Forums

Full Version: THE GLOBAL FINANCIAL MELTDOWN
You're currently viewing a stripped down version of our content. View the full version with proper formatting.
Pages: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

Admin

FINANCIAL CRISIS : DUBAI BUBBLE BURST


Washington's Blog
http://www.globalresearch.ca/index.php?context=va&aid=16328

You know about Dubai's economic crisis. But do you know the background to - and fallout from - the crisis?

A Brief History
Historically, Dubai had an oil-based economy.

But because Dubai's oil reserves were declining, the government - led by Sheikh Muhammed Al Maktoum - decided to diversify into other areas, especially tourism and commerce. See this and this.

That's why Dubai built the world's only 7 star hotel, a series of luxury islands, and the world's largest tower.

But the global property bubble is bursting.

As I wrote last December:

Housing bubbles are now bursting in China, France, Spain, Ireland, the United Kingdom, Eastern Europe, and many other regions.


And the bubble in commercial real estate is also bursting world-wide. See this.

But Dubai got hit the hardest.

As Bloomberg notes:


Dubai suffered the world’s steepest property slump in the global recession, with home prices dropping 50 percent from their 2008 peak, according to Deutsche Bank AG.


As the CBC notes, things went South quickly in Dubai:


Hundreds of billions of dollars worth of building projects were delayed or cancelled. Thousands of jobs disappeared.

Dubai, playground of the über-extravagant, suddenly found itself facing the very real possibility that its biggest state-owned company, Dubai World, could go into bankruptcy. It warned it was having trouble making debt payments on $59 billion US — money borrowed to pay for all the excess.


Global Impact

The CBC also notes that Dubai World has holdings worldwide:


Dubai World is Dubai's main holding and investment enterprise, but its holdings range far beyond the Persian Gulf area ...

Another Dubai World holding — DP World — operates Centerm, a container terminal in Vancouver's inner harbour. DP World acquired the terminal when it bought the marine terminal assets of P&O Ports in 2006, and plans to spend $140 million to expand it.

That purchase also gave it ownership of many key U.S. ports — something that raised national security concerns in the U.S. Some American legislators didn't like the idea that U.S. ports would be controlled by Middle Eastern state-owned enterprises. DP World subsequently sold its U.S. port assets.

In Britain, another Dubai World subsidiary, Leisurecorp, bought the Turnberry Resort in Scotland in 2008 — home to the 2009 British Open — for more than 50 million pounds.

In the U.S., Dubai World's investment arm, Istithmar World, bought the luxury retailer Barneys New York in 2007 for almost $1 billion US. There were reports earlier this year it was trying to unload the retailer as the luxury market unwound and Istithmar racked up big losses from the global financial meltdown, but Dubai World's chair denied it.


In addition, Bloomberg notes that India might be effected by Dubai's economic problems:


About 4.5 million Indians live and work in the Gulf region and remit more than $10 billion annually, according to government data. The turmoil may affect remittances, said Thomas Issac, finance minister of the southern state of Kerala, which accounted for about a quarter India’s migrant labor in 2005...

Remittances from the Middle East account for about 25 percent of Kerala’s economy, Issac said


The Royal Bank of Scotland is Dubai's biggest creditor, with $2.3 billion, or 17 percent, of Dubai World loans since January 2007. HSBC, Europe’s biggest bank, has the “largest absolute exposure” in the U.A.E. with $17 billion of loans in 2008


Yves Smith notes that Dubai's default caught creditors by surprise:


I got a message from someone who was on the conference call [with Dubai government officials]... Some European banks may be on the wrong side of this trade. As readers may know, EuroBanks went into the crisis with even lower capital levels than their US counterparts, and have taken fewer writedowns of their dodgy exposures:

The standstill announcement…was a massive surprise. One could sense the panic in those asking questions….this could be the turning point in spreads and could be viewed similar to the Russian debt crisis in 1998 or the Bear situation in 2007…based on companies and the accents of the people asking questions, it is obvious European institutions will be hit hard…Dubai made this announcement at the beginning of a four day holiday, so there will be little news until next week…There is another wave of pain out there. This information does not seem to be making its way to other markets. It will.


Zero Hedge has a good roundup of statistics regarding the biggest creditors of the United Arab Emirates, of which Dubai is a part:


Creditors:

Of United Arab Emirates (By Origin via Credit Suisse citing Bank for International Settlements):

United Kingdom: $50.2 billion
France: $11.3 billion
Germany: $10.6 billion
United States: $10.6 billion
Japan: $ 9.0 billion
Switzerland: $ 4.6 billion
Netherlands: $ 4.5 billion

Of United Arab Emirates (By Entity via Credit Suisse, citing Emirates Bank Association):

HSBC Bank Middle East Limited: $17.0 billion
Standard Chartered Bank: $ 7.8 billion
Barlays Bank Plc: $ 3.6 billion
ABN-Amro (RBS): $ 2.1 billion
Arab Bank Plc: $ 2.1 billion
Citibank: $ 1.9 billion
Bank of Baroda: $ 1.8 billion
Bank Saderat Iran: $ 1.7 billion
BNP Parabas: $ 1.7 billion
Lloyds: $ 1.6 billion


The Associated Press has additional details.

Bloomberg notes that Dubai's default might increase risk aversion of investors to emerging markets:


“We’re bound to see a rise in risk aversion,” Arnab Das, the London-based head of market research and strategy at Roubini Global Economics said in an interview. “The Dubai situation signifies that although the major central banks around the world have stabilized the financial system, they can’t make all the excesses simply disappear.”

India’s stocks, currency and bonds fell on concern investors may shy away from riskier emerging market assets over losses stemming from the turmoil in Dubai. India’s benchmark stock index dropped 1.3 percent yesterday, while the rupee lost 0.5 percent.

Zero hedge also notes:

UBS speculates that (among other possibilities) $80-90 billion (which is already over 100% of GDP) may be a low figure for Dubai's debt and that significant "off-balance sheet" amounts might explain the restructuring attempt
The Dubai government is on holiday (Eid Al-Adha) until December 6th
Abu Dhabi's Sovereign Wealth Fund (generally thought to command upwards of $500 billion) may have significantly less available. (Rumors of $125 billion in 2008 losses abounded last year). Bloomberg quotes sources to the effect that Abu Dhabi SWF's AUM has been "overstated, sometimes by as much as 100 percent."
British prime minister Gordon Brown has indicated how serious the situation is:

"Clearly the restructuring announcement has caused disruption and uncertainty in world markets,” Brown’s spokeswoman Vickie Sheriff told reporters in London. Brown’s “view is that U.K. banks are well capitalized having undergone rigorous stress testing,” she said.

And the Associated Press is asking whether Dubai's default will cause another financial panic.

The numbers involved are not that great for most creditors - on the order of hundreds of millions of dollars.

But the sense of shock and loss of confidence - when many had optimistically believed that the world economy was out of the woods - could indeed be profound.


Admin

BANKRUPTCY AND FISCAL COLLAPSE: THE GLOBAL ECONOMIC CRISIS WILL EXPERIENCE A TIPPING POINT IN SPRING 2010
http://www.globalresearch.ca/index.php?context=va&aid=16603

LEAP/E2020 believes that the global systemic crisis will experience a new tipping point from Spring 2010. Indeed, at that time, the public finances of the major Western countries are going to become unmanageable, as it will simultaneously become clear that new support measures for the economy are needed because of the failure of the various stimuli in 2009 (1), and that the size of budget deficits preclude any significant new expenditures.

If this public deficit « slip knot » which governments gladly placed around their necks in 2009, refusing to make the financial system pay for mistakes (2) is going to weigh heavily on all public expenditure, it is going to particularly affect the social security systems of the rich countries in always impoverishing the middle classes and the retired, and setting the poorest adrift (3).

At the same time, the general context of the bankruptcy of an increasing number of states and other authorities (regions, provinces, federal states) will entail a double paradoxical event of increasing interest rates and the flight out of currencies towards gold. In the absence of an organised alternative to a weakening US Dollar and in order to find an alternative to the loss in value of treasury bonds (in particular US ones) all central banks will have, in part, to « reconvert to gold », the old enemy of the US Federal Reserve, without being able to state the fact officially. The bet on recovery having been, at this point, totally lost by governments and central banks (4), this Spring 2010 tipping point is thus going to represent the beginning of the huge transfer of 20,000 billion USD of « ghost assets » (5) in the direction of the social security systems of the countries which have accumulated them.

In GEAB N°40, the LEAP/E2020 team develops its anticipations on these various subjects, whilst also giving a detailed appraisal of its 2009 anticipations which achieved an overall success rate of 72% (6). Finally our researchers unveil their recommendations regarding this month in particular: commercial real estate, currencies and expatriates’ revenues.


The ten most vulnerable countries on a debt/GDP ratio (in blue; public debt; in orange: private debt) – Source: Crédit Suisse, 03/2009
Reality quickly fuelled GEAB N°39’s anticipation which indicated that 2010 would be a year noted for three trends, one of which would be state bankruptcy (7): from Dubai to Greece, via more and more worrying reports from the rating agencies on US and British debt, or the draconian Irish budget and the Eurozone suggestions for grappling with public deficits, states’ increasing incapacity to manage their debts is making press headlines. However at the centre of this press ferment, all the information isn’t of the same value: certain are no more than laborious works on the « finger » of the Chinese proverb (8), whilst others really stretch to the moon.

On the subject of laborious works on the « finger », this public announcement of the GEAB N°40 presents the case for its anticipations on Greece.


Greek debt crisis: A small problem for Frankfurt and a strong warning for Washington and London
Coming now to Greece, we find a theme similar to what our team showed up in the GEAB N°33 in March 2009, when the press gave widespread publicity to the idea that Eastern Europe was going to lead the European banking system and the Euro into a major crisis. We have explained that this « news » was not based on anything credible and that it was only « a deliberate attempt on the part of Wall Street and the City to create the belief of a crack in the EU and instill the idea of « deadly » risk weighing on the Eurozone, in continually publishing false stories on the « banking risk from Eastern Europe » and trying to stigmatise a Eurozone cowardness compared to American or British « willful » measures. One of the objectives is also to try and turn international attention away from the increasing financial problems in New York and London, all with the purpose of weakening the European position on the eve of the G20 summit ».

The Greek case is rather the same. Not that there isn’t a crisis in Greek public finances (that is the reality), but the supposed consequences for the Eurozone are overestimated, whereas this crisis indicates increasing tensions surrounding sovereign debt, the Achilles heel of the United States and Great Britain (9).


New sovereign debt issuance in 2009 (USD billions) – Source: PhoenixProject, 07/2009
First of all, one must remember that Greece remains the country above all others, which badly managed its EU accession. Since 1982, different Greek governments have done nothing but use the EU as an inexhaustible source of subsidies, without ever taking steps to modernise the financial and social framework of the country. With nearly 3% of GDP coming directly from Brussels in 2008 (10), Greece is indeed a country which has been on a European drip-feed for almost thirty years. The actual deterioration in the country’s public finances is, then, only another step in this drawn-out development. The Eurozone leaders have known for a long time that the Greek problem would materialise one day.

But with a country producing 2.5% of the Eurozone’s GDP (and 1.9% of the EU’s) we are far from a dangerous situation weighing on the single European currency and the Eurozone. By way of example, the California’s default (12% of US GDP) entails far more risks of destablisation of the Dollar and the American economy. Moreover, since the same analysts usually like to make lists of all the Eurozone countries facing up to a serious crisis in their public finances (Spain, Ireland, Portugal, to which we can add France and Germany), for the sake of completeness it should be pointed out that in the United States, besides the fact that the Federal State would be technically bankrupt (11) if the Fed weren’t printing Dollars in unlimited quantities for the purpose of buying, directly or indirectly, Treasury Bonds for an equal value, and besides California (the richest state in the Union teetering on the edge of the abyss for months), there are altogether 48 States out of 50 with growing budget deficits now (12). As summed up by the title of the December 14th edition of Stateline, an American website specialising in the US States and municipalities, said « Nightmare scenarios haunt the States », all the states of the United States are afraid of defaulting on their debt in 2010/2011.

The Eurozone, which has the largest gold reserves in the world (13), also includes countries which accumulated budget surpluses until last year, a foreign trade surplus and a central bank which hasn’t turned its balance sheet into a pool of « rotten or ghost » assets (contrary to the Fed in the last 18 months). So, if the crisis in Greek public finances clearly indicates something, it is not so much Greece’s situation or a specific Eurozone problem, but a wider problem which is going to become much worse in 2010: the fact that Government bonds are now a bubble on the verge of exploding (more than 49,500 billion USD worldwide, a 45% increase in two years (14)).

The deteriorating ratings published by US rating agencies since the Dubai crisis shows, as always, that these agencies don’t know how to (or can’t) anticipate these developments. Let’s remember that they didn’t see the sub-prime crisis coming nor the collapse of Lehman Brothers and AIG, nor the Dubai crisis. Because they are dependent on the US government (15), they are unable, of course, to directly blame the two at the heart of present financial system (Washington and London). However, they show from which direction the next big shock is going to come, State bonds… and in this field, the two countries with the most exposure are the United States and Great Britain.

Besides, it is very instructive to see the subtle change in the tenor of the articles published by these agencies. In a few weeks we have gone from the same old explanation stating that the intrinsic quality of these two countries’ (16) economies and their management removes all risk of default on the part of their respective governments to a warning that, from 2010, it will be necessary to demonstrate these qualities and management skills in order to keep the coveted Triple A rating which allows borrowing at the lowest cost (17). If even the rating agencies start to ask for proof, it’s because things are going really badly.

To finish on Greece’s case, our team feels that the current situation is a triple positive for the Eurozone:

. it requires it to seriously consider the solidarity measures to put in place in this type of situation. The watchers are thus going to have to make a clear choice: either they treat Greece as an isolated example, or they treat it as a component of the Eurozone. But they can’t do both at once, adding the weakness of an isolated Greece to a weakened Eurozone caused by Greece.


. it requires, at last, the Greek authorities to carry out an operation of « Truth » on the financial state of their country and allows the EU to push forward the necessary reforms, notably to substantially reduce endemic corruption and cronyism (18).

. it should serve as an example to European governments (and others) who fudge economic and social statistics more and more, demonstrating that such fudging only results in plunging a country into crisis even more. Sadly, we are more doubtful on the idea that other leaders will follow the Greek Prime Minister’s example… certainly not before a change of government in Great Britain, the United States, France, or Germany.

Notes

(1) Consumption still remains lack-lustre in the United States and Europe as well (in spite of year-end celebrations). So-called Chinese growth (watch this eye-opening video by Al Jazeera on the reality behind the Chinese numbers) doesn’t even begin to stimulate its Japanese neighbour one little bit (which would have been a clear signal that there really has been a restart of the Chinese economy), requiring it to be the first major country to adopt a second economic stimulation package in less than two years (source: Asahi Shimbun, 09/12/2009). On the other hand the faking of statistics is beating all records: a « radical » fall in unemployment in the United States fed by temporary jobs related to the Christmas shopping period and a method of calculation as « theoretical » as before (source: Global Economic Trend Analysis, 04/12/2009), « Black Friday:// » which in fact saw the value of sales dropping compared to the year before (source: Reuters, 29/11/2009), unemployment which continues to rise, and business real-estate in free-fall in Europe (source: Les Echos, 10/12/2009, and an interesting visual stroll amongst empty office blocks in Amsterdam made by Tako Dankers, « reassuring » Chinese industrial production numbers in November 2009 since they were compared to the big fall in November 2008. Such fantastic results for the hundreds of billions of 2009 stimulus plans!

(2)And in believing the banks who told them that saving them would save the economy.

(3) Source: USAToday, 12/14/2009

(4) Source: CNBC, 08/12/2009; Yahoo/Reuters, 27/11/2009

(5) Two-thirds of the global amount estimated by LEAP/E2020 a year ago, out of which two-thirds haven’t yet gone up in smoke in the various financial and real estate markets of the world.

(6) This score is lower than the 80% of 2008 but still high, particularly for an exceptional year with regard to the unprecedented extent and number of interventions by the authorities, multiplying the factors at play.

(7) On the subject of « fiscal pressure », London and Dublin have just started the ball rolling. Sources: Times, 06/12/2009; Irish Times, 11/12/2009

(8) « When the wise man points at the moon, the fool looks at the finger »

(9) And of Japan to a lesser extent.

(10) Source: La Croix, 10/05/2009

(11) Source: New York Times, 11/22/2009

(12) Source: CBPP, 12/19/2009

(13) For instance, between national central banks and the ECB, the Eurozone possesses 10,900 tons of gold and the United States only 8,133 tons (source: FMI/Wikipedia, 11/2009). Or, more precisely: the US Treasury declares that the United States holds that amount of gold, knowing that there has been no independent audit of US gold reserves for over forty years. We will return to the subject of the true amount of US gold reserves in more detail in the next edition of GEAB (N°41). Indeed our team believes that in 2010, in a context of explosion of the Government bond bubble, gold is going to become an absolute necessity for central banks.

(14) Sources: DailyMarkets, 11/24/2009; Telegraph, 11/30/2009; Forbes, 11/24/2009

(15) Legally and even financially speaking, see previous editions.

(16) Sometimes we see the wildest surrealism in reading the views of these agencies.

(17) Source: Wall Street Journal, 12/08/2009

(18) Source: Financial Times, 12/11/2009

Admin

"ECONOMIC TERRORISM": THE CONSEQUENCES ARE POVERTY AND MASS UNEMPLOYMENT

David DeGraw
http://globalresearch.ca/index.php?context=va&aid=17633

“The American oligarchy spares no pains in promoting the belief that it does not exist, but the success of its disappearing act depends on equally strenuous efforts on the part of an American public anxious to believe in egalitarian fictions and unwilling to see what is hidden in plain sight.” — Michael Lind, To Have and to Have Not

Yes, of course, we all have very strong differences of opinion on many issues.

However, like our Founding Fathers before us, we must put aside our differences and unite to fight a common enemy. It has now become evident to a critical mass that the Republican and Democratic parties, along with all three branches of our government, have been bought off by a well-organized Economic Elite who are tactically destroying our way of life. The harsh truth is that 99% of the US population no longer has political representation. The US economy, government and tax system is now blatantly rigged against us.

Current statistical societal indicators clearly demonstrate that a strategic attack has been launched and an analysis of current governmental policies prove that conditions for a large majority of Americans will continue to deteriorate. The Economic Elite have engineered a financial coup and have brought war to our doorstep. . . and make no mistake, they have launched a war to eliminate the US middle class.

Unless we all unite and organize on common ground, our very way of life and the ideals that our country was founded upon will continue to unravel.

Before exposing exactly who the Economic Elite are, and discussing common sense ways in which we can defeat them, let’s take a look at how much damage they have already caused.

I: "Economic Terrorism": Surveying the Damage

America is the richest nation in history, yet we now have the highest poverty rate in the industrialized world with an unprecedented amount of Americans living in dire straights and over 50 million citizens already living in poverty.

The government has come up with clever ways to down play all of these numbers, but we have over 50 million people who need to use food stamps to eat, and a stunning 50% of US children will use a food stamp to eat at some point in their childhood. Approximately 20,000 people are added to this total every day. In 2009, one out of five US households didn’t have enough money to buy food. In households with children, this number rose to 24%, as the hunger rate among US citizens has now reached an all time high.

We also currently have over 50 million US citizens without healthcare. 1.4 million Americans filed for bankruptcy in 2009, a 32% increase from 2008. As bankruptcies continue to skyrocket, medical bankruptcies are responsible for over 60% of them, and over 75% of the medical bankruptcies filed are from people who have healthcare insurance. We have the most expensive healthcare system in the world, we are forced to pay twice as much as other countries and the overall care we get in return ranks 37th in the world.

In total, Americans have lost $5 trillion from their pensions and savings since the economic crisis began and $13 trillion in the value of their homes. During the first full year of the crisis, workers between the age of 55 - 60, who have worked for 20 - 29 years, have lost an average of 25% off their 401k. “Personal debt has risen from 65% of income in 1980 to 125% today.” Over five million US families have already lost their homes, in total 13 million US families are expected to lose their home by 2014, with 25% of current mortgages underwater. Deutsche Bank has an even grimmer prediction: “The percentage of ‘underwater’ loans may rise to 48 percent, or 25 million homes.” Every day 10,000 US homes enter foreclosure. Statistics show that an increasing number of these people are not finding shelter elsewhere, there are now over 3 million homeless Americans, the fastest growing segment of the homeless population is single parents with children.

One place more and more Americans are finding a home is in prison. With a prison population of 2.3 million people, we now have more people incarcerated than any other nation in the world - the per capita statistics are 700 per 100,000 citizens. In comparison, China has 110 per 100,000, France has 80 per 100,000, Saudi Arabia has 45 per 100,000. The prison industry is thriving and expecting major growth over the next few years. A recent report from the Hartford Advocate titled “Incarceration Nation” revealed that “a new prison opens every week somewhere in America.”

Mass Unemployment

The government unemployment rate is deceptive on several levels. It doesn’t count people who are “involuntary part-time workers,” meaning workers who are working part-time but want to find full-time work. It also doesn’t count “discouraged workers,” meaning long-term unemployed people who lost hope and don’t consistently look for work. As time goes by, more and more people stop consistently looking for work and are discounted from the unemployment figure. For instance, in January, 1.1 million workers were eliminated from the unemployment total because they were “officially” labeled “discouraged workers.” So instead of the number rising, we will hear deceptive reports about unemployment leveling off.

On top of this, the Bureau of Labor Statistics recently discovered that 824,000 job losses were never accounted for due to a “modeling error” in their data. Even in their initial January data there appears to be a huge understating, with the newest report saying the economy lost 20,000 jobs. TrimTabs employment analysis, which has consistently provided more accurate data, “estimated that the U.S. economy shed 104,000 jobs in January.”

When you factor in all these uncounted workers — “involuntary part-time” and “discouraged workers” — the unemployment rate rises from 9.7% to over 20%. In total, we now have over 30 million US citizens who are unemployed or underemployed. The rarely cited “employment-participation” rate, which reveals the percentage of the population that is currently in the workforce, has now fallen to 64%.

Even based on the “official” unemployment rate, just to get back to the unemployment level of 4.6% that we had in 2007, we need to create over 10 million new jobs, and most every serious economist will tell you that these jobs are not coming back. In fact, we are still consistently shedding jobs, on just one day, January 27th, several companies announced new cuts of more than 60,000 jobs.

Due to the length of this crisis already, millions of Americans are reaching a point where the unemployment benefits that they have been surviving off of are coming to an end. More workers have already been out of work longer than at any point since statistics have been recorded, with over six million now unemployed for over six months. A record 20 million Americans qualified for unemployment insurance benefits last year, causing 27 states to run out of funds, with seven more also expected to go into the red within the next few months. In total, 40 state programs are expected to go broke.

Most economists believe that the unemployment rate will remain high for the foreseeable future. What will happen when we have millions of laid-off workers without any unemployment benefits to save them?

Working More for Less

The millions struggling to find work are just part of the story. Due to the fact that we now have a record high six people for every one job opening, companies have been able to further increase the workload on their remaining employees. They have been able to increase the amount of hours Americans are working, reduce wages and drastically cut back on benefits. Even though Americans were already the most productive workers in the world before the economic crisis, in the third quarter of 2009, average worker productivity increased by an annualized rate of 9.5%, at the same time unit labor cost decreased by 5.2%. This has led to record profits for many companies. Of the 220 companies in the S&P 500 who have reported fourth-quarter results thus far, 78% of them had “better-than-expected profits” with earnings 17% above expectations, “the highest for any quarter since Thomson Reuters began tracking data.”

According to the Bureau of Labor Statistics, the national median wage was only $32,390 per year in 2008, and median household income fell by 3.6% while the unemployment rate was 5.8%. With the unemployment rate now at 10%, median income has been falling at a 5% rate and is expected to continue its decline. Not surprisingly, Americans’ job satisfaction level is now at an all time low.

There are also a growing number of employed people who, despite having a job, are still living in poverty. There are at least 15 million workers who now fall into this rapidly growing category. $32,390 a year is not going to get you far in today’s economy, and half of the country is making less than that. This is why many Americans are now forced to work two jobs to provide for their family to hopefully make ends meet.

A Crime Against Humanity

The mainstream news media will numb us to this horrifying reality by endlessly talking about the latest numbers, but they never piece them together to show you the whole devastating picture, and they rarely show you all the immense individual suffering behind them. This is how they “normalize the unthinkable” and make us become passive in the face of such a high causality count.

Behind each of these numbers, is a tremendous amount of misery, the physical toll is only outdone by the severe psychological toll. Anyone who has had to put off medical care, or who couldn’t get medical care for one of their family members due to financial circumstances, can tell you about the psychological toll that is on top of the physical suffering. Anyone who has felt the stress of wondering how they were going to get their child’s next meal or their own, or the stress of not knowing how you are going to pay the mortgage, rent, electricity or heat bill, let alone the car payment, gas, phone, cable or internet bill.

There are now well over 150 million Americans who feel stress over these things on a consistent basis. Over 60% of Americans now live paycheck to paycheck.

These are all basic things that every person should be able to easily afford in a technologically advanced society such as ours. The reason why we struggle with these things is because the Economic Elite have robbed us all. This amount of suffering in the United States of America is literally a crime against humanity.

Admin

THE EURO SYSTEM IS ON THE BRINK OF COLLAPSE
Helga Zepp-LaRouche
http://www.larouchepub.com/hzl/2010/3707...risis.html


The author is the chairwoman of the Civil Rights Solidarity Movement (BüSo), a German political party. Her article was translated from German.

The European Union summit in Brussels on Feb. 10-11 did absolutely nothing to avert the looming collapse of the euro system. The demand that Greece reduce its 2010 budget by 4%, repeats the error of Chancellor Heinrich Brüning's 1930-32 austerity policy, and cannot be implemented, in any event, because of massive resistance. The question of who should pay to refinance the Greek debt (the German taxpayer, naturally), was postponed, due to the explosiveness of the question, until Feb. 15-16. By contrast, EU president Herman van Rompuy shamelessly announced that the European Council should be responsible for economic policy, budget planning, structural reform, and measures regarding climate change—effective immediately.

Even though the term "European Economic Government" was avoided, the European Council intends to operate precisely as such—i.e., to treat not only Greece, but all member-states, as protectorates, and thus, to dictatorially launch the entire disastrous arsenal of the Maastricht Treaty criteria, the Stability Pact, and the debt brake. Thus, the EU of the Lisbon Treaty has emerged precisely as the monster we warned against, even before it was signed: an oligarchical imperium, in which the last vestige of sovereignty of the nation-state has vanished.

It is significant that EU Commission advisor Alberto Giovannini, who led the group that worked out the technical transition from national currencies to the euro, outrageously told the Italian daily Il Sole 24 Ore on Feb. 10: "History teaches us that empires always achieve greater efficiency and prosperity; with its extensive geography, the imperial model is more successful."

The Problem Is Not Greece
Unless there is a dramatic change in policy, the entire European system will collapse. Given the huge deficits of almost all EU member-states, the German taxpayer is left as the big paymaster. So the excessive focus on Greece is itself a deception, because the Greek debts to the various European banks are a relatively small problem. The far more dramatic problem is the debt of Spain, whose banks spread their bad mortgage loans all over Europe, by securitizing them.

In December 2007 alone, Spanish banks obtained EU63 billion through the European Central Bank's repo facility, and, between the middle of 2008 and the end of 2009, an additional EU27.7 billion from the ECB in new money, for which they deposited, to a large extent, toxic real estate titles as securities, and thus titles in a market, which, according to the president of the Spanish Mortgage Association, Santos Gonzáles Sanchez, is de facto bankrupt. Banco Santander, which is closely connected with the Royal Bank of Scotland, in terms of personnel and business practice, sits atop gigantic financial bubbles, such as the "bolha Brazil," the Brazilian bubble. Between the Brazilian "carry trade"—by which investors raise money at almost 0% in Europe, the U.S.A., or Japan, and then invest it at 8.75% interest in Brazil—and a 27% appreciation of the Brazilian currency—the real, in 2009, speculators were able to pocket a profit of 35.75% at the end of the year. But this bubble is no more stable than the similar profits, which Santander has made with its operations in Great Britain.

In reality, with the imminent state bankruptcies of Greece, Spain, Portugal, Ireland, Italy, Turkey, Dubai, Great Britain, and the U.S.A., to name only a few, this amounts to the same thing as the gigantic trillion-dollar bailout packages already given to the banks in the United States and Europe: that the governments should reward the banks and their continual gambling, with new public funds. If this policy were continued, it would end very soon in dramatic inflation.

Defend National Sovereignty
This obviously also caught the attention of Frankfurter Allgemeine Zeitung editor Holger Steltzner, who wrote in an alarmed lead commentary, on the day of the EU summit: "In plain language that means: Germany should be responsible for Greece's debts. But this is not the way the euro was sold to the Germans. Before the we left the German mark, the Maastricht Treaty was solemnly signed, explicitly forbiding a member of the Monetary Union from being held accountable for the debts of another member. If this central precept of financial-policy stability no longer applies, then the Maastricht Treaty, the Stability and Growth Pact, and also the debt limits in the German Constitution are not worth the paper on which their praise for stability is written. Then, Germans will want the mark back." The survival of the European Monetary Union and the stability of the common currency would be at stake, he wrote, and the citizens would be threatened with depreciation of their money and their pensions. Strong words, for a newspaper which seemed to be wedded to the neo-liberal paradigm.

In fact, the European nations will only survive, if they regain sovereignty over their own currencies and economic policies. And they will also only survive, if the high-risk speculation to which the G20 governments have consistently given their blessing since the outbreak of the crisis 27 months ago, is brought to an end, once and for all, through reintroduction of the Glass-Steagall standard, which strictly separates commercial and investment banks, and cancels toxic waste.

We shall see how the Constitutional Court in Karlsruhe reacts to the latest EU summit, since the Court had explicitly ruled in June 2009 that the EU is not a Federal state, and had confirmed Germany's sovereignty as an EU member-state, as well as its own supervisory authority. In its so-called "Maastricht Judgment" of October 1993, Karlsruhe had, in any case, granted any German government the right to leave the Monetary Union, should the stability of the euro turn out to be illusory, and should the euro fall below the value of the deutschemark.

In this highly dramatic and high-risk situation, it is indispensable, that mythologies be cleared up and the truth be reestablished. One such myth is that banks have a "systemic" character, and therefore have to be "rescued" over and over again by the taxpayer. If there is something that has a systemic character, then it is the real economy, the general welfare, and the life of the citizen.

Another one of these mythologies, anthropogenic global warming, has just disappeared under mountains of falsified e-mails, non-melting Himalayan glaciers, and great quantities of real snow, which St. Peter has generously and demonstratively dumped on the Northern Hemisphere.

There is not much time left to act.

AS EURO SYSTEM DISINTEGRATES, EU FINANCE MINISTERS PRESENT NO SOLUTION
http://www.larouchepub.com/pr/2010/10021...risis.html

After today's fruitless meeting of Finance Ministers of the 16 European nations using the euro, Helga Zepp-LaRouche said: "These guys are clueless, and meanwhile the clock is ticking on sovereign defaults not only in Greece, but across the entire eurozone."

Jean-Claude Juncker, the Luxemburg Prime Minister who chairs the Eurogroup, had nothing to announce to the expectant world media about the results of their latest urgent discussion of what they continue to insist is the Greek financial crisis.

Lyndon LaRouche emphasized that while people continue to focus on Greece, the situation is actually far worse in Spain and Portugal, where the assets of banks like Santander are totally fake, and are cross-related. For that reason, only a total reorganization-in-bankruptcy of the international financial system, such as that proposed by LaRouche, in which banks and other institutions are sorted out along Glass-Steagall standards, can defuse the otherwise certain explosion.

The British financial empire, which had intended to use the Greek crisis to bully European nations into adopting draconian austerity across the board instead of bailing out the holders of Greek debt, is now in a jam. Robert Mazzuoli, chief analyst at the Landesbank Baden-Württemberg (state bank, LBBW) in Germany, is quoted in yesterday's German media as having warned that the option of driving Greece out of the euro to protect the eurozone would not work, "because there is no middle-of-the-road approach." It's either a full sovereign default, or a full bailout, and a Greek default would, he added, not only pull down the other "PIIGS" states (Portugal, Italy, Ireland, Greece, Spain) immediately, but also the highly indebted Great Britain, and the rest of the EU thereafter.

The vulnerability of the British had not been publicly discussed until Lyndon LaRouche pointed out last week that the holdings of the Spanish bank Santander is worthless, and that Santander is closely linked with British financial interests. Before that, the British financial imperialists had portrayed themselves as a powerful force other nations could look to as they attempted to navigate the financial collapse.

The European finance ministers today took the occasion to further beat up on Greece, demanding that more, and more, and yet more austerity be imposed on Greece, but no concrete steps were announced, nor bailout package revealed, because Germany remained firmly opposed to picking up the tab and bailing out the banks and derivatives traders who have been gambling with the Greek debt. The only thing agreed upon, was that they would "monitor" Greece's "progress," and send in a team from the EU, the European Central Bank, and the IMF in March to pronounce their verdict. Predictably, the euro headed for a nine-month low against the dollar on Monday, "as investors grew increasingly nervous about the absence of any quick bailout package," as one wire service put it.


THE`BANCO SANTANDER ': CITY OF LONDON's SUCKER GAME
Dennis Small
http://www.larouchepub.com/other/2010/37...drome.html


"A great fraud has been shaping international relations, including relations of Russia with the United States, which I have some privy insight into," said the world's leading economist Lyndon LaRouche on Feb. 6.

What is going on, is the Russians have been induced to believe, that there's a vast pool of international money, centered in institutions such as the London-controlled Spanish bank, Banco Santander, which were going to be the resource for the Russians, when the British, and these fellows, succeeded in bringing down the United States. That is why we've been having some resistance from some Russians on looking at cooperation with the United States, in my Four Powers proposal to use the combined political and economic power of the United States, China, India, and Russia to replace the current bankrupt international monetary system, with a new credit system to foster high-technology development.

They have been convinced to believe in the fraud that Banco Santander, and similar, related institutions of the British imperial system, have this vast amount of resources, which was going to secure the existence of Russia, at the point that the United States disintegrated.

Now, I don't agree with letting that go that way—as you may know. So, since I knew, not by figures, but by the nature of the situation, that Banco Santander, and its vast empire extended into South America, especially Brazil, and other places, was one giant fraud, that there are no solid assets, survivable assets, associated with a network of banks, which are grouped around a Spanish-speaking British bank called Banco Santander. So this week, I did the obvious.

LaRouche was referring to his warning first made public on Feb. 2, that a full-fledged meltdown crisis was underway throughout the Eurozone, that could bring down Brazil, and hit Russia—and everything in between. "You have a euro crisis," LaRouche said, "which will hit Britain and Brazil, notably, as well as Spain and other parts at the same time. So, people should be warned. This is now in progress. The Greek situation is a minor also-ran. This could be the chain-reaction collapse of the euro system."

The debt numbers show it. For example, the total exposure of German banks throughout the Eurozone is some EU540 billion, but the Greek share is only 8% of that total, or some EU43 billion. German banking exposure to Spain, on the other hand, is 44% of the total, or EU240 billion.

"The whole Atlantic community of nations is in a British-directed crash of the entire euro system," LaRouche said. "The whole system is going down." In fact, LaRouche added, a widespread wave of bankruptcies is to be expected, possibly led by the meltdown of Santander, whose own debt began to be downgraded by Fitch and other rating agencies in early February. These things are coming to the surface and being exposed now, LaRouche said, because the entire international financial system is coming down.

On the eve of a Feb. 11 European Union summit to address the crisis—with an agenda centered on British-scripted calls for bailing out the entire bankrupt London-centered banking system with massive austerity, and by imposing a top-down supranational dictatorship along imperial lines—LaRouche warned European leaders: "Do not make the mistake that the U.S. made in bailing out Wall Street. If you do that in Europe, you are going to sink Europe, because Europe is more vulnerable than the United States. It is the high-gain creditors, like the London-run Spanish Banco Santander, that are going to have to take the main burden of the hit. Anything else would just reproduce in Europe a far worse form of the crisis we have experienced in the United States."

Which BRIC?
London-centered enemies of LaRouche's Four Powers proposal have been countering LaRouche's policy by puffing the so-called BRIC alliance of Brazil, Russia, India, and China.

"People think the 'B' in 'BRIC' is Brazil," LaRouche said. "I'm informing them, it is not. The 'B' in 'BRIC' stands for British. Santander is part of the British Empire, and it is the instrument of a precarious, British financial bubble. It may be about to blow, and the current British manipulations may be involved in trying to bail it out. That's why I took the step I did."

In fact, Banco Santander has its very own BRIC project, which is run through the Marcelino Botín Foundation, the personal foundation of the Botín family, which has run Banco Santander since its inception in 1857. From 2006 to 2009, the foundation, headed by Santander CEO Emilio Botín, held a forum at Botín Foundation headquarters in Madrid, centered each year on a different member of the BRIC countries, pulling in leading figures from the governments and policymaking circles for private discussions with members of the foundation and Spanish figures, on what each country's strategic orientation should be. The first seminar, in 2006, was dedicated to China in the 21st Century; in 2007, India was the topic; 2008 was the year to discuss "the political, economic and strategic adjustments to be made by Russia today"; and, in 2009, the cycle concluded with a forum on Brazil's role as an "emerging nation" on the global scene.

"The notable point to be emphasized," LaRouche commented, "is that the three-power bloc of the real-life Russia, China, and India, is not to be confused with the BRIC, as physical economies. It is the fat monetarist parasite sitting on top of them presently, which is the problem.

"My problem is to rescue Russia, China, India, and even Brazil itself (which has useful physical-economic relations with the bloc of Russia, China, and India), from this British swindle."

Santander and the Stench of Empire
By the end of the week that began with LaRouche's warning about the impending Santander blowout, that bank's stocks had tumbled by over 10%, with similar plunges of other Spanish bank stocks, and the European and Brazilian stock markets, in general. Particularly ironic, is that the Santander collapse began the same day (Feb. 4) that the bank announced its much-ballyhooed 2009 results, with reported international profits of EU8.943 billion (about $12.43 billion), up 1% from 2008. The two main sources of its profits were Brazil (20% of the total) and the United Kingdom (16% of the total). In both cases, those profits are about as stable as quicksand—as we shall demonstrate below.

So, just what is Banco Santander? Santander's meteoric growth over recent years has made it the number one bank in the Eurozone—recently surpassing London's Hongkong and Shanghai Banking Corporation (HSBC)—and the ninth-largest in the world, based on market capitalization. It is also the single largest banking group in Ibero-America, with some 10% of the area's total banking assets—dominating a region whose primary economic activity is drug trafficking. In 2007, Santander finally achieved a major position in the coveted Brazilian banking system as well, where it now controls about 11% of bank assets.

Santander is nominally an old-line Spanish bank, founded in 1857 by Emilio Botín López, and run today by the original Botín's great-grandson, Emilio Botín-Sanz de Sautuola y García de los Ríos—often listed as Spain's richest man. But Banco Santander today is run, top-down, by the City of London, through the British monarchy's Royal Bank of Scotland (RBS) and related institutions, and by old Venetian financial interests associated with the notorious insurance firm, Assicurazioni Generali, which helped put Benito Mussolini in power in Italy. Santander, in a word, is an instrument of ancient, imperial, feudalist financial interests.

Santander has had a "strategic alliance" with the RBS since 1988, one year after Emilio Botín took control of the bank. As EIR documented, in a July 2, 2004 feature, "Empire Strikes Back: Spanish Banks Recolonize Ibero-America," excerpts of which we publish below, Botín and Santander were considered so trustworthy by the British monarchy, that, in May 2003, RBS sold all of the Ibero-American branches of its international private banking division, Coutts & Co.—the Queen's personal banker—to Santander.

Santander and RBS are both part of a broader international banking network called the Inter-Alpha group, with tentacles extending across Western and Eastern Europe, and beyond (see below).

Botín is tight with the British monarchy and related financial aristocrats, beyond the RBS axis. For example, Botín has a multi-faceted relationship—business, social, and more—with Maj. Gen. Gerald Grosvenor, the 6th Duke of Westminster, Britain's richest man by some accounts, and the United Kingdom's top owner of real estate. The duke is a cousin of Queen Elizabeth II, and "is one of Prince Charles's best friends. Grosvenor also is Prince William's godfather," according to an article published in the March 12, 2008 issue of the New York Daily News, which also reported that Grosvenor "was a customer of the same high-end prostitution service patronized by [New York] Gov. [Eliot] Spitzer ... [and] hired four hookers over a six-week stretch in late 2006."

But pornography is the least of it. The stench of imperial decadence is all-pervasive in this world of the British royals and their foreign lickspittles.

For example, both billionaires—Botín and Grosvenor—hold enormous feudal estates near the city of Ciudad Real in the Castilla-La Mancha region of Spain, about 100 miles south of Madrid, which are exclusive hunting reserves. The Duke of Westminster's "La Garganta" estate is about 15,000 hectares (57 square miles) in size, and has, on occasion, hosted super-private parties for the British Princes William and Harry. Botín's nearby estate, El Castaño, is some 30 miles from the duke's, and a tad smaller, at a mere 11,000 hectares (42 square miles). In total, there are some 7 million hectares (25,000 square miles) of private hunting land belonging to estates in Castilla-La Mancha, according to ElDigitalCastillaLaMancha.es of May 13, 2009—over 80% of the land area of the entire Castilla-La Mancha region, the third-largest in Spain.

This world "is not within reach of all; power, money and land go hand in hand. It is the businessmen, the bankers and the aristocrats who control cynegetic 'high society,' a class which has majority residence in Castilla-La Mancha," the Spanish electronic publication explained. "You can attend these hunting events by invitation. The proprietor organizes the hunt, which becomes a social event where meetings occur among the partners in wanderings and business, and the fact of hunting becomes secondary." Among the regular visitors to these hunt country estates is Spain's King Juan Carlos.

Botín's estate reportedly received a different kind of visitor on April 25, 2008, according to accounts in the Spanish daily El País and Bloomberg news wires. A light plane crashed while attempting to land at the private airport on Botín's estate that day, killing both men on board. The plane was reportedly carrying 200 kg of hashish from Morocco (or 200 kg of cocaine, according to other accounts), and the person waiting for the plane in a truck at the landing strip was arrested—and was subsequently spirited out of the country. Spokesmen for both the Santander Group and the Marcelino Botín Foundation—both headed by Emilio Botín—denied that any member of the Botín family was involved.

This was not the first time that Botín's name had come up in connection with the drug trade. On Sept. 5, 2004, veteran British journalist Hugh O'Shaughnessy reported that the U.S. Senate's Permanent Subcommittee on Investigations had "issued a fierce warning to the banks" Santander and HSBC, for lax money-laundering procedures and receiving suspicious wire transfers in excess of $35 million from a suspected drug-runner in Equatorial Guinea.

Besides aristocratic hunting—long a central social, political, and business nexus of British imperial interests (see "The Coming Fall of the House of Windsor," EIR, Oct. 28, 1994)—Botín and the Duke of Westminster are joined in other business activities. In July 2008, the duke's British property group Grosvenor, with $26 billion in real estate assets under management (including those of the duke himself), traded the first Spanish property derivative—and teamed up with Banco Santander for that auspicious occasion. As a Reuters wire explained at the time, "Property swaps enable investors to rapidly increase or hedge exposure to real estate without having to buy or sell bricks and mortar in costly and often time-consuming transactions."

Grosvenor pioneered this new form of speculative bubble in the U.K. in the mid-2000s, and then spread it to the U.S., Germany, France, and Hong Kong. In 2007, Grosvenor extended this novel speculative disease to Australia, Japan, and Italy, all in the middle of the global financial bubble, whose immediate trigger (not its cause) had been the U.S. mortgage frenzy.

The importance of the 2008 Spain joint venture, was that it constituted an urgent effort to build a new bubble on the already collapsing British and Spanish real estate bubbles. As Reuters put it: "Supporters of Europe's fledgling property derivatives market also hope the [Grosvenor-Santander] trade will inspire investors to use property swaps to help offset potential losses stemming from sharp corrections in UK and Spanish commercial residential property prices."

At the time, Grosvenor and Santander trumpeted their intention to go hog wild with property derivatives. A release issued by Grosvenor reported that, "Andrew Fenlon, Global Head of Property Derivatives at Santander Global Banking & Markets said: 'We see this as an important first step for the Spanish property derivatives market, and a sure sign that this market will develop along the same lines as the French, German and even the UK markets. We are very pleased to work with Grosvenor who have shown themselves keen to complement their substantial property investment business and embrace the synthetic property market.' "

The "synthetic property market?" Are these the kind of phony assets that Russians and others are being suckered into betting on, strategically? The more one delves into it, the more Santander begins to look like an AIG-type financial shill for the wildest forms of British imperial financial speculation.

So, let us delve a bit further.

Dirty Acquisitions
The day after Santander's Feb. 4, 2010 release of its 2009 Annual Report—which trumpeted its profits and tried to argue that its ratio of non-performing loans (NPLs), while rising by 60%, from 2.04% to 3.24%, over the year, was still lower than Spain's average—a London Financial Times blog, on ft.com/alphaville, took note of the sharp drop in Santander stocks that day, and asked: "So what could have spooked shareholders?" One blogger's laconic reply hit the nail on the head: "In general, I would be wary of companies that have had acquisition-led growth, and be more mistrustful of their NPL figures."

If ever there were a bank that grew by scandal-laced acquisitions, and with non-performing and other phony assets galore, that bank is Santander.

In 1999, Santander and Spain's Banco Central Hispano (BCH) announced a "merger of equals," to form Banco Santander Central Hispano (BSCH). But differences quickly arose, and Botín drove the former BCH executives out, greasing the skids with a EU164 million "severance payment." Botín was subsequently charged with "misappropriation of funds" and "irresponsible management," but, in April 2005, he was cleared of all these charges. Later that year, Spain's public prosecutor's office also cleared Botín of separate charges of insider trading.

Then, there is the notorious case of ABN Amro bank. In October 2007, Santander, its long-time strategic ally RBS, and the Dutch-Belgian bank Fortis, outbid Barclays and other major banks to acquire the failing giant Dutch bank. As part of the deal, ABN Amro's Brazilian subsidiary, Banco Real, went to Santander. With that move, Santander became the third-largest private bank in the Brazilian market, controlling 11% of the country's banking assets—a long-coveted prize. In Dutch parliamentary hearings on Feb. 3, 2010, former ABN CEO Rijkman Groenink confessed that the Santander-RBS-Fortis consortium had acted in a way that was "so bizarre and irresponsible, I couldn't have imagined." According to a Dow Jones wire, Groenink also said that the three banks were poorly informed beforehand, and that the price they offered was absurd. "The due diligence was limited, and they based most of their information on the past. They didn't know what they were buying," Groenink said.

Groenink added that a merger with Barclays would have made much more sense: "It's likely that this combination wouldn't have required a substantial amount of state aid. It would have entered the crisis with the highest solvency. In that case, the Dutch state wouldn't have spent 30 billion euros on ABN Amro"—which they did, to help clean up the assets for Fortis, to the delight of Santander and RBS.

Groenink stated: "I shouldn't have taken responsibility for the acquisition because I was against it. Up to this day, I regret that we weren't able to prevent it." He did admit, however, that his regrets were tempered by a departure package of tens of millions of euros that Santander et al. gave him.

One Santander alliance that went a bit awry, however, was with Bernie Madoff, with his well-known links to dirty money laundering, where the Spanish bank reportedly lost over EU2 billion.

Santander has also "picked up some of the pieces of the weakened British banking system," in the words of the Financial Times, with its 2004 acquisition of the U.K.'s Abbey bank, followed by Alliance & Leicester and Bradford & Bingley in 2008. In 2009, they were all merged and "rebranded" under the Santander name, taking advantage of Santander's much-publicized promotion of Formula One driver Lewis Hamilton. For 2010, Santander is reported to be placing a bid to buy 318 branches, put up for sale by its own beleagured strategic ally, RBS, now 84% owned by the state.

'Bolha Brasil'
Santander's 2009 Annual Report is filled with glossy charts designed to impress the casual reader and other suckers. One of them presents the world's ten most profitable banks from 2006 to 2009, which shows Santander going from #7 to #3 in that period, surpassed last year only by two Chinese banks, ICBC and CCB (which were not even in the top 10 in 2006). Even the notorious Goldman Sachs came in slightly behind Santander in 2009 reported profits. Thus, between 2006 and 2009, Santander leapt ahead of Citibank, Bank of America, HSBC, JP Morgan, Royal Bank of Scotland, and Union Bank of Switzerland in annual profits reported.

Santander is using these figures to argue that it, and it alone, has managed to navigate in the troubled waters of the international financial crisis.

Hardly.

Although the Spanish domestic market still accounts for about 30% of Santander's business, its 2009 profits came largely from two "growth" markets: Brazil and the United Kingdom. Brazil was the source of 20% of Santander's attributable profits, rising from $2.370 billion in 2008 to $3.013 billion in 2009—a 27% increase. And the U.K. delivered 16% of total profits, rising from $1.550 billion to $2.402 billion in the same period—a 55% increase. Both of these prize Santander markets are built on the same house of cards.

Take the case of Brazil. In October 2007, Santander closed on the ABN Amro deal that finally gave it a major position inside the coveted banking system of Brazil, which is South America's largest country, both geographically and economically. As part of the deal, ABN Amro's Brazilian subsidiary, Banco Real, went to Santander, making it the number three private bank in the Brazilian banking system.

This capped years of intense activity by Santander designed, as a Bloomberg wire put it, to "Build [the] 'Republic of Santander' in Lula's Brazil." As EIR documented at the time, Santander poured almost $1 million into Lula da Silva's 2002 Presidential campaign, and, later, maintained an open $2 billion trade credit line, when other foreign banks stopped lending to Brazil, for fear that Lula might default on the country's debt.

In early 2007, Santander succeeded in insinuating two of its "former" executives, Miguel Jorge and Mario Toros, into the sensitive posts of Brazil's Trade Minister and Central Bank Director of Monetary Policy, respectively. When President Lula da Silva met Spanish Premier José Luis Rodríguez Zapatero on Sept. 17, 2007, in Madrid, a beaming Emilio Botín, Santander's president, was also present, and offered an affectionate hug to Jorge.

Santander is now reportedly considering acquiring Brazil's ninth-largest bank, Safra bank, owned by the infamous narco-banker Edmund Safra (see "New York Fed Is in Bed with Safra and the Russian Mafia," EIR, Feb. 2, 1996). That would allow Santander to leap from the #6 to the #4 position in Brazil, and hold 13% of total banking assets.

How does Santander make its money in Brazil? The same way all the other banks do: by feeding at the public trough through a highly profitable international carry trade, which is looting Brazil to the bone.

For example: In 2009, foreign speculative capital flooded Brazil's stock market (which rose by 83% over the year) and Treasury bills, to the tune of a net inflow of $80 billion, between March and October of 2009 alone, according to one economist from the Jubilee South network in Brazil. The way it works is that international banks and other speculators borrow money at near 0% interest rates in the U.S., Europe, and Japan, and then "invest" that money in Brazilian government bonds, which carry a tidy 8.75% interest rate.

But that's not the half of it. The Brazilian currency, the real, has also been appreciating at an annual rate of about 27% in 2009. That means that carry traders bringing in dollars in January 2009, that they placed in government Treasury notes, left the country at the end of the year with 35.75% more dollars than they brought in—27% from the appreciation, 8.75% from interest payments. Where did such an incredible profit margin come from? From the Brazilian population—which is being looted mercilessly through payments on the government's Treasury bonds.

The Brazil bubble—"bolha Brasil," as they call it there—did not start in 2009. As EIR wrote in 2004: "In point of fact, the Brazilian banking system is on life support from the government treasury. Brazil's total public debt at the end of 2003 had risen to a staggering 913 billion reais [$311 billion, at the exchange rate of the time].... This public debt pays the highest real interest rates on the planet."

Brazilian banks generated most of their profits from that activity then, and they still do today. The total net debt of Brazil's public sector is today, 1.345 trillion reais, about 44% greater than what it was in 2003. And because of the appreciation of the real, the dollar equivalent of that public debt exploded from $311 bilion to $770 billion at the end of 2009—a staggering 138% increase in six years.

Squatting in the middle of this speculative scandal, is Banco Santander.

Surreal Estate in Spain and Britain
As the world financial system entered a terminal disintegration in the second half of 2007, British financial interests turned to their trusted Santander operation as a platform for financially bolstering the City of London. At the end of 2007, Spanish banks including Santander massively created securities which had no markets, largely based on toxic real estate assets they were holding, for the sole purpose of depositing them at the European Central Bank in exchange for fresh loans, after the ECB issued new, looser regulations for collateral. The operation amounted to an ECB-orchestrated bailout of the Spanish banking sector and, through it, of their allies abroad. LaRouche, knowing Santander's intimacy with the House of Windsor, commented at the time: "They are bailing out the British royal family."

The sums involved were substantial. It was reported that, in December 2007 alone, Spanish banks borrowed EU63 billion through the ECB Repo facility. In March 2008, EIR wrote: "Since last September, the Spanish banks alone represent 9% of the volume of refinancing conducted by the ECB, whereas they comprised only 4-5% before then."

Spanish banks got EU27.7 billion in liquidity injections from the ECB between mid-2008 and late 2009, according to a chart published by Santander's controller, the Royal Bank of Scotland. This amounts to 12.1% of total ECB injections in the Eurozone. Germany, which is twice the size of Spain, got roughly the same amount—EU28.5 billion.

Santander has plenty of toxic assets, in real estate and other sectors, to dump on the ECB—or anyone else foolish enough to buy them. More than mortgages per se, the biggest bubble is in Spanish real estate developer debt, which today amounts to some $450 billion. Santander is the bank with the greatest exposure, holding about 10% of the total. Anywhere from 50-70% of the entire developer debt bubble of $450 billion is thought to be bad debt. In fact, the bubble is so out of control that the president of the Spanish Mortgage Association, Santos González, pronounced the sector's de facto bankruptcy in a Jan. 26, 2010 speech to the national convention of the Association of Real Estate Developers of Spain: "A sector which doesn't generate enough to pay the interest on its debt is a sector which is bankrupt," he lamented.

A source consulted by EIR noted: "The real estate sector in Spain has so far collapsed only 20%; therefore, it still has a long way to go."

In fact, overall bad loans in the Spanish banking system, as of December 2009, had doubled over what they were a year earlier.

That Spanish real estate and property development sector is now about to drop off the face of the Earth, and with it, the banks that are holding all the bad paper. Spain's General Judicial Council is forecasting that last year's 115,000 foreclosures will jump by more than 50% to 180,000 this year, according to Property Wire, a real estate news service, and that banks will have to write off about 50% of the valuation on their books.

"That's a vast underestimation on both counts," LaRouche commented.

Already, in 2009, Santander had to increase loan loss provisions by about $1.45 billion, which essentially came from their IPO sale of 16% of their Brazilian subsidiary for about $2 billion. Santander is reportedly quietly preparing for a far, far worse meltdown of assets in 2010, and is considering selling up to 25% of its U.K. and U.S. holdings in similar IPOs.

During the 2007-09 period, Santander also moved directly into the British market, especially its bankrupt real estate sector, using its newly acquired British banks—Abbey, Bradford & Bingley, and Alliance & Leicester—as a platform. By the end of 2009, Santander accounted for half of all new mortgages issued in the United Kingdom, according to the London Guardian. The bank's share of gross lending, which includes remortgaging, stood at 20% of total market share.

Overall, Santander today has 1,300 branches in the U.K. and about 15% of the retail banking market. Emilio Botín last month stated that he wants nothing less than to make Santander Britain's #1 bank, as measured by market share, profitability, and efficiency.

Such a hunter's trophy is one that Botín, and his British superiors, would no doubt be proud of—even as their entire international financial system disintegrates into oblivion. But this Santander Syndrome is a deadly swindle that patriots in Russia, China, India, and elsewhere, would do well to steer clear of.





Admin

DEBT DYNAMITE DOMINOES: THE COMING FINANCIAL CATASTROPHE ASSESSING THE ILLUSION OF RECOVERY

Andrew Gavin Marshall
http://www.globalresearch.ca/index.php?context=va&aid=17736

Understanding the Nature of the Global Economic Crisis

The people have been lulled into a false sense of safety under the rouse of a perceived economic recovery. Unfortunately, what the majority of people think does not make it so, especially when the people making the key decisions think and act to the contrary. The sovereign debt crises that have been unfolding in the past couple years and more recently in Greece, are canaries in the coal mine for the rest of Western civilization. The crisis threatens to spread to Spain, Portugal and Ireland; like dominoes, one country after another will collapse into a debt and currency crisis, all the way to America.

In October 2008, the mainstream media and politicians of the Western world were warning of an impending depression if actions were not taken to quickly prevent this. The problem was that this crisis had been a long-time coming, and whats worse, is that the actions governments took did not address any of the core, systemic issues and problems with the global economy; they merely set out to save the banking industry from collapse. To do this, governments around the world implemented massive stimulus and bailout packages, plunging their countries deeper into debt to save the banks from themselves, while charging it to people of the world.

Then an uproar of stock market speculation followed, as money was pumped into the stocks, but not the real economy. This recovery has been nothing but a complete and utter illusion, and within the next two years, the illusion will likely come to a complete collapse.

The governments gave the banks a blank check, charged it to the public, and now its time to pay; through drastic tax increases, social spending cuts, privatization of state industries and services, dismantling of any protective tariffs and trade regulations, and raising interest rates. The effect that this will have is to rapidly accelerate, both in the speed and volume, the unemployment rate, globally. The stock market would crash to record lows, where governments would be forced to freeze them altogether.

When the crisis is over, the middle classes of the western world will have been liquidated of their economic, political and social status. The global economy will have gone through the greatest consolidation of industry and banking in world history leading to a system in which only a few corporations and banks control the global economy and its resources; governments will have lost that right. The people of the western world will be treated by the financial oligarchs as they have treated the global South and in particular, Africa; they will remove our social structures and foundations so that we become entirely subservient to their dominance over the economic and political structures of our society.

This is where we stand today, and is the road on which we travel.
The western world has been plundered into poverty, a process long underway, but with the unfolding of the crisis, will be rapidly accelerated. As our societies collapse in on themselves, the governments will protect the banks and multinationals. When the people go out into the streets, as they invariably do and will, the government will not come to their aid, but will come with police and military forces to crush the protests and oppress the people. The social foundations will collapse with the economy, and the state will clamp down to prevent the people from constructing a new one.

The road to recovery is far from here. When the crisis has come to an end, the world we know will have changed dramatically. No one ever grows up in the world they were born into; everything is always changing. Now is no exception. The only difference is, that we are about to go through the most rapid changes the world has seen thus far.

Assessing the Illusion of Recovery

In August of 2009, I wrote an article, Entering the Greatest Depression in History, in which I analyzed how there is a deep systemic crisis in the Capitalist system in which we have gone through merely one burst bubble thus far, the housing bubble, but there remains a great many others.



There remains as a significantly larger threat than the housing collapse, a commercial real estate bubble. As the Deutsche Bank CEO said in May of 2009, It's either the beginning of the end or the end of the beginning.



Of even greater significance is what has been termed the bailout bubble in which governments have superficially inflated the economies through massive debt-inducing bailout packages. As of July of 2009, the government watchdog and investigator of the US bailout program stated that the U.S. may have put itself at risk of up to $23.7 trillion dollars.



[See: Andrew Gavin Marshall, Entering the Greatest Depression in History. Global Research: August 7, 2009]



In October of 2009, approximately one year following the great panic of 2008, I wrote an article titled, The Economic Recovery is an Illusion, in which I analyzed what the most prestigious and powerful financial institution in the world, the Bank for International Settlements (BIS), had to say about the crisis and recovery.



The BIS, as well as its former chief economist, who had both correctly predicted the crisis that unfolded in 2008, were warning of a future crisis in the global economy, citing the fact that none of the key issues and structural problems with the economy had been changed, and that government bailouts may do more harm than good in the long run.



William White, former Chief Economist of the BIS, warned:



The world has not tackled the problems at the heart of the economic downturn and is likely to slip back into recession. [He] warned that government actions to help the economy in the short run may be sowing the seeds for future crises.



[See: Andrew Gavin Marshall, The Economic Recovery is an Illusion. Global Research: October 3, 2009]



Crying Wolf or Castigating Cassandra?



While people were being lulled into a false sense of security, prominent voices warning of the harsh bite of reality to come were, instead of being listened to, berated and pushed aside by the mainstream media. Gerald Celente, who accurately predicted the economic crisis of 2008 and who had been warning of a much larger crisis to come, had been accused by the mainstream media of pushing pessimism porn.[1] Celentes response has been that he isnt pushing pessimism porn, but that he refuses to push optimism opium of which the mainstream media does so outstandingly.



So, are these voices of criticism merely crying wolf or is it that the media is out to castigate Cassandra? Cassandra, in Greek mythology, was the daughter of King Priam and Queen Hecuba of Troy, who was granted by the God Apollo the gift of prophecy. She prophesied and warned the Trojans of the Trojan Horse, the death of Agamemnon and the destruction of Troy. When she warned the Trojans, they simply cast her aside as mad and did not heed her warnings.



While those who warn of a future economic crisis may not have been granted the gift of prophecy from Apollo, they certainly have the ability of comprehension.



So what do the Cassandras of the world have to say today? Should we listen?



Empire and Economics



To understand the global economic crisis, we must understand the global causes of the economic crisis. We must first determine how we got to the initial crisis, from there, we can critically assess how governments responded to the outbreak of the crisis, and thus, we can determine where we currently stand, and where we are likely headed.



Africa and much of the developing world was released from the socio-political-economic restraints of the European empires throughout the 1950s and into the 60s. Africans began to try to take their nations into their own hands. At the end of World War II, the United States was the greatest power in the world. It had command of the United Nations, the World Bank and the IMF, as well as setting up the NATO military alliance. The US dollar reigned supreme, and its value was tied to gold.



In 1954, Western European elites worked together to form an international think tank called the Bilderberg Group, which would seek to link the political economies of Western Europe and North America. Every year, roughly 130 of the most powerful people in academia, media, military, industry, banking, and politics would meet to debate and discuss key issues related to the expansion of Western hegemony over the world and the re-shaping of world order. They undertook, as one of their key agendas, the formation of the European Union and the Euro currency unit.



[See: Andrew Gavin Marshall, Controlling the Global Economy: Bilderberg, the Trilateral Commission and the Federal Reserve. Global Research: August 3, 2009]



In 1971, Nixon abandoned the dollars link to gold, which meant that the dollar no longer had a fixed exchange rate, but would change according to the whims and choices of the Federal Reserve (the central bank of the United States). One key individual that was responsible for this choice was the third highest official in the U.S. Treasury Department at the time, Paul Volcker.[2]



Volcker got his start as a staff economist at the New York Federal Reserve Bank in the early 50s. After five years there, David Rockefellers Chase Bank lured him away.[3] So in 1957, Volcker went to work at Chase, where Rockefeller recruited him as his special assistant on a congressional commission on money and credit in America and for help, later, on an advisory commission to the Treasury Department.[4] In the early 60s, Volcker went to work in the Treasury Department, and returned to Chase in 1965 as an aide to Rockefeller, this time as vice president dealing with international business. With Nixon entering the White House, Volcker got the third highest job in the Treasury Department. This put him at the center of the decision making process behind the dissolution of the Bretton Woods agreement by abandoning the dollars link to gold in 1971.[5]



In 1973, David Rockefeller, the then-Chairman of Chase Manhattan Bank and President of the Council on Foreign Relations, created the Trilateral Commission, which sought to expand upon the Bilderberg Group. It was an international think tank, which would include elites from Western Europe, North America, and Japan, and was to align a trilateral political economic partnership between these regions. It was to further the interests and hegemony of the Western controlled world order.



That same year, the Petri-dish experiment of neoliberalism was undertaken in Chile. While a leftist government was coming to power in Chile, threatening the economic interests of not only David Rockefellers bank, but a number of American corporations, David Rockefeller set up meetings between Henry Kissinger, Nixons National Security Adviser, and a number of leading corporate industrialists. Kissinger in turn, set up meetings between these individuals and the CIA chief and Nixon himself. Within a short while, the CIA had begun an operation to topple the government of Chile.



On September 11, 1973, a Chilean General, with the help of the CIA, overthrew the government of Chile and installed a military dictatorship that killed thousands. The day following the coup, a plan for an economic restructuring of Chile was on the presidents desk. The economic advisers from the University of Chicago, where the ideas of Milton Freidman poured out, designed the restructuring of Chile along neoliberal lines.



Neoliberalism was thus born in violence.



In 1973, a global oil crisis hit the world. This was the result of the Yom Kippur War, which took place in the Middle East in 1973. However, much more covertly, it was an American strategem. Right when the US dropped the dollars peg to gold, the State Department had quietly begun pressuring Saudi Arabia and other OPEC nations to increase the price of oil. At the 1973 Bilderberg meeting, held six months before the oil price rises, a 400% increase in the price of oil was discussed. The discussion was over what to do with the large influx of what would come to be called petrodollars, the oil revenues of the OPEC nations.



Henry Kissinger worked behind the scenes in 1973 to ensure a war would take place in the Middle East, which happened in October. Then, the OPEC nations drastically increased the price of oil. Many newly industrializing nations of the developing world, free from the shackles of overt political and economic imperialism, suddenly faced a problem: oil is the lifeblood of an industrial society and it is imperative in the process of development and industrialization. If they were to continue to develop and industrialize, they would need the money to afford to do so.



Concurrently, the oil producing nations of the world were awash with petrodollars, bringing in record surpluses. However, to make a profit, the money would need to be invested. This is where the Western banking system came to the scene. With the loss of the dollars link to cold, the US currency could flow around the world at a much faster rate. The price of oil was tied to the price of the US dollar, and so oil was traded in US dollars. OPEC nations thus invested their oil money into Western banks, which in turn, would recycle that money by loaning it to the developing nations of the world in need of financing industrialization. It seemed like a win-win situation: the oil nations make money, invest it in the West, which loans it to the South, to be able to develop and build western societies.



However, all things do not end as fairy tales, especially when those in power are threatened. An industrialized and developed Global South (Latin America, Africa, and parts of Asia) would not be a good thing for the established Western elites. If they wanted to maintain their hegemony over the world, they must prevent the rise of potential rivals, especially in regions so rich in natural resources and the global supplies of energy.



It was at this time that the United States initiated talks with China. The opening of China was to be a Western project of expanding Western capital into China. China will be allowed to rise only so much as the West allows it. The Chinese elite were happy to oblige with the prospect of their own growth in political and economic power. India and Brazil also followed suit, but to a smaller degree than that of China. China and India were to brought within the framework of the Trilateral partnership, and in time, both China and India would have officials attending meetings of the Trilateral Commission.



So money flowed around the world, primarily in the form of the US dollar. Foreign central banks would buy US Treasuries (debts) as an investment, which would also show faith in the strength of the US dollar and economy. The hegemony of the US dollar reached around the world.



[See: Andrew Gavin Marshall, Controlling the Global Economy: Bilderberg, the Trilateral Commission and the Federal Reserve. Global Research: August 3, 2009]



The Hegemony of Neoliberalism



In 1977, however, a new US administration came to power under the Presidency of Jimmy Carter, who was himself a member of the Trilateral Commission. With his administration, came another roughly two-dozen members of the Trilateral Commission to fill key positions within his government. In 1973, Paul Volcker, the rising star through Chase Manhattan and the Treasury Department became a member of the Trilateral Commission. In 1975, he was made President of the Federal Reserve Bank of New York, the most powerful of the 12 regional Fed banks. In 1979, Jimmy Carter gave the job of Treasury Secretary to the former Governor of the Federal Reserve System, and in turn, David Rockefeller recommended Jimmy Carter appoint Paul Volcker as Governor of the Federal Reserve Board, which Carter quickly did.[6]



In 1979, the price of oil skyrocketed again. This time, Paul Volcker at the Fed was to take a different approach. His response was to drastically increase interest rates. Interest rates went from 2% in the late 70s to 18% in the early 1980s. The effect this had was that the US economy went into recession, and greatly reduced its imports from developing nations. A the same time, developing nations, who had taken on heavy debt burdens to finance industrialization, suddenly found themselves having to pay 18% interest payments on their loans. The idea that they could borrow heavily to build an industrial society, which would in turn pay off their loans, had suddenly come to a halt. As the US dollar had spread around the world in the forms of petrodollars and loans, the decisions that the Fed made would affect the entire world. In 1982, Mexico announced that it could no longer service its debt, and defaulted on its loans. This marked the spread of the 1980s debt crisis, which spread throughout Latin America and across the continent of Africa.



Suddenly, much of the developing world was plunged into crisis. Thus, the IMF and World Bank entered the scene with their newly developed Structural Adjustment Programs (SAPs), which would encompass a country in need signing an agreement, the SAP, which would provide the country with a loan from the IMF, as well as development projects by the World Bank. In turn, the country would have to undergo a neoliberal restructuring of its country.



Neoliberalism spread out of America and Britain in the 1980s; through their financial empires and instruments  including the World Bank and IMF  they spread the neoliberal ideology around the globe. Countries that resisted neoliberalism were subjected to regime change. This would occur through financial manipulation, via currency speculation or the hegemonic monetary policies of the Western nations, primarily the United States; economic sanctions, via the United Nations or simply done on a bilateral basis; covert regime change, through colour revolutions or coups, assassinations; and sometimes overt military campaigns and war.



The neoliberal ideology consisted in what has often been termed free market fundamentalism. This would entail a massive wave of privatization, in which state assets and industries are privatized in order to become economically more productive and efficient. This would have the social effect of leading to the firing of entire areas of the public sector, especially health and education as well as any specially protected national industries, which for many poor nations meant vital natural resources.



Then, the market would be liberalized which meant that restrictions and impediments to foreign investments in the nation would diminish by reducing or eliminating trade barriers and tariffs (taxes), and thus foreign capital (Western corporations and banks) would be able to invest in the country easily, while national industries that grow and compete would be able to more easily invest in other nations and industries around the world. The Central Bank of the nation would then keep interest rates artificially low, to allow for the easier movement of money in and out of the country. The effect of this would be that foreign multinational corporations and international banks would be able to easily buy up the privatized industries, and thus, buy up the national economy. Simultaneously major national industries may be allowed to grow and work with the global banks and corporations. This would essentially oligopolize the national economy, and bring it within the sphere of influence of the global economy controlled by and for the Western elites.



The European empires had imposed upon Africa and many other colonized peoples around the world a system of indirect rule, in which local governance structures were restructured and reorganized into a system where the local population is governed by locals, but for the western colonial powers. Thus, a local elite is created, and they enrich themselves through the colonial system, so they have no interest in challenging the colonial powers, but instead seek to protect their own interests, which happen to be the interests of the empire.



In the era of globalization, the leaders of the Third World have been co-opted and their societies reorganized by and for the interests of the globalized elites. This is a system of indirect rule, and the local elites becoming indirect globalists; they have been brought within the global system and structures of empire.



Following a Structural Adjustment Program, masses of people would be left unemployed; the prices of essential commodities such as food and fuel would increase, sometimes by hundreds of percentiles, while the currency lost its value. Poverty would spread and entire sectors of the economy would be shut down. In the developing world of Asia, Latin America and Africa, these policies were especially damaging. With no social safety nets to fall into, the people would go hungry; the public state was dismantled.



When it came to Africa, the continent so rapidly de-industrialized throughout the 1980s and into the 1990s that poverty increased by incredible degrees. With that, conflict would spread. In the 1990s, as the harsh effects of neoliberal policies were easily and quickly seen on the African continent, the main notion pushed through academia, the media, and policy circles was that the state of Africa was due to the mismanagement by Africans. The blame was put solely on the national governments. While national political and economic elites did become complicit in the problems, the problems were imposed from beyond the continent, not from within.



Thus, in the 1990s, the notion of good governance became prominent. This was the idea that in return for loans and help from the IMF and World Bank, nations would need to undertake reforms not only of the economic sector, but also to create the conditions of what the west perceived as good governance. However, in neoliberal parlance, good governance implies minimal governance, and governments still had to dismantle their public sectors. They simply had to begin applying the illusion of democracy, through the holding of elections and allowing for the formation of a civil society. Freedom however, was still to maintain simply an economic concept, in that the nation would be free for Western capital to enter into.



While massive poverty and violence spread across the continent, people were given the gift of elections. They would elect one leader, who would then be locked into an already pre-determined economic and political structure. The political leaders would enrich themselves at the expense of others, and then be thrown out at the next election, or simply fix the elections. This would continue, back and forth, all the while no real change would be allowed to take place. Western imposed democracy had thus failed.



An article in a 2002 edition of International Affairs, the journal of the Royal Institute of International Affairs (the British counter-part to the Council on Foreign Relations), wrote that:



In 1960 the average income of the top 20 per cent of the worlds population was 30 times that of the bottom 20 per cent. By 1990 it was 60 times, ad by 1997, 74 times that of the lowest fifth. Today the assets of the top three billionaires are more than the combined GNP [Gross National Product] of all least developed countries and their 600 million people.



This has been the context in which there has been an explosive growth in the presence of Western as well as local non-governmental organizations (NGOs) in Africa. NGOs today form a prominent part of the development machine, a vast institutional and disciplinary nexus of official agencies, practitioners, consultants, scholars and other miscellaneous experts producing and consuming knowledge about the developing world.



[. . . ] Aid (in which NGOs have come to play a significant role) is frequently portrayed as a form of altruism, a charitable act that enables wealth to flow from rich to poor, poverty to be reduced and the poor to be empowered.[7]



The authors then explained that NGOs have a peculiar evolution in Africa:



[T[heir role in development represents a continuity of the work of their precursors, the missionaries and voluntary organizations that cooperated in Europes colonization and control of Africa. Today their work contributes marginally to the relief of poverty, but significantly to undermining the struggle of African people to emancipate themselves from economic, social and political oppression.[8]



The authors examined how with the spread of neoliberalism, the notion of a minimalist state spread across the world and across Africa. Thus, they explain, the IMF and World Bank became the new commanders of post-colonial economies. However, these efforts were not imposed without resistance, as, Between 1976 and 1992 there were 146 protests against IMF-supported austerity measures [SAPs] in 39 countries around the world. Usually, however, governments responded with brute force, violently oppressing demonstrations. However, the widespread opposition to these reforms needed to be addressed by major organizations and aid agencies in re-evaluating their approach to development:[9]



The outcome of these deliberations was the good governance agenda in the 1990s and the decision to co-opt NGOs and other civil society organizations to a repackaged programme of welfare provision, a social initiative that could be more accurately described as a programme of social control.



The result was to implement the notion of pluralism in the form of multipartyism, which only ended up in bringing into the public domain the seething divisions between sections of the ruling class competing for control of the state. As for the welfare initiatives, the bilateral and multilateral aid agencies set aside significant funds for addressing the social dimensions of adjustment, which would minimize the more glaring inequalities that their policies perpetuated. This is where the growth of NGOs in Africa rapidly accelerated.[10]



Africa had again, become firmly enraptured in the cold grip of imperialism. Conflicts in Africa would be stirred up by imperial foreign powers, often using ethnic divides to turn the people against each other, using the political leaders of African nations as vassals submissive to Western hegemony. War and conflict would spread, and with it, so too would Western capital and the multinational corporation.



Building a New Economy



While the developing world fell under the heavy sword of Western neoliberal hegemony, the Western industrialized societies experienced a rapid growth of their own economic strength. It was the Western banks and multinational corporations that spread into and took control of the economies of Africa, Latin America, Asia, and with the fall of the Soviet Union in 1991, Eastern Europe and Central Asia.



Russia opened itself up to Western finance, and the IMF and World Bank swept in and imposed neoliberal restructuring, which led to a collapse of the Russian economy, and enrichment of a few billionaire oligarchs who own the Russian economy, and who are intricately connected with Western economic interests; again, indirect globalists.



As the Western financial and commercial sectors took control of the vast majority of the worlds resources and productive industries, amassing incredible profits, they needed new avenues in which to invest. Out of this need for a new road to capital accumulation (making money), the US Federal Reserve stepped in to help out.



The Federal Reserve in the 1990s began to ease interest rates lower and lower to again allow for the easier spread of money. This was the era of globalization, where proclamations of a New World Order emerged. Regional trading blocs and free trade agreements spread rapidly, as world systems of political and economic structure increasingly grew out of the national structure and into a supra-national form. The North American Free Trade Agreement (NAFTA) was implemented in an economic constitution for North America as Reagan referred to it.



Regionalism had emerged as the next major phase in the construction of the New World Order, with the European Union being at the forefront. The world economy was globalized and so too, would the political structure follow, on both regional and global levels. The World Trade Organization (WTO) was formed to maintain and enshrine global neoliberal constitution for trade. All through this time, a truly global ruling class emerged, the Transnational Capitalist Class (TCC), or global elite, which constituted a singular international class.



However, as the wealth and power of elites grew, everyone else suffered. The middle class had been subjected to a quiet dismantling. In the Western developed nations, industries and factories closed down, relocating to cheap Third World countries to exploit their labour, then sell the products in the Western world cheaply. Our living standards in the West began to fall, but because we could buy products for cheaper, no one seemed to complain. We continued to consume, and we used credit and debt to do so. The middle class existed only in theory, but was in fact, beholden to the shackles of debt.



The Clinton administration used globalization as its grand strategy throughout the 1990s, facilitating the decline of productive capital (as in, money that flows into production of goods and services), and implemented the rise finance capital (money made on money). Thus, financial speculation became one of the key tools of economic expansion. This is what was termed the financialization of the economy. To allow this to occur, the Clinton administration actively worked to deregulate the banking sector. The Glass-Steagle Act, put in place by FDR in 1933 to prevent commercial banks from merging with investment banks and engaging in speculation, (which in large part caused the Great Depression), was slowly dismantled through the coordinated efforts of Americas largest banks, the Federal Reserve, and the US Treasury Department.



Thus, a massive wave of consolidation took place, as large banks ate smaller banks, corporations merged, where banks and corporations stopped being American or European and became truly global. Some of the key individuals that took part in the dismantling of Glass-Steagle and the expansion of financialization were Alan Greenspan at the Federal Reserve and Robert Rubin and Lawrence Summers at the Treasury Department, now key officials in Obamas economic team.



This era saw the rise of derivatives which are complex financial instruments that essentially act as short-term insurance policies, betting and speculating that an asset price or commodity would go up or go down in value, allowing money to be made on whether stocks or prices go up or down. However, it wasnt called insurance because insurance has to be regulated. Thus, it was referred to as derivatives trade, and organizations called Hedge Funds entered the picture in managing the global trade in derivatives.



The stock market would go up as speculation on future profits drove stocks higher and higher, inflating a massive bubble in what was termed a virtual economy. The Federal Reserve facilitated this, as it had previously done in the lead-up to the Great Depression, by keeping interest rates artificially low, and allowing for easy-flowing money into the financial sector. The Federal Reserve thus inflated the dot-com bubble of the technology sector. When this bubble burst, the Federal Reserve, with Allen Greenspan at the helm, created the housing bubble.



The Federal Reserve maintained low interest rates and actively encouraged and facilitated the flow of money into the housing sector. Banks were given free reign and actually encouraged to make loans to high-risk individuals who would never be able to pay back their debt. Again, the middle class existed only in the myth of the free market.



Concurrently, throughout the 1990s and into the early 2000s, the role of speculation as a financial instrument of war became apparent. Within the neoliberal global economy, money could flow easily into and out of countries. Thus, when confidence weakens in the prospect of one nations economy, there can be a case of capital flight where foreign investors sell their assets in that nations currency and remove their capital from that country. This results in an inevitable collapse of the nations economy.



This happened to Mexico in 1994, in the midst of joining NAFTA, where international investors speculated against the Mexican peso, betting that it would collapse; they cashed in their pesos for dollars, which devalued the peso and collapsed the Mexican economy. This was followed by the East Asian financial crisis in 1997, where throughout the 1990s, Western capital had penetrated East Asian economies speculating in real estate and the stock markets. However, this resulted in over-investment, as the real economy, (production, manufacturing, etc.) could not keep up with speculative capital. Thus, Western capital feared a crisis, and began speculating against the national currencies of East Asian economies, which triggered devaluation and a financial panic as capital fled from East Asia into Western banking sectors. The economies collapsed and then the IMF came in to restructure them accordingly. The same strategy was undertaken with Russia in 1998, and Argentina in 2001.



[See: Andrew Gavin Marshall, Forging a New World Order Under a One World Government. Global Research: August 13, 2009]



Throughout the 2000s, the housing bubble was inflated beyond measure, and around the middle of the decade, when the indicators emerged of a crisis in the housing market a commercial real estate bubble was formed. This bubble has yet to burst.



The 2007-2008 Financial Crisis



In 2007, the Bank for International Settlements (BIS), the most prestigious financial institution in the world and the central bank to the worlds central banks, issued a warning that the world is on the verge of another Great Depression, citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system.[11]



As the housing bubble began to collapse, the commodity bubble was inflated, where money went increasingly into speculation, the stock market, and the price of commodities soared, such as with the massive increases in the price of oil between 2007 and 2008. In September of 2007, a medium-sized British Bank called Northern Rock, a major partaker in the loans of bad mortgages which turned out to be worthless, sought help from the Bank of England, which led to a run on the bank and investor panic. In February of 2008, the British government bought and nationalized Northern Rock.



In March of 2008, Bear Stearns, an American bank that had been a heavy lender in the mortgage real estate market, went into crisis. On March 14, 2008, the Federal Reserve Bank of New York worked with J.P. Morgan Chase (whose CEO is a board member of the NY Fed) to provide Bear Stearns with an emergency loan. However, they quickly changed their mind, and the CEO of JP Morgan Chase, working with the President of the New York Fed, Timothy Geithner, and the Treasury Secretary Henry Paulson (former CEO of Goldman Sachs), forced Bear Stearns to sell itself to JP Morgan Chase for $2 a share, which had previously traded at $172 a share in January of 2007. The merger was paid for by the Federal Reserve of New York, and charged to the US taxpayer.



In June of 2008, the BIS again warned of an impending Great Depression.[12]



In September of 2008, the US government took over Fannie Mae and Freddie Mac, the two major home mortgage corporations. The same month, the global bank Lehman Brothers declared bankruptcy, giving the signal that no one is safe and that the entire economy was on the verge of collapse. Lehman was a major dealer in the US Treasury Securities market and was heavily invested in home mortgages. Lehman filed for bankruptcy on September 15, 2008, marking the largest bankruptcy in US history. A wave of bank consolidation spread across the United States and internationally. The big banks became much bigger as Bank of America swallowed Merrill Lynch, JP Morgan ate Washington Mutual, and Wells Fargo took over Wachovia.



In November of 2008, the US government bailed out the largest insurance company in the world, AIG. The Federal Reserve Bank of New York, with Timothy Geithner at the helm:

[Bought out], for about $30 billion, insurance contracts AIG sold on toxic debt securities to banks, including Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale and Deutsche Bank AG, among others. That decision, critics say, amounted to a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been allowed to fail.

As Bloomberg reported, since the New York Fed is quasi-governmental, as in, it is given government authority, but not subject to government oversight, and is owned by the banks that make up its board (such as JP Morgan Chase), Its as though the New York Fed was a black-ops outfit for the nations central bank.[13]

The Bailout

In the fall of 2008, the Bush administration sought to implement a bailout package for the economy, designed to save the US banking system. The leaders of the nation went into rabid fear mongering. The President warned: More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically.The head of the Federal Reserve Board, Ben Bernanke, as well as Treasury Secretary Paulson, in late September warned of recession, layoffs and lost homes if Congress doesnt quickly approve the Bush administrations emergency $700 billion financial bailout plan.[14] Seven months prior, in February of 2008, prior to the collapse of Bear Stearns, both Bernanke and Paulson said the nation will avoid falling into recession.[15] In September of 2008, Paulson was saying that people should be scared.[16]

The bailout package was made into a massive financial scam, which would plunge the United States into unprecedented levels of debt, while pumping incredible amounts of money into major global banks.The public was told, as was the Congress, that the bailout was worth $700 billion dollars. However, this was extremely misleading, and a closer reading of the fine print would reveal much more, in that $700 billion is the amount that could be spent at any one time. As Chris Martenson wrote:

This means that $700 billion is NOT the cost of this dangerous legislation, it is only the amount that can be outstanding at any one time. After, say, $100 billion of bad mortgages are disposed of, another $100 billion can be bought. In short, these four little words assure that there is NO LIMIT to the potential size of this bailout. This means that $700 billion is a rolling amount, not a ceiling.

So what happens when you have vague language and an unlimited budget? Fraud and self-dealing. Mark my words, this is the largest looting operation ever in the history of the US, and it's all spelled out right in this delightfully brief document that is about to be rammed through a scared Congress and made into law.[17]

Further, the proposed bill would raise the nation's debt ceiling to $11.315 trillion from $10.615 trillion, and that the actions taken as a result of the passage of the bill would not be subject to investigation by the nations court system, as it would bar courts from reviewing actions taken under its authority:

The Bush administration seeks dictatorial power unreviewable by the third branch of government, the courts, to try to resolve the crisis, said Frank Razzano, a former assistant chief trial attorney at the Securities and Exchange Commission now at Pepper Hamilton LLP in Washington. We are taking a huge leap of faith.[18]

Larisa Alexandrovna, writing with the Huffington Post, warned that the passage of the bailout bill will be the final nails in the coffin of the fascist coup over America, in the form of financial fascists:

This manufactured crisis is now to be remedied, if the fiscal fascists get their way, with the total transfer of Congressional powers (the few that still remain) to the Executive Branch and the total transfer of public funds into corporate (via government as intermediary) hands.

The Treasury Secretary can buy broadly defined assets, on any terms he wants, he can hire anyone he wants to do it and can appoint private sector companies as financial deputies of the US government. And he can write whatever regulation he thinks [is] needed.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.[19]

At the same time, the US Federal Reserve was bailing out foreign banks of hundreds of billions of dollars, that are desperate for dollars and cant access Americas frozen credit markets  a move co-ordinated with central banks in Japan, the Eurozone, Switzerland, Canada and here in the UK.[20] The moves would have been coordinated through the Bank for International Settlements (BIS) in Basle, Switzerland. As Politico reported, foreign-based banks with big U.S. operations could qualify for the Treasury Departments mortgage bailout. A Treasury Fact Sheet released by the US Department of Treasury stated that:

Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.[21]

So, the bailout package would not only allow for the rescue of American banks, but any banks internationally, whether public or private, if the Treasury Secretary deemed it necessary, and that none of the Secretarys decisions could be reviewed or subjected to oversight of any kind. Further, it would mean that the Treasury Secretary would have a blank check, but simply wouldnt be able to hand out more than $700 billion at any one time. In short, the bailout is in fact, a coup détat by the banks over the government.

Many Congressmen were told that if they failed to pass the bailout package, they were threatened with martial law.[22] Sure enough, Congress passed the bill, and the financial coup had been a profound success.

No wonder then, in early 2009, one Congressman reported that the banks are still the most powerful lobby on Capitol Hill. And they frankly own the place.[23] Another Congressman said that The banks run the place, and explained, I will tell you what the problem is - they give three times more money than the next biggest group. It's huge the amount of money they put into politics.[24]

The Collapse of Iceland

On October 9th, 2008, the government of Iceland took control of the nations largest bank, nationalizing it, and halted trading on the Icelandic stock market. Within a single week, the vast majority of Iceland's once-proud banking sector has been nationalized. In early October, it was reported that: Iceland, which has transformed itself from one of Europe's poorest countries to one of its wealthiest in the space of a generation, could face bankruptcy. In a televised address to the nation, Prime Minister Geir Haarde conceded: "There is a very real danger, fellow citizens, that the Icelandic economy in the worst case could be sucked into the whirlpool, and the result could be national bankruptcy."

An article in BusinessWeek explained:
How did things get so bad so fast? Blame the Icelandic banking system's heavy reliance on external financing. With the privatization of the banking sector, completed in 2000, Iceland's banks used substantial wholesale funding to finance their entry into the local mortgage market and acquire foreign financial firms, mainly in Britain and Scandinavia. The banks, in large part, were simply following the international ambitions of a new generation of Icelandic entrepreneurs who forged global empires in industries from retailing to food production to pharmaceuticals. By the end of 2006, the total assets of the three main banks were $150 billion, eight times the country's GDP.

In just five years, the banks went from being almost entirely domestic lenders to becoming major international financial intermediaries. In 2000, says Richard Portes, a professor of economics at London Business School, two-thirds of their financing came from domestic sources and one-third from abroad. More recentlyuntil the crisis hitthat ratio was reversed. But as wholesale funding markets seized up, Iceland's banks started to collapse under a mountain of foreign debt.[25]

This was the grueling situation that faced the government at the time of the global economic crisis. The causes, however, were not Icelandic; they were international. Iceland owed more than $60 billion overseas, about six times the value of its annual economic output. As a professor at London School of Economics said, No Western country in peacetime has crashed so quickly and so badly.[26]

What went wrong?

Iceland followed the path of neoliberalism, deregulated banking and financial sectors and aided in the spread and ease of flow for international capital. When times got tough, Iceland went into crisis, as the Observer reported in early October 2008: Iceland is on the brink of collapse. Inflation and interest rates are raging upwards. The krona, Iceland's currency, is in freefall and is rated just above those of Zimbabwe and Turkmenistan. The discredited government and officials from the central bank have been huddled behind closed doors for three days with still no sign of a plan. International banks won't send any more money and supplies of foreign currency are running out.[27]
In 2007, the UN had awarded Iceland the best country to live in:
The nation's celebrated rags-to-riches story began in the Nineties when free market reforms, fish quota cash and a stock market based on stable pension funds allowed Icelandic entrepreneurs to go out and sweep up international credit. Britain and Denmark were favourite shopping haunts, and in 2004 alone Icelanders spent £894m on shares in British companies. In just five years, the average Icelandic family saw its wealth increase by 45 per cent.[28]

As the third of Icelands large banks was in trouble, following the government takeover of the previous two, the UK responded by freezing Icelandic assets in the UK. Kaupthing, the last of the three banks standing in early October, had many assets in the UK. On October 7th, Icelands Central Bank governor told the media, We will not pay for irresponsible debtors andnot for banks who have behaved irresponsibly. The following day, UK Chancellor of the Exchequer, Alistair Darling, claimed that, The Icelandic government, believe it or not, have told me yesterday they have no intention of honoring their obligations here, although, Arni Mathiesen, the Icelandic minister of finance, said, nothing in this telephone conversation can support the conclusion that Iceland would not honor its obligation.[29]

On October 10, 2008, UK Prime Minister Gordon Brown said, We are freezing the assets of Icelandic companies in the United Kingdom where we can. We will take further action against the Icelandic authorities wherever that is necessary to recover money. Thus:Many Icelandic companies operating in the U.K., in totally unrelated industries, experienced their assets being frozen by the U.K. government--as well as other acts of seeming vengeance by U.K. businesses and media.
The immediate effect of the collapse of Kaupthing is that Iceland's financial system is ruined and the foreign exchange market shut down. Retailers are scrambling to secure currency for food imports and medicine. The IMF is being called in for assistance.[30] The UK had more than £840m invested in Icelandic banks, and they were moving in to save their investments,[31] which just so happened to help spur on the collapse of the Icelandic economy.

On October 24, 2008, an agreement between Iceland and the IMF was signed. In late November, the IMF approved a loan to Iceland of $2.1 billion, with an additional $3 billion in loans from Denmark, Finland, Norway, Sweden, Russia, and Poland.[32] Why the agreement to the loan took so long, was because the UK pressured the IMF to delay the loan until a dispute over the compensation Iceland owes savers in Icesave, one of its collapsed banks, is resolved.[33]

In January of 2009, the entire Icelandic government was formally dissolved as the government collapsed when the Prime Minister and his entire cabinet resigned. This put the opposition part in charge of an interim government.[34] In July of 2009, the new government formally applied for European Union membership, however, Icelanders have traditionally been skeptical of the benefits of full EU membership, fearing that they would lose some of their independence as a small state within a larger political entity.[35]

In August of 2009, Icelands parliament passed a bill to repay Britain and the Netherlands more than $5 billion lost in Icelandic deposit accounts: Icelanders, already reeling from a crisis that has left many destitute, have objected to paying for mistakes made by private banks under the watch of other governments. Their anger in particular is directed at Britain, which used an anti-terrorism law to seize Icelandic assets during the crisis last year, a move which residents said added insult to injury. The government argued it had little choice but to make good on the debts if it wanted to ensure aid continued to flow. Rejection could have led to Britain or the Netherlands seeking to block aid from the International Monetary Fund (IMF).[36] Iceland is now in the service of the IMF and its international creditors. The small independent nation that for so long had prided itself on a strong economy and strong sense of independence had been brought to its knees. In mid-January of 2010, the IMF and Sweden together delayed their loans to Iceland, due to Icelands failure to reach a £2.3bn compensation deal with Britain and the Netherlands over its collapsed Icesave accounts. Sweden, the UK and the IMF were blackmailing Iceland to save UK assets in return for loans.[37]

In February of 2010, it was reported that the EU would begin negotiations with Iceland to secure Icelandic membership in the EU by 2012. However, Icelands aspirations are now tied partially to a dispute with the Netherlands and Britain over $5 billion in debts lost in the country's banking collapse in late 2008.[38] Iceland stood as a sign of what was to come. The sovereign debt crisis that brought Iceland to its knees had new targets on the horizon.


Dubai Hit By Financial Storm

In February of 2009, the Guardian reported that, A six-year boom that turned sand dunes into a glittering metropolis, creating the world's tallest building, its biggest shopping mall and, some say, a shrine to unbridled capitalism, is grinding to a halt, as Dubai, one of six states that form the United Arab Emirates (UAE), went into crisis. Further, the real estate bubble that propelled the frenetic expansion of Dubai on the back of borrowed cash and speculative investment, has burst.[39] Months later, in November of 2009, Dubai was plunged into a debt crisis, prompting fears of sparking a double-dip recession and the next wave of the financial crisis. As the Guardian reported:

Governments have cut interest rates, created new electronic money and allowed budget deficits to reach record levels in an attempt to boost growth after the near-collapse of the global financial system. [. . . ] Despite having oil, it's still the case that many of these countries had explosive credit growth. It's very clear that in 2010, we've got plenty more problems in store.[40] The neighboring oil-rich state of Abu Dhabi, however, came to the rescue of Dubai with a $10 billion bailout package, leading the Foreign Minister of the UAE to declare Dubais financial crisis as over.[41] In mid-February of 2010, however, renewed fears of a debt crisis in Dubai resurfaced; Morgan Stanley reported that, the cost to insure against a Dubai default [in mid-February] shot up to the level it was at during the peak of the city-state's debt crisis in November.[42] These fears resurfaced as:

Investors switched their attention to the Gulf [on February 15] as markets reacted to fears that a restructuring plan from the state-owned conglomerate Dubai World would pay creditors only 60 per cent of the money they are owed.[43] Again, the aims that governments seek in the unfolding debt crisis is not to save their people from a collapsing economy and inflated currency, but to save the interests of their major banks and corporations within each collapsing economy.

A Sovereign Debt Crisis Hits Greece
In October of 2009, a new Socialist government came to power in Greece on the promise of injecting 3 billion euros to reinvigorate the Greek economy.[44] Greece had suffered particularly hard during the economic crisis; it experienced riots and protests. In December of 2009, Greece said it would not default on its debt, but the government added, Salaried workers will not pay for this situation: we will not proceed with wage freezes or cuts. We did not come to power to tear down the social state. As Ambrose Evans-Pritchard wrote for the Telegraph in December of 2009: Greece is being told to adopt an IMF-style austerity package, without the devaluation so central to IMF plans. The prescription is ruinous and patently self-defeating. Public debt is already 113pc of GDP. The [European] Commission says it will reach 125pc by late 2010. It may top 140pc by 2012.

If Greece were to impose the draconian pay cuts under way in Ireland (5pc for lower state workers, rising to 20pc for bosses), it would deepen depression and cause tax revenues to collapse further. It is already too late for such crude policies. Greece is past the tipping point of a compound debt spiral. Evans-Pritchard wrote that the crisis in Greece had much to do with the European Monetary Union (EMU), which created the Euro, and made all member states subject to the decisions of the European Central Bank, as Interest rates were too low for Greece, Portugal, Spain, and Ireland, causing them all to be engulfed in a destructive property and wage boom. Further: EU states may club together to keep Greece afloat with loans for a while. That solves nothing. It increases Greece's debt, drawing out the agony. What Greece needs  unless it leaves EMU  is a permanent subsidy from the North. Spain and Portugal will need help too.[45]

Greeces debt had soared, by early December 2009, to a spiraling 300-billion euros, as its financial woes have also weighed on the euro currency, whose long-term value depends on member countries keeping their finances in order. Further, Ireland, Spain and Portugal were all facing problems with their debt. As it turned out, the previous Greek government had been cooking the books, and when the new government came to power, it inherited twice the federal deficit it had anticipated.[46]

In February of 2010, the New York Times revealed that: [W]ith Wall Streets help, [Greece] engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels. Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November  three months before Athens became the epicenter of global financial anxiety  a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting. The bankers, led by Goldmans president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greeces health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.[47]

Even back in 2001, when Greece joined the Euro-bloc, Goldman Sachs helped the country quietly borrow billions in a deal hidden from public view because it was treated as a currency trade rather than a loan, [and] helped Athens to meet Europes deficit rules while continuing to spend beyond its means. Further, Greece owes the world $300 billion, and major banks are on the hook for much of that debt. A default would reverberate around the globe. Both Goldman Sachs and JP Morgan Chase had undertaken similar efforts in Italy and other countries in Europe as well.[48]

In early February, EU nations led by France and Germany met to discuss a rescue package for Greece, likely with the help of the European Central Bank and possibly the IMF. The issue had plunged the Eurozone into a crisis, as confidence in the Euro fell across the board, and Germans have become so disillusioned with the euro, many will not accept notes produced outside their homeland.[49]Germany was expected to bail out the Greek economy, much to the dismay of the German people. As one German politician stated, We cannot expect the citizens, whose taxes are already too high, to go along with supporting the erroneous financial and budget policy of other states of the eurozone. One economist warned that the collapse of Greece could lead to a collapse of the Euro: There are enough people ­speculating on the markets about the possible bankruptcy of Greece, and once Greece goes, they would then turn their attentions to Spain and Italy, and Germany and France would be forced to step in once again.[50]

However, the Lisbon Treaty had been passed over 2009, which put into effect a European Constitution, giving Brussels enormous powers over its member states. As the Telegraph reported on February 16, 2010, the EU stripped Greece of its right to vote at a crucial meeting to take place in March: The council of EU finance ministers said Athens must comply with austerity demands by March 16 or lose control over its own tax and spend policies altogether. It if fails to do so, the EU will itself impose cuts under the draconian Article 126.9 of the Lisbon Treaty in what would amount to economic suzerainty [i.e., foreign economic control].
While the symbolic move to suspend Greece of its voting rights at one meeting makes no practical difference, it marks a constitutional watershed and represents a crushing loss of sovereignty."We certainly won't let them off the hook," said Austria's finance minister, Josef Proll, echoing views shared by colleagues in Northern Europe. Some German officials have called for Greece to be denied a vote in all EU matter until it emerges from "receivership".

The EU has still refused to reveal details of how it might help Greece raise 30bn (£26bn) from global debt markets by the end of June.[51]
It would appear that the EU is in a troubling position. If they allow the IMF to rescue Greece, it would be a blow to the faith in the Euro currency, whereas if they bailout Greece, it will encourage internal pressures within European countries to abandon the Euro.

In early February, Ambrose Evans-Pritchard wrote in the Telegraph that, The Greek debt crisis has spread to Spain and Portugal in a dangerous escalation as global markets test whether Europe is willing to shore up monetary union with muscle rather than mere words:Julian Callow from Barclays Capital said the EU may to need to invoke emergency treaty powers under Article 122 to halt the contagion, issuing an EU guarantee for Greek debt. If not contained, this could result in a `Lehman-style tsunami spreading across much of the EU.[. . . ] EU leaders will come to the rescue in the end, but Germany has yet to blink in this game of brinkmanship. The core issue is that EMUs credit bubble has left southern Europe with huge foreign liabilities: Spain at 91pc of GDP (950bn); Portugal 108pc (177bn). This compares with 87pc for Greece (208bn). By this gauge, Iberian imbalances are worse than those of Greece, and the sums are far greater. The danger is that foreign creditors will cut off funding, setting off an internal EMU version of the Asian financial crisis in 1998.[52]

Fear began to spread in regards to a growing sovereign debt crisis, stretching across Greece, Spain and Portugal, and likely much wider and larger than that.

A Global Debt Crisis

In 2007, the Bank for International Settlements (BIS), the world's most prestigious financial body, warned of a coming great depression, and stated that while in a crisis, central banks may cut interest rates (which they subsequently did). However, as the BIS pointed out, while cutting interest rates may help, in the long run it has the effect of sowing the seeds for more serious problems further ahead.[53]. In the summer of 2008, prior to the apex of the 2008 financial crisis in September and October, the BIS again warned of the inherent dangers of a new Great Depression. As Ambrose Evans-Pritchard wrote, the ultimate bank of central bankers warned that central banks, such as the Federal Reserve, would not find it so easy to clean up the messes they had made in asset-price bubbles. The BIS report stated that, It is not impossible that the unwinding of the credit bubble could, after a temporary period of higher inflation, culminate in a deflation that might be hard to manage, all the more so given the high debt levels. As Evans-Pritchard explained, this amounts to a warning that monetary overkill by the Fed, the Bank of England, and above all the European Central Bank could prove dangerous at this juncture. The BIS report warned that, Global banks - with loans of $37 trillion in 2007, or 70pc of world GDP - are still in the eye of the storm. Ultimately, the actions of central banks were designed to put off the day of reckoning, not to prevent it.[54]

Seeing how the BIS is not simply a casual observer, but is in fact the most important financial institution in the world, as it is where the worlds central bankers meet and, in secret, decide monetary policy for the world. As central banks have acted as the architects of the financial crisis, the BIS warning of a Great Depression is not simply a case of Cassandra prophesying the Trojan Horse, but is a case where she prophesied the horse, then opened the gates of Troy and pulled the horse in. It was within this context that the governments of the world took on massive amounts of debt and bailed out the financial sectors from their accumulated risk by buying their bad debts.

In late June of 2009, several months following Western governments implementing bailouts and stimulus packages, the world was in the euphoria of recovery. At this time, howeve...

Admin

GLOBAL DEBT CRISIS

In 2007, the Bank for International Settlements (BIS), the world's most prestigious financial body, warned of a coming great depression, and stated that while in a crisis, central banks may cut interest rates (which they subsequently did). However, as the BIS pointed out, while cutting interest rates may help, in the long run it has the effect of sowing the seeds for more serious problems further ahead.[53]



In the summer of 2008, prior to the apex of the 2008 financial crisis in September and October, the BIS again warned of the inherent dangers of a new Great Depression. As Ambrose Evans-Pritchard wrote, the ultimate bank of central bankers warned that central banks, such as the Federal Reserve, would not find it so easy to clean up the messes they had made in asset-price bubbles.



The BIS report stated that, It is not impossible that the unwinding of the credit bubble could, after a temporary period of higher inflation, culminate in a deflation that might be hard to manage, all the more so given the high debt levels. As Evans-Pritchard explained, this amounts to a warning that monetary overkill by the Fed, the Bank of England, and above all the European Central Bank could prove dangerous at this juncture. The BIS report warned that, Global banks - with loans of $37 trillion in 2007, or 70pc of world GDP - are still in the eye of the storm. Ultimately, the actions of central banks were designed to put off the day of reckoning, not to prevent it.[54]



Seeing how the BIS is not simply a casual observer, but is in fact the most important financial institution in the world, as it is where the worlds central bankers meet and, in secret, decide monetary policy for the world. As central banks have acted as the architects of the financial crisis, the BIS warning of a Great Depression is not simply a case of Cassandra prophesying the Trojan Horse, but is a case where she prophesied the horse, then opened the gates of Troy and pulled the horse in.



It was within this context that the governments of the world took on massive amounts of debt and bailed out the financial sectors from their accumulated risk by buying their bad debts.



In late June of 2009, several months following Western governments implementing bailouts and stimulus packages, the world was in the euphoria of recovery. At this time, however, the Bank for International Settlements released another report warning against such complacency in believing in the recovery. The BIS warned of only limited progress in fixing the financial system. The article is worth quoting at length:



Instead of implementing policies designed to clean up banks' balance sheets, some rescue plans have pushed banks to maintain their lending practices of the past, or even increase domestic credit where it's not warranted.



[. . . ] The lack of progress threatens to prolong the crisis and delay the recovery because a dysfunctional financial system reduces the ability of monetary and fiscal actions to stimulate the economy.



That's because without a solid banking system underpinning financial markets, stimulus measures won't be able to gain traction, and may only lead to a temporary pickup in growth.



A fleeting recovery could well make matters worse, the BIS warns, since further government support for banks is absolutely necessary, but will become unpopular if the public sees a recovery in hand. And authorities may get distracted with sustaining credit, asset prices and demand rather than focusing on fixing bank balance sheets.



[. . . ] It warned that despite the unprecedented measures in the form of fiscal stimulus, interest rate cuts, bank bailouts and quantitative easing, there is an open question whether the policies will be able to stabilize the global economy.



And as governments bulk up their deficits to spend their way out of the crisis, they need to be careful that their lack of restraint doesn't come back to bite them, the central bankers said. If governments don't communicate a credible exit strategy, they will find it harder to place debt, and could face rising funding costs  leading to spending cuts or significantly higher taxes.[55]



The BIS had thus endorsed the bailout and stimulus packages, which is no surprise, considering that the BIS is owned by the central banks of the world, which in turn are owned by the major global banks that were bailed out by the governments. However, the BIS warned that these rescue efforts, while necessary for the banks, will likely have deleterious effects for national governments.



The BIS warned that, theres a risk central banks will raise interest rates and withdraw emergency liquidity too late, triggering inflation:



Central banks around the globe have lowered borrowing costs to record lows and injected billions of dollars [or, more accurately, trillions] into the financial system to counter the worst recession since World War II. While some policy makers have stressed the need to withdraw the emergency measures as soon as the economy improves, the Federal Reserve, Bank of England, and European Central Bank are still in the process of implementing asset-purchase programs designed to unblock credit markets and revive growth.



The big and justifiable worry is that, before it can be reversed, the dramatic easing in monetary policy will translate into growth in the broader monetary and credit aggregates, the BIS said. That will lead to inflation that feeds inflation expectations or it may fuel yet another asset-price bubble, sowing the seeds of the next financial boom-bust cycle.[56]



Of enormous significance was the warning from the BIS that, fiscal stimulus packages may provide no more than a temporary boost to growth, and be followed by an extended period of economic stagnation. As the Australian reported in late June:



The only international body to correctly predict the financial crisis - the Bank for International Settlements (BIS) - has warned the biggest risk is that governments might be forced by world bond investors to abandon their stimulus packages, and instead slash spending while lifting taxes and interest rates.



Further, major western countries such as Australia faced the possibility of a run on the currency, which would force interest rates to rise, and Particularly in smaller and more open economies, pressure on the currency could force central banks to follow a tighter policy than would be warranted by domestic economic conditions. Not surprisingly, the BIS stated that, government guarantees and asset insurance have exposed taxpayers to potentially large losses, through the bailouts and stimulus packages, and stimulus programs will drive up real interest rates and inflation expectations, as inflation would intensify as the downturn abated.[57]



In May of 2009, Simon Johnson, former chief economist of the International Monetary Fund (IMF), warned that Britain faces a major struggle in the next phase of the economic crisis:



[T]he mountain of debt that had poisoned the financial system had not disappeared overnight. Instead, it has been shifted from the private sector onto the public sector balance sheet. Britain has taken on hundreds of billions of pounds of bank debt and stands behind potentially trillions of dollars of contingent liabilities.



If the first stage of the crisis was the financial implosion and the second the economic crunch, the third stage  the one heralded by Johnson  is where governments start to topple under the weight of this debt. If 2008 was a year of private sector bankruptcies, 2009 and 2010, it goes, will be the years of government insolvency.



However, as dire as things look for Britain, The UK is likely to be joined by other countries as the full scale of the downturn becomes apparent and more financial skeletons are pulled from the sub-prime closet.[58]



In September of 2009, the former Chief Economist of the Bank for International Settlements (BIS), William White, who had accurately predicted the previous crisis, warned that, The world has not tackled the problems at the heart of the economic downturn and is likely to slip back into recession. He also warned that government actions to help the economy in the short run may be sowing the seeds for future crises. An article in the Financial Times elaborated:



Are we going into a W[-shaped recession]? Almost certainly. Are we going into an L? I would not be in the slightest bit surprised, [White] said, referring to the risks of a so-called double-dip recession or a protracted stagnation like Japan suffered in the 1990s.



The only thing that would really surprise me is a rapid and sustainable recovery from the position were in.



The comments from Mr White, who ran the economic department at the central banks bank from 1995 to 2008, carry weight because he was one of the few senior figures to predict the financial crisis in the years before it struck.



Mr White repeatedly warned of dangerous imbalances in the global financial system as far back as 2003 and  breaking a great taboo in central banking circles at the time  he dared to challenge Alan Greenspan, then chairman of the Federal Reserve, over his policy of persistent cheap money [i.e., low interest rates].



[. . . ] Worldwide, central banks have pumped [trillions] of dollars of new money into the financial system over the past two years in an effort to prevent a depression. Meanwhile, governments have gone to similar extremes, taking on vast sums of debt to prop up industries from banking to car making.



These measures may already be inflating a bubble in asset prices, from equities to commodities, he said, and there was a small risk that inflation would get out of control over the medium term if central banks miss-time their exit strategies.



Meanwhile, the underlying problems in the global economy, such as unsustainable trade imbalances between the US, Europe and Asia, had not been resolved.[59]



In late September of 2009, the General Manager of the BIS warned governments against complacency, saying that, the market rebound should not be misinterpreted, and that, The profile of the recovery is not clear.[60]



In September, the Financial Times further reported that William White, former Chief Economist at the BIS, also argued that after two years of government support for the financial system, we now have a set of banks that are even bigger  and more dangerous  than ever before, which also, has been argued by Simon Johnson, former chief economist at the International Monetary Fund, who says that the finance industry has in effect captured the US government, and pointedly stated: recovery will fail unless we break the financial oligarchy that is blocking essential reform.[61]



In mid-September, the BIS released a warning about the global financial system, as The global market for derivatives rebounded to $426 trillion in the second quarter [of 2009] as risk appetite returned, but the system remains unstable and prone to crises. The derivatives rose by 16% mostly due to a surge in futures and options contracts on three-month interest rates. In other words, speculation is back in full force as bailout money to banks in turn fed speculative practices that have not been subjected to reform or regulation. Thus, the problems that created the previous crisis are still present and growing:



Stephen Cecchetti, the [BIS] chief economist, said over-the-counter markets for derivatives are still opaque and pose "major systemic risks" for the financial system. The danger is that regulators will again fail to see that big institutions have taken far more exposure than they can handle in shock conditions, repeating the errors that allowed the giant US insurer AIG to write nearly "half a trillion dollars" of unhedged insurance through credit default swaps.[62]



In late November of 2009, Morgan Stanley warned that, Britain risks becoming the first country in the G10 bloc of major economies to risk capital flight and a full-blown debt crisis over coming months. The Bank of England may have to raise interest rates before it is ready -- risking a double-dip recession, and an incipient compound-debt spiral. Further:



Morgan Stanley said [the] sterling may fall a further 10pc in trade-weighted terms. This would complete the steepest slide in the pound since the industrial revolution, exceeding the 30pc drop from peak to trough after Britain was driven off the Gold Standard in cataclysmic circumstances in 1931.[63]



As Ambrose Evans-Pritchard wrote for the Telegraph, this is a reminder that countries merely bought time during the crisis by resorting to fiscal stimulus and shunting private losses onto public books, and, while he endorsed the stimulus packages claiming it was necessary, he admitted that the stimulus packages have not resolved the underlying debt problem. They have storied up a second set of difficulties by degrading sovereign debt across much of the world.[64] Morgan Stanley said another surprise in 2010 could be a surge in the dollar. However, this would be due to capital flight out of Europe as its economies crumble under their debt burdens and capital seeks a safe haven in the US dollar.



In December of 2009, the Wall Street Journal reported on the warnings of some of the nations top economists, who feared that following a financial crisis such as the one experienced in the previous two years, there's typically a wave of sovereign default crises. As economist Kenneth Rogoff explained, If you want to know what's next on the menu, that's a good bet, as Spiraling government debts around the world, from Washington to Berlin to Tokyo, could set the scene for years of financial troubles. Apart from the obvious example of Greece, other countries are at risk, as the author of the article wrote:



Also worrying are several other countries at the periphery of Europethe Baltics, Eastern European countries like Hungary, and maybe Ireland and Spain. This is where public finances are worst. And the handcuffs of the European single currency, Prof. Rogoff said, mean individual countries can't just print more money to get out of their debts. (For the record, the smartest investor I have ever known, a hedge fund manager in London, is also anticipating a sovereign debt crisis.)



[. . . ] The major sovereign debt crises, he said, are probably a couple of years away. The key issue is that this time, the mounting financial troubles of the U.S., Germany and Japan mean these countries, once the rich uncles of the world, will no longer have the money to step in and rescue the more feckless nieces and nephews.



Rogoff predicted that, We're going to be raising taxes sky high, and that, we're probably going to see a lot of inflation, eventually. We will have to. It's the easiest way to reduce the value of those liabilities in real terms. Rogoff stated, The way rich countries default is through inflation. Further, even U.S. municipal bonds won't be safe from trouble. California could be among those facing a default crisis. Rogoff elaborated, It wouldn't surprise me to see the Federal Reserve buying California debt at some point, or some form of bailout.[65]



The bailouts, particularly that of the United States, handed a blank check to the worlds largest banks. As another favour, the US government put those same banks in charge of reform and regulation of the banking industry. Naturally, no reform or regulation took place. Thus, the money given to banks by the government can be used in financial speculation. As the sovereign debt crisis unfolds and spreads around the globe, the major international banks will be able to create enormous wealth in speculation, rapidly pulling their money out of one nation in debt crisis, precipitating a collapse, and moving to another, until all the dominoes have fallen, and the banks stand larger, wealthier, and more powerful than any nation or institution on earth (assuming they already arent). This is why the bankers were so eager to undertake a financial coup of the United States, to ensure that no actual reform took place, that they could loot the nation of all it has, and profit off of its eventual collapse and the collapse of the global economy. The banks have been saved! Now everyone else must pay.



Edmund Conway, the Economics Editor of the Telegraph, reported in early January of 2010, that throughout the year:



[S]overeign credit will buckle under the strain of [government] deficits; the economic recovery will falter as the Government withdraws its fiscal stimulus measures and more companies will continue to fail. In other words, 2010 is unlikely to be the year of a V-shaped recovery.[66]



In other words, the recovery is an illusion. In mid-January of 2010, the World Economic Forum released a report in which it warned that, There is now more than a one-in-five chance of another asset price bubble implosion costing the world more than £1 trillion, and similar odds of a full-scale sovereign fiscal crisis. The report warned of a simultaneous second financial crisis coupled with a major fiscal crisis as countries default on their debts. The report also warned of the possibility of China's economy overheating and, instead of helping support global economic growth, preventing a fully-fledged recovery from developing. Further:



The report, which in previous years had been among the first to cite the prospect of a financial crisis, the oil crisis that preceded it and the ongoing food crisis, included a list of growing risks threatening leading economies. Among the most likely, and potentially most costly, is a sovereign debt crisis, as some countries struggle to afford the unprecedented costs of the crisis clean-up, the report said, specifically naming the UK and the US.



[. . .] The report also highlights the risk of a further asset price collapse, which could derail the nascent economic recovery across the world, with particular concern surrounding China, which some fear may follow the footsteps Japan trod in the 1990s.[67]



Nouriel Roubini, one of Americas top economists who predicted the financial crisis, wrote an article in Forbes in January of 2010 explaining that, the severe recession, combined with a financial crisis during 2008-09, worsened the fiscal positions of developed countries due to stimulus spending, lower tax revenues and support to the financial sector. He warned that the debt burden of major economies, including the US, Japan and Britain, would likely increase. With this, investors will become wary of the sustainability of fiscal markets and will begin to withdraw from debt markets, long considered safe havens. Further:



Most central banks will withdraw liquidity starting in 2010, but government financing needs will remain high thereafter. Monetization and increased debt issuances by governments in the developed world will raise inflation expectations.



As interest rates rise, which they will have to in a tightening of monetary policy, (which up until now have been kept artificially low so as to encourage the spread of liquidity around the world), interest payments on the debt will increase dramatically. Roubini warned:



The U.S. and Japan might be among the last to face investor aversionthe dollar is the global reserve currency and the U.S. has the deepest and most liquid debt markets, while Japan is a net creditor and largely finances its debt domestically. But investors will turn increasingly cautious even about these countries if the necessary fiscal reforms are delayed.[68]



Governments will thus need to drastically increase taxes and cut spending. Essentially, this will amount to a global Structural Adjustment Program (SAP) in the developed, industrialized nations of the West.



Where SAPs imposed upon Third World debtor nations would provide a loan in return for the dismantling of the public state, higher taxes, growing unemployment, total privatization of state industries and deregulation of trade and investment, the loans provided by the IMF and World Bank would ultimately benefit Western multinational corporations and banks. This is what the Western world now faces: we bailed out the banks, and now we must pay for it, through massive unemployment, increased taxes, and the dismantling of the public sphere.



In February of 2010, Niall Ferguson, a prominent British economic historian, wrote an article for the Financial Times entitled, A Greek Crisis Coming to America. He starts by explaining that, It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies. He explained that this is not a crisis confined to one region, It is a fiscal crisis of the western world, and Its ramifications are far more profound than most investors currently appreciate. Ferguson writes that, the problem is essentially the same from Iceland to Ireland to Britain to the US. It just comes in widely differing sizes, and the US is no small risk:



For the worlds biggest economy, the US, the day of reckoning still seems reassuringly remote. The worse things get in the eurozone, the more the US dollar rallies as nervous investors park their cash in the safe haven of American government debt. This effect may persist for some months, just as the dollar and Treasuries rallied in the depths of the banking panic in late 2008.



Yet even a casual look at the fiscal position of the federal government (not to mention the states) makes a nonsense of the phrase safe haven. US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.



Ferguson points out that, The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget. Thats right, never. Ferguson explains that debt will hurt major economies:



By raising fears of default and/or currency depreciation ahead of actual inflation, they push up real interest rates. Higher real rates, in turn, act as drag on growth, especially when the private sector is also heavily indebted  as is the case in most western economies, not least the US.



Although the US household savings rate has risen since the Great Recession began, it has not risen enough to absorb a trillion dollars of net Treasury issuance a year. Only two things have thus far stood between the US and higher bond yields: purchases of Treasuries (and mortgage-backed securities, which many sellers essentially swapped for Treasuries) by the Federal Reserve and reserve accumulation by the Chinese monetary authorities.[69]



In late February of 2010, the warning signs were flashing red that interest rates were going to have to rise, taxes increase, and the burden of debt would need to be addressed.


Admin


US Treasuries are US government debt that is issued by the US Treasury
Department, which are bought by foreign governments as an investment.
It is a show of faith in the US government by buying their debt(i.e., Treasuries). In buying a US Treasury, you are lending money to the US government for a certain period of time. However, as the United States has taken on excessive debt loads to save the banks from crisis, the prospect of buying US Treasuries has become less appealing, and the threat that they are an unsafe investment is ever-growing. In February of 2009, Hilary Clinton urged China to continue buying US Treasuries in order to finance Obama’s stimulus package. As an article in Bloomberg pointed out:

The U.S. is the single largest buyer of the exports that drive growth in China, the world’s third-largest economy. China in turn invests surplus earnings from shipments of goods such as toys, clothing and steel primarily in Treasury securities, making it the world’s largest holder of U.S. government debt at the end of last year with $696.2 billion.[70]
The following month, the Chinese central bank announced that they would continue buying US Treasuries.[71]

However, in February of 2009, Warren Buffet, one of the world’s richest individuals, warned against buying US Treasuries: Buffett said that with the U.S. Federal Reserve and Treasury Department going "all in" to jump-start an economy shrinking at the fastest pace since 1982, "once-unthinkable dosages" of stimulus will likely spur an "onslaught" of inflation, an enemy of fixed-income investors.

"The investment world has gone from underpricing risk to overpricing it," Buffett wrote. "Cash is earning close to nothing and will surely find its purchasing power eroded over time." "When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s," he went on. "But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary."[72]

In September of 2009, an article on CNN reported of the dangers if China were to start dumping US Treasuries, which “could cause longer-term interest rates to shoot up since bond prices and yields move in opposite directions,” as a weakening US currency could lead to inflation, which would in turn, reduce the value and worth of China’s holdings in US Treasuries.[73]

It has become a waiting game; an economic catch-22: China holds US debt (Treasuries) which allows the US to spend to “save the economy” (or more accurately, the banks), but all the spending has plunged the US into such abysmal debt from which it will never be able to emerge. The result is that inflation will likely occur, with a possibility of hyperinflation, thus reducing the value of the US currency. China’s economy is entirely dependent upon the US as a consumer economy, while the US is dependent upon China as a buyer and holder of US debt. Both countries are delaying the inevitable. If China doesn’t want to hold worthless investments (US debt) it must stop buying US Treasuries, and then international faith in the US currency would begin to fall, forcing interest rates to rise, which could even precipitate a speculative assault against the US dollar. At the same time, a collapsing US currency and economy would not help China’s economy, which would tumble with it. So, it has become a waiting game.

In February of 2010, the Financial Times reported that China had begun in December of 2009, the process of dumping US Treasuries, and thus falling behind Japan as the largest holder of US debt, selling approximately $38.8 billion of US Treasuries, as “Foreign demand for US Treasury bonds fell by a record amount”: The fall in demand comes as countries retreat from the "flight to safety" strategy they embarked on at the peak of the global financial crisis and could mean the US will have to pay more in debt interest.

For China, the sale of US Treasuries marks a reversal that it signalled last year when it said it would begin to reduce some of its holdings. Any changes in its behaviour are politically sensitive because it is the biggest US trade partner and has helped to finance US deficits. Alan Ruskin, a strategist at RBS Securities, said that China's behaviour showed that it felt "saturated" with Treasury paper. The change of sentiment could hurt the dollar and the Treasury market as the US has to look to other countries for financing.[74] So, China has given the US a vote of non-confidence. This is evident of the slippery-slide down the road to a collapse of the US economy, and possibly, the US dollar, itself.

Is a Debt Crisis Coming to America?

All the warning signs are there: America is in dire straights when it comes to its total debt, proper actions have not been taken to reform the monetary or financial systems, the same problems remain prevalent, and the bailout and stimulus packages have further exposed the United States to astronomical debt levels. While the dollar will likely continue to go up as confidence in the Eurozone economies tumbles, this is not because the dollar is a good investment, but because the dollar is simply a better investment (for now) than the Euro, which isn’t saying much.
The Chinese moves to begin dumping US Treasuries is a signal that the issue of American debt has already weighed in on the functions and movements of the global financial system. While the day of reckoning may be months if not years away, it is coming nonetheless.
On February 15, it was reported that the Federal Reserve, having pumped $2.2 trillion into the economy, “must start pulling that money back.” As the Fed reportedly bought roughly $2 trillion in bad assets, it is now debating “how and when to sell those assets.”[75] As the Korea Times reported, “The problem: Do it too quickly and the Fed might cut off or curtail the recovery. Wait too long and risk setting off a punishing round of inflation.”[76]

In mid-February, there were reports of dissent within the Federal Reserve System, as Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, warned that, “The US must fix its growing debt problems or risk a new financial crisis.” He explained, “that rising debt was infringing on the central bank’s ability to fulfill its goals of maintaining price stability and long-term economic growth.” In January, he was the lone voice at a Fed meeting that said interest rates should not remain near zero for an “extended period.” He said the worst case scenario would be for the US government to have to again ask the Fed to print more money, and instead suggested that, “the administration must find ways to cut spending and generate revenue,” admitting that it would be a “painful and politically inconvenient” process.[77]

However, these reports are largely disingenuous, as it has placed focus on a superficial debt level. The United States, even prior to the onset of the economic crisis in 2007 and 2008, had long been a reckless spender. The cost of maintaining an empire is astronomical and beyond the actual means of any nation. Historically, the collapse of empires has as much or more to do with a collapse in their currency and fiscal system than their military defeat or collapse in war. Also important to note is that these processes are not mutually exclusive, but are, in fact, intricately interconnected.

As empires decline, the world order is increasingly marred in economic crises and international conflict. As the crisis in the economy worsens, international conflict and wars spread. As I have amply documented elsewhere, the United States, since the end of World War II, has been the global hegemon: maintaining the largest military force in the world, and not shying away from using it, as well as running the global monetary system. Since the 1970s, the US dollar has acted as a world reserve currency. Following the collapse of the USSR, the grand imperial strategy of America was to dominate Eurasia and control the world militarily and economically.

[See: Andrew Gavin Marshall, An Imperial Strategy for a New World Order: The Origins of World War III. Global Research: October 16, 2009]

Throughout the years of the Bush administration, the imperial strategy was given immense new life under the guise of the “war on terror.” Under this banner, the United States declared war on the world and all who oppose its hegemony. All the while, the administration colluded with the big banks and the Federal Reserve to artificially maintain the economic system. In the latter years of the Bush administration, this illusion began to come tumbling down. Never before in history has such a large nation wages multiple major theatre wars around the world without the public at home being fiscally restrained in some manner, either through higher taxes or interest rates. In fact, it was quite the opposite. The trillion dollar wars plunged the United States deeper into debt.

By 2007, the year that Northern Rock collapsed in the UK, signaling the start of the collapse of 2008, the total debt – domestic, commercial and consumer debt – of the United States stood at a shocking $51 trillion.[78] As if this debt burden was not enough, considering it would be impossible to ever pay back, the past two years has seen the most expansive and rapid debt expansion ever seen in world history – in the form of stimulus and bailout packages around the world. In July of 2009, it was reported that, “U.S. taxpayers may be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, said Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program.”[79]

That is worth noting once again: the “bailout” bill implemented under Bush, and fully supported and sponsored by President-elect Obama, has possibly bailed out the financial sector of up to $23.7 trillion. How could this be? After all, the public was told that the “bailout” was $700 billion.

In fact, the fine print in the bailout bill revealed that $700 billion was not a ceiling, as in, $700 billion was not the maximum amount of money that could be injected into the banks; it was the maximum that could be injected into the financial system “at any one time.” Thus, it became a “rolling amount.” It essentially created a back-door loophole for the major global banks, both domestic and foreign, to plunder the nation and loot it entirely. There was no limit to the money banks could get from the Fed. And none of the actions would be subject to review or oversight by Congress or the Judiciary, i.e., the people.[80]

This is why, as Obama became President in late January of 2009, his administration fully implemented the financial coup over the United States. The man who had been responsible for orchestrating the bailout of AIG, the buyout of Bear Stearns as a gift for JP Morgan Chase, and had been elected to run the Federal Reserve Bank of New York by the major global banks in New York (chief among them, JP Morgan Chase), had suddenly become Treasury Secretary under Obama. The Fed, and thus, the banks were now put directly in charge of the looting.

Obama then took on a team of economic advisers that made any astute economic observer flinch in terror. The titans of economic crisis and catastrophe had become the fox in charge of the chicken coop. Those who were instrumental in creating and constructing the economic crises of the previous decades and building the instruments and infrastructure that led to the current crisis, were with Obama, brought in to “solve” the crisis they created. Paul Volcker, former Chairman of the Federal Reserve and architect of the 1980s debt crisis, was now a top economic adviser to Obama. As well as this, Lawrence Summers joined Obama’s economic team, who had previously been instrumental in Bill Clinton’s Treasury Department in dismantling all banking regulations and creating the market for speculation and derivatives which directly led to the current crisis. In short, the financial oligarchy is in absolute control of the United States government. Concurrently, the military structure of the American empire has firmly established its grip over foreign policy, as America’s wars are expanded into Pakistan, Yemen, and potentially Iran.
Make no mistake, a crisis is coming to America, it is only a question of when, and how severe.

Imperial Decline and the Rise of the New World Order

The decline of the American empire, an inevitable result of its half-century of exerting its political and economic hegemony around the world, is not an isolated event in the global political economy. The US declines concurrently with the rise of what is termed the “New World Order.” America has been used by powerful western banking and corporate interests as an engine of empire, expanding their influence across the globe. Banks have no armies, so they must control nations; banks have no products, so they must control industries; banks have only money, and interest earned on it. Thus, they must ensure that industry and governments alike borrow money en masse to the point where they are so indebted, they can never emerge. As a result, governments and industries become subservient to the banking interests. Banks achieved this masterful feat through the construction of the global central banking system. Bankers took control first of Great Britain through the Bank of England, building up the massive might of the British Empire, and spread into the rest of Europe, creating central banks in the major European empires. In the 20th Century, the central bankers took control of the United States through the creation of the Federal Reserve in 1913, prior to the outbreak of World War I.

[See: Andrew Gavin Marshall, Global Power and Global Government: Evolution and Revolution of the Central Banking System. Global Research: July 21, 2009]

Following World War I, a restructuring of the world order was undertaken. In part, these actions paved the way to the Great Depression, which struck in 1929. The Great Depression was created as a result of the major banks engaging in speculation, which was actively encouraged and financed by the Federal Reserve and other major central banks. As a result of the Great Depression, a new institution was formed, the Bank for International Settlements (BIS), based in Basle, Switzerland. As historian Carroll Quigley explained, the BIS was formed to “remedy the decline of London as the world’s financial center by providing a mechanism by which a world with three chief financial centers in London, New York, and Paris could still operate as one.” He explained: [T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.[81]

The new order that is being constructed is not one in which there is another single global power, as many commentators suggest China may become, but rather that a multi-polar world order is constructed, in which the global political economy is restructured into a global governance structure: in short, the new world order is to be marked by the construction of a world government. This is the context in which the solutions to the global economic crisis are being implemented. In April of 2009, the G20 set into motion the plans to form a global currency, which would presumably replace the US dollar as the world reserve currency. This new currency would either be operated through the IMF or the BIS, and would be a reserve currency whose value is determined as a basket of currencies (such as the dollar, yen, euro, etc), which would play off of one another, and whose value would be fixed to the global currency.
This process is being implemented, through long-term planning, simultaneously as we see the further emergence of regional currencies, as not only the Euro, but plans and discussions for other regional currencies are underway in North America, South America, the Gulf states, Africa and East Asia.

A 1988 article in the Economist foretold of a coming global currency by 2018, in which the author wrote that countries would have to give up monetary and economic sovereignty, however: Several more big exchange-rate upsets, a few more stockmarket crashes and probably a slump or two will be needed before politicians are willing to face squarely up to that choice. This points to a muddled sequence of emergency followed by patch-up followed by emergency, stretching out far beyond 2018-except for two things. As time passes, the damage caused by currency instability is gradually going to mount; and the very trends that will make it mount are making the utopia of monetary union feasible.[82]To create a global currency, and thus a global system of economic governance, the world would have to be plunged into economic and currency crises to force governments to take the necessary actions in moving towards a global currency.

From 1998 onwards, there have been several calls for the formation of a global central bank, and in the midst of the global economic crisis of 2008, renewed calls and actual actions and efforts undertaken by the G20 have sped up the development of a “global Fed” and world currency. A global central bank is being offered as a solution to prevent a future global economic crisis from occurring.

[See: Andrew Gavin Marshall, The Financial New World Order: Towards a Global Currency and World Government. Global Research: April 6, 2009]

In March of 2008, closely following the collapse of Bear Stearns, a major financial firm released a report stating that, “Financial firms face a ‘new world order’,” and that major banks would become much larger through mergers and acquisitions. There would be a new world order of banking consolidation.[83] In November of 2008, The National, a prominent United Arab Emirate newspaper, reported on Baron David de Rothschild accompanying Prime Minister Gordon Brown on a visit to the Middle East, although not as a “part of the official party” accompanying Brown. Following an interview with the Baron, it was reported that, “Rothschild shares most people’s view that there is a new world order. In his opinion, banks will deleverage and there will be a new form of global governance.”[84]

In February of 2009, the Times Online reported that a “New world order in banking [is] necessary,” and that, “It is increasingly evident that the world needs a new banking system and that it should not bear much resemblance to the one that has failed so spectacularly.”[85] However, what the article fails to point out is that the ‘new world order in banking’ is to be constructed by the bankers. This process is going hand-in-hand with the formation of a new world order in global political structures, following the economic trends. As regionalism was spurred by economic initiatives, such as regional trading blocs and currency groupings, the political structure of a regional government followed closely behind. Europe was the first to undertake this initiative, with the formation of a European trading bloc, which became an economic union and eventually a currency union, and which, as a result of the recently passed Lisbon Treaty, is being formally established into a political union.

[See: Andrew Gavin Marshall, Forging a “New World Order” Under a One World Government. Global Research: August 13, 2009]

The new world order consists of the formation of regional governance structures, which are themselves submissive to a global governance structure, both economically and politically.

‘New Capitalism’

In the construction of a ‘New World Order’, the capitalist system is under intense reform. Capitalism has, since its inception, altered its nature and forms. In the midst of the current global economic crisis, the construction of the ‘New Capitalism’ is based upon the ‘China model’; that is, ‘Totalitarian Capitalism’. Governments will no longer stand behind the ‘public relations’ – propagandized illusion of ‘protecting the people’. When an economy collapses, the governments throw away their public obligations, and act for the interests of their private owners. Governments will come to the aid of the powerful banks and corporations, not the people, as “The bourgeoisie resorts to fascism less in response to disturbances in the street than in response to disturbances in their own economic system.”[86] During a large economic crisis:

[The state] rescues business enterprises on the brink of bankruptcy, forcing the masses to foot the bill. Such enterprises are kept alive with subsidies, tax exemptions, orders for public works and armaments. In short, the state thrusts itself into the breach left by the vanishing private customers. [. . . ] Such maneuvers are difficult under a democratic regime [because people still] have some means of defense [and are] still capable of setting some limit to the insatiable demands of the money power. [In] certain countries and under certain conditions, the bourgeoisie throws its traditional democracy overboard.[87]
Those who proclaim the actions of western governments ‘socialist’ are misled, as the ‘solutions’ are of a different nature. Daniel Guerin wrote in Fascism and Big Business about the nature of the fascist economies of Italy and Germany in the lead up to World War II. Guerin wrote of the actions of Italian and German governments to bail out big businesses and banks in an economic crisis:

It would be a mistake to interpret this state intervention as ‘socialist’ in character. It is brought about not in the interest of the community but in the exclusive interest of the capitalists.[88]

Fascist economic policy:

[I]ssues paper and ruins the national currency at the expense of all the people who live on fixed incomes from investments, savings, pensions, government salaries, etc., - and also the working class, whose wages remain stable or lag far behind the rise in the cost of living. [. . .] The enormous expenses of the fascist state do not appear in the official budget, [hiding the inflation].[89] [. . . ] The hidden inflation produces the same effects as open inflation: the purchasing power of money is lessened.[90] The bureaucracy of the fascist state becomes much more powerful in directing the economy, and is advised by the ‘capitalist magnates’, who “become the economic high command – no longer concealed, as previously, but official – of the state. Permanent contact is established between them and the bureaucratic apparatus. They dictate, and the bureaucracy executes.”[91] This is exactly the nature of the Treasury Department and Federal Reserve, most especially since the Obama administration took office.

In November of 2008, the National Intelligence Council (NIC) issued a report in collaboration between all sixteen US intelligence agencies and major international foundations and think tanks, in which they assessed and analyzed general trends in the world until 2025. When it reported on trends in ‘democratization’, discussing the spread and nature of democracy in the world, the report warned:[A]dvances [in democracy] are likely to slow and globalization will subject many recently democratized countries to increasing social and economic pressures that could undermine liberal institutions. [. . . ] The better economic performance of many authoritarian governments could sow doubts among some about democracy as the best form of government.
[. . . ] Even in many well-established democracies [i.e., the West], surveys show growing frustration with the current workings of democratic government and questioning among elites over the ability of democratic governments to take the bold actions necessary to deal rapidly and effectively with the growing number of transnational challenges.[92]

The warning from Daniel Guerin is vital to understanding this trend: “The bourgeoisie resorts to fascism less in response to disturbances in the street than in response to disturbances in their own economic system.”[93] Totalitarianism is on the rise, as David Lyon wrote:
The ultimate feature of the totalitarian domination is the absence of exit, which can be achieved temporarily by closing borders, but permanently only by a truly global reach that would render the very notion of exit meaningless. This in itself justifies questions about the totalitarian potential of globalization. [. . . ] Is abolition of borders intrinsically (morally) good, because they symbolize barriers that needlessly separate and exclude people, or are they potential lines of resistance, refuge and difference that may save us from the totalitarian abyss? [I]f globalization undermines the tested, state-based models of democracy, the world may be vulnerable to a global totalitarian etatization, [i.e., centralization and control].[94]

In 2007, the British Defense Ministry released a report in which they analyzed future trends in the world. It stated in regards to social problems, “The middle classes could become a revolutionary class, taking the role envisaged for the proletariat by Marx.” Interestingly:
The thesis is based on a growing gap between the middle classes and the super-rich on one hand and an urban under-class threatening social order: ‘The world's middle classes might unite, using access to knowledge, resources and skills to shape transnational processes in their own class interest’. Marxism could also be revived, it says, because of global inequality. An increased trend towards moral relativism and pragmatic values will encourage people to seek the ‘sanctuary provided by more rigid belief systems, including religious orthodoxy and doctrinaire political ideologies, such as popularism and Marxism’.[95]

The general trend has thus become the reformation of the capitalist system into a system based upon the ‘China model’ of totalitarian capitalism. The capitalist class fear potential revolutionary sentiment among the middle and lower classes of the world. Obama was a well-packaged Wall Street product, sold to the American people and the people of the world on the promise of ‘Hope’ and ‘Change.’ Obama was put in place to pacify resistance. Prior to Obama becoming President, the American people were becoming united in their opposition against not only the Bush administration, but Congress and the government in general. Both the president and Congress were equally hated; the people were uniting. Since Obama became President, the people have been turned against one another: ‘conservatives’ blame the ‘liberals’ and ‘socialists’ for all the problems, pointing fingers at Obama (who is nothing more than a figurehead), while those on the left point at the Republicans and ‘conservatives’ and Bush, placing all the blame on them. The right defends the Republicans; the left defends Obama. The people have been divided, arguably more so than at any time in recent history.
In dividing the people against each other, those in power have been able to quell resistance against them, and have continued to loot and plunder the nation and people, while using its military might to loot and plunder foreign nations and people. Obama is not to provide hope and change for the American people; his purpose was to provide the illusion of ‘change’ and provide ‘hope’ to the elites in preventing a purposeful and powerful opposition or rebellion among the people. Meanwhile, the government has been preparing for the potentiality of great social and civil unrest following a future collapse or crisis. Instead of coming to the aid of the people, the government is preparing to control and oppress the people.

Could Martial Law Come to America?

Processes undertaken in the American political establishment in previous decades, and rapidly accelerated under the Bush administration and carried on by the Obama administration, have set the course for the imposition of a military government in America. Readily armed with an oppressive state apparatus and backed by the heavy surveillance state apparatus, the ‘Homeland Security’ state is about controlling the population, not protecting them. In January of 2006, KBR, a subsidiary of the then-Vice President Cheney’s former corporation, Halliburton, received a contract from the Department of Homeland Security:
[T]o support the Department of Homeland Security’s (DHS) U.S. Immigration and Customs Enforcement (ICE) facilities in the event of an emergency. [The contract] has a maximum total value of $385 million over a five-year term, consisting of a one-year based period and four one-year options, the competitively awarded contract will be executed by the U.S. Army Corps of Engineers, Fort Worth District. KBR held the previous ICE contract from 2000 through 2005.

[It further] provides for establishing temporary detention and processing capabilities to augment existing ICE Detention and Removal Operations (DRO) Program facilities in the event of an emergency influx of immigrants into the U.S., or to support the rapid development of new programs. [. . . ] The contract may also provide migrant detention support to other U.S. Government organizations in the event of an immigration emergency, as well as the development of a plan to react to a national emergency, such as a natural disaster. [emphasis added][96]
Put simply, the contract is to develop a system of ‘internment camps’ inside the United States to be used in times of ‘emergency’. Further, as Peter Dale Scott revealed in his book, The Road to 9/11:

On February 6, 2007, homeland security secretary Michael Chertoff announced that the fiscal year 2007 federal budget would allocate more than $400 million to add sixty-seven hundred additional detention beds (an increase of 32 percent over 2006). [This was] in partial fulfillment of an ambitious ten-year Homeland Security strategic plan, code-named Endgame, authorized in 2003, [designed to] remove all removable aliens [and] potential terrorists.[97]

As Scott previously wrote, “the contract evoked ominous memories of Oliver North's controversial Rex-84 ‘readiness exercise’ in 1984. This called for the Federal Emergency Management Agency (FEMA) to round up and detain 400,000 imaginary ‘refugees,’ in the context of ‘uncontrolled population movements’ over the Mexican border into the United States.” However, it was to be a cover for the rounding up of ‘subversives’ and ‘dissenters’. Daniel Ellsberg, who leaked the ‘Pentagon papers’ in 1971, stated that, “Almost certainly this [new contract] is preparation for a roundup after the next 9/11 for Mid-Easterners, Muslims and possibly dissenters.”[98]

In February of 2008, an article in the San Francisco Chronicle, co-authored by a former US Congressman, reported that, “Beginning in 1999, the government has entered into a series of single-bid contracts with Halliburton subsidiary Kellogg, Brown and Root (KBR) to build detention camps at undisclosed locations within the United States. The government has also contracted with several companies to build thousands of railcars, some reportedly equipped with shackles, ostensibly to transport detainees.”[99]

Further, in February of 2008, the Vancouver Sun reported that:
Canada and the U.S. have signed an agreement that paves the way for the militaries from either nation to send troops across each other's borders during an emergency, but some are questioning why the Harper government has kept silent on the deal. [. . .] Neither the Canadian government nor the Canadian Forces announced the new agreement, which was signed Feb. 14 in Texas [but the] U.S. military's Northern Command, however, publicized the agreement with a statement outlining how its top officer, Gen. Gene Renuart, and Canadian Lt.-Gen. Marc Dumais, head of Canada Command, signed the plan, which allows the military from one nation to support the armed forces of the other nation in a civil emergency. [. . . ] If U.S. forces were to come into Canada they would be under tactical control of the Canadian Forces but still under the command of the U.S. military.[100]

Commenting on the Military Commissions Act of 2006, Yale law and political science professor Bruce Ackerman wrote in the Los Angeles Times that the legislation “authorizes the president to seize American citizens as enemy combatants, even if they have never left the United States. And once thrown into military prison, they cannot expect a trial by their peers or any other of the normal protections of the Bill of Rights.” Further, it states that the legislation “grants the president enormous power over citizens and legal residents. They can be designated as enemy combatants if they have contributed money to a Middle Eastern charity, and they can be held indefinitely in a military prison.” Not only that, but, “ordinary Americans would be required to defend themselves before a military tribunal without the constitutional guarantees provided in criminal trials.” Startlingly, “Legal residents who aren't citizens are treated even more harshly. The bill entirely cuts off their access to federal habeas corpus, leaving them at the mercy of the president's suspicions.”[101]

Senator Patrick Leahey made a statement on February 2007 in which he discussed the John Warner Defense Authorization Act of 2007, saying:
Last year, Congress quietly made it easier for this President or any President to declare martial law. That’s right: In legislation added at the Administration’s request to last year’s massive Defense Authorization Bill, it has now become easier to bypass longtime posse comitatus restrictions that prevent the federal government’s use of the military, including a federalized National Guard, to perform domestic law enforcement duties.

He added that, “posse comitatus [is] the legal doctrine that bars the use of the military for law enforcement directed at the American people here at home.” The Bill is an amendment to the Insurrection Act, of which Leahey further commented:When the Insurrection Act is invoked, the President can — without the consent of the respective governors -- federalize the National Guard and use it, along with the entire military, to carry out law enforcement duties. [This] is a sweeping grant of authority to the President. [. . . ] In addition to the cases of insurrection, the Act can now be invoked to restore public order after a terrorist attack, a natural disaster, a disease outbreak, or — and this is extremely broad — ‘other condition’.[102]

On May 9, 2007, the White House issued a press release about the National Security Presidential Directive (NSPD) 51, also known as the “National Security and Homeland Security Presidential Directive.” This directive:

[P]rescribes continuity requirements for all executive departments and agencies, and provides guidance for State, local, territorial, and tribal governments, and private sector organizations in order to ensure a comprehensive and integrated national continuity program that will enhance the credibility of our national security posture and enable a more rapid and effective response to and recovery from a national emergency.

The document defines “catastrophic emergency” as, “any incident, regardless of location, that results in extraordinary levels of mass casualties, damage, or disruption severely affecting the U.S. population, infrastructure, environment, economy, or government functions.” It explains “Continuity of Government” (COG), as “a coordinated effort within the Federal Government's executive branch to ensure that National Essential Functions continue to be performed during a Catastrophic Emergency.” [emphasis added]

The directive states that, “The President shall lead the activities of the Federal Government for ensuring constitutional government. In order to advise and assist the President in that function, the Assistant to the President for Homeland Security and Counterterrorism (APHS/CT) is hereby designated as the National Continuity Coordinator.”[103]

Essentially, in time of a “catastrophic emergency”, the President takes over total control of the executive, legislative and judicial branches of government in order to secure “continuity”. In essence, the Presidency would become an “Executive Dictatorship”. In late September of 2008, in the midst of the financial crisis, the Army Times, an official media outlet of the Pentagon, reported that, “Helping ‘people at home’ may become a permanent part of the active Army,” as the 3rd Infantry Division’s 1st Brigade Combat Team, having spent years patrolling Iraq, are now “training for the same mission — with a twist — at home.” Further:

They may be called upon to help with civil unrest and crowd control or to deal with potentially horrific scenarios such as massive poisoning and chaos in response to a chemical, biological, radiological, nuclear or high-yield explosive, or CBRNE, attack.[104]None of the authorizations, bills, executive orders, or contracts related to the declaration of marital law and suspension of democracy in the event of an ‘emergency’ have been repealed by the Obama administration.

In fact, as the New York Times revealed in July 2009, the Obama administration has decidedly left in place the Bush administration decisions regarding the government response to a national emergency in ‘Continuity of Government’ (COG) plans in establishing a ‘shadow government’:A shift in authority has given military officials at the White House a bigger operational role in creating a backup government if the nation’s capital were “decapitated” by a terrorist attack or other calamity, according to current and former officials involved in the decision.

The move, which was made in the closing weeks of the administration of President George W. Bush, came after months of heated internal debate about the balance of power and the role of the military in a time of crisis, participants said. Officials said the Obama administration had left the plan essentially intact.

Under the revamped structure, the White House Military Office, which reports to the office of the White House chief of staff, has assumed a more central role in setting up a temporary “shadow government” in a crisis.

The Obama administration announced that their continuity plans were ‘settled’ and they “drew no distance between their own policies and those left behind by the Bush administration.”[105] In July of 2009, it was also reported on moves by the Obama administration to implement a system of ‘preventive detention’. With this, any semblance of democratic accountability and freedom have been utterly gutted and disemboweled; the Republic is officially dead:

[‘Preventive detention’] is to be a permanent, institutionalized detention scheme with the power vested in the President going forward to imprison people with no charges.

[. . . ] Manifestly, this isn't about anything other than institutionalizing what has clearly emerged as the central premise of the Obama Justice System: picking and choosing what level of due process each individual accused Terrorist is accorded, to be determined exclusively by what process ensures that the state will always win. If they know they'll convict you in a real court proceeding, they'll give you one; if they think they might lose there, they'll put you in a military commission; if they're still not sure they will win, they'll just indefinitely imprison you without any charges.

[. . .] It's Kafkaesque show trials in their most perverse form: the outcome is pre-determined (guilty and imprisoned) and only the process changes. That's especially true since, even where a miscalculation causes someone to be tried but then acquitted, the power to detain them could still be asserted.[106] Society, and with it, any remaining
‘democracy’ is being closed down. In this economic crisis, as Daniel Guerin warned decades ago, the financial oligarchy have chosen to ‘throw democracy overboard’, and have opted for the other option: totalitarian capitalism; fascism.

In Conclusion
The current crisis is not merely a failure of the US housing bubble, that is but a symptom of a much wider and far-reaching problem. The nations of the world are mired in exorbitant debt loads, as the sovereign debt crisis spreads across the globe, entire economies will crumble, and currencies will collapse while the banks consolidate and grow. The result will be to properly implement and construct the apparatus of a global government structure. A central facet of this is the formation of a global central bank and a global currency. The people of the world have been lulled into a false sense of security and complacency, living under the illusion of an economic recovery. The fact remains: it is only an illusion, and eventually, it will come tumbling down. The people have been conned into handing their governments over to the banks, and the banks have been looting and pillaging the treasuries and wealth of nations, and all the while, and making the people pay for it. There never was a story of more woe, than that of human kind, and their monied foe. Truly, the people of the world do need a new world order, but not one determined and constructed by and for those who have created the past failed world orders. It must be a world order directed and determined by the people of the world, not the powerful. But to do this, the people must take back the power. The way to achieving a stable economy is along the path of peace. War and economic crises play off of one another, and are systematically linked. Imperialism is the driver of this system, and behind it, the banking establishment as the financier.
Peace is the only way forward, in both political and economic realms. Peace is the pre-requisite for social sustainability and for a truly great civilization. The people of the world must pursue and work for peace and justice on a global scale: economically, politically, socially, scientifically, artistically, and personally. It’s asking a lot, but it’s our only option. We need to have ‘hope’, a word often strewn around with little intent to the point where it has come to represent failed expectations. We need hope in ourselves, in our ability to throw off the shackles that bind us and in our diversity and creativity construct a new world that will benefit all.
No one knows what this world would look like, or how exactly to get there, least of all myself. What we do know is what it doesn’t look like, and what road to steer clear of. The time has come to retake our rightful place as the commanders of our own lives. It must be freedom for all, or freedom for none. This is our world, and we have been given the gift of the human mind and critical thought, which no other living being can rightfully boast; what a shame it would be to waste it.




Admin

SIX THEORIES ON WHY THE STOCK MARKET HAS RALLIED

Washington's Blog

Global Research, March 11, 2010
Washington's Blog - 2010-03-10

There are at least 6 theories about why the stock market has rallied some 70% off its lows a year ago, even though nothing has been done to actually address the root causes of the financial crisis.

What The Dumb Money Believes

The dumb money believes what CNBC and their trusty stock churner ... er, broker ... says: that the government has fixed the economy but it just has to "kick in" (and that unemployment is just a lagging indicator, nothing important. See this, this, this andthis).Therefore, these folks believe that stocks are hugely undervalued, and that if they buy while most people are still afraid, they'll make a killing when the market goes to the moon.

Temporary Juice
Others believe that it is the quantitative easing, low rates, bank bailouts, stimulus spending, and other portions of the "wall of money" which the feds have thrown at the economy are creating a temporary pump to the stock market. But they think that - when the spigot is turned off - the market will tank.

The Situation is Inflation
Others believe that - regardless of continued loose monetary and fiscal policy or real stock valuations, we're in for some serious inflation. Stocks tend to preform well during inflationary periods.

Machines Run Amok
Tyler Durden explains that all of the stock market gains have occurred after hours when mystery buyers purchase stock futures in low volume environments (and seethis).

Vincent Deluard - a strategist for TrimTabs Investment Research (25% of the top 50 hedge funds in the world use TrimTabs' research for market timing) - said last month: We've never seen this before – such a huge rally, and the little guy is out.

Some argue that it is high-frequency trading or momentum-chasing trading algorithms doing the buying, and that the market will tank when they change their game.


Fed Futures
Others argue that the government is itself buying stock futures.
Some believe that the Feds aren't buying, but that they have intentionally showered the big banks with money, and encouraged the banks to buy. In other words, they argue that the Feds are indirectly promoting a stock market rally.

Fraud Central
Karl Denninger believes that the market has rallied due to the systemic, fraudulent overvaluation of assets. As Denninger wrote yesterday:
[A reader wrote] the FDIC to ask about [allegations of fraudulent valuations]. This was their response: That’s the value the bank had them on their books on their year-end financials, but the true value is much less. It is similar to someone in Las Vegas saying that their house is worth $300,000 because that’s what they paid for it three years ago, but the reality is, if they had to sell it in today’s market, they’d only get $250,000 for it. The FDIC has to sell assets in today’s market...
Or tomorrow's market. The simple fact of the matter is that there it is, right in front of you. A raw admission that the banks are carrying these loans at dramatically above their actual value. Yes, this means that essentially all balance sheets must now be considered fraudulent, and thus the valuations assigned by the market to them are also fraudulent.
Extending this to the stock market as a whole you now have a market that is intentionally overvalued as a direct and proximate consequence of fraud, permitted and endorsed by the government, of somewhere between 25-40%. Now you know why the market rallied off the SPX 666 lows to where it is now. 1139 (where we are now) * .60 (a 40% haircut) = 683.40, or awfully close to that 666 bottom.

Of course this "valuation" expressed in the market can only be maintained for as long as the fraud is. If the ability to maintain that fraud is lost for any reason then values will instantly collapse back to reflect reality.

Note: Obviously, I believe this is a bear market rally which will eventually fizzle out. If the bulls are instead right, then that will make me the dumb money. But I think it much more likely that the rally will change direction in the not-too-distant future.

Admin

WALL STREET's WAR AGAINST MAIN STREET AMERICA
Prof. Michael Hudson
Global Research, February 17, 2010

Former Treasury Secretary Hank Paulson wrote an op-ed in The New York Times, (Feb. 16)[1] outlining how to put the U.S. economy on rations. Not in those words, of course. Just the opposite: If the government hadn't bailed out Wall Streets bad loans, he claims, unemployment could have exceeded the 25 percent level of the Great Depression. Without wealth at the top, there would be nothing to trickle down.

The reality, of course, is that bailing out casino capitalist speculators on the winning side of A.I.G.s debt swaps and CDO derivatives didnt save a single job. It certainly hasnt lowered the economys debt overhead. But matters will soon improve, if Congress will dispel the present cloud of uncertainty as to whether any agency less friendly than the Federal Reserve might regulate the banks.

Mr. Paulson spelled out in step-by-step detail the strategy of doing Gods work, as his Goldman Sachs colleague Larry Blankfein sanctimoniously explained Adam Smiths invisible hand. Now that pro-financial free-market doctrine is achieving the status of religion, I wonder whether this proposal violates the separation of church and state. Neoliberal economics may be a travesty of religion, but it is the closest thing to a Church that Americans have these days, replete with its Inquisition operating out of the universities of Chicago, Harvard and Columbia.

If the salvation is to give Wall Street a free hand, anathema is the proposed Consumer Financial Protection Agency intended to deter predatory behavior by mortgage lenders and credit-card issuers. The same day that Mr. Paulsons op-ed appeared, the Financial Times published a report explaining that Republicans say they are unconvinced that any regulator can even define systemic risk.  the whole concept is too vague for an immediate introduction of sweeping powers.  Republican Senator Bob Corker from Tennessee was willing to join with the Democrats to ensure there is not some new roaming regulator out there  putting companies unbeknownst to them under its regime.[2]

Mr. Paulson uses the same argument: Because the instability extends not just to the banks but also to Fannie Mae and Freddie Mac, Lehman Brothers, A.I.G. and Wall Street underwriters, it would be folly to try to regulate the banks alone! And because the financial sector is so far-flung and complex, it is best to leave everything deregulated. Indeed, there simply is no time to discuss what kind of regulation is appropriate, except for the Feds familiar protective hand: delays are creating uncertainty, undermining the ability of financial institutions to increase lending to businesses of all sizes that want to invest and fuel our recovery. So Mr. Paulsons crocodile tears are all for the people. (Except that the banks are not lending at home, but are shoveling money out of the U.S. economy as fast as they can.)

As Mr. Obamas chief of staff Emanuel Rahm put it, a crisis is too good a thing to waste. Its a con mans old trick to pressure the victim to make a decision fast. Having created the crisis, Wall Street wants to use its momentum to knock out any potential checks to its power. No systemic risk regulator, no matter how powerful, can be relied on to see everything and prevent future problems, Mr. Paulson explained. Thats why our regulatory system must reinforce the responsibility of lenders, investors, borrowers and all market participants to analyze risk and make informed decisions, In other words, blame the victims! The way to protect victims of predatory bank lending (and crooked sales of junk securities) is not new regulations but just the opposite: to simplify the patchwork quilt of regulatory agencies and improve transparency so that consumers and investors can punish excesses through their own informed investing decisions. Simplification means the Fed, not a Consumer Financial Protection Agency.

Moving in for the kill, Mr. Paulson explains that the Treasury is bare, having used $13 trillion to bail out high finance in 2008-09. So he warns the government not to run a Keynesian-type budget deficit. The federal budget should move into balance or even surplus, even if this accelerates the rise in unemployment and decline in wage levels as the economy moves deeper into recession and debt deflation. We must also tackle what is by far our greatest economic challenge  the reduction of budget deficits  a big part of which will involve reforming our major entitlement programs: Medicare, Medicaid and Social Security. The economy thus is to be sacrificed to Wall Street rather than reforming finance so that it serves the economy more productively. It is simple mathematics to see that if the government cannot raise taxes, it must scale back Social Security, other social welfare spending and infrastructure spending.

What is remarkably left out of account is that todays financial crisis centered on public debts is largely fiscal crisis. It is caused by replacing progressive taxation with regressive taxes, and above all by untaxing finance and real estate. Take the case of California, where tears are being shed over the dismantling of the once elite University of California system. Since American independence, education has been financed by the property tax. But Proposition 13 has freed property from taxation  so that its rental value can be borrowed against and turned into interest payments to banks. Californias real estate costs are just as high with its property taxes frozen, but the rising rental value of land has been paid to the banks  forcing the state to slash its fiscal budget or else raise taxes on labor and consumers.

The link between financial and fiscal crisis  and hence the need for a symbiotic fiscal-financial reform  is just as clear in Europe. The Greek government has pre-sold its tax revenues from roads and other infrastructure to Wall Street, leaving less future revenue to pay its public debt. To cap matters, paying income tax is almost voluntary for wealthy Greeks. Tax evasion is hardly necessary in the post-Soviet states, where property is hardly taxed at all. (The flat tax falls almost entirely on labor.)

Throughout the world, scaling back the 20th centurys legacy of progressive taxation and untaxing real estate and finance has led to a public debt crisis. Property income hitherto paid to governments is now paid to the banks. And although Wall Street has extracted $13 trillion in bailouts just since October 2008, the thought of raising taxes on wealth to pay just $1 trillion over an entire decade for Social Security or health insurance is deemed a crisis that would lead Wall Street to shut down the economy. It is telling governments to shift to a regressive tax system to make up the fiscal shortfall by raising taxes on labor and cutting back public spending on the economy at large. This is what is plunging economies from California to Greece and the Baltics into fiscal and financial crisis. Wall Streets solution  to balance the budget by cutting back the governments social contract and deregulating finance all the more  will shrink the economy and make the budget deficits even more severe. Financial speculators no doubt will clean up on the turmoil.


Admin

ECONOMIC BLACK HOLE : 20 REASONS WHY THE U.S. ECONOMY IS DYING AND IS SIMPLY NOT GOING TO RECOVER
http://theeconomiccollapseblog.com/archi...to-recover


Even though the U.S. financial system nearly experienced a total meltdown in late 2008, the truth is that most Americans simply have no idea what is happening to the U.S. economy.  Most people seem to think that the nasty little recession that we have just been through is almost over and that we will be experiencing another time of economic growth and prosperity very shortly.  But this time around that is not the case.  The reality is that we are being sucked into an economic black hole from which the U.S. economy will never fully recover.

The problem is debt.  Collectively, the U.S. government, the state governments, corporate America and American consumers have accumulated the biggest mountain of debt in the history of the world.  Our massive debt binge has financed our tremendous growth and prosperity over the last couple of decades, but now the day of reckoning is here.

And it is going to be painful.

The following are 20 reasons why the U.S. economy is dying and is simply not going to recover....

#1) Do you remember that massive wave of subprime mortgages that defaulted in 2007 and 2008 and caused the biggest financial crisis since the Great Depression?  Well, the "second wave" of mortgage defaults in on the way and there is simply no way that we are going to be able to avoid it.  A huge mountain of mortgages is going to reset starting in 2010, and once those mortgage payments go up there are once again going to be millons of people who simply cannot pay their mortgages.  The chart below reveals just how bad the second wave of adjustable rate mortgages is likely to be over the next several years....

#2) The Federal Housing Administration has announced plans to increase the amount of up-front cash paid by new borrowers and to require higher down payments from those with the poorest credit.  The Federal Housing Administration currently backs about 30 percent of all new home loans and about 20 percent of all new home refinancing loans.  Tighter standards are going to mean that less people will qualify for loans.  Less qualifiers means that there will be less buyers for homes.  Less buyers means that home prices are going to drop even more.

#3) It is getting really hard to find a job in the United States.  A total of 6,130,000 U.S. workers had been unemployed for 27 weeks or more in December 2009.  That was the most ever since the U.S. government started keeping track of this statistic in 1948.  In fact, it is more than double the 2,612,000 U.S. workers who were unemployed for a similar length of time in December 2008.  The reality is that once Americans lose their jobs they are increasingly finding it difficult to find new ones.  Just check out the chart below....

#4) In December, there were also 929,000 "discouraged" workers who are not counted as part of the labor force because they have "given up" looking for work.  That is the most since the U.S. government first started keeping track of discouraged workers in 1949.  Many Americans have simply given up and are now chronically unemployed.

#5) Some areas of the U.S. are already virtually in a state of depression.  The mayor of Detroit estimates that the real unemployment rate in his city is now somewhere around 50 percent.

#6) For decades, our leaders in Washington pushed us towards "a global economy" and told us it would be so good for us.  But there is a flip side.  Now workers in the U.S. must compete with workers all over the world, and our greedy corporations are free to pursue the cheapest labor available anywhere on the globe.  Millions of jobs have already been shipped out of the United States, and Princeton University economist Alan S. Blinder estimates that 22% to 29% of all current U.S. jobs will be offshorable within two decades.  The days when blue collar workers could live the American Dream are gone and they are not going to come back.  

#7) During the 2001 recession, the U.S. economy lost 2% of its jobs and it took four years to get them back. This time around the U.S. economy has lost more than 5% of its jobs and there is no sign that the bleeding of jobs is going to stop any time soon.

#8) All of this unemployment is putting severe stress on state unemployment funds.  At this point, 25 state unemployment insurance funds have gone broke and the Department of Labor estimates that 15 more state unemployment funds will likely go broke within two years and will need massive loans from the federal government just to keep going.

#9) 37 million Americans now receive food stamps, and the program is expanding at a pace of about 20,000 people a day.  The United States of America is very quickly becoming a socialist welfare state.

#10) The number of Americans who are going broke is staggering.  1.41 million Americans filed for personal bankruptcy in 2009 - a 32 percent increase over 2008.

#11) For decades, the fact that the U.S. dollar was the reserve currency of the world gave the U.S. financial system an unusual degree of stability.  But all of that is changing.  Foreign countries are increasingly turning away from the dollar to other currencies.  For example, Russia’s central bank announced on Wednesday that it had started buying Canadian dollars in a bid to diversify its foreign exchange reserves.

#12) The recent economic downturn has left some localities totally bankrupt.  For instance, Jefferson County, Alabama is on the brink of what would be the largest government bankruptcy in the history of the United States - surpassing the 1994 filing by Southern California's Orange County.

#13) The U.S. is facing a pension crisis of unprecedented magnitude.  Virtually all pension funds in the United States, both private and public, are massively underfunded.  With millions of Baby Boomers getting ready to retire, there is simply no way on earth that all of these obligations can be met.  Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern's Kellogg School of Management recently calculated the collective unfunded pension liability for all 50 U.S. states for Forbes magazine.  So what was the total?  3.2 trillion dollars.

#14) Social Security and Medicare expenses are wildly out of control.  Once again, with millions of Baby Boomers now at retirement age there is simply going to be no way to pay all of these retirees what they are owed.

#15) So will the U.S. government come to the rescue?  The U.S. has allowed the total federal debt to balloon by 50% since 2006 to $12.3 trillion.  The chart below is a bit outdated, but it does show the reckless expansion of U.S. government debt over the past several decades.  To get an idea of where we are now, just add at least 3 trillion dollars on to the top of the chart....

#16) So has the U.S. government learned anything from these mistakes?  No.  In fact, Senate Democrats on Wednesday proposed allowing the federal government to borrow an additional $2 trillion to pay its bills, a record increase that would allow the U.S. national debt to reach approximately $14.3 trillion.

#17) It is going to become even harder for the U.S. government to pay the bills now that tax receipts are falling through the floor.  U.S. corporate income tax receipts were down 55% in the year that ended on September 30th, 2009.

#18) So where will the U.S. government get the money?  From the Federal Reserve of course.  The Federal Reserve bought approximately 80 percent of all U.S. Treasury securities issued in 2009.  In other words, the U.S. government is now being financed by a massive Ponzi scheme.

#19) The reckless expansion of the money supply by the U.S. government and the Federal Reserve is going to end up destroying the U.S. dollar and the value of the remaining collective net worth of all Americans.  The more dollars there are, the less each individual dollar is worth.  In essence, inflation is like a hidden tax on each dollar that you own.  When they flood the economy with money, the value of the money you have in your bank accounts goes down.  The chart below shows the growth of the U.S. money supply.  Pay particular attention to the very end of the chart which shows what has been happening lately.  What do you think this is going to do to the value of the U.S. dollar?....

#20) When a nation practices evil, there is no way that it is going to be blessed in the long run.  The truth is that we have become a nation that is dripping with corruption and wickedness from the top to the bottom.  Unless this fundamentally changes, not even the most perfect economic policies in the world are going to do us any good.  In the end, you always reap what you sow.  The day of reckoning for the U.S. economy is here and it is not going to be pleasant.


The curse of millions of innocent victims of American imperialistic ways through out the world are slowly casting the darkest cloud all over the States the world has ever seen. Every great empire has come to an end and the judgment day for America is in the horizon.
Pages: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31