Cost of GWOT and US Bankruptcy – analysis – numbers don’t lie, but politicians do (a lot) …
Gerald Celente from the US-based Trends Journal says the political elite will not recognize simple solutions to curb America’s deficit.
He said: “The country is going bankrupt — just look at the numbers. The numbers do not lie — politicians lie,”….. “We do not have a representative form of government, we have a government that represents only the very powerful and the very rich and that is all this is about — letting them keeping their perks.”
He’s got a perfect track record for his trend analysis. This guy has my ear.
The videos below are taken from 2 separate appearances on Fox and Friends
just google that one on youtube
Dubya, Rummy & Cheney.
George W. Bush’s memoir, “Decision Points,” is full of newsy tidbits,…In the book, which hits bookstore shelves on Tuesday, Bush describes how upset Cheney was at him for his refusal to give a full pardon to Lewis “Scooter” Libby, the senior Cheney aide who got caught up in the Valerie Plame scandal and who in 2007 was convicted and sentenced to 30 years in prison.
Former Vice President Dick Cheney says he’s using modern technology like a BlackBerry and Kindle, when he didn’t even have a cellphone at the White House.
“I’m not totally modern. I still write long-hand and don’t use a computer for that kind of thing,” Cheney said in an NBC interview. “My grandchildren still laugh at me,” he said, and his 3-year-old grandson showed him how to play the Angry Birds game on an iPad.
Lawmakers on Capitol Hill, while sticking to their well-trod positions on healthcare, did refrain from aiming big slingshots at opponents. (Angry Birds fans, that’s for you).
Chinese President Hu Jintao arrived to a red carpet welcome at Andrews Air Force Base where Vice President Joe Biden greeted him. Full pomp and circumstance will be on display tomorrow at the White House, symbolizing the importance that the United States places on ties with China.
But there will be plenty of squawking in the background over China’s currency and human rights.
Here are our top stories from Washington today…
Deals, currency spat accompany China’s Hu to U.S.
I almost didn’t recognize him.
Watching Dick Cheney, one of the most recognizable political figures of the decade, on television speaking at the groundbreaking ceremony for the George W. Bush Presidential Center in Dallas, I did a double-take.
He is about 30 pounds lighter, after being in the hospital for five weeks this summer for a procedure to improve his heart function, according to someone close to him.
The former vice president and president appear to have moved beyond the end-of-term friction over Bush’s decision not to pardon Cheney’s chief of staff Lewis “Scooter” Libby.
Cheney in a television interview last year, and Bush in his newly released book, both said they hadn’t seen eye-to-eye on the former president’s decision to commute Libby’s sentence but not pardon him. Bush also wrote in his memoir “Decision Points” that he once had considered replacing Cheney as vice president.
But in a rare public appearance together since they left office, both seemed to have left past disagreements in the past.
Cheney praised Bush for being a president who did not “put on airs,” and said that ”history is beginning to come around.”
Missourimule; You have to be kidding, right??
American Hero?? What did Cheney ever do that was Heroic? He has never served in the Militaty, He has never done anything that would remotely be called Heroic, unless you count his shooting of his “friend” and then waiting until after supper to even check on his condition.
Someone in Cheney’s Office outted a Covert CIA Operative during a time of war. Unless the defination of treason has changed dramatically “Giving aid and comfort to the enemy during a time of war” is still defined as treason.
The fact thst Scooter Libby was the fall guy for this does not change the fact. Cheney should have been brought up on charges over this crime.
George W. Bush’s memoir, “Decision Points,” is full of newsy tidbits, and there’s a lot of material about his relationship with his vice president, Dick Cheney, whom Bush considered dumping from the 2004 ticket.
In the book, which hits bookstore shelves on Tuesday, Bush describes how upset Cheney was at him for his refusal to give a full pardon to Lewis “Scooter” Libby, the senior Cheney aide who got caught up in the Valerie Plame scandal and who in 2007 was convicted and sentenced to 30 years in prison.
Bush commuted the sentence, but refused entreaties to give Libby a full pardon.
Bush writes that in the closing days of his time in the White House in early 2009, Cheney pressed his case that Libby should be pardoned, and was angry when Bush refused.
“I can’t believe you’re going to leave a soldier on the battlefield,” Cheney told Bush.
“The comment stung,” Bush writes. “I had never seen Dick like this, or even close to this. I worried that the friendship we had built was about to be severely strained, at best.”
Bush tells NBC’s Matt Lauer in an interview to air tonight that their friendship survived the dispute. “I’m pleased to report we are friends today,” Bush said.
George you are still there? Give us a break please. We know that Mr Obama is proving even worst than your draconiac rule, please give him another two years to sort out the mess you left for him!
Former Vice President Dick Cheney swapped barbs with Vice President Joe Biden on the morning talk shows Sunday.
Beyond the fireworks, however, there were interesting things they didn’t argue about.
Cheney endorsed President Barack Obama’s approach in Afghanistan.
He backed an end to the “don’t ask, don’t tell” policy that limits the ability of homosexuals to serve in the military.
“I’m a complete supporter of what they’re doing in Afghanistan,” Cheney told ABC’s “This Week” program. “I think the president made the right decision to send troops into Afghanistan.”
the so called Iraq ‘War‘ is, quite clearly, the greatest criminal heist in history. Really. You can put cash money on it. Trust us.
And now, it seems that US (Democratic Party) politician Henry Waxman who chairs the House Committee on Oversight and Government Reform is saying the same thing, though obviously using his own choice of words — instead of pinching our personal, precise pronouncements on said subject:
“The money that’s gone into waste, fraud and abuse under these contracts is just so outrageous, its egregious.
“It may well turn out to be the largest war profiteering in history.”
The two quotes above are clipped from today’s following report by the BBC.
BBC uncovers lost Iraq billions
By Jane Corbin – BBC News
A BBC investigation estimates that around $23bn (£11.75bn) may have been lost, stolen or just not properly accounted for in Iraq.
For the first time, the extent to which some private contractors have profited from the conflict and rebuilding has been researched by the BBC’s Panorama using US and Iraqi government sources.
A US gagging order is preventing discussion of the allegations.
The order applies to 70 court cases against some of the top US companies.
While George Bush remains in the White House, it is unlikely the gagging orders will be lifted.
To date, no major US contractor faces trial for fraud or mismanagement in Iraq.
(Cross posted at ‘appletree’)
HALLIBURTON GETS HUGE CONTRACT
Cartoon by Elaine Meinel Supkis
By Elaine Meinel Supkis
A picture is worth a thousand words and there are a million words needed to describe the systematic looting of America thanks to the GOP and lobbyists and unprincipled traitors. The pigs running Halliburton and their protector/sponsor/stock owner, the Vice President, Cheney, are now so famous for ripping us all off and thriving on disasters that Bush should never have allowed in the first place, even while suffering from the effects of Kathrine, an angry citizen erected this sign in New Orleans:
Not only that, Cheney, trying to pretend to be concerned about the welfare of the people he is ripping off, was doing a cheesy photo-op down in the hurricane death zone and an outraged citizen yelled, “Fuck off, Cheney,” plus more choice words.
Cheney thought all this was funny. Indeed, I have seen many a laughing GOP face from that Ma Kettle Clone, Babs Bush, her son, all their courtiers and so on. In picture after picture, they are laughing. They only frown or snarl when cornered by angry questions and angry people who have finally broken through the protective bubble that protects this army of Marie Antoinettes. Then they are hurt, oh so hurt, and they just want to banish us all.
Well, the first contracts for the hurricane damage are now being awarded! From ABC News:
Companies with ties to the White House and the former head of FEMA have clinched some of the administration’s first disaster relief and reconstruction contracts in the aftermath of Hurricane Katrina.
At least two major corporate clients of lobbyist Joe Allbaugh, President George W Bush’s former campaign manager and a former head of the Federal Emergency Management Agency (FEMA), have already been tapped to start recovery work along the battered Gulf Coast.
One is Shaw Group and the other is Halliburton-subsidiary Kellogg Brown and Root (KBR). Vice President Dick Cheney is a former head of Halliburton.
Bechtel National, a unit of San Francisco-based Bechtel Corp, has also been selected by FEMA to provide short-term housing for people displaced by the hurricane.
Mr Bush named Bechtel’s chief executive to his Export Council and put the former chief executive of Bechtel Energy in charge of the Overseas Private Investment Corporation.
Mr Allbaugh is also a friend of Michael Brown, director of FEMA who was removed as head of Katrina disaster relief and sent back to Washington amid allegations he had padded his resume.
What a surprize! We all wondered why, on 9/11, Bush and Cheney didn’t react nor even want to be bothered to be told that several jets were hijacked out of Boston. For over an hour, the two jets flew, unimpeded and unwatched, until they flew into the WTC. I saw it happen. I reacted, after the first jet, with horror. Bush heard about it while driving to the school. In the school, he learned about the second jet. Hearing this news, he SMILED and then read a book to kids.
This disaster, he again, laughed about the hurricane coming. Laughed when it hit. Goofed around with his buds after it hit and then laughed when he flew over and I saw a TV spot where he was hugging victims and LAUGHING. We know why!
His oil buddies are raking in the dough. His Halliburton buddies are now going to get more billions. Everyone is going to get tons of blood stained loot and this fills him with joy. He now can cut services to all Americans, ruthlessly, because we have no money and he doesn’t care, it is all going to off shore bank accounts!
Halliburton alone has earned more than $US9 billion. Pentagon audits released by Democrats in June showed $US1.03 billion in “questioned” costs and $422 million in “unsupported” costs for Halliburton’s work in Iraq.
Hahaha, he laughs. All that money coming from Uncle Hu and Uncle Wen. Bush will wave the flag and drive us into another disaster and his Communist uncles will bankroll everything. All he has to do is secretly sign certain documents turning over America to them. He doesn’t care. He plans to leave.
&spades From CNN:
At the request of CNN, a federal judge in Texas Friday night blocked emergency officials in New Orleans from preventing the media from covering the recovery of bodies from Hurricane Katrina.
Attorneys for the network argued that the ban was an unconstitutional prior restraint on news gathering.
U.S. District Judge Keith Ellison issued a temporary restraining order against a “zero access” policy announced earlier Friday by Army Lt. Gen. Russel Honore, who is overseeing the federal relief effort in the city, and Terry Ebbert, the city’s homeland security director.
A hearing was scheduled for Saturday morning to determine if the order should be made permanent.
Bush and the military, after successfully hiding all the dead Iraqis and dead Afghanis and dead American soldiers are now trying to hide the dead American citizens. They should quiz some Nazis about this art form. Already, a ghoulish fashion designer has made a dress based on the photo (which I posted here) of the impromptu grave of “Vera”.
America didn’t go bankrupt during WWII simply because the Democratic President wouldn’t let the industrialists charge an arm and a leg for everything. No one got filthy rich but no one was beggared, indeed, we flourished and America came out stronger.
Now they are leeches and vampires and we get weaker and weaker, look at our debts we are accumulating! We know for certain that Bush will laugh when California blows out. His minions will joke about it. They will say, we won another trifecta! And count the dollars. Like vandals breaking windows for the glass factory, they will imagine rebuilding America at tremendous cost will make us all billionaires.
It will make us all slaves.
Rome was trashed over and over, too. And laid in ruins for 1,000 years.
TEN YEARS ON:
US economy paying steep price
SHOOTING ONE’S SELF:While wars are usually financed with tax increases, the launch of George W. Bush’s ‘war on terror’ coincided with the implementation of major tax cuts
Then-White House chief-of-staff Andrew Card informs US president George W. Bush of attacks on US soil in Sarasota, Florida, on Sept. 11, 2001. Ten years later, analysts say, the US has not fully recovered its standing as a steadfast defender of liberty and fierce protector of the rule of law, handing al-Qaeda at least a partial victory.
Former al-Qaeda leader Osama bin Laden failed in his lifetime to achieve his goal of “bleeding America to bankruptcy,” but 10 years after the Sept. 11, 2001, attacks, the US is still paying a steep economic price.
The avalanche of spending on military and counterterrorism operations that followed the Sept. 11 attacks — estimated at up to US$4 trillion in foreign wars — combined with sweeping tax cuts under former US president George W. Bush, helped spawn the deficit crisis now roiling the country.
In the name of the “war on terror,” Bush launched the US military into Afghanistan in October 2001 and then into Iraq in March 2003, swelling the Pentagon’s already significant budget.
Fueled by war expenses and its response to the financial crisis, Washington’s spending has more than doubled over the past decade, while revenues to pay the bills only grew 10 percent, leading the government to borrow to finance its “war on terror.”
Fast-forward to this year and Washington politics has deadlocked over how to deal with the soaring debt, bringing the country to the brink of default and costing its triple-“A” credit rating from Standard & Poor’s.
The US debt has soared from US$6.4 trillion in March 2003 to more than US$14 trillion today.
In comparison, the al-Qaeda attacks on Washington and New York cost between US$400,000 and US$500,000 to execute, according to the US government’s 9/11 Commission Report.
Bin Laden boasted in an October 2004 video that Arab and Afghan mujahidin fighters “bled Russia for 10 years until it went bankrupt and was forced to withdraw in defeat” from Afghanistan in the 1980s.
“We are continuing this policy in bleeding America to bankruptcy,” he said.
‧ US debt
March 2003: US$6.4 trillion
Present: US$14 trillion
‧ Cost to al-Qaeda to initiate attacks
‧ Replacing World Trade Center
US$3 billion-US$4.5 billion
‧ Repairing the Pentagon
‧ Wars in Iraq and Afghanistan (including Pakistan)
US$3.2 trillion-US$4 trillion
‧ US budget surplus amount in January 2001
The short-term economic costs of bin Laden’s attacks in New York alone were about US$100 billion in lost jobs, lost taxes, destroyed infrastructure and cleanup, according to figures compiled by the Washington-based Institute for the Analysis of Global Security.
Replacing the destroyed World Trade Center has a US$3 billion to US$4.5 billion price tag, while it cost US$1 billion to fix damage caused to the Pentagon building, the institute estimates.
The greatest expense, however, came not from the destruction wrought on Sept. 11, but from the policy decisions made in response to the attacks.
The Pentagon’s budget grew from 16 percent of US federal spending to 20 percent, as the US Congress financed the costly foreign missions begun by Bush and continued by US President Barack Obama.
At the same time, the US national security and apparatus ballooned at significant cost to include 1,271 state agencies and 1,931 private companies working on counterterrorism programs, according to a Washington Post investigation.
Researchers at Brown University’s Watson Institute for International Studies estimate that the wars in Iraq, Afghanistan and including Pakistan have already cost between US$3.2 trillion and US$4 trillion.
The figure includes commitments to future medical care and disability for war veterans, but does not include interest on war-related debt.
Economists Linda Bilmes and Joseph Stiglitz go further to argue that the 2008 financial meltdown linked to the US mortgage crisis was also “due, at least in part, to the war.”
The pair wrote last year that consequences of the wars and notably higher oil prices linked to the Iraq conflict, drained away money that would have sustained growth and either eased the crisis when the US housing bubble burst or strengthened the nation’s ability to respond to it.
TEN YEARS ON: US economy paying steep price
SHOOTING ONE’S SELF:While wars are usually financed with tax increases, the launch of George W. Bush’s ‘war on terror’ coincided with the implementation of major tax cuts
The US government budget was in near-balance at the time of the Sept. 11 attacks. Former US president Bill Clinton even left an US$86 billion budget surplus when Bush succeeded him in the White House in January 2001.
Tax cuts and wars in Afghanistan and Iraq followed.
“The war in Iraq, which had nothing to do with terrorism, was a huge price to pay to get rid of one dictator,” said William Hartung, a defense expert at the New America Foundation. “And whereas in the past the US has financed wars in part with tax increases, that war was launched at the same time as tax cuts.”
Economist Ryan Edwards estimated that without the wars, the ratio of civilian to military spending would be 9 to 10 percentage points lower than it is today.
“War spending is stimulative to an extent, but when financed by deficits and borrowing, the benefits do not seem to be worth the costs,” he said in a study, Post-9/11 War Spending, Debt, and the Macroeconomy, published in June.
The paradox is not lost on Admiral Michael Mullen, the outgoing chairman of the US Joint Chiefs of Staff, who, after a decade of waging the “war on terror,” called the US public debt “the most significant threat to our national security.”
Wednesday, May 04, 2011
Osama bin Laden’s Ultimate Goal: Bankrupt America
Osama bin Laden knew what any student of history knows; all empires eventually fall due to their own excess and hubris.
Imperial Rome, the Spanish Empire, the British Empire and the Soviet Union all crumbled under the weight of their military over-reach.
The US appears to be next on this list of infamy, and bin Laden knew it all along.
More than three years after the September 11, 2001 terrorist attacks on the US, Bin laden released a videotape in which he staked out his ultimate goal; to bankrupt America.
“We are continuing this policy in bleeding America to the point of bankruptcy, Allah willing. And nothing is too great for Allah,” bin Laden said.
The al Qaeda leader said his goal was to do to the US what had previously been done to the Soviet Union; slowly bleed it to death in a long, intractable military conflict in Afghanistan.
Though the Afghans were outgunned and out-spent by the Soviets, they used “guerrilla warfare and the war of attrition to fight tyrannical superpowers,” bin Laden said.
This same strategy, which bin Laden referred to as the “bleed-until-bankruptcy plan,” was being utilized to ultimately defeat the mighty US, he said.
At the time of the video’s release, in November 2004, the US national debt was more than $7 trillion and the federal deficit was $413 billion.
“Every dollar of al Qaeda defeated a million dollars, by the permission of Allah, besides the loss of a huge number of jobs,” said bin Laden. “As for the economic deficit, it has reached record astronomical numbers estimated to total more than a trillion dollars.”
For all this expense, bin Laden said, America would “suffer human, economic and political losses without their achieving anything of note, other than some benefits for their private corporations.”
Even bin Laden knew about the influence of America’s Military-Industrial Complex. He was well aware of its political connections and power.
Driving the US further into debt showed “that al Qaeda has gained. But on the other hand it shows that the Bush administration has also gained, something that anyone who looks at the size of the contracts acquired by the shady Bush administration-linked mega-corporations, like Halliburton and its kind, will be convinced.
“And it all shows that the real loser is you,” he said. “It is the American people and their economy.”
The cagey al Qaeda leader displayed a keen foresight that now seems rather remarkable.
Of President Bush, Bin Laden said, “the darkness of black gold blurred his vision and insight, and he gave priority to private interests over the public interests of America.
“So the war went ahead, the death toll rose, the American economy bled, and Bush became embroiled in the swamps of Iraq that threaten his future,” bin Laden said.
In the end, he was right.
Simultaneous engagement in two wars — Afghanistan and Iraq — has saddled the US with enormous debts. But that onerous debt burden only became crippling when, for the first time in US history, the government cut taxes as it went to war.
Both military adventures were financed through borrowing. As a result, the US debt soared from $6.4 trillion in March 2003 to $10 trillion in 2008 (before the financial crisis). At least a quarter of that increase is directly attributable to the war, according to Nobel economist Joseph Stiglitz.
Stiglitz estimates that the total cost of the Iraq war will exceed $3 trillion, a staggering sum. The war has already eclipsed the cost of the Vietnam conflict.
Remarkably, defense spending has doubled over the last ten years, according to Ashton Carter, the Defense Department’s undersecretary for acquisitions.
The Afghan war, alone, costs more than $9 billion a month. This means that the government is spending more than $100 billion a year on an unfunded, unwinnable war. And money is being poured into the rebuilding of Afghanistan and Iraq, even as America crumbles.
According to the National Priorities Project, total defense/security/intelligence spending accounts for 66% of discretionary spending.
The stunning fact is that the US spends more on its military budget than all of the other nations on earth combined. Consider this; if the Pentagon were an independent country, it would be the 10th richest in the world.
The US has 500,000 military personnel, stationed on over 700 military bases, in more than 150 nations around the world. That is the definition of an empire.
More six decades after the end of WWII, the US still has more than 50,000 troops in Germany and 30,000 in Japan. More than a half century after the Korean conflict ended, the US still has 29,000 military personnel stationed in South Korea.
All of these advanced, wealthy nations are quite capable of defending themselves. Instead, we pay for their defense.
Japan has long been the the world’s second biggest economy, until recently falling behind China. While Japan dedicates its revenues to domestic, economic and technical development, the US pays for its defense.
Germany is one of the world’s biggest economies and exporters. It has been a unified nation for more than two decades and is no longer under threat from the Soviet Union, which no longer exists. Yet, we keep forces stationed in Germany, paying for their defense.
You might be stunned to discover that America now spends more, in real, inflation-adjusted terms, than at any point during the Cold War, Korean War, and Vietnam War.
The US faces no credible, conventional military threat. Yet, it continues to build up its military, in a race against no one, to counter a conventional threat that doesn’t even exist. Countering terrorists doesn’t warrant this kind of spending.
The US is a welfare state in as much as it supports the Military-Industrial Complex. In reality, we are truly a warfare state.
The Military-Industrial Complex has always needed a bogey man to justify its existence. First it was the Soviets and communism; now it is al Qaeda and Islamic fundamentalism.
The Soviet menace was never as dangerous as advertised. The free world didn’t crumble when the communists took North Korea or Vietnam. Yet, the US fought two separate wars — costing over 100,000 American lives — due to the hysteria whipped up about the dangers if the communists prevailed.
The Military-Industrial Complex cried wolf, and America fell for it.
The same is true again today. Same story; different cast.
The US has been in Iraq for seven years and in Afghanistan for 10. Who knows when our military personnel will finally exit both nations? The US may even try to establish a permanent presence in both countries, with permanent military bases as anchors.
The US is an empire, and all empires are unsustainable in the long run. All of the wars, military engagements and bases around the world will eventually come to an end. It may be imposed on us, but it will all end sooner than later. Right now, it’s being held afloat by borrowed money.
Dwight Eisenhower warned, “It has been coldly calculated by the Soviet leaders … by their military threat to force upon America and the free world an unbearable security burden leading to economic disaster.”
The irony was that the opposite occurred. The Soviet military expansion and reach led to its own demise.
Osama bin Laden saw the same opportunity to destroy the United States.
Eisenhower argued that a strong American economy might well be its most valuable asset. He knew that a strong economy was essential to a strong defense.
Osama bin Laden clearly saw it the same way. So, as the US sails into insolvency, bin Laden may laugh last, even in death.
Posted by The Independent Report at 1:39 PM
Osama Bin Laden’s Dream of US Economic Collapse
September 18th, 2008
Daniel Eran Dilger
Supporters of the Bush administration like to say that there have been no terrorist attacks on US soil since the tragedy of September 11, 2001, suggesting that President Bush has kept the country safe from terrorism. What they forget is that Osama Bin Laden clearly outlined his strategy for battling America, not by flying more planes into new buildings, but by driving the US into bankruptcy.
The current economic collapse among US banks has cost taxpayers over $800 billion so far in federal bailouts. Add in the trillions spent off the budget in financing the occupation of Iraq and a maintenance mode war in Afghanistan, and it’s obvious that the yet uncaptured Bin Laden can declare “mission accomplished.”
In November 2004, CNN reported that Bin Laden released a video monologue to Al-Jazeera where the terror-savvy, extreme fundamentalist announced plans to continue a “policy in bleeding America to the point of bankruptcy” using similar tactics to those used when fighting the Soviet Union in Afghanistan in the 80s, “guerrilla warfare and the war of attrition to fight tyrannical superpowers.”
“Easy to Provoke and Bait this Administration.”
Bin Laden bragged at the time that al Qaeda has found it “easy for us to provoke and bait this administration. All that we have to do is to send two mujahedeen to the furthest point east to raise a piece of cloth on which is written al Qaeda, in order to make generals race there to cause America to suffer human, economic and political losses without their achieving anything of note other than some benefits for their private corporations.”
“And it all shows that the real loser is you,” Bin Laden said. “It is the American people and their economy.”
Bin Laden said of President Bush that “the darkness of black gold blurred his vision and insight, and he gave priority to private interests over the public interests of America.”
In 2004, the US national debt was more than $7 trillion, but today it has grown to $9.6 trillion, roughly $31,640 of debt for every American citizen according to the U.S. National Debt Clock. The US is currently spending an astounding $12 billion per month in Iraq.
McCain Doesn’t Understand the Economic Crisis.
While Alan Greenspan called the current economic crisis “by far the worst financial crisis in a century,” John McCain has repeated over and over that “the fundamentals of the economy are strong,” even while the market tumbled and major financial institutions went on fire sale earlier this week.
McCain has failed to articulate any understanding of the economy or any interest in doing anything differently. His position has repeatedly been to follow the strategies of William ‘Phil’ Gramm, a Democrat turned Republican who sat in the House from 1978 to 1985, and then the Senate through 2002.
In the second half of the 90s, Gramm received over a million dollars in campaign contributions from the securities and investment industry during his five years on the U.S. Senate Committee on Banking, Housing, and Urban Affairs. His wife sat on the board of Enron, and Gramm himself authored the “Enron loophole” in 2000, enabling the Enron scandal.
Gramm pushed to dismantle regulations enacted during the Depression to separate banking, insurance and brokerage activities, passing the Gramm-Leach-Bliley Act in 1999. That legislation was key to enabling today’s mortgage crisis.
Gramm served as McCain’s campaign co-chair and his most senior economic adviser through July, when he famously downplayed the economic crisis by saying, “You’ve heard of mental depression; this is a mental recession,” and, “we have sort of become a nation of whiners, you just hear this constant whining, complaining about a loss of competitiveness, America in decline.” Gramm stepped down from his official role in the McCain campaign following those comments, but continues to advise McCain on economic policy.
Not Just a String of Bad Luck.
While some pundits have tried to spin blame for the current economic crisis everywhere but the “Gramm negative” economic policy of deregulation that has forced America to front hundreds of billions of dollars to bail out the fraud and poor business decisions Gramm’s own deregulation policies enabled, the solution is quite obviously not more of the same.
The contributing problem of spending trillions to finance an occupation in Iraq based on false pretense while ignoring Bin Laden and enabling him to continue his efforts to bankrupt the US through guerrilla warfare should cause anyone who thinks that there is no difference between Barack Obama and McCain to wake up.
Obama plans to scale down the unwelcome operations in Iraq that are costing the nation absurd amounts of money while watering down the country’s military strength, provide a $1,000 tax break to the middle class, and stop the out of control profiteers that are devastating the economy as they take full advantage of Gramm’s catastrophic deregulation policies to manipulate the market and then promptly abandon any accountability and leave the taxpayer to pay for the damages.
McCain Plays Depressing Hoover Tune.
McCain has continued to describe himself as “fundamentally a deregulator” and has repeatedly stated that the “fundamentals of our economy are strong,” echoing the lack of understanding voiced by President Herbert Hoover the day after the stock market crashed on Black Tuesday in October 1929, when he said, “The fundamental business of the country, that is the production and distribution of commodities, is on a sound and prosperous basis.”
Despite Hoover’s comments, the market continued to fall. John D. Rockefeller repeated the same line of optimism days later, “Believing that fundamental conditions of the country are sound . . . my son and I have for some days been purchasing sound common stocks.” The market didn’t hit bottom until the middle of November.
Hoover promised a tax cut and voiced further optimism, but over the next year, things only got worse as the economy contracted, a thousand banks failed, and the nation experienced widespread poverty for years.
In a similar fashion, the McCain campaign has attempted to cloud reality by trotting out billionaire democrat and wife of a knight Lynn Forester de Rothschild to insist that McCain knows what he’s doing on the economy but that Obama is an “elitist,” while she also says she sees no political difference in social issues between Hillary Clinton and the McCain/Palin campaign.
Palin Drone Says the Same Thing Backwards.
McCain’s running mate is even further out of touch with reality in economic matters. As mayor, Palin was able to hire John Cramer as a full time city manager to do her job so she could focus on turning Wasilla into a town modeled on the evangelical teachings of the Institute in Basic Life Principles. Alaska is swimming in oil money, so most of the town’s infrastructure and planning was subsidized and managed by Alaska’s Matanuska-Susitna Borough, a regional govenment.
A Salon article quoted Michelle Church, a member of the borough, as saying Palin was “unprepared to be mayor — it was John Cramer who actually ran the city,” and noting that, “the borough takes care of most of the planning, the fire, the ambulance, collecting the property taxes. And on top of that she brought in a city manager to actually run the city day to day. So what executive experience did she have as mayor?”
Still, Palin managed to leave behind massive debt after building a sports complex so far out of town that kids couldn’t ride their bikes there, and an unnecessary and duplicative new emergency dispatch center. Both as mayor and as the governor of Alaska, Palin has requested massive earmarks for Federal dollars, despite the fact that local residents pay nearly nothing in taxes due to Alaska’s oil wealth.
In her acceptance speech and repeatedly afterward, Palin has come out as being against earmarks and wasteful spending, claiming to have said “thanks but no thanks to that bridge to nowhere,” to Congress, then admitting that she accepted the money after the earmark was canceled by Congress, and then returning to her line about “thanks but no thanks” in subsequent recitations of her speech.
What Palin seems to fail to understand is that earmarks are the mechanism Congress uses to ensure that funding is spent on a specific project. There is nothing wrong with earmarks themselves, as they can be used to ensure that Federal money isn’t just spent frivolously with nothing to show for it. The real problem is wasteful spending and requesting funding for unnecessary projects.
In the case of Palin’s bridge to nowhere, while Congress removed the earmark, Palin took the money anyway and spent it at her own discretion. By presenting herself as a champion of “ending earmarks,” Palin reveals that she is either grossly ignorant of how things work, or simply a disingenuously hypocritical liar.
In neither case is Palin qualified to help sort out economic policy for McCain, who has admitted that economic matters are not his strong point and who is surrounded by lobbyists and career politicians who have served the needs of those lobbyists in removing the economic regulations that were originally put in place to prevent the Depression from occurring again. Neither McCain nor Palin can offer real change, just more of the same as things get worse.
We Don’t Need Not Another Hoover.
America has to fight to take the nation back from the profiteers who have been cashing in at the trough of deregulation just like speculators in the 20s, who bought stock on margins hoping to make a quick profit. That worked well until everyone began selling at once. Today, bad home loans and speculative investments have resulted in a similar crisis, and are setting up a domino effect of future disasters.
On top of this, the nation has taken on a fantastically expensive war on multiple fronts, playing right into the hand of Bin Laden’s attempts to bankrupt us. McCain and Palin not only plan to stay in Iraq indefinitely, but threaten to start new wars in Iran, Syria, and between Georgia and Russia. This is ridiculous.
And for all my rich readers who fear Fox New’s propaganda that Obama will redistribute their wealth, remember that the market has always performed better under a Democrat for president. According to Ned Davis Research cited by MarketWatch, “the Dow Jones Industrial Average produced an annualized return of 7.21% during Democratic presidents, in contrast to an average of 3.6% during Republican presidents,” and when accounting for inflation, “2.5% annualized during Democratic presidencies, versus 1.7% during Republican presidencies.”
If those making more than a quarter million a year are afraid of Obama repealing parts of the Bush tax reductions that overwhelmingly favored them above the majority of Americans, imagine the consequences of more deregulation and another century in Iraq at $12 billion per month. Your taxes will eventually have to pay for that too. Stop deluding yourselves with Depression era Hooverism and wake up to the real threat: Bin Laden Bankruptcy.
Other articles on current events:
The Economics of Osama’s Death
Three years later, Osama released a videotape where he explicitly stated his intentions to bankrupt the US.
“We are continuing this policy in bleeding America to the point of bankruptcy…and it all shows that the real loser is you. It is the American people and their economy.”
In addition, Osama bin Laden also pointed out that while the 9/11 attacks cost al-Qaeda around US$500,000, it paled in comparison to what the US was spending to try and catch him and fight the global war on terror.
According to Ezra Klein from the Washington Post, “Even a partial, very haphazard tallying of the costs from 9/11 reaches swiftly into the trillions of dollars. The Afghanistan and Iraq wars, neither of which would’ve been launched without bin Laden’s provocation, will cost us a few trillion on their own, actually.”
While Osama bin Laden failed to bankrupt the US economy, his actions forced the US into increasing their military spending and indirectly led to other economic impacts in the aftermath of 9/11. According to renowned economist Joseph Stiglitz, the credit bubble that caused the 2008 financial crisis was linked to the Federal Reserves’ loose monetary policy intended to stave off any future recessions due to a major terrorist attack.
Whether Osama ever intended to cause such an economic impact is debatable. What remains clear though was his desire to harm the US economy.
The Economic Terrorist
According to reports by people who knew him personally, Osama bin Laden was a soft-spoken and mild-mannered man with strong ideological beliefs.
Rory Nugent of Rolling Stone Magazine met Osama bin Laden in 1994, long before the United States Embassy bombings in Africa brought him to the US, and the world’s, attention.
“Osama bin Laden was considered a rich kid with a mixed reputation as a fighter. His money bought him attention, and his knack for logistics garnered him respect. Earlier, during conversations with various commanders in the Afghan war, bin Laden had been described to me as just the kind of guy you want behind the lines to keep an army going. These men thought it funny that bin Laden’s organizational skills were honed by retired American spooks working with his father’s construction company while building the Saudi infrastructure. Not once did anyone remark on bin Laden’s qualities as a fighter.”
While Osama “didn’t strike Nugent (me) as a particularly interesting character” at that time, Osama was already a well-known figure in his home country, Saudi Arabia, for speaking out against the government for aiding US troops.
Osama’s desire to hurt the US economy can also be traced back to his time in Saudi Arabia. He was born into a rich family and attended elite schools before studying economics and business administration at King Abdulaziz University. His economics education may have played a role in his calculated attempts at damaging the US economy.
Osama’s overall strategy of hurting the US economy was also partly derived from Al-Qaeda’s methods during the Soviet Union’s invasion of Afghanistan during the 1980s where they would use “guerrilla warfare and the war of attrition to fight tyrannical superpowers.” Eventually, Osama wanted to force America to slowly become bankrupt as they spent more and more money searching for him and fighting Al-Qaeda.
Economic Impact on US economy of Osama bin Laden’s Death
Ultimately, Osama failed in his attempt to bleed the US dry. Although the US increased their security budget after the events of 9/11, Osama’s actions did not directly have as major an effect on the US economy as the 2008 financial crisis or even China’s emergence as a global economic superpower.
Hence, there has also been debate among analysts on whether Osama’s death would have any economic impact on the US and the world’s economy.
Amidst widespread celebrations in the US after President Barack Obama announcement of Osama bin Laden’s death, the Dow Jones industrial average, the Standard & Poor’s 500 and the Nasdaq composite rose by 0.3, 0.2 and 0.2 percent respectively. The US dollar also strengthened briefly on May 1st before declining later on Monday.
Globally, most major stock markets reacted positively to the news of Osama’s death. Meanwhile both oil and gold prices fell slightly in the immediate aftermath of President Obama’s announcement, though most believe that they are likely to return back to previous levels.
“This seems like a gut reaction to what the West views as a happy event. A lot of times we see markets move on happy news that in reality has nothing to do with the market, and I think this is one of them,” James Williams, an energy economist at WTRG Economics, said.
However, most experts believe that any economic gains derived from Osama’s death will be short-lived. Furthermore, the short-term effect is more likely to see economic risk rather than economic gain.
Economist Nouriel Roubini warned of economic repercussions due to a possible retaliation by Al-Qaeda to Osama bin Laden’s death.
“Somebody could decide to try to show strength by attacking the U.S. or Western forces in other parts of the world. So in some sense, the risk premium might be lower today, but there is still significant risk in down there in the global economy,” said Roubini.
In the long run, few see any economic impact for the US economy as a direct result of Osama’s death.
Bin Laden’s war against the U.S. economy
(Koji Sasahara – AP) Did Osama bin Laden win? No. Did he succeed? Well, America is still standing, and he isn’t. So why, when I called Daveed Gartenstein-Ross, a counterterrorism expert who specializes in al-Qaeda, did he tell me that “bin Laden has been enormously successful”? There’s no caliphate. There’s no sweeping sharia law. Didn’t we win this one in a clean knockout?Apparently not. Bin Laden, according to Gartenstein-Ross, had a strategy that we never bothered to understand, and thus that we never bothered to defend against. What he really wanted to do — and, more to the point, what he thought he could do — was bankrupt the United States of America. After all, he’d done the bankrupt-a-superpower thing before. And though it didn’t quite work out this time, it worked a lot better than most of us, in this exultant moment, are willing to admit.Bin Laden’s transition from scion of a wealthy family to terrorist mastermind came in the 1980s, when the Soviet Union was trying to conquer Afghanistan. Bin Laden was part of the resistance, and the resistance was successful — not only in repelling the Soviet invasion, but in contributing to the communist super-state’s collapse a few years later. “We, alongside the mujaheddin, bled Russia for 10 years, until it went bankrupt,” he later explained.The campaign taught bin Laden a lot. For one thing, superpowers fall because their economies crumble, not because they’re beaten on the battlefield. For another, superpowers are so allergic to losing that they’ll bankrupt themselves trying to conquer a mass of rocks and sand. This was bin Laden’s plan for the United States, too.“He has compared the United States to the Soviet Union on numerous occasions — and these comparisons have been explicitly economic,” Gartenstein-Ross argues in a Foreign Policy article. “For example, in October 2004 bin Laden said that just as the Arab fighters and Afghan mujaheddin had destroyed Russia economically, al Qaeda was now doing the same to the United States, ‘continuing this policy in bleeding America to the point of bankruptcy.’ ”For bin Laden, in other words, success was not to be measured in body counts. It was to be measured in deficits, in borrowing costs, in investments we weren’t able to make in our country’s continued economic strength. And by those measures, bin Laden landed a lot of blows.Nobel laureate Joseph Stiglitz estimates that the price tag on the Iraq War alone will surpass $3 trillion. Afghanistan likely amounts to another trillion or two. Add in the build-up in homeland security spending since 9/11 and you’re looking at yet another trillion. And don’t forget the indirect costs of all this turmoil: The Federal Reserve, worried about a fear-induced recession, slashed interest rates after the attack on the World Trade Center, and then kept them low to combat skyrocketing oil prices, a byproduct of the war in Iraq. That decade of loose monetary policy may well have contributedto the credit bubble that crashed the economy in 2007 and 2008.Then there’s the post-9/11 slowdown in the economy, the time wasted in airports, the foregone returns on investments we didn’t make, the rise in oil pricesas a result of the Iraq War, the cost of rebuilding Ground Zero, health care for the first responders and much, much more.But it isn’t quite right to say bin Laden cost us all that money. We decided to spend more than a trillion dollars on homeland security measures to prevent another attack. We decided to invade Iraq as part of a grand, post-9/11 strategy of Middle Eastern transformation. We decided to pass hundreds of billions of dollars in unpaid-for tax cuts and add an unpaid-for prescription drug benefit in Medicare while we were involved in two wars. And now, partially though not entirely because of these actions, we are deep in debt. Bin Laden didn’t — couldn’t — bankrupt us. He could only provoke us into bankrupting ourselves. And he came pretty close.It’s a smart play against a superpower. We didn’t need to respond to 9/11 by trying to reshape the entire Middle East, but we’re a superpower, and we think on that scale. We didn’t need to respond to failed attempts to smuggle bombs onto airplanes through shoes and shampoo bottles by screening all footwear and banning large shampoo bottles, but we’re a superpower, and our tolerance for risk is extremely low. His greatest achievement was getting our psychology at least somewhat right.In the end, of course, bin Laden was just another bag of meat and bones, hiding in a walled compound in Pakistan, so deeply afraid of death that he tried to use his wife as a shield when the special forces came for him. But he understood the mind of the superpower well enough to use our capabilities against us. He may not have won, but he did succeed, at least partially.But then, we can learn from our mistakes. He can’t.
The Price of Lost Chances
A survey by The New York Times puts a stark price tag on the cost of reacting — and overreacting — to the Sept. 11 attacks. An even more difficult question is how much Americans paid in “opportunity costs.”
By DAVID E. SANGER Published: September 8, 2011
One 9/11 Tally: $3.3 Trillion »
In 2004, when he was arguably still capable of initiating another devastating attack on the United States, Osama bin Laden released a video gloating about his plan of “bleeding America to the point of bankruptcy.”
As usual, Bin Laden’s vow was overblown — but, as it turned out, not entirely crazed. A survey by The New York Times, detailed in the accompanying chart, puts a stark price tag on the cost of reacting — and overreacting — to the defining event of the past decade. America’s bill for fighting a 21st-century “asymmetric war” comes to at least $3.3 trillion. Put another way, for every dollar Al Qaeda spent to pull off the Sept. 11 attacks, the cost to the United States was an astonishing $6.6 million.
Today, Al Qaeda in Pakistan is crippled and Bin Laden is dead. But the $3.3 trillion figure suggests that the unanticipated costs of how we managed a grim decade — money already spent or committed in the future — amount to a little more than one-fifth of America’s current national debt.
Some of those were unavoidable, direct costs of responding to the attack. Some, like the Iraq war, were expenditures of choice. But there is also the more difficult, less quantifiable question of what we paid in “opportunity costs.”
Less than a trillion dollars of the $3.3 trillion was for direct responses — including toppling the Taliban. But what if at least some of the remaining $2 trillion plus had been spent on other, longer-range threats to American national security? Rebuilding a broken education system? Finding more imaginative ways to compete with China? Reducing the national debt? Or delivering on promises, by President George W. Bush and Secretary of State Hillary Rodham Clinton alike, for “Marshall plans” to rebuild societies at risk of letting the next Al Qaeda flourish?
“We’re Americans,” Adm. Dennis C. Blair, who served briefly as President Obama’s director of national intelligence, said recently when asked how the costs rose, then spiraled out of control. “If it’s worth doing, it’s worth overdoing.” The nation never really debated these priorities: “What justifies this level of spending?” he asked. That debate has begun, but only recently, after a huge federal deficit and a national weariness with a decade of war created a reaction so powerful that some fear the nation will retreat into isolationism.
“From today’s perspective, we suffered a trauma and then a post-traumatic stress disorder that we tried to cure by throwing endless money at the problem,” said David Rothkopf, who wrote a history of the National Security Council, where many of the decisions were made. “There are expenditures of necessity and expenditures of choice, and it has taken us a full decade to recognize that some of the choices were fundamentally wrong. Only now have we hit the pivot point.”
The trade-offs — not guns versus butter but short-term security versus long-term — were not apparent in the early days when Sept. 11 seemed like the new Pearl Harbor. They were the furthest thing from anyone’s mind on that sunny, horrifying day. I was covering President Bush’s visit to a Sarasota, Fla., schoolhouse that morning, and when the second plane hit the south tower in New York, it became instantly evident to both the president’s aides and the traveling press that this was the work of Bin Laden, and that a presidency was transforming before our eyes. A forceful response was inevitable.
It was more than a year before anyone talked about whether America’s whatever-it-takes approach risked granting Bin Laden his obvious wish of wreaking huge economic havoc, and by then the United States was headed to Iraq.
As the immediate response turned into the broader, ill-defined “Global War on Terror” — the Pentagon even issued a GWOT medal for service outside the main theaters of battle — that debate over opportunity costs was labeled almost unpatriotic. The director of the National Economic Council, Lawrence Lindsey, was forced to resign after suggesting in 2002 that a war with Iraq could cost $100 billion to $200 billion. Mitch Daniels, then head of the Office of Management and Budget, was sent to offer a counterestimate of $50 billion to $60 billion, a rounding error in modern federal budgeting. (The Democrats’ estimate was $93 billion.) The actual number, according to the Congressional Research Service, is $800 billion and climbing.
Afghanistan, by contrast, has been a bargain, at about half the cost — less than the long-term price tag, $589 billion by one estimate, of caring for the veterans of both wars.
No president enters a war with the faintest idea of what it will cost, of course. But at least two-thirds of the 9/11 response can be traced to a few lines in the 2002 National Security Strategy of the United States, which declared the United States had to pre-empt any credible, emerging threat. For years, there was no talk of a “minimal deterrent,” proportionate response or balancing defense against other priorities. As one White House official asked me scoldingly, who applies cost-benefit calculations to national security?
Today, it seems unimaginable not to. Indeed, perhaps the biggest single change in the national security strategy of the United States since Mr. Obama came to office is the constant whir of that calculation. When Mr. Obama announced the “surge” in Afghanistan — modeled after the largely successful surge in Iraq — he slipped a few paragraphs into his speech to make clear that the days of open-ended war were over. “Over the past several years, we have lost that balance” between investing at home and investing in national security, he said. “Competition within the global economy has grown more fierce. So we can’t simply afford to ignore the price of these wars.”
At the time, Mr. Obama’s caution was dismissed as political posturing. “What everyone missed — even his own generals — is that he believes this to his core, and that’s what differentiates his strategy from Bush’s,” one senior administration official said. Mr. Obama has set a deadline for the surge troops to be pulled back by September 2012, two months before the election.
But the real model for a new approach — one that avoids $3.3 trillion price tags — was evident in Libya. To Mr. Obama, this was the test of the thesis that there is an alternative approach to bringing about regime change. Like Saddam Hussein, Col. Muammar el-Qaddafi was a vicious dictator with a history of terrorism and nuclear ambitions. While Mr. Obama decided to intervene in Libya — over the objections of his defense secretary — he insisted that there be no ground troops, that NATO allies take the lead and that the United States offer only “unique capabilities.” Even with those restrictions, American operations cost more than a billion dollars, and critics like Senator John McCain, the Arizona Republican, charged that the “halfway in” approach prolonged the conflict and cost untold Libyan lives.
Whether he is right or wrong, Libya was an example of what countries with real restraints — fiscal, political and strategic — have to do. Because even a hyperpower, as the French called the United States just before 9/11, cannot absorb more than one bill for $3.3 trillion.
Who Is Winning the War on Terrorism?
New York is a city under siege. As I write on the morning of the tenth anniversary of 9/11, thousands of police, federal agents, and the National Guard are swarming over the panicked metropolis, as reports proliferate that three suspected terrorists who entered the country recently are planning a car-bomb attack. Bomb-sniffing dogs patrol Grand Central Station, while police checkpoints delay traffic for hours – and threats appear on the White House Facebook page.
Amid the hundreds of editorials, reminiscences, and opinion pieces directed our way this somber day, all of which seek to extract some larger meaning from the worst terrorist attack in American history, the real meaning of that signal event is plain as day: we are losing the “war on terrorism” – big time.
Look at what happened in New York City: how many resources, how many tax dollars, have been expended in the search for three terrorists who may or may not be planning an attack? One of the major pieces of evidence for the 9/11/11 plot is the uptick in “chatter” supposedly filling the terrorist communications network. But what if this “chatter” is a calculated tactic? Simply by feinting – “leaking” false information – the Bad Guys can provoke a major and exhausting response, draining us until we’re eventually so worn down – or so bankrupt – that they accomplish their goal without even launching another strike on the scale of 9/11.
As Osama bin Laden put it in a videotaped message broadcast by al-Jazeera on November 1, 2004:
“All that we have to do is to send two Mujahedin to the farthest point East to raise a piece of cloth on which is written al-Qa’ida in order to make the generals race there to cause America to suffer human economic and political losses without their achieving for it anything of note.… So we are continuing this policy in bleeding America to the point of bankruptcy.”
The late terrorist leader went on to point out that
“Al-Qa’ida spent $500,000 on the [9/11 attacks], while America in the incident and its aftermath lost – according to the lowest estimates – more than 500 billion dollars, meaning that every dollar of al-Qa’ida defeated a million dollars by the permission of Allah besides the loss of a huge number of jobs. As for the size of the economic deficit, it has reached record, astronomical numbers estimated to total more than a trillion dollars. And even more dangerous and bitter for America is that the Mujahedin recently forced Bush to resort to emergency funds to continue the fight in Afghanistan and Iraq which is evidence of the success of the bleed-until-bankruptcy plan with Allah’s permission.”
As we scramble to defend New York City against a threat that may not even exist, bin Laden’s ghost is laughing at us from beyond the grave.
Yet there are worse fates than mere bankruptcy. We are living in a world where, if you get up and go to the bathroom more than once while traveling on a airplane, the flight is diverted on account of your “suspicious behavior.”
Hysteria has blinded us to the real threat. Even as the terrorists openly proclaim their “bleed-until-bankruptcy plan,” we continue to travel down the same path to economic oblivion. It has been widely noted that the 19 hijackers appropriated our own high technology – airliners – and turned them against us, but little noted that they also appropriated our emotional commitment to a war of revenge and used it in a similar fashion. As bin Laden put it:
“So we are continuing this policy in bleeding America to the point of bankruptcy. Allah is willing and nothing is too great for Allah. That being said, those who say that al-Qa’ida has won against the administration in the White House or that the administration has lost in this war have not been precise because when one scrutinizes the results, one cannot say that Al-Qa’ida is the sole factor in achieving these spectacular gains. Rather, the policy of the White House that demands the opening of war fronts to keep busy their various corporations – whether they be working in the field of arms or oil or reconstruction – has helped al-Qa’ida to achieve those enormous results.”
New fronts in our endless “war on terrorism” are opened, it seems, with each passing week: Somalia, Sudan, Yemen, the Philippines, Pakistan, and now Libya – where we are carrying out the new co-optation strategy of the Obama administration, which seeks to hijack the “Arab Spring” and utilize it as a weapon of against Islamist extremism. By setting up US-aligned “democratic” states in the Middle East, from Egypt to Libya and beyond, the Americans hope to inoculate the region against the virus represented by al-Qaeda.
This is a dangerous policy in so many ways that it would take more than a single column to even list them. Suffice to say that recent events in Egypt, and the growing influence of Islamist elements among the Libyan rebels, underscores how the “blowback” from our efforts could backfire in our faces.
We’ve spent trillions fighting this losing battle, but more than money has been lost – we’ve forfeited our freedom. The barrage of legislation enacted since 9/11 that empowers our government to openly spy on us in ways that would have been inconceivable before has effectively abolished our old republic, and replaced it with something else – a misshapen, polyglot creature, half “democratic” and fully authoritarian, which cannot sustain itself economically, and – for all its vaunting about exercising “world leadership” – shows every sign of descending into an irreversible decline.
If some historian of the future should attempt to chronicle the decline of the American republic, the point when history made its fateful turn will be readily identifiable: September 11, 2001, the day the 9/11 coup d’etat was victorious. As President George W. Bush sat reading The Pet Goat to a group of schoolchildren while the World Trade Center and the Pentagon came under attack, the government was effectively taken over by Vice President Dick Cheney and a cabal of government officials already in place and ready to assume command of the world’s mightiest superpower. From that moment on, the War Party had its hands on the reins of power, and they remain in the drivers seat to this day – albeit under another partisan alias.
For ten years they’ve been driving this country into the ground, just as bin Laden predicted they would. As dead as he is, he’s having the last laugh: his strategy is working.
Speaking of strategies that work: the circumstances surrounding the terrorist icon’s death point the way to fighting an effective campaign against those who plot and plan to pull off another 9/11. We didn’t get bin Laden by launching a massive invasion, or by “democratizing” the Middle East: it was good old fashioned police work, meticulous and patiently executed, that finally nailed him in his lair. We didn’t beat the Mafia by invading Italy – and we won’t beat the Islamist Mafioso by conquering Afghanistan and occupying great swathes of the Muslim world. Unfortunately, our present rulers show no signs of having learned the lesson of their greatest success.
Yes, we do have enemies who want to kill us, but those ghouls who worship Thanatos understand that death can take on many forms. A man can still continue to exist long after he has betrayed everything that made him uniquely himself. Nations, too, can commit this kind of slow motion suicide, so that the passage from life to death can go undetected until it is far too late to reverse course.
Is it too late for us? I fear the answer to this question, because we cannot know it until that point is well behind us. I can only let the historians of the future argue the question, while here, in the present, I fight – in my small way – to influence their verdict.
Read more by Justin Raimondo
By Matt Duss on Sep 25, 2008 at 4:37 pm
As Congress considers a $700 billion way out of the current economic crisis, it’s hard not to notice that this sum closely resembles the amount that the U.S. has spent so far in Iraq. (We will have spent far more than that by the time we withdraw.)
Many will remember Osama bin Laden’s November 2004 straight-to-video release where he discussed Al Qaeda’s stratey against the United States, saying it was “easy for [Al Qaeda] to provoke and bait this administration“:
All that we have to do is to send two Mujahedin to the farthest point East to raise a piece of cloth on which is written al-Qa’ida in order to make the generals race there to cause America to suffer human economic and political losses without their achieving for it anything of note other than some benefits to their private companies. […]
So we are continuing this policy in bleeding America to the point of bankruptcy. […]
And even more dangerous and bitter for America is that the Mujahedin recently forced Bush to resort to emergency funds to continue the fight in Afghanistan and Iraq which is evidence of the success of the bleed-until-bankruptcy plan with Allah’s permission… And it all shows that the real loser is… you. It’s the American people and their economy.
Anticipating the likely release of a new Al Qaeda video starring either bin Laden or Ayman al Zawahiri — both of whom remain at large, more than seven years after George W. Bush promised to bring them in “dead or alive” — we should remember that, as Ron Suskind reported in The One Percent Doctrine, the CIA’s strategic assessment that “bin-Laden’s [Nov. 2004] message was clearly designed to assist the President’s reelection“:
At the five o’clock meeting, [deputy CIA director] John McLaughlin opened the issue with the consensus view: “Bin-Laden certainly did a nice favor today for the President.”
McLaughlin’s comment drew nods from CIA officers at the table. Jami Miscik, CIA deputy associate director for intelligence, suggested that the al-Qaeda founder may have come to Bush’s aid because bin-Laden felt threatened by the rise in Iraq of Jordanian terrorist Abu Musab al-Zarqawi; bin-Laden might have thought his leadership would be diminished if Bush lost the White House and their “eye-to-eye struggle” ended.
But the CIA analysts also felt that bin-Laden might have recognized how Bush’s policies – including the Guantanamo prison camp, the Abu Ghraib scandal and the endless bloodshed in Iraq – were serving al-Qaeda’s strategic goals for recruiting a new generation of jihadists.
“Certainly,” the CIA’s Miscik said, “he would want Bush to keep doing what he’s doing for a few more years,” according to Suskind’s account of the meeting.
John McCain has been very clear that when it comes to national security, he would like to keep doing what Bush has been doing for a few more years. That is, he would like to keep jumping at the bait. Remember that when that new AQ video drops.
US struggles over war expenditures
Thursday, August 18, 2011
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Prophets Of Doom: 12 Shocking Quotes From Insiders About The Horrific Economic Crisis That Is Almost Here
We are getting so close to a financial collapse in Europe that you can almost hear the debt bubbles popping. All across the western world, governments and major banks are rapidly becoming insolvent. So far, the powers that be are keeping all of the balls in the air by throwing around lots of bailout money. But now the political will for more bailouts is drying up and the number of troubled entities seems to grow by the day. Right now the western world is facing a debt crisis that is absolutely unprecedented in world history. Europe has had a tremendously difficult time just trying to keep Greece afloat, and several much larger European countries are now on the verge of a major financial crisis. In addition, there is a growing number of very large financial institutions all over the western world that are also rapidly approaching a day of reckoning. The global financial system is a sea or red ink, and when we get to the point where there are hundreds of ships going under how is it going to be possible to bail all of them out? The quotes that you are about to read show that quite a few top financial and political insiders know that things cannot hold together much longer and that a horrific economic crisis is coming. We built the global financial system on a foundation of debt, leverage and risk and now this house of cards that we have created is about to come tumbling down.
A lot of people in politics and in the financial world know what is about to happen. Once in a while they will even be quite candid about it with the media.
As I have written about previously, Europe is on the verge of a financial collapse. If things go really badly, things could totally fall apart in a few weeks. But more likely it will be a few more months until the juggling act ends.
Right now, the banking system in Europe is coming apart at the seams. Because the global financial system is so interconnected today, when major European banks start to fail it is going to have a cascading effect across the United States and Asia as well.
The financial crisis of 2008 plunged us into the deepest recession since the Great Depression.
The next financial crisis could potentially hit the world even harder.
The following are 12 shocking quotes from insiders that are warning about the horrific economic crisis that is almost here….
#1 George Soros: “Financial markets are driving the world towards another Great Depression with incalculable political consequences. The authorities, particularly in Europe, have lost control of the situation.”
#2 PIMCO CEO Mohammed El-Erian: “These are all signs of an institutional run on French banks. If it persists, the banks would have no choice but to delever their balance sheets in a very drastic and disorderly fashion. Retail depositors would get edgy and be tempted to follow trading and institutional clients through the exit doors. Europe would thus be thrown into a full-blown banking crisis that aggravates the sovereign debt trap, renders certain another economic recession, and significantly worsens the outlook for the global economy.”
#3 Attila Szalay-Berzeviczy, global head of securities services at UniCredit SpA (Italy’s largest bank): “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits.”
#4 Stefan Homburg, the head of Germany’s Institute for Public Finance: “The euro is nearing its ugly end. A collapse of monetary union now appears unavoidable.”
#5 EU Parliament Member Nigel Farage: “I think the worst in the financial system is yet to come, a possible cataclysm and if that happens the gold price could go (higher) to a number that we simply cannot, at this moment, even imagine.”
#6 Carl Weinberg, the chief economist at High Frequency Economics: “At this point, our base case is that Greece will default within weeks.”
#7 Goldman Sachs strategist Alan Brazil: “Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world’s base currency?”
#8 International Labour Organization director general Juan Somavia recently stated that total unemployment could “increase by some 20m to a total of 40m in G20 countries” by the end of 2012.
#9 Deutsche Bank CEO Josef Ackerman: “It is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels.”
#10 Alastair Newton, a strategist for Nomura Securities in London: “We believe that we are just about to enter a critical period for the eurozone and that the threat of some sort of break-up between now and year-end is greater than it has been at any time since the start of the crisis”
#11 Ann Barnhardt, head of Barnhardt Capital Management, Inc.: “It’s over. There is no coming back from this. The only thing that can happen is a total and complete collapse of EVERYTHING we now know, and humanity starts from scratch. And if you think that this collapse is going to play out without one hell of a big hot war, you are sadly, sadly mistaken.”
#12 Lakshman Achuthan of ECRI: “When I call a recession…that means that process is starting to feed on itself, which means that you can yell and scream and you can write a big check, but it’s not going to stop.”
In my opinion, the epicenter of the “next wave” of the financial collapse is going to be in Europe. But that does not mean that the United States is going to be okay. The reality is that the United States never recovered from the last recession and there are already a lot of signs that we are getting ready to enter another major recession. A major financial collapse in Europe would just accelerate our plunge into a new economic crisis.
If you want to read something that will really freak you out, you should check out what Dr. Philippa Malmgren is saying. Dr. Philippa Malmgren is the President and founder of Principalis Asset Management. She is also a former member of the Bush economic team. You can find her bio right here.
Malmgren is claiming that Germany is seriously considering bringing back the Deutschmark. In fact, she claims that Germany is very busy printing new currency up. In a list of things that we could see happen over the next few months, she included the following….
“The Germans announce they are re-introducing the Deutschmark. They have already ordered the new currency and asked that the printers hurry up.”
This is quite a claim for someone to be making. You would think that someone that used to work in the White House would not make such a claim unless it was based on something solid.
If Germany did decide to leave the euro, you would see an implosion of the euro that would be truly historic.
But as I have written about previously, it should not surprise anyone that the end of the euro is being talked about because the euro simply does not work.
The only way that the euro would have had a chance of working is if all of the governments using the euro would have kept debt levels very low.
Unfortunately, the financial systems of the western world are designed to push governments into high levels of debt.
The truth is that the euro was doomed from the very beginning.
Now we are approaching a day of reckoning. We have been living in the greatest debt bubble in the history of the world, but the bubble is ending. There are several ways that the powers that be could handle this, but all of them will lead to greater financial instability.
In the end, we will see that the debt-fueled prosperity that the western world has been enjoying for decades was just an illusion.
Debt is a very cruel master. It will almost always bring more pain and suffering than you anticipated.
It is easy to get into debt, but it can be very difficult to get out of debt.
There is no way that the western world can unwind this debt spiral easily.
The only way that another massive economic crisis can be put off for even a little while would be for the powers that be to “kick the can down the road” a little farther by creating even more debt.
But in the end, you can never solve a debt problem with more debt.
The next several years are going to be an incredibly clear illustration of why debt is bad.
When the dominoes start to fall, we are going to witness a financial avalanche which is going to destroy the finances of millions of people.
You might want to try to get out of the way while you still can
U.S. Is Bankrupt and We Don’t Even Know It: Laurence Kotlikoff
By Laurence Kotlikoff – Aug 10, 2010 9:00 PM ET
Aug. 11 (Bloomberg) — Laurence Kotlikoff, an economics professor at Boston University, talks about the state of the U.S. economy. Kotlikoff speaks with Erik Schatzker on Bloomberg Television’s InsideTrack.” (Source: Bloomberg)
Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.
What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.
Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”
But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”
The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.
Double Our Taxes
To put 14 percent of gross domestic product in perspective, current federal revenue totals 14.9 percent of GDP. So the IMF is saying that closing the U.S. fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act.
Such a tax hike would leave the U.S. running a surplus equal to 5 percent of GDP this year, rather than a 9 percent deficit. So the IMF is really saying the U.S. needs to run a huge surplus now and for many years to come to pay for the spending that is scheduled. It’s also saying the longer the country waits to make tough fiscal adjustments, the more painful they will be.
Is the IMF bonkers?
No. It has done its homework. So has the Congressional Budget Office whose Long-Term Budget Outlook, released in June, shows an even larger problem.
Based on the CBO’s data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt. This gargantuan discrepancy between our “official” debt and our actual net indebtedness isn’t surprising. It reflects what economists call the labeling problem. Congress has been very careful over the years to label most of its liabilities “unofficial” to keep them off the books and far in the future.
For example, our Social Security FICA contributions are called taxes and our future Social Security benefits are called transfer payments. The government could equally well have labeled our contributions “loans” and called our future benefits “repayment of these loans less an old age tax,” with the old age tax making up for any difference between the benefits promised and principal plus interest on the contributions.
The fiscal gap isn’t affected by fiscal labeling. It’s the only theoretically correct measure of our long-run fiscal condition because it considers all spending, no matter how labeled, and incorporates long-term and short-term policy.
$4 Trillion Bill
How can the fiscal gap be so enormous?
Simple. We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today’s dollars. Yes, our economy will be bigger in 20 years, but not big enough to handle this size load year after year.
This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck.
Herb Stein, chairman of the Council of Economic Advisers under U.S. President Richard Nixon, coined an oft-repeated phrase: “Something that can’t go on, will stop.” True enough. Uncle Sam’s Ponzi scheme will stop. But it will stop too late.
And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.
Worse Than Greece
Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.
Some doctrinaire Keynesian economists would say any stimulus over the next few years won’t affect our ability to deal with deficits in the long run.
This is wrong as a simple matter of arithmetic. The fiscal gap is the government’s credit-card bill and each year’s 14 percent of GDP is the interest on that bill. If it doesn’t pay this year’s interest, it will be added to the balance.
Demand-siders say forgoing this year’s 14 percent fiscal tightening, and spending even more, will pay for itself, in present value, by expanding the economy and tax revenue.
My reaction? Get real, or go hang out with equally deluded supply-siders. Our country is broke and can no longer afford no- pain, all-gain “solutions.”
(Laurence J. Kotlikoff is a professor of economics at Boston University and author of “Jimmy Stewart Is Dead: Ending the World’s Ongoing Financial Plague with Limited Purpose Banking.” The opinions expressed are his own.)
To contact the writer of this column: Laurence Kotlikoff at email@example.com
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Al-Qaeda’s Project for Ending the American Century Largely Succeeded
A decade after its spectacular Sep. 11, 2001 attacks on New York City’s twin World Trade Center towers and the Pentagon and despite the killing earlier this year of its charismatic leader, Osama bin Laden, al-Qaeda appears to have largely succeeded in its hopes of accelerating the decline of U.S. global power, if not bringing it to the brink of collapse.
That appears to be the strong consensus of the foreign-policy elite which, with only a few exceptions, believes that the administration of President George W. Bush badly “overreacted” to the attacks and that that overreaction continues to this day.
That overreaction was driven in major part by a close-knit group of neoconservatives and other hawks who seized control of Bush’s foreign policy even before the dust had settled over Lower Manhattan and set it on a radical course designed to consolidate Washington’s dominance of the Greater Middle East and “shock and awe” any aspiring global or regional rival powers into acquiescing to a “unipolar” world.
Led within the administration by Vice President Dick Cheney, Pentagon chief Donald Rumsfeld and their mostly neoconservative aides and supporters, the hawks had four years before joined the Project for the New American Century (PNAC). The letter-head organization was co-founded by neoconservative ideologues William Kristol and Robert Kagan, who, in an important 1996 article, called for the U.S. to preserve its post-Cold War “hegemony as far into the future as possible.”
In a series of subsequent letters and publications, they urged ever more military spending; pre-emptive, and if necessary, unilateral military action against possible threats; and “regime change” for rogue states, beginning with Iraq’s Saddam Hussein.
On the eve of 9/11, PNAC’s notion that Washington could extend its “benevolent global hegemony” indefinitely did not appear unreasonable. With more than 30 percent of the global economy, the strongest fiscal position in a generation, and a defense budget greater than the 20 next-most-powerful militaries combined, Washington looked unchallengeable, a perception soon enhanced by the show of national unity that followed the attacks and the speed and apparent ease with which Washington orchestrated the defeat of the Taliban in Afghanistan later that year.
“I’ve gone back in world history and never seen anything like it,” exclaimed Yale University historian Paul Kennedy, a leading exponent of the “declinist” school of U.S. power 15 years before, about Washington’s dominance, which he compared favorably to the British Empire in its day.
PNAC’s associates were similarly impressed. “People are now coming out of the closet on the word ‘empire’,” exulted the Washington Post‘s neoconservative columnist, Charles Krauthammer, a Cheney favorite and long-time advocate of a U.S.-led “unipolar” world. “The fact is no country has been as dominant culturally, economically, technologically, and militarily in the history of the world since the Roman Empire.”
Such exuberance (or hubris) naturally fueled the next phase in PNAC’s quest – originally laid out in an open letter to Bush published by the group just nine days after 9/11 – for victory in what was now called the “global war on terror”: regime change in Iraq.
“Failure to undertake such an effort will constitute an early and perhaps decisive surrender in the war on international terrorism,” PNAC had warned, arguing that Washington must expand its target list to include states — particularly those hostile to Israel — that support terrorist groups, as well as the terrorist groups themselves.
So, instead of focusing on capturing bin Laden and other al-Qaeda leaders and providing the kind of security and material assistance needed to pacify and begin rebuilding Afghanistan, Bush turned his attention — and diverted U.S. military and intelligence resources — to preparing for war against Iraq.
That decision is now seen universally — with the exception of Cheney and his die-hard PNAC supporters — as perhaps the single-most disastrous foreign policy decision by a U.S. president in the past decade, if not the past century.
Not only did it effectively set the stage for an eventual Taliban comeback in Afghanistan (which is now costing the U.S. some 10 billion dollars a month), but it also destroyed the international support and solidarity Washington had enjoyed immediately after the 9/11 attacks — a fact made excruciatingly clear by Bush’s failure to gain U.N. Security Council backing for his invasion of Iraq in March 2003. It also helped persuade tens of millions of Muslims that the U.S. was waging war on Islam, according to dozens of public-opinion surveys.
Indeed, by invading Iraq, the U.S. fell into a trap set by bin Laden who, convinced that Moscow’s decade-long occupation of Afghanistan contributed critically to the Soviet Union’s eventual collapse, clearly believed that the U.S. was susceptible to the same kind of over-extension.
“We, alongside the mujahedeen, bled Russia for 10 years until it went bankrupt and was forced to withdraw in defeat,” he said in a 2004 video-tape describing what he called a “war of attrition.”
“We are continuing this policy in bleeding America to the point of bankruptcy,” he added. “All that we have to do is to send two mujahedeen to the furthest point east to raise a piece of cloth on which is written ‘al-Qaeda’, in order to make generals race there and to cause America to suffer human, economic, and political losses without their achieving anything of note other than some benefits for their private corporations,” he went on.
Of course, by the time bin Laden recorded those remarks, the U.S. forces in Iraq were battling a growing insurgency, one that not only would result in hugely costly abuses by U.S. forces at Abu Ghraib that inflicted serious damage to Washington’s already-tattered moral image, but that would also push Iraq to the very brink of civil war and lead to an even deeper and more expensive intervention by the U.S. military.
True to bin Laden’s prediction, Washington, goaded by PNAC associates and alumni, also deployed forces — or drone missiles at the very least — to virtually wherever al-Qaeda or its alleged affiliates raised its flag, often at the cost of weakening local governments and incurring the wrath of local populations, particularly in Somalia and Yemen.
More importantly, the same held true in nuclear-armed Pakistan, not to mention Afghanistan, where Bush’s successor, Barack Obama, more than doubled U.S. troop strength to 100,000 in his first two years in office, even as he withdrew an equivalent number from Iraq.
The costs have been staggering in almost every respect. The estimated three to 4.4 trillion dollars Washington has incurred either directly or indirectly in conducting the “global war on terror” account for a substantial portion of the fiscal crisis that transformed the country’s politics and brought it to the edge of bankruptcy last month.
And while the U.S. military remains by far the strongest in the world, its veil of invincibility has been irreparably pierced by the success with which rag-tag groups of guerrillas have defied and frustrated it. The result, according to conservative New York Times columnist Ross Douthat, has been “a steady erosion of America’s position in the world,” which Obama has so far been unable to reverse.
“…(F)or a long time,” wrote Richard Clarke, a top national-security official under Bush who warned the White House several months before 9/11 that al-Qaeda was planning a major operation against the U.S. homeland, in the Daily Beast, “we actually played into the hands of our opponents, doing precisely what they had wanted us to do, responding in the ways that they had sought to provoke, damaging our economy and alienating much of the Middle East.”
And leading the charge were precisely those hawks whose fondest wish was to extend, rather than cut short, Washington’s global hegemony.
(Inter Press Service)
12 Facts That Show America Can’t Afford To Police The World Anymore Read more: http:12 Facts That Show America Can’t Afford To Police The World Anymore
Today, the United States has become the police of the world. The U.S. military has a total of over 700 military bases in 130 countries around the world.
Total military spending by the U.S. government is nearly equal to the combined military spending of the rest of the globe. Meanwhile, the federal government is literally drowning in debt.
So if US make some significant cuts to military spending will we fix the national debt problem? Of course not. In fact, it would only put a small dent in it. But at least it would help.
The truth is that US cannot afford to be the police of the world and the Pentagon wastes so much money that it is almost incomprehensible. Secretary of Defense Donald Rumsfeld once publicly admitted that the Pentagon lost track of 2.3 trillion dollars and cannot tell us how it was spent. Just imagine how your boss would react if you lost track of just 2.3 thousand dollars. So why wasn’t there more of an uproar about losing track of 2.3 trillion dollars? Has US become so accustomed to military waste that they don’t even care anymore?
Not that US don’t need a strong military. The truth is that liberals are dead wrong when they claim that USA now live in a world where a strong military is no longer necessary. China is a bigger threat than it ever has been before. Russia is a bigger threat than it ever has been before. North Korea is absolutely insane and they have nuclear weapons. There are several other radical regimes around the globe that are working hard toward getting nuclear weapons.
But you know what? The U.S. military is spread so thin right now that they could not even respond adequately if a real threat did emerge. Trying to be the police of the world is not only incredibly costly, it is also strategic suicide.
What possible justification could there possibly be for having U.S. troops in 130 different nations?
Why in the world do U.S. still need huge contingents of troops in Germany and Japan? It is funny when people talk about them pulling out of Afghanistan or Iraq, because they never even pulled out of Germany or Japan after World War II. Once the U.S. military gets boots on the ground somewhere, they very rarely ever leave.
Look, it is about darn time that nations like Japan and Germany learned to defend themselves. Nobody is going to invade them any time soon. Everyone knows they are protected by U.S. nukes. So why do U.S. have to station so many troops in both countries?
U.S. is spending so many resources patrolling the streets of Iraq and rounding up goat herders in Afghanistan that U.S. aren’t even preparing for the real threats. If World War III does break out in the coming years, it is probably going to be the United States against an allied front of Russia and China. But U.S. aren’t preparing to fight that war. Instead, Bush and Obama have been slashing their nuclear arsenal to the bone as they obsessively hunt for “boogeymen” in the caves of the Middle East.
So in their attempt to police the world, U.S. is spending way too much money, their military is stretched far too thin and theye aren’t even preparing to fight their real threats.
The truth is that U.S. military spending is totally out of control. The following are 12 facts that show that we cannot afford to be the police of the world….
Today the U.S. military has over 700 bases (some say it is actually over 1000 bases) in 130 different countries around the globe.
The U.S. military budget for 2010 was $693 billion.
However, when you throw in all “off budget” items and other categories of “defense” spending not covered in the Pentagon budget you get a grand total of somewhere between $1.01 and $1.35 trillion spent on national defense in 2010.
The truth is that U.S. military spending is greater than the military spending of China, Russia, Japan, India, and the rest of NATO combined.
Total U.S. military spending makes up approximately 44 percent of all the military spending on the entire globe.
The Pentagon currently gobbles up 56 percent of all discretionary spending by the federal government.asato ma sadh gamaya
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Re: 12 Facts That Show America Can’t Afford To Police The World Anymore Read more: h
Together, the wars in Iraq and Afghanistan cost more than $150 billion a year.
Up to this point, it is estimated that the U.S. government has spent over 373 billion dollars on the war in Afghanistan.
Up to this point, it is estimated the the U.S. government has spent over 745 billion dollars on the war in Iraq.
Since 2001, the total cost of the wars in Iraq and Afghanistan breaks down to $3,644 for every man, woman and child in the United States.
The Sustainable Defense Task Force has produced a report which shows that the U.S. could easily slash a trillion dollars from the defense budget over the next ten years.
The truth is that the U.S. government has accumulated the biggest mountain of debt in the history of the world.
U.S. has now reached a point where an economic collapse seems virtually inevitable. There is no way that U.S. is going to be able to continue to police the world. In fact, unless U.S. military spending becomes far more efficient and far more focused on the real threats they may not even be able to protect their own nation when the time comes.
Transcript of Osama bin Laden’s Speech
Aljazeera.net (online publication), Doha, Qatar,
October 30, 2004
|A frame grab taken from a videotape aired by Al-Jazeera news channel on October 29, 2004. (Photo: AFP/Getty Images)|
Praise be to Allah who created the creation for his worship and commanded them to be just and permitted the wronged one to retaliate against the oppressor in kind. To proceed:
Peace be upon he who follows the guidance: People of America this talk of mine is for you and concerns the ideal way to prevent another Manhattan, and deals with the war and its causes and results.
Before I begin, I say to you that security is an indispensable pillar of human life and that free men do not forfeit their security, contrary to Bush’s claim that we hate freedom.
If so, then let him explain to us why we don’t strike for example – Sweden? And we know that freedom-haters don’t possess defiant spirits like those of the 19 – may Allah have mercy on them.
No, we fight because we are free men who don’t sleep under oppression. We want to restore freedom to our nation, just as you lay waste to our nation. So shall we lay waste to yours.
No one except a dumb thief plays with the security of others and then makes himself believe he will be secure. Whereas thinking people, when disaster strikes, make it their priority to look for its causes, in order to prevent it happening again.
But I am amazed at you. Even though we are in the fourth year after the events of September 11th, Bush is still engaged in distortion, deception and hiding from you the real causes. And thus, the reasons are still there for a repeat of what occurred.
So I shall talk to you about the story behind those events and shall tell you truthfully about the moments in which the decision was taken, for you to consider.
I say to you, Allah knows that it had never occurred to us to strike the towers. But after it became unbearable and we witnessed the oppression and tyranny of the American/Israeli coalition against our people in Palestine and Lebanon, it came to my mind.
The events that affected my soul in a direct way started in 1982 when America permitted the Israelis to invade Lebanon and the American Sixth Fleet helped them in that. This bombardment began and many were killed and injured and others were terrorised and displaced.
I couldn’t forget those moving scenes, blood and severed limbs, women and children sprawled everywhere. Houses destroyed along with their occupants and high rises demolished over their residents, rockets raining down on our home without mercy.
The situation was like a crocodile meeting a helpless child, powerless except for his screams. Does the crocodile understand a conversation that doesn’t include a weapon? And the whole world saw and heard but it didn’t respond.
In those difficult moments many hard-to-describe ideas bubbled in my soul, but in the end they produced an intense feeling of rejection of tyranny, and gave birth to a strong resolve to punish the oppressors.
And as I looked at those demolished towers in Lebanon, it entered my mind that we should punish the oppressor in kind and that we should destroy towers in America in order that they taste some of what we tasted and so that they be deterred from killing our women and children.
And that day, it was confirmed to me that oppression and the intentional killing of innocent women and children is a deliberate American policy. Destruction is freedom and democracy, while resistance is terrorism and intolerance.
This means the oppressing and embargoing to death of millions as Bush Sr did in Iraq in the greatest mass slaughter of children mankind has ever known, and it means the throwing of millions of pounds of bombs and explosives at millions of children – also in Iraq – as Bush Jr did, in order to remove an old agent and replace him with a new puppet to assist in the pilfering of Iraq’s oil and other outrages.
So with these images and their like as their background, the events of September 11th came as a reply to those great wrongs, should a man be blamed for defending his sanctuary?
Is defending oneself and punishing the aggressor in kind, objectionable terrorism? If it is such, then it is unavoidable for us.
This is the message which I sought to communicate to you in word and deed, repeatedly, for years before September 11th.
And you can read this, if you wish, in my interview with Scott in Time Magazine in 1996, or with Peter Arnett on CNN in 1997, or my meeting with John Weiner in 1998.
You can observe it practically, if you wish, in Kenya and Tanzania and in Aden. And you can read it in my interview with Abdul Bari Atwan, as well as my interviews with Robert Fisk.
The latter is one of your compatriots and co-religionists and I consider him to be neutral. So are the pretenders of freedom at the White House and the channels controlled by them able to run an interview with him? So that he may relay to the American people what he has understood from us to be the reasons for our fight against you?
If you were to avoid these reasons, you will have taken the correct path that will lead America to the security that it was in before September 11th. This concerned the causes of the war.
As for it’s results, they have been, by the grace of Allah, positive and enormous, and have, by all standards, exceeded all expectations. This is due to many factors, chief among them, that we have found it difficult to deal with the Bush administration in light of the resemblance it bears to the regimes in our countries, half of which are ruled by the military and the other half which are ruled by the sons of kings and presidents.
Our experience with them is lengthy, and both types are replete with those who are characterised by pride, arrogance, greed and misappropriation of wealth. This resemblance began after the visits of Bush Sr. to the region.
At a time when some of our compatriots were dazzled by America and hoping that these visits would have an effect on our countries, all of a sudden he was affected by those monarchies and military regimes, and became envious of their remaining decades in their positions, to embezzle the public wealth of the nation without supervision or accounting.
So he took dictatorship and suppression of freedoms to his son and they named it the Patriot Act, under the pretence of fighting terrorism. In addition, Bush sanctioned the installing of sons as state governors, and didn’t forget to import expertise in election fraud from the region’s presidents to Florida to be made use of in moments of difficulty.
All that we have mentioned has made it easy for us to provoke and bait this administration. All that we have to do is to send two mujahidin to the furthest point east to raise a piece of cloth on which is written al-Qaida, in order to make the generals race there to cause America to suffer human, economic, and political losses without their achieving for it anything of note other than some benefits for their private companies.
This is in addition to our having experience in using guerrilla warfare and the war of attrition to fight tyrannical superpowers, as we, alongside the mujahidin, bled Russia for 10 years, until it went bankrupt and was forced to withdraw in defeat.
All Praise is due to Allah.
So we are continuing this policy in bleeding America to the point of bankruptcy. Allah willing, and nothing is too great for Allah.
That being said, those who say that al-Qaida has won against the administration in the White House or that the administration has lost in this war have not been precise, because when one scrutinises the results, one cannot say that al-Qaida is the sole factor in achieving those spectacular gains.
Rather, the policy of the White House that demands the opening of war fronts to keep busy their various corporations – whether they be working in the field of arms or oil or reconstruction – has helped al-Qaida to achieve these enormous results.
And so it has appeared to some analysts and diplomats that the White House and us are playing as one team towards the economic goals of the United States, even if the intentions differ.
And it was to these sorts of notions and their like that the British diplomat and others were referring in their lectures at the Royal Institute of International Affairs. [When they pointed out that] for example, al-Qaida spent $500,000 on the event, while America, in the incident and its aftermath, lost – according to the lowest estimate – more than $500 billion.
Meaning that every dollar of al-Qaida defeated a million dollars by the permission of Allah, besides the loss of a huge number of jobs.
As for the size of the economic deficit, it has reached record astronomical numbers estimated to total more than a trillion dollars.
And even more dangerous and bitter for America is that the mujahidin recently forced Bush to resort to emergency funds to continue the fight in Afghanistan and Iraq, which is evidence of the success of the bleed-until-bankruptcy plan – with Allah’s permission.
It is true that this shows that al-Qaida has gained, but on the other hand, it shows that the Bush administration has also gained, something of which anyone who looks at the size of the contracts acquired by the shady Bush administration-linked mega-corporations, like Halliburton and its kind, will be convinced. And it all shows that the real loser is … you.
It is the American people and their economy. And for the record, we had agreed with the Commander-General Muhammad Ataa, Allah have mercy on him, that all the operations should be carried out within 20 minutes, before Bush and his administration notice.
It never occurred to us that the commander-in-chief of the American armed forces would abandon 50,000 of his citizens in the twin towers to face those great horrors alone, the time when they most needed him.
But because it seemed to him that occupying himself by talking to the little girl about the goat and its butting was more important than occupying himself with the planes and their butting of the skyscrapers, we were given three times the period required to execute the operations – all praise is due to Allah.
And it’s no secret to you that the thinkers and perceptive ones from among the Americans warned Bush before the war and told him: “All that you want for securing America and removing the weapons of mass destruction – assuming they exist – is available to you, and the nations of the world are with you in the inspections, and it is in the interest of America that it not be thrust into an unjustified war with an unknown outcome.”
But the darkness of the black gold blurred his vision and insight, and he gave priority to private interests over the public interests of America.
So the war went ahead, the death toll rose, the American economy bled, and Bush became embroiled in the swamps of Iraq that threaten his future. He fits the saying “like the naughty she-goat who used her hoof to dig up a knife from under the earth”.
So I say to you, over 15,000 of our people have been killed and tens of thousands injured, while more than a thousand of you have been killed and more than 10,000 injured. And Bush’s hands are stained with the blood of all those killed from both sides, all for the sake of oil and keeping their private companies in business.
Be aware that it is the nation who punishes the weak man when he causes the killing of one of its citizens for money, while letting the powerful one get off, when he causes the killing of more than 1000 of its sons, also for money.
And the same goes for your allies in Palestine. They terrorise the women and children, and kill and capture the men as they lie sleeping with their families on the mattresses, that you may recall that for every action, there is a reaction.
Finally, it behoves you to reflect on the last wills and testaments of the thousands who left you on the 11th as they gestured in despair. They are important testaments, which should be studied and researched.
Among the most important of what I read in them was some prose in their gestures before the collapse, where they say: “How mistaken we were to have allowed the White House to implement its aggressive foreign policies against the weak without supervision.”
It is as if they were telling you, the people of America: “Hold to account those who have caused us to be killed, and happy is he who learns from others’ mistakes.”
And among that which I read in their gestures is a verse of poetry. “Injustice chases its people, and how unhealthy the bed of tyranny.”
As has been said: “An ounce of prevention is better than a pound of cure.”
And know that: “It is better to return to the truth than persist in error.” And that the wise man doesn’t squander his security, wealth and children for the sake of the liar in the White House.
In conclusion, I tell you in truth, that your security is not in the hands of Kerry, nor Bush, nor al-Qaida. No.
Your security is in your own hands. And every state that doesn’t play with our security has automatically guaranteed its own security.
And Allah is our Guardian and Helper, while you have no Guardian or Helper. All peace be upon he who follows the Guidance
نص خطاب أسامة بن لادن 15 رمضان 1425 هـ – 29 أكتوبر/تشرين الأول 2004 م
الحمد لله الذي خلق الخلق لعبادته وأمرهم بالعدل، واذن للمظلوم أن يقتص من ظالمه بالمثل، أما بعد:
السلام على من اتبع الهدى،
أيها الشعب الأمريكي؛
حديثي هذا لكم عن الطريقة المثلى لتجنب "مانهاتن" أخرى، عن الحرب وأسبابها ونتائجها، وبين يدي الحديث أقول لكم؛ إن الأمن ركن مهم من أركان الحياة البشرية، وإن الأحرار لا يفرطون بأمنهم، بخلاف ادعاء بوش بأننا نكره الحرية, فليعلمنا لِمَ لمْ نضرب السويد مثلا؟
ومعلوم أن الذين يكرهون الحرية لا يملكون نفوسا أبية كنفوس الـ 19 رحمهم الله، وإنما قاتلناكم لأننا أحرار لا ننام على الضيم، نريد إرجاع الحرية لأمتنا، فكما تهدرون أمننا نهدر أمنكم، ولا يعبث بأمن الآخرين ثم يتوهم بأنه سيبقى آمنا إلا اللص الأحمق، وإن العقلاء إذا وقعت المصائب كان من أهم أعمالهم البحث عن أسبابها لتجنبها.
ولكننني أعجب منكم؛ فبالرغم من دخولنا السنة الرابعة بعد أحداث الـ 11 فما زال بوش يمارس عليكم التشويش والتضليل وتغييب السبب الحقيقي عنكم, وبالتالي فإن الدواعي قائمة لتكرار ما حدث، وإني ساحدثكم عن الأسباب وراء تلك الأحداث، وساصدقكم القول باللحظات التي اتخذ فيها هذا القرار لتتفكروا، فأقول لكم؛ علم الله ما خطر في بالنا ضرب الأبراج، ولكن بعدما طفح الكيل وشاهدنا ظلم وتعسف التحالف الأميركي الإسرائيلي على أهلنا في فلسطين ولبنان فبادر إلى ذهني ذلك.
وإن الأحداث التي أثرت في نفسي بشكل مباشر ترجع إلى عام 1982 وما تلاها من أحداث، عندما أذنت أميركا للإسرائيليين باجتياح لبنان وساعد في ذلك الأسطول الثالث الأميركي، وبدأ القصف وقتل وجرح كثيرون وروع وشرد آخرون، وما زلت أتذكر تلك المشاهد المؤثرة؛ دماء وأشلاء وأطفال ونساء صرعى في كل مكان، منازل تدمر بمن فيها وأبراج تدك على ساكنيها، قذائف كالمطر تصب على ديارنا بلا رحمة، وكان الحال كتمساح التقم طفلا لا حول له ولا قوة إلا الصراخ، فهل يفهم التمساح حوارا بغير سلاح، وكان العالم كله يسمع ويرى ولا يزيد، وفي تلك اللحظات العصيبة جاشت في نفسي معان كثيرة يصعب وصفها ولكنها انتجت شعورا عارما يرفض الظلم وولدت تصميما قويا على معاقبة الظالمين.
وبينما أنا أنظر إلى تلك الأبراج المدمرة في لبنان انقدح في ذهني أن نعاقب الظالم بالمثل وأن ندمر أبراجا في أميركا لتذوق بعض ما ذقنا ولترتدع عن قتل أطفالنا ونسائنا، وتأكد لي يومها أن الظلم وقتل الأبرياء من الأطفال والنساء عن عمد؛ قانون أميركي معتمد، والترويع حرية وديمقراطية، وأما المقاومة؛ فإرهاب ورجعية، وتعني الظلم وحصار الملايين حتى الموت كما فعل بوش الأكبر في أكبر مجزرة للأطفال جماعية عرفتها البشرية في العراق، وتعني أن يلقى من القنابل والمتفجرات ملايين الأرطال على ملايين الأطفال في العراق أيضا كما فعل بوش الأبن لعزل عميل قديم وتنصيب عميل جديد يعين على اختلاس نفط العراق، وغير ذلك من الفظائع.
وعلى خلفية تلك الصور وأمثالها جاءت أحداث الـ 11 ردا على تلك المظالم العظام، فهل يلام المرء في الذود عن حماه؟ وهل الدفاع عن النفس ومعاقبة الظالم بالمثل إرهاباً مذموماً؟ فإن يكن كذلك فما لنا منه بد.
فهذه هي الرسالة التي حرصنا على إبلاغها لكم – قوليا وعمليا – مراراً منذ سنين قبل أحداث الـ 11، وطالعوها إن شئتم في لقائي مع “سكوت” في مجلة “التايم” عام 96, وكذلك مع “بيتر أرنيت” في “السي أن أن” عام 97، ثم لقائي مع “جون وتر” عام 98، وطالعوها عمليا إن شئتم في نيروبي وتنزانيا وفي عدن، وطالعوها في لقائي مع عبد الباري عطوان وكذلك لقائاتي مع “روبرت فيسك” – وهذا الأخير هو من جلدتكم وعلى ملتكم وأحسب أنه محايدا – فهل يستطيع مدعو الحرية في البيت الأبيض والقنوات الخاضعة لهم أن يجروا معه لقاء لينقل للشعب الأميركي ما فهمه منا عن أسباب قتالنا لكم؟
فإن تتجتنبوا هذه الأسباب تكونوا قد سرتم في الطريق الصحيح الذي يوصل أميركا إلى أمنها الذي كانت عليه قبل الـ 11، فهذا عن الحرب وأسبابها.
وأما عن نتائجها؛
فهي بفضل الله تعالى إيجابية وكبيرة جدا, وفاقت كل التوقعات والمقاييس، لأسباب كثيرة، من أهمها:
إننا لم نجد صعوبة في التعامل مع بوش وإدارته، نظرا للتشابه بينها وبين الأنظمة في بلادنا، والتي نصفها يحكمها العسكر والنصف الآخر يحكمه أبناء الملوك والرؤساء، وخبراتنا معهم طويلة، وكلا الصنفين يكثر فيهم الذين يتصفون بالكبر والغطرسة والطمع أخذ المال بغير حق.
وقد بدا هذا التشابه منذ زيارات بوش الأب إلى المنطقة، ففي الوقت الذي كان بعض بني جلدتنا منبهرا بأميركا ويأمل أن تؤثر هذه الزيارات في بلادنا, إذا به يتأثر هو بتلك الأنظمة الملكية والعسكرية ويحسدهم على بقائهم عشرات السنين في مناصبهم يختلسون مال الأمة دون حسيب ولا رقيب، فنقل الاستبداد وقمع الحريات إلى ابنه، وسموه “قانونا وطنيا”، تحت ذريعة محاربة الإرهاب.
واستحسن بوش الأب تولية الأبناء على الولايات، كما لم ينس أن ينقل خبرات التزوير من رؤساء المنطقة إلى "فلوريدا" للاستفادة منها في اللحظات الحرجة كل ما ذكرنا سابقا؛ سهل علينا استفزاز هذه الإدارة واستدراجها؛ فيكفي أن نرسل اثنين من المجاهدين إلى أقصى المشرق ليرفعوا خرقة مكتوب عليها "القاعدة" حتى يركض الجنرالات إلى هناك مسرعين ليتسببوا في تكبيد أميركا الخسائر البشرية والمالية والسياسية دون أن يحققوا لها شيئا يذكر، باستثناء بعض المنافع لشركاتهم الخاصة.
إضافة إلى أننا خبرنا حرب العصابات وحرب الاستنزاف في مقارعة القوى الكبرى الظالمة، حيث استنزفنا مع المجاهدين روسيا عشر سنين إلى أن أفلسوا بفضل الله فاضطروا إلى الانسحاب منهزمين، فلله الحمد والمنة، ونحن ماضون في هذه السياسة في استنزاف أميركا إلى درجة الإفلاس بإذن الله، وما ذلك على الله بعزيز.
فمن قال؛ إن القاعدة انتصرت على إدارة البيت الأبيض، أو أن إدارة البيت الأبيض قد خسرت في هذه الحرب؛ فهو كلام يفتقد إلى الدقة، لأنه عند النظر بتمعن إلى النتائج فلا يمكن القول أن القاعدة هي السبب الوحيد في الوصول إلى هذه المكاسب المذهلة، بل إن سيادة البيت الأبيض الحريصة على فتح جبهات قتال لتشغيل شركات باختلاف أنواعها – سواء العاملة في مجال السلاح أو النفط أو الإعمار – ساعدت جميعها في تحقيق تلك النتائج الهائلة للقاعدة.
كما بدا لبعض المحللين والدبلوماسيين؛ إننا والبيت الأبيض نلعب كفريق واحد نهدف في مرمى الولايات المتحدة الإقتصادي – وإن اختلفت النوايا – وبمثل هذه المعاني وغيرها أشار الدبلوماسي البريطاني في محاضرته بالمعهد الملكي للشؤون الدولية.
فعلى سبيل المثال؛ إن القاعدة انفقت 500 ألف دولار في الحدث، بينما خسرت أميركا على أقل تقدير في الحدث وتداعياته أكثر من 500 مليار دولار، أي أن كل دولار من القاعدة هزم مليون دولار بفضل الله تعالى.
علاوة على فقدها عددا هائلا من الوظائف، وأما عن حجم العجوزات المالية؛ فقد بلغت أرقاما قياسية وفلكية تقدر بأكثر من تريليون دولار.
والأخطر والأمر على أميركا؛
أن المجاهدين اضطروا بوش – أخيرا – إلى أن يلجأ لميزانية الطوارئ لمواصلة القتال في أفغانستان وفي العراق، مما يدل على نجاح خطة الاستنزاف إلى درجة الإفلاس بأذن الله.
وصحيح أن هذا يوضح أن القاعدة كسبت، لكنه في المقابل يوضح أن إدارة بوش كسبت أيضا، لأن الناظر إلى ضخامة العقود التي نالتها الشركات الكبرى المشبوهة كـ “هالبيرتون” ومثيلاتها ذات الصلة ببوش وإدارته يتأكد له ذلك، وإن الخاسر في الحقيقة إنها هو أنتم؛ هو الشعب الأميركي واقتصاده.
وللعلم؛ كنا قد اتفقنا مع الأمير العام؛ محمد عطا رحمه الله أن ينجز جميع العمليات خلال 20 دقيقة، قبل أن يتنبه بوش وإدارته، ولم يخطر ببالنا قط أن القائد الأعلى للقوات المسلحة الأميركية سيترك 50 ألف من مواطنيه في البرجين ليواجهوا تلك الأهوال العظام وحدهم وقت أشد حاجتهم إليه، لأنه قد بدا له أن الانشغال بحديث الطفلة عن عنزتها ونطحها أهم من انشغاله بالطائرات ونطحها لناطحات السحاب، مما وفر لنا ثلاثة أضعاف المدة المطلوبة لتنفيذ العمليات، فلله الحمد.
كما لا يخفى عليكم أن المفكرين وأولي الألباب من الأميركيين حذروا بوش قبل الحرب قائلين له؛ “أن كل ما تريده لتأمين أميركا بنزع أسلحة الدمار الشامل – على افتراض وجودها – متاح لك، ودول العالم معك في التفتيش، ومصلحة أميركا تقتضي أن لا تزج بها في حرب غير مبررة ولا تعرف نهايتها“، ولكن سواد الذهب الأسود ختم على بصره وبصيرته، فقدم المصالح الخاصة على مصلحة أميركا العامة، فكانت الحرب وكثر القتلى، واستنزف الاقتصاد الأميركي وتورط بوش في مستنقعات العراق التي تهدد مستقبله، ومثاله كما قيل:
فكان كعنز السوء قامت بظلفها *** إلى مدية تحت التراب تثيرها
وأني أقول لكم؛
لقد قتل من أهلنا أكثر من 15 ألفاً وجرح عشرات الآلاف، كما قتل منكم أكثر من ألف وجرح أكثر من عشرة الآف، وجميع هؤلاء القتلى من الطرفين تلطخت يدا بوش بدمائهم من أجل النفط وتشغيل شركاتهم الخاصة.
واعلموا؛ أن الأمة التي تعاقب الضعيف إذا تسبب في قتل رجل من أبنائها من أجل المال وتترك الشريف إذا تسبب في قتل أكثر من ألف رجل من أبنائها من أجل المال ايضا …
وكذلك حلفاؤكم في فلسطين فيروعون النساء والأطفال ويقتلون ويأسرون الرجال وهم نائمون مع أهلهم وعلى فرشهم.
ومطلبي منكم يسير؛ وهو أن تتذكروا أن لكل فعل رد فعل.
وأخيرا؛ يحسن أن تتدبروا وصايا الألوف الذين فارقوكم يوم الـ 11 وهم يلوحون في يأس، وهي وصايا ملهمة ينبغي ان تخرج في بحوث ودراسات.
وإن من أهم ما أقرأه نثرا في تلويحاتهم قبل السقوط قولهم؛ “كم كنا مخطئين عندما تركنا البيت الأبيض ينتقد سياساته الخارجية على المستضعفين بلا رقيب”، وكأنهم كانوا يقولون؛ “أيها الشعب الأميركي حاسبوا الذين تسببوا في قتلنا”، والسعيد من وعِظَ بغيره، ومما أقرأه شعرا في تلويحاتهم أيضا:
البغي يصرع أهله *** والظلم مرتعه وخيم
وقد قيل؛ درهم وقاية خير من قنطار علاج.
وأعلموا؛ أن الرجوع إلى الحق خير من التمادي في الباطل، وأن العاقل لا يفرط بأمنه وماله وبنيه من أجل كذاب البيت الأبيض.
وفي الختام؛ أقول لكم – وأصدقكم القول – إن أمنكم ليس بيد كيري أو بوش أو القاعدة، إن أمنكم هو في أيديكم أنتم وإن كل ولاية لا تعبث بأمننا فهي تلقائيا قد أمنت أمنها.
والله مولانا ولا مولى لكم،
والسلام على من أتبع الهدى
Jekyll Island II – Federal Reserve Make Trillion Dollar Decision without Congress
The Creature Form Jekyll Island Returns. Welcome to Fed Island.
Greenspan admits that it was all a scam and fraud……
Alan Greenspan: ‘There are two fundamental reforms that we need; that is to get adequate capital and two to get far high levels of enforcement of fraud statues. Existing ones I’m not even talking about new ones.
Things were being done which were certainly illegal and clearly criminal in certain cases. In which, I mean Fraud, Fraud is a Fact, Fraud Creates very considerable instability in competitive markets.
If you cannot trust your counter parties it won’t work and indeed we saw that it didn’t.’
November 5-6, 2010, Jekyll Island Club Hotel, Jekyll Island, King Georgia
(FRB of Atlanta)
A Return to Jekyll Island: The Origins, History, and Future of the Federal Reserve
Alan Greenspan: ‘We’re not in the business of trying to create inflation…Our purpose is to provide some additional stimulus to help the economy recover and to avoid, potentially, additional disinflation.’
While admitting the house of cards, the avalanche that could be created, E. Gerald Corrigan: ‘there is a risk, however small, that once that nudge takes hold, it may not be easy to cap inflation and inflationary expectations at levels that are still broadly compatible with price stability.’
Bernanke is frustrated by the sharp public response to the Fed’s decision to begin a strategy of quantitative easing, that IS the Federal Reserve ‘creating’ debt based money to directly buy real tax backed debt based Treasury securities. For a Total Cartelization and Enslavement of the United States.
After Obama Slammed by Unilateral Fed Move China Returns Fire with Missle Launch off Los Angeles Coast
China flexed its military muscle Monday evening in the skies west of Los Angeles when a Chinese Navy Jin class ballistic missile nuclear submarine, deployed secretly from its underground home base on the south coast of Hainan island, launched an intercontinental ballistic missile from international waters off the southern California coast.
The reported Chinese missile test off Los Angeles came as a double blow to Obama. The day after the missile firing, China’s leading credit rating agency, Dagong Global Credit Rating, downgraded sovereign debt rating of the United States to A-plus from AA. The missile demonstration coupled with the downgrading of the United States financial grade represents a military and financial show of force by Beijing to Washington.
In 2008 the legislature made the decision to offer the largest ‘bailout’ for trouble assests in the history of the world.
On November 3rd the Federal reserve made the decision to buy the US Debt with the Debt based notes that it creates in it’s private vaults. The elected, accountable government was not involved in the decision.
China as the second largest holder of US debt (second only to the Private Federal Reserve Bank) is not happy with the Federal Reserves announcement that protects the Fraud that is a Fact of the US and Saxe-Coburg-Gotha international Financial System.
NY Times – Bernanke Attempts to Soothe Doubters
The Brunswick News – Federal Reserve hosts Jekyll conference
Economic Policy Journal – The Fed at Jekyll Island: 100 Years Later, They’re Baaack!
Geithner Says the US Government Is Bankrupt
The U.S. government is insolvent. Who says so? Timothy F. Geithner, the U.S. Secretary of the Treasury.
Geithner sent a letter to Congress on Jan. 6, 2011 asking for the debt limit to be raised. If it is not raised, he warned, the U.S. will default on its debt. In his words:
Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States.”
He didn’t say that the government will be inconvenienced. He didn’t say that the government would be forced to muddle through by delaying payments, raising taxes, and cutting non-obligatory programs and services. He said the government will default. This means that the government doesn’t have enough cash to pay its obligations to the many and sundry persons to whom it owes cash unless Congress authorizes an issue of even more debt.
After the government issues the new debt, its overall debt will be even higher than before. Unless its obligations that require cash payments are reduced, or unless it finds new sources of revenue, or unless the interest rates that it pays decline, the same situation will surely occur again and occur even faster because its overall debt will have risen. It will run short of cash to pay its obligations.
Suppose that you had a debt of $10,000 that required a payment of $500 in order to stave off your creditors’ seizing your assets. Suppose that you didn’t have the $500. One way out would be to borrow $500 from a new lender and use that $500 to pay off the old lenders. That buys you time. However, now you have debts of $10,500. You have to find ways of lowering this or else you will again be faced with an even worse situation.
You are approaching insolvency when you begin to run out of new lenders who are willing to add to your debt. The willing lenders dry up because they know that they have to get in line to get their promised payments while you continually seek out new borrowers, all the while making your situation worse and worse.
Knowing their precarious position, the new lenders are likely to demand rising default risk premiums.
That means they demand higher interest rates.
That means your cash payment obligations go up. That hastens your approach to insolvency.
Insolvency occurs when you cannot find enough cash from any source, even new lenders, in order to make required payments.
The U.S. is approaching insolvency, according to its Treasury Secretary. He didn’t put the matter in precisely that way, but he put it in words that are as close as you can get to it. He said that the U.S. would default, and its only way out at this moment is to issue more debt.
The increases in the debt limit have necessarily accompanied the increase in the government’s overall debt. Those increases have been especially astonishing in the last 10 years. The ceiling is now $14.29 trillion. The ceiling was $5.73 trillion in September of 2001. That’s a growth rate of over 10 percent a year.
A few months back, Laurence Kotlikoff wrote that “The U.S. is bankrupt.” Using the government’s numbers properly labeled, he found that the U.S. fiscal gap, which is the difference between the present value of projected spending and revenues, is $202 trillion. An IMF study of the U.S. finances found that it would have to double taxes to close its fiscal gap. This is an impossibility. It would destroy the struggling economy.
Geithner’s statement confirms those of other analysts outside of the U.S. government.
According to Kotlikoff, the government’s sixty-year “massive Ponzi scheme” will end when there are not enough revenues to pay for Social Security, Medicare, and Medicaid. He sees large benefit cuts, large tax increases, and high inflation ahead when the government seeks to survive.
How will the U.S. extricate itself from this situation? That’s a matter of speculation because there are many interacting variables involved. There are lots of ifs, ands, and buts.
When a state cannot meet its promised obligations, there is no bankruptcy code to guide a reorganization, as there is with a company. There is no court to oversee a restructuring. There is no judge or panel that decides on the priority of claims. Instead, the government itself decides how to handle its inability to pay cash to fulfill its promises.
In the immediate future, the U.S. government will not default on its bonds. They will have priority of payment. The reason the government will do that is to maintain its capacity to borrow at reasonable rates of interest so that it can maintain its size and programs. If the government defaulted on its bonds as a way of solving its financial problem, it would have immediately to cut back its spending severely. The government would shrink radically all at once. The government would take a big bath. Congress doesn’t want to do that. It would rather stretch out the default process and inflict the pain over time and among more groups than bondholders. Congressmen prefer to maintain themselves in power while managing a large government. Other branches and bureaucracies also prefer to keep their pet programs and activities afloat.
Therefore, as usual, Congress will raise the debt limit again. That doesn’t end the financial problem. It adds to it even as it postpones and enhances possible insolvency.
The new lenders that the government seeks out to lend it new cash are likely to demand higher interest rates, except for one major lender, which is the Federal Reserve System.
Bond yields are subject to numerous worldwide influences. They include the default risk premiums demanded by foreign lenders, including Asian central banks. Those risk premiums are likely to rise.
In contrast, the Federal Reserve has committed itself to buying $600 billion of new government debt in the next few months. Its purchases tend to support bond prices and keep interest rates down, other things equal.
As the Federal Reserve keeps buying more and more government debt, with no prospect of reducing its holdings unless and until the government gets its house in order, bond yields are likely to rise, despite Fed buying, because yields also reflect inflation premiums. The prospect of inflation will rise as the Fed monetizes the debt. We would then see yields rising accompanied by firm prices of commodities and metals.
The inflationary participation by the Fed, which postpones the inevitable fiscal decisions of the government, harms all holders of fixed-dollar assets and all those whose receipts of dollars are fixed and lag behind the Fed’s production of new dollars. In addition and more importantly, the inflation sets in motion another boom-bust cycle.
Continued debt monetization by the Fed is quite likely for many reasons. One is that the Fed can act even when Congress is deadlocked. Another is the apparent necessity, in the Fed’s view, to avoid the failure of government debt issues. A third is that the Fed rationalizes what it’s doing by economic slack and low headline CPI inflation. Fourth, the banking system is still insolvent and the Fed wishes to raise asset prices. Fifth, the Fed doesn’t connect its debt monetization to higher yields. When it starts to make that connection, either directly or because headline CPI inflation rises, then it may be more likely to alter its current policy.
If the U.S. does not decrease the fiscal gap, rising yields will rapidly force it into taking action because rising yields raise the likelihood of insolvency and raise the likelihood of its occurring sooner rather than later.
The effects of the Fed’s inflation on stocks vary by individual company. They depend on the net monetary positions of the companies, the nature and location of its operations, its hedging, and other factors. There is no simple prognosis for the whole stock market.
Since yields are likely to rise as lenders demand higher default risk premiums and as they demand higher inflation premiums (when the Fed monetizes debt), with the Fed’s ability to keep rates down only a temporary and/or only a restraining phenomenon, and since these yield increases hasten the prospect of insolvency, the government can only avoid default by either slowing down its borrowing (and spending) or by raising revenues. Doing nothing means it will default.
If government borrowing slows down, its spending will have to slow down. Many Americans will find this very unpleasant as benefits, now and prospective, are cut, and as various other programs are cut. If government raises taxes, the impact of its gargantuan borrowing will come home to Americans, again in a most unpleasant way. Their disposable incomes will fall sharply.
Outright default on U.S. bonds is not in the cards because that immobilizes the entire U.S. government. The government won’t do that. It will look after itself and its own survival first. The American public comes last. Default upon promises made to Americans is the more likely course of action.
Thus, the government will slow budget increases, or stop them altogether, or cut its spending in absolute terms. Like any borrower, its borrowing capacity is not unlimited. Its borrowing capacity depends on its taxing power which, in turn, depends on the productivity of those whom it taxes. Causation runs in both directions. The productivity also depends on the tax and regulatory structures. It’s inconceivable that the government could double taxes. If it did, most of the economy would attempt to go underground. Whatever remained above ground would have vastly reduced incentives to produce.
Which groups and programs will be the object of government cutbacks? That is again a matter of speculation. It depends on which groups have the firmest control over the government’s purse, which groups make the largest protests, and which groups have the greatest influence on votes for key Congressmen and campaign contributions. I agree with Kotlikoff and Gary North that the most likely targets are the largest ones, and they are the social welfare programs.
Some groups are going to experience the brunt of the actions taken to avoid default. Others are likely to go relatively unscathed. Government bureaucrats will try to protect themselves. This is going to create domestic conflict, protests, and dissension. Life is going to be much harder for Americans in the future, unless increased productivity from some unknown sources of invention or technology offsets the impact of government promises that are going to be defaulted upon.
Congress has another option, which is to seize the assets of Americans. This is a form of taxation. Congress can force pension funds to take its bond issues. This would force down the prices of corporate stocks and bonds. It would devastate the economy. A large-scale program of bond cram-downs is almost tantamount to making the Fed absorb bonds. It puts pressure on the Fed to create more money so as to keep asset prices up. Such a program would be an act of desperation by the government that simply beggared the population. It would certainly not resolve the insolvency.
When, if ever, will Congress start to act in size, that is, with cutbacks large enough to avoid defaulting on its bonds? My answer is this: Not yet.
The prospect of rising yields is not yet felt in the minds of those in government. The prospect of a budget out of control due to a huge and rising bond interest payment obligation hasn’t yet hit home among government officials. They can’t see the tidal wave. They don’t believe it’s coming. The Fed’s purchase program is obscuring their vision. The slow economy is helping to hold down bond yields for the moment. The foreign central banks, as a group, are still supporting the U.S. bond market. People who are afraid of going back into stocks are still supporting the U.S. debt market.
Furthermore, the two parties are both enamored of big government. Nearly all politicians are sensitive to public demands for free lunches. That is one reason why the fiscal gap is so huge in the first place. America did not exactly fall all over itself in trying to stop a prescription drug benefit. Consequently, the government is postponing actions to close the fiscal gap.
One fine day, there will be a discontinuity. There will be a many-sigma event. There will be a fiscal earthquake or a market earthquake or some combination of both. This will not be a pleasant experience for Americans, but those in government have little reason to fear it. They can label it a crisis, as if we do not already have a crisis. They can use such a “crisis” as the excuse for more radical government action. The government can demand even more power or simply exercise it, even if the results are to make matters worse for Americans.
For governments, crises are opportunities, a fact well known among analysts of government. This fact is one reason why governments postpone taking actions to remedy what appear to the rest of us to be bad situations.
Unfortunately, the fact that governments batten on crises and see them as opportunities is not well known among the general population which still looks to government to handle crises.
Since the insolvency of the U.S. is a fact and a fact that implies hard times ahead for anyone who depends on government, it is prudent to take measures to make oneself as independent of government as one possibly can.
© 2011 Copyright Michael S. Rozeff – All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
© 2005-2011 http://www.MarketOracle.co.uk –
August 20, 2011
Standard and Poor’s may seem to think so. After all, the reputed rating agency
downgraded the US government’s credit rating from AAA to AA+, an act that drew plenty of protests from politicians. Recently, the New York Times reported that the Justice
Department has been investigating the business practices of Standard and Poor’s, a
process that has been going on since 2008 when the rating agency highlighted the sorry state of the country’s mortgage securities that resulted in the sub-prime mortgage crisis
that year. Apparently, the investigation has intensified in the last few weeks and its
focus has also changed.
However, it is surprising that our politicians are dissatisfied with S&P’s evaluation of the
credit rating of the country when the amount of public debt is plain for all to see. The
US government owes $14.5 trillion and long-term entitlement liabilities of over $100
trillion but taxes collected amount to only $2.2 trillion per year, which goes to pay
salaries of all government servants, maintenance of all public assets and funding
government projects. How do we even begin to pay off any part of that mountainous
It does not seem like the US government has any sincere desire to pay off any of the
public debt. Neither the Democrats nor GOP has put forth any credible game plan to
seriously tackle the problem. So far, all the budgets that have been proposed have only served to add not lessen the public debt. With each budget deficit, the zeros keep
being added to the debt figure.
The amount of debt has become so much that we would not be able to bring it down
even if there was political will to do so. Right now, there is no such will in Washington.
Our Congressmen should not investigate whether S&P’s did the right thing in
downgrading the US government’s credit rating, they should investigate whether the
downgrading was sufficient to reflect the true nature of the nation’s ability to repay its
debt. In light of the above, perhaps the downgrading should have been more than just
AAA to AA+.
Given the grave condition of our public debt, most of the US government’s bonds and promissory notes should be rated junk. Don’t be surprised if the amount of returns you get when you redeem your government bonds is much lower in value compared to the amount of capital you invested.
In view of this, the only investigation that should be carried out is on our politicians on
how and why they allowed America’s financial condition to deteriorate to what it is today.
Buffett’s Partner: ‘It’s Over’ for U.S. Economy
Monday, 22 Feb 2010 11:42 AM
By Dan Weil
Charlie Munger, Warren Buffett’s longtime business partner in Berkshire Hathaway, warns in a new column that the U.S. economic empire is crumbling before our eyes, thanks to federal debt and poor planning.
In an article penned for Slate.com, Munger uses the form of a parable to explain how Wall Street’s love affair with gambling has destroyed America’s Main Street.
The article leads with this headline: “Basically, It’s Over.”
The Berkshire Hathaway vice chairman describes the economic history of Basicland, which happens to match U.S. history.
Early in its history, debt is unknown except for home mortgages and some consumer loans, and people live within their means. Speculation is discouraged, and commodities markets are small and tightly regulated.
Under this rational system, economic growth skips merrily along at a steady 3 percent, Munger explains.
Taxes are limited and pay for only “essential services” like fire protection, courts, and defense. Most taxes are collected on imports, and government spending matches that tax income. Debt via government bonds is limited.
Then things take a turn for the worse.
“The extreme prosperity of Basicland had created a peculiar outcome: As their affluence and leisure time grew, Basicland’s citizens more and more whiled away their time in the excitement of casino gambling,” Munger writes.
Financial services soon grow to account for too big a portion of the economy, Munger says.
“The winnings of the casinos eventually amounted to 25 percent of Basicland’s GDP, while 22 percent of all employee earnings in Basicland were paid to persons employed by the casinos, many of whom were engineers needed elsewhere.”
Then, a shock: Imported energy costs rise, and low-cost labor competition from abroad appears, Munger writes.
“Suddenly Basicland had to come up with 30 percent of its GDP every year, in foreign currency, to pay its creditors,” Munger writes.
The U.S. deficit — just the gap between spending and income in one year — is projected to hit $1.6 trillion in 2010. Total debt is project to exceed 100 percent of GDP starting in 2011.
In the parable, Munger strongly suggests that the United States take seriously the campaign of Reagan-era Fed Chairman Paul Volcker, who wants the big banks to cease pretending to be banks if they expect the freedom to trade securities on the side.
“He suggested that Basicland should strongly discourage casino gambling, partly through a complete ban on the trading in financial derivatives, and it should encourage former casino employees — and former casino patrons — to produce and sell items that foreigners were willing to buy,” Munger writes.
As the parable ends, none of the politicians listen, and Basicland turned into “Sorrowland,” Munger concludes.
Gerald Celente: US is Going to Bankrupt, Numbers Don’t Lie
- Credit card debt settlement
- Debt consolidation programs
- Credit card debt relief
While the politicians battle it out over who would be to blame if the American economy hit a brick wall, Gerald Celente from the US-based Trends Journal says the political elite will not recognize simple solutions to curb America’s deficit. ”The country is going bankrupt — just look at the numbers. The numbers do not lie — politicians lie,” nails Celente. The bigger picture includes the long-predicted devaluation of the dollar, says the forecaster, recalling that gold gained $US 115 an ounce last month alone. And against that background the talks about deficit reduction do not mention the most obvious measures like cutting the military budget or slashing foreign aid, which topped $US 57 billion a year. “How about companies like General Electric that made $US 14 billion last year, paying no taxes?” says Celente, who is sure there is plenty of room to turn the deficit situation around and clean up the economy. “We do not have a representative form of government, we have a government that represents only the very powerful and the very rich and that is all this is about — letting them keeping their perks.
The Bankruptcy of The United States
United States Congressional Record, March 17, 1993 Vol. 33, page H-1303
Speaker-Rep. James Traficant, Jr. (Ohio) addressing the House:
“Mr. Speaker, we are here now in chapter 11.. Members of Congress are official trustees presiding over the greatest reorganization of any Bankrupt entity in world history, the U.S. Government. We are setting forth hopefully, a blueprint for our future. There are some who say it is a coroner’s report that will lead to our demise.
It is an established fact that the United States Federal Government has been dissolved by the Emergency Banking Act, March 9, 1933, 48 Stat. 1, Public Law 89-719; declared by President Roosevelt, being bankrupt and insolvent. H.J.R. 192, 73rd Congress m session June 5, 1933 – Joint Resolution To Suspend The Gold Standard and Abrogate The Gold Clause dissolved the Sovereign Authority of the United States and the official capacities of all United States Governmental Offices, Officers, and Departments and is further evidence that the United States Federal Government exists today in name only.
The receivers of the United States Bankruptcy are the International Bankers, via the United Nations, the World Bank and the International Monetary Fund. All United States Offices, Officials, and Departments are now operating within a de facto status in name only under Emergency War Powers. With the Constitutional Republican form of Government now dissolved, the receivers of the Bankruptcy have adopted a new form of government for the United States. This new form of government is known as a Democracy, being an established Socialist/Communist order under a new governor for America. This act was instituted and established by transferring and/or placing the Office of the Secretary of Treasury to that of the Governor of the International Monetary Fund. Public Law 94-564, page 8, Section H.R. 13955 reads in part: “The U.S. Secretary of Treasury receives no compensation for representing the United States?’
Gold and silver were such a powerful money during the founding of the united states of America, that the founding fathers declared that only gold or silver coins can be “money” in America. Since gold and silver coinage were heavy and inconvenient for a lot of transactions, they were stored in banks and a claim check was issued as a money substitute. People traded their coupons as money, or “currency.” Currency is not money, but a money substitute. Redeemable currency must promise to pay a dollar equivalent in gold or silver money. Federal Reserve Notes (FRNs) make no such promises, and are not “money.” A Federal Reserve Note is a debt obligation of the federal United States government, not “money?’ The federal United States government and the U.S. Congress were not and have never been authorized by the Constitution for the united states of America to issue currency of any kind, but only lawful money, -gold and silver coin.
It is essential that we comprehend the distinction between real money and paper money substitute. One cannot get rich by accumulating money substitutes, one can only get deeper into debt. We the People no longer have any “money.” Most Americans have not been paid any “money” for a very long time, perhaps not in their entire life. Now do you comprehend why you feel broke? Now, do you understand why you are “bankrupt,” along with the rest of the country?
Federal Reserve Notes (FRNs) are unsigned checks written on a closed account. FRNs are an inflatable paper system designed to create debt through inflation (devaluation of currency). when ever there is an increase of the supply of a money substitute in the economy without a corresponding increase in the gold and silver backing, inflation occurs.
Inflation is an invisible form of taxation that irresponsible governments inflict on their citizens. The Federal Reserve Bank who controls the supply and movement of FRNs has everybody fooled. They have access to an unlimited supply of FRNs, paying only for the printing costs of what they need. FRNs are nothing more than promissory notes for U.S. Treasury securities (T-Bills) – a promise to pay the debt to the Federal Reserve Bank.
There is a fundamental difference between “paying” and “discharging” a debt. To pay a debt, you must pay with value or substance (i.e. gold, silver, barter or a commodity). With FRNs, you can only discharge a debt. You cannot pay a debt with a debt currency system. You cannot service a debt with a currency that has no backing in value or substance. No contract in Common law is valid unless it involves an exchange of “good & valuable consideration.” Unpayable debt transfers power and control to the sovereign power structure that has no interest in money, law, equity or justice because they have so much wealth already.
Their lust is for power and control. Since the inception of central banking, they have controlled the fates of nations.
The Federal Reserve System is based on the Canon law and the principles of sovereignty protected in the Constitution and the Bill of Rights. In fact, the international bankers used a “Canon Law Trust” as their model, adding stock and naming it a “Joint Stock Trust.” The U.S. Congress had passed a law making it illegal for any legal “person” to duplicate a “Joint Stock Trust” in 1873. The Federal Reserve Act was legislated post-facto (to 1870), although post-facto laws are strictly forbidden by the Constitution. [1:9:3]
The Federal Reserve System is a sovereign power structure separate and distinct from the federal United States government. The Federal Reserve is a maritime lender, and/or maritime insurance underwriter to the federal United States operating exclusively under Admiralty/Maritime law. The lender or underwriter bears the risks, and the Maritime law compelling specific performance in paying the interest, or premiums are the same.
Assets of the debtor can also be hypothecated (to pledge something as a security without taking possession of it.) as security by the lender or underwriter. The Federal Reserve Act stipulated that the interest on the debt was to be paid in gold. There was no stipulation in the Federal Reserve Act for ever paying the principle.
Prior to 1913, most Americans owned clear, allodial title to property, free and clear of any liens or mortgages until the Federal Reserve Act (1913)
“Hypothecated” all property within the federal United States to the Board of Governors of the Federal Reserve, -in which the Trustees (stockholders) held legal title. The U.S. citizen (tenant, franchisee) was registered as a “beneficiary” of the trust via his/her birth certificate. In 1933, the federal United States hypothecated all of the present and future properties, assets and labor of their “subjects,” the 14th Amendment U.S. citizen, to the Federal Reserve System.
In return, the Federal Reserve System agreed to extend the federal United States corporation all the credit “money substitute” it needed. Like any other debtor, the federal United States government had to assign collateral and security to their creditors as a condition of the loan. Since the federal United States didn’t have any assets, they assigned the private property of their “economic slaves”, the U.S. citizens as collateral against the unpayable federal debt. They also pledged the unincorporated federal territories, national parks forests, birth certificates, and nonprofit organizations, as collateral against the federal debt. All has already been transferred as payment to the international bankers.
Unwittingly, America has returned to its pre-American Revolution, feudal roots whereby all land is held by a sovereign and the common people had no rights to hold allodial title to property. Once again, We the People are the tenants and sharecroppers renting our own property from a Sovereign in the guise of the Federal Reserve Bank. We the people have exchanged one master for another.
This has been going on for over eighty years without the “informed knowledge” of the American people, without a voice protesting loud enough. Now it’s easy to grasp why America is fundamentally bankrupt.
Why don’t more people own their properties outright?
Why are 90% of Americans mortgaged to the hilt and have little or no assets after all debts and liabilities have been paid? Why does it feel like you are working harder and harder and getting less and less?
We are reaping what has been sown, and the results of our harvest is a painful bankruptcy, and a foreclosure on American property, precious liberties, and a way of life. Few of our elected representatives in Washington, D.C. have dared to tell the truth. The federal United States is bankrupt. Our children will inherit this unpayable debt, and the tyranny to enforce paying it.
America has become completely bankrupt in world leadership, financial credit and its reputation for courage, vision and human rights. This is an undeclared economic war, bankruptcy, and economic slavery of the most corrupt order! Wake up America! Take back your Country.”
Image: United States Congressional Record, March 17, 1993 Vol. 33, page H-1303
Back to Citizens for Better Government
Last Modified March 5, 2001
The Short Road To Chaos And Destruction
An Expose of the Federal Reserve Banking System
The End of Ordinary Money, Part I
The End of Ordinary Money, Part II:
Mathematic PROOF: Federal Reserve CAUSED Great Depression
Part 1: Mathematic PROOF the Federal Reserve CAUSED the Great Depression.
Part 2: Congressman Louis T. McFadden’s famous 1932 Congressional Address.
Nature and iniquitous history of the private international banks deceitfully
called The Federal Reserve System. A blueprint for irreversible multiplication
of debt in proportion to commerce, until world-wide economic collapse under
insoluble debt. Tens of thousands of visitors voted this page a Starting Point
Hotsite award, November 7, 1998. Hopefully, mathematic proof of a singular
prescription for perfected economy will ultimately serve as the impetus for
world-wide establishment of mathematically perfected economy.
Who Owns The Federal Reserve?
There has been much speculation about who owns the Federal Reserve Corporation.
It has been one of the great secrets of the century, because the Federal Reserve
Act of 1913 provided that the names of the owner banks be kept secret.
However, R. E. McMaster publisher of the newsletter The Reaper, asked his Swiss
banking contacts which banks hold the controlling stock in the Federal Reserve
Corporation. The Federal System is by the way a private Corporation # 62 domiciled
in Puerto Rico.
The answer to who owns the Fed and by proxy the entire USA:
Rothschild Banks of London and Berlin
Lazard Brothers Bank of Paris
Israel Moses Sieff Banks of Italy
Warburg Bank of Hamburg and Amsterdam
Lehman Brothers Bank of New York
Kuhn Loeb Bank of New York
Chase Manhattan Bank of New York
Goldman Sachs Bank of New York.
In The Secrets Of The Federal Reserve, Eustace Mullins indicates that, because the
Federal Reserve Bank of New York sets interest rates and controls the daily supply
and price of currency throughout the U.S., the owners of that bank are the real
directors of the entire system. Mullins states:
“The shareholders of these banks which own the stock of the Federal Reserve
Bank of New York are the people who have controlled our political and economic
destinies since 1914.
They are the Rothschilds,
Lazard Freres (Eugene Mayer),
Kuhn Loeb Company,
the Rockefeller family, and the
J.P. Morgan interests.”
The Bankruptcy of the United States
Gold and silver were such a powerful money during the founding of the
The USA Is Already Bankrupt!
YOU are the last generation living in the twilight near the edge of the abyss!
No Empire has EVER lasted forever, not even the mighty Roman’s!
Congress is marching us all down a similar political and ideological path as
the Roman’s once took. Governments backed only with military force as their
only true source of revenue and power soon fall. We have become such an empire.
The end with be tyrannical, violent, maybe vicious! IF you are one of the lucky few
citizens with any valuables left you will have to defend them from seizure not only
from an increasingly aggressive government taxation force but also from your
fellow citizens that have already hit rock bottom and are homeless by the millions.
If you can afford to leave the USA make plans now!
Havens for the wealthy are sprouting up like weeds
all over the world NOW! The exodus of the wealthy
from Europe, Japan and the USA is well underway!
If you stay here be sure to hide your assets very well!!! Do not keep your money in
the bank!!! Do not hide cash under the mattress either as inflation can turn that
into a pile of worthless paper in only a few BAD years. Invest in durable goods
and non-perishable inventory. Hide it well from the prying eyes of both government
and citizen thieves alike! With these assets your family can barter for food, medicine
and any of the other basic necessities of life in the turbulent years to come.
THE UNPREPARED ARE NOT GOING TO DO WELL WHEN THIS TIME COMES!
|United States Congressional Record – March 17, 1993 – Vol. #33, page H-1303 – Speaker- Rep. James Traficant, Jr. (Ohio) addressing the House:|
“Mr. Speaker, we are here now in chapter 11. Members of Congress are official trustees presiding over the greatest reorganization of any Bankrupt entity in world history, the U.S. Government. We are setting forth hopefully, a blueprint for our future. There are some who say it is a coroner’s report that will lead to our demise.”
- Imagine for a moment that someone inherits a farm. Let’s say that the farm has good topsoil, a good well, good breeding stock, good seed, and excellent farm equipment in good repair. Prior to passing into the control of the present owner the farm did a good business selling vegetables, meat, and dairy products to the local market, and it made a small profit.
- But let us suppose for a moment that the present owner of the farm doesn’t understand farming, or isn’t even really interested in learning. The present owner has no objection to standing around looking good, so he stays at the farm, standing in front of it, looking good to passers by.
- Of course, the bills still come in, so our farmer puts them on his credit card. When that bill comes due he uses another credit card, Then another. Pretty soon the interest payments alone are higher than his bills and the banks get nervous and call him. No problem. Our farmer sells the tractor, takes the money around to the various credit cards, the food store, the utilities, and pays off all his bills. Then he stands around in front of the farm looking good to passers-by, the lord of his domain.
- Will, the bills still come in. Again the credit cards get loaded up. So, this time our farmer sells the harvester. Then later on, the cattle, then the chickens, then the seeds, then he leases the well to his neighbor and finally sells the top soil from his farm to another farm down the road whose soil is getting tired. The cash is taken around to the various creditors, the food store, the utilities, etc.
- Now at this point, our farmer thinks everything is okay. The bills are paid, he has a little cash in his pocket, and everything is fine.
- Of course, you know better. The farm simply does not exist any more; it’s just an empty lot with a few buildings, and soon they will be gone as well. The path from the farmer’s present condition to seizure of the property for unpaid taxes is a foregone conclusion, even if the farmer doesn’t look far enough ahead to see it.
- Poor, dumb, stupid farmer.
- That farmer is our government, and our business leaders.
- Just as our hypothetical farm has lost its soil, livestock, seed, and farm equipment, America has lost its manufacturing ability. Short sighted business leaders, with as little interest in manufacturing as our farmer had in farming, decided their own personal bonuses would be higher if they simply sold their factories rather that ran them. After WW2, the 27 American TV companies including Zenith, Emerson, RCA, GE, etc. led the world in TV technology. Then, the owners of the patents on TV technology decided they didn’t need to dirty their hands by actually making the TV sets themselves any more, and they started selling licenses to manufacture, which the Japanese bought.
- By 1987, the only remaining American TV company is Zenith. The patent holders get their money, but the American products which can be sold overseas are gone, along with the jobs to make them.
- The same happened in high-tech electronics. The integrated circuit was invented in the United States. But rather than focus on selling integrated circuits, the companies that owned that technology sold the machines to MAKE integrated circuits around the world, and now America sells very few chips anywhere. The patent holders have their money, but the cash flow from sales of manufactured goods, and the jobs that go with them, are gone. When Seymour Cray needed custom chips for his supercomputers, he had to order them from Japan.
- The same thing has been happening in aviation. The airplane was invented in the United States, and through the 60s, we sold a lot of them around the world. But lately, all aircraft sales to foreign countries involve “offsets”, a portion of the core technology that gets licensed to the purchasing nation and gets manufactured there. Bit by bit, the core technology gets bled off, taking with it jobs, and cash flow from the sale of those manufactured products. Along the way, the rights to manufacture American inventions outside America leak away on a steadily increasing basis. Even the mighty F-16 is now being manufactured overseas, under license.
- To cover the loss of manufacturing jobs, our government has invented the catch phrase “service economy”. This is the idiotic notion that we don’t need to actually sell manufactured products; that we can grow and prosper our nation by doing each other’s laundry. To conceal the loss of manufacturing jobs, the government has legislated into existence thousands upon thousands of useless paper-shuffling jobs, and declared their necessity by fiat. The most obvious is the income tax which has been so obfuscated by the government that half of you had to rely on an outside expert to figure out just what all those incomprehensible words really meant. By this device, the government has replaced those jobs that made products to sell with an equal number of jobs that produce nothing whatsoever of any worth, except to keep the unemployment figures down. This over-burdening of the American people with gratuitous regulations and paperwork has accomplished nothing except to obfuscate the loss of manufacturing jobs, and to transform the American character from innovators and inventors creating new products to that of minor clerks, peeking under each other’s seat cushions for lost change.
- So, with most of our manufacturing now gone, just what DOES America make? Trouble, mostly. With 4% of the world’s population and 18% of the economy, we have 50% of all the lawyers, all looking to make a killing by looting those few industries that still call America home (like Microsoft). Kids don’t want to be scientists and engineers; they’ve seen how little such people are valued in our country. Based on recent history, kids see the “big bucks” are in corporate law, specifically investment banking, leveraged buyouts, greenmail, junk bonds, in short what other countries describe as “trying to make money grow by shaking it side to side”.
- With America’s ability to actually produce products that can compete on the open world market in decline, it’s no wonder that the balance of trade is the problem it is. Nobody buys our export products because we just don’t make that many any more, and like or not, we have to buy our appliances from the people who make them, which are NOT Americans. (When Ampex invented the VCR, they didn’t even bother trying to find an American company to make it, they immediately sold the rights to Japan).
- So, what do all these countries on the plus side of the trade imbalance do with their surplus billions? Well, they have been loaning it right back to us!
- Our government engages in a practice politely called “deficit spending”. Other terms which would aptly describe the practice include “counterfeiting” and “check kiting”, but it all comes down to the same thing; spending money one does not actually have.
- What would be a jailable offense for a normal citizen was rendered legal for the government by the Federal Reserve Act. This was not a popular piece of legislation. In fact the Democrats had campaigned in 1912 on a platform of rejection of the creation of a private bank in charge of a fiat money system. Nevertheless, on December 23, 1913, taking advantage of the absence of congressmen opposed to the creation of a fiat monetary system during the Christmas break, the Federal Reserve Act was passed.
- Years later, during the great depression, Congressman Louis T. McFadden (who served twelve years as Chairman of the Committee on Banking and Currency) asked for congressional investigations of criminal conspiracy to establish the privately owned ‘Federal Reserve System’. He requested impeachment of Federal officers who had violated oaths of office both in establishing and directing the Federal Reserve — imploring Congress to investigate an incredible scope of overt criminal acts by the Federal Reserve Board and Federal Reserve Banks. McFadden even suggested that the Federal Reserve deliberately triggered the great stock market crash of 1929, in order to eventually force the passage of the Emergency Banking Act of March 9, 1933, which suspended the gold standard.
- In describing the FED, McFadden remarked in the Congressional Record, House pages 1295 and 1296 on June 10, 1932:
- “Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal reserve banks. The Federal Reserve Board, a Government Board, has cheated the Government of the United States and he people of the United States out of enough money to pay the national debt. The depredations and the iniquities of the Federal Reserve Board and the Federal reserve banks acting together have cost this country enough money to pay the national debt several times over. This evil institution has impoverished and ruined the people of the United States; has bankrupted itself, and has practically bankrupted our Government. It has done this through the misadministration of that law by which the Federal Reserve Board, and through the corrupt practices of the moneyed vultures who control it”.
- Why all the fuss over the gold standard?
- Well it goes back to the original Founding Fathers and the meaning of the word “dollar”. “Dollar” is actually a weight measure of silver, 371.25 grains, to be exact. Our American silver dollars are actually heavier, since other metals were added for durability. But that 371.25 grains of silver WAS the dollar, matching in weight an unbroken chain of accepted monetary units that reached back through the Spanish Milled Dollar, the Dutch Daller, back to the German Thaler; the product of a silver mine which sold it’s product in coins of an exact weight. The Coinage Act of 1792 defined our dollar to exactly match in weight the silver dollars in use around the world, and then defined the gold dollar to be that amount of gold which would equal the worth of silver in a silver dollar, 24.75 grains, 1/15 the weight of the silver in a silver dollar.
- So, what’s wrong with this? Nothing really. When you, as a citizen, hold a silver dollar or a gold dollar in our hand, you hold that actual worth of metal. Nothing the government can do can change the worth of the money in your control.
- Take the Roman Silver Denarius pictured above. The Roman Empire is long gone, but the money that Rome issued still has worth because the coins themselves had inherent worth. Long after the collapse of the empire, Roman silver coins were still used as money, because the silver in the coin itself did not depend on the issuing government for its worth.
- Of course, carrying around too much coin can be bothersome, so many nation, including our own, issued paper notes as a convenience. But that paper currency of the nation was just a convenience. The gold and silver certificates were merely “claim checks” for the equivalent weight of gold or silver held in the treasury, and which would be produced on demand when the certificate was presented. But in the end, the lawful dollar of the United States was 371.25 in silver, or 24.75 grains of gold.
- The problem with this system from the point of view of the government or the banks is that it limits the amount of money they can work with. When the bank runs out of silver or gold (or the equivalent certificates) it can no longer lend any more money with which to earn interest. When the government runs out of gold or silver (or the equivalent certificates) it can no longer spend money (just like the rest of us).
- The immediate effect of ending the gold standard was that with the paper dollar no longer legally dependent on 371.25 in silver or 24.75 grains of gold, more paper dollars (now called “Federal Reserve Notes”) could be printed, their worth no longer under the control of the citizens but under the control of the issuing central bank, based on the total number of dollars printed (or created as credit lines). The more dollars which are created out of thin air, the less each one is worth.
- A federal Reserve Note.
- The swindle of the system is simple. The Federal Reserve Bank hires the US Treasury to print up some money. The Federal Reserve only actually pays the treasury for the cost of the printing, they do NOT pay $1 for each 1$ printed. But the Federal Reserve turns around and loans out that money (or credit line) to banks at full face value, those banks which have exhausted their deposits then loan that Federal Reserve fiat money to you, and you must repay it in the full dollar value (plus interest) in work product, even though the Federal Reserve printed that money for pennies, or created it out of thin air in a computer.
- As the Federal Reserve overprints more money, the money supply inflates, and too much money starts chasing too few goods and services, which means prices go up. But contrary to the charade put on by the Federal Reserve, inflation doesn’t just come and go due to some arcane sorcery. The Federal Reserve can halt inflation any time it wants to by simply shutting down those printing presses. It therefore follows that both inflation and recession are fully under the control of the Federal Reserve.
- Over time, that excess of printing has destroyed the value of that dollar you think you have. If you want to know by just how much, go out and try to purchase 371.25 grains of silver right now. Usually, the deterioration is gradual. Sometimes, it has to be obvious, such as the 1985 devaluation (done to halt the trade imbalance) which triggered the Japanese real-estate grab in this country.
- Many politicians have attempted to reverse this process. John F. Kennedy issued an Executive Order 11110, requiring the Treasury Department to start printing and issuing silver certificates for the silver then remaining in the US Treasury.
- Kennedy decided that by returning to the constitution, which states that only Congress shall coin and regulate money, the soaring national debt could be reduced by not paying interest to the bankers of the Federal Reserve System, who print paper money then loan it to the government at interest. This was the reason he signed Executive Order 11110 which called for the issuance of $4,292,893,815 in United States Notes through the U.S. Treasury rather than the traditional Federal Reserve System.
- John F. Kennedy’s United States Note.
- That same day, Kennedy signed a bill changing the backing of one and two dollar bills from silver to gold, adding strength to the weakened U.S. currency.
- Kennedy’s comptroller of the currency, James J. Saxon, had been at odds with the powerful Federal Reserve Board for some time, encouraging broader investment and lending powers for banks that were not part of the Federal Reserve system. Saxon also had decided that non-Reserve banks could underwrite state and local general obligation bonds, again weakening the dominant Federal Reserve banks”.
- Kennedy’s E.O. was never implemented following his assassination, and shortly afterwards, United States silver coins were taken out of circulation and replaced with the copper clad slugs in use today. These two events, the failure to print new silver certificates, and the substitution of worthless slugs for our silver coins, may explain why the Warren Commission included on its panel John J. McCloy, a man with no experience in crime, law enforcement, or national security, but who had been the President of the Chase Manhattan Bank.
- It should be noted that the banks themselves are still using the gold standard. Accounts are still settled between major national banks by the transfer of gold bullion.
- So here we are with a bank that legally counterfeits the money you borrow but expects a full value (plus interest) repayment. But what’s good for the Federal Reserve is good for the government itself, and this is where we get back into that funny word “deficit spending”. The government spends more money than it takes in. It has for many years now. The Federal Reserve, being the only lawful source of this fiat money, prints up the excess cash the government needs (or manufactures a credit line in a computer). This extra cash is treated as a loan, in order to keep the government overspending from further eroding the worth of the dollar in the world market. The government (meaning the taxpayers) is on the hook for the full face value, plus interest.
- But there’s another problem. The government is borrowing so much money that it drives the interest rates up! You pay MORE interest on your mortgage, car loan, and credit cards, because the government cannot balance its books. That extra interest you pay is therefore another hidden tax. The government, in its “generosity”, gives you a tax credit on mortgage interest that is higher because of their own borrowing!
- During the 80s, as exports dropped, and jobs moved from manufacturing to lower paying “service sector” jobs, the US tax base declined. In order to keep the jobless rate from rising, a massive defense program called the Strategic Defense Initiative was cranked up, but since this program produced no exportable product, it produced no taxable sales revenues, and hence the money poured into the project accelerated the government decline into debt. Because manufacturing was on the decline, fewer start-up companies were approaching the lending institutions, so the government loosened up the rules (while increasing the insurable deposit limit) to allow “investments” in more high risk ventures, most of which turned out to be frauds, or worse, money laundering operations for drug criminals. This includes Whitewater, Flowerwood, and Castle Grande. Despite shifting the S&L loss primarily onto the taxpayers (to reassure foreign investors that the taxpayers still made America a safe place to park their surplus cash) the government plunged further into debt.
- In the 12 years of the Reagan/Bush administrations, the United States went from being the world’s largest creditor nation to the world’s largest debtor. Many of those nations which had enjoyed huge trade surpluses started loaning that profit back to the United States with the stipulation that we work on our manufacturing, clean up our infrastructure, raise taxes, in short, clean up our act, so that investment in America makes sense!
- However, we didn’t quite do that.
- There has been some shuffling around to try to conceal the real scope of the problem. Over the last several years, the Federal Government has been sending less tax money back to the states than it takes in in taxes. This means that the states have to borrow MORE money to cover their obligations. The net result is that the debt is being transferred to the states, to conceal its true size. The government will easily admit to a $3 trillion “publicly held” debt, grudgingly concede that it’s “unfunded liability” brings that number to almost $7 trillion, but the real hard truth is that total government debt, state and federal, is now over $14 trillion dollars, or about 50,000 for every man, woman, and child inside the United States. Since 1960, the taxpayers have shelled out $15 trillion in interest payments alone, while the principal continues to rise.
- Yet another stunt the government has pulled is to “borrow” from the various trust funds under its control. Some $2 billion has vanished from the trust accounts of Native Americans (presently suing the Departments of the Interior and Treasury), and nearly ¾ of a TRILLION dollars has been removed from your Social Security retirement trust fund and spent in the last 8 years.
- If the government has to borrow your retirement money when things are supposed to be so good, under what conditions can it repay the money? Or is that government IOU in your retirement account merely a promise to either tax you a second time or stiff you on the benefits you thought you were paying for?
- In the last 8 years, during what are supposed to be record setting good times, the Federal government has nearly DOUBLED its debt load. The estimated interest on the debt equals all the personal income tax paid by all Americans. Our government is so deep in debt that it cannot get out.
- This brings us to the issue of collateral. We’ve borrowed so much money the lenders are getting nervous. Back during the Johnson administration Charles DeGaulle demanded the United States collateralize the loans owed to France in gold and started carting out the bullion from the treasury. This caused several other nations to demand the same and President Nixon had to slam the gold window closed or the treasury would have been emptied, since the United States was even then in debt for more money than the treasury could cover in gold.
- But Nixon had to collateralize that debt somehow, and he hit upon the plan of quietly setting aside huge tracts of American land with their mineral rights in reserve to cover the outstanding debts. But since the American people were already angered over the war in Vietnam, Nixon couldn’t very well admit that he was apportioning off chunks of the United States to the holders of foreign debt. So, Nixon invented the Environmental Protection Agency and passed draconian environmental laws which served to grab land with vast natural resources away from the owners and lock it away, and even more, prove to the holders of the foreign debt that US citizens were not drilling. mining, or otherwise developing those resources. From that day to this, as the government sinks deeper into debt, the government grabs more and more land, declares it a wilderness or “roadless area” or “heritage river” or “wetlands” or any one of over a dozen other such obfuscated labels, but in the end the result is the same. We The People may not use the land, in many cases are not even allowed to enter the land.
- This is not about conservation, it is about collateral. YOUR land is being stolen by the government and used to secure loans the government really had no business taking out in the first place. Given that the government cannot get out of debt, and is collateralizing more and more land to avoid foreclosure, the day is not long off when the people of the United States will one day wake up and discover they are no longer citizens, but tenants.
- The following map shows the current extent of all lands grabbed by the government under the guise of environmentalism.
- In short, the United States is in deep trouble. We have lost a huge amount of our manufacturing capacity, and those products we still make do not compete well on the world market, despite the steady devaluation of the dollar. In short we have vast debts to pay and little to pay them with. Like the foolish Farmer we have sold the machinery that allowed us to prosper, and we stand around shaking our investment portfolios back and forth in the hopes that the money inside will somehow grow all by itself. It won’t. It never has. The very best that can be said is that money gets moved from one person to the other.
- Those nations and banks to whom we owe money have been very patient indeed with us. They know that our economies are so tightly entwined that what hurts America will hurt them. But sooner or later, possibly after a market crash, someone, in order to pay their own debts, will demand their loans to the United States be paid. Rather than get caught with “bad paper”, there will be a run on the United States government.
- In addition to the government debt of $14 trillion, our businesses are home to trillions more in foreign investment, kept here by the promise that the American taxpayer will be made to cover all losses. But with our manufacturing in decline and our schools producing far more lawyers than anything else, it should be obvious to the prudent observer that the American taxpayer, even if so inclined, may not be able to cover the losses of their own government, let alone a foreign investor. That has to be making them nervous as well.
- This brings us to the “equities markets”, most notably the stock market. Over the last several years a constant media harangue has assured us that the soaring numbers of the stock market are the sole measure of how good our economy is. But close examination of those high-priced stocks reveals that most are heavily over-valued; their price the result of market forces rather than underlying worth (earnings ability). Amazon.com, as one example, has had a terrific run-up of its stock price, even though the company itself has yet to show a profit.
- The government has admitted to using covert means to prevent a market downturn; to keep the stock prices at an artificially high and overvalued level, in order to wave those impressive numbers about as “proof” that everything is okay so that the taxpayers go back to work and pay more taxes. But in order to keep those stock prices up above their actual worth, demand must be maintained to keep the prices high. In other words, NEW investors must constantly be brought into the bottom of the pyramid to keep the prices of the stocks at the top from dropping. Hence the onslaught of commercials luring neophyte investors into the stock market via “online trading”. Like any Ponzi scheme, the stock market will collapse when no more new buyers can be dragged in at the bottom. As the market starts to stutter, governments (most recently Britain) have moved to dump huge reserves of gold onto the world market to depress gold prices and deter investors from deserting the stock market for gold.
- Some years back I worked on the film version of “The Day The Bubble Burst”, and in between playing a stock broker, I got to spend some time with the show’s consultant, Mr. William Hupt, who had been on the trading floor in 1929 as it all fell apart. He still had, framed, that last strip of ticker tape that ushered in the Great Depression, and he shared some stories which have a bearing on what is going on today.
- The first story Bill shared is that there had been early indications of a dangerously over-valued market, running to deep on margin, and like the Plunge Protection Team, the largest investment houses, in particular the House of Morgan, attempted to reverse the early corrections by purchasing large blocks of stock in order to create market demand and drive the prices back up. It worked all but the last time.
- The second story Bill shared was that a friend of his, riding up to his office in September of 1929, overheard the elevator operator chatting about his own stock portfolio, and his investments. Something about that image of an elevator operator playing the market set off warning signals, and Bill’s friend immediately liquidated his entire portfolio, just in time to miss the great crash. Many people, including the actor Charlie Chaplin, had recognized the “recruitment” of that segment of society that did NOT have risk capital as new investors as a desperate attempt to prop up an overvalued market, and got out in time to save their own personal fortunes.
- In the end, there is no such thing as a free lunch. You cannot make money grow in value by shaking it back and forth from one bank to another. You cannot prosper a nation by doing each other’s laundry, or filling out their government mandated and greatly obfuscated paperwork, or flinging stock certificates around which may have as little real worth as Federal Reserve Notes. To make money, to show a profit, you must make products that somebody else wants to buy, and sadly, that is a capability the United States has allowed to slip away in great measure. The “service economy” was political propaganda to make the public believe that the decline of our manufacturing ability was a good thing.
- Our nation is broke, bankrupt, and having sold much of its machinery and technology (or given it away to political donors), is unable to easily return to those endeavors which once made our nation great. Our infrastructure is in decay (the percentage of roads in the US with major damage doubled last year alone), our public schools unable to produce a workforce able to function in a high-tech manufacturing environment, and those managers end engineers with manufacturing experience have in great part been lured away to other nations. The severity of our total government debt has reached a point where the promise that the taxpayers can be made to cover any foreign investment loss rings hollow, because we can no longer pay the debts our government has now.
- Our nation is in trouble. We don’t make many of the products we used to make. Consequently we don’t have the products to sell that we used to. We don’t even make most of the products we need ourselves (like that computer you’re staring at this very moment). Result: we have a massive trade imbalance. Cash is flowing out of the nation, and it’s not coming back in anywhere near as fast. There’s no way to spin it; that is a major problem. Our nation is becoming poorer, it is hopelessly in debt, and all the artificial escalation of stock prices cannot conceal that.
- And as the artificially pumped up stock market continues to decline, the true scale of the economic horror which is the product of decades of government corruption, will become apparent to all. At that point you the average American citizen could become the terrorist’s and your activities will need to be tagged and tracked with your new micro chipped ID card. This assures your obedience to an out of control taxation policy and possibly even discourage citizens against any type of organized rebellion to enforce the US Constitution.
Empire of Chaos: How 9/11 Shaped the Politics of a Failing State
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The events made my mind reel. The angry plumes of smoke, office paper raining like confetti, tumbling windows flashing in the sunlight. I could make out jumpers and watched a jet fighter whoosh by the burning towers, bank and disappear. I thought, “This is like a movie.”
It upset me that my only way to comprehend the events was to reference the Hollywood imaginarium. But it was understandable. Where else would I have seen images resembling the war in my backyard – collapsing skyscrapers, gigantic fireballs and thousands of dead?
The need to make sense of the events of Sept. 11 – the plot by al-Qaeda, four hijacked airliners, the demolished twin towers and nearly 3,000 dead – is universal. It is why the state’s first task after 9/11 – before one bomb dropped, one soldier deployed – was to imprint the “war on terror” on the collective American mindset.
Mere hours after the attack, in his address to the nation, President Bush began assembling the ideological scaffolding for endless war: “America was targeted for attack because we’re the brightest beacon for freedom and opportunity in the world”; “our nation saw evil”; “the American economy will be open for business”; “We will make no distinction between the terrorists who committed these acts and those who harbor them”; and “we stand together to win the war against terrorism.”
Many of the ideas that have shaped the events and policies of the first decade of the war on terror are right there: American exceptionalism, they hate us for our freedoms, capitalism will triumph, and this war will know no geographic or temporal bounds.
These ideas were bundled into the “New American Century,” the neoconservative dream to extend Pax Americana indefinitely. Ten years later that dream has evaporated as the United States is being battered by an economic depression that shows no end. The only question appears to be how quickly America will be eclipsed by China. So how did we get from the triumphalism of “mission accomplished” to the twilight of American Empire?
In essence, the responses to 9/11 by the managers of the corporate-military state, which were largely shaped by ideology, have accelerated a decline that started decades ago. After World War II, U.S. hegemony was based on its ability to order the world. Today, U.S. power is dominant but waning, and its main effect is that of disorder – internationally and domestically. And that disorder is eroding the military, economic, political and diplomatic foundations of its rule.
While there is no certainty that China will usher in a Pacific Century – in the 1980s it was “the Japan threat” that generated U.S. anxiety – American Empire will continue to decay if for no other reason than its economic base has been hollowed out and new power blocs are taking shape across the world.
After WWII, the United States wielded all manner of institutions and ideology in establishing global rule: the Bretton Woods Agreement ordered the world economy, the dollar was the reserve currency, the United Nations legitimized undemocratic big-power rule, the Pentagon and threat of nuclear weapons served as the instruments of violence, the transnational corporation combined with U.S. government aid opened and created new capitalist markets, and anti-Communism undermined and isolated mass anti-capitalist forces in the West. Finally, the compact between capital and labor provided for social welfare, generous benefits and increasing wages so workers could enjoy the consumer bounty in return for purging the left from unions and helping squelch labor movements in the Third World.
By the 1970s that system was fraying. The wealth held by the top 1 percent was plunging because of economic stagnation in the core capitalist economies. Relatively generous social welfare states in the West combined with demands from radicalized minority groups and women for a share of the pie plus assertive decolonized nations in the Third World were squeezing capital.
Neoliberalism was the solution, and Ronald Reagan sold it with slogans like “government is the problem.” But Americans first had to buy the idea that freedom flowed organically from the market, and that government’s role was to maximize opportunity – by “getting out of the way” – so we could succeed or fail by our own initiative.
For all the talk about the rule of markets, neoliberalism was about an upward transfer of wealth. By 1990 wealth and income for the super-rich was near pre-WWII levels. And government was central to that the wealth transfer by imposing austerity on Third World countries, bombing rogue states back into submission, policing and surveilling the domestic front, and perhaps most important, bailing out capital due to the endemic financial bubbles unleashed by deregulation.
Social welfare drew the ire of neoliberal ideologues, which is ironic because that is precisely what would level a grossly slanted playing field. Reagan, America’s avuncular bigot, traded in stereotypes like teenage mothers, welfare cheats, gangbangers and illegal immigrants. He spun yarns about welfare queens driving Cadillacs, “strapping young bucks” buying T-bone steaks with food stamps and social programs that were “demeaning” and “insulting” to Blacks and Latinos. His rose-colored racism helped convince a critical mass of the public that hacking away at social welfare was somehow in their interest, not that of the oligarchy.
Similarly, the war on terror needed its own brand of white supremacist ideology. Hollywood did its part before Sept. 11 with hundreds of movies replete with Orientalist imagery, as documented in books like Reel Bad Arabs. One writer observed about the popular image of the Arab, “He is robed and turbaned, sinister and dangerous, engaged mainly in hijacking airlines and blowing up public buildings.”
Other ideas found new currency after 9/11 like the “clash of civilizations” thesis. Bush could not endorse it outright, needing the support of Arab and Muslim states to wage global war, but he gave it credence by speaking of “a struggle for civilization” involving a fight “between tyranny and freedom.” With Obama in the White House, the right no longer has to worry about the consequences of acting irresponsibly, and many have unabashedly donned the mantle of Islamophobia, the barnyard version of the clash of civilizations.
It has long been a given that the war on terror is a meaningless phrase – how do you wage war on an abstract noun? – but that abstraction is useful. It obscures the concreteness of this war, that it is waged against Muslim people. And warring against an idea rather than a movement, a people, a nation enables the war to continue endlessly. The killing of bin Laden was just another way marker. Hilary Clinton proclaimed, “the battle to stop al-Qaeda and its syndicate of terror will not end with the death of bin Laden. [We must] redouble our efforts.”
Another pernicious idea is “everything changed.” It assumes American exceptionalism. Everything could have changed only if the United States was the only country that mattered. All at once, it denies history, marks a closing of “the end of history” – the alleged triumph of the market and liberal democracy – and restarts the historical clock anew.
Everything changed really meant nothing had changed except the complete unshackling of state power. The latest renewal of the Patriot Act, until 2015, retains the National Security letters, roving wiretaps, sweeping record gathering and “lone wolf” provisions. Direct military spending now in excess of $1 trillion annually combined with domestic austerity is whittling down the state to purely repressive functions of policing, surveillance, detention and war. The United States is openly bombing six countries: Afghanistan, Iraq, Libya, Pakistan, Somalia and Yemen. It has deployed Special Operations forces to 75 countries as part of “a largely secret U.S. war against al-Qaeda and other radical groups,” according to theWashington Post. And it continues to expand its global network of rendition, secret prisons and torture.
The forces of the state, corporate interests and their propagandists in academia and the media undoubtedly had a tremendous of amount of power to popularize the post-9/11 mindset, especially given how it was underpinned by racist narratives and an imperial system. But it’s easy to forget there was a popular and viable counter-narrative before 9/11.
The mass protests that derailed the WTO ministerial in Seattle in 1999 marked a coming out moment for the alter-globalization movement. It was a true global phenomenon, it proclaimed “another world is possible,” and it had capitalist globalization on the defensive ideologically and in the streets.
The reality that neoliberalism benefited an elite few, while the rest of humanity coped with the social and ecological devastation, was inspiring tens of thousands to nonviolently shut down meetings of institutions like the WTO, IMF and G-8 that regulate the global capitalist order.
The World Bank-IMF meeting for late September 2001 in Washington, D.C., had been cancelled ahead of time (according to an inside source) because it was decided police forces would be unable to control the tens of thousands of people expected in the streets. Organizers were preparing to take the fight directly to capital with a global day of action against multiple stock exchanges in November 2001. Another reminder of elite fear at the time was that the New York Times speculated that anarchists were behind the 9/11 hijackings and attacks.
Thus, 9/11 was a godsend for Empire. It could construct a harsher authoritarian order at home and embark on a “New American Century” overseas. There was nothing pre-ordained about this, particularly the rapid collapse of the U.S.-based alter-globalization movement. But there was a logic to it.
Market fundamentalism is a centrifugal force. We live in a society where profit and cost-benefit analysis dominate social relations – just look at what is happening to public education. Subjecting everything to market forces tears apart the social forces the state relies upon to rule, like nation, community, kinship and spirituality. As the social order started to fragment by the 1970s, a social glue was needed, which is provided by neoconservatives. David Harvey explains in A Brief History of Neoliberalism that the neocons promote a militarized order as the solution to the chaos of the market, and they seek to restore “higher-order values that will form the stable center of the body politics” such as cultural nationalism, family values and Evangelical Christianity. This reliance on a militarized order, argues Harvey, makes the neocons tend to highlight external threats real or perceived, which justifies and expands the corporate-military state.
The Cold War ideology was the free market, democratic liberalism and anti-communism. The post-9/11 ideology updates the militarization and moralism with new categories such as the war on terror, everything’s changed and Islamophobia. It’s remarkably crude – “they hate us for our freedoms” – but it works.
Far from reviving Empire abroad or the economy at home, the war on terror has sapped American power. The obvious beneficiary is China, but it lacks the tools of global rule that the United States still possesses, especially the Pentagon and the dollar, but it is catching up economically.
As evidenced by the global economic rut, China’s hybrid system of authoritarian state-organized capitalism has proved far more resilient than the U.S. system of predatory private corporations. China can enter cutting-edge markets like high-speed rail, solar panel, wind turbine and lithium battery manufacturing and through use of robust state subsidies and planning become the world leader in all of them in barely a decade.
Despite the growing Sinophobia, shown by the hand-wringing over Amy Chua’s Battle Hymn of the Tiger Mother, China is in no position to challenge U.S. hegemony. Other than Russia, major regional powers like Japan, Taiwan, South Korea and India are in the American camp. China is spreading around its currency, the Renminbi, for settling international trade, but it will likely take decades to supplant the U.S. dollar and Treasury securities. The United Nations may be moribund, but Washington can still bend it to its needs most of the time, and China’s military is decades behind the Pentagon. Perhaps most important, China does not offer a social order that differs in how work, public, educational and community life are organized, and in fact has adopted many of the harshest practices of 19th century capitalism.
At the same time, the United States is unable to order the world so that social benefits are disbursed to the middle classes not just the upper crust. It can spread disorder as evidenced by the six countries tormented by America’s video-game bombing campaigns, but it’s ability to conquer and rule on land is minimal given the Iraq and Afghanistan quagmires. Its control of the skies, outer space and electronic mediums allows it to disrupt but not to dominate.
This has given rise to new power configurations. Latin America’s left turn had made the IMF irrelevant in that region, undermining the U.S.-organized financial order. The Arab Spring has eroded the U.S. political order in the Middle East and gives lie to the Orientalist ideology that Arab and Muslim nations are irrational, violent and backward. Turkey and Egypt are pulling away from being Israel’s watchdogs and provide a buffer against a U.S.-orchestrated attack on Iran. And the spread of popular public occupations now to Europe echoes the period when another world did seem possible. Another hopeful sign is that more U.S.-based organizing is opting for occupations rather than legal, polite and ineffective protests.
The disorder is felt profoundly on the home front. Beginning in the 1980s IMF austerity was for the periphery – from Latin America to East Asia. The austerity has now moved to Greece, Ireland, Spain, Great Britain and the United States. The ideology is the same here as it is in the Third World: when choosing between the health of bondholders and the health of human societies, the bondholders always win and profits must keep flowing to the banks.
The repression of left and progressive dissent has left the state in the hands of a fanatical right wing and their corporate allies. The U.S. political system is unable to respond to the needs of rational capitalists. On Aug. 26, at Jackson Hole, Wyoming, Fed Chair Ben Bernanke pointed to the housing crisis, political dysfunction and the “extraordinarily high level of long-term unemployment” as the main symptoms crippling the economy. Warren Buffet has been pleading for the government to raise taxes on the super-rich like him. Influential economist Nouriel Roubini said in August that in the last few years there has been “a massive redistribution of income from labor to capital, from wages to profit … Karl Marx had it right, at some point capitalism can self-destroy itself.”
Bill Gross, a Republican and a chief investment officer of the “giant bond fund Pimco,” recently told the New York Times that to “arrest America’s dangerous economic slide” government currently needs to provide refinancing relief for homeowners, provide loans to small business, which the banks are not providing, and most of all, rebuild the nation’s decaying roads, bridges and airports so the government can create jobs directly because the “private sector is not going to do it.”
So even as some of the chief managers and intellectuals of American capitalism are calling for government jobs, higher taxes on the rich and more stimulus to bail out the economy, the political class is busy force-feeding us austerity coated in trillion-dollar war budgets.
Not that this is entirely irrational. The staggering amounts of money spent on war, spying, the military, mercenaries, policing and all the other security apparatuses creates many millions of jobs. Add to that secondary contracting, support services and economic activity generated by all these workers and you have millions of jobs more. And given all their dependents, this means tens of millions of Americans benefit directly from the war economy. This is a wasteful form of Keynesianism, employing school teachers and healthcare workers is far more beneficial to society and the world than building drones and airport X-ray scanners, but the huge economic base that is the American way of war is part of the reason it’s so hard to dismantle.
The philosopher Hannah Arendt once observed that Empire abroad requires tyranny at home. The post-9/11 police state has proved useful in suppressing “enemies”: the threat within, Arab and Muslim communities; the social threat, the left; and the demographic threat, Latinos. All have come under severe repression in the last decade, Arab- and Muslim-Americans most of all.
Ten years on, ideology has outlasted the relevance of the events of 9/11. Islamophobia serves to mobilize support for an endless war. Suppressing the left has scattered radical social opposition to the dominant order, and the war against Latino immigrants has created shadow armies of fearful workers with few rights that corporations prey on to drive down wages and further impede labor organizing.
As tragic as September 11, 2001 was, it is a historical blip because it only speeded up the process of imperial decline. Shortly after the attacks, the historian Immanuel Wallerstein suggested the American hegemony could go down one of two paths. The first was managing a soft decline. The other was a crash landing. It’s not hard to see which path we’ve been on since 9/11.
Economist: 46 out of 50 US States are Insolvent
- Credit card debt settlement
- Account central online payment
- Reverse Mortgage
(Economic Policy Journal) During a presentation today at the Adam Smith Institute, economist Kevin Dowd, a visiting professor at the Pensions Institute, Cass Business School in London, told his audience:
Fiat money is entering its death spiral…
Banks use crooked accounting methods to hide losses and enrich employees with bonuses. It’s another form of looting…
At least 46 out of 50 US states are insolvent.
What’s behind Dowd’s thinking? He wrote this last December:
Sooner rather than later, it will dawn on investors that Treasuries are over-valued and confidence in the Treasuries market will crack: one possibility is that rising inflation expectations or higher deficits will then push up market interest rates, causing bond prices to falter and then fall; an even more imminent prospect is that some combination of the Fed’s quantitative easing and yawning Federal budget and U.S. balance of payments deficits will cause a further decline in the dollar that makes foreign holders of Treasury bonds lose confidence in their investments. In either case, there is then likely to be a rush to the exits – a flight from Treasuries on a massive scale – forcing up interest rates in general and inflicting heavy losses on bondholders, especially on those holding long-term bonds.
• The collapse of the Treasuries market will cause the banks’ previously profitable ‘gapping’ adventure to unravel with a vengeance: the very positions that yielded them such easy returns will now suffer swingeing capital losses. Confidence in the banks – never strong since the onset of the crisis – will collapse (again) and we will enter a new (and severe) banking crisis.
• The bursting of the Treasuries and financials bubbles will then feed through to the junk bond bubble: the collapse in the Treasuries market and the renewed banking crisis will lead to sharp falls in the values of corporate bonds and sharp rises in credit spreads. Highly leveraged firms will then default in droves, the junk bond market will collapse and LBO activity will dry up.
We also have to consider the nontrivial knock-on effects: the Treasuries collapse will trigger an immediate financing crisis for governments at all levels, and especially for the federal government, and one which will likely involve the downgrading of its AAA credit rating, and so further intensify the government’s by-then already chronic financing problems. Nor should we forget that these financial tsunamis are likely to overwhelm the Federal Reserve itself: the Fed has a highly leveraged balance sheet that would do any aggressive hedge fund proud; it too will therefore suffer horrendous losses and is likely to become insolvent. The events of the last three years will then look like a picnic.
There is also the problem of resurgent inflation. For a long time, the U.S. has been protected from much of the inflationary impact of Federal Reserve policies: developments in IT and the cost reductions attendant on the outsourcing of production to east Asia had the impact of suppressing prices and masking the domestic impact of Fed policies. Instead, these policies produced a massive buildup in global currency reserves: these have increased at 16% per annum since 1997-98 and caused soaring commodity prices and rampant inflation in countries such as India (current inflation 16%) and China (maybe 20%, judging by wage inflation, and definitely much higher than official figures acknowledge) whose currencies have been (more or less) aligned to the dollar. U.S. inflation was already rising by 2008 (annual rate 3.85%), but this rise was put into reverse when bank lending and consumer spending then fell sharply. However, there are good reasons to think that inflation will soon take off again: (1) The combination of booming commodity prices and a depreciating dollar (trade-weighted dollar exchange rate index down 15% since March ’09) means that imports will cost more in dollar terms and this must inevitably feed through to U.S. inflation. (2) Rising labor costs in the Asian economies mean that the outsourcing movement is coming to an end and even beginning to reverse itself, and with it the associated cost reductions for American firms that outsource to Asia. Most importantly, (3), there is the huge additional monetary overhang created over the last couple of years (or, to put it more pointedly, the vast recent monetizations of government debt), the impact of which has been held temporarily in check by sluggish conditions over 2009-2010, but which will must eventually flood forth – and, when it does, inflation is likely to rise sharply.
Once inflation makes a comeback, a point will eventually come where the Fed policy has to go into sharp reverse – just like the late 1970s, interest rates will be hiked upwards to slow down monetary growth. The consequences would be most unpleasant: the U.S. would experience the renewed miseries of stagflation – and a severe one at that, given the carnage of a renewed financial crisis and the large increases in money supply working through the system. Moreover, as in the early 1980s, higher interest rates would lead to major falls in asset prices and inflict further losses on financial institutions, wiping out their capital bases in the process. Thus, renewed inflation and higher interest rates would deliver yet another blow to an already gravely weakened financial system.
Within the next month, the Pentagon will submit its 2009 budget to Congress and it’s a fair bet that it will be even larger than the staggering 2008 one. Like the Army and the Marines, the Pentagon itself is overstretched and under strain — and like the two services, which are expected to add 92,000 new troops over the next five years (at an estimated cost of $1.2 billion per 10,000), the Pentagon’s response is never to cut back, but always to expand, always to demand more.
After all, there are those disastrous Afghan and Iraqi wars still eating taxpayer dollars as if there were no tomorrow. Then there’s what enthusiasts like to call “the next war” to think about, which means all those big-ticket weapons, all those jets, ships, and armored vehicles for the future. And don’t forget the still-popular, Rumsfeld-style “netcentric warfare” systems (robots, drones, communications satellites, and the like), not to speak of the killer space toys being developed; and then there’s all that ruined equipment out of Iraq and Afghanistan to be massively replaced — and all those ruined human beings to take care of.
You’ll get the gist of this from a recent editorial in the trade magazine Aviation Week & Space Technology:
“The fact Washington must face is that nearly five years of war have left U.S. forces worse off than they have been in a generation, yes, since Vietnam, and restoring them will take budget-building unlike any in the past.”
Even on the rare occasion when — as in the case of Boeing’s C-17 cargo plane — the Pentagon decides to cancel a project, there’s Congress to remember. Contracts and subcontracts for weapons systems, carefully doled out to as many states as possible, mean jobs, and so Congress often balks at such cuts. (Fifty-five House members recently warned the Pentagon of a “strong negative response” if funding for the C-17 is excised from the 2009 budget.) All in all, it adds up to a defense menu for a glutton.
Already, Secretary of Defense Robert Gates has said that 2009 funding is “largely locked into place.” The giant military-industrial combines — Lockheed Martin, Northrop Grumman, Boeing, Raytheon — have been watching their stocks rise in otherwise treacherous times. They are hopeful. As Ronald Sugar, Northrop CEO, put it: “A great global power like the United States needs a great navy and a great navy needs an adequate number of ships, and they have to be modern and capable” — and guess which company is the Navy’s largest shipbuilder?
There should be nothing surprising in all this, especially for those of us who have read Chalmers Johnson’s Nemesis, The Last Days of the American Republic, the final volume of his Blowback Trilogy. Published in 2007, it is already a classic on what imperial overstretch means for the rest of us. The paperback of Nemesis is officially out today, just as global stock markets tumble. It is simply a must-read (and if you’ve already read it, then get a copy for a friend). In the meantime, hunker in for Johnson’s latest magisterial account of how the mightiest guns the Pentagon can muster threaten to sink our own country. (For those interested, click here to view a clip from a new film, “Chalmers Johnson on American Hegemony,” in Cinema Libre Studios’ Speaking Freely series in which he discusses military Keynesianism and imperial bankruptcy.) Tom
Why the Debt Crisis Is Now the Greatest Threat to the American Republic
By Chalmers Johnson
The military adventurers of the Bush administration have much in common with the corporate leaders of the defunct energy company Enron. Both groups of men thought that they were the “smartest guys in the room,” the title of Alex Gibney’s prize-winning film on what went wrong at Enron. The neoconservatives in the White House and the Pentagon outsmarted themselves. They failed even to address the problem of how to finance their schemes of imperialist wars and global domination.
As a result, going into 2008, the United States finds itself in the anomalous position of being unable to pay for its own elevated living standards or its wasteful, overly large military establishment. Its government no longer even attempts to reduce the ruinous expenses of maintaining huge standing armies, replacing the equipment that seven years of wars have destroyed or worn out, or preparing for a war in outer space against unknown adversaries. Instead, the Bush administration puts off these costs for future generations to pay — or repudiate. This utter fiscal irresponsibility has been disguised through many manipulative financial schemes (such as causing poorer countries to lend us unprecedented sums of money), but the time of reckoning is fast approaching.
There are three broad aspects to our debt crisis. First, in the current fiscal year (2008) we are spending insane amounts of money on “defense” projects that bear no relationship to the national security of the United States. Simultaneously, we are keeping the income tax burdens on the richest segments of the American population at strikingly low levels.
Second, we continue to believe that we can compensate for the accelerating erosion of our manufacturing base and our loss of jobs to foreign countries through massive military expenditures — so-called “military Keynesianism,” which I discuss in detail in my book Nemesis: The Last Days of the American Republic. By military Keynesianism, I mean the mistaken belief that public policies focused on frequent wars, huge expenditures on weapons and munitions, and large standing armies can indefinitely sustain a wealthy capitalist economy. The opposite is actually true.
Third, in our devotion to militarism (despite our limited resources), we are failing to invest in our social infrastructure and other requirements for the long-term health of our country. These are what economists call “opportunity costs,” things not done because we spent our money on something else. Our public education system has deteriorated alarmingly. We have failed to provide health care to all our citizens and neglected our responsibilities as the world’s number one polluter. Most important, we have lost our competitiveness as a manufacturer for civilian needs — an infinitely more efficient use of scarce resources than arms manufacturing. Let me discuss each of these.
The Current Fiscal Disaster
It is virtually impossible to overstate the profligacy of what our government spends on the military. The Department of Defense’s planned expenditures for fiscal year 2008 are larger than all other nations’ military budgets combined. The supplementary budget to pay for the current wars in Iraq and Afghanistan, not part of the official defense budget, is itself larger than the combined military budgets of Russia and China. Defense-related spending for fiscal 2008 will exceed $1 trillion for the first time in history. The United States has become the largest single salesman of arms and munitions to other nations on Earth. Leaving out of account President Bush’s two on-going wars, defense spending has doubled since the mid-1990s. The defense budget for fiscal 2008 is the largest since World War II.
Before we try to break down and analyze this gargantuan sum, there is one important caveat. Figures on defense spending are notoriously unreliable. The numbers released by the Congressional Reference Service and the Congressional Budget Office do not agree with each other. Robert Higgs, senior fellow for political economy at the Independent Institute, says: “A well-founded rule of thumb is to take the Pentagon’s (always well publicized) basic budget total and double it.” Even a cursory reading of newspaper articles about the Department of Defense will turn up major differences in statistics about its expenses. Some 30-40% of the defense budget is “black,” meaning that these sections contain hidden expenditures for classified projects. There is no possible way to know what they include or whether their total amounts are accurate.
There are many reasons for this budgetary sleight-of-hand — including a desire for secrecy on the part of the president, the secretary of defense, and the military-industrial complex — but the chief one is that members of Congress, who profit enormously from defense jobs and pork-barrel projects in their districts, have a political interest in supporting the Department of Defense. In 1996, in an attempt to bring accounting standards within the executive branch somewhat closer to those of the civilian economy, Congress passed the Federal Financial Management Improvement Act. It required all federal agencies to hire outside auditors to review their books and release the results to the public. Neither the Department of Defense, nor the Department of Homeland Security has ever complied. Congress has complained, but not penalized either department for ignoring the law. The result is that all numbers released by the Pentagon should be regarded as suspect.
In discussing the fiscal 2008 defense budget, as released to the press on February 7, 2007, I have been guided by two experienced and reliable analysts: William D. Hartung of the New America Foundation’s Arms and Security Initiative and Fred Kaplan, defense correspondent for Slate.org. They agree that the Department of Defense requested $481.4 billion for salaries, operations (except in Iraq and Afghanistan), and equipment. They also agree on a figure of $141.7 billion for the “supplemental” budget to fight the “global war on terrorism” — that is, the two on-going wars that the general public may think are actually covered by the basic Pentagon budget. The Department of Defense also asked for an extra $93.4 billion to pay for hitherto unmentioned war costs in the remainder of 2007 and, most creatively, an additional “allowance” (a new term in defense budget documents) of $50 billion to be charged to fiscal year 2009. This comes to a total spending request by the Department of Defense of $766.5 billion.
But there is much more. In an attempt to disguise the true size of the American military empire, the government has long hidden major military-related expenditures in departments other than Defense. For example, $23.4 billion for the Department of Energy goes toward developing and maintaining nuclear warheads; and $25.3 billion in the Department of State budget is spent on foreign military assistance (primarily for Israel, Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, the United Arab Republic, Egypt, and Pakistan). Another $1.03 billion outside the official Department of Defense budget is now needed for recruitment and reenlistment incentives for the overstretched U.S. military itself, up from a mere $174 million in 2003, the year the war in Iraq began. The Department of Veterans Affairs currently gets at least $75.7 billion, 50% of which goes for the long-term care of the grievously injured among the at least 28,870 soldiers so far wounded in Iraq and another 1,708 in Afghanistan. The amount is universally derided as inadequate. Another $46.4 billion goes to the Department of Homeland Security.
Missing as well from this compilation is $1.9 billion to the Department of Justice for the paramilitary activities of the FBI; $38.5 billion to the Department of the Treasury for the Military Retirement Fund; $7.6 billion for the military-related activities of the National Aeronautics and Space Administration; and well over $200 billion in interest for past debt-financed defense outlays. This brings U.S. spending for its military establishment during the current fiscal year (2008), conservatively calculated, to at least $1.1 trillion.
Such expenditures are not only morally obscene, they are fiscally unsustainable. Many neoconservatives and poorly informed patriotic Americans believe that, even though our defense budget is huge, we can afford it because we are the richest country on Earth. Unfortunately, that statement is no longer true. The world’s richest political entity, according to the CIA’s “World Factbook,” is the European Union. The EU’s 2006 GDP (gross domestic product — all goods and services produced domestically) was estimated to be slightly larger than that of the U.S. However, China’s 2006 GDP was only slightly smaller than that of the U.S., and Japan was the world’s fourth richest nation.
A more telling comparison that reveals just how much worse we’re doing can be found among the “current accounts” of various nations. The current account measures the net trade surplus or deficit of a country plus cross-border payments of interest, royalties, dividends, capital gains, foreign aid, and other income. For example, in order for Japan to manufacture anything, it must import all required raw materials. Even after this incredible expense is met, it still has an $88 billion per year trade surplus with the United States and enjoys the world’s second highest current account balance. (China is number one.) The United States, by contrast, is number 163 — dead last on the list, worse than countries like Australia and the United Kingdom that also have large trade deficits. Its 2006 current account deficit was $811.5 billion; second worst was Spain at $106.4 billion. This is what is unsustainable.
It’s not just that our tastes for foreign goods, including imported oil, vastly exceed our ability to pay for them. We are financing them through massive borrowing. On November 7, 2007, the U.S. Treasury announced that the national debt had breached $9 trillion for the first time ever. This was just five weeks after Congress raised the so-called debt ceiling to $9.815 trillion. If you begin in 1789, at the moment the Constitution became the supreme law of the land, the debt accumulated by the federal government did not top $1 trillion until 1981. When George Bush became president in January 2001, it stood at approximately $5.7 trillion. Since then, it has increased by 45%. This huge debt can be largely explained by our defense expenditures in comparison with the rest of the world.
The world’s top 10 military spenders and the approximate amounts each country currently budgets for its military establishment are:
1. United States (FY08 budget), $623 billion
2. China (2004), $65 billion
3. Russia, $50 billion
4. France (2005), $45 billion
5. United Kingdom, $42.8 billion
6. Japan (2007), $41.75 billion
7. Germany (2003), $35.1 billion
8. Italy (2003), $28.2 billion
9. South Korea (2003), $21.1 billion
10. India (2005 est.), $19 billion
World total military expenditures (2004 est.), $1,100 billion
World total (minus the United States), $500 billion
Our excessive military expenditures did not occur over just a few short years or simply because of the Bush administration’s policies. They have been going on for a very long time in accordance with a superficially plausible ideology and have now become entrenched in our democratic political system where they are starting to wreak havoc. This ideology I call “military Keynesianism” — the determination to maintain a permanent war economy and to treat military output as an ordinary economic product, even though it makes no contribution to either production or consumption.
This ideology goes back to the first years of the Cold War. During the late 1940s, the U.S. was haunted by economic anxieties. The Great Depression of the 1930s had been overcome only by the war production boom of World War II. With peace and demobilization, there was a pervasive fear that the Depression would return. During 1949, alarmed by the Soviet Union’s detonation of an atomic bomb, the looming communist victory in the Chinese civil war, a domestic recession, and the lowering of the Iron Curtain around the USSR’s European satellites, the U.S. sought to draft basic strategy for the emerging cold war. The result was the militaristic National Security Council Report 68 (NSC-68) drafted under the supervision of Paul Nitze, then head of the Policy Planning Staff in the State Department. Dated April 14, 1950, and signed by President Harry S. Truman on September 30, 1950, it laid out the basic public economic policies that the United States pursues to the present day.
In its conclusions, NSC-68 asserted: “One of the most significant lessons of our World War II experience was that the American economy, when it operates at a level approaching full efficiency, can provide enormous resources for purposes other than civilian consumption while simultaneously providing a high standard of living.”
With this understanding, American strategists began to build up a massive munitions industry, both to counter the military might of the Soviet Union (which they consistently overstated) and also to maintain full employment as well as ward off a possible return of the Depression. The result was that, under Pentagon leadership, entire new industries were created to manufacture large aircraft, nuclear-powered submarines, nuclear warheads, intercontinental ballistic missiles, and surveillance and communications satellites. This led to what President Eisenhower warned against in his farewell address of February 6, 1961: “The conjunction of an immense military establishment and a large arms industry is new in the American experience” — that is, the military-industrial complex.
By 1990, the value of the weapons, equipment, and factories devoted to the Department of Defense was 83% of the value of all plants and equipment in American manufacturing. From 1947 to 1990, the combined U.S. military budgets amounted to $8.7 trillion. Even though the Soviet Union no longer exists, U.S. reliance on military Keynesianism has, if anything, ratcheted up, thanks to the massive vested interests that have become entrenched around the military establishment. Over time, a commitment to both guns and butter has proven an unstable configuration. Military industries crowd out the civilian economy and lead to severe economic weaknesses. Devotion to military Keynesianism is, in fact, a form of slow economic suicide.
On May 1, 2007, the Center for Economic and Policy Research of Washington, D.C., released a study prepared by the global forecasting company Global Insight on the long-term economic impact of increased military spending. Guided by economist Dean Baker, this research showed that, after an initial demand stimulus, by about the sixth year the effect of increased military spending turns negative. Needless to say, the U.S. economy has had to cope with growing defense spending for more than 60 years. He found that, after 10 years of higher defense spending, there would be 464,000 fewer jobs than in a baseline scenario that involved lower defense spending.
“It is often believed that wars and military spending increases are good for the economy. In fact, most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment.”
Hollowing Out the American Economy
It was believed that the U.S. could afford both a massive military establishment and a high standard of living, and that it needed both to maintain full employment. But it did not work out that way. By the 1960s, it was becoming apparent that turning over the nation’s largest manufacturing enterprises to the Department of Defense and producing goods without any investment or consumption value was starting to crowd out civilian economic activities. The historian Thomas E. Woods, Jr., observes that, during the 1950s and 1960s, between one-third and two-thirds of all American research talent was siphoned off into the military sector. It is, of course, impossible to know what innovations never appeared as a result of this diversion of resources and brainpower into the service of the military, but it was during the 1960s that we first began to notice Japan was outpacing us in the design and quality of a range of consumer goods, including household electronics and automobiles.
Nuclear weapons furnish a striking illustration of these anomalies. Between the 1940s and 1996, the United States spent at least $5.8 trillion on the development, testing, and construction of nuclear bombs. By 1967, the peak year of its nuclear stockpile, the United States possessed some 32,500 deliverable atomic and hydrogen bombs, none of which, thankfully, was ever used. They perfectly illustrate the Keynesian principle that the government can provide make-work jobs to keep people employed. Nuclear weapons were not just America’s secret weapon, but also its secret economic weapon. As of 2006, we still had 9,960 of them. There is today no sane use for them, while the trillions spent on them could have been used to solve the problems of social security and health care, quality education and access to higher education for all, not to speak of the retention of highly skilled jobs within the American economy.
The pioneer in analyzing what has been lost as a result of military Keynesianism was the late Seymour Melman (1917-2004), a professor of industrial engineering and operations research at Columbia University. His 1970 book, Pentagon Capitalism: The Political Economy of War, was a prescient analysis of the unintended consequences of the American preoccupation with its armed forces and their weaponry since the onset of the Cold War. Melman wrote (pp. 2-3):
“From 1946 to 1969, the United States government spent over $1,000 billion on the military, more than half of this under the Kennedy and Johnson administrations — the period during which the [Pentagon-dominated] state management was established as a formal institution. This sum of staggering size (try to visualize a billion of something) does not express the cost of the military establishment to the nation as a whole. The true cost is measured by what has been foregone, by the accumulated deterioration in many facets of life by the inability to alleviate human wretchedness of long duration.”
In an important exegesis on Melman’s relevance to the current American economic situation, Thomas Woods writes:
“According to the U.S. Department of Defense, during the four decades from 1947 through 1987 it used (in 1982 dollars) $7.62 trillion in capital resources. In 1985, the Department of Commerce estimated the value of the nation’s plant and equipment, and infrastructure, at just over $7.29 trillion. In other words, the amount spent over that period could have doubled the American capital stock or modernized and replaced its existing stock.”
The fact that we did not modernize or replace our capital assets is one of the main reasons why, by the turn of the twenty-first century, our manufacturing base had all but evaporated. Machine tools — an industry on which Melman was an authority — are a particularly important symptom. In November 1968, a five-year inventory disclosed (p. 186) “that 64 percent of the metalworking machine tools used in U.S. industry were ten years old or older. The age of this industrial equipment (drills, lathes, etc.) marks the United States’ machine tool stock as the oldest among all major industrial nations, and it marks the continuation of a deterioration process that began with the end of the Second World War. This deterioration at the base of the industrial system certifies to the continuous debilitating and depleting effect that the military use of capital and research and development talent has had on American industry.”
Nothing has been done in the period since 1968 to reverse these trends and it shows today in our massive imports of equipment — from medical machines like proton accelerators for radiological therapy (made primarily in Belgium, Germany, and Japan) to cars and trucks.
Our short tenure as the world’s “lone superpower” has come to an end. As Harvard economics professor Benjamin Friedman has written:
“Again and again it has always been the world’s leading lending country that has been the premier country in terms of political influence, diplomatic influence, and cultural influence. It’s no accident that we took over the role from the British at the same time that we took over the job of being the world’s leading lending country. Today we are no longer the world’s leading lending country. In fact we are now the world’s biggest debtor country, and we are continuing to wield influence on the basis of military prowess alone.”
Some of the damage done can never be rectified. There are, however, some steps that this country urgently needs to take. These include reversing Bush’s 2001 and 2003 tax cuts for the wealthy, beginning to liquidate our global empire of over 800 military bases, cutting from the defense budget all projects that bear no relationship to the national security of the United States, and ceasing to use the defense budget as a Keynesian jobs program. If we do these things we have a chance of squeaking by. If we don’t, we face probable national insolvency and a long depression.
Chalmers Johnson is the author of Nemesis: The Last Days of the American Republic, just published in paperback. It is the final volume of his Blowback Trilogy, which also includes Blowback (2000) and The Sorrows of Empire (2004).
[Note: For those interested, click here to view a clip from a new film, “Chalmers Johnson on American Hegemony,” in Cinema Libre Studios’ Speaking Freely series in which he discusses “military Keynesianism” and imperial bankruptcy. For sources on global military spending, please see: (1) Global Security Organization, “World Wide Military Expenditures” as well as Glenn Greenwald, “The bipartisan consensus on U.S. military spending”; (2) Stockholm International Peace Research Institute, “Report: China biggest Asian military spender.”]
These are only some of the many deleterious effects of military Keynesianism.
Copyright 2008 Chalmers Johnson
The is the author of the
The Blowback series
Johnson believed that the enforcement of American hegemony over the world constitutes a new form of global empire. Whereas traditional empires maintained control over subject peoples via colonies, since World War II the US has developed a vast system of hundreds of military bases around the world where it has strategic interests. A long-time Cold Warrior, he applauded the dissolution of the Soviet Union: “I was a cold warrior. There’s no doubt about that. I believed the Soviet Union was a genuine menace. I still think so.” But at the same time he experienced a political awakening after the dissolution of the Soviet Union, noting that instead of demobilizing its armed forces, the US accelerated its reliance on military solutions to problems both economic and political. The result of this militarism (as distinct from actual domestic defense) is more terrorism against the US and its allies, the loss of core democratic values at home, and an eventual disaster for the American economy. Of four books he wrote on this topic, the first three are referred to as The Blowback Trilogy:
- Blowback: The Costs and Consequences of American Empire
Chalmers Johnson summarized the intent of Blowback in the final chapter of Nemesis.
- “In Blowback, I set out to explain why we are hated around the world. The concept “blowback” does not just mean retaliation for things our government has done to and in foreign countries. It refers to retaliation for the numerous illegal operations we have carried out abroad that were kept totally secret from the American public. This means that when the retaliation comes — as it did so spectacularly on September 11, 2001 — the American public is unable to put the events in context. So they tend to support acts intended to lash out against the perpetrators, thereby most commonly preparing the ground for yet another cycle of blowback. In the first book in this trilogy, I tried to provide some of the historical background for understanding the dilemmas we as a nation confront today, although I focused more on Asia — the area of my academic training — than on the Middle East.”
- The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic
Chalmers Johnson summarizes the intent of The Sorrows of Empire in the final chapter of Nemesis.
- “The Sorrows of Empire was written during the American preparations for and launching of the invasions and occupations of Afghanistan and Iraq. I began to study our continuous military buildup since World War II and the 737 military bases we currently maintain in other people’s countries. This empire of bases is the concrete manifestation of our global hegemony, and many of the blowback-inducing wars we have conducted had as their true purpose the sustaining and expanding of this network. We do not think of these overseas deployments as a form of empire; in fact, most Americans do not give them any thought at all until something truly shocking, such as the treatment of prisoners at Guantanamo Bay, brings them to our attention. But the people living next door to these bases and dealing with the swaggering soldiers who brawl and sometimes rape their women certainly think of them as imperial enclaves, just as the people of ancient Iberia or nineteenth-century India knew that they were victims of foreign colonization.”
- Nemesis: The Last Days of the American Republic
Chalmers Johnson summarizes the intent of the book Nemesis.
- “In Nemesis, I have tried to present historical, political, economic, and philosophical evidence of where our current behavior is likely to lead. Specifically, I believe that to maintain our empire abroad requires resources and commitments that will inevitably undercut our domestic democracy and in the end produce a military dictatorship or its civilian equivalent. The founders of our nation understood this well and tried to create a form of government – a republic – that would prevent this from occurring. But the combination of huge standing armies, almost continuous wars, military Keynesianism, and ruinous military expenses have destroyed our republican structure in favor of an imperial presidency. We are on the cusp of losing our democracy for the sake of keeping our empire. Once a nation is started down that path, the dynamics that apply to all empires come into play – isolation, overstretch, the uniting of forces opposed to imperialism, and bankruptcy. Nemesis stalks our life as a free nation.”
- Dismantling the Empire: America’s Last Best Hope
Johnson outlines how the United States can reverse American hegemony.
 Audio and Video
China’s Recipe for the West: Cut Your Debt or It Will Cut You!
- Credit card debt settlement
- Account central online payment
- Reverse Mortgage
Regarding the financial crisis and chaos going on in the Eurozone, Obama gave out some harsh words, saying that it was China’s turn to tell the EU to get their financial house in order. The Eurozone, being the second largest economy in the world, must stop the crisis from getting worse. Asia’s concern is that the EU crisis will eventually take down the whole global economy.
Italian officials met with Chinese delegation in the beginning of September 2011, asking Beijing to buy significant amount of debt. China is already holding about 4% of Italian national debt. So Italy will have to refinance part of the debt coming due this year. Italy is asking China to buy a huge amount of it, because China has about 3 trillion US dollar of foreign exchange reserve. Basically, Italy wants China to underwrite the sovereign debt.
Francis Lun, Managing Director of Hong Kong’s investment company, Lyncean Holdings Ltd., commented on Russia Today about Obama’s statement:
(Article continues below.)
“Europes debt problems must be solved by Europeans alone. Don’t think of China as the lender of last resort that China will underwrite Europe’s debt. Politicians have been paying their budget deficits, actually mortgaging or charging their future. Sooner or later it will catch up with them. 2011 is the year that the debt finally catches up with their debt, such as in several EU countries such as Greece and Italy.”
Watch the whole interview below:
Al Qaeda and Other Jihadists Increasingly Wage Econo-Jihad, Study Finds
♦ Photo by savethedave/Flickr
Vol. 6 Issue 8 16-30 September 2011
Minaret Research Network
9/11– Was There an Alternative?
Suppression of one’s own crimes is virtually ubiquitous among powerful states, at least those that are not defeated.
We are approaching the 10th anniversary of the horrendous atrocities of September 11, 2001, which, it is commonly held, changed the world. On May 1, the presumed mastermind of the crime, Osama bin Laden, was assassinated in Pakistan by a team of elite US commandos, Navy SEALs, after he was captured, unarmed and undefended, in Operation Geronimo.
A number of analysts have observed that although bin Laden was finally killed, he won some major successes in his war against the US. “He repeatedly asserted that the only way to drive the US from the Muslim world and defeat its satraps was by drawing Americans into a series of small but expensive wars that would ultimately bankrupt them,” Eric Margolis writes. “‘Bleeding the US,’ in his words. The United States, first under George W Bush and then Barack Obama, rushed right into bin Laden’s trap … Grotesquely overblown military outlays and debt addiction … may be the most pernicious legacy of the man who thought he could defeat the United States” – particularly when the debt is being cynically exploited by the far right, with the collusion of the Democrat establishment, to undermine what remains of social programs, public education, unions, and, in general, remaining barriers to corporate tyranny.
That Washington was bent on fulfilling bin Laden’s fervent wishes was evident at once. As discussed in my book 9-11, written shortly after those attacks occurred, anyone with knowledge of the region could recognise “that a massive assault on a Muslim population would be the answer to the prayers of bin Laden and his associates, and would lead the US and its allies into a ‘diabolical trap’, as the French foreign minister put it”.
The senior CIA analyst responsible for tracking Osama bin Laden from 1996, Michael Scheuer, wrote shortly after that “bin Laden has been precise in telling America the reasons he is waging war on us. [He] is out to drastically alter US and Western policies toward the Islamic world”, and largely succeeded: “US forces and policies are completing the radicalisation of the Islamic world, something Osama bin Laden has been trying to do with substantial but incomplete success since the early 1990s. As a result, I think it is fair to conclude that the United States of America remains bin Laden’s only indispensable ally.” And arguably remains so, even after his death.
The first 9/11
Was there an alternative? There is every likelihood that the Jihadi movement, much of it highly critical of bin Laden, could have been split and undermined after 9/11. The “crime against humanity”, as it was rightly called, could have been approached as a crime, with an international operation to apprehend the likely suspects. That was recognised at the time, but no such idea was even considered.
In 9-11, I quoted Robert Fisk’s conclusion that the “horrendous crime” of 9/11 was committed with “wickedness and awesome cruelty”, an accurate judgment. It is useful to bear in mind that the crimes could have been even worse. Suppose, for example, that the attack had gone as far as bombing the White House, killing the president, imposing a brutal military dictatorship that killed thousands and tortured tens of thousands while establishing an international terror centre that helped impose similar torture-and-terror states elsewhere and carried out an international assassination campaign; and as an extra fillip, brought in a team of economists – call them “the Kandahar boys” – who quickly drove the economy into one of the worst depressions in its history. That, plainly, would have been a lot worse than 9/11.
Unfortunately, it is not a thought experiment. It happened. The only inaccuracy in this brief account is that the numbers should be multiplied by 25 to yield per capita equivalents, the appropriate measure. I am, of course, referring to what in Latin America is often called “the first 9/11”: September 11, 1973, when the US succeeded in its intensive efforts to overthrow the democratic government of Salvador Allende in Chile with a military coup that placed General Pinochet’s brutal regime in office. The goal, in the words of the Nixon administration, was to kill the “virus” that might encourage all those “foreigners [who] are out to screw us” to take over their own resources and in other ways to pursue an intolerable policy of independent development. In the background was the conclusion of the National Security Council that, if the US could not control Latin America, it could not expect “to achieve a successful order elsewhere in the world”.
The first 9/11, unlike the second, did not change the world. It was “nothing of very great consequence”, as Henry Kissinger assured his boss a few days later.
These events of little consequence were not limited to the military coup that destroyed Chilean democracy and set in motion the horror story that followed. The first 9/11 was just one act in a drama which began in 1962, when John F Kennedy shifted the mission of the Latin American military from “hemispheric defense” – an anachronistic holdover from World War II – to “internal security”, a concept with a chilling interpretation in US-dominated Latin American circles.
In the recently published Cambridge University History of the Cold War, Latin American scholar John Coatsworth writes that from that time to “the Soviet collapse in 1990, the numbers of political prisoners, torture victims, and executions of non-violent political dissenters in Latin America vastly exceeded those in the Soviet Union and its East European satellites”, including many religious martyrs and mass slaughter as well, always supported or initiated in Washington. The last major violent act was the brutal murder of six leading Latin American intellectuals, Jesuit priests, a few days after the Berlin Wall fell. The perpetrators were an elite Salvadorean battalion, which had already left a shocking trail of blood, fresh from renewed training at the JFK School of Special Warfare, acting on direct orders of the high command of the US client state.
The consequences of this hemispheric plague still, of course, reverberate.
From kidnapping and torture to assassination
All of this, and much more like it, is dismissed as of little consequence, and forgotten. Those whose mission is to rule the world enjoy a more comforting picture, articulated well enough in the current issue of the prestigious (and valuable) journal of the Royal Institute of International Affairs in London. The lead article discusses “the visionary international order” of the “second half of the twentieth century” marked by “the universalisation of an American vision of commercial prosperity”. There is something to that account, but it does not quite convey the perception of those at the wrong end of the guns.
The same is true of the assassination of Osama bin Laden, which brings to an end at least a phase in the “war on terror” re-declared by President George W Bush on the second 9/11. Let us turn to a few thoughts on that event and its significance.
On May 1, 2011, Osama bin Laden was killed in his virtually unprotected compound by a raiding mission of 79 Navy SEALs, who entered Pakistan by helicopter. After many lurid stories were provided by the government and withdrawn, official reports made it increasingly clear that the operation was a planned assassination, multiply violating elementary norms of international law, beginning with the invasion itself.
There appears to have been no attempt to apprehend the unarmed victim, as presumably could have been done by 79 commandos facing no opposition – except, they report, from his wife, also unarmed, whom they shot in self-defense when she “lunged” at them, according to the White House.
A plausible reconstruction of the events is provided by veteran Middle East correspondent Yochi Dreazen and colleagues in the Atlantic. Dreazen, formerly the military correspondent for the Wall Street Journal, is senior correspondent for the National Journal Group covering military affairs and national security. According to their investigation, White House planning appears not to have considered the option of capturing bin Laden alive: “The administration had made clear to the military’s clandestine Joint Special Operations Command that it wanted bin Laden dead, according to a senior US official with knowledge of the discussions. A high-ranking military officer briefed on the assault said the SEALs knew their mission was not to take him alive.”
The authors add: “For many at the Pentagon and the Central Intelligence Agency who had spent nearly a decade hunting bin Laden, killing the militant was a necessary and justified act of vengeance.” Furthermore, “capturing bin Laden alive would have also presented the administration with an array of nettlesome legal and political challenges”. Better, then, to assassinate him, dumping his body into the sea without the autopsy considered essential after a killing – an act that predictably provoked both anger and skepticism in much of the Muslim world.
As the Atlantic inquiry observes, “The decision to kill bin Laden outright was the clearest illustration to date of a little-noticed aspect of the Obama administration’s counterterror policy. The Bush administration captured thousands of suspected militants and sent them to detention camps in Afghanistan, Iraq, and Guantanamo Bay. The Obama administration, by contrast, has focused on eliminating individual terrorists rather than attempting to take them alive.” That is one significant difference between Bush and Obama. The authors quote former West German Chancellor Helmut Schmidt, who “told German TV that the US raid was ‘quite clearly a violation of international law’ and that bin Laden should have been detained and put on trial”, contrasting Schmidt with US Attorney General Eric Holder, who “defended the decision to kill bin Laden although he didn’t pose an immediate threat to the Navy SEALs, telling a House panel … that the assault had been ‘lawful, legitimate and appropriate in every way’”.
The disposal of the body without autopsy was also criticised by allies. The highly regarded British barrister Geoffrey Robertson, who supported the intervention and opposed the execution largely on pragmatic grounds, nevertheless described Obama’s claim that “justice was done” as an “absurdity” that should have been obvious to a former professor of constitutional law. Pakistan law “requires a colonial inquest on violent death, and international human rights law insists that the ‘right to life’ mandates an inquiry whenever violent death occurs from government or police action. The US is therefore under a duty to hold an inquiry that will satisfy the world as to the true circumstances of this killing.”
Robertson usefully reminds us that:
“[I]t was not always thus. When the time came to consider the fate of men much more steeped in wickedness than Osama bin Laden – the Nazi leadership – the British government wanted them hanged within six hours of capture. President Truman demurred, citing the conclusion of Justice Robert Jackson that summary execution ‘would not sit easily on the American conscience or be remembered by our children with pride … the only course is to determine the innocence or guilt of the accused after a hearing as dispassionate as the times will permit and upon a record that will leave our reasons and motives clear.’”
Eric Margolis comments that “Washington has never made public the evidence of its claim that Osama bin Laden was behind the 9/11 attacks”, presumably one reason why “polls show that fully a third of American respondents believe that the US government and/or Israel were behind 9/11”, while in the Muslim world skepticism is much higher. “An open trial in the US or at the Hague would have exposed these claims to the light of day,” he continues, a practical reason why Washington should have followed the law.
In societies that profess some respect for law, suspects are apprehended and brought to fair trial. I stress “suspects”. In June 2002, FBI head Robert Mueller, in what the Washington Post described as “among his most detailed public comments on the origins of the attacks”, could say only that “investigators believe the idea of the Sept. 11 attacks on the World Trade Center and Pentagon came from al Qaeda leaders in Afghanistan, the actual plotting was done in Germany, and the financing came through the United Arab Emirates from sources in Afghanistan”.
What the FBI believed and thought in June 2002 they didn’t know eight months earlier, when Washington dismissed tentative offers by the Taliban (how serious, we do not know) to permit a trial of bin Laden if they were presented with evidence. Thus, it is not true, as President Obama claimed in his White House statement after bin Laden’s death, that “[w]e quickly learned that the 9/11 attacks were carried out by al-Qaeda”.
There has never been any reason to doubt what the FBI believed in mid-2002, but that leaves us far from the proof of guilt required in civilised societies – and whatever the evidence might be, it does not warrant murdering a suspect who could, it seems, have been easily apprehended and brought to trial. Much the same is true of evidence provided since. Thus, the 9/11 Commission provided extensive circumstantial evidence of bin Laden’s role in 9/11, based primarily on what it had been told about confessions by prisoners in Guantanamo. It is doubtful that much of that would hold up in an independent court, considering the ways confessions were elicited. But in any event, the conclusions of a congressionally authorised investigation, however convincing one finds them, plainly fall short of a sentence by a credible court, which is what shifts the category of the accused from suspect to convicted.
There is much talk of bin Laden’s “confession”, but that was a boast, not a confession, with as much credibility as my “confession” that I won the Boston marathon. The boast tells us a lot about his character, but nothing about his responsibility for what he regarded as a great achievement, for which he wanted to take credit.
Again, all of this is, transparently, quite independent of one’s judgments about his responsibility, which seemed clear immediately, even before the FBI inquiry, and still does.
Crimes of aggression
It is worth adding that bin Laden’s responsibility was recognised in much of the Muslim world, and condemned. One significant example is the distinguished Lebanese cleric Sheikh Fadlallah, greatly respected by Hizbollah and Shia groups generally, outside Lebanon as well. He had some experience with assassinations. He had been targeted for assassination: by a truck bomb outside a mosque, in a CIA-organised operation in 1985. He escaped, but 80 others were killed, mostly women and girls as they left the mosque – one of those innumerable crimes that do not enter the annals of terror because of the fallacy of “wrong agency”. Sheikh Fadlallah sharply condemned the 9/11 attacks.
One of the leading specialists on the Jihadi movement, Fawaz Gerges, suggests that the movement might have been split at that time had the US exploited the opportunity instead of mobilising the movement, particularly by the attack on Iraq, a great boon to bin Laden, which led to a sharp increase in terror, as intelligence agencies had anticipated. At the Chilcot hearings investigating the background to the invasion of Iraq, for example, the former head of Britain’s domestic intelligence agency MI5 testified that both British and US intelligence were aware that Saddam posed no serious threat, that the invasion was likely to increase terror, and that the invasions of Iraq and Afghanistan had radicalised parts of a generation of Muslims who saw the military actions as an “attack on Islam”. As is often the case, security was not a high priority for state action.
It might be instructive to ask ourselves how we would be reacting if Iraqi commandos had landed at George W Bush’s compound, assassinated him, and dumped his body in the Atlantic (after proper burial rites, of course). Uncontroversially, he was not a “suspect” but the “decider” who gave the orders to invade Iraq – that is, to commit the “supreme international crime differing only from other war crimes in that it contains within itself the accumulated evil of the whole” for which Nazi criminals were hanged: the hundreds of thousands of deaths, millions of refugees, destruction of much of the country and its national heritage, and the murderous sectarian conflict that has now spread to the rest of the region. Equally uncontroversially, these crimes vastly exceed anything attributed to bin Laden.
To say that all of this is uncontroversial, as it is, is not to imply that it is not denied. The existence of flat earthers does not change the fact that, uncontroversially, the earth is not flat. Similarly, it is uncontroversial that Stalin and Hitler were responsible for horrendous crimes, though loyalists deny it. All of this should, again, be too obvious for comment, and would be, except in an atmosphere of hysteria so extreme that it blocks rational thought.
Similarly, it is uncontroversial that Bush and associates did commit the “supreme international crime” – the crime of aggression. That crime was defined clearly enough by Justice Robert Jackson, Chief of Counsel for the United States at Nuremberg. An “aggressor,” Jackson proposed to the Tribunal in his opening statement, is a state that is the first to commit such actions as “[i]nvasion of its armed forces, with or without a declaration of war, of the territory of another State …” No one, even the most extreme supporter of the aggression, denies that Bush and associates did just that.
We might also do well to recall Jackson’s eloquent words at Nuremberg on the principle of universality: “If certain acts in violation of treaties are crimes, they are crimes whether the United States does them or whether Germany does them, and we are not prepared to lay down a rule of criminal conduct against others which we would not be willing to have invoked against us.”
It is also clear that announced intentions are irrelevant, even if they are truly believed. Internal records reveal that Japanese fascists apparently did believe that, by ravaging China, they were labouring to turn it into an “earthly paradise”. And although it may be difficult to imagine, it is conceivable that Bush and company believed they were protecting the world from destruction by Saddam’s nuclear weapons. All irrelevant, though ardent loyalists on all sides may try to convince themselves otherwise.
We are left with two choices: either Bush and associates are guilty of the “supreme international crime” including all the evils that follow, or else we declare that the Nuremberg proceedings were a farce and the allies were guilty of judicial murder.
The imperial mentality and 9/11
A few days before the bin Laden assassination, Orlando Bosch died peacefully in Florida, where he resided along with his accomplice Luis Posada Carriles and many other associates in international terrorism. After he was accused of dozens of terrorist crimes by the FBI, Bosch was granted a presidential pardon by Bush I over the objections of the Justice Department, which found the conclusion “inescapable that it would be prejudicial to the public interest for the United States to provide a safe haven for Bosch”. The coincidence of these deaths at once calls to mind the Bush II doctrine – “already … a de facto rule of international relations”, according to the noted Harvard international relations specialist Graham Allison – which revokes “the sovereignty of states that provide sanctuary to terrorists”.
Allison refers to the pronouncement of Bush II, directed at the Taliban, that “those who harbour terrorists are as guilty as the terrorists themselves”. Such states, therefore, have lost their sovereignty and are fit targets for bombing and terror – for example, the state that harbored Bosch and his associate. When Bush issued this new “de facto rule of international relations”, no one seemed to notice that he was calling for invasion and destruction of the US and the murder of its criminal presidents.
None of this is problematic, of course, if we reject Justice Jackson’s principle of universality, and adopt instead the principle that the US is self-immunised against international law and conventions – as, in fact, the government has frequently made very clear.
It is also worth thinking about the name given to the bin Laden operation: Operation Geronimo. The imperial mentality is so profound that few seem able to perceive that the White House is glorifying bin Laden by calling him “Geronimo” – the Apache Indian chief who led the courageous resistance to the invaders of Apache lands.
The casual choice of the name is reminiscent of the ease with which we name our murder weapons after victims of our crimes: Apache, Blackhawk … We might react differently if the Luftwaffe had called its fighter planes “Jew” and “Gypsy”.
The examples mentioned would fall under the category of “American exceptionalism”, were it not for the fact that easy suppression of one’s own crimes is virtually ubiquitous among powerful states, at least those that are not defeated and forced to acknowledge reality.
Perhaps the assassination was perceived by the administration as an “act of vengeance,” as Robertson concludes. And perhaps the rejection of the legal option of a trial reflects a difference between the moral culture of 1945 and today, as he suggests. Whatever the motive was, it could hardly have been security. As in the case of the “supreme international crime” in Iraq, the bin Laden assassination is another illustration of the important fact that security is often not a high priority for state action, contrary to received doctrine.
(Source: Aljazeera, September 7, 2011)
The price of 9/11
Joseph E. Stiglitz
Joseph Stiglitz, Nobel laureate
Ten years after 9/11, al-Qaeda has been greatly weakened; but the price paid by the US was enormous, and unnecessary.
The September 11, 2001, attacks by al-Qaeda were meant to harm the United States, and they did, but in ways that Osama bin Laden probably never imagined. President George W Bush’s response to the attacks compromised the United States’ basic principles, undermined its economy, and weakened its security.
The attack on Afghanistan that followed the 9/11 attacks was understandable, but the subsequent invasion of Iraq was entirely unconnected to al-Qaeda – as much as Bush tried to establish a link. That war of choice quickly became very expensive – orders of magnitude beyond the $60bn claimed at the beginning – as colossal incompetence met dishonest misrepresentation.
Indeed, when Linda Bilmes and I calculated the United States’ war costs three years ago, the conservative tally was $3-5tn. Since then, the costs have mounted further. With almost 50 per cent of returning troops eligible to receive some level of disability payment, and more than 600,000 treated so far in veterans’ medical facilities, we now estimate that future disability payments and health-care costs will total $600-900bn. But the social costs, reflected in veteran suicides (which have topped 18 per day in recent years) and family breakups, are incalculable.
Even if Bush could be forgiven for taking the United States, and much of the rest of the world, to war on false pretenses, and for misrepresenting the cost of the venture, there is no excuse for how he chose to finance it. His was the first war in history paid for entirely on credit. As the US went into battle, with deficits already soaring from his 2001 tax cut, Bush decided to plunge ahead with yet another round of tax “relief” for the wealthy.
Today, the US is focused on unemployment and the deficit. Both threats to America’s future can, in no small measure, be traced to the wars in Afghanistan and Iraq. Increased defense spending, together with the Bush tax cuts, is a key reason why the US went from a fiscal surplus of 2 per cent of GDP when Bush was elected to its parlous deficit and debt position today. Direct government spending on those wars so far amounts to roughly $2tn – $17,000 for every US household – with bills yet to be received increasing this amount by more than 50 per cent.
Moreover, as Bilmes and I argued in our book The Three Trillion Dollar War, the wars contributed to the United States’ macroeconomic weaknesses, which exacerbated its deficits and debt burden. Then, as now, disruption in the Middle East led to higher oil prices, forcing Americans to spend money on oil imports that they otherwise could have spent buying goods produced in the US.
But then the US Federal Reserve hid these weaknesses by engineering a housing bubble that led to a consumption boom. It will take years to overcome the excessive indebtedness and real-estate overhang that resulted.
Ironically, the wars have undermined the United States’ (and the world’s) security, again in ways that Bin Laden could not have imagined. An unpopular war would have made military recruitment difficult in any circumstances. But, as Bush tried to deceive the US about the wars’ costs, he underfunded the troops, refusing even basic expenditures – say, for armoured and mine-resistant vehicles needed to protect American lives, or for adequate health care for returning veterans. A US court recently ruled that veterans’ rights have been violated. (Remarkably, the Obama administration claims that veterans’ right to appeal to the courts should be restricted!)
Military overreach has predictably led to nervousness about using military power, and others’ knowledge of this threatens to weaken US security as well. But the United States’ real strength, more than its military and economic power, is its “soft power,” its moral authority. And this, too, was weakened: as the US violated basic human rights like habeas corpus and the right not to be tortured, its longstanding commitment to international law was called into question.
In Afghanistan and Iraq, the US and its allies knew that long-term victory required winning hearts and minds. But mistakes in the early years of those wars complicated that already-difficult battle. The wars’ collateral damage has been massive: by some accounts, more than a million Iraqis have died, directly or indirectly, because of the war. According to some studies, at least 137,000 civilians have died violently in Afghanistan and Iraq in the last ten years; among Iraqis alone, there are 1.8m refugees and 1.7m internally displaced people.
Not all of the consequences were disastrous. The deficits to which the US’ debt-funded wars contributed so mightily are now forcing the US to face the reality of budget constraints. US military spending still nearly equals that of the rest of the world combined, two decades after the end of the Cold War. Some of the increased expenditures went to the costly wars in Iraq and Afghanistan and the broader Global War on Terrorism, but much of it was wasted on weapons that don’t work against enemies that don’t exist. Now, at last, those resources are likely to be redeployed, and the US will likely get more security by paying less.
Al-Qaeda, while not conquered, no longer appears to be the threat that loomed so large in the wake of the 9/11 attacks. But the price paid in getting to this point, in the US and elsewhere, has been enormous – and mostly avoidable. The legacy will be with us for a long time. It pays to think before acting.
(Source: Al Jazeera, September 5, 2011)
An America Adrift
Ten years ago, a well-coordinated terrorist plot led to the assault upon the United States with disastrous loss of human life. The worst of all this was the destruction of the World Trade Center towers in lower Manhattan, where nearly 3,000 innocent people were killed.
The loss to America was immediate: The stock market closed down and then lost great value, and for a while the infrastructure system closed down.
The world watched in awe, and many foreigners thought it served the arrogant American empire right; across the Arab world, including in supposedly pro-U.S. nations, there was rejoicing on the streets. Surely, then, America had been weakened?
But the response of the U.S. government was fast, decisive and, in a calculated way, quite brutal. The attackers were known to be of the Al Qaeda terrorist organization, it was known that they were housed by the Taliban in Afghanistan. And it was known how to project American military power into the mountains of Southwest Asia and crush the greater part of Al Qaeda; hunting down Osama bin Laden was a matter of time.
Two years later, in 2003, U.S. forces (with a few allies) poured into Iraq for a second time in recent memory and eradicated Saddam Hussein and his unpleasant regime.
This time, the world stood aghast for a different reason: The blunt display of America’s military might, and thus the possibility that the United States had gone as far ahead in “hard power” capabilities compared to other powers (Russia, India, China, Europe) as the Romans had vis-à-vis the barbarian tribes 2,000 years earlier.
Russian nationalists, French intellectuals and Chinese planners were all upset, which probably made American hawks like Vice President Dick Cheney and Defense Secretary Donald Rumsfeld doubly happy. The United States was back on top.
But was it? And, even if it had displayed an impressive amount of military muscle, how long would that last? And of what deeper value was it to the preservation of America’s long-term power position? Over the years that followed, the epic events of 2001 and 2003, the ground wars in Iraq and especially in Afghanistan became more protracted, more bloody and ever less clear for the American public to understand.
I cannot do the sophisticated polling that the Pew Foundation expert pollsters do, and the Pew polls show Americans nowadays much more uncertain about their post-9/11 position than they apparently were 10 years ago. But when I talk with the folks at my local hardware store or Italian deli, I hear no Cheney-like pride or aggressiveness.
There is a feeling that these wars have lasted too long and aren’t going anywhere, and an even stronger feeling that the White House and Congress should cease bickering and focus all their attention upon America’s undoubted domestic ills.
Is isolationism in evidence at my hardware store and deli? You bet it is. Nobody talks much here about the rise of China. Nobody cares about Putin’s Russia. Latin America and Africa, apart from helping starving babies, are off the mental map. India is marginally on the map. The Middle East is just full of stupidities — why can’t we just get out? And the situation in Israel is to most Americans just an embarrassment. Europe is, except for college students planning an exchange program, not a place of interest; nobody knew of Dominique Strauss-Kahn until he was hauled off the Air France plane.
If asked “which foreign country would you fight for,” the largest number of those Americans polled would say Britain, but that is because those polled feel that Brits are the only people who have fought alongside America in a world in which the superpower feels increasingly lonely and sick of overextending itself. To the average American, few other countries are worth fighting for.
When the actual day of the 10th anniversary occurs, the ceremonials arranged by the White House will be sensitive, intelligent, suitable. How could they not be? And it will be proper to respect what President Obama is trying to do, and to respect American emotions. These events will undoubtedly attract all the chatter of the absurdly short-term media in this country, eager for instant coverage and unintelligent commentary. Obama will strive to be above that.
But what of those of us who are attempting to step back from these memorials and ask questions about where America is in the world now compared to a decade ago? Has the United States been weakened, or strengthened? How has its foreign policy been affected, in the largest sense?
And perhaps the real answer to that critical last question might be this: That the largest effect of 9/11 upon America is that it became distracted. Distracted in two very important ways. In the first place, it was distracted from many other things that are going on in the world. Secondly, it’s been distracted from the erosion of its financial strength and international competitiveness.
Let us look briefly at the first matter. In its own hemisphere — surely among the most important areas in the world to U.S. interests — a new Latin America is emerging, unsteadily but observably. There is human catastrophe in Haiti, an uncertain future for Cuba, the continued idiocies of a sick Chávez regime in Venezuela, and drug-gangster wars from Bolivia to Mexico.
Yet there is also the extraordinary transformation of Brazil, the success of Chile, and the quiet recovery of Argentina. But does the United States have a positive, carefully crafted strategy for Latin America? Of course not.
Africa, apart from a few lights of promise, trembles over the pit of environmental and demographic disaster, but Washington leaves that problem to the World Bank. Europe fades further away. Russia is neglected. An India-Pakistan policy is, well, hard to describe. And American views on China range from blind enthusiasm to calls to build up the U.S. Navy immediately. And all this neglect for adventures in Afghanistan and Iraq that are now being wound down. This will be hard to explain to history students in 50 years’ time.
Even more worrying has been a decade of distraction from attending the “common wealth” — that is, the common good of America itself and of its citizenry.
The Bush administration’s combination of expensive foreign wars and inexcusable tax cuts that favored the rich has had dreadful effects upon U.S. federal deficits, upon America’s growing dependency upon foreigners, and upon the long-term future of the dollar.
The social fabric is fraying, the underclass is growing — it is observable year upon year in the soup kitchen where I work — and the public-school system crumbling. Under-investment in our roads and railways and power systems is visible every day. And, as if any more bad news was needed, along comes a Tea Party with policies that would make America’s double-distraction even worse.
This, then, may be the real legacy of 9/11, long after U.S. troops are withdrawn from those high Hindu Kush ranges.
For here was the decade when America turned its attention away from its own domestic condition and from its need to have a wider view of global change.
(Source: The New York Times, September 6, 2011)
The Day America’s Decline Began
The US enjoyed an outpouring of global sympathy after 9/11. Within a couple of years that sympathy had been utterly squandered.
Ten years. An eyeblink in the eternal march of history – yet sufficient distance to gauge the impact of America’s most dreadful day, one that no one old enough to remember will ever forget. After 10 years, winners and losers can be declared. And in the case of 9/11, it becomes more evident by the day, both sides are losers.
The most obvious one of course is Osama bin Laden. The organisation that he founded has been not only decapitated, but decimated. Hardly a week passes now without the death or capture of top al-Qa’ida commanders, their security presumably compromised by the documents seized during the raid in Pakistan in which Bin Laden was killed. Touch wood, there seems scant chance of the spectacular 10th anniversary attack for which, those documents show, he was desperately trying to organise.
As for his notion that violent Islamic jihad might create a new caliphate stretching from Indonesia to Spain – that seems even more far-fetched than it did 10 years ago. Even the “Arab Spring” of uprisings against the secular Middle Eastern dictators that Bin Laden hated is no vindication of his warped ideology.
The protest reflects far more a popular yearning to enjoy the simple rights of political freedom and economic opportunity that we take for granted, than any answer of 9/11’s call to strike down a decadent yet overbearing West. And yet my guess is that Bin Laden would be fairly pleased right now, even though by any standard measure, he’s lost the fight he started.
But what about the ledger on the other side. Yes, America’s leaders can claim that, contrary to every prediction at the time, there has been no terrorist attack on the US mainland since. And yes, the particular group that carried out the attacks on New York and Washington DC has been largely destroyed. But it took the mightiest military on earth almost 10 years to track down and eliminate its most wanted single target, while the terrorist movement for which he was the inspiration has become a Hydra. Chop off one head in Pakistan, Afghanistan or Yemen and others start to grow elsewhere. And in almost every other sense, these past 10 years have been a tale of mistakes made, opportunities missed and lessons not learned.
Consider first the opportunities missed. In the aftermath of 9/11, the US enjoyed an outpouring of global support and sympathy unmatched since the Second World War: “We Are All Americans Now,” proclaimed that headline in Le Monde, speaking on behalf of the European country that has more hang-ups about America than most.
Within a couple of years, however, that sympathy had been utterly squandered. George W Bush and Dick Cheney were Ugly Americans reborn, loathed across the Arab world and beyond. Barack Obama has repaired much of the damage among traditional US allies. But in Islamic countries America’s reputation remains in tatters, despite its deliberately low profile in the campaign to overthrow Muammar Gaddafi. (“Leading from behind,” one White House aide injudiciously described the approach, provoking scorn and anger from the president’s Republican foes, insulted that the US was not visibly heading this latest Western military foray against an Arab land.) But at least Obama had tried to take the mistakes to heart.
And even setting aside Libya, America remains bogged down in two wars in Islamic countries, as a result of 9/11. The October 2001 invasion of Afghanistan to remove the Taliban government that not only sheltered al-Qa’ida but was literally of a piece with it, was absolutely justifiable – though Bin Laden and his cohorts should have been eliminated within months at Tora Bora. But why did everything take so much longer than it should have? The answer of course lies in that other mistake of the Bush administration, arguably the biggest single foreign policy blunder in all US history: the war of choice against Iraq that has succeeded only in strengthening the position of America’s arch enemy Iran across the entire region.
According to one estimate, Iraq and Afghanistan may end up costing $4 trillion between them, an outlay covered thus far not by raising taxes as most wars are covered, but by borrowing. To that extent, 9/11 has contributed to the current economic crisis, helping create the mountain of debt that now ties Obama’s hands.
And that borrowing continues. America is still in Iraq and may retain a presence there for decades. The same goes for Afghanistan, even though the killing of Bin Laden and the dispersal of al-Qa’ida to other countries mean there is no sane reason why tens of thousands of US troops should remain there, on a nation-building mission impossible. Afghanistan has already provided its own grim 10th anniversary of the 2001 attacks: August 2011 was the deadliest month ever for US forces deployed there.
Contributing to the two longest wars in the country’s history were two more pervasive errors. The first was the “Global War on Terror” itself. At the time, the Bush administration’s decision to treat 9/11 as an act of war seemed to make sense; the country after all had suffered something that neither Hitler nor the Soviet Union could manage, a devastating foreign attack on its own soil.
But declaration of the war on terror was the slippery slope that led to so much that proved disastrous to America’s reputation: torture, Abu Ghraib, rendition, Guantanamo Bay, the denial of basic defendants’ rights to captured “enemy combatants” (many of whom, it belatedly transpired, were innocent.) How much better to have treated the attacks as a criminal matter, monstrous to be sure, but which could have been handled by civilian courts.
But the US strategy post-9/11 contained an even greater mistake: a refusal to face up to the basic dilemma at the core of its policy – that some of its main allies in the “War on Terror” were in fact accomplices or even instigators of that terrorism. One of them, Pakistan, sheltered Bin Laden. Another, Saudi Arabia, provided 15 of the 19 hijackers.
September 11, 2001 was a chance for Bush to take a real hack at the Gordian knot of oil and security that distorts US policy in the Middle East, by increasing the gasoline tax, reducing its addiction to imported oil, and boosting alternative sources of energy. But next to nothing was done. The world was told, you are either with us or against. For the 99 per cent of the population not involved with the armed forces, Bush’s rallying cry was: “Keep on driving, keep on spending.”
The real world, however, moved on. Amid Washington’s obsession with terror, China has stepped up its economic challenge. The present moment has odd echoes of the past – a whiff of the frivolity of those carefree days before the real September 11, when the fuss was about shark attacks in Florida, and whether a California Congressman was having an affair with a missing Washington intern.
And here we are 10 years on, amid a gathering economic crisis far more obvious than the clues back then to an impending terrorist attack, wondering if the magnificently absurd Sarah Palin will run for the White House, watching in disbelief as the two parties squabble over the timing of a presidential speech. 9/11 is not the cause of American decline. But it’s as good a marker as any of when that decline began.
(Source: The Independent, September 7, 2011)
Historians will label the events of that September morning 10 years ago as the most destructive act of terrorism ever committed up to that time. But I suspect they will also judge America’s last decade as one of history’s worst overreactions.
Of course overreaction is what terrorists hope to provoke. If judged by that standard, 9/11 was also one of history’s most successful terrorist acts, dragging the United States into two as yet unresolved wars, draining the treasury of $1 trillion and climbing, as well as damaging America’s power and prestige. These wars have empowered our enemies and hurt our friendships, and have almost certainly generated more terrorists than they have killed.
Like other victims of terrorism, the United States believed that somehow the answer could be found in brute force. But ideas seldom yield to force, and militant Islam is an idea. The result has been the militarization of U.S. foreign policy.
The brief war to topple the Taliban and rid Afghanistan of Osama bin Laden was admirably executed, using air power, Northern Alliance allies, and a few C.I.A. agents on horseback to achieve a specific goal. The failure to nab Bin Laden and his deputy, Ayman al-Zawahri, to let them escape from Tora Bora where they were cornered, was a spectacular failure.
Our 10-year occupation, and our off-and-on-again attempts at nation building, have been a disaster. At first Afghanistan was starved for resources, taking a back seat to the ill-planned, and ill-advised attack on Iraq. When, at last, Afghanistan became a priority, the moment for success had already passed.
Today the Afghan war has morphed into a war against the Pashtuns — perhaps the most war-like people on earth, whom two great empires before us, the Russian and the British, failed to subdue. One could not possibly find a worse place to fight, or a less likely people on whom to impose our will. The Pashtun tribes have risen to the call of Jihad for centuries, and their prowess at battling foreigners is unmatched.
Despite a heavy propaganda campaign to suggest otherwise, the subjugation of the Taliban has been a failure. Counterinsurgency — protecting the people and winning their support — never really got off the ground. Our strategy seems to be that if we can only kill enough Pashtuns somehow they will agree to surrender.
It is true that the Pashtun tribes and clans have traditionally been willing to switch allegiances when the incentives were sufficiently attractive, so the idea of winning over some groups who are now fighting against us was not totally out of the question.
But so far it has simply not worked, and General David Petraeus fell into the trap into which so many generals before him have fallen: He believed that what he learned in one war, the Iraq war, could be replicated in the next: Afghanistan.
Our British allies made the same mistake, believing that what had succeeded in bringing peace to Northern Ireland could apply to Afghanistan.
As for Iraq, if ever there was an intellectuals’ war, it was Iraq. Neoconservative theorists, who knew nothing about Iraq , believed that the transformational power of democracy could change the Middle East — make Arabs more like Americans.
But what happened was that Iraq became more like the Middle East, and, although violence has slowed, it has by no means been brought to any semblance of normalcy. None of the underlying questions, the balance of power between Sunnis and Shiites, what should be the relations of Kurdistan to the rest of the country, have been settled.
In the meantime, the Iraq war has greatly empowered Iran, and the reaction of Iraqi Prime Minister Nuri Kamal al-Maliki in backing Syria’s Bashir al-Assad at Iran’s bidding speaks for itself.
The Bush-Cheney years saw a remarkable abrogation of civil liberties in the name of fighting terrorism, and the descent into torture showed how easily fear can bring even a modern democracy over to the dark side.
Although Al Qaeda was remarkably successful at linking together so many of the Muslim world’s pockets of grievances, mastering the techniques of the Internet, the fact of the matter is that most Muslims would rather not live under the extreme Wahhabism that Al Qaeda preachs. Bin Laden’s ideas about his faith were to Islam what Pol Pot’s were to socialism.
But the sad and counterproductive rise of anti-Muslim attitudes in both Europe and the United States since 9/11 testify that Bin Laden was not entirely unsuccessful in driving a wedge between the Islamic world and the West.
(Source: International Herald Tribune, September 2, 2011)
My Unfinished 9/11 Business
Ten years after the attacks, we memorialize the loss and we mark the heroism, but there is no organized remembrance of the other feelings that day aroused: the bewilderment, the vulnerability, the impotence. It may be difficult to recall with our attention now turned inward upon a faltering economy, but the suddenly apparent menace of the world awakened a bellicose surge of mission and made hawks of many — including me — who had a lifelong wariness of the warrior reflex.
When the planes hit, I was beginning a new life in the opinion department, an elevator ride up from the newsroom that I had served as a Times reporter and editor for 17 years. My debut was not for a couple of weeks, and I was laboring on a nice, safe essay about Western water rights. As the ash cloud spread, I set off on foot through the dazed city, feeling more than a little pointless, until I was summoned by my new boss to write. Something. Now.
My first Op-Ed column, published Sept. 12, counted the ways our sense of the world would now be changed; we would be like Israelis, rearranging our lives around threat. The column was the opposite of warlike.
“Perhaps,” I counseled, “after the obligatory and symbolic reprisals, which will be as ineffectual as Israel’s, our president will spend more time talking about the real-world vigilance of intelligence and law enforcement — which depend on a world of carefully tended alliances — and less about the computer-game threat of a nuclear missile from a suicidal rogue state, which we can handle in the solitude of the Situation Room.”
But my prudent punditry soon felt inadequate. I remember a mounting protective instinct, heightened by the birth of my second daughter almost exactly nine months after the attacks. Something dreadful was loose in the world, and the urge to stop it, to do something — to prove something — was overriding a career-long schooling in the virtues of caution and skepticism. By the time of Alice’s birth I had already turned my attention to Iraq, a place that had, in the literal sense, almost nothing to do with 9/11, but which would be its most contentious consequence. And I was no longer preaching “the real-world vigilance of intelligence and law enforcement.”
During the months of public argument about how to deal with Saddam Hussein, I christened an imaginary association of pundits the I-Can’t-Believe-I’m-a-Hawk Club, made up of liberals for whom 9/11 had stirred a fresh willingness to employ American might. It was a large and estimable group of writers and affiliations, including, among others, Thomas Friedman of The Times; Fareed Zakaria, of Newsweek; George Packer and Jeffrey Goldberg of The New Yorker; Richard Cohen of The Washington Post; the blogger Andrew Sullivan; Paul Berman of Dissent; Christopher Hitchens of just about everywhere; and Kenneth Pollack, the former C.I.A. analyst whose book, “The Threatening Storm,” became the liberal manual on the Iraqi threat. (Yes, it is surely relevant that this is exclusively a boys’ club.)
In several columns I laid out justifications for overthrowing Saddam Hussein. There were caveats — most significantly, that there was no reason to rush, that we should hold off to see whether Iraq’s behavior could be sufficiently contained by sanctions and inspections. Like many liberal hawks, I was ambivalent; Pollack said he was 55 to 45 for war, which feels about right.
But when the troops went in, they went with my blessing. Of course I don’t think President Bush was awaiting permission from The New York Times’s Op-Ed page — or, for that matter, from my friends in the Times newsroom, who during the prewar debate published some notoriously credulous stories about Iraqi weapons. The administration, however, was clearly pleased to cite the liberal hawks as evidence that invading Iraq was not just the impetuous act of cowboy neocons. Thus did Tony Judt in 2006 coin another, unkinder name for our club: “Bush’s Useful Idiots.”
In 2004, a year after the invasion, and again in 2008, Jacob Weisberg, editor of the online magazine Slate and a charter member of my I-Can’t-Believe club, invited liberal hawks to second-guess their support for the war. The responses ranged from remorse to self-vindication, with lots of tortured doubt and defensiveness in between. But I held my tongue. By that time I had moved from the Op-Ed page into a job — executive editor — in which I was obliged to keep my opinions to myself lest they be mistaken for the newspaper’s agenda or influence our coverage. I’m pretty sure the reporters who have covered Iraq with such distinction in the ensuing years could not tell you whether I still believed the war was just or necessary. I’m not sure I knew myself at that point. It is the job of news to recount, clear-eyed, what is, and questions of what should be are an occupational distraction. In any case, I declined to participate in Slate’s collective examination of conscience.
But I have now returned to the opinion business, at a time when America’s role in the world — and in Iraq — is still unsettled. So, let me be the last of the club to retrace my steps, and see if there is any wisdom to be salvaged there.
The question is really two questions: Knowing what we know now, with the glorious advantage of hindsight, was it a mistake to invade and occupy Iraq? And knowing what we knew then, were we wrong to support the war?
Broadly speaking, there were three arguments for invading Iraq: the humanitarian case that Saddam Hussein was a monster whose cruelties were intolerable to civilized nations; the opportunity case — that we might plant the seeds of democracy and freedom in a region desperately in need of them; and the strategic case that Hussein posed an important threat, not only because of his unaccounted-for weapons stockpiles but also because of his habit of smashing through borders and the hospitality he offered to terrorists of various kinds.
For many of us, the monster argument was potent, even if it was not sufficient. Hussein’s genocidal persecution of the Kurds, the Grand Guignol of his prisons and the memory of his savage assault on Kuwait all confirmed him as the beastliest of despots. Those like Christopher Hitchens who had made friends among Iraq’s Kurdish minority felt an acute sympathy and a sense of obligation, because the United States had abandoned the Kurds to Hussein’s butchery after the first gulf war. Others brought to this moment the lessons of Bosnia, where an American-led alliance had stopped the murderous Serbs and somewhat erased the residue of American impotence left by Ho Chi Minh and “Black Hawk Down.” We were, as Andrew Sullivan put it, “enamored of [our] own morality.”
But there are plenty of monstrous regimes that we do not go to the trouble of overthrowing. It should perhaps have caught our attention that Samantha Power, who literally wrote the book on humanitarian intervention (the Pulitzer-winning “A Problem From Hell: America and the Age of Genocide”) and who had endorsed armed intervention in Bosnia and Rwanda, and at an earlier time in Iraq, did not support the invasion of Iraq in 2003.
“My criterion for military intervention — with a strong preference for multilateral intervention — is an immediate threat of large-scale loss of life,” explained Power, who now advises President Obama on multilateral affairs and human rights. “That’s a standard that would have been met in Iraq in 1988 but wasn’t in 2003.”
The idea that America could install democracy in Iraq always seemed to me the most wishful of the rationales for war, although some people who knew the region far better than I made that case. It is true that we had played midwife to new democracies in Germany and Japan after World War II. But those were war-weary societies, with stabilizing institutions, industrialized economies and coherent national cultures, and even so the rebuilding was colossally expensive. The exiled Iraqi academic Kanan Makiya — a proponent of invasion who later repented — observed that Iraq’s population was so traumatized by decades of abuse that they were unwilling to take initiative or responsibility: “A regime was removed and a people liberated overnight, but it was a people that did not understand what had happened to it or why.”
And if we were paying closer attention, as we should have been, we would have been more alarmed by the fact that the authors of the invasion had shown open contempt for the kind of “nation building” that went into the Marshall Plan. They seemed to have in mind a hit-and-run democracy project for Iraq, which was folly.
Beyond Iraq, the idea that a country democratized under American occupation would become a beacon to the region, an antidote to the poisonous doctrine of extremism, was highly questionable given the region’s bitter history of occupation and the popular resentment of America for, among other things, its generous support of so many Arab autocrats.
It turns out, though nobody imagined it eight years ago, that the model for aspiring democrats in the Arab world would be Tunisia, followed in short order by Egypt and Yemen. Do these examples suggest that if we had waited long enough, the Iraqis would have rid themselves of Hussein without American intervention? I doubt it; surely Hussein would have followed the Iranian and Syrian examples of sheer brutality rather than surrender to the streets. Or is it fair to argue that the ouster of Saddam Hussein cleared the way for, even inspired, the recent uprisings around the Mediterranean? Probably not. Friends who have covered the Arab awakening on the ground say there is a powerful pride in its indigenous quality, and specifically a pride that they are not sponsored by Washington. Moreover, America’s occupation of Iraq, and the resulting sectarian upheavals, have been propaganda points for other dictators trying to hold onto power.
The main selling point for war in Iraq, at least for the American public, was that Hussein represented a threat to American security. But what kind of threat, exactly?
Iraq was not, as Afghanistan had been, the host country and operational base of the new strain of Islamic fascism represented by Al Qaeda. It is true that Hussein hosted some nasty characters, but so did many other dictators hostile to America. At the time, Iraq was one of seven countries designated as sponsors of terrorism by the State Department, and in the other six cases we settled for sanctions as recourse enough. And his conventional military — what was left of it after it was laid waste in the deserts of Kuwait and Iraq in 1991 — was under close supervision.
That leaves the elusive weapons of mass destruction. We forget how broad the consensus was that Hussein was hiding the kind of weapons that could rain holocaust on a neighbor or be delivered to America by proxy. He had recently possessed chemical weapons (he used them against the Kurds), and it was only a few years since we had discovered he had an active ambition to acquire nuclear weapons. Inspectors who combed the country after the first gulf war discovered a nuclear program far more advanced than our intelligence agencies had believed; so it is understandable that the next time around the analysts erred on the side of believing the worst.
We now know that the consensus was wrong, and that it was built in part on intelligence that our analysts had good reason to believe was cooked. Should we — those of us without security clearances — have known it in 2003? Certainly we should have been more suspicious of the administration’s assurances. Kenneth Pollack, the former C.I.A. analyst who is now at the Brookings Institution, concedes that he should have drilled deeper into the claims of the intelligence crunchers; he was misled, he says, by the fact that they had seriously underestimated Hussein in the past. A few journalists — notably Jonathan Landay and Warren Strobel of Knight Ridder newspapers — emphasized conflicting intelligence that questioned Hussein’s capabilities. But assuming we couldn’t know for sure, what would have been acceptable odds? If there was only a 50-50 chance that Hussein was close to possessing a nuclear weapon, could we live with that? One in five? One in 10?
Colin Powell, who oversaw the campaign that drove Saddam Hussein out of Kuwait in 1991 and who was the most cautious member of President Bush’s war cabinet, was reluctantly convinced (duped, he would later say) that the W.M.D. risk merited military action. His word carried great weight. The journalist and author Fred Kaplan was one of many, I suspect, who joined the hawk club on the strength of Powell’s speech to the United Nations Security Council six weeks before the invasion.
“I was particularly struck by the tape-recording of an intelligence intercept that Powell played — a phone conversation in which one Iraqi Republican Guard officer tells another to clean out a site before the inspectors get there,” Kaplan recalled. We learned much later that the Iraqi officers wanted to erase traces of chemical weapons that had been stored before the first gulf war. Kaplan dropped out of the hawk club within a month when he concluded that, whether or not an invasion was morally justified, he doubted the Bush administration was up to the task. The rest of us were still a little drugged by testosterone. And maybe a little too pleased with ourselves for standing up to evil and defying the caricature of liberals as, to borrow a phrase from those days, brie-eating surrender monkeys.
In 1992, after driving the Iraqi army out of Kuwait, Defense Secretary Dick Cheney mused on the calculus of war. Why, he asked an audience in Seattle, had the United States not pursued Hussein’s forces all the way to Baghdad and removed him from power? Because, Cheney said, that would have committed the U.S. to an unacceptable long-term occupation, and it would have meant more American casualties. “The question in my mind is, how many additional American casualties is Saddam worth?” Cheney asked at the time. “And the answer is, not that damned many.”
Of course, Cheney wasn’t so cautious the second time around. Along with the arguments that he and many others made after 9/11 came some insufficiently considered assumptions: that we were competent to invade and occupy Iraq without making an awful mess of it and that we could do it at a cost — in lives and money — that we could live with. In the end, the costs were greater than anyone anticipated because of calamitous mistakes in execution. Some critics would put at the top of their list of blunders the abrupt dismantling of the Iraqi Army and the purge of Hussein’s Baath Party from government ministries, moves that simultaneously deprived the unsettled country of stabilizing institutions and created an angry and battle-ready cadre of insurgents. Others will say the stupidest mistake was failing to have a credible plan for what came after the conquest. Others will point to the folly of installing power-hungry exiles in key jobs — handing the Oil Ministry to the great con artist Ahmed Chalabi, for example. All in all, Fred Kaplan, who predicted they would screw it up, looked like Nostradamus.
Just consider the numbers. In the short-lived first gulf war, 148 Americans died in battle. In the current war, the toll so far is nearly 4,500 American dead and 32,000 wounded. At least 100,000 Iraqis, most of them noncombatants, have been killed. A war and occupation estimated to cost $100 billion over two years has already cost eight times that amount. And the meter is still running.
For that price, we have purchased an Iraq where the fear of the tyrant has given way to the fear of random death. Baghdad remains a maze of blast walls and checkpoints, less menacing than during the spasmodic sectarian slaughter of 2006-2007, but still a very dangerous place to live. There is a querulous elected Parliament, but few of the other fundamentals of civil society like an adversarial press and trustworthy courts. The economy still depends overwhelmingly on oil and state jobs. It is one of the most corrupt countries on earth. And there is little confidence that things will not get worse. Many Iraqis fear the American occupation (as they still call it) is the only thing preventing a revival of sectarian killing and an even more authoritarian government.
Our occupation of Iraq has also distracted us from Afghanistan, furnished a propaganda point for Al Qaeda recruiters and limited the credibility of our support for independence movements elsewhere. It is worth mentioning, too, that our moral standing as champions of civil society has been compromised by the abuses of Abu Ghraib and rendition and torture, byproducts of the war that will long remain a blot on our reputation.
Where does this leave me? The world is well rid of Saddam Hussein. But knowing as we now do the exaggeration of Hussein’s threat, the cost in Iraqi and American lives and the fact that none of this great splurge has bought us confidence in Iraq’s future or advanced the cause of freedom elsewhere — I think Operation Iraqi Freedom was a monumental blunder.
Whether it was wrong to support the invasion at the time is a harder call. I could not foresee that we would mishandle the war so badly, but I could see that there was no clear plan for — and at the highest levels, a shameful smugness about — what came after the invasion. I could not have known how bad the intelligence was, but I could see that the White House and the Pentagon were so eager to go that they were probably indifferent to any evidence that didn’t fit their scenario. I could see that they had embraced Chalabi, the exile cheerleader for war, despite considerable suspicion within the State Department and elsewhere that he was a charlatan. I could have seen, had I looked hard enough, that even by the more dire appraisals of Hussein’s capabilities he did not amount to what Oliver Wendell Holmes Jr. called in a very different context “a clear and present danger.” But I wanted to be on the side of doing something, and standing by was not enough.
As a candidate for president, George W. Bush famously argued that to command respect in the world, we needed to demonstrate not only strength but also humility. In office, though, the humility gave way to hubris. President Bush got it wrong. And so did I.
The remedy for bad journalism is more and better journalism. Reporters at The Times made amends for the credulous prewar stories with investigations of the bad intelligence and with brave, relentless and illuminating coverage of the war and occupation. But what The Times writes casts a long shadow. For years, our early stories hyping Iraq’s menace (and to a lesser extent what people like me wrote on the opinion pages) fed a suspicion, especially on the left, that we were not to be trusted.
John F. Burns, a correspondent who chronicled the tyranny of Hussein while the man was still in power and stayed on to cover the invasion and aftermath, recalls the reflexive hostility he encountered as a Times reporter on trips home. “We were all liars, warmongers, lapdogs of Bush and Cheney and so forth,” he told me.
“Whatever we wrote — no matter what it was, and no matter how well documented — was dismissed as Bush propaganda,” added Dexter Filkins, who covered the battlefields and politics of Afghanistan and Iraq for The Times before moving last January to The New Yorker. “That was probably going to happen anyway, but the paper’s real failings gave those criticisms more credibility — and longer legs — than they deserved. Remember that the right-wingers (and a lot of the military) hated us at the time, too, since the war had started to go badly from the get-go, and we were reporting that.”
The last big story to break on my watch as executive editor was the upheaval in Libya. The contours weren’t exactly the same, but they involved another entrenched, grotesque strongman; another oil economy; another fractured Arab society; another cloud of misinformation. This time we all — president, public and press — picked our way more carefully through the mess, weighing the urge to support freedom against the cost of becoming part of a drama we don’t fully understand. That is the caution of a country feeling more threatened these days by our own economics than by foreign enemies. But for some of us it is also the costly wisdom of Iraq.
(Source: International Herald Tribune, September 6, 2011)
How 9/11 Triggered America’s Decline
Gregor Peter Schmitz
The smoke was still rising from the rubble of the World Trade Center when Richard Armitage, at the time the US deputy secretary of state, spoke in the aftermath of the 9/11 attacks. “History begins today,” he said.
In the coming decade, Armitage would turn out to be right — except the politician could not have foreseen how tragic the history would be following the epochal event.
It is the history of the decline of the USA as a superpower.
Immediately before the attacks, this country was in full bloom — like Rome at its peak, as TV host Joe Scarborough recalls today.
The Republican President George W. Bush had inherited a fat budget surplus from the Democrat Bill Clinton. In Kosovo, the US, which Madeleine Albright dubbed “the indispensable nation,” had just shown the Europeans how it could resolve conflicts, even in their own backyard. Bill Gates and Microsoft were still cool.
Then came the planes, piloted by the followers of Osama bin Laden — and for a brief moment, the superpower seemed even more powerful than ever. Palestinian leader Yasser Arafat had himself photographed donating blood for the victims. Even the French all suddenly wanted to be Americans. German Chancellor Gerhard Schröder promised “unlimited solidarity.”
What followed was an unlimited mistake. Bin Laden had hoped to entangle the Americans in bloody wars. How well he would succeed in doing this, he probably could not have imagined himself.
Bush’s Tragic Legacy
America was trapped in Iraq for years, where a victory was a long time coming and was never a real one. It is currently trapped in Afghanistan, where victory no longer even seems possible. And it is trapped in an embrace with its ally Pakistan, which it does not trust and yet cannot release.
These are costly defeats for America and the rest of the world. According to a conservative estimate by Brown University, there have been almost 140,000 civilian casualties in Afghanistan and Iraq. The massive retaliation cost more than $3 trillion (€2.2 trillion) — dollars that would have been better used in America’s schools or in the wallets of US citizens.
For a short time after the attacks, the country seemed united. Americans embraced each other. Even the cold city of New York suddenly seemed warm. But instead of cultivating public spirit, President Bush sought to find a pretext — any pretext — to invade Afghanistan and Iraq. This is his most tragic legacy, the fact that America can no longer even mourn its victims properly — because Americans have long been not just victims, but also perpetrators.
But the decade of terror did in fact traumatize Americans and turn them into victims — even those who only experienced the attacks on television.
A Country at War with Itself
Today, following all the Bush-era tax cuts, the US is a deeply divided country in social terms. The gap between rich and poor is almost as great as it was in the days of oil barons and steel magnates in the last century. Five percent of Americans buy almost 40 percent of all consumer goods sold in the country.
The country is at war with itself. It has a Congress where there is perpetual conflict between the right and the left — and where they don’t even want to talk to each other when the threat of a national bankruptcy looms.
Like no other country, the US became great because of its openness. Now, it has become distrustful, fearful and defensive — against Muslims, against foreigners, against anyone who is different. Citizen militias hunt down illegal immigrants, and many people can still not accept having a black president in the White House.
“American exceptionalism” was always the US’s trump card. The new candidates for the White House still refer to it in the election campaign, but it sounds like a hollow mantra — one of those election promises that shouldn’t be examined too closely.
Because if it was, then people might realize that many things in America are only exceptional because they are exceptionally bad. The country has lousy health statistics despite having one of the most expensive health care systems in the world. Then there are the billions wasted in the education system, not to mention the armaments madness — the US spends almost as much on defense as the rest of the world put together.
And then there is the fixation on a financial system that rewards gamblers, where the country’s most talented young people no longer work on developing new patents, but devote themselves to financial wizardry. Meanwhile, China and other emerging economies can happily concentrate on their own ascent.
Estranged from the Rest of the World
Where has that one-of-a-kind America gone? New York Magazine sums it up: “Ten years later, America now looks a bit more like other countries do — our embrace of capitalism has grown more complicated, our class mobility less certain, our immigrants and our diversity less unique.”
Even in foreign policy, the world power is no longer seen as the world’s role model. “Leading from behind” is the maxim of the current president, Barack Obama. He says it out of necessity, because stateside a strange alliance has formed, between those on the fringes of mainstream politics both on the left and on the right.
They want to turn America into a tight-fisted world power. They only want one thing: US troops should come home, and then other countries should see how they fare. After all, the isolationists argue, these other countries don’t understand America anyway.
The US has become estranged from the rest of the world. It is partly its own fault, but the rest of the world also shares some of the blame — because many only see America as a perpetrator, and no longer regard it as a victim.
This was most evident on the day that bin Laden was killed. Americans cheered spontaneously on the streets when they heard the news. But many people in other parts of the world did not want to celebrate with them. They reacted with agitation to the openly flaunted joy over the terrorist’s death. The alienation of the others often sounded patronizing and self-satisfied.
But it underlined the fact that the victims of the attacks were no longer in the foreground. Instead, the sins of the original victim were brought into focus — America’s sins. The superpower, to a large extent, only has itself to blame. But that is still sad nonetheless.
(Source: Spiegel Online, September 9, 2011)
The Uncontrollable Momentum of War
The initial decision to strike back after the 9/11 attacks is easy to understand. History, however, will ask not why the West invaded Afghanistan, but why did it stay so long?
Why, a decade after 9/11, were there still 140,000 coalition troops on the ground? Why were there so many civilian casualties in May and June 2011 — more than in any preceding recorded month? Why had the United States been in Afghanistan for twice the length of World War II?
The conventional answer to all these questions is that Afghanistan still poses an existential threat to global security. In March 2009, presenting his strategy for a surge in troop numbers, President Obama said, “If the Afghan government falls to the Taliban … that country will again be a base for terrorists who want to kill as many of our people as they possibly can.”
These fears are reinforced by a domino theory that if Afghanistan falls, Pakistan will follow, and the Taliban will get their hands on nuclear weapons.
Every one of these claims is wrong.
First, Afghanistan poses less of a threat to global security than has been imagined. The Taliban are extremely unlikely to be able to seize Kabul, even if there was a very significant reduction in foreign troops. In the unlikely event they succeeded, they are even more unlikely to invite Al Qaeda back: Many Taliban leaders see that connection as their fundamental mistake before 9/11 and believe that if they had not supported Al Qaeda, they would still be in power.
And even with a foothold in Afghanistan, Al Qaeda wouldn’t significantly strengthen its ability to harm the West. The U.S. would respond much more vigorously than it did before 9/11 if Al Qaeda bases were detected in Afghanistan, and the Taliban could offer little protection.
If the question is about regional stability, Egypt is more important than Afghanistan. If the concern is terrorism, Pakistan is more important. And Pakistan’s security won’t be determined by events across the border but by its own internal politics, economic decline and toxic relationship with India. Afghanistan isn’t strategically important enough to justify the West’s current level of military and humanitarian investment — and failure there is inevitable unless we reverse course.
Consider the conventional wisdom that following the fall of Kabul, the West was distracted by Iraq and maintained too light a footprint in Afghanistan, failing to provide sufficient money or troops for the mission. Afghans who initially welcomed a foreign military intervention were alienated by the slow pace of development and the poor governance. This lack of progress created the opening for the Taliban to return. According to this narrative, it was only Obama’s surge of 2009 that, in his words, “for the first time in years … put in place the strategy and resources” so that by December 2010, the U.S. was “on track to achieve (its) goals.”
An irony is that the “light footprint” of the early years was relatively successful — Al Qaeda members were driven out of the country almost immediately, and very quickly, school attendance improved dramatically, health clinics were rolled out, and mobile telephone usage exploded. Non-state-controlled media outlets were established and elections were held for the first time in decades. These are accomplishments worthy of pride, but sadly, the addition of more troops and resources to the NATO-led mission since 2006 has made the situation worse.
The tens of billions of dollars donated to the government of Afghanistan have undermined its leadership. The fashionable agendas of foreigners on short-term tours and their micromanagement have pushed aside the priorities of Afghan ministers. Many of the reconstruction projects have fueled waste and corruption. What’s more, the increases in foreign troops didn’t improve security: rather the reverse. Helmand is less safe in 2011 with 32,000 foreign troops in the province than it was in 2005, when there were only 300.
When I walked alone across central Afghanistan in the winter of 2001 and 2002, I found Afghan villagers to be hospitable and generous, but also far more conservative, insular and Islamist than foreigners acknowledged. When I returned to the country in 2006, to establish a nonprofit organization, it was clear that their resistance was inflamed by the increasingly heavy presence of Western troops, which allowed the Taliban to gain support by presenting themselves as fighters for Islam and Afghanistan against a foreign occupation.
In June, Obama announced a drawdown of U.S. forces, to be completed in 2014 with the handover of responsibility to Afghan forces. But a political settlement in the next three years is highly improbable because neither the Taliban, nor the Afghan government, nor Afghanistan’s neighbors are showing much commitment to compromise, in part because they still believe they can win.
Many people have pointed out the absurdity of the West’s approach. From 2008 to 2010, I ran the Carr Center for Human Rights Policy at Harvard’s Kennedy School. The center’s research fellows collectively had more than a century of experience on the ground in Afghanistan. Research by fellows such as Andrew Wilder, David Mansfield and Michael Semple proved that our aid projects were increasing instability; that we were undermining any chance of political settlement with the Taliban; and that the Taliban-controlled areas were often more secure than the government areas. Their findings explained why our counterinsurgency strategy was empty and the “surge” was counterproductive, but they were often ignored by the military and political establishment, which has remained defiantly optimistic.
Over the last decade of war, many politicians have trusted charismatic, optimistic generals rather than their own instincts and reason. Concerns about the huge costs of the mission ($120 billion per year for the U.S. alone) and exaggerated fears about what would follow if it failed co-opted almost everyone: Afghan businessmen and foreign contractors, writers and academics. All continued to hope that some magic plan would extract us from humiliation.
At the heart of our irrational persistence are the demons of guilt and fear. Leaders are hypnotized by fears about global security; feel guilty about the loss of lives; ashamed at their inability to honor our promises to Afghans; and terrified of admitting defeat.
Failure in Afghanistan has become “not an option.” This is the fatal legacy of 9/11, because with that slogan, failure has become invisible, inconceivable and inevitable.
(Source: The New York Times, September 9, 2011)
An Infamy in History
“What were you doing on 9/11?” In a few days this question will dominate all conversations, at least in the Western world. The emotional centrality of this tragic day remains undeniable, but what about its strategic centrality?
Is 9/11 an historical turning point, one that ushered us into the 21st century just as the Sarajevo assassination in July 1914 marked our entrance into the 20th?
Contrary to what some analysts said in the immediate aftermath of the terrorist attacks, 9/11 did not signify the entrance into a world dominated by the “clash of civilizations” announced in the 1990s by Samuel Huntington.
With the benefit of hindsight, this unique human tragedy — nearly 3,000 people died in the Twin Towers of Manhattan — appears instead as the culminating point and the beginning of decline for Al Qaeda in its sectarian warfare against established Islam, as much as against the West.
Nor did 9/11 usher in, fortunately, a world dominated by “hyper-terrorism.” Terrorists inspired by Al Qaeda have continued to strike from Spain to Britain and from India to Nigeria, just to mention a few of their targets.
But placed on the defensive by the mobilization of the world against them — a collaborative effort that really made the difference — they have never been able to repeat 9/11.
The death of Osama bin Laden in the midst of the Arab Spring — a revolution that began without the knowledge or involvement of fundamentalist Islamists — declared the defeat of the terrorists and the dawn of a post-Islamist world, even if Islamist parties do well in elections in countries like Egypt.
Of course terrorism can never be fully defeated. There will be more terror attacks. Al Qaeda may win a few more battles, but it has lost the war.
If 21st century historians will continue to regard 9/11 as a symbolic date, as a revealing accelerator of history, it will be less for the terror attacks themselves than for the American response.
Historians speak of the “law of unintended consequences.” The encounter between a few thousand confused voters in Florida in the presidential elections in 2000 and a dozen terrorists indoctrinated by a nihilist ideology accelerated and may even have modified the course of history.
The encounter between George W. Bush and 9/11 produced consequences that even the terrorists, in their darkest dreams, could not foresee. It is unlikely that Al Gore as president would have used 9/11 as a pretext to launch the war in Iraq, a war that has resulted in the doubling of the American debt.
It would be highly exaggerated to say that Bin Laden became the equivalent for the United States of what Ronald Reagan was for a declining Soviet empire — the prime mover of a ruinous and ill-considered rush forward (the armaments race for Moscow, and foreign adventures for Washington). And of course America today is not the equivalent of what the Soviet Union was yesterday — America’s internal contradictions have neither the depth nor the gravity of the Soviet Union’s.
Yet it is legitimate to ask whether the first decade of the 21st century has not been a “lost” one for the United States, and whether, in American eyes, the tree of fundamentalist terrorism did not hide the forest of the rise of Asia.
The purported American victory against fundamentalism has been a Pyrrhic one not only because of its financial, moral and diplomatic cost, but in its overreaction, in the waste of energy that could have been used far better in Afghanistan than in Iraq.
America probably underreacted to the terrorist threat before 9/11, and overreacted after the event.
So 9/11 is a historical moment, but not necessarily for the reasons that seemed to prevail at the time. It did not signal the arrival of a new world, but it has accelerated the end of the American Century.
(Source: The New York Times, September 7, 2011)
My daughter turned four that day. She was in my arms as my wife and I ran down Remsen Street to the Brooklyn Promenade. Smoke from the towers was thickening into a churning cloud. Papers from incinerated brokerage houses fluttered across the East River beneath that sky I think of now as 9/11 blue.
Journalists are bound to observe which way people are moving and go in the opposite direction. I boarded the No. 2 train at Clark Street. The woman next to me was fighting back tears. Her brother was in the North Tower, she thought. I tried to console her. The subway, one of the last to run, passed beneath the inferno to Times Square.
It was my first day in a new job as an editor. I’d been at my desk 10 minutes when, at 9:59 a.m., the South Tower came down. Adrenalin kicked in: the alchemy of newspapering. Grief suppressed only became irrepressible a couple of days later. A woman searching for her lost husband had tacked to a wall an ultrasound showing an unborn child who would now grow up fatherless. That did it.
The fires burned, fed by molten steel buried deep. They burned for weeks. Sometimes, in certain winds, the acrid-sweet smell below Canal Street carried into Brooklyn, an emetic reminder of what the fires had consumed.
I remember that. One thing 9/11 teaches, a decade on, is that memory is treacherous. It is ever shifting and unscientific, close to imagination, as distinct from history as emotion from form.
How many times since that day have I listened to people around the world expound on their theory of what really happened, based on what they believe they saw. No conspiracy has proved too outlandish or too foul to entertain. I’ve had to restrain myself.
Tell me your 9/11 and I’ll tell you who you are.
Joseph Brodsky once wrote: “If there is any substitute for love, it’s memory. To memorize, then, is to restore intimacy.” That’s not a bad definition of what the best journalism does: restore intimacy. The Portraits of Grief that appeared in The New York Times for months after the attack hit home because they undercut, through the particulars of single lives, Stalin’s formula: Murder en masse and loss becomes a mere statistic.
There followed the nation’s loss — of direction. The early 20th century was a period of giddy American expansion. The early 21st century has been a period of gathering American doubt. The American Century is behind us; this one still seeks its epithet among the emergent powers. What role the attack played in this reshaping of the globe, and what part of it is attributable to the inexorable currents of history, is an open question.
I’d say the power shift was inevitable but accelerated by 9/11 and by chance. Hanging chads contributed. The United States found itself with an accidental president. He took the nation into two wars without preparing the nation for sacrifice. His righteousness brooked no questioning. Irresponsibility was allied to conviction, a heinous marriage. Self-delusion is the mother of perdition. Wars killed. Wall Street made killings. “Whatever” became the watchword of maxed-out Americans; and in time things fell apart.
When they do, extreme ideologies thrive. There must be an enemy within. Scapegoats must be found, compromise crushed. The most devastating effect of 9/11 has been the polarization of America and the incubation of hatred.
The national interest has lost out to settling scores or whipping up bigotry. It is the manipulation of memory — not fit remembrance — that has turned an attack by a band of fanatical Muslims into grounds for the grotesque attempt to ban Shariah law in several U.S. states, and to scurrilous imaginings about President Obama and Islam.
There is a coda to this decade: Hope. Arabs have risen up by the hundreds of millions to claim a dignity and freedom long denied them. The kleptocratic tyrannies they lived under were production lines for the fanaticism behind 9/11; the hypocrisy of Western support for those tyrannies was a great propaganda tool for terrorists. As America has learned of late, change is hard. It will be uneven in the Arab world. But in this transformation a constructive answer to 9/11 is at last being traced.
On one of those scraps of paper that fluttered over the East River I found these words written to my daughter: “I am leaving this world on your birthday. Remember what you see. Write it down. This is what hatred does. Go forth. Embrace love. Seek understanding. Anything can happen. I don’t know if God exists. It might be better for His reputation if He didn’t.”
My little girl is now an adolescent poised on the fulcrum between childhood and womanhood. She used to say her birthday was famous but she’s not. She used to say her birthday is on the day the towers came down. Now she says nothing. That seems wise. There’s enough noise. Silence is remembrance.
I never gave her that note from a departed soul because in fact I imagined it.
(Source: The New York Times, September 8, 2011)
After September 11: What We Still Don’t Know
After September 11, 2001, it is often said, “everything changed.” The shock of that day, on which nearly three thousand civilians were murdered, still reverberates, affecting politics, law, and policy here and abroad. But ten years later, it is worth asking what, precisely, did and did not change, particularly with respect to law, liberty, and security.
One of the most important lessons of the past decade may be that the rule of law, seemingly so vulnerable in the attacks’ aftermath, proved far more resilient than many would have predicted. President George W. Bush’s administration initially rejected the constraints of law as inconvenient obstacles on the path to security. But the administration was eventually forced to adapt its response to legal demands. The American constitutional system ordinarily relies on courts and checks and balances to impose legal restrictions on government officials. But in this period, with one significant exception, restraint of government was brought about neither by judicial enforcement of constitutional law nor by legislative checks on executive power, but by civil society’s demands for adherence to basic principles of human rights. Ten years and one administration later, the threats, both to our security and to our liberty, are far from over. But the experience of the last ten years shows the importance of maintaining public pressure for fidelity to our core principles as we enter the second decade of the “war on terror.”
Much has changed since September 11. The United States launched two wars, one against the country that harbored al-Qaeda, the other against a country that did not. The federal government undertook the largest bureaucratic reorganization since the New Deal, creating the Department of Homeland Security, the Office of the Director of National Intelligence, and the National Counterterrorism Center. The FBI shifted its focus from law enforcement to intelligence-gathering and preventing terrorism, aggressively employing informants and provocateurs to “flush out” would-be terrorists before they acted. Congress expanded the government’s authority to gather intelligence on people in the US and to prosecute even speech and association that allegedly gave “material support” to terrorist groups.
How much are we spending on counterterrorism efforts? According to Admiral (Ret.) Dennis Blair, who served as director of national intelligence under both Bush and Obama, the United States today spends about $80 billion a year, not including expenditures in Iraq and Afghanistan (which of course dwarf that sum).1 Generous estimates of the strength of al-Qaeda and its affiliates, Blair reports, put them at between three thousand and five thousand men. That means we are spending between $16 million and $27 million per year on each potential terrorist. As several administration officials have told me, one consequence is that in government meetings, the people representing security interests vastly outnumber those who might speak for protecting individual liberties. As a result, civil liberties will continue to be at risk for a long time to come.
The most radical responses to September 11 were undertaken unilaterally by the Bush administration in the first couple of years following the attacks. It imprisoned hundreds of people it called “enemy combatants” indefinitely, sought to keep them beyond the reach of courts or the law, and denied them even basic Geneva Convention protections, such as humane treatment—protections the United States had afforded its foes in all previous armed conflicts. It “disappeared” suspects into secret CIA prisons, or “black sites,” holding them incommunicado and refusing to acknowledge even the fact of their detention for years at a time. We still don’t know a good deal about the secret prisons or those who were detained there.
The government held suspects without trial or even hearings, and subjected them to torture and cruelty, including waterboarding, slamming them into walls, and forcing them into painful stress positions for hours at a time. It “rendered” still other suspects to security services in countries, such as Syria, Egypt, and Morocco, that we had long condemned for using torture as a tool of interrogation, so that they could torture them for us.
In addition, the Bush administration unilaterally created “military commissions” to try prisoners. As originally formulated, they would have permitted the execution of defendants on the basis of evidence gained from torture, without any independent judicial review. It authorized the National Security Agency to conduct warrantless wiretapping, including of US citizens, in direct violation of a federal law that made such surveillance a crime. And it subjected more than five thousand Arab and Muslim foreign nationals within the United States to preventive detention—not one of whom stands convicted of a terrorist offense. Its rationale for many of these actions, formulated by a young Justice Department lawyer, now a Berkeley law professor, John Yoo, was that as commander in chief, the president was free to take any action he deemed necessary to “engage the enemy,” even if Congress or international law expressly forbade it. In short, the president was above the law.
Times like these test the limits of the rule of law. The nation wanted security, and an administration none too sensitive to civil liberties in the best of times took that demand as a mandate to thrust legal restrictions aside. And who could stop it? The United States was the most powerful country in the world and, at least militarily, easily outmuscled any other nation. The group that had attacked us in such a brutal and cold-blooded manner had few friends beyond the Taliban. And the American population was unlikely to object to measures that sacrificed the rights of others—Arabs and Muslims, and especially Arab and Muslim foreigners—for American security. Had you asserted, on September 11, 2001, that the United States would not be able to do whatever it wanted in response to the attacks of that day, you would have been met with derision.
Yet the Bush administration was forced to retreat on all of these fronts. When the memorandum authorizing the CIA to use waterboarding and other forms of torture and cruelty was leaked and published by The Washington Post, the administration retracted it. When conservative New York Times columnist William Safire, among others, condemned the military commissions for the absence of judicial review, then White House Counsel Alberto Gonzales wrote an Op-Ed column claiming that the President never meant to deny judicial review—despite having said exactly that in his original order. And after The New York Times revealed the NSA’s illegal warrantless wiretapping program, the administration was compelled to suspend it.
In a series of extraordinary cases reviewing the administration’s asserted authority to hold “enemy combatants” beyond the reach of the law, the Supreme Court repeatedly rejected the administration’s position that judicial review was unavailable, even after Congress had expressly sought to insulate the detentions from judicial review. The Court overruled the administration’s position that the Geneva Conventions were inapplicable to al-Qaeda detainees, thereby confirming that they had a right to humane treatment. The Court also refuted the administration’s position that it could hold even US citizens as “enemy combatants” without a hearing and an adequate opportunity to defend themselves. And it declared the President’s scheme for military commissions illegal. Despite his contention that the courts had no authority to intrude upon his power as commander in chief, President Bush had to comply.
None of the administration’s retreats was voluntary. In each instance, it acted reluctantly, adhering to legal constraints only because it felt that it had no choice. In some instances, moreover, it sought to give the impression that it was complying with the law, while secretly continuing to act lawlessly. Thus, when the Justice Department retracted its August 1, 2002, “torture memo,” it wrote, in secret, a series of further memos that continued to give the CIA a green light to employ waterboarding and other inhumane and coercive interrogation tactics for six more years.2 And while it transferred detainees out of the CIA’s secret prisons in Romania, Poland, and elsewhere when it became clear that they were protected by the Geneva Conventions, it kept the prisons open for potential future use. Still, by the second term of the Bush administration, US counterterrorism policy had stepped substantially back from its post–September 11 origins.
In his presidential campaign, Barack Obama vigorously attacked the Bush administration’s lawless ways, and promised meaningful reform. Immediately upon taking office, he closed the CIA’s secret prisons, barred the use of “enhanced interrogation techniques,” and vowed to close Guantánamo within a year. He released the previously secret Justice Department memos that had authorized torture and cruel treatment, in the President’s own words, “to ensure that the actions described within them never take place again.” In May 2009, he delivered a major speech on the importance of fighting terrorism within the rule of law, insisting that “time and again, our values have been our best national security asset.”
President Obama expressly renounced his predecessor’s theory that the commander in chief had unilateral power to violate the law, and maintained instead that his authority was limited by the scope of Congress’s Authorization to Use Military Force, issued shortly after September 11. And when, in 2010, a panel of the US Court of Appeals for the D.C. Circuit ruled that the president’s authority to detain was not bound by the laws of war, the Obama administration took the extraordinary step of arguing that the court had granted it too much power. It argued to the full court that the president’s authority is indeed constrained by the laws of war. The appeals court then rejected the panel’s prior reasoning as unnecessary to the result.
These developments suggest three conclusions. First, the values of the rule of law are more tenacious than many cynics and “realists” thought, certainly than many in the Bush administration imagined. The most powerful nation in the world was forced to retreat substantially on each of its lawless ventures.
Second, there is no evidence that the country is less safe now that the lawless measures have been rescinded. Bush administration defenders often assert that its initial responses were driven by necessity, but the fact that we remain reasonably secure under a more law-bounded regime refutes that claim. Indeed, even some of Bush’s own security experts now recognize that our success rests on resisting overreaction. Michael Leiter, head of the National Counterterrorism Center under Presidents Bush and Obama, maintained at the Aspen Security Forum in July that the way to defeat terrorism is “to maintain a cultural resilience,” and that if we do not overreact, “our basic principles that have held our country together…can continue to do so.”
Third, the choice to jettison legal constraints has inflicted long-lasting costs. The principal reason that we have yet to bring any of the September 11 conspirators to justice, ten years after their abominable crimes, is that we chose to “disappear” and torture them, thereby greatly compromising our ability to try them. And the decision to deny those at Guantánamo any of the most basic rights owed enemy detainees turned the prison there into a symbol of injustice and oppression, exactly the propaganda al-Qaeda needed to foster anti-Americanism and inspire new recruits and affiliates.
The Constitution created a divided government to limit overreaching by any one branch, and established judicial review to ensure that we would have a government “of laws, not men,” as Chief Justice John Marshall put it. In ordinary times, that structure functions reasonably well. But in times of crisis, it has proved inadequate. In World War I, Congress made it a crime to speak against the war, the executive prosecuted hundreds for doing so, and the Supreme Court upheld the sentences. In World War II, Franklin D. Roosevelt’s administration interned more than 110,000 people of Japanese descent, and neither Congress nor the Supreme Court tried to stop it. And in the McCarthy era, Congress and the Truman administration imposed guilt by association on Communist “sympathizers,” and the Supreme Court did nothing to restrain them until the Senate had censured McCarthy and he and his allies had lost power and public influence. In each crisis, the political branches were more likely to goad each other on than to impose limits, and the Supreme Court either expressly affirmed what went on or looked the other way.
This time was different. As before, the executive overreacted. As before, Congress imposed no meaningful limits. But this time the Supreme Court, breaking from its past, stood up to the President. It insisted that it was responsible for reviewing detentions during wartime, rejected claims that it must defer to the executive, ruled that military detainees must be accorded Geneva Conventions protections, and, most extraordinarily, kept the courthouse door open for the Guantánamo detainees even after Congress and the President, acting together, had unequivocally sought to close it.
Still, it would be wrong to say that the Supreme Court was the only, or even the principal, checking mechanism. The Court’s decisions were in truth quite limited. Two decisions addressed only whether Guantánamo detainees could be heard in court, but said nothing about the law that would apply once their claims were adjudicated. Since then, many district courts have ruled that Guantánamo detainees should be released for lack of evidence, but those decisions can be appealed. In each case that the Obama administration has appealed, it has won in the D.C. Circuit; the Supreme Court, in turn, has declined to exercise further review. Thus, in nearly ten years, not a single detainee has been released by order of a court. (The administration has forgone appeals in some cases and released the detainees, but given its record in the court of appeals, these releases were a matter of choice, not legally compelled.)
The Supreme Court’s ruling that a US citizen was entitled to due process upon being held as an “enemy combatant” failed to specify the particular procedures due him, and the administration avoided further court review, releasing the detainee on condition that he resettle in Saudi Arabia. And the Court’s decision declaring President Bush’s military commissions illegal rested only on statutory grounds, which Congress promptly overruled.
Beyond these cases, the Court has done nothing to halt the government from overreaching its legitimate constitutional powers. In a case I argued, it ruled that Congress could constitutionally make it a crime to advocate for peace and human rights as a form of “material support” to a disfavored group, the Kurdistan Workers Party in Turkey. It dismissed suits against Attorney General John Ashcroft for mistreatment of September 11 detainees and for abuse of the “material witness” statute to lock up a Muslim man without probable cause. And it has declined to review several cases challenging the executive’s aggressive uses of secrecy, torture, and rendition.
Yet despite the fact that no detainee has been released by court order, more than 600 of the 775 people once held at Guantánamo Bay have been released. Torture and inhumane treatment are no longer official US policy. The NSA spying program now has a statutory footing and is subject to judicial approval and oversight. Widespread preventive detention of Muslim and Arab immigrants in the United States has not been repeated. There have been no reports of rendition to torture in years. And the CIA’s black sites are closed.
If these changes cannot be attributed to judicial enforcement or congressional mandates, what was the moving force? The answer is not to be found in the institutions of government, but in civil society—in the loosely coordinated political actions of concerned individuals and groups, here and abroad. Following September 11, many organizations took up the task of defending liberty—among them the American Civil Liberties Union, the Center for Constitutional Rights, Human Rights First, Human Rights Watch, the Council on American-Islamic Relations, and the American Arab Anti-Discrimination Committee. Most of these groups did not even exist in the McCarthy era, our nation’s last security crisis.
Many individual defenders of liberties also spoke out, including Lord Steyn, a former British Law Lord who labeled Guantánamo a “legal black hole”; 175 members of Parliament who signed an amicus brief on behalf of Guantánamo detainees in the first detainee case to reach the Supreme Court; several retired US generals and admirals who insisted on the importance of adhering to the Geneva Conventions; many members of the press, who not only disclosed some of the worst abuses but published countless editorials on the importance of adhering to constitutional and human rights; and individual members of Congress, especially Senators Pat Leahy, Dick Durbin, and Bernie Sanders, and Representatives John Conyers Jr., Jerrold Nadler, and Keith Ellison. These individuals and organizations issued statements, held hearings, filed lawsuits, wrote reports and articles, and tirelessly insisted that the rule of law should not be abandoned in the pursuit of security.
But of course it’s not only that American civil society mobilized in defense of liberty. Civil society mobilizes around a lot of issues, and as often as not it is unable to make much, if any, headway. That the public criticism of government repression was effective also attests to the residual power of the ideals encompassed in the rule of law—liberty, equality, fair process, and dignity. Those values were strong enough, when pressed by a wide range of voices, to restrain the highest officials of the most powerful country in the world. Margaret Mead famously warned that one should “never underestimate the power of a few committed people to change the world.” One might add that one should also never underestimate the power of appeals to the rule of law.
Still, President Obama’s administration has fallen short in a number of critical ways. He has continued to rely on broad claims of secrecy, invoking the “state secrets privilege” to block lawsuits seeking redress for victims of torture and extraordinary rendition. He has dramatically expanded a program of targeted killings using unmanned drones, without setting forth the general procedures or criteria he is employing. Killing the enemy during wartime is not illegal, of course, but assassinating people outside of war is. As long as the contours of the targeted killing program remain secret, we cannot know whether it accords with basic principles of constitutional and international law.
Obama has also defended a sweeping interpretation of the laws prohibiting “material support” to designated terrorist groups. His then solicitor general, Elena Kagan, told the Supreme Court in 2010 that the law makes it a crime even to file an amicus brief on a designated group’s behalf. By a divided vote, the Court upheld the statute, but the dissenting justices—Stephen Breyer, Ruth Bader Ginsburg, and Sonia Sotomayor—made it clear that a much narrower reading, limited to aid intended to further terrorism, was available had the administration chosen to adopt it.3
Now the administration is defending on appeal a conviction, under the same statute, of members of the board of the Holy Land Foundation, the nation’s largest Muslim charity, who were sentenced to as much as sixty-five years in prison for providing humanitarian aid to hungry and indigent families in the West Bank—even though, according to the government’s own evidence, not a penny went to any group designated as terrorist, and not a penny was used for anything but humanitarian purposes. Lacking such evidence the administration argued that the board members’ provision of aid to small West Bank charities violated the law because they should have known the charities were affiliated with Hamas—even though the government had never before said so.
Obama has also failed to deliver on his promise to close Guantánamo, and backed down on his commitment to try terrorists in civilian court wherever possible. In both instances, he did so because of substantial opposition from members of Congress, many from his own party, so he is not solely or even primarily to blame. But on this subject, as on too many others, he has failed to lead.
But most disturbing, from the standpoint of resurrecting the rule of law, the administration has refused to confront honestly the nation’s past wrongs. As President Obama entered office, he sought to make a clean break with his predecessor. But at the same time, he has insisted that we look forward, not back. His administration has refused to conduct the criminal investigation that the Convention Against Torture requires wherever there are credible allegations that a person within our jurisdiction has committed torture. His Justice Department vetoed the recommendation of its own Office of Professional Responsibility that lawyers John Yoo and Jay Bybee be referred to their bar associations for disciplinary action in view of their having failed to provide candid legal advice in drafting the “torture memos.” The administration has sought to derail efforts in Spain to investigate US responsibility for torture of Spanish citizens held at Guantánamo. And President Obama continues to oppose even a high-level commission to investigate and report on the nation’s departure from the rule of law and descent into torture, abduction, and disappearances.
Obama appears to believe that such an investigation would be divisive, and might undermine his efforts to portray himself as above partisan wrangling. But division is a fact of life in Washington these days. And being above the fray is not an unmitigated good; some things are worth fighting for. A legal and moral accounting of the wrongs we have done should be high on the list.
Because so much was done under the veil of secrecy, much remains unknown about the extent of the illegality. Mark Danner’s publication in these pages of the Red Cross’s report on the abusive interrogations of “high-value” detainees provides a glimpse at the horrors US agents inflicted. But we do not even know how many people US officials have abducted, rendered, disappeared, tortured, or killed. We do not know the extent of the injuries suffered, and still being suffered, by those we abused. We still know relatively little about the mistreatment of most of the Guantánamo detainees. We have not apologized to even a single victim—not even to those, like Canadian citizen Maher Arar and German citizen Khaled al-Masri, who were targeted for renditions and torture based on misinformation, and have been cleared of any wrongdoing themselves.
Meanwhile, our former president in his memoir has proudly proclaimed that he personally authorized waterboarding—a practice we prosecuted as torture in the past when it was used against our troops. The former vice-president recently replied affirmatively when asked whether waterboarding should “still be a tool” of interrogation. Failing to condemn such blatant wrongdoing in some official way leaves an open wound both for the victims and for the integrity of our system, and implies that the tactics were neither lawless nor immoral. The rule of law may be tenacious when it is supported, but violations of it that go unaccounted corrode its very foundation.
All of which only underscores the continuing need for an engaged civil society committed to the ideals of liberty and law. The past decade suggests that the rule of law may be stronger than cynics thought. It teaches that adherence to values of liberty, equality, and dignity is more likely to further than to obstruct our security interests. But it also illustrates our collective reluctance to confront our past, a reluctance that threatens to erode our most important values. As one of America’s greatest judges, Learned Hand, once cautioned, “Liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can even do much to help it. While it lies there it needs no constitution, no law, no court to save it.”
(Source: New York Review of Books, September 11, 2011)
by Patrick J. Buchanan
The insurgencies in Iraq and Afghanistan have thus far cost fewer U.S. lives than the Filipino insurgency of 1899-1902. Yet Army Chief of Staff Gen. Peter Schoomaker warned Congress last week the U.S. Army “will break” without more troops. We started this war “flat-footed,” with 500,000 fewer soldiers than we had before the Gulf War, says the general, who wants 7,000 soldiers added yearly to the 507,000 on active duty. The Army is “about broken,” agrees Colin Powell, the former chairman of the Joint Chiefs. Powell believes we “are losing the war” in Iraq, but opposes any “surge” of 15,000 to 30,000 U.S. troops, as urged by Sen. John McCain…
Broken Army, Broken Empire
by Patrick J. Buchanan – December 20, 2006
The insurgencies in Iraq and Afghanistan have thus far cost fewer U.S. lives than the Filipino insurgency of 1899-1902. Yet Army Chief of Staff Gen. Peter Schoomaker warned Congress last week the U.S. Army “will break” without more troops.
We started this war “flat-footed,” with 500,000 fewer soldiers than we had before the Gulf War, says the general, who wants 7,000 soldiers added yearly to the 507,000 on active duty.
The Army is “about broken,” agrees Colin Powell, the former chairman of the Joint Chiefs. Powell believes we “are losing the war” in Iraq, but opposes any “surge” of 15,000 to 30,000 U.S. troops, as urged by Sen. John McCain.
“There are no additional troops,” says Powell. “All we would be doing is keeping some of the troops who were there, there longer, and escalating or accelerating the arrival of other troops.”
CentCom commander Gen. John Abizaid lately told an audience at Harvard, “This is not an Army that was built to sustain ‘a long war.’”
Retired Gen. Kevin Ryan agrees: “Today, the 37 combat brigades of the active Army are almost totally consumed by the wars in Iraq and Afghanistan. With all units either deployed, returning from deployment or preparing to deploy, there is none left to prepare for other contingencies.”
Yet, adds Ryan, “Our published defense strategy requires a military that can defend our homeland, sustain two major wars, be present in key regions abroad and fight a global war on terrorism. With Marine and Army ground forces barely able to fight the two major wars, the other security tasks are left to flyovers and ship visits from our Air Force and Navy.”
What these generals are saying is ominous. Not only is the United States “losing” the war in Iraq, the Army is breaking, and we do not have the troops to meet the commitments America has made all over the world. In short, U.S. foreign policy is bankrupt. We cannot meet all the IOUs we have outstanding if several are called at once.
What kind of superpower is it whose army can be “broken” by two insurgencies that have required only half the number of troops we sent to Korea, and a third of the number we sent to Vietnam?
If our Army is “about broken” now, how do we propose to defend the Baltic republics and, if Bush and the neocons get their way, Ukraine and Georgia from a revanchist Russia? How could we fight a second Korean war, the first of which required a third of a million men?
If our Army is “about broken,” has our commander in chief lost his mind when he issues bellicose ultimatums to Tehran? And if our Army is not built to “sustain a long war,” are not those people insane who talk wildly of fighting “World War IV”? In World War II, we had 12 million men under arms on V-E Day.
Our Army, says Abizaid, is not “built to sustain a long war.” Yet we are committed by NATO to defend Central and Eastern Europe – including the Baltic republics and the eastern Balkans, against a resurgent Russia. We are committed to defend Israel, Kuwait, Iraq, Saudi Arabia and the Gulf states from Iran. We are committed to defend Afghanistan from the Taliban, South Korea from North Korea, and Japan and Taiwan from China.
Who do we think we are kidding? America today is like an auto insurance company with the cash on hand to handle one or two fender-benders, but anything beyond that means Chapter 11.
In the Reagan decade, writes national security analyst William Hawkins, the United States had 18 Army divisions. Clinton cut it to 10. Yet, since Reagan, we have not cut commitments, but added to them: in Eastern Europe, the Balkans, the Gulf and the Taiwan Strait.
The American Imperium is hollow. We have nowhere near the troops to sustain the security commitments and war guarantees we have ladled out. Like the Brits in 1945, ours is an overstretched empire with a sinking currency, whose enemies are salivating at the prospect of being in on the kill.
America may need a larger Army. More imperative is the need for a radical reduction in treaty and war commitments.
While the U.S. Navy and Air Force remain supreme, the Army and Marines are, as Abizaid says, too small a force to fight a long war. We must adjust our commitments to reflect our capabilities and, beyond that, to defend only what is truly vital to the national security.
While our armed forces are more than adequate to defend us, they are insufficient to defend an empire. Rather than bleed and bankrupt the nation endlessly, we should let go of the empire.
Americans must learn how to mind our own business and cease to meddle in other nation’s quarrels. Iraq was never a threat to the United States. Only our mindless intervention has made it so.
Ron Paul: “The U.S. Government Must Admit It Is Bankrupt”
Submitted by Tyler Durden on 01/06/2011 18:58 -0400
Any time you bring the two Pauls together in an interview, and start discussing items such as the debt ceiling, government spending, and monetary policy you know the results will be good. Sure enough, in this rare ABC interview with father and son, the sparks fly, and among the topic touched is the most popular story on Zero Hedge from yesterday, namely President Obama fabulous hypocrisy, who after bashing the debt ceiling as a senator 4 years ago, has bet the outcome of his entire economic policy on maxing out every single credit card available to him. Paul’s response: “we have to face the fact that we are bankrupt and we can’t pay our bills.” Not exactly the kind of thing one wants to hear if one’s name is Hu Jintao. That said you know the Paul-led interrogation of Bernanke will be something else, even if it is ultimately totally fruitless.
Interest Payments on U.S. Government Debt Are on Track to Bankrupt America
It’s official. U.S. debt has surpassed GDP. Let’s imagine the country is a person. For argument’s sake, we’ll call him Sam. If Sam was fortunate enough to have a $50,000 a year job, yes in these times $50,000 should be considered fortunate, it’s fair to say he would have around $51,000 in debt. It’s obvious Sam needs to cut back on spending, put more in the bank, increase annual debt payment, harness resources more efficiently and reconsider what constitutes a wise expenditure. Common sense dictates Sam should first look to cut budgetary items of little or no significance towards short or long term survival. Simple things like not going out to dinner all the time, buying store-brand instead of brand-name and brewing your own coffee instead of hitting Dunkin’ Donuts every morning. You know, the very sacrifices run of the mill Americans are forced to make. Logically, should not our representatives be forced to do the same, if indeed they are a true representation?
The answer so far is no. While we’re still spending $1,000,000 a minute in Iraq, the knee jerk reaction from those in office has been to wield the axe on education, space exploration and entitlements such as medicare and medicaid. It’s as if Sam continues his $1,000 a week cocaine habit after ripping his kids from private school, taking his mother out of the nursing home and setting his PC on fire because he thinks it uses too much energy and is outdated. Are we honestly supposed to believe the first logical step of the budget debate should be an assault on American Bulwarks of tradition? The first question on the minds of everyone should be what spending qualifies as unnecessary. Of course, unnecessary is a subjective term and our “representatives” seem to have a very narrow definition.
We’re not known internationally as the United States of Amnesia for nothing folks. Our ability and willingness to ignore and forget is uncanny. Some dreamers out there prefer to think this is residual of our origins as pioneers; people fleeing their homeland with nothing but the future in store had no use focusing on the past and cultural evolution has exponentially honed this tendency to an extreme. Others say it’s indicative the Christian tendency to turn the other cheek and cast a blind eye on aggressors. More cynical Citizens believe it’s proof of our over-stimulation as a whole and the by-product of a society centered on instant gratification. Regardless of why, it is our duty to neither forget or ignore the spending atrocities occurring right under our noses, which should first be examined before this assault continues.
Let us not forget when the Pentagon’s pound-foolish practices were exposed a few years ago. In an act of journalistic boldness, the Pentagon was shown having committed such spending frauds as paying $998,798 to ship two washers. Not commercial washing machines (as if that would make a difference), no, we’re talking two, little washers – the kind found between a nut and a bolt. This was simply one item on a laundry list of fraud that totaled around $70 billion. Where did all of this money go? Into the abyss. Without this kind of laundering, would the behind-the-scenes work necessary to incite war be able to take place? How many wars and their inherent cost could be prevented if the shady, covert dealings which ultimately create them were never funded?
Recently, it was found the Federal government provided $2.6 million to train Chinese prostitutes to drink more responsibly on the job. Now, MAYBE this would be acceptable if we were talking about Chinese immigrants in America who unfortunately fell into prostitution. We’re not. All of the recipients were tried and true Tiananmeners. Undoubtedly the work of Chinese lobbyists getting a kickback for all that dollar buying. http://mediamatters.org/research/200905130010
The Federal government spends $25 billion annually maintaining unused or vacant federal properties. These are not national parks, but property sitting idle with no immediate positive benefit to the public. Surely a way to provide kickbacks to federal employees and contractors.
Between 2004 and 2009, government auditors examined all federal programs and found that 22 percent of them fail to show any positive impact on the populations they serve at an annual cost of $123 billion.
Sometimes the Government simply cannot account for large sums of money. In 2003, the Bush administration and Congress couldn’t account for $24.5 billion.
The federal government spends $23 billion annually on special interest pork projects. Some of which actually enhance the lives of constituents. Sadly, many are put forth to line the pockets of cronies, embolden legacies of career politicians with egotistically self-named infrastructure and clear the path for select corporations, otherwise known as, “picking a winner”.
The federal government made $20 billion in overpayments in 2001. The Department of Housing and Urban Development’s $3.3 billion in overpayments in 2001 accounted for over 10% of the department’s total budget.
Over one recent 18-month period, Air Force and Navy personnel used government-funded credit cards to charge at least $102,400 for admission to entertainment events, $48,250 for gambling, $69,300 for cruises, and $73,950 for exotic dance clubs and prostitutes.
The Defense Department wasted $100 million on unused flight tickets and never bothered to collect refunds even though the tickets were reimbursable.
The Conservation Reserve program pays farmers $2 billion annually to not farm their land.
Washington spends $60 billion annually on corporate welfare.
The Department of Agriculture spends $12 billion to $30 billion annually on farm subsidies, the vast majority of which go to agribusinesses and farmers averaging $135,000 in annual income.
Massive farm subsidies also go to several members of Congress, and celebrity “hobby farmers” such as David Rockefeller, Ted Turner, Scottie Pippen, and former Enron CEO Ken Lay.
The Medicare program pays as much as eight times the cost that other federal agencies pay for the same drugs and medical supplies.
The Army Corps of Engineers has been accused of illegally manipulating data to justify expensive but unnecessary public works projects.
Medicare contractors owe the federal government $7 billion.
If the aforementioned wastes and debts were resolved, the total
savings would surpass $300 billion.
American Citizens are being asked to go against common sense and accept the cutting of things that really matter while the gluttonous hacks continue to waste! This is simply unacceptable! In their minds, what the American Public doesn’t know, makes us the American Public. Arrogance, greed and avarice dominate the psyches of many of our leaders. As we have seen in the past, it often leads to their political demise. Their overconfidence in their falsely assumed ability to get away with this garbage is sickening. Just remember what Neil Armstrong said, “when you get overconfident, that’s when something snaps up and bites you”. We are practicing self-control. It’s time we hold our representatives to the same standards we hold ourselves!
Ted Covey et al., “Agriculture Income and Finance Outlook”, U.S. Department of Agriculture, Economic Research Service, November 2006, pp. 40 and 48.
Jonathan Rockoff, “NIH Paying $1.3 million Monthly for Unused Lab,” Baltimore Sun, December 2, 2007.
Kevin Duffy, “Why Did the Federal Government Help This Golf Course?,” Atlanta-Journal-Constitution, November 13, 2006
TAGS: american debt ceiling, american debt crisis, civilian news, class warfare, conservative news, debt ceiling debates, liberal news, news radio, s and p 500, tax hikes, tax raise, us credit downgrade, us debt crisis
THE COMING COLLAPSE
“The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.” [To be dropped out of helicopters -ed.]
Helicopter-Ben Shalom Bernanke 2002
Marc Faber: ‘QE3 Will Begin As Soon As Stock Prices Fall’ Video Bloomberg May 25, 2011
Quantitative Easing Explained Video Nov 11, 2010
Financial Collapse Guaranteed Video Charlie May 12, 2011
Obama Kills Osama After the Bernank Spoke, US Dollar Bubble Bursts Trending Towards USD69 PDF By Nadeem Walayat May 03, 2011 – IGNORE central bank propaganda statements on QE ending, or not continuing because it is a LIE, there WILL be QE3, no matter what the Fed says
Total Collapse Video crabbydogtrix Apr 25, 2011
Deepening Economic Crisis: Inflation, Rising Interest Rates, Surge in the Price of Gold and Silver PDF by Bob Chapman April 24, 2011 – How bad is it when the largest bond fund in the world, PIMCO, not only sells all its US Treasuries and Agencies, because they see no value and then they proceed to short them?
CHART: Ten Years, Ten Increases In The Debt Ceiling PDF Daily Bail Apr 22, 2011 – [Other sources report the Defense buget is 51%. -ed.]
Federal Reserve Needs To Cut US Dollar In Half Over Next 14 years Video – The IMF is going to be issuing SDRs to fund the world’s ecomony.
Burning The Candle At Both Ends: Raising the Debt Ceiling, and Extending QE-2 Indefinitely PDF by Gonzalo Lira April 14, 2011
Video From Bankrupting America: Who’s More Responsible: Charlie Sheen Or Washington? Video Daily Bail Mar 30, 2011
9 TRILLION Dollars Missing from Federal Reserve,Fed Inspector General Can’t Explain Video March 7, 2011 [Maybe they were using it to cover all those short sales of silver and gold! -ed.]
Market alarm as US fails to control biggest debt in history PDF Liam Halligan 12 December 2010 – Now borrowing costs are 28pc higher than a month ago
China’s Dagong Lowers U.S. Credit Rating on Fed Monetary Policy PDF By Joshua Fellman and Ye Xie – Nov 9, 2010
Economic Collapse is the Plan Video Charlie crabbydogtrix | October 26, 2010
Global Collapse of the Fiat Money System: Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011 PDF by Matthias Chang August 31, 2010
“Enron Accounting” Has Bankrupted America: U.S. Deficit Really $202 Trillion, Kotlikoff Says PDF by Peter Gorenstein Aug 23, 2010
Economy Heading for a Systemic Collapse into Hyperinflationary Great Depression PDF Economics / Great Depression II Aug 05, 2010
“The Secret of Oz” trailer – How to Fix the 2010 Depression Video – directed by Bill Still
China Calls Our Bluff: The U.S. is Insolvent and Faces Bankruptcy as a Pure Debtor Nation PDF Global Research, August 3, 2010
Crash Proof 2.0: How to Profit From the Economic Collapse by Peter Schiff
Dow Theorist Richard Russell: Sell Everything Liquid, You Won’t Recognize America By The End Of The Year PDF Joe Weisenthal | May. 18, 2010
Peter Schiff: The Crisis Starts Now! Video 16th Mar 10
Webster Tarpley: Bankers in slump plot against euro to save dollar Video 3rd Mar 10
Jew who broke the Bank of England, George Soros, ‘at centre of hedge funds plot to cash in on fall of the euro’ PDF Posted by Europe Feb 26, 2010
Ron Paul: Chaos in The Streets and Poverty Coming To the USA Video February 4, 2010
No Recovery. It’s a Cover up! Recession To Worsen � Revolution To Follow PDF Gerald Celente Trends Research Institute 10-20-9
The Coming Economic Collapse PDF by Graham Summers June 12, 2009 – if you included the net value of those un funded Social Security and Medicare expenses we cleared a $1 trillion deficit in 2007, a $5 TRILLION deficit in 2008 and are on course to clear a $9 TRILLION deficit this year.
Imminent Global Stock Market Crash to Support U.S. Dollar By: Global_Research May 09, 2009
Us gov spending history 1902 2010.png
A History of Overspending
The last election was largely driven by a strong reaction to government’s overspending.
While the Republicans won control of the House of Representatives, gained seats in the
Senate, and won many gubernatorial races, a Republican victory is not an assurance of
fiscal responsibility. For decades, Republicans have been complicit in — and at times
entirely responsible for — spending taxpayer dollars like Monopoly money.
Voters today are still restless and they’re concerned about Republicans’ commitment to
spending restraint. These concerns are not unfounded. Republicans’ history of
mismanaging the public coffers is undeniable. Consider the following:
• During the Reagan years, which some consider to be GOP glory-days, federal
spending grew by 68 percent (OMB historical tables). Yes, we were fighting the
Cold War, but after the Soviet Union collapsed, spending didn’t. After the Cold
War ended, defense spending fell for several years, but overall spending didn’t
(OMB historical tables).
• During six of President Bush’s eight years in office, Republicans had control of
the U.S House. Republicans controlled the Senate for four-and-a-half years of
President Bush’s tenure. During this time, the country experienced massive
growth in deficits and debt. While President Obama has made a bad spending
situation worse, the facts are clear that under President Bush’s tenure the
national debt exploded. In fact, the national debt increased $4.9 trillion while
Bush was in office (CBS NEWS). Many attribute the increase solely to the war
on terror, but this is not the case. According to the non-partisan Congressional
Research Service the costs of these conflicts, as of March 2011–over two years
since President Bush has left office–was $1.283 trillion.
• Republicans in Congress and the Bush administration were responsible for some
of the largest government spending programs in recent history, including the
creation of a new prescription drug entitlement program for seniors, Medicare
Part D, and the Troubled Asset Relief Program that bailed-out banks.
◦ According to Medicare’s own actuaries, the Republican-created Medicare
Part D needs $9.9 trillion from the federal government over the next 75
years to continue operating (2011 Medicare Board of Trustees Report,
Bankrupting America ⏐ http://www.bankruptingamerica.org ⏐ August 11, 2011
Voters are telling us spending is one of the most important issues. They are asking, will
• According to a recent Gallup Poll, “eight in 10 Republicans say they worry a
‘great deal’ about federal spending” (USA Today).
• According to a recent CNN/ORC International poll, Independents and
Republicans do not think the spending cuts in the debt-ceiling law went far
The country is in desperate need of leaders who will do what is needed to turn the
nation’s fiscal ship around, no matter which side of the political aisle they are on. The
last election was a clear mandate to reduce government spending. But what has
Congress done to cut spending? What will Congress do to cut spending? Just because
a candidate says “it’s time to get our fiscal house in order,” does not mean that he or
she will follow through.
IT IS TIME TO GET SERIOUS ABOUT ADDRESSING OUR COUNTRY’S PERILOUS
FISCAL SITUATION. IT IS TIME TO CUT SPENDING.
Bankrupting America ⏐ http://www.bankruptingamerica.org ⏐ August 11, 2011
War is Bankrupting America and Enslaving Future Generations to Oppressive Debt
America is going broke (already insolvent) and having difficulties selling government securities but yet our expensive wars are expanding at an alarming rate. There is no open discussion as to what our priorities may be as our rulers have decided that war trumps all. The United States, like the rest of the international banking cartel client states; does no financial planning – everything is an emergency that must be handled without any future consideration.
This should not surprise anyone as our economic policies are dictated by the banking cartel that holds our purse strings. If they want, they can contract the money supply tomorrow and bring on our bankruptcy. They are not Americans but yet they hold absolute power over us and use it as an extortion hammer. We are living in debt slavery (more debt that one generation may pay) and worse, we have immorally sold future generations to bondage. The first act of citizenship for new born Americans is to assume over $300,000 in debt (national debt + unfunded liabilities).
This is by choice and not necessity. We are either too ignorant or apathetic to realize that we have the sovereign power to issue and control our money – for free. There is no reason for a national debt or federal income tax as they are both by products of the private debt based system that rules our lives. We still hold this power and need to exert it as our top priority. We’re like hamsters running full speed on a treadmill, so busy trying to keep up that we can’t see the cage door is open.
- The NYT says Social Security is in deeper trouble than anticipated. “This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.”
- Mathematically, it is impossible to repay our national debt but yet this is not acknowledged yet alone discussed.
- During the past year, around half of our economy has been moved from the private sector to the governBank. “[Obama] has taken over, Freddie, Fannie, Chrysler, GM, banks, AIG, students loans … with this 18 percent, that brings it up to 48 percent [of the private economy] that the federal government owns or controls. … And they are not done.” How can we hope to recover when the private sector is disappearing?
One would think solvency would be an integral part of national security but it is not part of the equation with our governBank. Instead, the war machine is ramping up to commit even more atrocities that jeopardize our safety, sanity and spirituality.
- US troops have entered Somalia. A “search team” marks the first known case of U.S. military boots on the ground in Somalia since a disastrous peacekeeping mission ended in 1994.
- Defiant Yemen tells US soldiers to keep out. “Yemen insisted that it could handle its own mounting security challenges without any direct foreign intervention, pointedly warning Washington to learn the lessons from Iraq and Afghanistan.” Why do we want troops there?
- Seven New US Military Bases in Colombia.
- US accused of ‘occupying’ Haiti as troops flood in…France accused the US of “occupying” Haiti on Monday as thousands of American troops flooded into the country to take charge of aid efforts and security.
- Eight new Missile batteries placed in four middle east countries
And, we may soon be launching a war against Iran.
The American Israel Public Affairs Committee (AIPAC) annual show in Washington would hardly be out of place in a Quentin Tarantino movie; picture a giant hall crammed with 7,500 very powerful people regimented by a very powerful lobby – plus half of the United States Senate and more than a third of the congress – basically calling in unison for Palestinian and Iranian blood.
The AIPAC 2010 show predictably was yet one more “bomb Iran” special; but it was also a call to arms against the Barack Obama administration, as far as the turbo-charging of the illegal colonization of East Jerusalem is concerned.
When Clinton switched to Iran demonization mode, she was met with universal rapture. The Obama administration will “not accept a nuclear-armed Iran”; is working on sanctions “that will bite”; and the leadership in Iran must know there are “real consequences” for not coming clean with their nuclear program.
AIPAC arm-twisted members of the US Congress to sign a letter to the White House calling for the US to bypass the United Nations Security Council and unilaterally sanction Iran. And AIPAC also urged lawmakers to pass with no comments the annual US$3 billion US aid to Israel.
No surprises here. This is a congress that backed Israel’s assault in Gaza in late 2008 and condemned the Goldstone Report on Israeli atrocities in that conflict by a vote of 334 to 36.
Phyllis Bennis of the Institute for Policy Studies could not have put it better. “Someone seems to have told the Obama administration that a series of polite requests equals pressure. It doesn’t. Real pressure looks like this: ‘Please stop settlements.’ Answer: ‘No.’ ‘Then, you know that [the] $30 billion that [former president George W] Bush arranged for you from US tax money, and we agreed to pay – you can kiss that goodbye.’ That’s what pressure looks like.”
Lindsey Graham: “Iran should not have one plane that can fly or one ship that can float.”
The United States, Israel, U.K., Australia, Germany, France, etc., are all controlled by the same international banking cartel so it should be no surprise that there really are no separate foreign policies. They are all merged together with one goal – secure and grow the power of the cartel.
You have to take a step back to see where we are at. Fortunately, this is all well documented through-out history. Benjamin Franklin, Andrew Jackson, Henry Carey, Abraham Lincoln, Thomas Edison, Charles Lindbergh, Louis McFadden are just a few who specifically warned us and fought back. For example, while the United States and most of Europe were suffering through the Great Depression, the banking cartel was flooding money into Nazi Germany to build up Hitlers war machine. And, even after the war began, the cartel continued their support of Hitler and the Nazi crimes against humanity.
We lost our independence many years ago and are now being merged into one group that can be ruled and plundered more efficiently. There will be no freedom here or elsewhere as long as the banking cartel holds our financial keys. If we wanted to, we could throw them out tomorrow and retake our financial sovereignty.
They fear this more than anything else and that is exactly why you won’t see it on the news or hear it from our politicians or economists. It is a line they cannot cross – disclosure would open the flood gates for questions and the dark history that has been thinly hidden would finally come to light. If and when you have figured this out, I think you are compelled to tell others. Nothing short of a popular mandate and understanding will work.
END the FED before it ENDS US
News & Analysis
$20-Trillion War Costs Bankrupting US
Secret China war plan: trillions in U.S. debt … Yes, Americans love war. Yes, wars cost money. And pile on debt, new taxes … Back in the ‘40s, WWII consumed 57% of our GDP. Today, war eats up about half America’s budget. We’re sinking under Iraq war debt. Nobel economist Joseph Stiglitz estimates Iraq at $3 trillion, with $2 trillion for future costs, like VA medical. The Afghan war, maybe another $3 trillion. Plus endless terrorist threats. Future wars are “planned” years, even decades in advance, strategies based on Pentagon-Rand war games. America talks peace. But deep inside our collective brain is a dark monster: We’re little kids who love playing war. – Paul B. Farrell/MarketWatch
Dominant Social Theme: Out of control spending must be examined and admitted so that the task of protecting the Homeland can be updated and maintained.
Free-Market Analysis: Paul Farrell, a columnist for MarketWatch (see above), reports what has been presented here as well: Perhaps 50 percent or more of America’s annual, governmental spending is war-and intel-related. Add up related veterans’ benefits, foreign and domestic bases, corollary and direct spending and the total closes in on US$1.5 trillion (not the US$700 billion that is often presented as the cost).
The wars in Afghanistan and Iraq (continuing) have cost, therefore, an unfathomable US$6 trillion. If overall military spending amounts to some US$1.5 trillion then during the decade that America has waged its latest serial wars, its putative leadership has spent approximately US$20 trillion on waging war or preparing for it. Add in another US$20 trillion or so that some pundits have estimated that the US in particular has printed “out of thin air” to reliquify its ruined dollar reserve economic system and the total arrived at is US$40 trillion. This sum then, still rising, represents resources that are basically commandeered by the so-called public sector to support the nation’s (and the West’s) solvency and superior firepower.
The full amount, little reported in the American press, shows clearly how the public’s perception of the US as a “capitalist” or free-market economy departs from reality. America’s elites – Anglosphere elites really – have commandeered the wealth of a nation; this massive resource base (and its leveraging) is apparently needed to fulfill the elite agenda of ever-closer global governance. Nation-building is expensive; shaping a new global order even moreso. The elite banking families and those corporate entities clustered around them prefer not to use their own resources. The standard method of operation (which provides access to almost unlimited wealth) is called mercantilism.
It is a kind of pincer strategy that has reshaped the globe over decades and even centuries. This pincer can be seen at work in the modern day in, say, Afghanistan. Here huge amounts of aid and Western knowhow help Afghans build a 21st century society. A central bank has been set up; a parliamentary democracy has been installed. A great deal of time and energy has been spent liberating women from Taliban religious ideology and concomitant illiteracy. Hospitals and social service networks have been installed and United Nation and other aid workers have flooded the country to help educate Afghans, generally, about modern ways. Farmers are even being weaned away from the poppy toward wheat and other such crops.
At the same time, a tremendous amount of military power has been focused on Afghanistan. Everything about these numbers is big. Over 50 NATO countries have sent troops and other military resources; an Afghan fighting force of some 500,000 soldiers and 300,000 military and civilian police is being trained; America alone has deployed some 130,000 troops, with all the commensurate, additional supply forces. A single drone strike – and there are dozens every month, often killing women and children – costs an apparent US$1 million.
This is the pincer of power. Afghan society is modernized on the one hand, while its non-Western elites are defeated militarily on the other. It is nation-building; and it has served the Anglosphere well for centuries. The elites that runs Britain (and America) used the formula to conquer one-fourth of the earth’s surface in the 1800s – as Bell interviewee Richard Maybury recently pointed out.
It is an expensive endeavor. And Farrell’s point, well stated, is that the military side of the equation (arguably the more expensive one to operate) is running out of resources. After nearly a century of uncontrollable spending – one that bankrupted first Britain and now America – the Anglo-American war machine is facing ruin. The mathematics become untenable.
What to do? The first step to salvaging the meme is to admit the need for overhaul. Of course, Farrell’s presentation is more than that; he argues that something in the American psyche demands war and its resultant carnage. This is the article’s weakest part, in our view. Farrell’s points are most credible as regards the unsustainability of modern military spending and the Anglosphere intention to identify a new threat. China, he writes, is rapidly emerging as the Western world’s number one nemesis. “Is this how WWIII starts?” he asks, “between an aging America that loves war, won’t surrender without a fight, and the world’s rapidly emerging superpower, predicted to have a population one billion larger than America’s by 2050.”
Farrell presents the creation of China’s first “stealth fighter” airplane as evidence of his argument, along with China’s fixation on Taiwan. He then marshals facts that describe a frightening China indeed: “An economy [eventually of] 40% of the world’s GDP, dwarfing America’s GDP predicted to fall to just 14% … China’s the emerging new superpower, a crafty enemy laughing as we waste our economic resources.”
Always there are enemies abroad and at home that need confronting. The dastardly “Hun” – and fascism – served well prior in the first half of the 20th century. The USSR – and communism – worked well in the second half. Past fascism and communism, there is the war on terror. As we’ve noted on numerous occasions, the war on terror has not gone well. The critical mass necessary to create a believable bogeyman is simply not there; and for this reason, China may seem a tempting alternative.
Yet we tend to disagree with the idea that China can be built up into a kind of 21st century USSR, complete with an additional Cold War, etc. For thousands of years, this is a culture that has attempted to protect itself from “barbarians at the gate,” going so far as to build a Great Wall to keep others out. China and its leaders have traditionally looked inward not outward.
The society as a whole is simply not expansionist, or not in the way the USSR seemed to be during its heyday. Additionally, China is engaged commercially on enormous variety of levels with the West. The Soviet Union never had the kind of engagement that China has today. Finally, it is very likely that China will soon face a critical recession due to its leaders inability to control price inflation. Domestic economic troubles, therefore, may make it even harder to portray China as an implacable military machine.
America’s domestic and international obligations are, astoundingly, in the area of US$200 trillion. At the highest levels, the power elite itself may have it in mind to inflict such ruin on the West that global governance becomes inevitable. Out of chaos, order, etc. Within this context, we think it more likely that the elite intends to continue to expand its commitment to a war on terror. This will inevitably feature fundamentalist Islam rather than a resurgent Red Scare.
Conclusion: We agree generally with the mechanism that Farrell identifies but not with the particular iteration. It is an important distinction. For those who wish to invest abroad, such analysis is not an academic consideration but one that has ramifications for everything from the price of oil to the availability of foodstuffs and commodities. It is of course possible that Western elites shall decide to build up two existential threats at once, but that is not its usual operative perspective in our view. One enemy at a time seems the preferred messaging. Thus, if we had to choose, we would identify militant Islam not communism.
Did bin Laden succeed in bankrupting America?
The al Qaeda leader long boasted that his terrorist tactics would drive the U.S. to financial ruin, and arguably, it may have worked
Soldiers stand in salute in Afghanistan: Though bin Laden’s terrorist network didn’t totally bankrupt the U.S., America’s wars in the Middle East have cost trillions of dollars. Photo: U.S. Army/Spc. Jeanita C. Pisachubbe SEE ALL 83 PHOTOS
Best Opinion: Wash. Post, The American, Mother Jones
Now that Osama bin Laden is dead, counterterrorism experts are debating how much damage he did to the U.S. and the world. Al Qaeda specialist Daveed Gartenstein-Ross argues in Foreign Policy that one of bin Laden’s fundamental goals was driving the U.S. to bankruptcy by forcing the nation into a costly global war, and, on that score, the architect of the 9/11 terrorist attacks accomplished more than anyone cares to admit. How successful was bin Laden’s strategy?
He did not break us, but he came close: America is still standing, and bin Laden isn’t, says Ezra Klein at The Washington Post. But he learned decades ago in Afghanistan, where a costly 10-year war against the mujahideen contributed to the Soviet Union’s collapse, that the “bankrupt-a-superpower” strategy could succeed. “It didn’t quite work out this time,” but, with the wars in Iraq and Afghanistan each costing us trillions, “it worked a lot better than most of us, in this exultant moment, are willing to admit.”
“Bin Laden’s war against the U.S. economy”
Nonsense. Blame entitlements, not bin Laden: “This is preposterous,” says Nick Schulz at The American. Bin Laden didn’t send us to the poor house by “goading it into expensive wars” we couldn’t afford. The Pentagon’s share of the federal budget is way smaller than it was in the 1950s. “To the extent the United States faces bankruptcy problems, it is not due to defense spending but to poorly constructed entitlement programs.”
“Osama won? (And other preposterous arguments from around the internet)”
Bin Laden’s bankruptcy boasts are often misinterpreted, anyway: “Economic warfare was implicit in bin Laden’s thinking,” says Kevin Drum at Mother Jones. But while bin Laden crowed about how much the 9/11 attacks cost the U.S. — in building losses and lost productivity — it’s a stretch to say he expected the U.S. to respond by rushing into budget-busting wars. If anything, bin Laden thought the United States was inherently decadent and weak, and would retreat from the Middle East if faced by a sufficiently determined jihadist guerrilla movement.”
“Osama bin Laden and national bankruptcy, part 2”
Osama bin Laden and National Bankruptcy, Part 2
—By Kevin Drum
When he planned the 9/11 attacks, was Osama bin Laden’s goal to drag the United States into a series of endless wars that would bankrupt us? I said earlier that I was “a little skeptical of attempts to take this argument too far” because bin Laden’s statements to this effect all came well after 9/11. But Daveed Gartenstein-Ross tweets:
Re OBL not having economics in mind on 9/11, see his contemporary comments to Allouni, which I quote here: http://bit.ly/kf1vdx
Bin Laden’s strategy’s initial phase linked terrorist attacks directly to economic harm….In a wide-ranging interview conducted by Al Jazeera’s Taysir Allouni in the month following the 9/11 attacks, bin Laden spoke at length about the extent of the economic damage the attacks had inflicted. “According to [the Americans’] own admissions,” he said, “the share of the losses on the Wall Street market reached 16%. They said that this number is a record.”….Factoring in building and construction losses, along with lost productivity, he concluded that the cost to the United States was “no less than $1 trillion.”
But this is an entirely different thing. This is merely bin Laden bragging about the amount of damage caused by the 9/11 attacks themselves. It says nothing about whether his longer term goal was to draw the United States into ruinously expensive military adventures overseas and massive internal security overreactions at home.
Just to be clear: I agree that economic warfare was implicit in bin Laden’s thinking. (Likewise, Gartenstein-Ross agrees that America’s potential future insolvency is mostly the result of domestic politics, not the war against al-Qaeda.) I’d just be careful about inferring more than the evidence will bear here. The first time that bin Laden explicitly said that his strategy was to bleed the United States into bankruptcy was in 2004, after the United States had invaded both Afghanistan and Iraq. Maybe that really was his intent all along. But it seems more likely that it was something he invented after the fact to make it look as if everything was going according to plan. It may have been one thread in his thinking, but I’m not sure you can say too much more than that about it.
FOR WHAT IT’S WORTH: My take on al-Qaeda’s actions and motivations comes largely from Steve Coll’s Ghost Wars and Lawrence Wright’s The Looming Tower. And Wright does say that bin Laden “wanted to lure the United State into Afghanistan, which was already being called the graveyard of empires” (though he doesn’t source this contention). But bin Laden himself seemed to have more prosaic views, namely that the United States was inherently decadent and weak and would retreat from the Middle East if faced by a sufficiently determined jihadist guerrilla movement, and his #2, Ayman al-Zawahiri, appeared to believe that striking the United States (and thus drawing the U.S. into battle) would serve primarily as a way of inspiring young jihadists to join the cause.
But I’m unquestionably no expert on this. Maybe there’s more evidence than I think that bin Laden’s strategy from the start was to bait the United States into spending itself into bankruptcy. I’d just like to hear a little more pre-9/11 evidence for this.
In 1953, at the beginning of his presidency, Dwight D. Eisenhower gave a speech in which he said, “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.”
That quotation is apt today. According to the War Resisters League, the United States spends 59 percent of its budget on the military. When spending on veterans’ affairs and nuclear weapons programs are added, Businessinsider.com says, the grand total is $1.01–1.35 trillion spent on national defense in 2010.
“Businessinsider.com published some facts about what it calls ‘ridiculous military spending,’ facts that show America ‘can’t afford to police the world any more.'”Businessinsider.com published some facts about what it calls “ridiculous military spending,” facts that show America “can’t afford to police the world any more”:
- U.S military spending is greater than that of China, Russia, Japan, India and the rest of NATO combined.
- The total U.S. military spending constitutes approximately 44 percent of all the military spending on the planet.
- Together, the wars in Iraq and Afghanistan cost more than $150 billion per year.
According to Nicholas D. Kristol, writing in the New York Times on July 28, “A recent report from the Congressional Research Service finds that the war on terror, including Afghanistan and Iraq, has been, by far, the costliest war in American history aside from World War II. It adjusted costs of all previous wars for inflation.”
The price tag for one Lockheed Martin F-35 Lightning II fighter plane is around $90 million, according to a March 15, 2011 article “The F-35: A Weapon That Costs More Than Australia” in The Atlantic.
In 1997 MIT received nearly $400 million from the Pentagon for military research, David Schweikart wrote in his book After Capitalism.
According to Harper’s Magazine, this year the Pentagon will spend over $44 billion on the “Star Wars” program.
The government just announced that the country’s nuclear arsenal consists of 5,112 nuclear warheads, enough to destroy the earth many times over.
***With all this, Congresspeople and other public officials say the United States can’t afford to educate its children properly, provide jobs for everyone, guarantee health care for all, and supply food, shelter and clean air and water for all its citizens.
Bringing the numbers home is informative. Indiana’s share of the costs of the wars in Iraq and Afghanistan since 2001 is more than $14.91 billion. For both wars, Indianapolis has paid over $1.85 billion.
“Indiana’s share of the costs of the wars in Iraq and Afghanistan since 2001 is more than $14.91 billion. For both wars, Indianapolis has paid over $1.85 billion.”
Stated another way, if you paid $8,000 in federal income tax two years ago, 43 percent, or nearly $3,500, went to military-related spending. The war machine receives more than $4 of every $10 the U.S. government receives in tax revenue.
Americans put vast amounts of money into systematically killing other people. Is this fair to Americans or the slightest bit sensible when there are so many needs at home?
U.S. Labor Against the War has found the following:
- One in six workers is unemployed or underemployed.
- Fifty million Americans lack health care.
- Millions of people have lost their homes because of foreclosure.
- Roads, bridges and other types of public infrastructure are falling apart.
- Schools are overcrowded and underfunded.
- Cities are shutting down public services and laying off public workers.
“There is no way to fund what we must do as a nation without bringing our troops home from Iraq and Afghanistan,” an Aug. 3 AFL-CIO Executive Council Statement noted.
For $1 trillion, says the War Resisters League, Americans could provide every unemployed citizen with a job paying $50,000 a year (total, $765 billion). Furthermore, unemployment could be reduced to zero and still have $235 billion left over to meet human needs – to provide health insurance, build schools and offer job training.
For what Americans have spent for just one day of the Iraq War, says the American Friends Service Committee, they could have funded: 95,364 Head Start places for children, 12,478 elementary school teachers, health care for 163,525 people, 34,904 four-year college scholarships or homes for 6,482 families.
***These issues are the topic of a talk, “The War Economy and You,” that internationally renowned peace and justice activist Cindy Sheehan will give in Bloomington on Wed., Oct. 5, at 7 p.m. at the First United Church, 2420 E. Third St.
“For $1 trillion, says the War Resisters League, Americans could provide every unemployed citizen with a job paying $50,000 a year.”
Linda Greene can be reached at email@example.com.
BAILOUT MADNESS – Wall Street Socialist Millionaires Mock Protesters While Drinking Champagne (Video)
Start watching at the 50-second mark – Runs 30 seconds from there.
Talk about irony. The millionaires at 55 Wall Street (who live well thanks to taxpayer bailouts) drink champagne and mock the ‘Occupy Wall Street’ protesters below, many of whom are strident capitalists demanding an end to stealth Wall Street bailouts by the Federal Reserve and U.S. Treasury.
Who occupies 55 Wall Street? The sprawling, historic Manhattan building is home to the Ciprion Club Residences, a private club as well as residence to Wall Street’s élite.
Gathered on the balconies of this home of the rich, men in suits and tuxedos as well as women in silk dresses and business suits, casually sipped on their glasses while smiling and taking pictures, seemingly oblivious to the fight of the 99 percent.
The club has a total of 106 residences (living quarters) and their website asserts, “The club will provide you with everything essential to live the good life.”
In just 15 seconds this clip perfectly encapsulates the Socialist madness of bailing out Wall Street millionaires.
Check out this Bush speech – Runs 1 minute.
Our Politicized Fight Against Terrorism: An Excerpt
By Daveed Gartenstein-RossSep 30 2011, 10:23 AM ET 1
In his new book, Bin Laden’s Legacy: Why We’re Still Losing the War on Terror, Daveed Gartenstein-Ross catalogs America’s strategic failures in the wake of the terrorist attacks on Sept. 11, 2001. The following is an excerpt.
It was perhaps inevitable that the fight against al Qaeda and other jihadi groups would become politicized, but it has nonetheless been extremely harmful. The fact that being seen as tough and effective in the fight against terrorism could help one’s political fortunes was evident almost immediately, for the standing of two politicians–George W. Bush and Rudy Giuliani–and that of the entire Republican Party dramatically changed because of the events of September 11, 2001.
President Bush’s initial reaction to the attacks was in fact rather confused and unimpressive due to security concerns that kept him out of sight for most of the day. After concluding his time on the morning of September 11 with a class of second grade students at Emma E. Booker Elementary School in Sarasota, Florida, Bush went to a classroom where a secure phone had been set up. He spoke to Vice President Dick Cheney, and after a brief address to the nation about the attacks, Bush was rushed to Air Force One. Concerned that the president could be a target, his security detail kept him on the move. In the thick fog of war, Bush heard reports that Camp David and the State Department had been attacked, that there was a fire in the White House, and that his ranch in Texas may have been targeted. His general invisibility throughout the day made strong leadership impossible.
Fortunately, President Bush hit his stride rapidly. That night, back in Washington, he declared in an address to the country, “Today, our fellow citizens, our way of life, our very freedom came under attack in a series of deliberate and deadly terrorist acts.” The speech outlined several themes that would become his administration’s staples, including the need to bring the full weight of the country’s resources to bear against those responsible, and Bush’s refusal to distinguish between terrorists attacking America and regimes harboring them. President Bush declared that “none of us will ever forget this day, yet we go forward to defend freedom and all that is good and just in our world.”
Bush would give several more increasingly forceful speeches that month. The public’s connection with him was obvious; Bush’s approval ratings rose from 55 percent to over 90 percent within two weeks of the attack. The remarkable rise in his ratings just after 9/11 showed the public’s fear, concern, and desire for action. It also showed why politicians would be so tempted to politicize terrorism.
New York City mayor Rudy Giuliani also found his fortunes dramatically changed by the attacks. A former prosecutor known for his toughness, Giuliani had won two mayoral terms because of his ability to return good governance to the city, in particular for tackling its seemingly intractable crime problem. But despite his accomplishments, Giuliani’s popularity had eroded, and he was viewed as a divisive figure at the time of 9/11.
But the mayor’s inspiring response to the attacks caused these critical perceptions to recede. Giuliani projected not only leadership and toughness but also compassion. The mayor took time to condemn the racial and religious hatred that might be directed at New York City’s Muslim community, a move that New Yorkers, and Americans as a whole, saw as genuine and laudable.
Giuliani became known as “America’s mayor,” an iconic figure who was instantly recognizable countrywide. He was named Time’s Person of the Year, and he became regarded as a viable presidential candidate. When he did run for president in 2008, early polls put Giuliani at the forefront of Republican contenders. A Gallup poll’s issue-by-issue breakdown made clear that the coolness and resolve that Giuliani displayed on September 11 was his key political strength.
Giuliani ultimately did not receive the Republican nomination. There were multiple reasons for his loss, including his blemished personal life and a bizarre campaign strategy that involved skipping the Iowa caucuses, running halfhearted campaigns in both New Hampshire and South Carolina, and placing all his bets on winning the Florida primary. (Giuliani finished third in that contest.)
And even though he was dealt a strong hand on terrorism issues, Giuliani may have overplayed it. Joe Biden famously commented in an October 2007 debate that Giuliani only mentions three things in a sentence: “a noun, and a verb, and 9/11.” But if Giuliani did overemphasize his response to those attacks, it was because he realized that it was such a political asset. Though Giuliani didn’t win the presidency, his experience confirms the political benefits of being seen as strong on terrorism.
It should be said that the fact that there were political benefits to being seen as strong on terrorism wouldn’t inevitably create a problem. After all, it could be healthy to motivate politicians to perform admirably under intense pressure. Rather, the problem was that terrorism became politicized as an issue within a year of the attacks in an incredibly divisive manner. A climate was created that has harmed rather than helped America’s effectiveness.
The Republicans were able to capitalize in the 2002 midterm election on the fact that their party was identified as tougher on terrorism. Before the attacks, it seemed that the Republicans could face significant midterm losses. Layoffs and rising unemployment, projected to hit 5 percent by the beginning of 2002, created the risk that voters would punish the party. (The fact that 5 percent unemployment was considered a major political liability seems quaint today.)
The 9/11 attacks, however, transformed the political landscape. Although the economy had been voters’ predominant concern until terrorists struck the United States, Gallup polling from January to June 2002 consistently found that terrorism and national security had eclipsed the economy as the issue voters cared about most. And if terrorism was on voters’ minds, this was good for the Republicans. An August 2002 Gallup analysis found that Republicans enjoyed a commanding nine point lead among voters who considered terrorism to be the most important issue.
The Republicans exploited this advantage. During the campaign Karl Rove, a senior adviser to President Bush, misplaced a computer disk that contained his PowerPoint presentations about the upcoming midterm election. One piece of advice to candidates was that they should “focus on the war.” Rove’s advice proved controversial once the public learned of it, but the issue resonated with voters, as did President Bush’s focus on selling the coming Iraq War during the campaign.
“We ought not to politicize this war,” Senate Majority Leader Tom Daschle responded. “We ought not to politicize the rhetoric about war and life and death.” (Senate Minority Leader Trent Lott responded to Daschle with a bizarre non sequitur: “Who is the enemy here, the president of the United States or Saddam Hussein?”)
The bottom line is that Daschle was right: politicizing national security when there was general agreement between Republicans and Democrats on how to combat terrorism was bad for the country. But even though Daschle was right philosophically, the Republicans read national politics correctly. They regained control of the Senate in 2002, picked up five seats in the House, outperformed expectations in the gubernatorial races, and even gained in state legislatures. The GOP’s overwhelming victory was not just unexpected but also historic: not since Franklin D. Roosevelt in 1934 had a president’s party made gains in both the House and Senate during the midterm election of his first term.
Terrorism was the key to this victory. Summarizing what many commentators had come to realize, conservative columnist Charles Krauthammer wrote, “Why did the Democrats lose? Forget the tactics. Forget the fundraising. Forget even the President’s popularity. This election was about Sept. 11.”
Terrorism and national security would continue to be a critical, divisive issue for the next few elections. It was clear from the outset that terrorism would factor heavily in the 2004 campaign. The Republicans’ choice of New York City as the location for that year’s Republican National Convention and their decision to hold it in September were obvious references. Terrorism was invoked almost constantly throughout the convention. In a speech that mentioned terror or terrorism forty-four times, and 9/11 eleven times, Rudy Giuliani said, “President Bush sees world terrorism for the evil that it is. [Democratic nominee] John Kerry has no such clear, precise and consistent vision.”
Although the Iraq War helped the Republicans in 2002, by 2004 the public perception was mixed. The death toll and economic costs of the war were mounting, and an intensive search had failed to unearth evidence that Saddam Hussein had rebuilt his nuclear weapons program. Kerry campaigned on the idea that the invasion had been “the wrong war, in the wrong place, at the wrong time.”
President Bush’s campaign would not back down from its claim that the Iraq War had been good for America. Instead, President Bush argued that the invasion of Iraq made America safer. In the first of three presidential debates, he argued that one critical lesson of 9/11 was to “take threats seriously, before they fully materialize.” Because of the invasion of Iraq, he said, “Saddam Hussein now sits in a prison cell. America and the world are safer for it.” Later in the debate, Bush said that Kerry’s criticism of the Iraq War reflected a “pre-September 11th mentality, the hope that somehow resolutions and failed inspections would make this world a more peaceful place.”
For his own part, Kerry did himself few favors on these issues. For example, the Democrats were eager to capitalize on the popularity of Michael Moore’s Fahrenheit 9/11, a documentary critiquing the Iraq War. Moore spoke at several events at the Democratic National Convention in Boston, and the cameras caught him sitting next to former president Jimmy Carter at one point. The problem is that Moore was more than just an antiwar filmmaker. In one statement on his personal website, posted about three months before the convention, he wrote: “The Iraqis who have risen up against the occupation are not ‘insurgents’ or ‘terrorists’ or ‘The Enemy.’ They are the REVOLUTION, the Minutemen, and their numbers will grow–and they will win. Get it, Mr. Bush?” Rather than simply disagreeing with the war, this post celebrated insurgents who were killing American forces–and it generated justifiable controversy. Predictably, the image of Moore sitting next to Carter featured prominently on conservative cable news shows, making the concerns that the Bush campaign raised about Kerry’s seriousness on national security issues seem credible to many voters.
On October 29, mere days before the election, Osama bin Laden appeared in a video address that was broadcast on the Al Jazeera Arabic-language satellite station. Obviously timed to coincide with the U.S. election, bin Laden addressed the American people. In the speech, he boasted that al Qaeda was winning its war against the United States. The primary reason he gave was the economics of the fight and his group’s strategy of “bleeding America to the point of bankruptcy.”
The voting public was largely uninterested in the substance of bin Laden’s speech. Rather, the most significant aspect was that the video showed that bin Laden was still alive. Before that, he featured infrequently in al Qaeda’s propaganda, and it had been years since he’d appeared in a video, leading many commentators to believe that he had been killed. Bin Laden’s video dominated the news cycle in the days leading up to the election, again putting national security at the forefront of voters’ minds.
President Bush won the election in 2004, and the GOP again made gains in both the House and the Senate. Party insiders correctly pointed to national security as a critical issue.
But by 2006, national security issues had been transformed from a significant Republican advantage into a thorn in the party’s side. The overarching reason was the Iraq War. Bloodshed markedly increased in that country during the course of the year, and many observers thought it was mired in civil war. Al Qaeda in Iraq (AQI) had been able to take and hold territory. It became the dominant player in Iraq’s expansive Anbar province and was able to erect a governing structure in the city of Mosul.
As the situation deteriorated, the Democrats realized that this time the Republicans were vulnerable on terrorism and national security. Democratic senator Evan Bayh of Indiana said in February 2006 that “for both substantive and political reasons,” the Democrats should take the Republicans on over terrorism and national security. Key Democratic politicians promised to push for immediate withdrawal from Iraq.
Sure enough, campaigning on national security issues again paid off in 2006, this time for the Democrats, who took back the House and Senate. According to late November 2006 polling data from the Pew Research Center, 53 percent of Americans considered the Iraq War one of the top two issues in the election.
Although Iraq had been central to the GOP’s defeat, President Bush did not hasten to withdraw. Instead, he announced a “surge,” an increase in the presence of American soldiers in an attempt to clear out al Qaeda’s strongholds and diminish sectarian violence. There was nothing wrong with the Democrats campaigning on national security: the Iraq War was incredibly costly, and there was a strong argument for political accountability. But many Democrats went beyond this, arguing that Bush’s surge ignored their “mandate” to get the U.S. military out of Iraq as soon as possible.
For example, Representative Dale Kildee of Michigan said, “President Bush either did not get or did not understand the message the American people sent last November. Before the end of this year, United States troops should be redeployed and their efforts focused on support and training the Iraqi Security Forces.”
Indeed, one of the surge’s biggest critics was Illinois senator Barack Obama. On January 10, 2007, as the surge was announced, Obama said, “I am not persuaded that 20,000 additional troops in Iraq is going to solve the sectarian violence there. In fact, I think it will do the reverse.” Obama swore that he would “actively oppose the president’s proposal.”
Ultimately, the surge worked. Although serious questions remain as the United States draws down its troops, President Bush made the right decision by undertaking a surge rather than a withdrawal. This is particularly true when one recalls the dark days of 2007, when Iraq was wracked by sectarian violence and ethnic cleansing, and AQI was able to carve out geographic safe havens. Obama himself conceded in a September 2008 interview with Fox News Channel’s Bill O’Reilly, “I think that the surge has succeeded in ways that nobody anticipated…. It’s succeeded beyond our wildest dreams.”
National security and terrorism was not the key election issue in either 2008 or 2010 that it had been previously; the September 2008 financial crisis caused economic issues to overshadow everything else. This does not mean, however, that the issue was entirely absent.
By 2008, Bush’s approval rating was microscopic, and he was considered politically toxic. The Republican nominee, Senator John McCain, found himself in the unique position of running a general-election presidential campaign that took aim at his own party’s incumbent. The Democratic nominee, Senator Obama, ran against the Bush administration virtually across the board, including on national security.
When the Obama administration took office after a resounding electoral victory, the new president trumpeted the new direction he would take on terrorism and foreign affairs. His efforts appeared so derogatory toward the Bush administration’s approach that they prompted Juan Zarate, President Bush’s counterterrorism advisor, to tell NPR, “I don’t think the administration has helped themselves, or frankly helped the country, by trying so hard to paint their policies as being so radically different from the past. They’re not, and for the sake of the country they shouldn’t be.”
Zarate was right. Although Obama swore on the campaign trail that his national security efforts would differ markedly from those of his predecessor, Obama’s counterterrorism policies have largely been a continuation of those forged during the last two years of the Bush administration. Some conservative pundits still attempt to show Obama’s overarching weakness on national security, and a select few portray him as dangerous, but there is a growing awareness among analysts of the continuity between Bush and Obama on counterterrorism policy.
Indeed, national security was marginal as an issue in the 2010 midterm election. One Republican pollster noted during that campaign that the economy “dwarfs everything. It’s sort of like looking at a house and there’s all these things that need repair, but if the roof’s on fire, all these things are secondary. Jobs and the economy are the equivalent of the fire on the roof.”
From 2002 through 2008, the politicians and parties that benefited from their politicization of terrorism and national security got a number of significant substantive points wrong. In 2002, the Republicans were wrong to politicize the issue in the first place. Moreover, the midterm results were viewed by many as a mandate for the disastrous invasion of Iraq. In 2004, President Bush’s winning campaign insisted that the country was safer due to this invasion, and that the administration would change neither its decision to go to war nor its execution of the conflict if given the opportunity. Not only did the invasion not make the United States safer, but the situation in Iraq would not improve until the administration dramatically changed its approach.
The Democrats finally gained some advantage from Bush’s foreign policy failures in the 2006 election, but they interpreted the vote as a mandate to get out of Iraq while it was mired in civil war and al Qaeda enjoyed a significant foothold. They used the 2006 results as a bludgeon with which to attack the surge that would help to reverse that dangerous situation. And in 2008, Obama exaggerated the aspects of Bush’s counterterrorism policies that should be changed, even making campaign promises that he couldn’t keep.
The good news is that because of the continuity between the Bush and Obama administrations on terrorism and national security, as well as waning voter interest, it may be possible to eliminate some of the harmful partisanship that has produced a suboptimal policy. Though doing so will not be easy, it would be one of the most productive accomplishments that could enhance America’s security.
Image credit: Pablo Martinez Monsivais/AP
America and Europe are Saving the Rich and Losing the Economy
Economic policy in the United States and Europe has failed, and people are suffering.
Economic policy failed for three reasons: (1) policymakers focused on enabling offshoring corporations to move middle class jobs, and the consumer demand, tax base, GDP, and careers associated with the jobs, to foreign countries, such as China and India, where labor is inexpensive; (2) policymakers permitted financial deregulation that unleashed fraud and debt leverage on a scale previously unimaginable; (3) policymakers responded to the resulting financial crisis by imposing austerity on the population and running the printing press in order to bail out banks and prevent any losses to the banks regardless of the cost to national economies and innocent parties.
Jobs offshoring was made possible because the collapse of the Soviet Union resulted in China and India opening their vast excess supplies of labor to Western exploitation. Pressed by Wall Street for higher profits, US corporations relocated their factories abroad. Foreign labor working with Western capital, technology, and business know-how is just as productive as US labor. However, the excess supplies of labor (and lower living standards) mean that Indian and Chinese labor can be hired for less than labor’s contribution to the value of output. The difference flows into profits, resulting in capital gains for shareholders and performance bonuses for executives.
As reported by Manufacturing and Technology News (September 20, 2011) the Quarterly Census of Employment and Wages reports that in the last 10 years, the US lost 54,621 factories, and manufacturing employment fell by 5 million employees. Over the decade, the number of larger factories (those employing 1,000 or more employees) declined by 40 percent. US factories employing 500-1,000 workers declined by 44 percent; those employing between 250-500 workers declined by 37 percent, and those employing between 100-250 workers shrunk by 30 percent. http://www.manufacturingnews.com/
These losses are net of new start-ups. Not all the losses are due to offshoring. Some are the result of business failures.
US politicians, such as Buddy Roemer, blame the collapse of US manufacturing on Chinese competition and “unfair trade practices.” However, it is US corporations that move their factories abroad, thus replacing domestic production with imports. Half of US imports from China consist of the offshored production of US corporations.
The wage differential is substantial. According to the Bureau of Labor Statistics, as of 2009, average hourly take-home pay for US workers was $23.03. Social insurance expenditures add $7.90 to hourly compensation and benefits paid by employers add $2.60 per hour for a total labor compensation cost of $33.53.
In China as of 2008, total hourly labor cost was $1.36, and India’s is within a few cents of this amount. Thus, a corporation that moves 1,000 jobs to China saves saves $32,000 every hour in labor cost.These savings translate into higher stock prices and executive compensation, not in lower prices for consumers who are left unemployed by the labor arbitrage.
Republican economists blame “high” US wages for for the current high rate of unemployment. However, US wages are about the lowest in the developed world. They are far below hourly labor cost in Norway ($53.89), Denmark ($49.56), Belgium ($49.40), Austria ($48.04), and Germany ($46.52). The US might have the world’s largest economy, but its hourly workers rank 14th on the list of the best paid. Americans also have a higher unemployment rate. The “headline” rate that the media hypes is 9.1 percent, but this rate does not include any discouraged workers or workers forced into part-time jobs because no full-time jobs are available.
The US government has another unemployment rate (U6) that includes workers who have been too discouraged to seek a job for six months or less. This unemployment rate is over 16 percent. Statistician John Williams (Shadowstats.com) estimates the unemployment rate when long-term discouraged workers (more than six months) are included. This rate is over 22 percent.
Most emphasis is on the lost manufacturing jobs. However, the high speed Internet has made it possible to offshore many professional service jobs, such as software engineering, Information Technology, research and design. Jobs that comprised ladders of upward mobility for US college graduates have been moved offshore, thus reducing the value to Americans of many university degrees. Unlike former times, today an increasing number of graduates return home to live with their parents as there are insufficient jobs to support their independent existence.
All the while, the US government allows in each year one million legal immigrants, an unknown number of illegal immigrants, and a large number of foreign workers on H-1B and L-1 work visas. In other words, the policies of the US government maximize the unemployment rate of American citizens.
Republican economists and politicians pretend that this is not the case and that unemployed Americans consist of people too lazy to work who game the welfare system. Republicans pretend that cutting unemployment benefits and social assistance will force “lazy people who are living off the taxpayers” to go to work.
To deal with the adverse impact on the economy from the loss of jobs and consumer demand from offshoring, Federal Reserve chairman Alan Greenspan lowered interest rates in order to create a real estate boom. Lower interest rates pushed up real estate prices. People refinanced their houses and spent the equity. Construction, furniture and appliance sales boomed. But unlike previous expansions based on rising real income, this one was based on an increase in consumer indebtedness.
There is a limit to how much debt can increase in relation to income, and when this limit was reached, the bubble popped.
When consumer debt could rise no further, the large fraudulent component in mortgage-backed derivatives and the unreserved swaps (AIG, for example) threatened financial institutions with insolvency and froze the banking system. Banks no longer trusted one another. Cash was hoarded. Treasury Secretary Paulson, browbeat Congress into massive taxpayer loans to financial institutions that functioned as casinos. The Paulson Bailout (TARP) was large but insignificant compared to the $16.1 trillion (a sum larger than US GDP or national debt) that the Federal Reserve lent to private financial institutions in the US and Europe.
In making these loans, the Federal Reserve violated its own rules. At this point, capitalism ceased to function. The financial institutions were “too big to fail,” and thus taxpayer subsidies took the place of bankruptcy and reorganization. In a word, the US financial system was socialized as the losses of the American financial institutions were transferred to taxpayers.
European banks were swept up into the financial crisis by their unwitting purchase of the junk financial instruments marketed by Wall Street. The financial junk had been given investment grade rating by the same incompetent agency that recently downgraded US Treasury bonds.
The Europeans had their own bailouts, often with American money (Federal Reserve loans). All the while Europe was brewing an additional crisis of its own. By joining the European Union and (except for the UK) accepting a common European currency, the individual member countries lost the services of their own central banks as creditors. In the US and UK the two countries’ central banks can print money with which to purchase US and UK debt. This is not possible for member countries in the EU.
When financial crisis from excessive debt hit the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) their central banks could not print euros in order to buy up their bonds, as the Federal Reserve did with “quantitative easing.” Only the European Central Bank (ECB) can create euros, and it is prevented by charter and treaty from printing euros in order to bail out sovereign debt.
In Europe, as in the US, the driver of economic policy quickly became saving the private banks from losses on their portfolios. A deal was struck with the socialist government of Greece, which represented the banks and not the Greek people. The ECB would violate its charter and together with the IMF, which would also violate its charter, would lend enough money to the Greek government to avoid default on its sovereign bonds to the private banks that had purchased the bonds. In return for the ECB and IMF loans and in order to raise the money to repay them, the Greek government had to agree to sell to private investors the national lottery, Greece’s ports and municipal water systems, a string of islands that are a national preserve, and in addition to impose a brutal austerity on the Greek people by lowering wages, cutting social benefits and pensions, raising taxes, and laying off or firing government workers.
In other words, the Greek population is to be sacrificed to a small handful of foreign banks in Germany, France and the Netherlands.
The Greek people, unlike “their” socialist government, did not regard this as a good deal. They have been in the streets ever since.
Jean-Claude Trichet, head of the ECB, said that the austerity imposed on Greece was a first step. If Greece did not deliver on the deal, the next step was for the EU to take over Greece’s political sovereignty, make its budget, decide its taxation, decide its expenditures and from this process squeeze out enough from Greeks to repay the ECB and IMF for lending Greece the money to pay the private banks.
In other words, Europe under the EU and Jean-Claude Trichet is a return to the most extreme form of feudalism in which a handful of rich are pampered at the expense of everyone else.
This is what economic policy in the West has become–a tool of the wealthy used to enrich themselves by spreading poverty among the rest of the population.
On September 21 the Federal Reserve announced a modified QE 3. The Federal Reserve announced that the bank would purchase $400 billion of long-term Treasury bonds over the next nine months in an effort to drive long-term US interest rates even further below the rate of inflation, thus maximizing the negative rate of return on the purchase of long-term Treasury bonds. The Federal Reserve officials say that this will lower mortgage rates by a few basis points and renew the housing market.
The officials say that QE 3, unlike its predecessors, will not result in the Federal Reserve printing more dollars in order to monetize US debt. Instead, the central bank will raise money for the bond purchases by selling holdings of short-term debt. Apparently, the Federal Reserve believes it can do this without raising short-term interest rates, because back during the recent debt-ceiling-government-shutdown-crisis, the Federal Reserve promised banks that it would keep the short-term interest rate (essentially zero) constant for two years.
The Fed’s new policy will do far more harm than good. Interest rates are already negative. To make them more so will have no positive effect. People aren’t buying houses because interest rates are too high, but because they are either unemployed or worried about their jobs and do not see a recovering economy.
Already insurance companies can make no money on their investments. Consequently, they are unable to build their reserves against claims. Their only alternative is to raise their premiums. The cost of a homeowner’s policy will go up by more than the cost of a mortgage will decline. The cost of health insurance will go up. The cost of car insurance will rise. The Federal Reserve’s newly announced policy will impose more costs on the economy than it will reduce.
In addition, in America today savings earn nothing. Indeed, they produce an ongoing loss as the interest rate is below the inflation rate. The Federal Reserve has interest rates so low that only professionals who are playing arbitrage with algorithm programmed computer models can make money. The typical saver and investor can get nothing on bank CDs, money market funds, municipal and government bonds. Only high risk debt, such as Greek and Spanish bonds, pay an interest rate that is higher than inflation.
For four years interest rates, when properly measured, have been negative. Americans are getting by, maintaining living standards, by consuming their capital. Even those with a cushion are eating their seed corn. The path that the US economy is on means that the number of Americans without resources to sustain them will be rising. Considering the extraordinary political incompetence of the Democratic Party, the right-wing of the Republican Party, which is committed to eliminating income support programs, could find itself in power. If the right-wing Republicans implement their program, the US will be beset with political and social instability. As Gerald Celente says, “when people have have nothing left to lose, they lose it.”
Paul Craig Roberts [ email him ] was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal . He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider’s Account of Policymaking in Washington ; Alienation and the Soviet Economy and Meltdown: Inside the Soviet Economy , and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice . Click here for Peter Brimelow’s Forbes Magazine interview with Roberts about the recent epidemic of prosecutorial misconduct.
© 2011 Copyright Paul Craig Roberts – All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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“Sheared by the Shorts”.
How Short Sellers Fleece Investors
by Ellen Brown
Global Research, September 29, 2011
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– by Ellen Brown, James Corbett – 2011-10-02
Why did gold and silver stocks just get hammered, at a time when commodities are considered a safe haven against widespread global uncertainty? The answer, according to Bill Murphy’s newsletter LeMetropoleCafe.com, is that the sector has been the target of massive short selling. For some popular precious metal stocks, close to half the trades have been “phantom” sales by short sellers who did not actually own the stock.
A bear raid is the practice of targeting a stock or other asset for take-down, either for quick profits or for corporate takeover. Today the target is commodities, but tomorrow it could be something else. When Lehman Brothers went bankrupt in September 2008, some analysts thought the investment firm’s condition was no worse than its competitors’. What brought it down was not undercapitalization but a massive bear raid on 9-11 of that year, when its stock price dropped by 41% in a single day.
The stock market has been plagued by these speculative attacks ever since the four-year industry-wide bear raid called the Great Depression, when the Dow Jones Industrial Average was reduced to 10 percent of its former value. Whenever the market decline slowed, speculators would step in to sell millions of dollars worth of stock they did not own but had ostensibly borrowed just for purposes of sale, using the device known as the short sale. When done on a large enough scale, short selling can force prices down, allowing assets to be picked up very cheaply.
Another Great Depression is the short seller’s dream, as a trader recently admitted on a BBC interview. His candor was unusual, but his attitude is characteristic of a business that is all about making money, regardless of the damage done to real companies contributing real goods and services to the economy.
How the Game Is Played
Here is how the short selling scheme works: stock prices are set by traders called “market markers,” whose job is to match buyers with sellers. Short sellers willing to sell at the market price are matched with the highest buy orders first, but if sales volume is large, they wind up matched with the bargain-basement bidders, bringing the overall price down. Price is set by supply and demand, and when the supply of stocks available for sale is artificially high, the price drops. When the bear raiders are successful, they are able to buy back the stock to cover their short sales at a price that is artificially low.
Today they only have to trigger the “stop loss” orders of investors to initiate a cascade of selling. Many investors protect themselves from sudden drops in price by placing a standing “stop loss” order, which is activated if the market price falls below a certain price. These orders act like a pre-programmed panic button, which can trigger further selling and more downward pressure on the stock price.
Another destabilizing factor is “margin selling”: many speculative investors borrow against their holdings to leverage their investment, and when the value of their holdings goes down, the brokerage may force them to come up with additional cash on short notice or else sell into the bear market. Again the result is something that looks like a panic, causing the stock price to overreact and drop precipitously.
Where do the short sellers get the shares to sell into the market? As Jim Puplava explained on FinancialSense.com on September 24, 2011, they “borrow” shares from the unwitting true shareholders. When a brokerage firm opens an account for a new customer, it is usually a “margin” account—one that allows the investor to buy stock on margin, or by borrowing against the investor’s stock. This is done although most investors never use the margin feature and are unaware that they have that sort of account. The brokers do it because they can “rent” the stock in a margin account for a substantial fee—sometimes as much as 30% interest for a stock in short supply. Needless to say, the real shareholders get none of this tidy profit. Worse, they can be seriously harmed by the practice. They bought the stock because they believed in the company and wanted to see its business thrive, not dive. Their shares are being used to bet against their own interests.
There is another problem with short selling: the short seller is allowed to vote the shares at shareholder meetings. To avoid having to reveal what is going on, stock brokers send proxies to the “real” owners as well; but that means there are duplicate proxies floating around. Brokers know that many shareholders won’t go to the trouble of voting their shares; and when too many proxies do come in for a particular vote, the totals are just reduced proportionately to “fit.” But that means the real votes of real stock owners may be thrown out. Hedge funds may engage in short selling just to vote on particular issues in which they are interested, such as hostile corporate takeovers. Since many shareholders don’t send in their proxies, interested short sellers can swing the vote in a direction that hurts the interests of those with a real stake in the corporation.
Some of the damage caused by short selling was blunted by the Securities Act of 1933, which imposed an “uptick” rule and forbade “naked” short selling. But both of these regulations have been circumvented today.
The uptick rule required a stock’s price to be higher than its previous sale price before a short sale could be made, preventing a cascade of short sales when stocks were going down. But in July 2007, the uptick rule was repealed.
The regulation against “naked” short selling forbids selling stocks short without either owning or borrowing them. But an exception turned the rule into a sham, when a July 2005 SEC ruling allowed the practice by “market makers,” those brokers agreeing to stand ready to buy and sell a particular stock on a continuous basis at a publicly quoted price. The catch is that market makers are the brokers who actually do most of the buying and selling of stock today. Ninety-five percent of short sales are done by broker-dealers and market makers. Market making is one of those lucrative pursuits of the giant Wall Street banks that now hold a major portion of the country’s total banking assets.
One of the more egregious examples of naked short selling was relayed in a story run on FinancialWire in 2005. A man named Robert Simpson purchased all of the outstanding stock of a small company called Global Links Corporation, totaling a little over one million shares. He put all of this stock in his sock drawer, then watched as 60 million of the company’s shares traded hands over the next two days. Every outstanding share changed hands nearly 60 times in those two days, although they were safely tucked away in his sock drawer. The incident substantiated allegations that a staggering number of “phantom” shares are being traded around by brokers in naked short sales. Short sellers are expected to cover by buying back the stock and returning it to the pool, but Simpson’s 60 million shares were obviously never bought back to cover the phantom sales, since they were never on the market in the first place. Other cases are less easy to track, but the same thing is believed to be going on throughout the market.
Why Is It Allowed?
The role of market makers is supposedly to provide liquidity in the markets, match buyers with sellers, and ensure that there will always be someone to supply stock to buyers or to take stock off sellers’ hands. The exception allowing them to engage in naked short selling is justified as being necessary to allow buyers and sellers to execute their orders without having to wait for real counterparties to show up. But if you want potatoes or shoes and your local store runs out, you have to wait for delivery. Why is stock investment different?
It has been argued that a highly liquid stock market is essential to ensure corporate funding and growth. That might be a good argument if the money actually went to the company, but that is not where it goes. The issuing company gets the money only when the stock is sold at an initial public offering (IPO). The stock exchange is a secondary market – investors buying from other stockholders, hoping they can sell the stock for more than they paid for it. In short, it is gambling. Corporations have an easier time raising money through new IPOs if the buyers know they can turn around and sell their stock quickly; but in today’s computerized global markets, real buyers should show up quickly enough without letting brokers sell stock they don’t actually have to sell.
Short selling is sometimes justified as being necessary to keep a brake on the “irrational exuberance” that might otherwise drive popular stocks into dangerous “bubbles.” But if that were a necessary feature of functioning markets, short selling would also be rampant in the markets for cars, television sets and computers, which it obviously isn’t. The reason it isn’t is that these goods can’t be “hypothecated” or duplicated on a computer screen the way stock shares can. Short selling is made possible because the brokers are not dealing with physical things but are simply moving numbers around on a computer monitor.
Any alleged advantages to a company or asset class from the liquidity afforded by short selling are offset by the serious harm this sleight of hand can do to companies or assets targeted for take-down in bear raids. With the power to engage in naked short sales, market makers have the market wired for demolition at their whim.
The Need for Collective Action
What can be done to halt this very destructive practice? Ideally, federal regulators would step in with some rules; but as Jim Puplava observes, the regulators seem to be in the pockets of the brokers and are inclined to look the other way. Lawsuits can have an effect, but they take money and time.
In the meantime, Puplava advises investors to call their brokers and ask if their accounts are margin accounts. If so, get the accounts changed, with confirmation in writing. Like the “Move Your Money” campaign for disciplining the Wall Street giants, this maneuver could be a non-violent form of collective action with significant effects if enough investors joined in. We need some grassroots action to rein in our runaway financial system and the government it controls, and this could be a good place to start.
|VIDEO: Finance Capital vs. Public Banking|
Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org. In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://webofdebt.com and http://ellenbrown.com.
Sunday, July 11, 2010
Debt and Deficit Commission Says We Will Destroy America From Within
The commission that President Barack Obama put together to look at the countries debt and deficit has come to a serious conclusion that has been known to most fiscally responsible people…the debt is going to destroy our country!
From the Washington Post:
BOSTON — The co-chairs of President Obama’s debt and deficit commission offered an ominous assessment of the nation’s fiscal future here Sunday, calling current budgetary trends a cancer “that will destroy the country from within” unless checked by tough action in Washington.
These two gentlemen are absolutely right…we are destroying our country with our debt and the out of control spending that takes place in Washington. As I write this, the national debt stands at $13.1 Trillion.
They are correct…there needs to be tough action in Washington to curb this impending destruction. David Walker, the former Comptroller General of the United States, has been warning about this cancer for some time. However, people like Barack Obama and the leaders in Washington could care less about the situation because it hurts their radical agenda. They put together these commissions just to give the perception of doing something about the problem, but he and they will ultimately ignore the recommendation of the commission.
Steps need to be taken to rid Washington of the people that are destroying it and to fix this debt situation. I will be proposing something as we get closer to the November elections that I think will radically change the way Washington looks in terms of the type of people who are serving….stay tuned!
Posted by R Bentley at 7/11/2010 12:58:00 PM
After Wall Street’s Broken, Who Pays the Piper?
In the last decade, we experienced the growth of the greatest number and size of asset bubbles in history made possible by a bubble in instruments that Warren Buffett has labeled “financial weapons of mass destruction.” Now that this mother of all bubbles is breaking, who can afford to pick up the tab? (For definitions, please see the glossary at the end of the article.)
It is the stuff of which legends are made. A get-together of finance geniuses in 1994 in Florida from JP Morgan (JPM), all brainstorming on ways to increase the amount of money the bank could loan. How could it find a way to free up more capital to loan and make more in fees?
The answer was simplicity itself. Create an insurance policy in which a third party (investor) would assume the loan risk in exchange for regular premiums from the bank. The bank got what it wanted – remove the loan from its books, freeing up money to make more loans. In return for helping out, the investor got paid for taking the risk in a derivative instrument called a credit default swap. It seemed like a match made in heaven.
Before long, according to Newsweek, investors were being encouraged to buy into riskier emerging markets in Russia and Latin America insuring debt. In the wake of Enron and WorldCom, it became obvious that there was a need for this type of insurance and the industry was well on its way. By 2000, the CDS market had passed the $100 billion mark and by 2004 it had grown to more than $8 trillion, an 8000% increase. It was just the beginning.
The Perfect Petri Dish
When the Federal Reserve cut interest rates in 2001 and kept cutting them into 2004 in an effort to avert the fallout from the bursting of the internet bubble, it created the perfect environment for a new series of bubbles and real estate was a major beneficiary. Demand for mortgages went through the roof as hordes rushed to buy property.
Banks hobbled by capital reserve restrictions that limited them to $10 in loans for every $1 on deposit needed help in expanding their mortgage businesses and CDSs were the perfect vehicle. Wall Street had come to the aid of Main Street and terms like collateralized debt obligations (CDOs), residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBSs) became new catch phrases in the lexicon of mortgage finance terminology.
Figure 1 – Credit derivative swaps are now the fastest growing segment of the derivatives market. These instruments traded in the billions in 2000. In 2007, credit derivative swaps (CDS) totaled $62.17 trillion up from $34.42 trillion in 2006.
New financial vehicles led to mortgage traunches in which thousand and in some cases millions of individual mortgages were pooled together by banks into CDOs and resold to Wall Street firms. Rating agencies like Standard & Poor’s, Fitches and Moody’s also got into the act to provide financial opinions as to the soundness of these nascent mortgage instruments which were in turn insured by CDSs to offset the risk.
But these instruments were only part of the story. Credit derivatives have been issued for everything from credit card, small business and student loan debt to aircraft loans.
Since it was nearly impossible for the investor to access the creditworthiness of a pool of a million mortgages or loans, Wall Street financial engineers thought it prudent to get a second opinion. Engaging the rating agencies was a brilliant marketing strategy. As it turns out, it was nearly impossible for rating agencies to assess the true risk of these instruments as well but I’m getting ahead of myself.
Here is how Jim Grant of Grant’s Interest Rate Observer described the creation of subprime mortgage derivatives in a March 2007 Bloomberg interview.
“Hundreds of billions of dollars of collateralized debt obligations and the like are sold in any year – immense amounts. They take a bunch of loans and fashion an asset backed security from those loans. They take those loans and you repackage them into a collateralized debt obligation, a CDO. There can be a million individual loans in a CDO,” he explained.
“Now here is the magic and mystery of a CDO,” he continued. “They take 70% of a pile of triple-B minus (meaning marginal credit) and the rating agencies will bless it. They will say that ‘we have studied the correlations and trends and we pronounce 70% of this pile of junk to be triple-A,’ triple-A!” he exclaimed (emphasis is his not mine).
How do they do that?
“They have their models – very elaborate and no doubt mathematically literate and internally logical models that tell them that in a given environment, these loans will perform up to triple-A standard. My contention is that the last couple of years have been so anomalous from the point of view of underwriting practices [not to mention appreciation in real estate prices] that all those models are going to be wrong,” Grant said.
Figure 2 – Interest rate and currency derivatives (like Forex options contracts) are also growing rapidly and totaled $382.3 trillion in 2007. This market is a little older than the CDS market and began in 1986-7.
How prophetic these words turned out to be. It soon became painfully apparent that rating agency models were based on the assumption that since housing prices had not dropped across the nation for more than 80 years since the Great Depression, a fall in prices was outside their realm of possibilities. And that assumption turned out to be catastrophically wrong.
As we see from Figure 1, by the end of 2007, the total amount of credit default swaps outstanding exploded to $62.2 trillion in 2008 according to the International Swaps & Credit Derivatives Association (ISDA). Between 2004 and 2008, CDSs were doubling every year! But then something unprecedented happened. The volume of CDS trades dropped 12% in the first half of 2008 to $54.6 trillion according to the ISDA.
A CDS is like an insurance policy. CDS issuers are relying on the buyer to act as insurer if the underlying debt, like a collateralized debt obligation of a million mortgages bundled together, for example, goes bad. In the event that the CDS holder is unable to full his or her obligation, this responsibility falls back on the issuer. The big difference between a CDS and an insurance policy is that to issue insurance, the insurer must be hold assets in reserve in case of a claim. CDS markets on the other hand are unregulated and there are no reserve requirements.
But this difference may be moot. As we saw with Lloyd’s of London more than two decades ago, a string of unexpected claims can bankrupt this reserve as well as its backers. But there is little doubt that any reserve, no matter how big could have anticipated the scope of the credit meltdown.
While only time will tell how many banks and non-bank institutions who issued these derivatives will ultimately survive, defaults are soaring forcing many to take liabilities back on their balance sheets. What happens if they can’t pay their obligations? During the first three quarters of 2008, insurer AIG (AIG) suffered $18 billion in losses tied to guarantees it wrote on mortgage backed derivatives and we know what happened that company.
We gained further insight into the scope of the problem in the October 10 auction of roughly $400 billion in credit default swaps held by bankrupt firm Lehman Brothers. The recovery rate on the firm’s senior debt was a meager 8.625 cents on the dollar which meant that CDS sellers were responsible for 91.375 cents out of every dollar sold. Looking at the bigger picture, does that mean that $54.6 trillion in CDSs could now be worth less than $5 trillion? And since Lehman is now bankrupt, who is stuck with this bill? These are just two of many questions that remain.
Figure 3 – Prices for the composite of 15 ABX subprime mortgage off-the-run indexes tracked by Markit.com (blue) and the worst performing (BBB-minus) in red. Index values priced at 100 in January 2007 had fallen to 33 for the composite and a mere 5.4 for the BBB- index.
As we see from Figure 3, values for subprime bonds that in effect insured these mortgages have fallen through the floor, and are worth anywhere from 5 to 33 cents on the dollar today. However, unlike subprime mortgages charted by Markit.com, most derivatives are not publicly reported making it next to impossible for anyone other than the parties to these contracts to assess their real value.
It is also important to point out that CDSs are a small part of the overall picture representing just 10% of the huge over-the-counter (OTC) derivatives market that totaled $596 trillion by December 2007 (see Figure 4 below) in a market that until recently had been doubling in size every 1.88 years. That works out to roughly 40 times 2008 U.S. GDP. In 2000, this market was worth less than $100 trillion.
Are U.S. Banks the Global Achilles Heel?
An examination of U.S. banking exposure to derivative risk is a sobering experience. Data from the Office of the Comptroller of Currency (OCC) clearly lays out which banks carry the highest risk. As of the latest available figures, the top five U.S. banks held more than 97% of total U.S. bank derivative counter-party risk. In other words, they could ultimately be responsible for picking up the tab on claims that result from bad investments backed by the derivatives they issued.
As we see from Table 1, JP Morgan Chase with nearly $90 trillion in total OTC derivative counterparty risk has the most to lose from a global credit meltdown. As of first quarter 2008, it had a nominal value of more than $8 trillion in credit derivatives on its books. If the October 10 Lehman CDS auction is a relevant benchmark, this means that JP Morgan could have seen the value of these derivatives drop to less than $700 billion which means it has a potential liability of more than $7.5 trillion! Such a loss would prove catastrophic to both JP Morgan and the banking system.
Top 25 U.S. Bank Derivative Exposure
% of Top 25
|RANK BANK NAME||
|1 JPMORGAN CHASE||
|2 BANK OF AMERICA||
|3 CITIBANK NATIONAL||
|4 WACHOVIA BANK||
|5 HSBC BANK USA||
|Top 5 Bank Totals||
|6 WELLS FARGO||
|7 BANK OF NEW||
|8 STATE STREET||
|9 PNC BANK NATIONAL||
|10 SUNTRUST BAN||
|11 MELLON BANK||
|12 NORTHERN TRUST||
|13 NATIONAL CITY||
|14 KEYBANK NATIONAL||
|15 U S BANK NATIONAL||
|16 REGIONS BAN||
|17 BRANCH BANK&TRUST||
|18 FIFTH THIRD||
|19 RBS CITIZENS||
|20 MERRILL LYNCH||
|21 FIRST TENNESSEE||
|22 LASALLE BANK||
|23 UNION BANK||
|24 UBS BANK USA||
|25 DEUTSCHE BANK||
|TOP 25 COMMERCIAL BANKS & TCs WITH DERIVATIVES||
|OTHER COMMERCIAL BANKS & TCs WITH DERIVATIVES||
|TOTAL COMMERCIAL BANKS & TCs WITH DERIVATIVES||
Table 1 – Breakdown of derivative holdings in the top 25 U.S. banks showing that JP Morgan has the lion’s share of the counter-party derivative risk.
In comparison, the next in line with derivative risk is Bank of America (BAC) with a total just shy of $40 trillion including slightly more than $3 trillion in credit derivative risk. Next is Citibank (C) with less overall derivative exposure but greater credit derivative risk.
This is the truly frightening part. As a group, the top 5 U.S. banks have total derivative liabilities of more than $174 trillion with $16 trillion in credit derivative risk. Is it any wonder that investors in the know have been running scared?
Figure 4 – Think with the credit meltdown that derivatives have been falling? Think again. As of the most recent data, the size of the Over-the-Counter (OTC) derivatives markets has continued to grow hitting nearly $600 trillion in December 2007 according to the Bank of International Settlements that tracks the data globally. This is a doubling rate of less than 2 years. As a point of comparison, trading volume on the Nasdaq doubled every 4.1 years from 1990 to 2000 and was doubling every 2.07 years in the wild parabolic increase from 1998-2000 and look what happened afterward. A doubling rate of 1.88 years was clearly unsustainable!
Can Bailouts Work?
As of the $700 billion bailout on October 3, 2008, the federal government and Federal Reserve are on the hook for more than $2 trillion dollars in bailouts, guarantees and similar debt programs. (See article, “Cost of U.S. Crisis Action Grows, Along With Debt” below.) Many in government and capital markets are hoping that much of this money will not be needed and that the taxpayer may actually profit in the final analysis. But what happens if the flip-side is true and it’s not enough to deal with the problems?
As we see from the next figure, debt at all levels from private to government have been steadily climbing, especially in the last two decades. As of the first quarter 2008, U.S. debt was nearly 350% of GDP but that’s not the scary part. According to some credible analysts like Ian McAvity, the true figure is actually 360% of GDP.
Figure 5 – Undoubtedly the most important chart in our indicator library currently as governments, especially here in the U.S., spends like there is no tomorrow. And judging by the lack of interest over the last six months in U.S. Treasuries from abroad, there may not be. I find it interesting that the financial media has not picked up on this. Treasury income flows were minus $400 million in August (more Treasuries were sold than purchased) down from the net redemption of $33.6 billion (revised) in July. But as we see from the orange trendline, this trend has been falling over the last three years.
The important takeaway is that Treasury must sell an average of a minimum of $33 billion (yellow dashed horizontal line) every month just to pay the bills – assuming the final 2008 budget deficit is $400 billion. In all likelihood it will be substantially higher especially given the more than $2.2 trillion in bailouts this year so far. Now imagine what would happen if the budget deficit soars above $1 trillion in 2009 (a very conservative estimate) which would push the federal government’s monthly requirement for cash up to more than $80 billion! Now imagine what this would do to real interest rates as Treasury was forced to increase the return in pays to attract enough foreign investors in a deteriorating economy!
Look what happened the last time we had a really serious slowdown in the early 1930s (Figure 6). GDP fell by 45% pushing the ratio Debt/GDP from 155% in 1929 to 260% by 1932 as the economy worsened – a 67% increase in just three years. A similar economic meltdown again, which is now looking increasingly possible, would push our total debt to GDP ratio to nearly 600%! What investor, foreign or domestic would finance a borrower with this level of debt burden? One only has to look at what is happening Iceland to get a taste of what to expect (see article below).
Figure 6 – Total credit market debt to GDP percentage rises to nearly 350% in Q1-2008. This rate of debt increase is clearly unsustainable but more alarming is what will happen when we have a significant economic slowdown.
Given the scenario above, how does the government pay the bills if the majority of bailouts are required? As of the latest U.S. Treasury income flow figures, net Treasury sales have fallen below the $33 billion per month needed just to pay the current government deficit of approximately $400 billion this year (see Figure 5). As the figure shows, net Treasury income flows (flow of money into and out of U.S. Treasuries) have shown a disturbing decline over the last two years.
Now imagine what would happen if the budget deficit doubles, triples or quadruples next year as the bailouts are needed? If the $2 trillion in bailouts currently committed is needed in 2009 or 2010 (and assuming no more bailouts are issued between now and then which is highly unlikely), the U.S. budget deficit would soar to $2.4 trillion. That translates to $200 billion in Treasuries every month that would need to be sold just to pay the bills on Capital Hill! Where is this money going to come from and what interest rate will Treasury have to pay?
Unless foreigners do an about-face and start buying Treasuries in record numbers, interest rates could be pushed dramatically higher as the government is forced to attract more money from abroad.
As Figure 6 demonstrates, it is unrealistic to expect the corporate or private sector to provide much help. Household debt is now at levels no seen before in history and corporate debt is being negatively impact by the derivative meltdown.
Living History – More questions than answers
In summary, we know from the Lehman auction that $400 billion in CDSs are worth less than 9 cents on the dollar. What about the other $54 trillion in CDSs? No government, central bank, or group of governments and central banks have the resources to pick up the tab if there is a significant mark-down in the value of these assets. And CDSs are only 10% of the total OTC derivative market. Will other derivatives risk a similar fate? It is a potential scenario that could make the Great Depression and 20-year Japanese collapse look like practice runs.
We are living through one of those rare periods in history in which theory and practice collide. In theory, capitalist systems should be self correcting. But at no time in history have we experienced so many bubbles at one time with the mother of them all driven by the unprecedented creation of new sources of money through unregulated derivatives. No one knows how bad it will get, what damage will ultimately be done to our economic fabric and how long it will take to repair it.
Talking heads in the financial industry and media are again telling us we are at a bottom. But it is important to remember that these so called “experts” have a lousy track record of getting you out of the markets in times of trouble. This became painfully evident when The Economist polled economists in March 2001 as to whether they though the U.S. would enter recession. A full 95% said no. But as we later learned, we were already in recession at the time! Are they are reinforcing that legacy once again?
We will never know how bad a situation will get till the risks have passed. It is at times like these when following the sage advice of Will Rogers is not a bad way to go.
“I’m more concerned about the return of my capital than the return on my capital.”
Capital Hill politicians deal with the heat. C. Beeler, published with permission
From March 2008 Report by the Office of the Comptroller of Currency
Commercial bank derivatives activity is heavily concentrated in the three largest dealers, which hold 92% of all contracts. The five largest dealers hold 97% of all contracts and the largest 25 banks with derivatives activity account for nearly 100% of all contracts.
A total of 1,003 insured U.S. commercial banks reported derivatives activities at the end of the first quarter, an increase of 48 banks from the prior quarter.
The notional amount of derivatives contracts held by U. S. commercial banks in the first quarter increased by $14.7 trillion, or 9%, to $180.3 trillion. Derivative notionals are 25% higher than a year ago. The first quarter increase follows an unusual fourth quarter 2007 decline in notionals due to declines in interest rate notionals. In the first quarter, however, interest rate contracts advanced 9%, or $13 trillion, as higher levels of interest rate volatility resulted in greater client flows and proprietary trading activity.
Glossary of Terms
Derivative: A financial contract whose value is derived from the performance of underlying market factors, such as interest rates, currency exchange rates, and commodity/equity prices. Derivative transactions include a wide assortment of financial contracts including structured debt obligations and deposits, swaps, futures, options, caps, floors, collars, forwards and various combinations thereof.
Credit Derivative: A financial contract that explicitly shifts credit risk from one party to another. Instruments include over-the-counter (OTC) credit derivatives, such as credit default swaps, total return swaps, and credit spread options.
Currency Derivative: It is a derivative contract in which one party pays a periodic fee to another party in return for compensation for default (or similar credit event) by a reference entity. It is not necessary for the protection buyer to suffer an actual loss to be eligible for compensation if a credit event occurs.
Credit Derivative Swap: A financial instrument the value of which is derived from the creditworthiness of an underlying asset, portfolio of assets or issuer. It is a derivative contract in which one party pays a periodic fee to another party in return for compensation for default by a reference entity. It is not necessary for the protection buyer to suffer an actual loss to be eligible for compensation if a credit event occurs.
Interest Rate Swap: An agreement to exchange interest rate cash flows at specified intervals during the life of the agreement. Each party’s payment obligation is computed using a different interest rate. In an interest rate swap, the notional principal is never exchanged. Although there are no standardized swaps, a plain vanilla swap typically refers to a generic interest rate swap in which one party pays a fixed rate and one party pays a floating rate (usually Libor).
Interest Rate Option: In an interest rate option, the underlying asset is related to the change in an interest rate. In an interest rate cap, for example, the seller agrees to compensate the buyer for the amount by which an underlying short-term rate exceeds a specified rate on a series of dates during the life of the contract. In an interest rate floor, the seller agrees to compensate the buyer for a rate falling below the specified rate during the contract period. A collar is a combination of a long (short) cap and short (long) floor, struck at different rates. Finally, a swap option (swaption) gives the holder the right—but not the obligation—to enter an interest rate swap at an agreed upon fixed rate until or at some future date.
Sources – ISDA and OCC
Stock position: None.
More articles by Matt Blackman »
11 Long-Term Trends That Are Absolutely Destroying The U.S. Economy
The U.S. economy is being slowly but surely destroyed and many Americans have no idea that it is happening. That is at least partially due to the fact that most financial news is entirely focused on the short-term. Whenever a key economic statistic goes up the financial markets surge and analysts rejoice. Whenever a key economic statistic goes down the financial markets decline and analysts speak of the potential for a “double-dip” recession. You could literally get whiplash as you watch the financial ping pong ball bounce back and forth between good news and bad news. But focusing on short-term statistics is not the correct way to analyze the U.S. economy. It is the long-term trends that reveal the truth. The reality is that there are certain underlying foundational problems that are destroying the U.S. economy a little bit more every single day.
11 of those foundational problems are discussed below. They are undeniable and they are constantly getting worse. If they are not corrected (and there is no indication that they will be) they will destroy not only our economy but also our entire way of life. The sad truth is that it would be hard to understate just how desperate the situation is for the U.S. economy.
Long-Term Trend #1: The Deindustrialization Of America
The United States is being deindustrialized at a pace that is almost impossible to believe. But now that millions upon millions of people have lost their jobs, more Americans than ever are starting to wake up and believe it.
A recent NBC News/Wall Street Journal poll found that 69 percent of Americans now believe that free trade agreements have cost America jobs. Ten years ago the majority of Americans had great faith in the new “global economy” that we were all being merged into, but now the tide has turned.
So why have Americans lost faith in “free trade”?
Well, it turns out that the current system is neither “free trade” nor “fair trade”. Many other nations impose extremely high tariffs on U.S. goods and put up ridiculous barriers to American products and yet the United States has generally let everyone else openly manipulate currency rates and flood our shores with whatever cheap products they want.
The results have been disastrous. Jobs and factories have been leaving the United States at a blinding pace.
The United States has lost approximately 42,400 factories since 2001. An economy without a manufacturing base does not have a bright long-term future. Yet our politicians have allowed our manufacturing base to be systematically dismantled.
As of the end of 2009, less than 12 million Americans worked in manufacturing. The last time that less than 12 million Americans were employed in manufacturing was in 1941.
How is the United States supposed to have a bright economic future if it consumes everything in sight and yet makes very little?
Something needs to be done.
In 1959, manufacturing represented 28 percent of all U.S. economic output. In 2008, it represented only 11.5 percent and it continues to fall.
Needless to say, millions of blue collar workers now find themselves unable to find jobs. Today, 28% of all U.S. households have at least one person that is looking for a full-time job and there is no sign that things are going to improve much any time soon.
Long-Term Trend #2: The Exploding U.S. Trade Deficit
Each month, tens of billions more dollars go out of the United States than come into it. In other words, every single month the United States gets poorer.
Recently, the U.S. trade deficit has been coming in at around 40 to 50 billion dollars a month. About half of that is with communist China.
Between 2000 and 2009, America’s trade deficit with China increased nearly 300 percent.
Sadly, things are getting even worse.
As of the end of July, the U.S. trade deficit with China had risen 18 percent compared to the same time period a year ago.
There is a reason why China has been able to loan the U.S. government nearly a trillion dollars. They have literally been bleeding us dry.
The United States spends approximately $3.90 on Chinese goods for every $1 that the Chinese spend on goods from the United States.
Does that sound like “fair trade” to you?
According to a new study conducted by the Economic Policy Institute, if the U.S. trade deficit with China continues to increase at its current rate, the U.S. economy will lose over half a million jobs this year alone.
Half a million jobs in just one year?
And that doesn’t even take into account the trade deficit that we have with all the other nations around the world.
We have literally built China into a superpower.
One prominent economist is now projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040.
But it isn’t just China that is a problem.
Since the implementation of NAFTA in 1994, 300,000 U.S. farms have gone out of business.
Globalism has forced U.S. workers to directly compete with the cheapest labor in the world for jobs. That is not good for American workers and it is not good for America.
Long-Term Trend #3: The Shrinking Middle Class
As jobs continue to flee the United States and as wages continue to be depressed, America’s middle class is shrinking at an alarming rate.
According to a poll taken in 2009, 61 percent of Americans “always or usually” live paycheck to paycheck. That was up substantially from 49 percent in 2008 and 43 percent in 2007.
Unfortunately, a growing number of Americans have found it impossible to make it from month to month without direct financial assistance from the federal government.
41 million Americans are now on food stamps. One out of every six Americans is now enrolled in at least one anti-poverty program run by the federal government. Economic pain is everywhere.
Tens of millions of Americans now live in poverty. The U.S. Census Bureau says that 43.6 million Americans are now living in poverty and according to them that is the highest number of poor Americans that they have ever recorded in 51 years of record-keeping.
Long-Term Trend #4: The Growing Size Of The U.S. Government
No matter whether it is a Republican or a Democrat in the White House, the size of the U.S. government has continued to grow by leaps and bounds in recent years.
This is a tremendous drain on the U.S. economy. The government produces very little value for the economy and yet costs a colossal amount to maintain.
In addition, multiplying government regulations have caused the United States to be a very difficult environment to operate a business in.
The Federal Register is the main source of regulations for U.S. government agencies. In 1936, the number of pages in the Federal Register was about 2,600. Today, the Federal Register is over 80,000 pages long.
Long-Term Trend #5: The Constantly Growing U.S. National Debt
The United States has accumulated the biggest mountain of debt in the history of the world and every single month it gets worse.
According to an official U.S. Treasury Department report to Congress, the U.S. national debt will top $13.6 trillion this year and will climb to an estimated $19.6 trillion by 2015.
Do we really want to pass on a 20 trillion dollar debt to our children and grandchildren?
But the truth is that the situation is actually a lot worse than that.
If the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion each and every year.
Needless to say, that is not anywhere close to sustainable. We are literally destroying our economic future with all of this debt.
Long-Term Trend #6: The Ongoing Devaluation Of The U.S. Dollar
The Federal Reserve constantly destroys the value of the U.S. dollar. Since the Federal Reserve was created in 1913, the U.S. dollar has lost over 95 percent of its purchasing power.
Inflation is like a hidden tax. The value of the dollars you are holding right now will decline a little bit more each and every month.
And now that the Federal Reserve is threatening to unleash another round of quantitative easing, it appears that the value of our dollars will soon be declining even more rapidly.
Long-Term Trend #7: The Derivatives Bubble
The one thing that the “Wall Street reform bill” should have done was that it should have done something about the horrific abuses in the derivatives markets. Instead, the Wall Street reform bill did next to nothing about derivatives and instead imposed hundreds of other useless regulations on Wall Street.
Most Americans don’t even know what derivatives are. Basically, they are side bets. They have no underlying value of their own. But today derivatives have taken center stage on Wall Street. Our financial markets have become a gigantic casino.
The total value of all derivatives worldwide is estimated to be somewhere between 600 trillion and 1.5 quadrillion dollars. And thanks to the U.S. Congress, the derivatives bubble is still growing.
It would be hard to understate the danger that the derivatives bubble represents. The danger from derivatives is so great that Warren Buffet once called them “financial weapons of mass destruction”.
When the derivatives bubble finally pops, there will not be enough money in the entire world to fix it.
Long-Term Trend #8: The Health Care Industry
The United States health care system is completely and totally broken. It has become a gigantic money making machine for health insurance companies, pharmaceutical corporations and greedy lawyers.
Americans pay more for health care than anyone else in the world and yet they get shockingly little in return.
Health care expenses are the number one reason why people file for personal bankrupty in the United States. Surprisingly, most of those who get bankrupted by health care expenses actually have health insurance.
The health insurance system in the United States is a complete and total mess. Health insurance premiums are busting the budgets of tens of millions of American families and yet they are getting ready to go up yet once again.
Already, large numbers of health insurance companies across the United States have announced that they plan to increase health insurance premiums in response to the new health care law.
But do health insurance companies actually need more money? Even as the rest of the U.S. economy deeply struggles, America’s health insurance companies increased their profits by 56 percent in 2009.
At least someone is doing well in this economy.
The truth is that the U.S. health care system needs to be totally and completely reinvented. The system we had before did not work. Barack Obama’s new health care system will be far worse. Meanwhile, the health care industry is literally choking the life out of the U.S. economy.
Long-Term Trend #9: Financial Power Is Becoming Concentrated In Fewer And Fewer Hands
Once upon a time, the United States had a very diverse financial system. But today financial power is becoming concentrated in fewer and fewer hands with each passing year.
More U.S. banks fail every single week. In fact, the number of bank failures is on pace to far surpass the total of 140 U.S. banks that failed last year.
There are now nearly 900 banks (well over 10 percent of all U.S. banks) on the FDIC list of problem banks.
Meanwhile, the “too big to fail” banks continue to pick up market share. The “big four” U.S. banks (Citigroup, JPMorgan Chase, Bank of America and Wells Fargo) had approximately 22 percent of all deposits in FDIC-insured institutions back in 2000. As of June 30th of last year that figure was up to 39 percent.
Putting an increasing amount of financial power into the hands of just a few elite banks is a recipe for disaster any way you want to cut it.
Long-Term Trend #10: Rampant Corruption On Wall Street
Our financial system has become an absolute cesspool of corruption. In the past I have written extensively about all of the corruption that Goldman Sachs has been involved in, but they are far from alone.
In fact, it seems like new stories of financial corruption emerge almost daily now.
For example, just recently Bank of America, JPMorgan Chase and GMAC Mortgage have all suspended foreclosures in many U.S. states due to serious concerns about foreclosure procedures.
But there is a lot of corruption that is a lot worse than that. The rampant manipulation of the gold and silver markets was completely blown open by an industry insider earlier this year, but the U.S. government had to be publicly shamed before they would even agree to look into it.
The truth is that corruption on Wall Street has become so common that it is almost impossible to keep up with it all. It seems like no matter what stone you turn over on Wall Street these days you find yet more corruption.
But if the core of our financial system is so incredibly corrupt, how long will it be before it collapses in on itself?
Long-Term Trend #11: The Growing Retirement Crisis That Threatens To Bankrupt America
The Baby Boomers may end up bankrupting America after all. A retirement tsunami is coming that threatens to drown our nation in a sea of red ink.
The truth is that Americans have not been preparing for retirement on their own. One shocking new study indicates that Americans are $6.6 trillion short of what they need to retire comfortably.
In fact, approximately half of all workers in the United States have less than $2000 saved up for retirement.
So what about corporate pension plans?
Are they in good shape?
One recent study found that America’s 100 largest corporate pension plans were underfunded by $217 billion as of the end of 2008.
But sadly, the pension plans run by U.S. state governments are in even worse shape.
Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern’s Kellogg School of Management recently calculated the combined pension liability of all 50 U.S. states. What they found was that the 50 states are collectively facing $5.17 trillion in pension obligations, but they only have $1.94 trillion set aside in state pension funds. That means that collectively, the 50 U.S. state governments are 3.2 trillion dollars short of what they need to meet their pension obligations.
But the biggest mess of all may be the U.S. Social Security system.
The sad reality is that anyone that has studied it closely knows that it is nothing more than a Ponzi scheme, and the scam has just about run its course.
According to the Congressional Budget Office, the Social Security system will pay out more in benefits than it receives in payroll taxes in 2010. That was not supposed to happen until at least 2016.
But things get really hairy when you start looking down the road.
The present value of projected scheduled benefits surpasses earmarked revenues for entitlement programs such as Social Security and Medicare by about 46 trillion dollars over the next 75 years.
It is time to face facts people.
We are in deep, deep, deep trouble.
An increasing number of Americans are starting to realize this. They may not always know the specifics of what is going wrong, but more people than ever realize that something is broken. According to one recent survey, 63 percent of Americans believe that the United States is on the wrong track.
And we are very much on the wrong track. We have squandered the great wealth that our parents and grandparents left us and we are wrecking the greatest economic machine that the world has ever seen.
If we do not get our act together, someday people will look back and will curse this generation for how incredibly stupid we were.
2008 – After the mortgage loan crisis, here comes the corporate debt crisis
– Excerpt GEAB N°21 (January 16, 2008)
Notes:(1) After acknowledging a few dozens of billions of USD at the end of the summer 2007, then a few hundreds of billions of USD in the middle of the autumn, banks now propound the figure of 1,000 billion USD (source: The Australian, 12/27/2007) knowing that some of them, like UBS, admit that they have no idea what their final losses in relation to this crisis will be (source: The Times, 01/12/2008).(2) These days, in the US, poor corporate performance announcements followed one another, thus proving that a recession has been here for some time already. Now let’s take a few eloquent examples providing a clear indication about the economy’s general trends: American Express announces a USD 440 million provision in the fourth quarter because it appears that their clients find it more and more difficult to make purchases and to pay their bills; FedEx announces poor performances due to a general slowdown in the US economy ; AT&T explains that they must face a significant slowdown in their broadband and traditional wire phone sales resulting from increasing service disconnections due to non-payment by their clients.
(3) Source: International Swaps and Derivatives Association
Current Economic Crisis Worse than the Great Depression
The mainstream media and Wall Street have reached the consensus that the current credit crisis is the worst since the post-war period. George Soros’ statement that ”the world faces the worst finance crisis since WWII” epitomizes the collective wisdom. The crisis is currently the ultimate scapegoat for all the economic evils that currently plague the global financial system and the global economy – from collapsing stock markets of the world to food shortages in third world counties. We are repeatedly assured that the ultimate fault lies with the Credit Crisis itself; if there were no Credit Crisis, all of these terrible things would never have happened in the economy and the financial markets.
The most extraordinary thing is that the mainstream media has never attempted to compare the current economic environment to the one preceding the Great Depression. In essence, it is assumed outright that the Great Depression can never possibly happen again, ever, thus obviating the need for such a comparison. I actually believe that the macroeconomic fundamentals today are much worse, so that we are in for a protracted period of economic depression – a depression much worse than the Great Depression, a depression that would likely be remembered in history as “The Second Great Depression” or The Greater Depression , as Doug Casey has called it so aptly. Here is why I believe that this is the case.
Duplicating Mistakes from the Great Depression
At its core, the environment of the 1990s, and the response of the Fed to the tech-telecom bust has created an economic environment that has encouraged the repetition of the very same mistakes that led to the Great Depression. Here is a concise summary of widely recognized mistakes of the 1920s, without going into the details, with obvious parallels in the current environment:
- Asset Bubbles – first in the stock market during the 1990s, then in real estate during the 2000s, pretty much mirroring the stock and real estate market bubbles of the 1920s.
- Securitization – although not in the very “ultra-modernistic” form and shape of the 2000s, with slicing and dicing of pools and tranches of seniority, it was widely recognized in the 1930s that securitization during the 20s drove the domino effect in the U.S. financial system during the Great Depression.
- Excessive Leverage – just like in 2008 the topic du jour is “deleveraging”, so the unwinding of leverage during the 1930s was the driver of forced liquidations and financial pain. Of course, it was very clear back then that the root of the problem was not deleveraging per se, but the excessive leverage that took place prior to the deleveraging process. “Investment Pools” were then instrumental in both the securitization and excessive leverage, just like the Hedge Funds of today.
- Corrupt Gatekeepers – we know well that the Enrons and Worldcoms were aided and abetted by the accounting firms – those same firms that were supposedly the Gatekeepers of the financial community, yet handsomely profited from the boom while neglecting their watchdog functions. In the current financial crisis, we also know that the rating agencies were also making hay during the boom. Very similar were the issues during the 1920s that led to the establishment of the SEC and other regulatory bodies to replace the malfunctioning “gatekeepers” at the time.
- Financial Engineering – we are led to believe that financial engineering is a rather recent phenomenon that flourished during the New Age Finance Era of the last 15 years, yet financial engineering was prevalent in the 1920s with very clear goals: (1) to evade restrictive regulations, (2) to increase leverage, and (3) to remove liabilities from the books, all too familiar to all of us today.
- Lagging Regulations – just like the regulatory environment lagged the events of the 1920s and regulations were introduced only after the Great Depression had obliterated the U.S. financial system, so we are yet to see new regulations addressing the causes of the current crisis. Understandably, regulations should have foreseen today’s financial problems and should have been introduced before the crisis.
- Market Ideology – back in the 1920s, just like in the last two decades, the market ideology of “laissez faire”, which Soros quite appropriately described as “Market Fundamentalism”, has swept the financial markets. Of course, the free market knows the best, but the reality is that the money market is not really free – when the Fed determines the cost of money (interest rates), and can fix this cost for as long as it wants, then all sorts of financial imbalances can be sustained without the discipline imposed by the market. This can lead to all sorts of problems that we actually have to face today.
- Non-Transparency – back in the 1930s, it was widely recognized that businesses and especially financial institutions lacked transparency, which allowed for the accumulation of significant imbalances and abuses. Today, financial markets and institutions have intentionally compromised transparency in a number of ingenious, or better disingenuous, accounting trickeries and financial gimmicks, like off-balance-sheet entities (SIVs), hard-to-understand derivatives, and opaque instruments with mind-boggling complexity. Today CEOs and Chief Risk Officers of major financial institutions cannot figure out their own risk exposures. Originally, lack of transparency was designed to fool the markets; ironically, modern-day financial executives have gotten to the point of fooling themselves.
Worse than the Great Depression
So, why Worse Than The Great Depression ? What makes me believe that the current depression will be worse than the Great Depression? I present six of the most important fundamentals that are “baked in the cake” and that suggest of a Greater Depression .
- Overvalued Real Estate. The real estate market has been driven by a number of innovations in real estate finance. Overvaluation in real estate implies overvaluation in real estate financial instruments; an implosion of real estate prices implies an implosion in those instruments. It is widely recognized by economists that the Case-Shiller Index is a good proxy for the prices of real estate. A widely-recognized chart from 1890 to 2007 tells the story. The chart makes it crystal clear that the current overvaluation of real estate in real terms grossly exceeds the one during the 1920s. The coming correction in real estate will be protracted and gut-wrenching, with an expected cumulative effect that is much worse than the Great Depression.
- Total U.S. Credit. Credit makes leverage: the more credit in the financial system, the more leveraged it is. Today’s total U.S. credit relative to GDP has surpassed significantly the levels preceding the Great Depression. Back then, the total amount of credit in the financial system almost reached an astonishing 250% of GDP. Using the same metric today, the debt level in the U.S. financial system surpassed 350% in 2008, while the level in 1982 was “only” 130%. As Charles Dumas from Lombard Street Research put it quite aptly, “we’ve had a 30-year leveraging up of America, ending in an unchecked orgy.”The chart below shows a dramatic buildup of debt (leverage) in the 1920s and a deleveraging from 1930 to 1945 (or 1952). Then it shows a consistent buildup of debt afterwards, with a dramatic rise since the 1990s, and surpassing in 2000 the previous peak in 1929. The chart shows the level of 299% at the end of 2005, but the level has already reached 350% by 2008.
Of course, leveraging, as already indicated above, must necessarily be followed by deleveraging.
The best way to think about leverage is to compare it with using drugs, while deleveraging is like detox. The problem is not that the detox is killing the patient who has abused drugs for years; what is really killing the patient is the drug abuse itself. However, one thing is clear – the patient must either go through a painful detox or die; the same applies for the financial system – it must either deleverage or implode.
- Explosion of Derivatives. Derivatives have been likened by Warren Buffet to “financial weapons of mass destruction”. The notional amount of total derivatives, as well as “Value at Risk” (VaR), has skyrocketed in recent years with the potential to destabilize the financial system for decades. To put it more allegorically, derivatives hang like a sword of Damocles over the financial system.A comparison with the 1920s is difficult to make. mostly Derivatives back then were extensively used, although not widely understood. Given that I am not aware of any statistics of derivatives for the period of the 1920s, a meaningful comparison based on hard data is admittedly impossible. Nevertheless, I would venture to make an intelligent guess that the size of modern-day derivatives is hundreds or even thousands of times larger relative to the size of the economy in comparison to the 1920s. Some of the latest reports indicate that the total notional value of derivatives outstanding surpasses one quadrillion dollars. To put this into perspective, this amounts to almost 100 times the GDP of the U.S. economy.
The chart below shows the explosion of derivatives in the U.S. banking system. You can see that in 1991 the notional value of the derivatives was about the size of the U.S. GDP. By 2006 the size has grown to about 10 times the GDP, vastly outgrowing the real economy.
The chart below shows an even more telling picture. It shows world GDP and world’s notional value of derivatives. Again, while there is no direct comparison with the 1920s, it is clear that the overall level of derivatives has skyrocketed during the last two decades and presents risks that were simply not present at the onset of the Great Depression. The unwinding of these derivatives could only be compared with a nuclear explosion in the financial system.
- Dow-Gold Ratio. The Dow-Gold ratio represents the most important ratio between the relative prices of financial assets and real assets. The Dow component represents the valuation of financial assets; the gold component – of real assets. When leverage in the financial system increases significantly, so does this ratio. A very high ratio is interpreted as an imbalance between financial and real assets – financial assets are grossly overvalued, while real assets are grossly undervalued. It also implies that a correction eventually will be necessary – either through deflation, which implies deleveraging and a collapsing stock market, or through inflation, which implies stagnant stock market for many years and steadily rising prices of real assets, commodities, and gold, usually associated with stagnant economy and typically resulting in stagflation. The first case—deflation—occurred during the 1930s, while the second case—stagflation—occurred during the 1970s.The graph below illustrates the above concepts. The very high Dow-Gold Ratio in 1929 was followed by the Great Depression, while the higher level in 1966 was followed by the stagflationary 70s. It is evident from the chart the peak in 2000 surpassed the previous two peaks in 1929 and 1966, so this provides a reasonable expectation that the forthcoming return to “normalcy” will be more painful than the Great Depression, at least in terms of cumulative pain over the next 10-15 years.
- Global Bubbles . It is impossible to make direct comparison with the 1920s, but today the global economy is rife with bubbles. Back then in the 1920s, the U.S. had its stock and real estate bubbles, while the European economies were struggling to rebuild from the devastations of WW1 that ended in 1919. I am personally not aware of any other bubbles during this period, although I welcome reader feedback on this topic.Today the picture is very different. The U.S. economy had a stock market and real estate bubble that has surpassed its own during the 1920s. Colossal US current account deficits have fuelled extraordinary growth in global monetary reserves. As a result, Europe has real estate bubbles across the board, from the U.K. and Ireland, throughout the Mediterranean (Spain, France, Italy and Greece), to the entire Baltic region (Latvia, Lithuania, and Estonia) and the Balkans (Romaina and Bulgaria). Even worse, many Asian countries (China, Korea, etc.) also have their own stock and property bubbles, only with the exception of Japan, which is still in the process of recovering from its own during the 1980s. Thus, during the 1920s only the U.S. suffered from gross financial imbalances, while today the imbalances have engulfed the whole world – both developed and developing. It stands to reason that the unwinding of those global imbalances is likely to be more painful today than it was during the Great Depression due to both size and scope.
- Collapsing Bretton Woods II. The global monetary system was on a quasi-gold standard during the 1920s. Back then dollars and pounds were convertible to gold, while all other currencies were convertible to dollars and pounds. An appropriate way to think about it is that of a precursor to the Bretton Woods from 1945-1971. What is important to understand is that while the system was fiat in nature, gold imposed significant limitations to credit expansion and leveraging.Somewhat similar was the role of Bretton Woods that lasted from 1945 to 1971. The dollar was tied to gold, while all other fiat currencies were tied to the dollar. Just like the interwar period, gold imposed some limitations on credit and financial imbalances.
We now live in what has been termed Bretton Woods II. Essentially, this is a pure fiat dollar standard, where all currencies are convertible to dollars, either at fixed or floating exchange rates, while the dollar itself is convertible to “nothing”. Thus, the dollar has no limitations imposed to it by gold, so without the discipline of gold, the current global monetary system has accumulated significantly more imbalances than ever before in modern capitalism. These imbalances show up in the international monetary system as unsustainable trade deficits (and surpluses), skyrocketing official dollar reserves in some European and many Asian central banks, and the proliferation of Sovereign Wealth Funds; more generally, these imbalances result in a myriad of bubbles, overleveraging, and other maladjustments already discussed above.
Today Bretton Woods II is in the process of disintegration. The world is slowly but steadily losing its confidence in the dollar as the world reserve currency. A flight from the dollar is in progress and the collapse of the global monetary system is imminent. As Bretton Woods II disintegrates and a new system replaces it, the process of readjustment will be necessarily more painful than the respective process during the Great Depression.
A caution on terminology is necessary here. While the literature over the last 10-20 years has widely recognized the term “Bretton Woods II”, in September-October of 2008 the term was widely used by the media to describe a proposed international summit with the goal of reconstructing a new international monetary system designed from scratch, just like “Bretton Woods”. Instantly dubbed by the media “Bretton Woods II”, this term could be potentially very confusing as it could mean very different things to different people. The interested reader should consult Wikipedia’s Bretton Woods II where both meanings are explained in detail.
Since August of 2007 we have witnessed the relentless escalation of the credit crisis: a steady constriction of credit markets, starting with subprime mortgage-backed securities, spreading to commercial paper, then to interbank credit, and then to CDOs, CLOs, jumbo mortgages, home equity lines of credit, LBOs and private equity markets, and then generally to the bond and securities markets.
While the media describes the problem as one of illiquidity and confidence, a more serious analysis indicates that boom-time credit has been employed unproductively and so losses must be incurred. In other words, scarce capital has been misallocated, poorly invested, and effectively wasted. No amount of monetary or fiscal policy can fix the errors of the past, just like no modern treatment can quickly restore to health a drug addict debilitated from a decade-long drug abuse.
Based on indicators like – (1) global real estate overvaluation, (2) indebtedness, (3) leverage, (4) outstanding derivatives, (5) global bubbles, and (6) the precariousness of the global monetary system, I would argue that the accumulated imbalances in the current period surpass significantly those preceding the Great Depression. I therefore conclude that the coming U.S. (and possibly) global depression will be of greater magnitude than the Great Depression of the 1930s. It likely suggests that we are entering a historic period that will likely be known as The Greater Depression .
Investor beware! Only gold can protect you from the ravages of another Depression!
By Dr Krassimir Petrov
Krassimir Petrov ( Krassimir_Petrov@hotmail.com ) has received his Ph. D. in economics from the Ohio State University and currently teaches Macroeconomics, International Finance, and Econometrics at the American University in Bulgaria. He is looking for a career in Dubai or the U. A. E.
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