressure on the Greeks and deterred potential allies. And the spinning continues. The understanding of most people still does not go much beyond this: the Greeks don't want to pay their bills and Syriza are incompetent radicals that made the problems worse and can't be trusted. In the face of this onslaught by the Troika and Troika-friendly media, Syriza's resistance is all but ignored in favor of trumpeting Greece's defeat (a warning to others?).

=

Is there any hope? Maybe.

1) Syriza formed a government with nationalists (ANEL). Why the Left is depicted as unpatriotic is beyond me, but the left may be getting its patriotic mojo back as WAR and trade deals are increasingly understood as benefiting an international elite. I could see similar political alliances forming in other countries. (In the US, I think the establishment had feared a potential Tea Party - Occupy alliance.)

2) Media reform (or the threat of it). The Greek government has begun investigations into media bias during the referendum (there was very little coverage of government rallies and government positions, etc.). If the Syriza-led government falls, any media reforms are probably less likely.

Ron Paul's "audit the Fed" movement got some traction which caused the Fed to take notice. "Truth in media" efforts should probably be re-doubled.

3) Education. We need to retain humanities education. Higher education is turning into vocational training. For example, IMO it's difficult to appreciate the myriad issues and import of the neolib consumer-oriented approach to government vs. the democratic citizen-oriented approach, without a humanities education.

Also, people don't usually react until it is too late - partly because few have enough learning to understand the impact that new policies will have. They try to make up for their lack of understanding by relying on trusted representatives like Obama. TTIP is a case in point. Look for demonstrations about Obamatrade in a few years when it is too late.

dana | Jul 16, 2015 1:25:52 PM | 19

Following, a link to a German documentary about the various mechanisms of the EU [Troika, Eurogroup, European Commission, Council, etc] which are being used as devastating tools to beat down and extract wealth, vampire style, from Greece [and Cyprus], in order to revive comatose banks and line the pockets of investors, through privatization of public property.

This documentary does a good job of demonstrating just how the power of technocratic branches of the EU is being rolled out to pillage Greek, Portuguese, Cyprus economies, plunging the respective populations into ever greater misery.

The Trail of the Troika [1:29:22]

psychohistorian | Jul 16, 2015 1:34:37 PM | 20

@ 15

james, If you read the Shock Doctrine by Naomi Kline you can follow the same financial rape of South American countries in the 70's that the financial mafia are doing now to the middle east.

The world needs to have a discussion about the world of private finance that exists now and what could be if all finance were sovereign.

psychohistorian | Jul 16, 2015 1:42:55 PM | 21

Let me add to the discussion my repeating postulate that if inheritance and ongoing private ownership of property are effectively neutered, the whole tenor of our social organization stops being Gawd of Mammon focused, kills the existing power bases and allows humanistic leadership to emerge instead of the puppet psychopaths of the global plutocrats we have currently.

guest77 | Jul 17, 2015 12:52:57 AM | 37

I haven't read this all, but looks very applicable to our times...

The network of global corporate control - https://archive.org/details/TheNetworkOfGlobalControl

Stefania Vitali, James B. Glattfelder, and Stefano Battiston

Abstract
The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions.

This core can be seen as an economic "super-entity" that raises new important issues both for researchers and policy makers.

MRW | Jul 17, 2015 2:05:22 AM | 40

The role of the Eurosystem within the half-hidden political order of the eurozone really is comparable to the Soviet or Chinese Communist Party.

No, it's not. Billmon doesn't understand the structure. He's not seeing it clearly, and is not getting to the root of the problem.

The individual EU countries that use the Euro cannot create their own currency. They GAVE UP their sovereign currency for a foreign one, the euro, when they agreed to make themselves subservient to the Maastricht Treaty.

The Maastricht Treaty did/does not allow for a 'federal government of Europe'. It ONLY concerned itself with a monetary union, and it set down strict rules for entry (for instance, a nation's deficits could be no more than 3%--an insanity). It allowed for the creation of a central bank, the European Central Bank (ECB), whose operating rules were dictated by the Maastricht Treaty (and subsequent revisions).

But crucial to understand is this: a central bank CAN ONLY SET MONETARY POLICY. You need a 'federal government' to SET FISCAL POLICY. The EU doesn't have that. Sure, it has the EU parliament, and it has a bunch of unelected officials running the ECB. But it has no overlord, no elected oversight, that can rule in conditions like Greece is going through to ease sectoral pain, and stop the bleeding of ordinary citizens. That requires fiscal policy. The only way that fiscal policy can be changed in the EU is by a change to the treaties. Or the blessing of Angela Merkel, because Germany has captured the ECB.

Let me try to put this in perspective. The US has a federal government AND a central bank. Despite what all the Federal Reserve haters and the 'get rid of the IRS' people claim (inaccurately), the US central bank is a creature of Congress and must answer, by law, to the federal government twice a year. It is the US Treasury's banker, and must, again by law, return all profits each year to the US Treasury.

The US federal government creates fiscal policy. This is the direction for the country that the central must follow and support trhough monetary polices. Fiscal policy is Congress' job although they haven't done it properly for 30 years. For example, if one of the 50 states is in trouble-let's be hyperbolic: devastating earthquake, massive drought, asteroid hits--Congress can authorize ("appropriate") funds--creating them 'out of thin air'-to help the state. With no debt to children or grandchildren.

Why? Because the US federal government issues the currency, the 50 states only use them. The 50 states cannot create their own currency, just like the countries that use the euro. But the 50 states have the protection of the US federal government.

The formerly sovereign countries in the EU that use the Euro are like the 50 US states now. They cannot create their own currency, which would give them the policy space to pay their own citizens and denominate all the debts incurred in their own currency. They are dependent on the ECB, a goddam central bank that has no fiscal authority, to help them. EVEN THOUGH, in Europe, the ECB issues the Euro 'out of thin air'. The ECB is a collection of central banks. And right now Germany's central bank is dominant because it has climbed to the top-Germany was deeply in debt before the euro took over-on the backs of the other nations.

You will not begin to understand what is going on until you realize that the euro was designed by the famous French economist, François Perroux, in 1942 in anticipation of Hitler winning WWII, which was expected then. The plan was that they (the Nazi Pétain government wanted to be aligned with the German hegemon) would introduce a pan-Eurpoean currency and force adoption by the southern and eastern European countries to control and impoverish them. Mitterand, aligned with the Nazi/fascist Cagoulard in the late 1930 and 40s, was a Pétain enthusiast; this only came out in 1990. It was Mitterand who pushed through the euro, if you will check history. Perroux's monetary replacement was the blueprint for the Maastricht Treaty and the subsequent treaties.

Posted by: rufus magister | Jul 18, 2015 12:18:48 PM | 78
Jackrabbit at 38, juliania at 66, jfl & fairleft >67

Like many, I've been waiting for the longest running drama on the Athens stage to finally get to the last act before attempting to make sense of the staging, plot and characters.

I still don't think we're quite there yet; probably a little more political fall-out still, but not much, see e.g., a majority of the Syriza Central Committee opposed the austerity deal.

The question of the political leadership of the left, however, is always an interesting topic. Also from the 17 July "Links" page at - dare I mention the name? - Naked Capitalism, John Pilger at Alternet argues thatThe Leaders of Greece Are Some of the Phoniest Idealists You'll Ever See. It seems hard to disagree.

Having set aside the mandate of the Greek electorate, the Syriza government has willfully ignored last week's landslide "No" vote and secretly agreed a raft of repressive, impoverishing measures....

The leaders of Syriza are revolutionaries of a kind – but their revolution is the perverse, familiar appropriation of social democratic and parliamentary movements by liberals groomed to comply with neo-liberal drivel and a social engineering whose authentic face is that of Wolfgang Schauble, Germany's finance minister, an imperial thug. Like the Labour Party in Britain and its equivalents among former social democratic parties such as the Labor Party in Australia, still describing themselves as "liberal" or even "left", Syriza is the product of an affluent, highly privileged, educated middle class, "schooled in postmodernism", as Alex Lantier wrote. [I could not immediately find whatever Pilger is quoting, he is affiliated with the "wsws" website; such sad sloppiness at a major site in these days of html coding...]

For them, class is the unmentionable, let alone an enduring struggle, regardless of the reality of the lives of most human beings. Syriza's luminaries are well-groomed; they lead not the resistance that ordinary people crave, as the Greek electorate has so bravely demonstrated, but "better terms" of a venal status quo that corrals and punishes the poor. When merged with "identity politics" and its insidious distractions, the consequence is not resistance, but subservience. "Mainstream" political life in Britain exemplifies this.

This is not inevitable, a done deal, if we wake up from the long, postmodern coma and reject the myths and deceptions of those who claim to represent us, and fight.

How then do democratic movements ensure that their leaders views and priorities accord with their own, and can be held responsible and be replaced? What sort of leadership is needed for industrial as well as political democracy?

Posted by: rufus magister | Jul 18, 2015 12:09:41 PM | 77 ps to 77 -- Amongst the parties affected by the Munich Agreement, I think Edvard Beneš, the Czechoslovakian President, is a better fit for poor Tsipras.

Posted by: MRW | Jul 18, 2015 7:29:54 PM | 85

paulmeli at @63 has got it exactly right. In all modern economies on a fiat currency, loans create deposits.

Bankers, as a result, create 'credit money', NOT new interest-free money. (Credit money also means that one person's asset is another person's liability. At the commercial banking level within the real economy that includes collateral, timed repayment schedule, and interest owed, which is income to the issuing bank. Everything nets to zero at this level across the macroeconomy.)

The US federal government, on the other hand, adds new money into the economy. Only entity that can. Only the US federal government can introduce new, interest-free money into the economy, and it does it via congressional spending based on the needs of its citizens, and where it wants the economy to grow (giving 40% of it to the financial institutions is NOT GROWTH). Which the mo-fos we've elected do not understand.

One small quibble, Paul. The amount of physical currency, physical cash and coin, is around 11.5% to12% of the available money. The rest are treasury securities. Don't forget that countries like Ecuador are pegged to the USD and need US cash for their citizens. Ecuador's central bank orders them from the US Treasury (Bureau of Printing and Engraving) and puts up 100% of the demanded amount in assets (treasury securities) to pay for them.

Posted by: MRW | Jul 18, 2015 7:29:54 PM | 85 Tom @61

Sorry for the delay. I'm traveling. Good questions, btw.

First, let's clear up what fractional reserve banking is. This is a lousy simplistic example, but it will work. And let's imagine a small western town with one bank, which I will call Bank Buckeroo. Introducing a second bank in the town mean I would have to explain how interbank reserves work, and it doesn't matter in this explanation. [BTW, US banks DO NOT LEND their reserves; reserves serve another purpose in the US banking system; namely to help the Federal Reserve retain the overnight interest rate target that banks charge each other. Canada, for example, doesn't even have a reserve requirement for their commercial banks.]

Fractional reserve banking explained

OK. Johnny Schwartzburger sidles into his Bank Buckeroo and deposits 100 bucks in cash in his savings account.

Now Bank Buckeroo has got $100 more than it had yesterday.

Because the reserve requirement is, say, 10%-the FRACTION of the loan that the bank must retain under "fractional reserve banking"--Bank Buckeroo holds onto $10 and can loan out $90.

Sally Sweetpea needs $90 for her beauty shop and she borrows $90 from Bank Buckeroo, and deposits that in her checking account.

Now Bank Buckeroo holds onto $9 (10% of $90) and can loan out $81.

Old Ray Saddleback needs $81 to buy supplies for the only café in town, so he hits up Bank Buckeroo for an $81 loan.

Bank Buckeroo holds onto $8.10 (10% of $81) and can loan out $72.90.

Paddy O'Gilligan needs $72.90 to top off his supply of whiskey at the only bar in town (and this banker likes his whiskey), so he borrows $72.90 from Bank Buckeroo.

Bank Buckeroo holds onto $7.29 (10% of $72.90) and can loan out $65.61

You see where I'm going with this. Eventually, Bank Buckeroo will have reserved all $100, but will have extended credit against that $100 to customers that he knows are good to pay back their loans. Under the gold standard system before 1933, each dollar had a statement on it that you could exchange 20 of the one-dollar bills for one ounce of gold (not exactly the statement but that's what it meant). It was a "fixed exchange rate." The value of a dollar (US) was fixed to the value of gold. So Bank Buckeroo has Johnny Schwartzburger's original $100 in cash that guarantees it can trade-in the cash for $100 in gold anytime it wants. It's protected against that loss. The only thing the banker has to worry about is whether his customers can pay back the new loans, and he knows their creditworthiness intimately.

That all changed in 1933-no more gold standard in the US

We went off the gold standard. The value of the USD was no longer pegged to the value of gold, the supply of which the US federal government could not control globally except for certain US mines. Each new goldmine find globally affected the value of the dollar before 1913 and led to extraordinary panics and busts in the last half of the 1800s. More gold available meant the value of the dollar dropped, and that affected international trade, and whether people exchanged their dollars for gold stateside and hoarded it, further diminishing the