Thread Rating:
  • 3 Vote(s) - 2 Average
  • 1
  • 2
  • 3
  • 4
  • 5
John Hoefle

Globalization is genocide. What else would you call a policy whereby trillions of dollars are spent to bail out the banking system, trillions of dollars are spent on war, and people are deliberately starved by a combination of financial policy and food cartel machinations? It is a decidedly anti-human policy, intended to restore what the London-centered international financial oligarchy sees as the natural order of things: itself on top, and everyone else expendable.

Globalization is a policy explicitly designed to destroy the nation-state. The globalizers claim that the nation-state is archaic, that it has failed, and must be replaced with a more ``modern'' form of world management--but that is a lie. The nation-state, and specifically the form of republic established by the Declaration of Independence and U.S. Constitution, is the highest form of political organization ever designed by man, one specifically designed to promote the General Welfare of all citizens.

The great irony is that what the ``modernizers'' are pushing is actually a far older, repressive system designed to protect the elite and keep the peasants in line. Were we to do what these modernizers propose, we would set the world back more than 250 years, to the days when the British Empire ruled, and the United States was a gleam in Ben Franklin's eye.

- The Nation-State -

How do you build a nation-state? You build cities with all the necessary infrastructure: power, water, sewage facilities, housing, transportation systems, schools, hospitals, libraries, cultural facilities--all the things you need to make the population productive. You create industry to produce goods and employ the people. You have agriculture in the surrounding areas to feed the cities. You build up its transportation systems so people can get around, and move goods efficiently. You build the transportation and communications grids necessary to move people and goods between cities. And above all, you have an educational system in which students can re-experience the great scientific and philosophical breakthroughs from the past, so that they may make the new breakthroughs required for the future.

The greatest asset any society has is the power of reason of individual human minds, for it is from those minds that the scientific and technological discoveries are made which increase the productive power of human labor. Societies which nurture this process succeed, and societies which do not, fail. A nation-state organized around these concepts is the most powerful, and most modern, form of political structure possible.

Look at globalization from this standpoint. One of the primary tenets of globalization is to move production to the areas where labor is cheapest. This is presented as a benefit, when in fact it is a highly destructive race to the bottom. Paying people fair prices for their labor is an essential component of a stable society. Families must have sufficient income to cover their basic expenses (with extra to put away as savings), and the time and money to pursue intellectual and cultural interests. People should not have to work all the time just to make ends meet--it's bad economics as well as bad social policy.

Additionally, moving production from areas of higher technological levels to areas of lower technological levels actually reduces the economic benefit of that production. Far from making the world more productive, globalization has made it weaker.

So who benefits? The corporations obviously benefit because it increases their profits, and the bankers benefit because they can extract more money from these corporations; but these benefits are an illusion, a short-term boost in profit at the expense of the long-term degradation of the planet. It is a form of economic cannibalism.

This cannibalism is deliberate, a policy designed to reduce the carrying-capacity of the world in order to reduce population levels. Contrary to Malthusian propaganda, the reason for this is to prevent the nations of Asia, Africa, and Ibero-America from developing their potential and taking their rightful place in the world.

For centuries, the European-centered oligarchy, located at various times around the Roman, Venetian, Spanish, British, and other empires, has viewed the world as its playground, and they want to keep it that way. They view the world's natural resources as theirs, no matter where they are located, and they will not tolerate nations interfering with their ``rights.''

The history of the world is replete with examples of governments being overthrown, and national borders redrawn, to protect these imperial looting prerogatives. Were these nations to develop themselves along the lines of the United States, these oligarchs know, it would change the balance of power globally, knocking these pompous jackasses off their lily-white thrones. No longer would the City of London and its satellites be able to dictate global policy.

Not only that, but with higher standards of living, including better nutrition and proper education, these so-called Second and Third World countries would produce populations more capable of scientific and technological breakthroughs of their own, including in the field of nuclear power. The technologies of the nuclear era would help smash the oligarchy's control over crucial raw materials such as petroleum and strategic minerals.

Faced with these prospects, the oligarchy launched a full-scale assault on the United States and other nation-states, under the euphemism ``globalization.''

- Globalization -

The aim of globalization is to ensure the domination over the planet of the Anglo-Dutch Liberal system. That is to be accomplished by the bankers and the Four Horsemen of the Apocalypse, using methods of which the evil Lord Bertrand Russell said, they might be unpleasant, but what of it. Or, as Dick Cheney might put it: So what?

Their goal is a dramatic reduction in global population, through a combination of famine, disease, war, and financial warfare. This effectively destroys a nation's ability to develop into a sovereign nation capable of resisting imperial designs.

Examples abound. Wars are very efficient ways of killing large numbers of people, as we have seen in several African countries, Cambodia under the Khmer Rouge, the former Yugoslavia, and in western Asia, to name just a few.

The British are masters at organizing such wars, provoking both sides to get the war going, selling arms to both sides, and blocking attempts to stop the fighting. Disease is another big killer, as the devastation of Africa by AIDS, malaria, and other killer diseases attests.

Famine is a similar weapon, as we discuss in detail elsewhere in this issue. In areas like Africa, long a European colonial subject, the combination of wars, famine, and disease has virtually destroyed the continent, especially in Black Africa.

Financial warfare serves a similar purpose. The manipulation of raw materials prices by the banker-run ``free markets'' allows the commodity cartels to pay low prices to the producing nations, while charging high prices to the consumers, gouging both in one operation.

Even more insidious are the repeated assaults on national currencies launched by the Western financiers, of which the late-1990s ``Asian crisis'' and the long-running Ibero-American debt crises are indicative. Hook a nation on debt (payable in dollars), force it to devalue its currency through financial warfare, then bankrupt it by forcing it to devote an ever-increasing share of its GDP to repaying that debt, thereby making it increasingly impossible to fund the sorts of large-scale infrastructure projects needed to build a nation.

The cumulative effect of these policies over decades destroys the fabric of these nations. Local oligarchies develop which are loyal not to the nations, but to their colonial overseers. These local oligarchies actively sabotage attempts by the citizens to put their nations back on track, much in the same way that the Anglophiles in the U.S. Establishment fight the efforts of the LaRouche movement to return the United States to the principles of the Founding Fathers and Presidents Lincoln and FDR.

Look at what has been done to the United States. Once the greatest industrial power in the world, the United States has been reduced to importing most of our manufactured products. This was not imposed upon us by China or Japan; we did this to ourselves, as nominally American corporations moved their production overseas, either by outsourcing or building new plants where labor was cheap.

Thanks to our failure to move to a nuclear economy, we are more dependent upon the London-centered oil distribution cartel than ever before, and we routinely import food from countries whose own populations do not have enough to eat. Far from benefitting from globalization, we are its greatest victim, a shell of our former selves, increasingly dependent upon a London-centered cartel system for the necessities of life, while our own economy collapses.

This is deliberate genocide, and it must be stopped if the world is to avoid collapsing into a new Dark Age. We must reject the archaic repression of the British Empire and its co-genocidalists, and use the power of the modern nation-state to rebuild the world.

James P. Tucker Jr.

The Trilateral Commission—one of the three most powerful globalist groups in the world—held closed-door meetings right here in Washington, D.C. from April 25 to 28. True to form, those members of the media who knew about the meeting—or were themselves participants in the proceedings—refused to discuss what went on inside or report on the attendees. Luckily, AFP’s own editor, Jim Tucker, was on the scene to bust this clandestine confabulation wide open.

Luminaries at the Trilateral Commission meeting in Washington expressed confidence that they own all three major presidential candidates, who, despite political posturing, will support sovereignty-surrendering measures such as NAFTA and the “North American Union.”

“John has always supported free trade, even while campaigning before union leaders,” said one. “Hil and Barack are pretending to be unhappy about some things, but that’s merely political posturing. They’re solidly in support.”

He was referring to Sens. John McCain (R-Ariz.), Hillary Clinton (D-N.Y.) and Barack Obama (D-Ill.).

Mrs. Clinton, they noted, held strategy sessions as first lady on how to get Congress to approve NAFTA “without changes.” As president, they agreed, she would do no more than “dot an i or cross a t.”

Candidate Obama has not denied news reports in Canada that his top economic adviser, Austan Goolsbee, assured Canadian diplomats that the senator would keep NAFTA intact and his anti-trade talk is just “campaign rhetoric.”


While they are confident they can deal with any “potential president,” the Trilateralists paid huge tribute to Ron Paul in an equally large twist of irony, by expressing alarm that he is causing “significant future damage.”

They expressed concern that Paul’s rallies have attracted multitudes of young people who are getting “their political education.” They want Republicans to pressure Paul to drop out now and stop his education rallies. This assignment was given to Thomas Foley, former U.S. House speaker.

The reasons Paul’s “education campaign” strikes fear into Trilateral hearts are obvious. Paul would refuse to surrender an ounce of U.S. sovereignty to an international organization and TC wants world government.

Paul would immediately bring U.S. troops home from Iraq, Afghanistan and from 130 UN “peacekeeping” missions around the globe. TC wants to enjoy war profiteering and global power. Paul would abolish the federal income tax while the TC wants to pile on a global tax payable to the UN.

The formal agenda was loaded with everything Paul and American patriots detest: higher taxes, more foreign giveaways, more immigration, both legal and illegal, into the United States and “engaging Iran,” among others.


The Trilaterals got down to real work on Saturday, April 26, with a high-powered panel called “U.S. Foreign and Domestic Policy: Broad Outlines for a New Administration.”

It was presided over by journalistic pimp David Gergen, who will write nothing about TC in his magazine, U.S News and World Report. Also participating were Kenneth Duberstein, former White House chief of staff for President Ronald Reagan; Strobe Talbot, president of the Brookings Institution and former deputy secretary of state; and Joseph Nye, former assistant secretary of defense. Henry Kissinger, former secretary of state and long-time Bilderberg leader, was present and listed as a participant. But a TC staff member crossed his name out. Some speculated he had throat problems.

This panel had these orders for the next president: increase foreign aid across the board because “America does not pay its fair share,” pay up the arrears in UN dues, allow as many immigrants into the United States as want to come and provide “amnesty” for illegal aliens already here.

Little, if anything, was said about the fact that American taxpayers pay one-fourth of the UN’s operating costs and one-third of the cost of 130 “peacekeeping missions” or the fact that immigrants from South America depress wages here and the average immigrant family costs the government thousands of dollars a year in welfare, health and other “benefits.”

Robert Zoellick, president of the World Bank and another long-time Bilderberg boy, largely echoed these views in a sweetheart “interview” by another journalistic strumpet, Lionel Barber, editor of The Financial Times, who will obediently report nothing.


There were “subgroup” meetings on “climate change,” “water and sanitation” and “migration and development.” Every nation, especially the U.S., should spend big bucks to fight “global warming,” they agreed. The United States should spend more “because Americans cause the most pollution,” one argued. Americans should send more money to Africa so natives can drink clean water and scrub themselves, they said.

Antonio Garrigues Walker, chairman of Garrigues Abogadas y Asesores Tributarios, joined Peter Sutherland, the UN secretary-general’s “special representative on migration and development,” to call on the United States to not only allow unlimited immigration, but to throw more money at Mexico and other impoverished Latin countries. It was, somehow, their “right” to have more U.S. dollars. Sutherland is chairman of British Petroleum and Goldman Sachs International. He is also a long-time Bilderberg leader.


Bill Emmott, another kept journalist, spoke on “the rise of Asia” at a reception-dinner held at the Smithsonian American Art Museum. Emmott, former editor of The Economist, will report nothing.

Sunday morning, Robert Blackwill, former U.S. deputy national security adviser for Iraq, led a panel discussion on “engaging Iran and building peace in the Persian Gulf Region.” For the first time, there was dissent. Blackwill tried to rationalize the invasion of Iraq. Others doubted that Saddam Hussein was connected to the 9-11 terrorist attacks or was a nuclear threat. Blackwill said the military option remains but he hopes diplomatic efforts succeed.

Other participants were Ray Takeyh of the Council on Foreign Relations, which functions as the propaganda ministry for TC and Bilderberg; Volker Perthes, head of the German Institute for International and Security Affairs and Hitoshi Tanaka, former Japanese deputy minister of Foreign Affairs.


More foreigners demanded more U.S. money at a lunch panel called “European and Asian views on U.S. Foreign and Security Policy.” Participants were Elisabeth Guigou, a member of the French National Assembly and former minister for European affairs and Han Sung-joo, former minister of foreign affairs for South Korea.

An afternoon session addressed “global health” with more calls for American tax dollars. A major voice in this cause came from Sylvia Mathews Burwell, president of Global Development Programs, Bill & Melinda Gates Foundation. Bill Gates has attended at least one Bilderberg meeting.


John Negroponte, U.S. deputy secretary of state, addressed the evening dinner on “U.S. foreign policy perspectives.” Again, the invasions of Iraq and Afghanistan were rationalized and an invasion of Iran held out as a possibility.

The Monday morning finale addressed the Global Financial Crisis involving these luminaries: Robert Kimmitt, U.S. deputy secretary of the treasury; Martin Feldstein, former chairman of the President’s Council of Economic Advisers; David Rubenstein, managing director of The Carlyle Group; Naoki Tanaka, president of the Center for International Public Policy Studies and Sir Andrew Crockett, president of JP Morgan Chase International.

Among them, there was much talk of the U.S. government’s “duty” to “intervene” on behalf of “financial institutions under stress.” Little or nothing was said of the hundreds of thousands of Americans who are losing their homes because financial institutions lured them into buying houses they could not afford.

Throughout the weekend, no American voices were heard objecting to the demands on their country. Instead, there were smiles, nods and applause.

The Trilateral Commission: North American Group 2008

Thomas S. Foley  North American Chairman
Peter Sutherland  European Chairman
Yotaro Kobayashi  Pacific Asia Chairman
Allan E. Gotlieb  North American Deputy Chairman
Herve De Carmoy  European Deputy Chairman
Han Sung-Joo Pacific  Asia Deputy Chairman
Lorenzo H. Zamibrano  North American Deputy Chairman
Ainijrzej Olechowski  European Deputy Chairman
Shijuro Ogata Pacific  Asia Deputy Chairman
David Rockefeller  Founder And Honorary Chairman
Paul A. Volcker  North American Honorary Chairman
Georges Berthoin  Chairman European Honorary
Otto Graf Lambsdorf  European Honorary Chairman
Michael J. O’Neil  North American Director
Paul Revay  European Director
Tadashi Yamamoto  Pacific Asia Director


Madeleine K Albright  The Albright Group LLC Washington, D.C.
Graham Allison  Kennedy School of Government, Harvard Cambridge, Mass.
Richard L. Armitage  Armitage International Washington, D.C.
James L. Balsillie  Co-Chief Exec. Officer, Research in Motion Waterloo, Ontario
Charlene Barshefsky Wilmer,  Cutler & Pickering Washington, D.C.
Alan R. Batkin  Eton Park Capital Management New York, N.Y.
Lael Brainard  The Brookings Institution Washington, D.C.
Doug Bereuter  The Asia Foundation San Francisco.
C. Fred Bergsten  Peterson Institute for Int’l Economics Washington, D.C.
Catherine Bertini  Syracuse University Syracuse, N.Y.
Robert D. Blackwill  Former Deputy Asst, to the President Washington D.C.
Dennis Blair, USN (Ret.)  Institute for Defense Analyses Alexandria, Va.
H. Blanco Mendoza Private Office of Herminio Blanco Mexico City
Stephen W. Bosworth  Dean, Tufts University Medford, Mass.
David G. Bradley  Atlantic Media Company Washington, D.C.
Harold Brown  Center for Strategic and Int’l Studies Washington, D.C.
Zbigniew Brzezinski  Center for Strategic and Int’l Studies Washington, D.C.
Sylvia Mathews Burwell  President Global Development Program Hinton, WV
Louis C. Camilleri  Altria Group, Inc New York, N.Y.
Kurt Campbell  CEO Center New American Security Washington, D.C.
Raymond Chrétien  Fasken Martineau DuMoulin LLP Montreal, Quebec
William T. Coleman III  Cassatt Corporation San Jose, Calif.
Timothy C. Collins  Ripplewood Holdings New York, N.Y.
Richard N. Cooper  Harvard University Cambridge, Mass.
F. Gerald Corrigan  Goldman, Sachs & Co. New York, N.Y.
Michael J. Critelli  Pitney Bowes Inc. Stamford, Conn.
Lee Cullum  “NewsHour with Jim Lehrer,” Dallas, Texas
H. Lawrence Culp, Jr  CEO of Danaher Washington, D.C.
Gerald L. Curtis  Columbia University New York, N.Y.
Douglas Daft  The Coca Cola Company Atlanta, Ga.
Lynn Davis  The RAND Corporation Arlington, Va.
Arthur A. DeFehr  Palliser Furniture Winnipeg
André Desmarais  Power Corporation of Canada Montréal, Quebec
John M. Deutch  Mass. Institute of Technology Cambridge, Mass.
Jamie Dimon  JP Morgan Chase & Co. New York, N.Y.
Peter C. Dobell  Parliamentary Centre Ottawa, Ontario
Wendy K Dobson  University of Toronto Toronto
Kenneth M. Duberstein  The Duberstein Group Washington, D.C.
Robert Eckert  Mattel, Inc. El Segundo, Calif.
Jessica P. Einhorn  The Johns Hopkins University Washington, D.C.
Jeffrey Epstein  J. Epstein & Company, Inc. New York, N.Y.
Dianne Feinstein  U.S. Senate (D-Calif.) Washington, D.C.
Martin S. Feldstein  Harvard University Cambridge, Mass.
Roger W. Ferguson, Jr.  Swiss Re America Holding Corp. Washington, D.C.
Stanley Fischer  Bank of Israel; frmr president, Citigroup New York, N.Y.
Richard W. Fisher  Federal Reserve Bank of Dallas Dallas, Texas
Thomas S. Foley  Akin Gump Strauss Hauer & Feld Washington, D.C.
Kristin J. Forbes  Associate Prof. of Int’l Management Cambridge Mass.
Michael B.G. Froman  Citigroup Inc. New York, N.Y.
Francis Fukuyama  The Johns Hopkins University Washington, D.C.
Dionisio Garza Medina  ALFA Mexico
Richard A. Gephardt  Former member House of Reps. (D-Mo.) Washington, D.C.
David Gergen Harvard; Editor, USN&WR Cambridge, Mass.
Peter C. Godsoe  Scotiabank (ret.) Toronto, Ontario
Allan E. Gotlieb  Bennett Jones LLP Toronto, Ontario
Bill Graham  Canadian House of Commons Ottawa, Ontario
Donald E. Graham  CEO of The Washington Post Company Washington, D.C.
Jeffrey W. Greenberg  Aquiline Capital Partners, LLC New York, N.Y.
Richard N. Haass  President, Council on Foreign Relations New York, N.Y.
James T. Hackett  Anadarko Petroleum Corp. Texas
John J. Hamre  Center for Strategic and Int’l Studies Washington, D.C.
William A. Haseltine  Haseltine Global Health, LLC Washington, D.C.
Richard F. Haskayne  University of Calgary Alberta
Charles B. Heck  Senior Adviser, Trilateral Commission Washington, D.C.
Carlos Heredia  International Affairs Mexico
Carla A. Hills  Hills & Company, Int’l Consultants Washington, D.C.
Richard Holbrooke Perseus LLC New York, N.Y.
Karen Elliott  House Dow Jones & Co. & Wall Street Journal Princeton, N.J.
Alej. Junco de la Vega  Grupo Reforma Monterrey, Mexico
Robert Kagan Carnegie  Endowment for Int’l Peace Washington, D.C.
Arnold Kanter  The Scowcroft Group Washington, D.C.
Charles R. Kaye Warburg Pincus LLC New York, N.Y.
James Kimsey  Founding CEO of AOL Washington, D.C.
Michael Klein  Citigroup Inc. New York, N.Y.
Steven E. Koonin  British Petroleum London
Enrique Krauze Editorial Clio Libros y Videos, S.A. de C.V. Mexico City
Robert Lane  Deere & Company Moline, Ill.
Fred Langhammer  The Estee Lauder Companies, Inc. New York, N.Y.
Jim Leach  Former U.S. Representative (R-IA) Washington, D.C.
Gerald M. Levin  AOL Time Warner, Inc. New York, N.Y.
Winston Lord  International Rescue Committee New York, N.Y.
E. Peter Lougheed  Bennett Jones, Banisters & Solicitors Calgary, Alberta
Roy MacLaren  Former High Commissioner to the UK Toronto, Ontario
John A. MacNaughton  Frmr CEO Canada Pension Plan Invest. Brd Toronto, Ontario
Antonio Madero  San Luis Corporacion, S.A. de C.V. Mexico
John Manley McCarthy Tétrault LLP Ottawa, Ontario
Sir Deryck C. Maughan  KKR Asia, Kohlberg Kravis Roberts & Co. New York, N.Y.
Jay Mazur  Union of Needletrades, Textile Employees New York, N.Y.
James Moore  Canadian Parliament Ottawa, Ontario
Marc H. Morial National Urban League New York, N.Y.
Heather Munroe-Blum  McGill University Montreal, Quebed
Brian Mulroney Ogilvy  Renault Montréal, Quebec
Indra K. Nooyi  PepsiCo, Inc. Purchase, N.Y.
Joseph S. Nye, Jr.  Kennedy School of Government, Harvard Cambridge, Mass.
David J. O’Reilly  Chevron Corporation San Ramon, Calif.
Meghan O’Sullivan  Former Deputy National Security Adviser Washington, D.C.
Richard N. Perle American Enterprise Institute Washington, D.C.
Thomas R. Pickering  Consultant, The Boeing Company Arlington, Va.
Martha C. Piper  The University of British Columbia Vancouver, B.C.
Richard Plepler  Executive Vice President, HBO New York, N.Y.
Joe Ralston, USAF (Ret) The Cohen Group Washington, D.C.
Charles B. Rangel  U.S. House of Representatives (D-N.Y.) Washington, D.C.
Susan Rice  Brookings Institution Washington, D.C.
Hartley Richardson  James Richardson & Sons, Ltd. Winnipeg, Manitoba
Joseph E. Robert, Jr. J.E. Robert Companies McLean, Va.
John D. Rockefeller IV  U.S. Senate (D-W.V.) Washington, D.C.
Kenneth Rogoff  Center for Int’l Development, Harvard Cambridge, Mass.
Charles Rose  The Charlie Rose Show, PBS New York, N.Y.
Irene B. Rosenfeld  CEO Kraft Foods Northfield, Ill
Dennis Ross  Ambassador Counselor and Ziegler Washington, D.C.
David M. Rubenstein  The Carlyle Group Washington, D.C.
Luis Rubio  Center of Research for Development Mexico City, Mexico
Arthur F. Ryan  Prudential Financial, Inc. Newark, N.J.
Jaime Serra  SAI Consulting Mexico City, Mexico
Dinakar Singh  TPG-Axon Capital New York, N.Y.
Anne-Marie Slaughter  Princeton University Princeton, N.J.
Gordon Smith  Centre for Global Studies, U. of Victoria Victoria, B.C.
Donald R. Sobey  Empire Company Ltd. Halifax, Nova Scotia
Ronald D. Southern  ATCO Group Calgary, Alberta
James B. Steinberg  LBJ School of Public Affairs, U. of Texas Austin, Texas
Jessica Stern  Program on Terrorism & the Law, Harvard Cambridge, Mass.
Barbara Stymiest  RBC Financial Group Toronto, Ontario
Lawrence H. Summers  Harvard University Cambridge, Mass.
John J. Sweeney  AFL-CIO Washington, D.C.
Strobe Talbott  The Brookings Institution Washington, D.C.
George J. Tenet  Georgetown Univ., former CIA Director Washington, D.C.
John Thain  New York Stock Exchange, Inc. New York, N.Y.
G. Richard Thoman  Columbia University New York, N.Y.
Paul A. Volcker  Wolfensohn & Co., Inc., frmr Fed. Res. Chair.New York, N.Y.
William H. Webster  Former CIA Director Washington, D.C.
Fareed Zakaria  Newsweek International New York, N.Y.
Lorenzo H. Zambrano  CEMEX Monterey, Mexico
Ernesto Zedillo  Former president of Mexico; Yale Univ. New Haven, Conn.
Mortimer B. Zuckerman  Chairman, U.S. News & World Report New York, N.Y.
William T. Coleman, Jr. Lifetime Trustee, Trilateral Commission Washington, D.C.
Henry A. Kissinger  Lifetime Trustee, Trilateral Commission Washington, D.C.
Robert S. McNamara  Lifetime Trustee, Trilateral Commission,
frmr pres., World Bank; frmr sec.of Defense; frmr pres., Ford Motor. Washington, D.C.
David Rockefeller  Founder, Lifetime Trustee, Trilateral Comm. New York, N.Y.


Patricia Barbizet  CEO Artemis Group, France
Dermot Gleeson  Chairman, AIB Group, Ireland
Elisabeth Guigou  French National Assembly, France
Nigel Higgins  Senior Partner N M Rohschild & Sons, UK
Jerzy Kozminski  President & CEO Polish-American Freedom, Poland
Thomas Leysen  CEO Umicore, Belgium
Manfred Bischoff Chairman, SNCF, France
Arpad Kovacs  Pres. State Audit Office Hungary, Budapest
Friedrich Merz  Member of the German Bundestag, Germany
Pietro Modiano Mng. Director CEO Intesa Sanpaolo, Italy
Hans Reisenhuber  (returning) Member of the German Bundestag, Germany
Jeroen van der Veer  Chief Executive, Royal Dutch Shell, The Netherlands

Helga Zepp-LaRouche

The fiery letters of an unprecedented human catastrophe already stand flickering on the wall, and it will be fatal for the world as a whole, if we do not succeed immediately, in the coming days and weeks, to declare globalization a failure, and to set everything into motion to double agricultural production capacity in the shortest possible time!

This is of the utmost urgency: Since October 2007, there have been food riots in over 40 nations. According to Rajat Nag, managing director general of the Asian Development Bank, 1 billion Asians (!) are already at serious risk from the hunger crisis, and in Africa, Ibero-America, and among the poor on the other continents, an additional 1 billion face the same fate. But according to Jacques Diouf, head of the UN Food and Agriculture Organization (FAO), since December his organization has been unable to raise 10.9 million euros (!) in order to purchase seed for poor farmers in developing countries. The rich states are simply not willing to support the developing countries with money, seed, and investment in infrastructure, Diouf told an FAO conference on Latin America in Brasilia in mid-April.

Jean Ziegler, UN Special Rapporteur on the Right to Food, pointed to an additional aspect of the crisis; namely, that the use of food for biofuels is a ``crime against humanity.'' In order that we might fill our gas tanks with ethanol with clear ecological conscience, people in the Third World must starve (and also die). Speaking of the resulting food riots, Ziegler said, ``These are riots of utter despair by people who fear for their lives, and who, nagged by deathly fear, take to the streets.''

And that's only the beginning. Because, as long as the current policy of the ``rich'' nations--i.e., the free-trade doctrine of the World Trade Organization (WTO), the European Union Commission, and so one--continues, the food cartels and speculators will take advantage of the conditions created by the escalating systemic crisis of the world financial system, to maximize their profits and to feed price inflation, without the farmers reaping any benefit therefrom. And if the world's central banks continue their practice of using tax revenues in an attempt to make up for the speculative losses of private banks, then we are going to see hyperinflation like Weimar Germany spread around the globe.

Under these circumstances, the entire planet will be swept by the storm winds of food riots, until humanity descends into a new dark age of chaos, gang warfare, and climbing death rates--or, until justice and life with human dignity is established for all human beings on this planet.

- The Oligarchy's Malthusian Axioms -

For the year 2050, the UN forecasts a population growth of 33%, that is, from the current 6.7 billion to approximately 9 billion human beings. The demand for food will rise correspondingly, and if we add the approximately 2 billion who are currently undernourished, then a doubling of food production is a good rough measure on which we can orient our planning efforts.

One would be hard put to find another issue which more effectively unmasks the oligarchical axiomatic state of mind, as this one. The U.S.-Eurocentric outlook regards the prospective population growth as a threat, bringing with it the challenge of mass immigration of poor people into the developed countries, and the struggle to secure raw materials (most of which are located in the poor countries). This viewpoint was most recently expressed by Michael V. Hayden, U.S. Director of Central Intelligence, at a speech at the University of Kansas. He asserted that this growth will occur chiefly in the nations of Africa, Asia, and the Middle East, places where this population growth cannot be sustained economically, thus leading to a heightened danger of violence, rebellion, and extremism. This same oligarchical axiomatic outlook underlies the unspeakable strategy paper issued by five retired generals, who count as the first among the six primary challenges to the world community, population growth and the unequal distribution of the demographic curve in the various continents. This poses the greatest threat to prosperity, responsible government, and energy security, these generals say. The model for this neo-Malthusian, imperial world-view is the infamous National Strategic Study Memorandum 200 (NSSM 200), drafted by Henry Kissinger in 1974, which declares all raw materials around the world to be a U.S. strategic security interest.

The truth is, that the oligarchical model which Richard Nixon, Henry Kissinger, and George Shultz set into motion on Aug. 15, 1971, with the end of Roosevelt's Bretton Woods system and of fixed currency exchange rates, thereby systematically guiding the economy into the direction of unregulated free trade, has now completely failed. This 1971 paradigm-shift away from production and into speculation--unregulated credit generation in the so-called offshore markets such as the Cayman Islands, where 80% of all hedge funds are headquartered--ushered in the emergence of today's casino economy.

Since that time, step by step, each new precedent has gone in the direction of the neo-liberal model: the creation of the eurodollar market; the 1974 oil price swindle; the 1975 hardening of ``IMF conditionalities''; the assaults by the Carter Administration, beginning in 1976, against ``mercantilist tendencies in the developing countries''; Federal Reserve Chairman Paul Volcker's 1979 high interest rate policy; the policies of ``Reaganomics'' and ``Thatcher economics'' in the 1980s, including the mergers and hostile takeovers typifying a process of ever greater cartellization; Alan Greenspan's invention of miraculous ``creative credit instruments'' following the Crash of 1987; and the unfettered globalization following the disintegration of the Soviet Union in 1991, and the transfer of industrial production into ``cheap production countries''--all these were further mileposts in the same direction.

- Behind Today's Hunger Catastrophe -

It is in this context that we must consider today's exploding hunger catastrophe. Formerly, since 1957, the European Economic Community's Common Agricultural Policy (CAP) had been designed to supply the population with sufficient foodstuffs at reasonable prices, so that farmers had an appropriate income and agricultural production could be increased. But with the introduction of unfettered globalization, other, entirely different criteria took precedence. With the 1992 agricultural reform, consumer price reductions were instituted, for example: beef farms 20%, grain farms 30%, and milk farms 15%. But there were no provisions for corresponding compensation to the farmers. Instead, they were offered financial assistance tied to compliance with ``ecological criteria.''

The farmers had been talked into this deal with the argument that they ``must hold their own on the world market,'' i.e., they must be able to compete with cheapened production abroad. In practice, however, it meant that many farmers had to shut down completely, while others could run their farms only as a part-time occupation, such that a career in farming became unattractive for the young generation, resulting in the loss of many family farms.

This trend in the direction of free trade was escalated by the so-called Uruguay Round, the final negotiation session of the GATT (General Agreement on Tariffs and Trade), which ended their former practice of considering the rules of agricultural production from the standpoint of food security, and instead bound themselves to the strict rule of free trade, and thus to the food cartels' demand for maximization of profit. Since that time, millions of farms have gone bankrupt, and the process of cartellization has taken hold to such an extent, that in five months, the FAO has been unable to pull together a pitiful 10 million euros so that, in the midst of this hunger catastrophe, the poor countries might be able to sow seed--seed which is controlled by only three companies!

The replacement of GATT--which still had the form of a multilateral agreement among states--by the World Trade Organization, a supranational bureaucracy with far-reaching independent powers, portended a further round of deregulation, abolishment of all trade barriers not bound by collective bargaining agreements, and ``harmonization'' of member-states' standards. The chief beneficiaries of these measures in the direction of free trade, were, once again, the food cartels. Since then, completely anonymous WTO boards of experts have enjoyed the right to impose penalties on violators against free trade, without these ``experts'' being obliged in any way to account to voters for their actions.

For the European Union, the Agenda 2000 and the agricultural reform of 2005 further stepped up the tempo in the direction of reduction of surpluses (and thus the destruction of foodstuff reserves and exports). Instead of setting fair producer prices which could cover production costs, compensatory payments were made for leaving land fallow--``set-aside'' policy--and for completely arbitrary environmental protection measures. And so, the trend toward sell-offs of independent family farms proceeded apace.

Former German Economics Minister (and later Consumer Protection Minister) Renate Künast, and Agriculture Minister Franz Fischler, were correct when they spoke of a systemic change being introduced with this agricultural reform. Fischler cynically observed at the time, that the compulsory price reductions would also bring about a reduction in the intensity of cultivation, because the farmers would not have any money left for fertilizer or pesticides.

A bit later, some farmers fared better financially for a while, because of the EU subsidies for cultivation of plants for biofuels--but with the above-mentioned catastrophic consequences.

And it should be pointed out that the pioneer in the use of foodstuffs for the production of ethanol, was Benito Mussolini. Under the WTO and EU Commission regime, production capacity was reduced in the industrial nations, while at the time, the developing countries were forced to export cheap foodstuff in order to earn cash to repay foreign debt--and this, frequently, even though their own population was not adequately supplied with food. And so, today, the economic and moral bankruptcy of this system of British free trade and Manchester capitalism is plain for all to see.

Fortunately, there is also resistance against the genocidal policies of WTO and EU free trade. In recent weeks, French Agriculture Minister Michel Barnier and German Consumer Protection Minister Horst Seehofer have begun a campaign aimed directly against the EU policies. Barnier started a European-wide campaign in defense of the CAP, a policy which some free-trade fanatics (such as David Spector, an Associate Professor at the Paris School of Economics, and the Financial Times) are demanding be completely abolished, despite the hunger crisis. Barnier attacks the idea that the poorest countries should export food to the rich countries, as a total departure from reality, since it is precisely such a policy which has ruined subsistence agriculture and local production in the poorest countries. Instead of this, Barnier demands that Africa, Latin America, and Asia likewise institute their own CAPs--i.e., a protectionist parity system.

- Emergency Measures Needed Now -

There can be only one answer to the obvious bankruptcy of murderous free trade: We need a worldwide mobilization for the most rapid possible doubling of agricultural production. The WTO itself must be dissolved, immediately.

Leading up to the FAO conference in Rome on June 3-5, all means, including unconventional ones, must be made available for enabling the FAO to set a program into motion to increase agricultural production worldwide. This must include a new ``Green Revolution,'' as well as medium-term measures for the expansion of infrastructure, the building up of food-processing industries in developing countries which do not have them, and for water management.

The topic of a new and just world economic order must be put onto the agenda. In view of the existential significance of this issue for the future of all humankind, a special session of the UN General Assembly must be convened on this theme. The New Bretton Woods system, and a New Deal for the entire world, in the tradition of Franklin D. Roosevelt--measures which many heads of state and economists have been calling for--must immediately become the subject of an emergency conference of heads of state, who must decide upon a new world financial system which would permit all nations to develop. The building of the Eurasian Land-Bridge must be agreed upon as the keystone for reconstructing the world economy.

In the U.S. Declaration of Independence--which the Schiller Institute's founding conference in 1984 adopted as its charter by making it applicable for all nations of this world, by just a few wording changes--it says:

``We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.''

This Declaration of Human Rights must hold true still today--for all human beings on this planet. What we need today, is men and women who fight with passion and love for the idea of a just world order, one in which the community of nations can live together in peace and human dignity. Life, Liberty, and Happiness mean, above all, that all people have enough to eat and that poverty is abolished--something which we have all the technological means to bring about. Whether we can make this vision into reality, or whether we instead speed humanity into collapse, is how each one of us will be measured by history.

Du Won Kang
Epoch Times
Tuesday, June 10, 2008

CHANTILLY, VA—While over a hundred of the most influential people in the world are believed to gather at the Westfields Marriott hotel in Chantilly, Virginia, for several days (June 5–8) all the major media, except for the Epoch Times, are apparently silent about it. The event is an annual gathering of the Bilderberg Group.

Former Secretary of State Madelin Albright, Chairman of the Federal Reserve Ben Bernanke, Henry Kissinger, Vernon Jordan, and others were seen by witnesses and some of them were confirmed by others just outside of the hotel. Photos and videotapes were taken of them. (See the websites operated by Alex Jones at the bottom of this report that have posted some of the videos and photos.)

Alex Jones, syndicate radio talk show host and documentary film maker, says that he invited the Washington Post, the Fairfax Times, and asked 16 million listeners of the Coast to Coast AM radio show to call on the press to cover the event. But no major media showed.

ALEX JONES: Syndicate radio talk show host and documentary film maker, Alex Jones, visits Chantilly, Virginia to document the events around the secretive Buiderberg Meeting and to protest against them. Photo taken on Sunday, June 8. (Du Won Kang/The Epoch Times)

"This is a criminal group. They're involved in very bad things," said Alex Jones, referring to the Bilderberg Group.

He said, "They violate the Logan Act. The federal law says that they can't come here and discuss policy with private interest in secret because we have the right to know. The only place they can discuss things in secret is in national security meetings, in the Congress, or in the Capitol, and that's amongst themselves ... This is illegal what they're doing … That's why we have moles inside reporting to us what's happened."

He continued, "This isn't about the federal government. This is about private interest meeting with members of the government, outside of the government, violating federal law, and the Logan Act. We are here because this is a criminal summit … These are globalists. They want one world government. They want to reduce liberty."

Alex Jones is also the producer of Endgame: Blueprint for Global Enslavement.

When asked about evidence for Bilderberg Group's influence over U.S. Presidential candidates, he said, "From our sources, they decide who they like best and they put their weight behind him. These people own the media. They own the big corporations. They've got trillions of dollars together. And when you get the nod from the big boys, you tend to get the support ... Do they have total control over society? No. Do they have total control over the candidates? No. But they're steering it. They're massively influencing it."

'WE ARE CHANGE': Luke Rudkowski (L) and John Paul Harkins ® are members of who visited Chantilly, Virginia to protest against the Bilderberg Group. Photo taken on Sunday, June 8. (Du Won Kang/The Epoch Times)

The Washington Post published an article on June 9 with headline, "Obama Adviser Faces Scrutiny Over Mortgage Deals." It reports that James A. Johnson, former Fannie Mae CEO, is leading Sen. Barack Obama's vice-presidential search process, and that Johnson is a member of the American Friends of Bilderberg.

Jim Tucker, co-founder of American Free Press (AFP), has been investigating the Bilderberg Group for over a quarter of a century. His research on the Bilderberg Group was highly praised by participants of the protests at Chantilly. He is the author of Jim Tucker's Bilderberg Diary (2005).

GROUP POSE: People who came to Chantilly, Virginia to protest against the secret meeting of the Bilderberg Group pose for a photo on Sunday, June 8. (Du Won Kang/The Epoch Times)

Jon Ronson, author of Them, describes the Bilderberg Group for CNN several years ago:

"Many members of the Bilderberg see themselves in much the same way as the conspiracy theorists see them: as shadowy figures out to influence world events. They see themselves as wise globalist centrists. Many of the anti-Bilderberg conspiricists see themselves as twigs in a tidal wave of globalization; they see themselves as nationalists. World government is what Bilderberg are into—the idea of a global community and a 'one world order.'

"The Bilderberg Group sees themselves as head hunters. They'll get an up and coming politician who they think may be President or Prime Minister one day and as globalist and industrialist leaders, they try to influence them. Bilderberg secrecy hulks back to Henry Kissenger who loves the idea of working in the shadows. The secrecy gives rise to conspiracy theories."

Stephen Lendman

In a new article, economics professor Richard Wolff explains the current crisis in Marxian terms. It "emerged from the workings of the capitalist class structure. Capitalism's history displays repeated boom-bust cycles punctuated by bubbles. They range unpredictably from local, shallow and short to global, deep and long." Clearly we're now in one of the latter and potentially the worst ever.

Wolff states that recurring crises and chronic instability come with capitalism, and only "social change to a non-capitalist class structure" will bring relief and stability. He explains how we got here:

-- since the mid-1970s, real wages haven't kept up with inflation;

-- "computerization of production displaced workers;"

-- production and service jobs (including high-paying ones) have been offshored to low-wage countries; and

-- "capitalists end(ed) the historic (1820 - 1970) rise of US wages" in real terms.

It gets worse. They increased productivity through technology and pressuring workers - to work harder for less pay and fewer benefits. "In Marxian terms, the surpluses extracted by capitalist employers - the difference between the value added by labor and the value paid to the laborer - rose. In capitalist class structures, each capitalist is better off the more surplus is exploited from employees. The last 30 years realized capitalists' wildest dreams."

Marx indeed was right, and his reward has been to be unfairly maligned. He explained capitalism's destructive contradictions and condemned the "free market" as anarchic and ungovernable. It alienates the masses by preventing the creation of a humane society. It produces class struggle between "haves" and "have-nots," the bourgeoisie (capitalists) and proletariat (workers). It exploits the many so a few can profit.

He predicted what's clear today. Over time, competition produces a handful of winners in the form of powerful monopolies or oligopolies controlling nearly all production, commerce and finance. Exploitation increases. Successive crises erupt, and ultimately abused workers react - according to Marx with an inevitable socialist revolution because a system this inequitable can't endure, so it won't.

Wolff explains more in his incisive analysis and in discussion on-air with this writer. "Stagnant wages traumatized (workers and destabilized families) accustomed to rising consumption afforded by rising wages." As a result, more family members work, put in longer hours on their jobs, assumed unmanageable debt to keep spending, have exhausted its limits, are now defaulting on their obligations, and so are corporations in as much or greater trouble.

It's a familiar story. "Bust followed bubble followed boom, once again" - but this time it's a whopper. As Wolff explains:

"The key point (is) since the mid-1970s, US corporate boards of directors took three interconnected steps" that got us to today. "They effectively froze workers' real wages, (cut benefits), extracted much more surplus from their increasingly productive workers, and....distributed (it in) cumulatively unsustainable" ways. This type system is "fundamentally crisis prone" and unworkable.

Wolff proposes a socially responsible one that is. He wonders if policy debates today will "ignore or deny (the) class structural basis" of today's crisis. If so, are we condemned to keep repeating this boom and bust cycle "with all the personal, familial, political, economic and cultural losses they inflict" - and in the end see capitalism fail anyway as it will.

A Systemic Crisis That's Bad and Worsening

Exhibit A - On December 5, Market headlined the bad news: "Payrolls plunge by stunning 533,000 in November." The alternate household survey showed a 673,000 decline. According to the Labor Department, it's the steepest job loss in 34 years, and even greater ones may be coming for an extended period as the systemic crisis worsens.

Only three other times in the past 58 years have payrolls shrunk by over 500,000 in a month. Since January, a reported 1.9 million jobs have been lost, but the real toll is far higher, and the worst is still ahead.

Dean Baker of the Center for Economic and Policy Research said the latest data brought the three-month job loss to 1,256,000, the largest three-month toll since the period ending February 1975 although losses in years like 1949 and 1958 were larger relative to the size of the labor force. Manufacturing and construction have been hardest and longest hit, but of late the service sector has been "imploding," according to research firm MKM chief economist Michael Darda. He added: "As the service sector goes, so goes the US economy."

Economist John Williams runs the "Shadow Government Statistics" web site and explains how government data are manipulated, corrupted and unreliable to make them look better than they are. Along with much more analysis, he reverse-engineers GDP, inflation and employment for more accurate readings and a truer picture of economic health.

According to the Bureau of Labor Statistics (BLS), the unemployment rate rose from 6.5% to 6.7%, and September and October job losses were revised sharply higher by 199,000. Over the past three months, payrolls have shrunk by an average of 419,000 per month compared to 82,000 a month early in the year. In addition, total hours worked fell 0.9% in November, the drop is 2% for the last three months for the sharpest three-month decline in any period since the data's 1964 inception, and the average workweek fell to a record-low 33.5 hours. In addition, so-called "underemployed" temporary and involuntary part-time workers hit a 12.5% rate, up sharply from 11.7% in October.

According to Moody's economist Ryan Sweet: "The labor market capsized in November." We're "seeing a very broad-based decline in payrolls" as all sectors were affected except education, health services and government. The crisis is clearly deepening - before large expected auto industry and supplier layoffs even with a Washington bailout.

The Labor Department report masks the true gravity of the jobs picture that Williams shows on his site. BLS calculates it by business and household surveys, produces a monthly employment report, and states in a section titled Reliability of the Estimates: "The confidence level for the monthly change in total employment is on the order of plus or minus 430,000 jobs."

The report plays other numbers games as well. In recent ones, more jobs are imputed for new firms than in the same months last year. A "birth/death model is also manipulated to color the picture brighter (at 143,000 for the September - November period compared to 117,000 for the same three months last year), anyone working an hour or more in the current period is considered employed, and interviewees aren't asked if they're unemployed.

Uncalculated are many people without jobs wanting work, many of whom are long-term unemployed who gave up after months of fruitless trying. Also omitted are part-time workers who prefer full-time employment. BLS plays a cynical numbers game and presents an unreliable employment picture. It's way more dismal than it reports so it hides it.

Williams corrects it by including what BLS leaves out, and through November reports unemployment at 16.5% or more than double the manipulated government data. In addition, he calculates the November job loss at around 873,000 or nearly two-thirds greater than the flawed BLS numbers.

He does the same thing with GDP, the real value of goods and services produced. When adjusted for his higher inflation calculation, it's lower than official reports. More inflation means higher prices, not increased output, but Washington tries to hide it. Williams' data showed a negative GDP reading in 2000, and it remained there except for briefly turning positive in early 2004. Through Q 3, he has it at over - 3% and falling, and at the rate it's happening, it should be considerably below that reading by Q 4 and way below official figures that barely acknowledge a deepening recession.

And it's happening at a time wages are declining, benefits are being lost, a record number of Americans use food stamps (31.5 million, up 17% from a year ago), homelessness and poverty are rising, and only a third of laid off workers are eligible for jobless benefits that even when gotten can't support a family.

The Latest Data Confirm the Grimmest Forecasts

Besides unemployment, it's all grim, worsening, and what JVB's chief economist William Sullivan calls "economic nuclear winter" with most reported numbers the worst in years or decades for - production, the service sector, retail sales, consumer spending, capital expenditures, housing, durable goods orders, construction, factory orders, virtually every economic report in an endless dismal stream all pointing precipitously down. Economist and business professor Peter Morici told the Wall Street Journal that "the threat of a widespread depression is now real and present."

The latest reported percentage of mortgage holder delinquencies is more proof. It hit a record 6.99%, according to the Mortgage Bankers Association ( MBA). The number of mortgages somewhere in the foreclosure process also reached a new high as home prices and demand are falling and greater numbers of owners are being pressured given mounting job losses in a weakening economy. Subprime mortgage holders are in the most trouble with more than 20% of them (for the first time) seriously delinquent in Q 3.

The MBA also reported a record 1.35 million foreclosed homes in Q 3, or a 76% increase from the same 2007 period. MBA's chief economist Jay Brinkmann stated: "We have not gone into past recessions with the housing market as weak as it is now, so it is likely that a much higher percentage of delinquencies caused by job losses will go to foreclosure than we have seen in the past." The report is based on 45.5 million mortgages, about 85% of the total number of first mortgages nationwide.

The latest retailers report is also weak. It shows "a Crisis in All Aisles," according to the Washington Post, as "shoppers stow credit cards" and retailers posted their worst November sales in over 30 years. They were down 2.7% compared with the same month last year, the second consecutive negative month, according to the International Council of Shopping Centers.

A recent Citi Investment Research (CIR) analysis sees at least a 5% consumer spending decline during the holiday season due to tighter consumer credit. According to CIR economist Kimberly Greenberger, "The bottom line is that consumers are genuinely concerned about their personal financial health and they are cutting back voluntarily." A Consumer Reports survey also showed that more than half of shoppers plan to rely less on credit this Christmas.

Overall, the economy is contracting at the sharpest rate since the 1930s, and before it's over may surpass the worst of those Depression years no matter how manipulative the camouflage. We're in unchartered territory, conditions are very grave, and their affect on many millions will be hugely destructive.

The toll showed up in the latest Business Roundtable's quarterly CEO Economic Outlook Index. It took its biggest ever drop to 16.5. It stood at 78.8 in Q 3, and it's lowest ever previous reading was 49.3 in Q 1 2003. Anything below 50 indicates contraction.

Budget Crises Are Impacting Cities and States Nationwide

According to the Center on Budget and Policy Priorities, "states are facing a great fiscal crisis." At least 41 have shortfalls in their budgets for this and/or next year, and the numbers are huge. For FY 2009, it's around $77 billion and likely to rise as conditions worsen. Municipal governments are as bad or worse off at about $100 billion or more in the red. It impacts all services including essential ones for the needy, and their numbers will rise going forward.

California is often a bellwether for the nation and not a good sign for what's coming. On December 1, governor Schwarzenegger declared a fiscal emergency, cited a $28 billion shortfall, and compared the state's condition to an accident victim bleeding to death. He wants an austerity budget to deal with it at a time such a measure will worsen it. It's an ongoing state problem, now aggravated by the deepening crisis, and according to one report, unless huge budget cuts are passed, California may run out of money by February or March 2009.

All sorts of draconian measures are proposed with bipartisan support except that Republicans want stiffer ones - cuts in education, health care, and help for the needy; regressive sales and other tax increases; less environmental protection; thousands of state employee layoffs; and tax breaks for business as "economic stimulus."

In addition, for the second time since the Great Depression, California may pay vendors with IOUs. In a December 1 letter to legislative leaders, State Finance Director Mike Genest said the state "will begin delaying payments or pay in registered warrants in March" unless an $11.2 billion deficit is closed or reduced. After approving its budget less than three months ago,  California is fast running out of money - and so are dozens of other states.

Schwarzenegger warned that warrants may have to be used as a promise to pay (with 5% interest based on state law) because credit markets are tight, and it's getting too costly to borrow. Controller John Chiang said state cash reserves will decline to $882 million by February and will be a negative $1.9 billion by March. Tax collections have been hammered the result of the collapsing real estate market and the nation's third highest unemployment rate at 8.2%. Chiang summed up the problem by stating: "We're just barely hanging on right now" and need major help immediately.

State budget crises was the central theme of the December 2 National Governors Association meeting at which Obama was asked for federal aid to offset up to a $180 billion shortfall over the next two fiscal years. He offered help but made no promises beyond saying he'll propose a massive stimulus package that he hopes to sign soon after taking office. "Make no mistake," he said, "these are difficult times, and we're going to have to make hard choices in the months ahead. I won't stand here and tell you that you'll like all the decisions I make. You probably won't."

Neither will auto workers as Congress and the Big Three  conspire against them along with UAW boss Ron Gettelfinger who earlier sold them out. On December 5, The New York Times headlined: "Democrats Set to Offer Loans to Carmakers." The leadership said they'll "provide a short-term rescue plan" and expect to vote on it shortly in a special session.

AP reported that it will amount to about $15 billion in loans while The Times said details aren't available "but senior congressional aides said that it would include billions of dollars in short-term loans," enough to last until Obama takes office. After that,  further aid will likely be in stages as a way to extort maximum rank and file concessions and signal what's ahead for all working Americans - sacrifice, austerity, lower wages, fewer benefits, and the continued erosion of their living standards, now accelerating during the systemic crisis.

What's good for General Motors, as they say, is bad for its workers, and here's what they'll face:

-- plant closures as the industry significantly downsizes;

-- tens of thousands of permanent layoffs;

-- greatly reduced wages and benefits - well beyond what they earlier sacrificed; last year the UAW leadership sold out the membership by accepting a "transformational" agreement; it slashed wages in half to $14 an hour, established a two-tiered wage and benefit arrangement (for new and current workers), cut health benefits and pensions, and let the Big Three off the hook entirely for their retirees' health care;

-- a likely government trusteeship with power to revoke union contracts for huge new concessions; Gettelfinger signaled he's willing; the UAW leadership (and other union bosses) care more about their status, high pay, and special perks, not the protection of union jobs, their pay, and benefits;

-- an accelerated dumping of higher-paid senior workers to be replaced by lower-paid new ones; and

-- an overall hostile environment for powerless workers forced to give up generations of hard won gains, accept pitiful little, or get nothing at all.

Over the past five years, UAW ranks have shrunk from 305,000 to 139,000 through plant closures, buyouts and early retirements. General Motors now announced that it will close another 11 North American plants and eliminate staff in them. Ford and Chrysler have their own plans along with suppliers that will shrink in numbers and size.

The Threat of Future Deflation

Most economists see deflation (not disinflation) as more  stubborn and harder to correct than inflation. It also may lead to depression. A textbook definition runs along the lines of falling prices, usually from a lack of money or credit, but it's also caused by less spending, either personal, government or by business in the form of investment. Serious side effects follow - rising unemployment and falling GDP (output) with the danger of a persistent downward spiral.

Ambrose Evans-Pritchard considers the prospect in his latest December 6 article titled: "Deflation virus is moving policy test beyond the 1930s extremes" (with a response showing) the frontiers of monetary policy being pushed to limits that may now test (the) viability of paper currencies and modern central banking."

Nations are hurtling toward zero interest rates "so what next if the credit markets (won't) thaw?" Think Japan's lost decade even though (so far) depression has been avoided.

But Japan is one country. Today's problem is global, so if depression is coming "we are all going down together." No deus ex machina will save the day, including from China that's very dependent on foreign markets.

Fed chairman Bernanke calls his solution a "technology....a printing press, that (can) produce as many US dollars as (we) wish at essentially no cost." Is he right or wrong? "The world's fate now hangs" on his judgment during a "far more serious (crisis) than the Great Depression," according to Michel Chossudovsky. All measures undertaken so far haven't worked, and in his judgment, "contribute to a further process of destabilization of the financial architecture."

Evans-Pritchard is also worried. "Once the killer (deflation) virus becomes lodged in the system, it leads to a self-reinforcing debt trap - the real burden of mortgages rises, year after year, house prices fall, year after year. The noose tightens until you choke. Subtly, it shifts wealth from workers to bondholders. It is a reactionary poison. Ultimately, it leads to civic revolt. Democracies do not tolerate such social upheaval for long. They change the rules."

Bernanke claims the Fed can "expand the menu of assets that it buys" and thus never run out of tools. It may or may not work but at what price. Perhaps short-term relief for much greater trouble ahead - either a deflationary or hyperinflationary collapse.

In late November, Nobel laureate Robert Mundell and others warned that without an immediate reversal of Fed and Treasury policies, America faces disaster ahead. Bernanke himself warned in a 2002 speech: "The best way to get out of trouble is not to get into it in the first place." Nonetheless, he cheerled "Greenspan's easy-money stupidities from 2003 - 2006, (then himself contributed to) debt debauchery."

Evans-Prichard thinks his monetary blitzkrieg "greatly reduce(s) the likelihood of a catastrophe." He also says: "History will judge."

Henry Kaufman on the Root of Today's Crisis and How It Will Change the Way America Does Business

Now age 81, Kaufman is a highly regarded economist once nicknamed "Dr. Doom" for his interest rate forecasts during the 1970s and early 1980s. He formerly was a Salomon Brothers managing director and executive committee member before heading his own firm, Henry Kaufman & Company. He recently addressed a group of international bankers on today's crisis and followed up with a Wall Street Journal op-ed.

He explained that "There have been more than a dozen financial crises since the end of World War II. The aftermath of each was transitory, and markets rebounded rather quickly." The current crisis is different, and at its root is decades of ballooning debt. Especially since 2000, nonfinancial debt outpaced nominal GDP growth by nearly $8 trillion, or more than double the 1990s gap.

While debt rose, savings shrank, but buying power stayed resilient through credit card availability, mortgage refinancings, and no shortage of willing lenders. From 1960 to 1990, nonfinancial debt grew at around 1.5 times nominal GDP growth while savings averaged about 9% yearly. From 1991 to 2000, debt outpaced GDP by 1.8 times and savings declined to 4.7%.

Since 2000, however, borrowing soared twice as fast as GDP, a housing bubble resulted, households got maxed out on credit, while savings shrunk to around 1.4% and more recently to zero. Kaufman believes that to regain our economic health, we have to kick our addiction to debt and start saving again.

He also cited what he calls the most profound long-term effect of the credit crisis - the radical financial industry concentration to a dominant 15 firms holding over half of the nation's nonfinancial debt (held by households, nonfinancial companies and government). "These are the very firms that played a central role in creating debt on an unprecedented scale through a process of massive securitization via complex new credit instruments (and that) pushed for legal structures that made many aspects of the financial market opaque."

Kaufman says these giants "will limit any chance for the US to move toward greater economic democracy" because they're riddled with conflicts of interests from their multiple roles "in securities underwriting, in lending and investing, in the making of secondary markets, and in the management of other people's money. Through their global reach, (they also) transmit financial contagion even more quickly (and) when the current crisis abates, the pricing power of these huge financial conglomerates will grow significantly, at the expense of borrowers and lenders."

This crisis "will usher in profound and lasting structural, behavioral and regulatory changes," for better or worse, and he lists some important ones:

-- "international portfolio diversification has been undermined;" it failed to weather the test of the current crisis;

-- "risk modeling will lose popularity" - for options and other complex financial derivatives "that are useful for dynamic hedging under normal circumstances," but these don't exist now and won't going forward;

-- "financial concentration will gain even greater momentum and influence;" this is the "most profound long-term consequence of the current credit crisis; in the years ahead, the influence of these financial conglomerates will be overwhelming;"

-- "the end of an era of ballooning nonfinancial debt" that's been a key US economic growth driver for decades; this trend will continue for some time;

-- "US government borrowing will continue to swell, at least for a few years;"

-- "Americans will begin to save again;" and

-- "regulatory reform of financial markets (is coming and) will carry high stakes;" it will become a "major political contest" between "embedded interests."

Down but not out is his message, so when the current crisis ends, it will be business as usual for larger more dominant financial giants. Given the gravity of things, the prospect for global depression and near certainty that the crisis will be protracted and deep, his outlook will unfold in very troubled waters and won't at all serve the public interest.

Today's problem is survival at a time it's daunting for millions and impossible for too many others, while lawmakers, the Treasury and Fed give trillions to banksters who caused the whole mess and billions more to the auto giants and other troubled industries and companies while public America goes begging.

Damien Millet and Eric Toussaint

The G20 summit that brought together major industrialised and emergent countries in Washington on 15 November 2008 is a dismal failure. The international financial crisis is deep indeed, stock markets lost close to 40% of their capitalisation in October 2008, financial markets are awaiting decisions by the States in order to develop remedies against a dark future. The international media spotlights were on Washington for this mid-November weekend. And yet…

Yet what happened in Washington? A sorry show, a script that lacks any credibility, but few spectators seem to care. In detective films it is seldom the case that the keys to the Court of Justice be given to arch criminals. Yet this is what the G20 summit is planning to do.

Since the debt crisis of 1982, major industrialised countries have strongly promoted the neoliberal economic measures that the IMF and the WB were imposing on DCs. In the 1980s and 1990s the South was crushed by debts because of the fall of commodity prices and a steep rise in interest rates; it was forced to reform its economy to be able to service the debt: it introduced wild deregulation, massive privatisations, opening of markets to the greater benefit of corporations in industrialised countries, cuts in public service and social budgets … It was claimed that the source of evil was too much State intervention, and the influence of the State on the economic sphere had to be reduced at all costs, even - or rather especially - when it attempts to stand up for the interests of the majority.

For Third World populations, the remedies imposed by the IMF, the WB and later the WTO, at the request of leaders of countries in the North were worse than the disease. Anti-IMF riots multiplied, for instance when the price of bread doubled overnight. With the notable exception of a few left-wing governments, often placed under strong pressure to bring them back to compliance, most governments of the South applied these measures without flinching. Presented as a prime requirement to the creation of wealth, economic deregulation was extended to the whole planet. Private financial institutions were then free to invent more and more complex financial products with a view to ever-increasing profits, turning a blind eye to actual economic consequences. Mind-boggling financial packages were set up without any public control, and of course any concern for morality. As long as it was possible, the dark side of deregulation was hidden behind enticing growth figures, without letting on that the growth thus paraded benefited only the richer segment of the population and that what was actually achieved was a staggering growth of inequalities.

Then the time came when it was no longer possible to claim that the bride was beautiful when her dress was soaked in blood. The international financial crisis started in August 2007 and intensified in 2008. Major banks (Northern Rock, RBS, Bear Stearns, ING, Fortis, Dexia, UBS and so many others), big insurance companies (AIG), mortgage associations (Freddy Mac, Fannie Mae) called on the State for help and the State often complied and bailed them out. But instead of taking advantage of the situation and retrieving control of those runaway machines, the State left decision-making power to those who had led the global economy to its current impasse.

This G20 summit shows that lessons have not been learned. The old demons of the past are still with us. The IMF and the WB, though further delegitimised by the failure of the measures they have enforced for 25 years and by the governance crisis they have experienced over the last years (Paul Wolfowitz' forced resignation as president of the WB, Horst Köhler and Rodrigo Rato resigning from the IMF, the recent investigation concerning Dominique Strauss-Kahn at the IMF), are still at the heart of the proposed solutions. WTO negotiations aiming at even more economic deregulation, while we have just witnessed the utter failure of this policy, are again on the agenda. While IMF loans could no longer find clients, Hungary, Ukraine and Pakistan have volunteered. Contrary to denials by concerned institutions, the same intolerable conditionalities are still the order of the day: as counterpart for the latest loan Hungary had to decide, among other things, to suppress civil servants’ 13th month bonus and freeze their salaries. Japan even proposed to supply the IMF with USD 100 billion so that it could increase its loans and carry on its fateful activities. Moreover the meeting that was intended to find a global solution to the current crisis was not held in the contexct of the United Nations but in the limited context of the G20. So the very promotors of an unfair and unsustainable model are asked to rescue this model. The only solutions that were put forward protect the interests of major creditors. Populations and poor countries as usual were not consulted.

When faced with such an inconsistent and ill-conceived script, one cannot but hope for a final twist that would introduce a measure of justice and ethics into all this. This final twist can only be found in social struggles all over the world to bring about a radical change in economic choices. And if the film should end as dismally as it started, there is a strong chance that the audience will be highly dissatisfied and make it known to the twenty directors in the most vehement manner ...


Shamus Cooke

After hearing that the media was referring to the weekend gathering of the G-20 as “Bretton Woods II”, the White House immediately began a coordinated attack on expectations.  The economic summit that was to fix the deepening economic crisis was raising hopes too high (Bretton Woods was the 1944 conference that re-organized the world capitalist system after WWII).  

Bush: “This problem did not develop overnight and it will not be solved overnight”.

Media outlets rightly interpreted this — and other statements — to mean that little or nothing would be accomplished.

After learning about the announced “successes” of the summit, working people will likewise conclude that nothing of importance had occurred. And this after Bush urgently declared, "Billions of hardworking people are counting on us."

What was accomplished?

The only real accomplishment of the meeting was that no fighting took place (publicly), and that all 20 participants signed their names onto a common document.   World tensions are in fact so strained that this really does constitute a form of success.

But when one browses through the lengthy joint statement, what is most noticeable is the lack of substance.  Even though the document includes an “action plan” with “immediate steps” to be taken, the already-vague content is dulled with such words as “should," “recommended” and “as appropriate," which appear in nearly every sentence.  For example:

“Regulators, supervisors, and accounting standard setters, as appropriate, should work with each other and the private sector on an ongoing basis to ensure consistent application and enforcement of high-quality accounting standards.”

The entire document is equally painful and ambiguous.   The New York Times correctly stated: “Though the proposals were cast as ambitious reform, they mainly reflected steps that the countries were already undertaking."

These vague steps include: “higher regulatory standards," “promoting stability” and “exercising effective risk management” at financial institutions.

Why was more not more accomplished?    

The answer to this was given by the Western corporate elite’s most intelligent publication, the Economist:

“… as urgency fades and the negotiators drown in complexity, national interest may gain at the expense of collective safety… international rules require enforcement, but nation-states demand sovereignty.”

These words echo the insight of Karl Marx 150 years ago, who pointed out that capitalism was an international system that contained a contraction due to the competing interests of each nation state. Although governments always claim to be acting impartially, real corporate interests are at stake -- most notably the pursuit of profits -- competing against the corporations of other nations, represented by their own “impartial” governments.  

During times of economic crisis, these “national” interests become increasingly desperate and competitive, a reality all too present at the G-20 summit.

The same contradiction prevented the recent WTO talks from being successful, and as the world economy spirals downwards, it will have a similar effect on all multilateral discussions.  Every country has an interest to push the effects of the crisis on to other, and use whatever methods available to push up domestic growth rates (the accumulated profits of each country’s mega-corporations).  

The urge to expand profit was what helped deepen the current crisis, since US banks used all sorts of schemes and accounting tricks to gain leverage over their international competitors; a trick they learned from the Japanese banks prior to Japan’s recession of the 1990s — known as “the lost decade."

The European countries at the G20 summit were hoping that the US would agree to specific regulations that would end these practices, which essentially give the US a trade advantage — in financial instruments such as packaged toxic mortgages— over the rest of the world.  The vague response of the document, combined with Bush’s repeated preaching about the “free market," put the issue at a stalemate.  

Bretton Woods II ?

So why cannot the international community cooperate like they did at the original Bretton Woods conference?

In short, the world situation is far different.  The Bretton Woods institutions were set up during WWII as soon as the Allies sensed they were going to win.  But these “negotiations” were mostly dictates from the US, which was the only country not financially ruined or physically smoldering.  As such, the Bretton Woods institutions — World Bank and IMF — strongly favored the US first, its European lackeys second, and the rest of the world last.  

The world today has not one power, but many.  France’s President Nicolas Sarkozy correctly pointed out, “America is still the number one power in the world…is it the only one? No, it isn’t.”

The “emerging economies” are demanding some real power, which the Bretton Woods institutions do not allow.  Changing these structures are not in the interests of the US and European corporations.  Although the G-20 document calls for more countries to play a bigger role in the IMF, the timetable for accomplishing this was not labeled as an “immediate action,” but a “medium-term action,” meaning that it could be put off indefinitely.  The US mega-corporations that ultimately make these decisions are unwilling to make concessions that will adversely affect their profit margins.  Strained tensions internationally will thus be further stressed.        

Under today’s conditions, a Bretton Woods type of agreement will not emerge from roundtable discussions, but from next round of wars, the winner of which will set the standard at Bretton Woods II.  

In 90 days the G-20 will reconvene and Obama will replace Bush as the chief US negotiator; he will be representing the same corporate interests, ensuring that nothing fundamental is done about an economic crisis that affects more ordinary people every day.

A necessary conclusion must be drawn: the world capitalist system is in a crisis that the ruling class cannot fix.  Likewise, nothing will be done to actually help working class people unless we demand and fight for it ourselves.  But points of unity already exist among us: stopping further Wall Street bailouts, ending war, creating jobs, saving and expanding social programs, stopping foreclosures, extending unemployment benefits, and most important, bailing out working people by taxing the super rich!  A broad coalition organized around these issues would be far more powerful than the handful of elites currently represented by the two party system.
Richard C. Cook

November 15, 2008

The G20 is meeting today in Washington , D.C. , to discuss the world financial crisis, its causes, and what can be done about it. But this won’t help the people of the U.S. who have been victimized by their own financial system.

The stated objectives are to find ways to stabilize and reduce speculation in the financial markets and make financial transactions more transparent, more efficient, and more international in scope. But this is also a revolt by the nations of the world against over-reliance on the U.S. dollar as the world’s reserve currency. What we are likely to see over time is a multi-currency regime that includes the Euro and one or more Asian currencies as well.

But the conference will not address the real causes of why the world is heading into a global recession or why the U.S. economy in particular is in such dire straits. Nor will the meeting lresult in redress of the staggering level of bankers’ criminality abetted by the U.S. government in the creation of the financial bubbles whose collapse is underway.

The real problem is that the world is locked into a debt-based financial system run by the world’s banks, where the only way currency can be entered into circulation is through lending. It’s been massive amounts of completely irresponsible lending which have leveraged the bubbles against much smaller amounts of tangible value.

The GDP of the entire world is $55 trillion. This is dwarfed by speculative lending in the derivatives markets of ten times that amount--$525-$550 trillion. No nation has clean hands in this travesty. The governments of the world and the central banks have allowed it to come into being.  

Within the U.S. , reliance on money-creation through bank lending has been the problem since the creation of the Federal Reserve System in 1913. At that point the U.S. monetary system was privatized. The case has been the same with all the other nations which have private banking systems that control their central banks. The granddaddy is the Bank of England which dates from 1694.

The creation of the Federal Reserve System marked the start of a century of world war. This is hardly a coincidence. Indeed, the central banking system encourages wars and lives off them, because it is war and the threat of war that is most profitable to a system where the more money governments borrow the more profits the banks make.

All this started with World War I, which was largely financed by the British, French, German, and the U.S. banks. Events have continued in that vein through today, where the nations of the world are armed to the teeth and global finance capitalism tries to increase its control everywhere to the detriment of workers, national economies, and the environment.  

To try to fix the crisis through bailing out the system, we are now seeing in the U.S. and Europe levels of government borrowing that have not been experienced since World War II. The purpose is to recapitalize a financial system that has destroyed itself through its own greed and folly. But all this does is defer the bill to future generations who have to pay the enormous compounded interest charges this borrowing entails. Interest on the national debt in the 2009 federal budget is over $500 billion. Every man, woman, and child in the nation is a victim of this crime.  

The situation is so bad that many people believe the U.S. may even be in danger of defaulting on its gigantic national debt sometime in 2009.

Meanwhile, the failed financial system is dragging down the world’s producing economy with it, and the bailouts won’t change that situation. Combined with the financial crash has been a collapse in consumer “demand.” In other words, consumers, who are maxed out on their credit, no longer can borrow enough to keep the wheels of the economy turning.

But the reason they must borrow for consumption is that earnings are not sufficient for people to buy what they need to live. This is why in the U.S. there has been an outcry, including with the Obama campaign, for new government job-creation programs. Every day there is another proposal by progressives for new government spending, which, of course, will have to be financed by even more government debt.

So when are we going to learn how to introduce purchasing power without debt? How did we ever come to believe that the only way to create money is through a bank inventing it out of thin air? In the past few weeks we have had a number of Nobel-prize winning economists chip in with their suggestions of what to do, but none have addressed the obvious question of what the alternatives may be to bankers’ debt-based currency.

If we look at history, we see other ways governments have used their powers to create money. Indeed, until the Federal Reserve Act of 1913, the U.S. was a kind of laboratory of alternative methods of money-creation.

If we go back to colonial days, the American colonies used a variety of means to introduce currency into circulation. In Virginia , plantation owners received tobacco certificates when they deposited their product at public warehouses. The certificates then circulated as currency.

In Pennsylvania the government ran a land bank which paid cash to land-owners for liens on property. The interest paid for the costs of government without any taxation of citizens.

In Massachusetts, Pennsylvania, and elsewhere, governments spent paper money directly into circulation. The money received value by then being accepted by those governments, after it circulated within the economy, in payment of taxes.

Other forms of currency were Spanish dollars, Indian wampum, and IOUs. There was also a flourishing barter trade.

The system worked. By 1764, the American colonies formed one of the most prosperous trading regions on the planet. When asked why, Benjamin Franklin said it was because of colonial scrip—i.e., their paper money. When the British Parliament outlawed it through the Currency Act of 1764, an economic depression followed. It was the underlying cause of the Revolutionary War.

During that war, the Continental Congress issued the famous Continental Currency. What likely caused that money to inflate was extensive British counterfeiting, not being used to excess by our national government.

Once the nation became independent, a U.S. mint was founded so individuals could bring in gold or silver and have it stamped into coinage free of charge. New discoveries as with the California and Yukon gold rushes or better methods of extraction from ores resulted in economic booms. From then until coinage lost its value after the Federal Reserve System was established, precious metals were a major part of the U.S. monetary system that included not only coinage but also gold and silver certificates.

In 1791 and again in 1816 Congress passed legislation for the First and Second Banks of the United States . These banks were dupicates of the Bank of England whose purposes were to fasten on the U.S. the same type of debt-based monetary system that was the driving force for the British Empire . Presidents Thomas Jefferson, James Madison, Andrew Jackson, and Martin van Buren were among those who saw these banks as a Trojan Horse for financier tyranny. The split between pro- and anti-bank forces was the origin of the two-party system within the United States .

When Jefferson became president in 1800 he refused to borrow from the bank and balanced the federal budget for eight consecutive years by cutting military expenditures. Andrew Jackson took similar action in 1833 when he withdrew federal funds from the bank and paid off the entire national debt. It was recognized back then that fiscal responsibility was an effective means for keeping the government out of the control of the bankers and their political friends.

When the Civil War broke out in 1861, President Abraham Lincoln refused to borrow from the banks. Instead he financed the war through income and excise taxes, sale of war bonds directly to citizens, and issuance of the famous Greenbacks. This came about in 1862 when Congress authorized the government to spend $450 million in paper Greenbacks directly into circulation. Congress also introduced tangible value into the economy by what was then the very wise policy of transferring huge amounts of public land to the railroads and to citizens under the Homestead Act.

During the late 19th century, ordinary citizens were not so stunningly ignorant of the politics of money as they are today. People recognized the Greenbacks for having saved the union. A Greenback Party was formed that elected representatives to Congress and ran candidates for president.

Greenbacks remained in circulation, and as late as 1900 still made up a third of the nation’s monetary supply, along with coinage, gold and silver certificates, and national bank notes. Also, many other business entities, including the “company stores” owned by mining companies, issued their own paper scrip that was part of the circulating currency. For example, in a pamphlet on monetary reform written by American poet Ezra Pound in the 1930s was an illustration of paper money his grandfather issued from his lumberyard in Michigan in the late 1800s backed by board-feet of lumber payable on demand! Of course barter trade continued and still exists today among industrial firms.

But the bankers were on the move. In 1863 and 1864 Congress passed the National Banking Acts which drove the extensive system of state-chartered banks, including some owned by state governments, out of existence. By the early 1900s, the power of the bankers had coalesced under the New York banking trust led by the J.P. Morgan and Rockefeller financial interests.

The bakers struck in 1913 just before the Christmas recess when many Congressmen had already left Washington for the holidays. The Federal Reserve Act had actually been written by bankers from Europe who were allied with the Rothschild interests. Congressman Charles Lindbergh, Sr., father of the aviator, called the Act “the legislative crime of the ages.” Later President Woodrow Wilson, who signed the Act, said he had “unwittingly ruined my nation.”

But the deed was done. The Federal Reserve System created the first major financial bubble through World War I spending, followed by a depression, then created and burst the stock market bubble whose collapse started the Great Depression in 1929. President Franklin D. Roosevelt took over credit creation through low-cost government lending in the 1930s but had to use World War II to achieve full employment because by then the government was totally locked into the Keynesian tax-and-borrow credo of public finance.

The bankers began their comeback in the 1950s and consolidated their power in the 1970s under the heading of “monetarism,” which is the philosophy of trying to control the economy through raising and lowering of interest rates. This travesty—which is really institutionalized usury—is as familiar to us today as the water a fish swims in. We don’t even notice it. Yet it’s this system that has ruined the world. Ever since the 1970s, every period of economic growth in the U.S. has been a bank-created bubble followed by a crash and a recession.

We had the inflation of the 1970s created by the government-induced oil prices shocks, followed by the Paul Volcker crash of 1979-83 when the Federal Reserve raised interest rates above twenty percent and caused the biggest downturn since the Great Depression.

During the later Reagan years we had the merger-acquisition bubble followed by the recession that brought Bill Clinton to office in 1992. Then we had the bubble of the mid- to late-1990s that ended with the crash of 2000-2001.

Next, instead, of rebuilding an economy that had been devastated by export of our best manufacturing jobs to China and other cheap-labor countries, the Federal Reserve under chairman Alan Greenspan, with assistance from the George W. Bush administration, created the biggest bubble economy in history, with the housing, commercial real estate, equity, hedge fund, derivatives, and commodities bubbles all blowing up at the same time and leaving us with the mess we are in today.

What has happened during the Bush administration has been the greatest crime against the public interest in U.S. history. Its effects are only starting to be evident.

Of course in the face of so many disasters, the credit markets have imploded, and governments don’t know what to do except recapitalize and restructure them but without taking action to address the deep systemic problems with the producing economy. And while the Europeans may have blown the whistle on U.S. excesses through the G20 meeting, this country still faces disaster.  

Yes, Wall Street is killing Main Street , and no one has come up with an answer except suggestions for the bailouts and some New Deal-type programs in an environment that is much worse even than in the 1930s. For one thing, most of what we consume today is produced abroad. For another, family farming has been ruined. In a pinch, our nation could no longer even feed itself.

But the amazing thing is how easy it would be to salvage the situation if the government took the simple step of treating credit as what it really is—a public utility like clean air, water, or electricity, not the private property of the banking system. In fact the banking system and the politicians they own have stolen and abused this fundamental piece of the social commons.

Banks have no legal right to work against the public interest. Every single bank that has ever existed has operated under a public charter. The Constitution gives Congress—i.e., the people’s representative government—authority to regulate interstate commerce. It also gives Congress the right and responsibility to control the monetary system.

So why doesn’t Congress do it? Why does Congress sit passively and stare when Federal Reserve chairmen such as Alan Greenspan or Ben Bernanke sit before them and mumble  nonsense about markets and interest rates and inflation and the rest of a made-up system whose main result is to funnel the wealth of the economy upwards into the hands of the financial elite?

In my writings I have advocated several measures Congress could take immediately to remedy the catastrophe we are facing:

Congress could authorize direct expenditure of government funds for legitimate public expenses, as was done with the Civil War-era Greenbacks. Contrary to bankers’ propaganda, the Greenbacks were not inflationary then and would not be inflationary now, because they would be backed by tangible economic production of goods and services. What has been inflationary has been the debt-based currency which, since it was introduced in 1913, has caused the dollar to lose 95 percent of its value. Greenback-type spending is contained in the proposed American Monetary Act, developed by the American Monetary Institute.
Congress could authorize a national infrastructure bank that would be self-capitalized and would lend money into existence to state and local governments at zero percent interest. Legislation for such a bank has been introduced by Congressman Dennis Kucinich.
Congress could authorize dividend payments to citizens as advocated by the Social Credit movement founded by Major C.H. Douglas of Great Britain decades ago as a means of monetizing the net appreciation of the producing economy. Dividends exceeding $1,000 a month could be issued from a national dividend account without recourse to taxation or borrowing. Such a concept is related to the Alaska Permanent Fund which paid over $3,200 to each state resident in 2008 and to the concept of a basic income guarantee advocated by proponents of the negative income tax in years past.
Congress could utilize dividend payments once they were spent, possibly in the form of vouchers for necessities of life like food and housing, to capitalize a new network of community savings banks that would provide low-cost credit to home purchasers, students, small business people, and local farms.
I worked in the U.S. Treasury Department for 21 years and learned first-hand the history and operations of public finance in the U.S. I have seen the disastrous results of the debt-based financial system and how it has driven our nation, government, and people into bankruptcy. I have also seen how these simple measures of monetary reform would be easy to implement and would begin to turn the situation around within weeks or months.

All it takes is political will and a determination to challenge the death-grip the financial elite has had on our economy for a century.

We can be quite certain that these vital issues will not be addressed by the summit of the G20 meeting in Washington today. If anything, these meetings are likely to render the grip of private finance on the peoples of the world even tighter than before.

But sooner or later change must come. For the immediate future people could fight back by doing everything possible to get out of debt, convert their cash reserves to tangible holdings, and start their own local currency and barter systems. But for real change, a monetary revolution is required.

Fidel Castro Ruz

Bush seemed happy to have Lula sitting to his right during dinner on Friday. On the other hand, Hu Jintao, whom he respects for the enormous market in his country, the capacity to produce consumer goods at low cost and the volume of his reserves in US dollars and bonds was sitting to his left.

Medvedev, whom he offends with the threat of locating strategic radars and missiles not far from Moscow, was assigned a seat rather distant from the White House host.

The King of Saudi Arabia, a country that in a near future will produce 15 million tons of light oil at highly competitive prices was also sitting at his left, at Hu’s side.

Meanwhile, Gordon Brown, the Prime Minister of the United Kingdom and his most faithful ally in Europe, could not be seen close to him in the pictures.

Nicolas Sarkozy, who is rather disappointed at the present architecture of the financial order, was far from him looking embittered.

The President of the Spanish Government, Jose Luis Rodriguez Zapatero, a victim of Bush’s personal resentment attending the conclave in Washington, I could not even see in the television images of the dinner.

That’s how those attending the banquet were sitting.

Anyone would have thought that the following day there would be a profound debate on the thorny issue.

On Saturday morning, the press agencies were reporting on the program that would unfold at the National Building Museum in Washington, D.C. Every second was covered. There would be an analysis of the current crisis and the actions to be taken. It would start at 11:30 a.m. local time. First, there would be a photo op, or “family picture” as Bush called it, and twenty minutes later the first plenary session would start followed by a another one in the second half of the day.  Everything was strictly planned, even the fine sanitary services.

The speeches and analysis would last approximately three hours and 30 minutes. Lunch would be at 3:25 local time, immediately followed by the final declaration at 5:05. One hour later, at 6:05, Bush would be leaving for Camp David to rest, have dinner and have a pleasant sleep.

Those following the event were impatient to see the day going by and trying to know how the problems of the earth and the human specie would be dealt with in such a short time. A final declaration had been announced.

The fact is that the Summit’s final declaration was worked out by previously chosen economic advisors, very much in line with neoliberal ideas, while Bush in his statements prior to the summit and after its conclusion claimed more power and more money for the International Monetary Fund, the World Bank and other world institutions under strict control of the United States and its closest allies. That country had decided to inject 700 billion dollars to bailout its banks and multinational corporations. Europe had offered an identical or even higher figure. Japan, its strongest pillar in Asia, has promised a 100 billion dollars contribution. In the case of the People’s Republic of China, which is developing increasing and convenient relations with Latin American countries, they are expecting another contribution of 100 billion dollars from its reserves.

Where would so many dollars, euros and pound sterlings come from if not from the deep indebtedness of new generations? How can the structure of the new world economy be built on paper money, which is what is really circulating in the short run, when the country issuing it is suffering from an enormous fiscal deficit? Would it be worthwhile traveling by air to a place on the planet named Washington to meet with a President with only 60 more days left in government and signing a document previously designed to be adopted at the Washington Museum? Could the US radio, TV and press be right not to pay special attention to this old imperialist game in the much-trumpeted meeting?

What is really incredible is the final declaration adopted by consensus in the conclave. It is obviously the participants’ full acceptance of Bush’s demands made before and during the summit. Some of the attending countries had no choice but to adopt it; in their desperate struggle for development, they did not want to be isolated from the richest and most powerful and their financial institutions, which are the majority in the G20.

Bush was really euphoric as he spoke. He used demagogic phrases which mirror the final declaration.

He said: “The first decision I had to make was who was coming to the meeting. And obviously I decided that we ought to have the G20 nations, as opposed to the G8 or the G13. But once you make the decision to have the G20 then the fundamental question is, with that many nations, from six different continents, who all represent different stages of economic development, would I be possible to reach agreements, and not only agreements, would I be possible to reach agreements that were substantive? And I’m pleased to report the answer to that question was, absolutely.”

“The United States has taken some extraordinary measures. Those of you who have followed my career know that I’m a free market person –until you are told that if you don’t take decisive measures then it’s conceivable that our country could go into a depression greater than the Great Depression.”

“[…] we just started on the $700 billion fund to start getting money out to our banks.”

“[…] we all understand the need to work on pro-growth economic policies.”

“Transparency is very important so that investors and regulators are able to know the truth.”

The rest of what Bush said goes more or less along this line.

The final declaration of the summit, which takes half an hour to read in public due to its length, is clearly defined in a number of selected paragraphs:

“We, the leaders of the G20 have held a first meeting in Washington, on November 15, in the light of serious challenges to the world economy and financial markets…”

“[…] we should lay the foundations for a reform that will make this global crisis less likely to happen again in the future. Our work should be guided by the principles of the free market, free trade and investment….”

“[…] the market players sought to obtain more benefits failing to make an adequate assessment of the risks and they failed…”

“The authorities, regulators and supervisors from some developed nations did not realize or adequately warned about the risks created in the financial markets…”

“…insufficient and poorly coordinated macroeconomic policies as well as inadequate structure reforms, led to an unsustainable macroeconomic global result.”

“Many emerging economies, which have helped sustain the world economy, are increasingly suffering from the world brakes.”

“We note the important role of the IMF in response to the crisis; we salute the new short-term liquidity mechanism and urge the constant reviewing of its instruments to ensure flexibility.”

“We shall encourage the World Bank and other multilateral developing banks to use their full capacity in support of their agenda for assistance…”

“We will make sure that the IMF, the World Bank and other multilateral developing banks have the necessary resources to continue playing their role in the solution of the crisis.”

“We shall exercise a strong monitoring of the credit agencies through the development of an international code of conduct.”

“We pledge to protect the integrity of the world financial markets by reinforcing protection to the investor and the consumer.”

“We are determined to advance in the reform of the Bretton Woods institutions so that they reflect the changes in the world economy to increase their legitimacy and effectiveness.”

“We shall meet again on April 30, 2009, to examine the implementation of the principles and decisions made today.”

“We concede that these reforms will only be successful if they are based on a serious commitment to the principles of free market, including the rule of law, respect for private property, free trade and investment, efficient and competitive markets and effectively regulated financial systems.”

“We shall refrain from erecting new barriers to investment and trade in goods and services.”

“We are aware of the impact of the current crisis on the developing nations, especially on those most vulnerable.”

“We are certain that as we advance through cooperation, collaboration and multilateralism we will overcome the challenges and restore stability and prosperity to the world economy.”

This technocratic language is beyond grasp of the masses.

The empire is treated courteously; its abusive methods are not criticized.

The IMF, the World Bank and the multilateral credit organizations are praised despite the fact that they generate debts, enormous bureaucratic expenses and investments while supplying raw materials to the large multinationals which are also responsible for the crisis.

This goes on like that until the last paragraph. It’s a boring declaration full of the usual rhetoric. It doesn’t say anything. It was signed by Bush, the champion of neoliberalism, the man responsible for genocidal wars and massacres, who has invested in his bloody adventures all the money that would have sufficed to change the economic face of the world.

The document does not have a word on the absurd policy promoted by the United States of turning food into fuel; or the unequal exchange of which the Third World countries are victims; or about the useless arms race, the production and trade of weapons, the breakup of the ecological balance and the extremely serious threats to peace that bring the world to the brink of annihilation.

Only a short four-word phrase in the long document mentions the need “to face climate change.”

The declaration reflects the demand of the countries attending the conclave to meet again in April 2009, in the United Kingdom, Japan or any other country that meets the necessary requirements --nobody knows which- to examine the situation of the world finances, dreaming that the cyclical crisis with their dramatic consequences never happen again.

Now is the time for the theoreticians from the left and the right to offer their passionate or dispassionate criteria on the document.

From my point of view, the privileges of the empire were not even touched upon. Having the necessary patience to read it completely, one can see that is simply a pious appeal to the ethic of the most powerful country on earth, both technologically and militarily, in the era of  economic globalization; it’s like begging the wolf not to eat up little red riding hood.

Mike Whitney

As expected, the G-20 Economic Summit in Washington turned out to be a total bust. None of the problems which have pushed the global economy to the brink of disaster were resolved and none of the main players who gamed the system with their toxic securities were held accountable. Instead, the visiting dignitaries gorged themselves on stuffed quail and roast rack of lamb before settling on a toothless "Statement on Financial Markets" which accomplished absolutely nothing. The one noteworthy clause in the entire document is a two paragraph indictment of the United States as the perpetrator of the financial crisis. At least they got that right.

From the text:

"Root Causes of the Current Crisis: During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.

Major underlying factors to the current situation were, among others, inconsistent and insufficiently coordinated macroeconomic policies, inadequate structural reforms, which led to unsustainable global macroeconomic outcomes. These developments, together, contributed to excesses and ultimately resulted in severe market disruption."

Bingo. The contagion started on Wall Street and that's where the responsibility lies. It was the result of the Fed's reckless low interest rates and lack of government oversight. This allowed market participants to create massive amounts of leverage via speculative bets on under-capitalized debt-instruments. The resulting collapse in value of all asset-classes across the spectrum has created a gigantic multi-trillion dollar capital hole in the global financial system which has precipitated violent swings in the stock markets, tightening credit, currency dislocations, soaring unemployment and deflation. Almost all of todays economic woes can be traced back to legislation that was promoted by key members of the Clinton and Bush administrations. (Many of who will now serve in the Obama White House) The G 20s statement puts the blame squarely where it belongs; on the Federal Reserve and Wall Street.

But this is old news. There's no point in rehashing the past unless there's a real interest in bringing the guilty parties to justice or unless the gathered leaders are serious about establishing the rules for a new economic regime. But they're not, which is why the confab was just another political gab-fest devoid of any serious reforms.

It was interesting, though, to hear Bush, in a rare, unscripted moment, acknowledge that the extreme steps taken by the Fed and US Treasury--since Bear Stearns defaulted 17 months ago--were intended to avoid what he called "a depression greater than the Great Depression." That's quite an admission for Bush, as well as a vindication of the left-wing web sites which have been making the same prediction for more than 2 years. And although Bush rejected any personal responsibility for the policies which led to the crisis, it's clear that he has some rudimentary grasp of its gravity. That's a start. As he opined to the press, "This sucker could go down".

Despite the outcry for meaningful reform, the summit only reinforces the status quo; the same old American-led financial system. In fact, there appears to be growing consensus that the IMF should spearhead the programs that provide liquidity to the developing countries that are getting pounded by the downturn. This is a major setback. It restores the IMF--which is the "iron fist" of the US Treasury-- to its former glory so it can once again use its extortionist loans to thrust faltering nations into structural adjustment, privatization and slave wages. The meetings are breathing new life into the failed neoliberal policies that should be done away with once and for all.

The G 20 statement invokes the same "pro growth", free market mumbo jumbo that permeates all far-right documents. Pro growth is code for low interest credit which allows market speculators to benefit from the steady flow of cheap capital while workers are stuck trying to make ends meet on stagnant wages and a falling dollar. It's a way of making sure that the playing field is always tilted in favor of Wall Street. Pro growth does not mean strengthening productive activity or manufacturing goods that consumers want to buy. It means expanding credit through derivatives contracts and other leveraged investments to maximize profits on borrowed money. The long-term objective is to put the financial sector above the productive sectors of the real economy. It is a blueprint for maintaining dollar hegemony and Wall Street's continued dominance over global finance.

The G 20 statement also rejects protectionism which defends the interests of labor and crucial national industries. Again, this just illustrates the blatant pro-Wall Street bias of the meetings where none of the leaders represented the interests of labor or unions. To hell with the working man.

The group called for more government stimulus to minimize the effects of the frozen credit markets, unemployment and deflation. They also demanded greater "transparency and accountability", although it will probably amount to nothing. Wall Street is not about to give up the Golden Goose; its off balance sheets operations, its Level 3 "marked to fantasy" assets, its "dark pool" trading, and its opaque, convoluted accounting methods. These are the alchemists best friends which allow investment gurus with little talent and even less scruples to weave exotic debt-instruments into pure gold. Expect plenty of lip-service from Paulson and his brood about transparency, while revealing next to nothing about their shady activities.

Of course, there was the usual high-minded gibberish about "fostering innovation", preserving market "dynamism" and striving for "poverty reduction". Some of the leaders even called for the creation of "supervisory colleges'' for bank regulators and limits on executive pay to "avoid excessive risk-taking." (Oh, please) It's a wonder that the developing nations, many of whom have been the victims of the IMF's heavy-handed policies, would allow this type capitalist claptrap to be inserted into the final copy. It's like something out of Milton Friedman's memoirs. No one in the penthouse suites in downtown Manhattan will be taking a cut in pay anytime soon nor do they lose any sleep over "poverty reduction". These guys are riverboat gamblers whose life-work is picking the pockets of unwitting investors.

What's really needed instead of all this diversionary nonsense is strict compliance to a basic set of rules . The rules for financial institutions have been articulated by many market analysts including Karl Denninger (Market Ticker) in his "Genesis Plan":

1-- Force all off-balance sheet "assets" back onto the balance sheet, and force the valuation models and identification of individual assets out of Level 3 and into 10Qs and 10Ks. Enact this requirement beginning with the 3Q 2008 reporting period which begins next month. (ed.--All assets must be accounted for on the banks balance sheet)

2. Force all Over the Counter (OTC) derivatives onto a regulated exchange similar to that used by listed options in the equity markets. This permanently defuses the derivatives time bomb. Give market participants 90 days to get this done; any that are not listed in 90 days are declared void; let the participants sue each other if they can't prove capital adequacy. (ed--This creates a public exchange so that regulators know whether derivatives contracts are sufficiently capitalized)

3. Force leverage by all institutions to no more than 12:1. The SEC intentionally dropped broker/dealer leverage limits in 2004; prior to that date 12:1 was the limit. Every firm that has failed had double or more the leverage of that former 12:1 limit. Enact this with a six month time limit and require 1/6th of the excess taken down monthly. (ed--The 5 largest investment banks claimed an aggregate asset-value of $4 trillion before Bear Stearns defaulted. Many, if not most, of those worthless assets are now on the Fed's balance sheet underwritten by the US taxpayer. Too much leverage, simply means that the taxpayer pays the difference when the bank fails)

That's the bulk of it right there. Follow the rules or go to jail. Period.

Of course, Glass Steagall will need to be reenacted--to separate commercial from investment banks--and the ratings agencies will have to be freed from any conflicts of interest. They cannot be paid by the same financial institutions that commission them to provide ratings; that's a non-starter. The main thing is to restore confidence in the markets through transparency. Right now, the Obama camp is amassing the same collection of Wall Street sharpies who pushed to repeal Glass Steagall and allow derivatives to be traded off of a public exchange. They believe they can keep the same financial regime in place with just slight face-lift using Obama's credibility to conceal their activities. That's why it is critical for the nations with the largest capital reserves to establish an independent model for providing relief for developing countries that are hurting from the financial crisis. Otherwise, the IMF (US Treasury) will entangle them in their web of debt.

In his latest article "The Great Depression of the 21st Century: Collapse of the Real Economy" author and economist Michel Chossudovsky sheds some light on the agenda of the banking giants led by their standard-bearer at Treasury, Henry Paulson:

"Once they have consolidated their position in the banking industry, the financial giants including JP Morgan Chase, Bank of America, et al will use their windfall money gains and bailout money provided under TARP, to further extend their control over the real economy. The target of these acquisitions are the numerous highly productive industrial and services sector companies, which are on the verge of bankruptcy and/or whose stock values have collapsed. As a result of these developments, which are directly related to the financial meltdown, the entire ownership structure of real economy assets is in turmoil.

In a bitter twist, the new owners of industry are the institutional speculators and financial manipulators. They are becoming the new captains of industry, displacing not only the preexisting structures of ownership but also instating their cronies in the seats of corporate management".

Chossudovsky sums it up perfectly. The financial crisis is being used by Wall Street big-wigs to restructure the economy and create a permanent class of working poor.

The world doesn't need a new Bretton Woods or a new world order; it needs a competing vision of global finance. One that will put an end to dollar tyranny, superpower politics and "beggar thy neighbor" economic policies. A system that strengthens national sovereignty, cooperation, and international law. That's what the G 20 should have been talking about, instead of wasting their time trying to prop up a system that's rotten to the core.
Huge Financial Entities Being Formed

Lawrence Velvel

In younger days I was an antitrust lawyer for a considerable number of years.  Most of my work, and my cast of mind, was on the plaintiff’s side.  This mentality meant, and means to this day, that I favor views expressed by Justices Brandeis and Douglas:  Antitrust is not simply about claimed efficiency that supposedly makes things better for consumers.  The claims of efficiency are often false and consumers often get the short end of the stick.  Rather than being solely about supposed efficiency, antitrust is also about fairness towards competitors, about the virtues of smallness in preference to corporate elephantiasis, about maintaining democracy by preserving economic opportunity for the small man or woman.  

The Brandeisian-Douglas view has not prevailed in the last 30 to 40 years.  Instead, with some of the most famous names in American law as the tip of the spear (in military terms), the field was taken over by, and federal judges learned from and implemented the views of, the economics boys -- famous professors and judges who claimed that economics were all that mattered and that they, with their verbal facility and occasional mathematical models, could tell us which principles of economics to apply.

The result has been the virtual death of antitrust under the guise of making it more sophisticated.  Colossal mergers, legalized price fixing, forcing unwanted products upon buyers as the price of purchasing other products which they do want, are the order of the day.  The consumer and the small man or woman exists to be screwed over.

One of the ideas of the economics ist alles boys (economics is all boys) has been that corporate giganticism, whether achieved by mergers, buyouts, internal growth or howsomever, represents a desirable triumph of . . . . something.  Maybe a triumph of efficiency, maybe a triumph of cost savings, maybe, if corporations in different fields are melded, a triumph of smoothing out overall corporate earnings cycles because one field will be up when the other is down, maybe a triumph of the idea that huge size and diversification would enable American companies (especially financial ones) to compete more effectively with European and Japanese ones.  Creating corporate giganticism had to be a triumph, the economics boys said, because, if it weren’t desirable, then hard-headed businessmen wouldn’t do it.

Well, one triumph of giganticism was for certain.  It was a triumph of the economics boys’ theories, verbal fluency and even mathematical claims, over reality.  Ignoring reality, the economics boys didn’t consider that high executives from one of the previously separate corporations would be at loggerheads with executives from the other, that from top to bottom the cultures of melded corporations wouldn’t mesh, that cost savings wouldn’t materialize, that earnings would not be smoothed out, that purchasing corporations wouldn’t know how to make good use of acquired corporations, that different industries require very different mentalities, that size was achieved by destroying highly innovative, often new companies, that companies make acquisitions not because this creates better economic entities but because it creates more power, more prestige and vast compensation for high executives, that people, including businessmen, do not act solely in accordance with the presumed economic dictates governing the rational economic man whose motivation the economics boys (falsely) like to posit as the only one to be considered, that the stock of the merged entity would tank, that ultimately there would have to be massive demerging (if I may call it that).  

Nor did the economics boys reckon with another point, a point which is assailing us big time today, even as this is written, a point which is the very reason this is being written.  The purveyors of "economics ist alles" did not consider that, when you create gigantic corporate organizations, you are in bigger trouble if one or a few of them make terrible mistakes or fail than if the organizations making mistakes or failing are only one third or one quarter the size.  

Today there is a crisis on Wall Street.  It involves enormous losses.  It threatens the economy.  One reason it is of such magnitude is that the institutions of Wall Street were allowed to become so huge.  They are so big that their mistakes and their failures threaten all of us.  

There have been Wall Street crises before that threatened or brought down the economy.  I think I’m right in recollecting, and I know I’m right in some of my recollections, about how problems in the financial markets led to or threatened depressions:  Such occurred in the 1830s, 1850s, 1870s, 1890s, early 1900s, and then in the Great Depression which began with the crash of 1929.  After the crash of 1929, however, it was thought -- I believe rightly, though economic revisionists, like many revisionists, seek to obscure the truth -- that one of the causative factors was that large Wall Street houses were simultaneously both investment banks and commercial banks. They were, in other words, both sellers and traders of stocks and the kind of bank in which you and I have savings accounts and checking accounts and that make loans for houses and businesses.  When the investment bank side of a house went down because it had made mistakes or the market tanked, it pulled down the commercial banking side of the house too.

One part of the solution to this was the Glass-Steagall Act, which decreed that a bank must choose to be either an investment bank or a commercial bank, but could not be both.  The House of Morgan, for example, had to be split into two entirely separate banks, initially named, if I remember correctly, J.P. Morgan & Co. and Morgan Guarantee Trust.  By forcing banks to be either one type of institution or the other, Glass-Steagall limited the havoc that could be caused by a horrible mistake or failure of a bank.  

This worked pretty well for roughly 50 or 60 years.  But then Wall Street greed (a reflection or leader of general American greed) took over.  I don’t remember all the details, but do remember my surprise, at what was being permitted, surprise arising from a belief in Brandeisian/Douglas principles.  Wall Street figures and houses began persuading various federal agencies -- if memory serves, the Federal Reserve and the Comptroller were involved at various points -- to let them make inroads on the separation ordained by Glass-Steagall.  It was claimed that the inroads would make them more competitive with foreign institutions, would create desirable financial supermarkets, and achieve other great things.  So given institutions got into both the stock business and the commercial banking business, thus undercutting Glass-Steagall.  (This is described briefly in a posting in Slate on Monday, September 15th, by Daniel Gross.)  Sometimes they did insurance too.  They became gigantic, and their heads were lionized by, and featured in, the mainstream mass media.  Ultimately the Wall Street titans, for their own benefit, persuaded Congress to completely repeal Glass-Steagall.

Corporate elephantiasis was further increased because -- antitrust and Brandeisian fear of huge size having become dead letters due to the "economics ist alles" crowd -- banks that already were huge began buying up other banks, until we now have banks with assets of what -- 500 or 750 billion dollars or more?  (I recently read that the merged Bank of America/Merrill Lynch will control customers’ assets of 2.5 trillion dollars.)  Similarly, investment banks (and commercial banks) began buying up mutual fund companies and/or moving into investment-related fields that were new to them.  

So, at the end of the day, so to speak, the big got even bigger, the already large became gigantic, and economic power was concentrated in fewer and fewer institutions.  And, when a mistake was made, it had larger ramifications because the company making it was much larger.  Even worse, when lots of institutions made the same mistake, the ramifications were that much larger because the various institutions making the mistake were that much larger and had greater effect on the economy.

Now we are seeing the results of one of the greatest mistakes ever, a mistake many of the giants engaged in, one that was an effort to repeal the financial laws of nature.  It involved, as all know, subprime, adjustable rate mortgages; pushing on people mortgages they didn’t understand and definitely could not afford once the adjustable rate went up -- as inevitably would occur; sometimes pushing the mortgages on them by fraud; buyer ignorance (and sometimes greed); securitizing the mortgages into hugely complex tranches with differing rights and risks; pushing these so-called mortgage-backed securities onto the public; an ever rising housing market driven higher and higher by the housing purchases made possible by the scheme; and, in the end, the bursting of the bubble.

You know, there is no end to greed, is there?  Perhaps ten years ago -- maybe even longer -- I read an article in Barron’s on the mortgage securitization phenomenon, with its incomprehensible tranches, its incomprehensible, differing sets of rights and risk.  The general thrust of the article was that nobody really understood the risks or who, if anyone, would come out okay if there were problems, and who would get creamed.  Barron’s was obviously right, and now, years later, we read almost every day that the risks (and the ever increasing complexities (including derivatives?)) were still not understood in recent days.  But greed prevailed, so the effort to defy the economic laws of nature by putting people into homes they obviously could not afford prevailed, and now the whole thing has tanked, as was expectable in the circumstances.  The situation was made even worse over time, and the tanking is worse now, because the institutions caught up in the whole deal are so gigantic.  The fall out from the disaster is far worse than otherwise because of the institutions’ size.  The whole American economy, even the world economy, is threatened.  

Much of the problem would almost surely have been avoided if the titans of Wall Street, the federal agencies, and the venal Congress which can be and is bought for the price of some campaign contributions, had not sought or granted exceptions to, and then ultimately repealed, Glass-Steagall, and if antitrust had not been eliminated as a significant factor by the theories of the economics boys.  A few of us like myself and other MSL professors, occasionally wrote about why the demise of Glass-Steagall and the rise of ever greater elephantiasis was a dangerous thing, but we were just small fry whistling in the wind.  The bigshots knew what they wanted and got it.  And now look what’s happened, as what was once called the madness of crowds morphed into the greedy madness of the far fewer and enormously larger.

You know, it is interesting that in recent years, even in recent days, the decades-long drive for ever greater size has begun to decline or be reversed in various fields.  People are buying smaller cars.  People are beginning to buy smaller houses -- sometimes teeny houses.  It is becoming recognized that there are great advantages to smaller schools, from grammar and high schools to universities.  It is understood that small companies are often the most innovative.  Small hospitals that specialize in one kind of operation are thought the best at what they do.  It very well may be that god or nature or something is telling us something, is telling us, perhaps, that organizations and artifacts cannot get bigger indefinitely, that beyond a certain size dysfunctionality takes over.  But the movers and shakers of the financial world and the politicians -- all of whom have a major say -- do not understand this yet.  They still think ever bigger is ever better; indeed, one of the methods of rescue is that the already gigantic Bank of America will take over Merrill Lynch, thereby becoming even larger.  (What will be the effect if the incredibly huge Bank of America now gets into deep doodoo in future years?)  Well, our betters are wrong in thinking ever bigger is ever better.  Instead of worshipping at the alter of size, Glass-Steagall should be reinstituted, antitrust should be used once again to protect the small guy, our other laws and practices should be conformed to the idea that smaller is often more desirable, and we all ought to begin to recognize that there are limits to how big things can get and remain workable.

Oh, and it also wouldn’t hurt if we tried to curb (and punish) greed and condemn associated stupidity.  

Forum Jump:

Users browsing this thread: 12 Guest(s)